Holding

The statutory presumption under Section 139 stands unless the accused convincingly rebuts it, and the evidence established a legally enforceable debt, justifying conviction under Section 138.

Summary

M/s. Shree Daneshwari Traders (appellant) supplied rice bags to Sanjay Jain (respondent) on a mixed cash‑and‑credit basis. The respondent issued several cheques to settle credit purchases, but the cheques were later presented and dishonoured for insufficient funds. The appellant filed two complaints under Section 138 of the Negotiable Instruments Act, alleging that the cheques were issued to discharge a legally enforceable debt, while the respondent contended that the cheques were given as security for cash purchases and that the receipts he produced rebutted the statutory presumption under Section 139. The trial court and High Court acquitted the respondent, holding that the presumption was not available and that the receipts rebutted it. The Supreme Court held that the appellant had discharged the initial burden by proving the cheques were issued for credit purchases, thereby invoking the presumption under Section 139, and that the respondent failed to produce sufficient evidence to rebut it. Consequently, the Court set aside the acquittals, convicted the respondent under Section 138, imposed a fine and a six‑month imprisonment (subject to fine payment).

Issues considered

The applicability of the statutory presumption under Section 139 of the Negotiable Instruments Act when the complaint does not expressly state that the cheques were for credit purchases.
Whether the respondent successfully rebutted the presumption by producing receipts and other evidence.
Whether the appellant proved the existence of a legally enforceable debt for which the cheques were issued.
Whether conviction under Section 138 is warranted in the facts of the case.

Legislation cited

Negotiable Instruments Act, 1881s. 138, s. 139

Subjects

Negotiable Instruments ActSection 138Section 139presumptioncheque dishonourcriminal liabilitydebtevidencerebuttalmercantile transaction

Judgment

370 [2019]
SUPREME COURT 11 S.C.R. 370
REPORTS [2019] 11 S.C.R.

A M/S. SHREE DANESHWARI TRADERS
v.
SANJAY JAIN AND ANOTHER
(Criminal Appeal Nos. 61-62 of 2011)
B AUGUST 21, 2019
[R. BANUMATHI AND A. S. BOPANNA, JJ.]
Negotiable Instruments Act, 1881: ss.138, 139 – Dishonour
of cheque – Insufficiency of funds – Complaint under s.138 – Case
of complainant-appellant was that the respondent-accused used to
C
purchase rice bags from the appellant sometimes on credit and
sometimes on cash and that the cheques issued by the respondent
were subject matter of the complaints and pertained to the credit
purchases made by the respondent for which no payment was made
– On the other hand, case of the respondent was that he always
D used to make credit purchase and leave blank cheques with the
appellant and thereafter, he used to make payment for which the
appellant used to issue receipts to the respondent; however, the
appellant did not return the blank cheques left by the respondent
with the appellant though the respondent made the payments and
those cheques were misused by the appellant-complainant – Acquittal
E
by trial court and High Court on the ground that appellant failed to
prove that respondent owed him debt and the cheques were issued
for the discharge of the said debt – Held: It is quite unbelievable
that in a business/mercantile transaction, the respondent even after
making payment towards the purchase of rice bags, did not insist
F for return of the cheques and did not take any steps to get them
back and continued with the business transaction even though the
appellant did not return the cheques after payment of the money –
Courts below referred to the three cheques and observed that the
date of issuance of the three cheques suggested that the cheques
were already with appellant and they were utilised by appellant
G
thereafter and, therefore, in view of inconsistency, the presumption
available under s.139 was not available to the appellant – The courts
below did not keep in view that the appellant had no control over
the manner of issuance of cheques by the respondent and how it
was issued – Merely because, later cheque was said to have been
H
370
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 371

