Section 138 NI Act: the presumption, and how it is rebutted
Sections 118 and 139, the probable-defence standard, and what the drawer can rely on.
What the offence needs
Section 138 of the Negotiable Instruments Act, 1881 makes the dishonour of a cheque an offence where the cheque was drawn to discharge a legally enforceable debt or liability and was returned unpaid for insufficient funds or because it exceeds the arrangement with the bank.
The proviso adds three conditions, and a complaint fails if any of them is missed:
- The cheque was presented within the period of its validity.
- The payee sent a written demand within 30 days of learning of the dishonour.
- The drawer did not pay within 15 days of receiving that notice.
The complaint must then be filed within one month of the cause of action, though the court may take it later where there is sufficient cause for the delay.
¶ NI Act s.142(1)(b)Time to file the complaint
The two presumptions
Section 118(a) presumes that every negotiable instrument was made for consideration. Section 139 presumes that the holder received the cheque in discharge of a debt or other liability.
The Supreme Court has held that the section 139 presumption includes the existence of a legally enforceable debt, and that it is rebuttable.
¶ Rangappa v Sri Mohan, (2010) 11 SCC 441Presumption covers a legally enforceable debt
Rebutting it
The accused does not have to disprove the debt beyond reasonable doubt. Raising a probable defence on a preponderance of probabilities is enough, and the accused may rely on the complainant’s own evidence rather than stepping into the witness box.
¶ Basalingappa v Mudibasappa, (2019) 5 SCC 418Standard and sources of rebuttal
A signed blank cheque voluntarily handed over towards some payment still attracts the presumption, even if the payee filled in the details later.
¶ Bir Singh v Mukesh Kumar, (2019) 4 SCC 197Signed blank cheques
Most section 138 defences are won or lost on the timeline. Check the dates of presentation, return memo, notice, receipt and complaint before anything else.
General information, not legal advice. Check the current text of the Act and the judgments before you rely on any of it.
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