Presumptions under Sections 118 & 139 NI Act Do Not Arise Unless the Complainant Proves the Underlying Transaction Through Direct-Knowledge Evidence

1. Introduction

Case: SHIJOSH.K. v. THE STATE OF KERALA (2026 KER 40471)
Court & Date: Kerala High Court, 09-06-2026
Judge: A. Badharudeen, J.

The appeal was filed by the complainant (Shijosh.K.) challenging the acquittal of the accused (Sujal Kuruvilla) in a prosecution under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”). The complainant alleged that the accused borrowed Rs. 4,50,000 and issued a cheque dated 09.03.2004, which was dishonoured, leading to statutory notice and complaint.

The central issue before the High Court was whether the complainant had laid the necessary factual foundation—particularly proof of the underlying transaction and consideration—so as to invoke the statutory presumptions under Sections 118 and 139 NI Act.

2. Summary of the Judgment

The High Court dismissed the appeal and confirmed the acquittal. It held that the complainant’s own evidence showed that the money was allegedly advanced by his father in multiple instalments, and that the complainant lacked direct knowledge of the transaction, its terms, and even the contemporaneous documentation said to exist (a notebook and a stamp paper agreement). The father—being the person with direct knowledge—was not examined, and the notebook was not produced.

Consequently, the Court held that the complainant failed to discharge the initial burden of proving the transaction and consideration in a convincing manner, and therefore could not claim the benefit of presumptions under Sections 118 and 139 NI Act. The prosecution under Section 138 thus failed.

3. Analysis

3.1 Precedents Cited

The Judgment states that the governing principles are “well settled,” but does not cite any specific precedents by name. The decision is therefore driven primarily by application of statutory presumptions and evidentiary principles to the facts as elicited in cross-examination.

3.2 Legal Reasoning

  1. Foundational requirement for NI Act presumptions:
    The Court reaffirmed that while Sections 118 and 139 create strong presumptions in favour of the holder/complainant, those presumptions are not a substitute for laying a credible factual basis. The complainant must prove, at least convincingly, the transaction and the execution of the cheque as part of that transaction, including the passing of consideration.
  2. Direct-knowledge evidence is crucial where the transaction is disputed:
    The Court treated the complainant’s cross-examination as fatal: PW1 admitted that the alleged loan amount was paid by his father in five instalments, with dates recorded by the father in a notebook. PW1 further admitted lack of knowledge about repayment period and the contents of the stamp paper agreement.

    From this, the Court inferred that the “transaction and passing of consideration” were between the father and the accused, not within PW1’s direct knowledge. Therefore, the “competent person” to prove the loan and circumstances of cheque issuance was the father, not PW1.
  3. Withholding best evidence undermined the complainant’s case:
    The complainant asserted the existence of contemporaneous records (a notebook with instalment details and a stamp paper agreement) but did not produce them. More importantly, he did not examine his father, the key witness. The Court treated these omissions as reinforcing the conclusion that the complainant failed to establish the foundational facts necessary to trigger presumptions.
  4. Resulting consequence—presumptions not available:
    Because the complainant did not discharge the initial burden, the Court held that he was disentitled to the presumptions under Sections 118 and 139. Without presumptions, and with doubts surrounding the very existence/terms of the underlying liability, the acquittal was justified.

3.3 Impact

  • Sharper focus on “who paid” and “who knows”: The decision signals that in Section 138 cases, if the complainant’s own evidence shows that the consideration flowed from a third person (here, the father), courts may insist on testimony from the direct participant to the loan/transaction—especially when documentary support is claimed but withheld.
  • Limits on mechanical invocation of Sections 118/139: The judgment is a caution against treating presumptions as automatic upon production of a dishonoured cheque. Where the complainant’s evidence itself introduces uncertainty about the origin of the liability, the court may hold that presumptions do not arise because the foundational facts are not credibly proved.
  • Litigation strategy in cheque cases: Complainants relying on family funds, informal instalments, or third-party payments should anticipate the need to: (i) examine the person with direct knowledge, and/or (ii) produce contemporaneous records they claim exist, failing which the complaint risks dismissal even before the presumption-driven burden shift becomes meaningful.
  • Evidentiary discipline: The ruling strengthens the practical message that suppression/non-production of “best evidence” (like notebooks/accounts/agreements referred to by the complainant) can materially weaken the complainant’s credibility and the court’s willingness to apply presumptions.

4. Complex Concepts Simplified

Section 138 NI Act
Makes dishonour of a cheque for insufficiency of funds (subject to statutory conditions like notice) a criminal offence, aimed at enhancing cheque credibility.
Section 118 NI Act (Presumption)
Presumes, among other things, that a negotiable instrument was made/drawn for consideration—unless the contrary is proved.
Section 139 NI Act (Presumption)
Presumes that the holder received the cheque for discharge (in whole or part) of a debt or other liability—unless the contrary is proved.
“Initial burden” / “foundational facts”
Before presumptions can practically help, the complainant must present believable proof of the basic transaction narrative—particularly when their own testimony shows they did not personally participate in, or know, the transaction details.
Direct knowledge
Evidence from a person who actually took part in the transaction (paid money, negotiated terms, received the cheque). Testimony based on what someone else did, without personal knowledge, is weaker—especially if the real participant is available but not examined.

5. Conclusion

This judgment crystallises a practical evidentiary rule in Section 138 prosecutions: statutory presumptions under Sections 118 and 139 cannot be relied upon unless the complainant convincingly proves the underlying transaction and consideration through competent, direct-knowledge evidence. Where the complainant’s own version shows that a third person actually advanced the money and maintained the records, failure to examine that person and produce those records can prevent presumptions from operating and justify acquittal.