issued by the respondent at an earlier date, it cannot be held that A
the appellant had used the blank cheques issued by the respondent
– The courts below disbelieved the evidence of appellant on the
ground that there were no averments in the complaint that the
commodities were sold for cash and that the rice bags were sold on
credit and the cheques were issued for the goods sold on credit – It
B
was for the respondent to adduce evidence to prove that the cheques
were not supported by consideration and that there was no debt or
liability to be discharged by him – The receipts relied upon by the
respondent did not create doubt about the purchases made on credit
and the existence of a legally enforceable debt for which the
cheques were issued – The courts below erred in saying that by the C
receipts, the respondent has rebutted the statutory presumption raised
under s.139 – The oral and the documentary evidence adduced by
the appellant were sufficient to prove that it was a legally enforceable
debt and that the cheques were issued to discharge the legally
enforceable debt – The impugned judgment of the High Court is
D
not sustainable and is set aside – Respondent is convicted under
s.138 in both the complaints.
Negotiable Instruments Act, 1881: ss.138, 139 – Presumption
in favour of holder – Held: Under s.138, once the cheque is issued
by the drawer, a presumption under s.139 in favour of the holder
would be attracted – s.139 creates a statutory presumption that a E
cheque received in the nature referred to under s.138 is for the
discharge in whole or in part of any debt or other liability – The
initial burden lies upon the complainant to prove the circumstances
under which the cheque was issued in his favour and that the same
was issued in discharge of a legally enforceable debt – It is for the F
accused to adduce evidence of such facts and circumstances to
rebut the presumption that such debt does not exist or that the
cheques are not supported by consideration – In the instant case,
by examining himself as PW-1, the complainant has discharged the
initial burden cast upon him that the cheques were issued for the
rice bags purchased on credit – With the examination of PW-1, the G
statutory presumption under s.139 of the Act arises that the cheques
were issued by the respondent-accused for the discharge of any
debt or other liability in whole or in part.

H
372 SUPREME COURT REPORTS [2019] 11 S.C.R.

A Allowing the appeals, the Court
HELD : 1. As seen from the receipts-Ex 16/C and Ex.-22/
C, though the amount said to have been credited to the account
of the respondent, the receipt contain the expression “cheques
are subject to realisation”. DW-2, father of respondent-accused,
B in his evidence, stated that the respondent used to leave blank
cheques with him in order to carry out the business transaction.
DW-2 stated that they used to purchase rice bags from the
complainant and leave the cheques with the complainant.
Admittedly, the cheques were in the handwriting of DW-2. In his
evidence, DW-2 stated that though the amount pertaining to the
C purchase of rice was already paid, the complainant did not return
the cheques in spite of having received the amount pertaining to
the purchase of rice. It is quite unbelievable that in a business/
mercantile transaction, the accused even after making payment
towards the purchase of rice bags, did not insist for the return of
D the cheques. [Paras 13, 14] [379-C; 380-A-C]
2.1 The trial court in its judgment referred to the three
cheques and observed that the three cheques bearing Nos.2463,
dated 18.08.2003; 2480 dated 25.08.2003 and 2497 dated
08.08.2003 go to suggest that the later cheque bearing No.2497
E was given much more earlier to 18.08.2003 or 25.08.2003 which
seemed inconsistent and it would not have been in the normal
course of business. The trial court held that the date of issuance
of the three cheques suggested that the cheques were already
with the complainant and they were utilised by the complainant
thereafter. On this aspect, PW-1 was cross-examined as to why
F cheque bearing No.2497 was issued on 08.08.2003 while it ought
to have been issued after 25.08.2003 to which PW-1 stated that
he did not know about the same. After referring to the above
three cheques, the trial court held that in view of inconsistency,
the presumption available under Section 139 of the Negotiable
G Instruments Act was not available to the complainant which was
affirmed by the High Court. The courts below did not keep in
view that the appellant has no control over the manner of issuance
of cheques by the respondent and how it was issued. Merely
because, later cheque No.2497 was said to have been issued by

