Defending a Cheque Bounce Case: The Presumption and How It Is Rebutted

The presumption

Once the accused admits signing the cheque, Section 139 of the Negotiable Instruments Act, 1881 requires the court to presume that it was issued for the discharge of a legally enforceable debt or liability. Section 118 adds presumptions about consideration and date. In Rangappa v. Sri Mohan (2010), the Supreme Court held that the presumption includes the existence of the debt itself.

Rebutting it

The presumption is rebuttable, and the accused need only raise a probable defence on a preponderance of probabilities, not prove it beyond reasonable doubt. In Basalingappa v. Mudibasappa (2019), the Supreme Court held that the accused may rely on the complainant's own evidence, including doubts about the complainant's financial capacity to advance the amount claimed.

Common defences

• No legally enforceable debt existed when the cheque was presented
• The cheque was given as security and the liability had not crystallised
• The debt had already been repaid in full or in part
• The amount filled in was more than the amount actually due
• The statutory notice was defective or not served, or the complaint was out of time
• In a company's case, the accused director was not in charge of its business

Security cheques

In Sripati Singh v. State of Jharkhand (2021), the Supreme Court held that a cheque given as security can still attract Section 138 if, on the date of presentation, the loan or liability had become due and remained unpaid. The defence that a cheque was 'only security' therefore depends on whether the liability existed when the cheque was presented.

Settlement and compounding

The offence is compoundable under Section 147 at any stage, including in appeal. Settling early usually reduces costs. Where a settlement is reached, its terms and the schedule of payments should be recorded before the court.