Cash loan and cheque presumption: breach of tax cash-payment rules does not defeat Section 138 liability absent a probable defence.

A cash loan alleged to breach Section 269SS of the Income-tax Act does not, by that reason alone, cease to be a legally enforceable debt for Section 138 of the Negotiable Instruments Act; the fiscal infraction may attract tax consequences, but it does not void the underlying liability. Once the drawer admits the cheque signature and bank particulars, the presumptions under Sections 118(a) and 139 arise, and a blank or partly filled cheque voluntarily delivered does not by itself rebut them. On the stated facts, the defence of a security cheque was unsupported, the presumption was not displaced on a preponderance of probabilities, and the cheque dishonour complaint was held proved.

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Issues: (i) Whether a cash loan advanced in alleged violation of Section 269SS of the Income-tax Act, 1961 ceases to be a legally enforceable debt or liability for the purposes of Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether the accused rebutted the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881 and established a probable defence.

Issue (i): Whether a cash loan advanced in alleged violation of Section 269SS of the Income-tax Act, 1961 ceases to be a legally enforceable debt or liability for the purposes of Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Section 269SS is a regulatory provision intended to curb unaccounted cash and tax evasion. A breach of that provision may invite penalty under the Income-tax Act, 1961, but it does not, by itself, render the underlying loan void or unenforceable. The legal position applied was that non-disclosure in income tax returns, or a cash mode of lending, may have fiscal consequences, yet the borrower cannot use such infraction to defeat a cheque claim under Section 138 when the transaction is otherwise proved.

Conclusion: The cash loan did not cease to be a legally enforceable debt or liability merely because it was alleged to be in breach of Section 269SS of the Income-tax Act, 1961.

Issue (ii): Whether the accused rebutted the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881 and established a probable defence.

Analysis: Once the accused admitted her signature and bank particulars on the cheque, the statutory presumption arose that it was issued for discharge of a debt or liability. A blank or partly filled cheque voluntarily handed over does not, by itself, negate the presumption. The defence version regarding a security cheque for a jewellery transaction remained unsupported by reliable contemporaneous material, while the defence witness did not support that narrative and instead undermined it. On the evidence, the accused failed to establish a probable defence on a preponderance of probabilities.

Conclusion: The accused did not rebut the statutory presumption, and the ingredients of Section 138 of the Negotiable Instruments Act, 1881 stood proved.

Final Conclusion: The acquittal was set aside, the complaint under Section 138 of the Negotiable Instruments Act, 1881 succeeded, and the accused was held guilty, with sentencing left for a later hearing.

Ratio Decidendi: A cash loan is not rendered legally unenforceable for Section 138 purposes merely because it may contravene Section 269SS of the Income-tax Act, 1961, and once the drawer admits the cheque signature, the presumption of liability continues unless the accused rebuts it by a probable defence on preponderance of probabilities.

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