H
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 373

the respondent at an earlier date i.e. 08.08.2003, it cannot be A
held that the complainant had used the blank cheques issued by
the respondent. [Para 15] [380-D-G]
2.2 Section 139 creates a statutory presumption that a
cheque received in the nature referred to under Section 138 of
the Negotiable Instruments Act is for the discharge in whole or B
in part of any debt or other liability. The initial burden lies upon
the complainant to prove the circumstances under which the
cheque was issued in his favour and that the same was issued in
discharge of a legally enforceable debt. It is for the accused to
adduce evidence of such facts and circumstances to rebut the
presumption that such debt does not exist or that the cheques C
are not supported by consideration. In the instant case, by
examining himself as PW-1, the complainant has discharged the
initial burden cast upon him that the cheques were issued for the
rice bags purchased on credit. With the examination of PW-1,
the statutory presumption under Section 139 of the Act arises D
that the cheques were issued by the respondent-accused for the
discharge of any debt or other liability in whole or in part. Though
the complaint contains no specific averments that the cheques
were issued for the purchase made on credit, in his evidence,
PW-1 clearly stated that the cheques were issued for the
commodities purchased on credit. The courts below erred in E
brushing aside the evidence of PW-1 on the ground that there
were no averments in the complaint as to the purchases made by
cash and purchase. [Paras 16-18] [381-A-C; 383-D-G]
3. It was for the respondent-accused to adduce evidence
to prove that the cheques were not supported by consideration F
and that there was no debt or liability to be discharged by him.
The receipts-Ex.-22/C (colly) relied upon by the respondent-
accused did not create doubt about the purchases made on credit
and the existence of a legally enforceable debt for which the
cheques were issued. The courts below erred in saying that by G
the receipts-Ex.22/C (colly), the respondent-accused rebutted
the statutory presumption raised under Section 139 of the
Negotiable Instruments Act. The oral and the documentary
evidence adduced by the complainant were sufficient to prove

H
374 SUPREME COURT REPORTS [2019] 11 S.C.R.

A that it was a legally enforceable debt and that the cheques were
issued to discharge the legally enforceable debt. The impugned
judgment of the High Court cannot be sustained and is liable to
be set aside. The respondent-accused is convicted under Section
138 of the Negotiable Instruments Act in both the complaints;
however, considering that the cheque transaction was of the
B
year 2003, at this distant point of time, it is not found appropriate
to impose any sentence of imprisonment on the accused.
[Paras 19-20] [383-H; 384-A-D]
Kumar Exports v. Sharma Carpets (2009) 2 SCC 513 :
[2008] 17 SCR 572 – relied on.
C
Case Law Reference
[2008] 17 SCR 572 relied on Para 17
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
Nos. 61-62 of 2011.
D
From the Judgment and Order dated 28.07.2008 of the High Court
of Bombay at Goa in Criminal Appeal Nos. 53 and 54 of 2006.
Arun R.Pedneker, Hitesh Kumar Sharma, V.N. Raghupathy,
Advs. for the Appellant.
E Devadatt Kamat, Sr. Adv., Rajesh Inamdar, Javedur Rahman,
Aditya Bhat, Ashwin G. Raj, Rauf Rahim, Advs. for the Respondents.
The Judgment of the Court was delivered by
R. BANUMATHI, J.

F 1. These appeals arise out of the judgment dated 28.07.2008 in
Criminal Appeal Nos.53 and 54 of 2006 passed by the High Court of
Bombay in and by which the High Court dismissed the appeals filed by
the appellant-complainant thereby upholding the acquittal of the
respondent-accused Sanjay Jain under Section 138 of the Negotiable
Instruments Act.
G
2. Brief facts which led to filing of these appeals are as under:-
The appellant-complainant had been supplying the commodities
and rice bags to the respondent-accused on his request. In this regard,
the respondent-accused issued various cheques which when presented
for collection were dishonoured. The appellant had filed two complaints
H
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 375
[R. BANUMATHI, J.]

