Interplay between statutory presumptions under Section 139 NI Act and the burden of rebutting financial capacity.

The applicant (complainant) advanced a loan of ₹4,70,000 to the respondent (accused) in September 2003 for business purposes, against which the accused executed a promissory note

To discharge the debt, the accused issued a cheque dated 04/09/2004 from his firm, Shri Bhavani Jewellers

The cheque was returned on 06/09/2004 with the memo "Today’s Opening Balance Insufficient"

Despite a statutory notice sent via Registered A.D. on 20/09/2004, the accused failed to repay the amount

The Metropolitan Magistrate convicted the accused under Section 138 of the NI Act, sentencing him to one year of simple imprisonment and a ₹5,000 fine

On appeal, the City Sessions Judge, Ahmedabad, reversed the conviction and acquitted the accused on 22/11/2010, citing a lack of legally enforceable debt and non-service of notice

The complainant then filed this revision application.

1. Whether the learned Sessions Court erred in overturning the conviction by failing to apply the statutory presumptions under Sections 118 and 139 of the NI Act

2. Whether the non-disclosure of the loan amount in Income Tax returns and the dispute over handwriting are sufficient to rebut the presumption of a legally enforceable debt

3. Whether the statutory notice was deemed served under Section 27 of the General Clauses Act when sent to the correct address

The court applied Section 138 of the Negotiable Instruments (NI) Act, 1881 regarding the dishonour of cheques for insufficiency of funds

It relied on the statutory presumptions under Sections 118 and 139 of the NI Act, which mandate that a cheque is presumed to be issued for consideration and discharge of debt once the signature is admitted

The court cited Kalamani Tex v. P. Balasubramanian and Rajesh Jain v. Ajay Singh regarding the burden of the accused to raise a "probable defence" through a preponderance of probabilities.

Section 27 of the General Clauses Act, 1897 and C.C. Alavi Haji v. Palapetty Muhammed were applied to establish the presumption of service of notice sent to a correct address

The High Court found that the Sessions Court failed to re-appreciate the evidence and ignored the reasoning of the Trial Court

Since the accused admitted his signature on the cheque, the legal presumption under Section 139 was triggered, shifting the burden to the accused to prove the non-existence of debt

The accused’s defence—that the cheque was given only to show a bank balance for his wife’s travel—was deemed improbable as the cheque was deposited in the complainant’s account

The Court held that the absence of the transaction in Income Tax returns does not automatically negate the existence of a debt, nor does the claim that the complainant filled the body of the cheque, provided the signature is genuine (citing Bir Singh v. Mukesh Kumar)

Furthermore, because the notice was sent to the same address the accused used in court proceedings, the Sessions Court erred in concluding the notice was not served

The court quashed and set aside the acquittal order dated 22/11/2010. The matter was remanded to the Additional Sessions Judge to pass a fresh order in the Criminal Appeal within two weeks, in accordance with the legal principles discussed