Burden of rebutting statutory debt presumption under Negotiable Instruments Act must be discharged during trial.

The Petitioner (accused) and Respondent (complainant) entered into a business arrangement regarding a "Preparation of Video Advertisement" project

The Respondent invested ₹8,50,000/- in three installments, and the parties executed a Memorandum of Understanding (MOU) on 18.08.2023, outlining profit-sharing and repayment terms

On 04.03.2025, the Petitioner issued a cheque for ₹8,50,000/- to refund the investment

The cheque was presented twice and returned unrealized due to "Funds Insufficient" on 06.03.2025 and 21.03.2025

After the Petitioner failed to respond to a statutory legal notice, the Respondent filed a complaint under Section 138 of the Negotiable Instruments (N.I.) Act, 1881. The Judicial Magistrate First Class, Kamrup(M), took cognizance and issued summons on 07.07.2025

The Petitioner sought quashment of these proceedings, contending that under the MOU, the debt was not legally enforceable because he had not yet received the contract payment from the State Department

1. Whether the criminal proceedings under Section 138 of the N.I. Act are liable to be quashed at the threshold on the ground that the debt was not legally enforceable as per the terms of an underlying MOU.

2. Whether the burden of proving the non-existence of a legally enforceable debt should be adjudicated at the stage of taking cognizance or during the trial.

The court primarily applied Section 138 and Section 139 of the Negotiable Instruments Act, 1881.

Section 139 establishes a statutory presumption that the holder of a cheque received it for the discharge of a debt or liability

The court relied on Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. (2000) 2 SCC 745 to define the ingredients of an offense under Section 138

It further applied the principle from M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd. (2002) 1 SCC 234, which mandates that the burden of proving the absence of a subsisting liability lies with the accused and must be discharged during the trial

Finally, the court followed Sumit Bansal v. M/s MGI Developers and Promoters and Another (2026) INSC 40, holding that courts must refrain from prematurely stifling prosecution when legal presumptions operate in favour of the complainant

The court reasoned that the complaint satisfied all the essential ingredients of Section 138 of the N.I. Act, as the cheque was issued, presented, dishonoured, and a notice was served without subsequent payment

Regarding the Petitioner's defense—that the debt was not yet "enforceable" under the MOU terms—the court determined that such a defense involves factual interpretations of the contract that cannot be decided in a quashing petition

Under Section 139, a legal presumption exists in favour of the complainant once the issuance and dishonour of the cheque are established

The court held that the Petitioner must rebut this presumption by proving that there was no existing debt at the time the cheque was drawn, a process that can only occur during a full trial where evidence is led

Therefore, invoking the High Court's jurisdiction under Section 528 BNSS (formerly Section 482 CrPC) to quash the case would be premature and would overlook the statutory weight of the legal presumption

It held that whether a legally enforceable debt existed at the relevant time, in light of the MOU dated 18.08.2023, is a matter of trial and not a ground for quashment

The Petitioner is required to establish his defense and rebut the statutory presumption of liability during the trial proceedings before the learned Magistrate