Cheque dishonour presumptions operate on admitted signatures, and financial capacity need not be proved absent a credible rebuttal.

In a prosecution under the Negotiable Instruments Act, once execution and signatures on the cheque are admitted, the statutory presumptions in favour of the holder arise and the accused must rebut them by a probable defence on a preponderance of probabilities. A bare allegation that signed cheques were stolen, without complaint or corroborative material, is insufficient to displace those presumptions. The complainant's financial capacity or source of funds need not be independently proved unless the accused first raises a credible challenge that rebuts the presumption. The note therefore states that a trial court approach demanding such proof at the outset was legally erroneous.

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Issues: (i) Whether the accused had rebutted the statutory presumptions arising under the Negotiable Instruments Act by setting up a probable defence that the cheques were stolen and misused. (ii) Whether the complainant was required to independently prove financial capacity and source of funds in the absence of a credible rebuttal by the accused.

Issue (i): Whether the accused had rebutted the statutory presumptions arising under the Negotiable Instruments Act by setting up a probable defence that the cheques were stolen and misused.

Analysis: Once execution and signatures on the cheques were not in dispute, the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 arose in favour of the complainant. The burden then lay on the accused to rebut those presumptions by raising a probable defence on a preponderance of probabilities. The alleged theft of signed cheques was not supported by any complaint or corroborative evidence, and a bare denial of liability was insufficient to dislodge the statutory presumption.

Conclusion: The accused did not rebut the presumptions on this ground, and the finding of probable defence was unsustainable.

Issue (ii): Whether the complainant was required to independently prove financial capacity and source of funds in the absence of a credible rebuttal by the accused.

Analysis: The obligation to prove financial capacity would arise only after the accused first placed a credible challenge to the transaction by rebutting the statutory presumption. In the present case, the accused had not raised such a challenge in a legally sufficient manner, nor had he produced independent material showing that the complainant lacked means. In those circumstances, the complainant was not required to initially prove the source of funds or his financial capacity. The adverse approach taken by the trial court on this aspect was therefore erroneous.

Conclusion: The complainant was not obliged to prove financial capacity or source of funds at that stage, and the acquittal could not be sustained on that basis.

Final Conclusion: The acquittal was set aside because the accused failed to rebut the statutory presumptions and the complainant's case could not be rejected for want of proof of financial capacity in the facts of the case.

Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, 1881, once the drawer admits the signature on the cheque, the presumptions under Sections 118 and 139 operate in favour of the holder, and the accused must first rebut them by a probable defence on preponderance of probabilities; only then does the complainant's burden to prove the transaction independently arise.

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