High Court Cannot Quash Section 138 Proceedings Where Disputed Facts Require Rebuttal of Statutory Presumption at Trial

The applicant, a retired Lt. Colonel and Director of a construction company, approached respondent no.2 (a money lender) for a loan of ₹5 Crores at 4% interest due to financial crunch

A notarized "Agreement of Amount Borrowed" was executed, and five cheques were issued as security

The complainant alleged he lent ₹1 Crore, of which ₹50 Lakhs was repaid; however, a cheque for the balance (₹54 Lakhs including interest) was returned with a "stop payment" endorsement

The applicant claimed the lender failed to disburse the full agreed amount and that the cheques were misused

After the applicant failed to respond to a legal notice and failed to appear during a pre-cognizance hearing under Section 223 of BNSS, the 2nd Additional Chief Judicial Magistrate, Nadiad, issued a summons

The applicant filed this petition under Section 528 of the BNSS (formerly Section 482 CrPC) to quash the proceedings

1. Whether a complaint under Section 138 of the N.I. Act can be quashed under Section 528 of the BNSS when there are disputed questions of fact regarding the existence of a legally enforceable debt

2. Whether the statutory presumption under Section 139 of the N.I. Act mandates that the burden of proof lies upon the accused to be discharged during trial rather than at the quashing stage

The court primarily applied Section 138 and Section 139 of the Negotiable Instruments Act, 1881, which establish the offence of cheque dishonour and the rebuttable presumption of a legally enforceable debt

It relied on Rathish Babu Unnikrishnan v. State (NCT of Delhi) (2022) and Rangappa v. Sri Mohan (2010), which affirm that Section 139 includes a presumption of existence of a debt and that this burden must be discharged by the accused during trial

the court cited Rajeshbhai Muljibhai Patel v. State of Gujarat (2020) to hold that disputed questions of fact should not be adjudicated in a quashing petition

The procedural framework for summoning was governed by Section 223 and Section 250 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023

The High Court observed that the applicant was the undisputed signatory of the cheques and had failed to reply to the statutory demand notice or appear before the Trial Court during the inquiry stage

The court found that the "Agreement of Amount Borrowed" supported the lender's claim of a debt, contradicting the applicant’s assertion that the loan did not materialize

Crucially, the court reasoned that the applicant's defenses—such as the lender's failure to disburse the full ₹5 Crores and the alleged misuse of security cheques—constituted "disputed questions of fact"

Applying the cited precedents, the court held that under Section 139 of the N.I. Act, there is a legal presumption in favor of the complainant that must be rebutted via evidence at trial. Adjudicating these merits at the Section 528 (BNSS) stage would prematurely extinguish the case and exceed the High Court's limited jurisdiction to interfere only in "rare cases" to prevent miscarriage of justice

The Court ruled that the statutory presumption of debt remains in force until rebutted by the accused during the trial process. Consequently, the prayer to quash Criminal Case No. 2407 of 2025 was denied, and the Rule was discharged