Cheque dishonour presumptions prevail when signature is admitted; a bare security-cheque defence will not rebut liability.

In a prosecution under the Negotiable Instruments Act, the Madhya Pradesh HC reiterated that once execution and signature on a cheque are admitted, the statutory presumptions under Sections 118 and 139 arise in favour of the holder that the cheque was issued for consideration and in discharge of a legally enforceable debt or liability. That presumption is rebuttable, but the accused must produce cogent evidence showing absence of liability or discharge of the debt. A bare claim that the cheque was only a security instrument, without supporting proof, was insufficient, and the acquittal was found unsustainable.

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Issues: Whether, in a prosecution under Section 138 of the Negotiable Instruments Act, 1881, the presumption under Sections 118 and 139 stands rebutted merely because the cheque was claimed to have been issued as security and, if not rebutted, whether the acquittal required interference.

Analysis: The agreement for sale and the issuance of the cheque were admitted, and the cheque had been dishonoured for insufficiency of funds. Once execution of the cheque and signature were admitted, the statutory presumptions under Sections 118 and 139 operated in favour of the complainant that the cheque was issued for consideration and in discharge of a legally enforceable debt or liability. That presumption was rebuttable, but the accused was required to adduce evidence showing that no such liability subsisted or that the amount due had been discharged. The plea that the cheque was issued only as security was not substantiated by cogent evidence, and the non-examination of the intermediary further weakened the defence. On the evidence, the presumption remained unrebutted and the trial court's view on acquittal was unsustainable.

Conclusion: The issue is answered in favour of the complainant-appellant. The cheque-security defence did not displace the statutory presumption, and the acquittal was liable to be set aside.

Final Conclusion: The complaint under Section 138 stood established, the acquittal was reversed, and the appellant obtained monetary relief with compensation.

Ratio Decidendi: In a cheque dishonour case, once issuance and signature on the cheque are admitted, the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 operate in favour of the holder, and a bare plea that the cheque was issued as security is insufficient unless supported by evidence rebutting the existence of a legally enforceable debt or liability.

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