Section 138 cheque dishonour liability may fail where probable defence, notice issues, and part payment before presentation are shown.

Under Section 138 of the Negotiable Instruments Act, 1881, the statutory presumption under Section 139 is rebuttable on a preponderance of probabilities, and the accused can displace it by showing a probable defence such as compromise and payment. In summons trial, incriminating circumstances, including alleged service of demand notice, must be put to the accused for explanation before reliance is placed on them; otherwise adverse inference is not ordinarily available. The text also states that where part payment is made before presentation of the cheque, the cheque may no longer represent the legally enforceable debt, and without endorsement under Section 56 the prosecution may fail on the original cheque amount.

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Issues: (i) Whether the accused rebutted the statutory presumption arising from cheque issuance and dishonour by proving a probable defence of compromise and payment. (ii) Whether the omission to put the service of demand notice and other incriminating circumstances to the accused vitiated reliance on that material. (iii) Whether part payment made before presentation of the cheque affected the maintainability of the complaint under Section 138 of the Negotiable Instruments Act, 1881.

Issue (i): Whether the accused rebutted the statutory presumption arising from cheque issuance and dishonour by proving a probable defence of compromise and payment.

Analysis: Once issuance of cheque, dishonour for insufficiency of funds, and existence of a transaction were admitted, the presumption under Section 139 of the Negotiable Instruments Act, 1881 operated in favour of the complainant. That presumption was rebuttable on the standard of preponderance of probabilities. The defence witnesses, supported by the account statement and the evidence of the police officer, showed a probable case that a compromise had taken place and that substantial payment had been made to the complainant before presentation of the cheques. The defence was therefore not shown to be improbable or inherently unbelievable.

Conclusion: The accused successfully rebutted the presumption and the acquittal was sustainable.

Issue (ii): Whether the omission to put the service of demand notice and other incriminating circumstances to the accused vitiated reliance on that material.

Analysis: In a summons trial, the accused is required to be heard after prosecution evidence is completed, and the incriminating circumstances must be put to him for explanation. Material not so put to the accused cannot ordinarily be used against him. Since the alleged service of demand notice was not properly put to the accused at the relevant stage, no adverse inference could be drawn from his failure to reply to the notice.

Conclusion: The service of demand notice could not be relied upon against the accused for want of proper explanation opportunity.

Issue (iii): Whether part payment made before presentation of the cheque affected the maintainability of the complaint under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The governing principle is that the dishonoured cheque must represent a legally enforceable debt on the date of maturity or presentation. If the drawer makes part payment before encashment, the debt represented by the cheque stands reduced, and unless the payment is endorsed on the cheque as contemplated by Section 56 of the Negotiable Instruments Act, 1881, prosecution under Section 138 cannot succeed on the original cheque amount. The evidence showed at least part payment before presentation, and even on the complainant's alternative case, the absence of endorsement was fatal to the prosecution.

Conclusion: Part payment before presentation defeated the complainant's claim under Section 138.

Final Conclusion: The acquittal was upheld because the defence had been made probable, the statutory presumption stood rebutted, and the complaint under Section 138 did not survive on the facts proved.

Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, 1881, the accused may rebut the statutory presumption on a preponderance of probabilities, and where part payment before presentation is shown without endorsement on the cheque, the cheque may cease to represent the legally enforceable debt needed to sustain conviction.

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