Section 139 NI Act Presumption Is Mandatory: Supreme Court

Cheque Bounce Presumptions Are Mandatory and Must Be Rebutted by Proof, Not Bare Explanation: Supreme Court

Published: 11 October 2026 · NyayVidhan

A three-Judge Bench of the Supreme Court upheld a broker's conviction for dishonour of four cheques, each for crores of rupees, issued to Standard Chartered Bank in 1991-92 (paras 16, 39). It held that the presumptions under Sections 138 and 139 of the Negotiable Instruments Act are mandatory, that they "do not conflict with the presumption of innocence", and that they are rebutted only by proof making the defence probable to a prudent man (paras 21-23).

Key holdings

The Special Court under the 1992 Act may try offences relating to securities transactions made between 1 April 1991 and 6 June 1992, whenever the offence was committed (paras 11, 16).

Presumptions under Sections 138 and 139 are mandatory presumptions of law; they are rules of evidence and do not conflict with the presumption of innocence (para 21).

Rebuttal need not be conclusive, but a merely plausible explanation is not enough; it must be supported by proof that makes the defence probable to a prudent man (paras 22-23).

An averment in the written statement, without evidence on why the cheques were given, cannot rebut the presumptions (paras 35-36).

Brief Facts

The appellant, a securities broker, issued four cheques between December 1991 and March 1992 to Standard Chartered Bank; they were dishonoured in May 1992 (para 16). The Special Court constituted under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 convicted him under Section 138 and sentenced him to one year's rigorous imprisonment and a fine of Rs. 1 lakh (para 1). He said the cheques were given for intended purchases that never materialised (para 17). A two-Judge Bench referred to three Judges his objection that the Special Court could try only offences committed between 1 April 1991 and 6 June 1992, in view of apparently contradictory observations in Minoo Mehta (paras 2-4).

Court's Findings

The period in Section 3(2) of the 1992 Act qualifies the transactions in securities, not the offence, so the date of the offence is immaterial; the Preamble, Sections 4 and 9-A and Harshad Shantilal Mehta support this, and the summing up in Minoo Mehta was an obvious error (paras 8-15). The jurisdictional objection failed (para 16). On merits, Sections 138 and 139 require the court to presume the drawer's liability once the factual basis exists; such a presumption of law shifts the onus to the accused (paras 20-21). Rebuttal need not be conclusive, but the court must believe the defence or consider it reasonably probable, judged by a prudent man (para 22). Following Dhanvantrai Balwantrai Desai, a mandatory presumption is not displaced by "a bare explanation which is merely plausible" (para 23). The appellant did not enter the witness box, his witnesses said nothing about why the cheques were given, and his written statement contradicted his reply to the notice (paras 32, 35-36). An averment in the written statement was not enough; the presumptions prevailed (para 36). The attachment of his properties did not excuse non-payment, since he never sought the Special Court's permission to pay (para 38).

Legal Principle

Where the factual basis is established, the court must presume under Sections 138 and 139 of the Negotiable Instruments Act that the cheque was issued for a debt or liability. The accused rebuts it only by evidence showing the defence to be true or reasonably probable to a prudent man (paras 21-23).

Precedents Relied Upon

Minoo Mehta v. Shavak D. Mehta (1998) 2 SCC 418
Explained Discussed at ¶ 2, 4, 12, 13, 14, 15
Its summing up that the offence must be committed within the statutory period was an obvious error; read with its paragraph 15, the period relates to the transactions in securities.
Harshad Shantilal Mehta v. Custodian and Others
Followed Discussed at ¶ 11
The Special Court's civil and criminal jurisdiction is in respect of transactions in securities during the statutory period 1.4.1991 to 6.6.1992.
State of Madras v. A. Vaidyanatha Iyer AIR 1958 SC 61
Relied Upon Discussed at ¶ 21, 23
"Shall presume" makes the presumption obligatory and shifts the onus to the accused, an exception to the general rule on the burden of proof.

View all precedents (10)

Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay AIR 1961 SC 1316
Explained Discussed at ¶ 23
The Section 118 presumption could be rebutted by a presumption of fact under Section 114 of the Evidence Act — limited to its facts.
Dhanvantrai Balwantrai Desai v. State of Maharashtra AIR 1964 SC 575
Followed Discussed at ¶ 23
A mandatory presumption is rebutted only by proof, not by an explanation that is merely reasonable or plausible.
V.D. Jhingan v. State of Uttar Pradesh AIR 1966 SC 1762
Referred To Discussed at ¶ 23
On the burden of rebutting a mandatory presumption.
Sailendranath Bose v. The State of Bihar AIR 1968 SC 1292
Referred To Discussed at ¶ 23
On the burden of rebutting a mandatory presumption.
Ram Krishna Bedu Rane v. State of Maharashtra 1973 (1) SCC 366
Referred To Discussed at ¶ 23
On the burden of rebutting a mandatory presumption.
Trilok Chand Jain v. State of Delhi 1975 (4) SCC 761
Relied Upon Discussed at ¶ 36
To rebut a presumption the accused must show his explanation so probable that a prudent man would accept it, or that the material on record makes the presumed fact improbable.
Standard Chartered Bank v. Custodian 2000 (6) SCC 427
Referred To Discussed at ¶ 37
In the Bank's recovery proceedings the appellant was found liable to pay Rs. 280 crores.

Cheque Bounce Presumptions Are Mandatory and Must Be Rebutted by Proof, Not Bare Explanation: Supreme Court

Judgment Intelligence

Key holdings

Brief Facts

Court's Findings

Legal Principle

Precedents Relied Upon

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