Rangappa v. Sri Mohan

The Legal Question Before the Court

In prosecutions under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) for dishonour of a cheque, the accused routinely disputed the existence of a legally enforceable debt — arguing that the cheque was given as security, for an illegal purpose, or without any consideration. The question was: how much must the accused do to rebut the statutory presumptions under Sections 118(a) and 139 of the NI Act, and what precisely do those presumptions cover?

The Court's Decision

The court held that the presumptions under Sections 118(a) and 139 of the NI Act are broad and cover the existence of a legally enforceable debt or liability. Once the accused's signature on the cheque is established (which is usually admitted), the court must presume: (a) that the cheque was made for consideration under Section 118(a); and (b) that the cheque was issued for the discharge of a legally enforceable debt or liability under Section 139.

To rebut these presumptions, the accused must raise a probable defence — not merely a bare denial or a perfunctory assertion that the cheque was given as security or blank. The standard for rebuttal is preponderance of probabilities: the accused must show that it is more probable than not that the debt did not exist or was not legally enforceable. A mere denial, or the fact that the underlying transaction is disputed, does not displace the presumption.

The Court's Reasoning

The court examined the legislative intent behind Section 138, which was introduced into the NI Act by the 1988 amendment specifically to address the menace of dishonoured cheques in commercial transactions. The provision was enacted to enhance the credibility of cheques as instruments of payment and to impose criminal liability on drawers who issue cheques without funds or with the intent that they should not be honoured.

The presumptions in Sections 118 and 139 are rebuttable presumptions of law. They shift the evidential burden to the accused to disprove what the legislature has presumed in favour of the complainant. The court held that this shift is constitutionally valid and is consistent with the accused's right to a fair trial under Article 21 — since the accused is not deprived of the opportunity to lead evidence; they are merely required to raise a plausible defence on the balance of probabilities.

Practical Implications — What This Means Today

Rangappa is the leading authority on the evidentiary dynamics of Section 138 proceedings and is cited in virtually every cheque dishonour case before the magistrate courts. Its practical implications are significant for both complainants and accused.

For complainants pursuing cheque dishonour cases, this ruling confirms that proving the dishonour and the demand notice is sufficient to establish a prima facie case. The burden then shifts to the accused. A complainant who has a dishonoured cheque, a valid demand notice, and a service-confirmed return does not need to lead additional evidence of the debt at the outset.

For accused persons, the ruling clarifies that merely asserting that the cheque was given "as security" or "without consideration" is not enough. The accused must lead positive evidence — bank records, correspondence, witness testimony — to support a probable version of events that negates the debt. An unsupported denial is invariably fatal at the trial stage.

Relevant Statutory Provisions

• Section 138, Negotiable Instruments Act, 1881 — Dishonour of cheque for insufficiency of funds — criminal liability
• Section 118, Negotiable Instruments Act, 1881 — Presumption as to negotiable instruments — consideration
• Section 139, Negotiable Instruments Act, 1881 — Presumption in favour of holder — legally enforceable debt
• Section 140, Negotiable Instruments Act, 1881 — Defence which may not be allowed in prosecution under Section 138

Analysis by Vinode V. Luka, Advocate | Published: May 2026 | Last reviewed: May 2026