Recurring Arguments · General Legal Principles

The recurring questions, and how the courts have answered them

Nine arguments recur in cheque-dishonour matters. None of them is settled in the abstract: each turns on a point of law on which there are authorities in both directions, and on facts that only the record can supply. What follows states the position for the holder and the position for the drawer alongside each other, in general terms. Nothing here describes any particular case, party or outcome, and nothing here is a prediction of how any argument will fare.

The “Security Cheque”

Whether a cheque described as having been given only as “security” is, for that reason, outside Section 138.

For the holder: the label is not decisive. In Sampelly Satyanarayana Rao v. IREDA, (2016) 10 SCC 458 and Sripati Singh v. State of Jharkhand, (2021) SCC OnLine SC 1002, cheques described as security were held to attract the section where the liability they answered had become due and payable.
For the drawer: a legally enforceable debt must subsist on the date the cheque was drawn. In Indus Airways Pvt Ltd v. Magnum Aviation Pvt Ltd, (2014) 12 SCC 539, post-dated cheques given purely as advance payment against purchase orders afterwards cancelled were held not to have been drawn for an existing liability, and the section was not attracted.
Neither the word “security” nor its absence decides the matter. Whether a debt had crystallised on the date of drawal does.

Denial of Issue — Theft, Loss or Misuse

Whether an assertion that the cheque was stolen, lost or misused displaces the presumption under Section 139.

For the holder: the presumption under Section 139 operates until it is displaced. A bare denial, unsupported by material, does not displace it.
For the drawer: Basalingappa v. Mudibasappa, (2019) 5 SCC 418 holds that the accused need not enter the witness box and may rely on the material brought by the complainant himself, and that the standard is preponderance of probabilities and not proof beyond reasonable doubt. What is required is a probable defence, not proof of the negative.
The presumption is rebuttable. What it requires is material from which a probable defence emerges — from whichever side of the record it comes.

The Post-Dated Cheque

Whether a cheque bearing a future date can attract Section 138, and what happens to the sum it represents in the meantime.

For the holder: a post-dated cheque is a valid instrument. Section 138 is attracted once it is presented on or after the date it bears, within its period of validity, and is returned unpaid.
For the drawer: the liability must exist when the cheque is drawn (Indus Airways), and where part payment is made between drawal and presentation the debt subsisting at presentation is less than the sum the cheque represents — a matter the courts have treated as material.
A future date does not put an instrument outside the section; nor does it freeze the underlying account between drawal and presentation.

Signature Admitted

Where the drawer admits that the signature on the cheque is genuine, the effect on the burden of proof.

For the holder: once execution is admitted or proved, the presumptions under Sections 118 and 139 arise, and on Rangappa v. Sri Mohan, (2010) 11 SCC 441 they extend to the existence of a legally enforceable debt.
For the drawer: the presumption is of law and is rebuttable. It is displaced on the preponderance of probabilities, and admission of the signature is not an admission of the debt, of the amount, or of the circumstances in which the instrument was completed or delivered.
An admitted signature shifts the burden. It does not discharge it.

The Blank or Incomplete Cheque

Where the cheque is said to have been handed over blank or only partly filled in.

For the holder: under Section 20, a person who signs and delivers an incomplete stamped instrument authorises the holder to complete it, and on Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197 the presumption under Section 139 is available to a holder in that position.
For the drawer: Section 20 and Bir Singh both presuppose voluntary delivery. Where the instrument was lost, or was obtained by coercion or intimidation, the foundation of the presumption is absent. Whether delivery was voluntary is a question of fact.
The section turns on how the instrument left the drawer’s hands, not on what was written on it when it did.

Service of the Notice

Whether the demand notice is to be treated as served where the envelope is returned unserved, unclaimed or not found.

For the holder: a notice correctly addressed and duly despatched by registered post attracts the presumption under Section 27 of the General Clauses Act, 1897 and Section 114 of the law of evidence. In Ajeet Seeds Ltd. v. K. Gopala Krishnaiah, (2014) 12 SCC 685 it was held that it is not necessary even to aver in the complaint that service was evaded or that the accused had a hand in the return of the notice; the matter is one for trial. C. C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555 is to the same effect.
For the drawer: the presumption is rebuttable, and it rests on a fact the holder must establish first — that the address used was the drawer’s correct or last known address. Where it was not, no presumption arises from the return of the envelope. C. C. Alavi Haji also records the course open to a drawer who says the notice never reached him, of making payment within fifteen days of receipt of the summons.
What the postal record proves is despatch to an address. Whether that was the right address is the argument.

Financial Capacity

Whether the means of the complainant, or the absence of a record of the advance in his own papers, displaces the presumption under Section 139.

For the holder: the presumption operates once execution of the cheque is admitted, and the burden of displacing it lies on the accused. In Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158, it was held that merely questioning the complainant’s capacity to advance the sum, or raising irregularities in the source of the funds, does not discharge that burden.
For the drawer: Basalingappa v. Mudibasappa, (2019) 5 SCC 418 holds that the accused need not enter the witness box and may build a probable defence from the material the complainant himself brings, on the standard of preponderance of probabilities. Where the complainant’s own accounts and returns cannot account for the sum said to have been advanced, that material is his.
The question is not whether the complainant was a person of means. It is whether his own papers make the advance he alleges improbable.

The Unaccounted Transaction

Whether a loan advanced in cash beyond the limit in Section 269SS of the Income Tax Act, 1961, or one not reflected in the complainant’s returns, is outside Section 138.

For the holder: on the fiscal point the position is settled. In Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158, it was held that a contravention of Section 269SS does not render the transaction unenforceable under Section 138; the breach attracts a penalty under Section 271D of that Act and nothing further, and the presumptions under Sections 118 and 139 are unaffected by it. The contrary view of the Kerala High Court was set aside.
For the drawer: the fiscal breach is not the point, and an argument put that way is now foreclosed. What is not foreclosed is the evidentiary one — whether the absence of a substantial advance from the complainant’s books and returns, taken with the rest of the record, makes the advance improbable within the meaning of Basalingappa. That remains a question of fact.
The breach of a fiscal statute decides nothing here. What the complainant’s own books do not show may still decide something.

The Officer Who Says He Was Not In Charge

Where the drawer is a company or a firm, and a director, partner or signatory says he was not in charge of and responsible for the conduct of its business.

For the holder: where the complaint carries the averment Section 141 requires, S. P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2022) 10 SCC 148 places on the person accused the burden of establishing that he was not in charge at the relevant time, and treats that as ordinarily a matter for trial rather than for quashing.
For the drawer: the averment must be a real one. Siby Thomas v. Somany Ceramics Ltd, (2024) 1 SCC 348 holds that a general or formulaic recital does not answer Section 141, and holding office is not by itself the same thing as being in charge of the conduct of the business. Separately, Aneeta Hada v. Godfather Travels & Tours (P) Ltd, (2012) 5 SCC 661 holds that arraigning the company is imperative before the vicarious liability of its officers can arise at all.
Section 141 fastens liability on a role in the conduct of the business, not on the holding of a title.
The periods the statute prescribes The judgments these principles come from

The notes above are general and simplified. They refer to no identifiable party or matter, and are no representation or guarantee of any outcome. Every matter turns on its own facts.