under Section 138 of the Negotiable Instruments Act - complaint No.339/ A
OA/NI/2004/A and complaint No.499/OA/NI/2004/A against the
respondent-accused alleging that the cheques issued by the respondent-
accused in lieu of payment owed to the appellant were dishonoured on
presentation. It was averred that despite issuance of legal notice, the
respondent did not make payments.
B
3. In case No.339/OA/NI/2004/A, the respondent-accused issued
three cheques drawn on UTI Bank details of which are as under:-
—————————————————————————
Date Number Amount
————————————————————————— C
1. 08.08.2003 002497 Rs.17,540.00
2. 18.08.2003 002463 Rs.17,871.00
3. 25.08.2003 002480 Rs.17,760.00
————————
Total = Rs.53,171.00
4. In case No.499/OA/NI/2004/A, the respondent-accused issued D
nine cheques, details of which are as under:-
Date Number Amount
—————————————————————————
1. 01.09.2003 002481 Rs.18,000.00
2. 15.09.2003 633427 Rs.20,000.00 E
3. 22.09.2003 633428 Rs.20,000.00
4. 29.09.2003 633429 Rs.20,000.00
5. 03.10.2003 531977 Rs.25,000.00
6. 06.10.2003 633430 Rs.20,979.00
7. 13.10.2003 531975 Rs.20,000.00
F
8. 27.10.2003 531976 Rs.25,000.00
9. 10.11.2003 531978 Rs.25,000.00
————————
Total = Rs.1,93,979.00
5. When the above said cheques were presented to United
Western Bank, Margao Branch for encashment, cheques were returned G
by the bank unpaid on 04.02.2004 and 20.02.2004 with the endorsement
“not arranged for/funds insufficient” and “funds insufficient”. The
appellant thereafter issued legal notices to the respondent-accused dated
05.02.2004 and 23.02.2004 respectively making a demand for the payment
of the cheque amount. The said notices were received by the respondent- H
376 SUPREME COURT REPORTS [2019] 11 S.C.R.

A accused; though respondent acknowledged the receipt of the notices, he
did not make the payment nor arranged that amount in satisfaction of
the cheques issued by him. Hence, the complainant filed two complaints
under Section 138 of the Negotiable Instruments Act as noted above.
6. Taking into account the receipts produced by the respondent-
B accused, the trial court acquitted the respondent-accused in both the
cases. The trial court rejected the case of the appellant that the
respondent sometimes used to purchase rice bags on credit and
sometimes used to purchase rice bags on payment of cash and the same
being inconsistent with the documents produced by the appellant. The
trial court held that in the written complaint, the appellant-complainant
C has not alleged anywhere that the respondent used to make credit as
well as cash purchases. The trial court held that the respondent left
blank cheques with the appellant as security whenever he used to make
credit purchases and therefore, the presumption under Section 139 of
the Act is not available to the appellant.
D 7. In appeal, the High Court affirmed the acquittal of the
respondent-accused and held that the respondent had taken the defence
that the subject cheques were issued as security towards the goods
supplied for which payment was subsequently made by cash. The High
Court held that by producing the relevant receipts, the respondent has
E rebutted the presumption and that the respondent was able to prove that
the cheques were issued by way of security towards the goods supplied
to him for which he made the payment by cash. The High Court further
held that it was incumbent upon the complainant to have explained in the
complaint that the cash payments made by the respondent were related
to other commodities and the cheques were made for payment of rice
F bags. Holding that the case of the appellant was not consistent, the High
Court affirmed the order of acquittal and dismissed the appeals filed by
the complainant-appellant.
8. The learned counsel for the appellant submitted that the
transaction between the parties was a mercantile transaction and during
G the course of the business, running accounts were maintained when
purchases were made at different times and payments were made by
both modes i.e. cash and cheques. It was submitted that both the courts
below overlooked the fact that the transactions were mercantile
transactions mixed up with cash payments and also payments made by
H cheques. It was submitted that the courts below erred in not keeping in
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 377
[R. BANUMATHI, J.]

