TaxTMI 
TaxTMI 
Admitted Cheque Signature and Presumption of Legally Enforceable Debt under Sections 118 and 139 of the Negotiable Instruments Act
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....ally enforceable debt or other liability. The result is a reverse evidentiary burden: the drawer must raise a probable defence capable of displacing those presumptions. The presumptions are mandatory but rebuttable. They do not make conviction automatic, nor do they relieve the complainant of proving the foundational requirements of Section 138. However, once execution of the cheque is admitted or proved and the statutory requirements are established, a bare denial, an unsupported assertion of misuse, or a belated defence concerning a blank cheque will ordinarily not suffice. The controlling principle is reaffirmed in 2026 (8) TMI 231 - Supreme Court: where the drawer admitted the signature, the presumptions under Sections 118 and 139....
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....t lacked reliable supporting material, there was no evidence of repayment of the asserted earlier transaction, no effective action to recover the alleged blank instruments, and the demand for their return was made only after commencement of the prosecution. The presumption accordingly remained unrebutted. Key Issues / Provisions Section 138: legally enforceable debt and procedural conditions Section 138 of the Negotiable Instruments Act, 1881 applies where a cheque drawn on an account maintained by the drawer for payment to another person is returned unpaid for insufficiency of funds or because it exceeds the arrangement with the bank. The operative requirement is that the cheque must have been drawn "for the discharge, in whole or....
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....ligatory once its foundational conditions are met. The words "unless the contrary is proved" preserve the accused's right to rebut it. Detailed Analysis Admission of signature triggers the combined presumptions The combined operation of Sections 118(a) and 139 is that, once execution of the cheque is admitted or established, the court must presume consideration and presume that the cheque was received towards discharge of a debt or liability. In 2026 (8) TMI 231 - Supreme Court, the Court held that an admitted signature required invocation of the presumptions under both provisions. It further held that the drawer is ordinarily taken to have been aware of the contents of the signed cheque unless the contrary is proved. This p....
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....icular of the antecedent transaction at the outset; it is whether the drawer has first produced material sufficient to displace the statutory presumption. A bare plea of blank cheque or misuse is insufficient A voluntarily signed blank cheque does not, by itself, neutralise the statutory presumptions. In 2021 (2) TMI 505 - Supreme Court, the admission of signatures attracted the presumptions notwithstanding the plea concerning blank cheque leaves. The defence was required to meet the standard of preponderance of probabilities through credible material; a bare denial was insufficient. Similarly, 2019 (2) TMI 547 - Supreme Court holds that an assertion of misuse of a signed blank cheque must be supported by cogent evidence. A fiducia....
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.... the evidence supporting the complainant's means. The Court held that the initial burden of raising this defence lies on the accused; only a properly founded challenge can require the complainant to establish capacity. The decision also affirms the reasoning in 2025 (9) TMI 1634 - Supreme Court that the statutory presumptions cannot be ignored merely because the transaction is alleged to be a cash loan. That authority expressly set aside the contrary conclusion in 2025 (7) TMI 1628 - KERALA HIGH COURT. Accordingly, the latter view cannot govern whether an admitted signature gives rise to the presumptions under Sections 118 and 139. Non-reply to the statutory notice and lack of contemporaneous conduct Failure to reply to a statu....
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....n. Once a probable challenge succeeds, the complainant must establish the loan transaction and capacity on the evidence. • Contemporaneous conduct is significant. Timely steps concerning allegedly lost, misappropriated, or unauthorised cheques may support a defence; delayed notices or unsubstantiated complaints may instead weaken it. • Courts must preserve the distinction between the initial statutory presumption and the complainant's ultimate obligation after rebuttal. Treating every Section 138 proceeding as requiring initial proof of the underlying debt in the manner of an ordinary civil recovery action would defeat the reverse-onus structure created by Sections 118 and 139. Key Takeaways • A....