Presumption of legally enforceable debt under Section 139 NI Act cannot be rebutted at pre-trial stage.

The appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act) against the second respondent, a mediator and friend of the appellant’s husband.

Following a matrimonial and property dispute settlement, the husband agreed to pay the appellant ₹50 crores.

To safeguard this interest, the second respondent issued a cheque for ₹50 crores on January 12, 2022.

The cheque was dishonoured on April 6, 2022, with the remark "payment stopped by drawer".

Despite a statutory notice, no payment was made, leading the Metropolitan Magistrate to issue process on June 17, 2022.

The Sessions Court, however, set aside this order, holding that no legally enforceable debt existed at the time of issuance because the settlement agreement was unsigned by the respondent.

The High Court of Bombay upheld the Sessions Court's decision, leading to this appeal.

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

Section 139 stipulates a mandatory "reverse onus" presumption that the holder of a cheque received it for the discharge of a debt or liability.

This principle was reinforced by Rangappa v. Sri Mohan, which clarifies that the presumption includes the existence of a legally enforceable debt.

Furthermore, in Rajesh Jain v. Ajay Singh, the court held that once the signature and issuance of the cheque are admitted, the evidential burden shifts to the accused to prove the contrary during the trial.

The Supreme Court observed that at the stage of issuing process, the Magistrate is only required to verify the prima facie ingredients of Section 138: issuance of the cheque, dishonour, statutory notice, and filing within the limitation period.

The Court reasoned that since the second respondent did not dispute the signature or the issuance of the cheque, the statutory presumption under Section 139 was immediately triggered.

The Sessions Court erred by conducting a mini-trial and giving undue weight to the fact that the settlement agreement was unsigned, thereby "washing away" the statutory presumption before the trial even commenced.

The Court emphasized that the rebuttal of such a presumption is a matter of evidence to be determined during the trial, not a summary determination to be made at the pre-trial stage.

The Court held that the dismissal of the complaint at the pre-trial stage was unjustified as the basic ingredients of Section 138 were satisfied.

The complaint (CC1831/SC/2022) was restored for adjudication on its merits, with a clarification that the trial court should decide the matter independently of any observations made in this judgment.