view the statutory presumption available under Section 139 of the A
Negotiable Instruments Act to the appellant and that the respondent-
accused failed to rebut the presumption by leading cogent and consistent
evidence. The learned counsel urged that the impugned judgment is
contrary to the object of Section 138 and Section 139 of the Negotiable
Instruments Act and is liable to be set aside.
B
9. The learned counsel appearing for the respondent submitted
that the respondent used to leave the cheques with the complainant when
he purchased the commodities – rice bags and used to make cash
payment towards those commodities for which complainant issued
receipts. It was submitted that even though the complainant received
the money for the rice bags, he failed to return the cheques and had C
misused those cheques and filed false complaints against the respondent.
It was submitted that the respondent has rebutted the statutory
presumption by producing twenty receipts-Ex.-22/C (colly) ranging from
02.09.2003 to 17.11.2003 as also receipts-Ex.16/C (colly). The total
amount of the receipts issued by the complainant is Rs.1,94,000/- and D
taking into consideration that the amount has been paid, the courts below
rightly held that the presumption under Section 139 of the Negotiable
Instruments Act was rebutted by the respondent-accused.
10. We have carefully considered the submissions and perused
the impugned judgment and other materials on record. The point falling E
for consideration is whether the courts below were right in acquitting
the respondent-accused by holding that the appellant-complainant has
failed to prove that the respondent owed him debt and that the cheques
were issued for the discharge of the said debt.
11. The appellant is a commission agent/merchant conducting his F
business and he used to supply rice bags to the respondent-accused on
his request. Admittedly, the transaction between the appellant-complainant
and the respondent-accused was a mercantile transaction. During the
course of business, running accounts were maintained by the parties.
Case of the appellant is that the respondent used to purchase rice bags
sometimes on credit and sometimes on cash. In his evidence, PW-1- G
complainant stated that the cheques were issued for the credit transaction
payable to the appellant by the respondent. Per contra, case of the
respondent is that Ex.-16/C (colly) and Ex.-22/C (colly) were issued
against the cash payment made by the respondent-accused and though
the payments were made, the cheques issued by the respondent-accused H
378 SUPREME COURT REPORTS [2019] 11 S.C.R.

A were not returned to him. The respondent-accused relies upon the various
receipts-Ex.-22/C (colly) which are as under:-
Sr.No. Receipt No. Date Amount
1. 1276 02.09.2003 Rs.16,000/-
B 2. 1291 04.09.2003 Rs.2,000/-
3. 1340 08.09.2003 Rs.16,000/-
4. 1489 27.09.2003 Rs.20,000/-
5. 1556 03.10.2003 Rs.20,000/-
C 6. 1615 06.10.2003 Rs.14,500/-
7. 1621 08.10.2003 Rs.5,000/-
8. 1682 13.10.2003 Rs.15,500/-
9. 1689 13.10.2003 Rs.3,300/-
D 10. 1746 20.10.2003 Rs.17,000/-
11. 1763 23.10.2003 Rs.1,500/-
12. 1760 23.10.2003 Rs.2,300/-
13. 1808 27.10.2003 Rs.16,000/-
E
14. 1828 01.11.2003 Rs.3,000/-
15. 1882 05.11.2003 Rs.20,000/-
16. 1942 11.11.2003 Rs.15,000/-
17. 1941 11.11.2003 Rs.3,000/-
F
18. 1953 15.11.2003 Rs.3,000/-
19. 1958 17.11.2003 Rs.12,000/-
20. 2001 17.11.2003 Rs.3,000/-
12. Case of the complainant is that whenever the respondent used
G
to make cash purchases, cash memos/receipts were issued to the
respondent and the above twenty receipts Ex.-22/C (colly) pertain to
cash sale. Complainant-PW-1 further stated that the cheques issued by
the respondent-accused are subject matter of the complaints and pertain
to the credit purchases made by the respondent-accused and the
H
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 379
[R. BANUMATHI, J.]

respondent has not made the payment or cleared the dues of the purchases A
made by him on credit. On the other hand, case of the respondent is that
he always used to make credit purchase and used to leave blank cheques
with the complainant-appellant and thereafter, he used to make payment
for which the complainant used to issue receipts to the respondent;
however, the appellant did not return the blank cheques left by the
B
respondent with the appellant though the respondent made the payments
and those cheques were misused by the appellant-complainant.
13. As seen from the receipts-Ex.-16/C (colly) and Ex.-22/C (colly),
though the amount said to have been credited to the account of the
respondent, the receipts contain the expression “cheques are subject to
realisation”. The format of the receipt-Ex.-16 (colly) is as under:- C

M (CST) 4265 dt. 4.9.91 Tel: ..............
M (ST) 6104 dt. 4.9.91 Res: ..............

