Section 138 cheque liability requires proof of existing debt; presumptions were rebutted and complaint dismissed.

A cheque attracts Section 138 of the Negotiable Instruments Act only if it is issued in discharge of an existing legally enforceable debt or liability. Although the signatures were admitted and the presumptions under Sections 118 and 139 arose, they were rebuttable on a preponderance of probability. The complainant failed to prove the alleged agreement to sell, the cash component of payment, or the full claimed liability of Rs. 1.5 crore; the evidence supported only a liability of Rs. 75 lakh. As the cheque exceeded the proved liability, it was not shown to have been issued for the existing debt, and the complaint was rightly dismissed.

---

---

Issues: Whether the cheque was issued in discharge of a legally enforceable debt or liability so as to attract Section 138 of the Negotiable Instruments Act, 1881, and whether the statutory presumptions under Sections 118 and 139 stood rebutted.

Analysis: The cheque was admitted to bear the signatures of the respondents, so the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881 arose. However, those presumptions were rebuttable on a preponderance of probability. The complainant failed to prove the foundational transaction of the alleged agreement to sell, did not establish the alleged cash component of the payment, and could not satisfactorily support the claim that liability of Rs. 1.5 crore subsisted. On the evidence, only a liability of Rs. 75 lakh stood reflected or admitted, while the cheque in question was for Rs. 1.5 crore. A cheque issued for an amount substantially in excess of the proved liability could not be treated as having been drawn in discharge of the existing debt or liability required by Section 138.

Conclusion: The presumptions were rebutted and the complaint under Section 138 of the Negotiable Instruments Act, 1881 was rightly dismissed; the appeal failed.

---