Statutory presumption of cheque consideration under the Negotiable Instruments Act was upheld where rebuttal failed on the evidence.

Section 118 of the Negotiable Instruments Act, 1881 creates a presumption that a cheque is issued for consideration, and the drawer must rebut it on a preponderance of probabilities using direct or circumstantial material. Applying the burden of proof principles under the Evidence Act, the court found that the respondent did not prove payment of the alleged foreign currency amount, while the appellants did not prove that the cheques were issued only as security. The surrounding circumstances, including the timing of issuance and presentation and the absence of a contemporaneous demand for return of the cheques, supported the statutory presumption. The presumption remained unrebutted and the decree in favour of the respondent was upheld.

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Issues: Whether the holder of the cheques was entitled to the statutory presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, and whether that presumption stood rebutted where neither side proved its asserted version of the underlying transaction.

Analysis: Section 118 of the Negotiable Instruments Act, 1881 raises a presumption that a cheque is drawn for consideration until the contrary is proved. The burden of rebuttal lies on the drawer, and the contrary is proved on a preponderance of probabilities. The Court applied the principles of burden of proof and presumptions under Sections 101 to 104 and Section 4 of the Indian Evidence Act, 1872, and held that rebuttal may rest on direct or circumstantial material. On the facts, the respondent failed to prove payment of the alleged foreign currency amount, and the appellants failed to prove that the cheques were issued merely as security. The surrounding circumstances, including the issuance and presentation dates of the cheques and the absence of any contemporaneous demand for return of the cheques, supported the statutory presumption.

Conclusion: The respondent was held entitled to the benefit of the presumption under Section 118 of the Negotiable Instruments Act, 1881, the presumption was not rebutted, and the decree in favour of the respondent was upheld.

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