Presumption U/S 139 Negotiable

Instruments Act, 1881 and

How it can be shifted to Section 118 of the
Act
Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66
of 1988 with the object of inculcating faith in the efficacy of banking operations
and giving credibility to negotiable instruments in business transactions. These
provisions were intended to discourage people from not honouring the
commitments by way of payment through cheques. It is for this reason that the
Courts should lean in favour of an interpretation which serves the object of the
statue.
Section 118 - Presumptions as to negotiable instruments—Until the contrary is
proved, the following presumptions shall be made:

(a) of consideration—that every negotiable instrument was made or drawn for

consideration, and that every such instrument, when it has been accepted,
endorsed, negotiated or transferred, was accepted, endorsed, negotiated or
transferred for consideration;
(b) as to date —that every negotiable instrument bearing a date was made or
drawn on such date;
(c) as to time of acceptance —that every accepted bill of exchange was accepted
within a reasonable time after its date and before its maturity;
(d) as to time of transfer —that every transfer of a negotiable instrument was
made before its maturity;
(e) as to order of indorsements —that the indorsements appearing upon a
negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps —that a lost promissory note, bill of exchange or cheque was
duly stamped;
(g) that holder is a holder in due course —that the holder of a negotiable
instrument is a holder in due course:
Section 139- Presumption in favour of holder—It shall be presumed, unless the
contrary is proved, that the holder of a cheque received the cheque of the nature
referred to in Section 138 for the discharge, in whole or in part, of any debt or
other liability.”
Dealings in cheques are vital and important not only for banking purposes but
also for the commerce and industry and the economy of the country. But
pursuant to the rise in dealings with cheques also rises the practice of giving
cheques without any intention of honouring them. Before 1988 there being no
effective legal provision to restrain people from issuing cheques without having
sufficient funds in their account or any stringent provision to punish them in the
vent of such cheque not being honoured by their bankers and returned unpaid.
Of course on dishonour of cheques there is a civil liability accrued.
Section 1381 creates statutory offence in the matter of dishonour of cheques on
the ground of insufficiency of funds in the account maintained by a person with
the banker. Section 138 of the Act can be said to be falling either in the acts
which are not criminal in real sense, but are acts which in public interest are
prohibited under the penalty or those where although the proceeding may be in
criminal form, they are really only a summary mode of enforcing a civil right.
Normally in criminal law existence of guilty intent is an essential ingredient of a
crime. However the Legislature can always create an offence of absolute liability
or strict liability where ;mens rea; is not at all necessary.
It is enough if a cheque is drawn by the accused on an account maintained by
him with a banker for payment of any amount of money to another person from
out of that account for discharge in whole or in part, of any debt or other
liability due.

Presumption2 - According to NI Act

The presumption under Sections 118 and 139 of the Negotiable Instrument Act
was required to be drawn that the cheques were issued for consideration and
until contrary was proved, such presumption would hold good and that the
complainant had proved legally enforceable debt in the oral as also
documentary evidence, including the written acknowledgment by the accused
on stamp paper; and that except bare denial, nothing was brought on record
by the accused to dislodge the proof adduced by the complainant.
1
http://www.legalserviceindia.com/articles/sec138.htm
2
https://www.vakilno1.com/legal-news/presumption-under-sec-139-of-ni-act-once-presumption-is-drawn-
complainant-need-not-prove-source-of-fund-sc.html
 A presumption was to be made that every negotiable instrument was made or
drawn for consideration and that it was executed for the discharge of debt or
liability once the execution of negotiable instrument was either proved or
admitted.
When the complainant discharged the burden to prove that the cheque was
executed by the accused, the rules of presumptions under Sections 118 and
139 were very much available to the complainant and the burden shifted on
the accused. However, this presumption was rebuttable. Under the
circumstances, it was the duty of the accused before the court by adducing
that the cheque was not supported by consideration and that there was no
debt or liability to be discharged as alleged.
In the Cheque Bounce/Misuse3 cases, the complainant's position is strong as
he has a cheque. The complainant has to issue a demand notice letter keeping
in view the provisions of Section 138, the complaint application should contain
the provisions of Section 138 only then the complainant is entitled to the
benefit of Sections 139 and 118 otherwise. The defendants can avail the
benefit of lack of pleading. If the provisions of Section 138 (a)(b)(c) are not
present in the complaint application, the indent is not valid and can be dismiss.
It is required to be presumed that the cheques in question were drawn for
consideration and the holder of the cheques. The onus therefore, shifts4 on
the accused-appellant to establish a probable defence so as to rebut such a
presumption.
Let understand these sections of NI with reference to some important
Case Laws,
 Rohitbhai Jivanlal Patel v. State of Gujrat & ors.

