Rebuttable cheque presumptions and inherent quashing power can defeat Section 138 complaints when debt or liability is doubtful.

In Section 138 cheque dishonour matters, the Gujarat HC noted that the presumption under Section 139 of the Negotiable Instruments Act is rebuttable on a preponderance of probabilities, including at the threshold. Where surrounding circumstances such as prior notices, delayed presentation, stop-payment instructions, and the complainant's conduct made the existence of a legally enforceable debt or liability doubtful, the Court held that inherent powers under Section 482 CrPC could be exercised to prevent injustice. On those facts, the complaints were quashed because the presumption stood displaced and the cheque was not clearly shown to have been issued in discharge of a debt or liability.

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Issues: (i) Whether criminal complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973 on the facts showing absence of legally enforceable debt or liability. (ii) Whether the presumption under Section 139 of the Negotiable Instruments Act, 1881 stood rebutted at the threshold by the surrounding circumstances and the conduct of the complainant.

Issue (i): Whether criminal complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973 on the facts showing absence of legally enforceable debt or liability.

Analysis: The material on record, including the sequence of notices, letters and the delayed presentation of the cheque, was found to be inconsistent with the complainant's version. The surrounding circumstances indicated that the cheque could have been misused and that the complainant had not clearly established that it was issued towards discharge of a debt or liability. The Court held that the power under Section 482 is not barred merely because Section 139 raises a presumption, and that in special facts the Court may intervene to prevent injustice.

Conclusion: The complaints were liable to be quashed under Section 482.

Issue (ii): Whether the presumption under Section 139 of the Negotiable Instruments Act, 1881 stood rebutted at the threshold by the surrounding circumstances and the conduct of the complainant.

Analysis: The Court applied the settled principle that the presumption under Section 139 is rebuttable on a standard of preponderance of probabilities. It relied on the complainant's own conduct, the absence of reference to the cheque in earlier notices, the stop-payment instruction, and the peculiar relationship between the parties to hold that the presumption was vulnerable and stood displaced at the initial stage.

Conclusion: The presumption under Section 139 stood rebutted on the facts of the case.

Final Conclusion: The criminal complaints were quashed, and the connected applications were disposed of in consequence.

Ratio Decidendi: In proceedings under Section 138 of the Negotiable Instruments Act, 1881, the statutory presumption under Section 139 is rebuttable even at the threshold, and where the surrounding circumstances show that the cheque was not issued for a legally enforceable debt or liability, the Court may quash the complaint in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973.

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