Under the Negotiable Instruments Act, 1881 (NI Act), specific presumptions are established in favour of the holder of a cheque, particularly in cases of dishonour under Section 138. These presumptions are crucial for the effective functioning of commercial transactions and to instill confidence in negotiable instruments. The primary presumptions are found in Sections 118 and 139 of the Act.

Presumption in Favour of the Holder of a Cheque:

1. Presumption as to Consideration (Section 118(a) of NI Act): This section states that until the contrary is proved, every negotiable instrument (including a cheque) was made or drawn for consideration, and that every such instrument, when accepted, endorsed, negotiated, or transferred, was accepted, endorsed, negotiated, or transferred for consideration.

2. Presumption as to Debt or Other Liability (Section 139 of NI Act): This is the most significant presumption in the context of cheque dishonour cases. Section 139 states: "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." This means that when a cheque is presented and dishonoured, the law presumes that the cheque was issued by the drawer to discharge a legally enforceable debt or liability owed to the payee (the holder).

These presumptions are 'rebuttable presumptions of law' (presumptio juris), meaning they stand true unless disproved by the party against whom they operate (i.e., the drawer of the cheque).

How can the Presumption be Rebutted?

The burden of proof to rebut these presumptions lies squarely on the drawer of the cheque. The standard of proof required for rebuttal is that of 'preponderance of probabilities' and not 'beyond reasonable doubt'. The drawer does not need to prove their case with absolute certainty; they only need to show that the existence of the debt or liability is improbable or that the cheque was not issued for a legally enforceable debt. This can be done by leading evidence or even by relying on the circumstances appearing in the prosecution's own case.

Common ways to rebut the presumption include:

1. Absence of Legally Enforceable Debt/Liability: The most common defence is to prove that there was no legally enforceable debt or liability for which the cheque was issued. This could involve:

   • Gift or Loan without Expectation of Repayment: Proving the cheque was given as a gift or a friendly loan without an intention of creating a legally enforceable debt.
   • Security Cheque: Arguing that the cheque was given as a security for a future transaction or a potential liability that never materialized, and not for an existing debt. However, the Supreme Court has clarified that even a security cheque can attract Section 138 if it is issued for a 'debt or other liability' that has become legally enforceable at the time of presentation.
   • Cheque for Illegal/Unenforceable Transaction: Proving that the underlying transaction for which the cheque was issued was illegal, immoral, or otherwise unenforceable in law (e.g., a gambling debt in jurisdictions where it's illegal).
   • Cheque for Time-Barred Debt: Demonstrating that the debt for which the cheque was issued was time-barred under the Limitation Act, as a time-barred debt is generally not a 'legally enforceable debt'.

2. Misuse of Cheque: Proving that the cheque was not issued for the purpose alleged by the complainant, but was misused. For example:

   • Lost or Stolen Cheque: Proving that the cheque was lost or stolen and subsequently misused by the complainant.
   • Cheque given for a different purpose: Proving that the cheque was given for a specific purpose (e.g., for a future payment, or as an advance for a contract that was later cancelled) and was misused by the complainant for a different, non-existent debt.
   • Blank Cheque Misused: Arguing that a blank signed cheque was given for a different purpose and was later filled in by the complainant for an amount not owed.

3. Failure of Consideration: Proving that the consideration for which the cheque was issued has failed (e.g., goods for which the cheque was paid were never delivered or were defective).

4. Lack of Signature/Authority: While less common for rebuttal of debt, proving that the signature on the cheque is not that of the drawer or that the person signing lacked authority.

Evidentiary Value:

The drawer can rebut the presumption by adducing direct evidence, cross-examining the complainant's witnesses, or by pointing out lacunae or inconsistencies in the prosecution's case. The standard is not to prove innocence beyond reasonable doubt, but merely to raise a probable defence that casts doubt on the existence of the debt or liability. Once the drawer successfully raises a probable defence, the burden shifts back to the complainant to prove the existence of the debt or liability beyond reasonable doubt.