A complainant need not prove financial capacity absent a probable defence challenging it.

The complainant alleged that he lent the accused ₹1,50,000 on 15 November 2013 and ₹12,00,000 on 17 December 2013, and that the accused issued cheques for those amounts, which were dishonoured for insufficient funds.

After notice and non-payment, the complainant instituted two complaints under Section 138 of the Negotiable Instruments Act, 1881.

The trial court acquitted the accused, reasoning in part that the complainant had not established his financial capacity or adequately documented the loans.

The complainant appealed both acquittals.

1. Whether the trial court erred in finding that the accused had rebutted the presumptions under Sections 118 and 139 of the Negotiable Instruments Act.

2. Whether the complainant’s financial capacity and proof of the loan transactions were required in the circumstances, and whether the acquittals were based on a legally erroneous or perverse assessment warranting appellate interference.

Sections 118 and 139 of the Negotiable Instruments Act raise rebuttable presumptions, once execution of the cheque is admitted, that it was issued for consideration and in discharge of a legally enforceable debt or liability.

The accused may rebut those presumptions on a balance of probabilities by raising a probable defence; a bare denial is insufficient.

The complainant’s financial capacity becomes material where the accused first raises a probable challenge to it, after which the burden may shift back to the complainant to establish capacity.

The Court relied principally on Rangappa v. Sri Mohan, (2011) 11 SCC 441; Basalingappa v. Mudibasappa, (2019) 5 SCC 418; Rohitbhai Jivanlal Patel v. State of Gujarat, Criminal Appeal No. 508 of 2019; and APS Forex Services Pvt. Ltd. v. Shakti International Fashion Linkers, AIR 2020 SC 945.