SUPREME COURT OF INDIA | LANDMARK JUDGMENT
Supreme Court: Mere Doubts About a Lender’s Financial Capacity Cannot Defeat a Cheque Bounce Case
Main Judgment
The Supreme Court allowed the complainant’s appeal and restored the accused’s conviction under Section 138 of the Negotiable Instruments Act, 1881.
The Court held that once the cheque signature is admitted, the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act apply, and the accused must rebut those presumptions with credible evidence.
The Supreme Court also held that the High Court had wrongly re-appreciated the evidence while exercising its revisional jurisdiction.
Key Facts
- Parties: Kuntegowda (Complainant) vs. Thurubaiah (Accused).
- Dispute: Dishonour of a ₹4.5 lakh cheque issued towards repayment of a hand loan.
- What Happened: The cheque was dishonoured due to “Funds Insufficient”. A legal notice was served, and a complaint under Section 138 of the Negotiable Instruments Act was filed.
- Background: The Trial Court and Appellate Court convicted the accused. However, the High Court acquitted him in revision, questioning the complainant’s financial capacity.
- Supreme Court: The Supreme Court restored the conviction, holding that the accused had failed to rebut the statutory presumptions with reliable evidence.
Why It Matters
Important for Cheque Bounce Cases: Once the drawer admits signing the cheque, the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act come into operation.
Mere allegations or doubts regarding the lender’s financial capacity are not, by themselves, sufficient to rebut the statutory presumption. The accused must place credible material before the court to establish a probable defence.
Statutory Presumption: The judgment highlights the importance of the presumptions operating in favour of the holder of a cheque once the foundational requirements are established.
Case Title, Date & Bench
Case Name: Kuntegowda v. Thurubaiah
Citation: 2026 INSC 790
Judgment Date: 04 August 2026
Bench: Justice B.V. Nagarathna & Justice Ujjal Bhuyan
Key Legal Principle
Under Section 138 of the Negotiable Instruments Act, 1881, dishonour of a cheque for insufficiency of funds may attract criminal liability when the statutory requirements are satisfied.
Sections 118 and 139 of the NI Act create statutory presumptions in favour of the holder of the cheque. These presumptions are rebuttable, and the accused can seek to establish a probable defence through credible evidence.
The Supreme Court’s decision also reiterates that the revisional jurisdiction of a High Court should not ordinarily be used to undertake a fresh appreciation of evidence merely because another view may be possible.
Key Legal Takeaway
The judgment is relevant to cheque bounce cases, Section 138 NI Act proceedings, loan transactions, statutory presumptions and the defence of financial capacity.
For legal advice relating to cheque bounce cases, Section 138 NI Act complaints, legal notices, defence in cheque dishonour cases and recovery proceedings, consult Adv. Keshav Mehra Advocate in Gurgaon experienced in cheque bounce litigation.