M/s SHREE DANESHWARI TRADERS D
General Merchant & Commission Agent
Shop No.8, Masjid Building
Malbhar, MARGAO-GOA
No.1145 Date: 18.8.03
RECEIPT E
Credited to the account of M/s Shantadurga Stores, Margao, the amount
of Rs. Fifteen Thousand only, by Cash/Cheque/Draft Rs.15,000/-.

For M/s. Shree Daneshwari Traders
L/F ______________________ F

Cheques are subject to realisation.
Case of the appellant is that the receipts-Ex.-22/C (colly) were
issued by the appellant to the respondent towards cash payment made
by the respondent during the course of business. The courts below G
failed to consider that Ex.-22/C (colly) were issued by the appellant to
the respondent as against the cash payment made by respondent.
Whereas the cheques were issued towards the credit purchases of
commodities from the complainant which is a legally enforceable debt.
H
380 SUPREME COURT REPORTS [2019] 11 S.C.R.

A 14. DW-2 is the father of respondent-accused. In his evidence,
DW-2 stated that the respondent used to leave blank cheques with him
in order to carry out the business transaction. DW-2 has stated that
they used to purchase rice bags from the complainant and had left the
cheques with the complainant. Admittedly, the cheques are in the
handwriting of DW-2. In his evidence, DW-2 stated that though the
B
amount pertaining to the purchase of rice has already paid, the complainant
did not return the cheques in spite of having received the amount pertaining
to the purchase of rice. It is quite unbelievable that in a business/
mercantile transaction, the accused even after making payment towards
the purchase of rice bags, did not insist for the return of the cheques. It
C is quite improbable that the respondent-accused did not take any steps
to get back the cheques and continued with the business transaction
even though the complainant has not returned the cheques after payment
of the money.
15. The trial court in its judgment referred to the three cheques
D and observed that the three cheques bearing Nos.2463, dated 18.08.2003;
2480 dated 25.08.2003 and 2497 dated 08.08.2003 go to suggest that the
later cheque bearing No.2497 was given much more earlier to 18.08.2003
or 25.08.2003 which seems inconsistent and it would not have been in
the normal course of business. The trial court held that the date of
issuance of the three cheques suggests that the cheques were already
E with the complainant and they were utilised by the complainant thereafter.
On this aspect, PW-1 was cross-examined as to why cheque bearing
No.2497 was issued on 08.08.2003 while it ought to have been issued
after 25.08.2003 to which PW-1 stated that he does not know about the
same. After referring to the above three cheques, the trial court held
F that in view of inconsistency, the presumption available under Section
139 of the Negotiable Instruments Act is not available to the complainant
which was affirmed by the High Court. It was further held that the
blank cheques left by the accused were with the complainant and they
have been used to file the complaint. The courts below did not keep in
view that the appellant has no control over the manner of issuance of
G cheques by the respondent and how it was issued. Merely because,
later cheque No.2497 was said to have been issued by the respondent at
an earlier date i.e. 08.08.2003, it cannot be held that the complainant had
used the blank cheques issued by the respondent.
16. Under Section 138 of the Negotiable Instruments Act, once
H the cheque is issued by the drawer, a presumption under Section 139 of
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 381
[R. BANUMATHI, J.]