The High Court while passing it’s order in the case observed that the
presumption under Sections 118 and 139 of the Negotiable Instrument
Act was required to be drawn that the cheques were issued for
consideration and until contrary was proved, such presumption would
hold good and that the complainant had proved legally enforceable debt
in the oral as also documentary evidence, including the written

3
http://www.legalserviceindia.com/legal/article-1109-misuse-and-violation-of-section-138-negotiable-
instrument-act-1881.html
4
https://www.vakilno1.com/legal-news/presumption-under-sec-139-of-ni-act-once-presumption-is-drawn-
complainant-need-not-prove-source-of-fund-sc.html
 acknowledgment by the accused on stamp paper; and that except bare
denial, nothing was brought on record by the accused to dislodge the
proof adduced by the complainant.

Remarkable observations5 made by apex court in this case;

 That an accused is presumed to be innocent unless proved guilty

beyond reasonable doubt and a judgment of acquittal further
strengthens such presumption in favor of the accused. However, such
restrictions need to be visualized in the context of the particular
matter before the Appellate Court and the nature of inquiry therein.
That the same rule with same rigor cannot be applied in a matter
relating to the offence under Section 138 of the NI Act, particularly
where a presumption is drawn that the holder has received the
cheque for the discharge, wholly or in part, of any debt or liability.
 That though the accused is entitled to bring on record the relevant
material to rebut such presumption and to show that preponderance
of probabilities are in favour of his defence but while examining if the
accused has brought about a probable defence so as to rebut the
presumption, the Appellate Court is certainly entitled to examine the
evidence on record in order to find if preponderance indeed leans in
favour of the accused.
 While noting the facts of the case, the Supreme Court was of the view
that all the basic ingredients of Section 138 as also of Sections 118
and 139 are apparent on the face of the record. Therefore, it is
required to be presumed that the cheques in question were drawn
for consideration and the holder of the cheques. The onus therefore,
shifts on the accused-appellant to establish a probable defence so as
to rebut such a presumption.

 Jaswant Singh v/s Shallu Jaswal6

Facts:

5
https://www.vakilno1.com/legal-news/presumption-under-sec-139-of-ni-act-once-presumption-is-drawn-
complainant-need-not-prove-source-of-fund-sc.html
6
https://indiankanoon.org/doc/192620450/
On 15.6.2005, the respondent and her husband approached the
appellant with an intention to purchase remaining share of Khasra No.
1601, situated in Village Sanghnai in presence of respectable persons of
the village. The appellant agreed to sell the same and consideration was
settled at Rs. 35,000/- in between both the parties. At the relevant time,
the respondent and her husband paid sale consideration of Rs. 35,000/-
by way of cheque No. 167409 of Punjab National Bank, Gagret, District
Una, H.P. making it post-dated as on 10.11.2005. A written agreement
was also entered into, which was duly signed by the respondent and her
husband. It was also agreed that if the cheque isreturned without
payment, then respondent and her husband shall be liable to pay double
of cheque amount. Consequently, the sale deed was executed on
17.8.2005. At the time of registration of sale deed, the appellant bona
fidely stated that consideration amount had been received by him on
the basis of aforesaid cheque of Rs. 35,000/- and consideration was
shown as Rs. 10,000/- on the request of respondent’s husband, who
along with deed writer had pretended that consideration must have to
be shown in the registered sale deed. Thereafter, the appellant
requested many times to the respondent to pay cheque amount, but of
no avail. On 31.12.2005, the appellant presented the cheque, but on
2.1.2006, the same was returned back unpaid with the remarks
“insufficient funds”. Thereafter, on 20.1.2006, the appellant issued a
legal notice to the respondent, yet the payment was not made
constraining him to file complaint under Section 138 of the Act.

