Statutory presumptions under the NI Act can be rebutted by a probable defence where proof of debt is unreliable.

In a Section 138 NI Act prosecution, admitted cheque signature and dishonour raise presumptions under Sections 118 and 139, but the accused may rebut them on a preponderance of probabilities by showing that no legally enforceable debt existed. The Court treated inconsistencies in the complainant's version, the unexplained source of funds, absence of bank withdrawal or accounting entry, and non-examination of a material witness as factors weakening proof of liability. Violation of Section 269SS of the Income-tax Act was not a defence by itself, but it was relevant to credibility. The presumptions were rebutted and the conviction could not be sustained.

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Issues: Whether the accused had successfully rebutted the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881, and whether the complainant had proved the existence of a legally enforceable debt so as to sustain conviction under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The dishonour of the cheque and the admitted signature raised the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881. The accused was therefore required to rebut those presumptions on a preponderance of probabilities by showing that the cheque was not issued towards a legally enforceable debt or liability. The defence version that the cheque had been part of a cheque series allegedly kept with another person, together with the inconsistencies in the complainant's account, materially weakened the prosecution case. The complainant did not disclose the source of funds, the precise circumstances of the alleged cash loan, or any adequate details showing a prior relationship justifying such a substantial cash transaction. The complainant also admitted that the loan was not reflected in his accounts and that the amount was not withdrawn from his bank account. The non-examination of the person said to have been present at the alleged cash delivery further dented the complainant's case. The Court treated the violation of Section 269SS of the Income-tax Act, 1961 as not constituting a defence by itself under the Negotiable Instruments Act, but as a relevant factor in assessing credibility and the existence of liability. On the totality of circumstances, the accused was found to have raised a probable defence sufficient to displace the statutory presumptions.

Conclusion: The statutory presumptions stood rebutted, the existence of a legally enforceable debt was not proved beyond reasonable doubt, and the conviction under Section 138 of the Negotiable Instruments Act, 1881 could not be sustained.

Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, 1881, once the accused raises a probable defence showing that the existence of debt or liability is doubtful, the burden shifts back to the complainant to prove the case by credible evidence; mere admission of signature on the cheque is not enough where the complainant's evidence on the loan and financial capacity is unreliable.

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