the Negotiable Instruments Act in favour of the holder would be attracted. A
Section 139 creates a statutory presumption that a cheque received in
the nature referred to under Section 138 of the Negotiable Instruments
Act is for the discharge in whole or in part of any debt or other liability.
The initial burden lies upon the complainant to prove the circumstances
under which the cheque was issued in his favour and that the same was
B
issued in discharge of a legally enforceable debt.
17. It is for the accused to adduce evidence of such facts and
circumstances to rebut the presumption that such debt does not exist or
that the cheques are not supported by consideration. Considering the
scope of the presumption to be raised under Section 139 of the Act and
the nature of evidence to be adduced by the accused to rebut the C
presumption, in Kumar Exports v. Sharma Carpets (2009) 2 SCC
513, the Supreme Court in paras (14-15) and paras (18-20) held as
under:-
“14. Section 139 of the Act provides that it shall be presumed,
unless the contrary is proved, that the holder of a cheque received D
the cheque of the nature referred to in Section 138 for the
discharge, in whole or in part, of any debt or other liability.
15. Presumptions are devices by use of which the courts are
enabled and entitled to pronounce on an issue notwithstanding
that there is no evidence or insufficient evidence. Under the E
Evidence Act all presumptions must come under one or the other
class of the three classes mentioned in the Act, namely, (1) “may
presume” (rebuttable), (2) “shall presume” (rebuttable), and (3)
“conclusive presumptions” (irrebuttable). The term “presumption”
is used to designate an inference, affirmative or disaffirmative of F
the existence of a fact, conveniently called the “presumed fact”
drawn by a judicial tribunal, by a process of probable reasoning
from some matter of fact, either judicially noticed or admitted or
established by legal evidence to the satisfaction of the tribunal.
Presumption literally means “taking as true without examination
or proof”. G
……..
18. Applying the definition of the word “proved” in Section 3 of
the Evidence Act to the provisions of Sections 118 and 139 of the
Act, it becomes evident that in a trial under Section 138 of the Act
H
382 SUPREME COURT REPORTS [2019] 11 S.C.R.

A a presumption will have to be made that every negotiable instrument
was made or drawn for consideration and that it was executed
for discharge of debt or liability once the execution of negotiable
instrument is either proved or admitted. As soon as the complainant
discharges the burden to prove that the instrument, say a note,
was executed by the accused, the rules of presumptions under
B
Sections 118 and 139 of the Act help him shift the burden on the
accused. The presumptions will live, exist and survive and shall
end only when the contrary is proved by the accused, that is, the
cheque was not issued for consideration and in discharge of any
debt or liability. A presumption is not in itself evidence, but only
C makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase “until the contrary is proved” in Section
118 of the Act and use of the words “unless the contrary is proved”
in Section 139 of the Act read with definitions of “may presume”
and “shall presume” as given in Section 4 of the Evidence Act,
D makes it at once clear that presumptions to be raised under both
the provisions are rebuttable. When a presumption is rebuttable, it
only points out that the party on whom lies the duty of going forward
with evidence, on the fact presumed and when that party has
produced evidence fairly and reasonably tending to show that the
real fact is not as presumed, the purpose of the presumption is
E over.
20. The accused in a trial under Section 138 of the Act has two
options. He can either show that consideration and debt did not
exist or that under the particular circumstances of the case the
non-existence of consideration and debt is so probable that a
F prudent man ought to suppose that no consideration and debt
existed. To rebut the statutory presumptions an accused is not
expected to prove his defence beyond reasonable doubt as is
expected of the complainant in a criminal trial. The accused may
adduce direct evidence to prove that the note in question was not
G supported by consideration and that there was no debt or liability
to be discharged by him. However, the court need not insist in
every case that the accused should disprove the non-existence of
consideration and debt by leading direct evidence because the
existence of negative evidence is neither possible nor contemplated.
At the same time, it is clear that bare denial of the passing of the
H
M/S. SHREE DANESHWARI TRADERS v. SANJAY JAIN 383
[R. BANUMATHI, J.]