In support of his complaint, the appellant examined three witnesses, but

the learned trial Court after recording the evidence and evaluating the
same dismissed the complaint vide judgment dated 14.12.2007 on the
ground that the appellant had failed to prove his case beyond shadow of
doubt.

It is vehemently argued by Mr. Tenzin Tashi Negi, learned vice Counsel

for the appellant, that the learned trial Court has failed to take into
consideration the presumption attached to the negotiable instrument
as per Sections 118(a) and 139 of the Act and thereby reached at a
wrong conclusion, whereas on the other hand, Mr. Sandeep K. Sharma,
learned Counsel for the respondent, would argue that no exception can
be taken to the findings recorded by the learned trial Court, more
particularly, when the appellant has failed to prove his case
  Jagdamba Nursery vs . Pramod Kumar on 24 April, 2019

The cheque in question was executed by the accused in favour of the

complainant, has not been denied nor was it in dispute that the cheques
were dishonoured because of insufficient funds in the accused account
with the drawer, viz. State Bank of India.
The court in the case has to consider whether the accused has
supported his defence by any proof sufficient to rebut the presumption
drawn against him.
Negotiable CC NO.13430/2016, PS- ANAND VIHAR Page 16/18
JAGDAMBA NURSERY vs. PRAMOD KUMAR Instruments Act it is the
case of the accused that the accused had visited the complainant's office
at least on three occasions and asked the complainant to deliver the said
plants clearly indicating first; the complainant had nursery or an office
from where the complainant was selling plants and second; that the
accused had made an agreement with respect to supplying of plants by
the complainant to the accused. Moreover the defense of the accused
that the complainant did not supply the plants which was agreed to be
deliver indicating that the cheque in question was without any valid
consideration is answered against the accused by the presumption
under section 118 of Negotiable Instruments Act that until the contrary
is proved it shall be presumed that every negotiable instrument was
made or drawn for consideration. In the entire record of the
cross-examination of the complainant there is nothing contrary to the
presumption under section 118 of Negotiable Instruments Act.

 K.N. Beena v/s Muniyappan and Another7

Criminal Appeal No. 1066 of 2001
Decided On, 18 October 2001

The appellant filed a complaint under section 138 of the Negotiable Instruments Act, 1881,
as the cheque dated April 6, 1993, in a sum of Rs. 63, 720 issued by the first respondent in
favour of the appellant on Central Bank, had been dishonoured with the remarks
"insufficient funds". The appellant had issued a legal notice dated April 28, 1993. Receipt of

7
https://www.casemine.com/judgement/in/5609ad97e4b0149711411cbd
the said notice is admitted. A reply dated May 21, 1993, was sent by the first respondent.
However, no payment was made.
After trial the judicial Magistrate-II, Kumbakonam, convicted the first respondent under
section 138 and directed payment of a fine of Rs. 65, 000. In default the first respondent
was to suffer simple imprisonment for one year. The first respondent challenged the
conviction and sentence by filing Criminal Appeal No. 32 of 1995. The same came to be
dismissed by the Sessions judge on August 28, 1995.
The judgment erroneously proceeds on the basis that the burden of proving consideration
for a dishonoured cheque is on the complainant. It appears that the learned judge had lost
sight of sections 118 and 139 of the Negotiable Instruments Act. Under section 118, unless
the contrary was proved, it is to be presumed that the negotiable instrument (including a
cheque) had been made or drawn for consideration.