Financial capacity in cheque dishonour cases must be proved once a probable defence rebuts statutory presumptions.

A cheque dishonour prosecution under the Negotiable Instruments Act depends on the complainant proving financial capacity once the accused raises a probable defence against the loan transaction. Statutory presumptions under Sections 118 and 139 do not, by themselves, end the inquiry; the complainant must still show a credible source of funds. Here, the alleged cash loan was not supported by bank extracts, the connected purchaser was not examined, ownership documents for the claimed vehicle sale were not produced, and timing inconsistencies further weakened the case. On that evidentiary record, the conviction was held unsustainable and acquittal followed.

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Issues: Whether the complainant had established financial capacity to advance the alleged cash loan so as to sustain the conviction under Section 138 of the Negotiable Instruments Act, 1881 despite the statutory presumptions under Sections 118 and 139.

Analysis: The accused specifically disputed the loan transaction and the complainant's capacity to lend Rs.3.5 lakhs in cash. Once such a probable defence was raised, the presumption in favour of the complainant did not by itself conclude the matter, and the burden shifted back to the complainant to prove his financial capacity. The material relied on to show source of funds was not adequately proved: the complainant did not produce bank account extracts to show availability or withdrawal of funds, did not examine the alleged purchaser connected with the claimed sale transaction, and did not produce supporting ownership documents for the vehicle said to have been sold. The evidence also contained inconsistencies regarding the timing of the loan and the cheque, which further weakened the prosecution case.

Conclusion: The complainant failed to prove financial capacity and consequently failed to establish the offence beyond reasonable doubt. The conviction and concurrent findings of the courts below were therefore unsustainable, and the accused was entitled to acquittal.

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