Security cheques under the Negotiable Instruments Act require proved liability; presumption was rebutted and Section 138 was not attracted.

Presumptions under Sections 118 and 139 of the Negotiable Instruments Act arose once the cheque signatures were admitted, but they were rebuttable on a preponderance of probabilities. The complainant failed to prove that the cheques were issued towards a loan or that any legally enforceable debt matched the cheque amounts; the defence evidence instead supported issuance of the cheques as security for consultancy fees. A security cheque can attract Section 138 only if, when presented, it represents an actual enforceable liability. Because the proved consultancy liability was much lower than the cheque amounts and there was no authority to fill them beyond that liability, Section 138 was not attracted on these facts.

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Issues: Whether the acquittal in the cheque dishonour complaints was sustainable where the complainant failed to prove that the cheques were issued towards a loan and the defence established that they were given as security for consultancy fees, and whether Section 138 of the Negotiable Instruments Act, 1881 was attracted when the cheques were filled for an amount exceeding the proved liability.

Analysis: Once the signatures on the cheques were admitted, the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 arose in favour of the complainant, but those presumptions were rebuttable on a preponderance of probabilities. The complainant's case of loan repayment was found to be unsupported by the complaint, lacking receipt or reliable particulars, inconsistent with the surrounding circumstances, and contradicted by the accused's financial position and the consecutive cheque numbers. The evidence instead supported the defence that the cheques were issued as security for consultancy fees. Even where a security cheque may attract Section 138 if liability later crystallises, the complainant still had to show a legally enforceable debt or liability to the extent of the cheque amounts. On the facts found, the actual consultancy liability was far below the aggregate cheque amount, and the complainant had no authority to fill the cheques for sums beyond the liability proved.

Conclusion: The complainant failed to prove a legally enforceable debt corresponding to the cheque amounts, and the defence successfully rebutted the statutory presumptions; the acquittal was therefore /justified and the complaints could not succeed.

Ratio Decidendi: A cheque issued as security can fall within Section 138 only if, at the time of presentation, it represents a legally enforceable debt or liability; where the complainant fails to prove such liability and the cheque amount exceeds the amount actually due, Section 138 is not attracted.

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