The Kerala High Court has held that use of different inks for the signature and other entries on a cheque does not by itself render the negotiable instrument invalid or cast doubt on its probable execution, and keeping a substantial sum of money at home is not an improbability in law unless the accused establishes the same through evidence. The Court also clarified that once the complainant discharges his initial burden by proving issuance of the cheque, its dishonour, and issuance of statutory notice, the presumptions under Sections 118 and 139 of the NI Act operate in his favour. These presumptions are rebuttable, but the accused must raise a probable defence meeting the standard of preponderance of probabilities, not mere possibility.
The Court explained that a bare denial or an uncorroborated assertion of repayment is insufficient to rebut the presumptions. The burden of specifically pleading and proving the complainant’s lack of financial capacity rests on the accused, and in the absence of such a plea in the reply notice, the complainant cannot be faulted for not adducing evidence on financial capacity.
A Single Judge Bench of Justice A. Badharudeen observed that the accused admitted borrowing Rs. 2.35 lakhs from the complainant and also admitted issuance of cheque bearing his signature. While there is evidence of repayment of Rs. 35,000/-, no documentary evidence was tendered to prove discharge of the remaining Rs. 2 lakhs, apart from the oral testimony of defence witness and the contention in the reply notice. The Court reiterated the settled legal position that when a party asserts discharge of a liability, he must prove the same with cogent and convincing evidence, and a bare denial of passing of consideration would not aid the case of the accused.
The Court found that the trial court erred in denying the presumptions under Sections 118 and 139 of the NI Act to the complainant. The complainant had successfully discharged his initial burden by proving issuance of the cheque, its dishonour, and the statutory notice. The trial court’s reliance on the improbability of keeping Rs. 7 lakhs at the residence was misplaced, as keeping money at home by itself is not an improbability unless established by evidence. The Court also noted that the use of different inks for the signature and other entries on the cheque does not by itself render the negotiable instrument invalid or cast doubt on its probable execution.
The Court placed strong reliance on the latest Supreme Court decision in Kuntegoweda v. Thurubaiah [2026 INSC 790, dated 4th August 2026], which held that the initial burden of raising a defence that the complainant lacked financial capacity to advance the loan rests upon the accused and must be specifically pleaded in the reply to the demand notice. In the absence of such a plea, the complainant cannot be expected to adduce evidence establishing his financial capacity while leading his evidence. The accused may discharge this burden by producing independent witnesses, documentary evidence, or through effective cross-examination, but no such contra material was placed on record in the present case.
Briefly, the complainant, D. Chandran, initiated prosecution against the accused, S. Anilkumar, under Section 138 of the Negotiable Instruments Act, 1881, alleging dishonour of a cheque dated Jan 28, 2013, for Rs. 7 lakhs, issued by the accused in discharge of a legally enforceable debt. The cheque was presented for collection and returned with the endorsement “payment stopped by drawer”. After issuance of a statutory lawyer notice and its acknowledgment, the accused failed to make the payment, prompting the complaint.
The accused’s defence was that he had borrowed only Rs. 2.35 lakhs from the complainant in 2011, for which he had issued two blank signed cheques as security, and that he had subsequently repaid the entire liability, including a Rs. 35,000. Since the cheques were not returned to him upon repayment, he issued a stop memo covering 15 cheques. The trial court acquitted the accused, holding that the complainant failed to prove beyond doubt that he was the holder of the cheque entitled to its possession, and denied the benefit of presumptions under Sections 118 and 139 of the NI Act, relying on the complainant’s inability to satisfactorily explain his financial capacity and the improbability of keeping Rs. 7 lakhs at his residence.