consideration and existence of debt, apparently would not serve A
the purpose of the accused. Something which is probable has to
be brought on record for getting the burden of proof shifted to the
complainant. To disprove the presumptions, the accused should
bring on record such facts and circumstances, upon consideration
of which, the court may either believe that the consideration and
B
debt did not exist or their non-existence was so probable that a
prudent man would under the circumstances of the case, act upon
the plea that they did not exist. Apart from adducing direct evidence
to prove that the note in question was not supported by
consideration or that he had not incurred any debt or liability, the
accused may also rely upon circumstantial evidence and if the C
circumstances so relied upon are compelling, the burden may
likewise shift again on to the complainant. The accused may also
rely upon presumptions of fact, for instance, those mentioned in
Section 114 of the Evidence Act to rebut the presumptions arising
under Sections 118 and 139 of the Act.” [underlining added].
D
18. In the present case, by examining himself as PW-1, the
complainant has discharged the initial burden cast upon him that the
cheques were issued for the rice bags purchased on credit. With the
examination of PW-1, the statutory presumption under Section 139 of
the Act arises that the cheques were issued by the respondent-accused
for the discharge of any debt or other liability in whole or in part. The E
courts below disbelieved the evidence of the complainant on the ground
that there are no averments in the complaint that the commodities were
sold for cash and that the rice bags were sold on credit and the cheques
were issued for the goods sold on credit. Though the complaint contains
no specific averments that the cheques were issued for the purchase F
made on credit, in his evidence, PW-1 clearly stated that the cheques
were issued for the commodities purchased on credit. The courts below
erred in brushing aside the evidence of PW-1 on the ground that there
were no averments in the complaint as to the purchases made by cash
and purchase. The courts below also erred in not raising the statutory
presumption under Section 139 of the Act that the complainant received G
the cheques to discharge the debt or other liability in whole or in part.
19. It is for the respondent-accused to adduce evidence to prove
that the cheques were not supported by consideration and that there
was no debt or liability to be discharged by him. The receipts-Ex.-22/C
H
384 SUPREME COURT REPORTS [2019] 11 S.C.R.

A (colly) relied upon by the respondent-accused do not create doubt about
the purchases made on credit and the existence of a legally enforceable
debt for which the cheques were issued. The courts below erred in
saying that by the receipts-Ex.22/C (colly), the respondent-accused has
rebutted the statutory presumption raised under Section 139 of the
Negotiable Instruments Act. The oral and the documentary evidence
B
adduced by the complainant are sufficient to prove that it was a legally
enforceable debt and that the cheques were issued to discharge the
legally enforceable debt. With the evidence adduced by the complainant,
the courts below ought to have raised the presumption under Section
139 of the Act. The evidence adduced by the respondent-accused is not
C sufficient to rebut the presumption raised under Section 139 of the Act.
The defence of the respondent that though he made payment for the
commodities/rice bags, the blank cheques were not returned by the
appellant-complainant is quite unbelievable and unacceptable. The
impugned judgment of the High Court cannot be sustained and is liable
to be set aside. The respondent-accused is convicted under Section 138
D
of the Negotiable Instruments Act in both the complaints; however,
considering that the cheque transaction was of the year 2003, at this
distant point of time, we do not deem it appropriate to impose any
sentence of imprisonment on the accused.
20. In the result, the impugned judgment of the High Court in
E Criminal Appeal Nos.53 and 54 of 2006 is set aside and these appeals
are allowed. The respondent-accused is convicted under Section 138 of
Negotiable Instruments Act and a fine of Rs.2,97,150/- (Rs.53,171/- +
Rs.1,93,979/- + compensation of Rs.50,000/-) is imposed on the
respondent in default of which, the respondent shall undergo imprisonment
F for six months. The fine amount of Rs.2,97,150/- is to be deposited before
the trial court within twelve weeks from today, failing which the
respondent shall be taken into custody to serve the default sentence.
On deposit of fine amount, the amount of Rs.2,97,150/- shall be paid to
the appellant-complainant.
G
Devika Gujral Appeals allowed.

H