M S Narayana Menon Vs State of Kerala and Anr, AIR 2006 SC 3366

NI Act- sec 138- Cheque dishonored with the remarks "account closed"- dispute was what is the burden of accused to rebut the presumption- Hon'ble Supreme Court of India observed, “The standard of proof evidently is pre-ponderance of probabilities. Inference of pre-ponderance of probabilities can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies. Presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another…. It is not in dispute that transactions comprising purchases and sales of shares by investors is a matter of confidence. Both parties would have to rely upon one another…. Whether in the given facts and circumstances of a case, the initial burden has been discharged by an accused would be a question of fact. It was matter relating to appreciation of evidence…. A presumption is a probable inference which common sense draws from circumstances usually occurring in such cases. The slightest presumption is of the nature of probability, and there are almost infinite shades from slight probability to the highest moral certainty. A presumption, strictly speaking, results from a previously known and ascertained connection between the presumed fact and the fact from which the inference is made…. The Appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act….”

K Bhaskaran Vs Sankaran Vaidhyan Balan, AIR 1999 SC 3762

Hon'ble Supreme Court of India observed, “As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears…. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice…. The more important point to be decided in this case is whether the cause of action has arisen at all as the notice sent by the complainant to the accused was returned as 'unclaimed.'… when a notice is returned by the sender as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in Clause (c) to the proviso of Section 138 of the Act….”

Goa Plast (P) Ltd Vs Chico Ursula D'Souza AIR 2004 SC 408

Hon'ble Supreme Court of India observed, “….cheque was dishonoured by the Bank on the ground that the respondent had issued instructions to stop payment…. the High Court and the learned Magistrate treated the proof adduced by the respondent, namely, the letter, denying the liability and that some other person is liable as sufficient to rebut the presumption under Section 139 of the Act…. To fulfil the objective, the Legislature while amending the Act has made the following procedure:

"(i) Under Section 138 a deeming offence is created.

(ii) In Section 139, a presumption is ingrained that the holder of the cheque received it in discharge of liability.

(iii) Disallowing a defence in Section 140 that drawer has no reason to believe that cheque would be dishonoured.

(iv) An explanation is provided to Section 138 to define the words "debt or other liability" to mean a legally enforceable debt or other liability."….
Both the Courts, in our view, failed to consider the important aspect as to the stop payment instructions issued by the respondent. Ordinarily, the stop payment instructions are issued to the Bank by the account holder when there is no sufficient amount in the account….
Both the Courts below have ignored the admission of the liability by the respondent who stated that the liability did exist but he was not responsible for it. While considering this, the Courts below treated the proof adduced by the respondent, namely, letter denying liability and that some other person is liable for it, as sufficient to rebut the presumption under Section 139 of the Act….
Certain comments were made by the High Court in regard to the relationship of the parties. For the cases filed under Section 142 of the Act for offence committed under the Act the relationship between the drawer and the drawee is not material because the liability admitted is one which can be legally enforced by way of suit…..”