Published On: July 30, 2026
Authored By: Sahil Yadav
National Law Institute University, Bhopal
1. Case Details
Case: Kalamani Tex and Another (Appellants) v P. Balasubramanian (Respondent)
Citation: (2021) 5 SCC 283
Bench: N.V. Ramana, Surya Kant (author of the judgment), and Aniruddha Bose
Date of Judgment: 10 February 2021
2. Facts of the Case
The dispute stems from a business arrangement between P. Balasubramanian (the respondent), proprietor of a garment company named “Growell International,” and Appellant 1. Together, they agreed to export garments to France jointly.
Complications arose regarding delayed shipments and pending payments from the foreign buyer. Because of these delays, the appellants became liable to pay the respondent a sum of ₹11.20 lakhs. To settle this, Appellant 2 issued a cheque (No. 897993) for ₹11.20 lakhs on behalf of Appellant 1, dated 7 November 2000. On the same day, Appellant 2 executed a deed of undertaking, personally promising to pay the respondent to cover the initial expenditures incurred. The respondent presented the cheque to the bank for collection on 29 December 2000, but it was returned due to “insufficient funds.”
Following the dishonour, the respondent sent a formal legal notice on 8 January 2001, demanding payment within 15 days. The appellants replied on 27 January 2001, denying any liability. They claimed that they had merely given the respondent blank signed cheques and blank stamp papers to assist him in separate debt recovery proceedings, rather than to clear a legally enforceable debt.
Dissatisfied with the response, the respondent filed a private complaint under Sections 138 and 142 of the Negotiable Instruments Act (NIA), read with Section 200 of the Code of Criminal Procedure (CrPC),[1] before the Judicial Magistrate in Tiruppur.
The trial court did not accept the respondent’s claim, finding that he had failed to prove a legally enforceable liability existed on the date the cheque was issued,[2] and dismissed the complaint. The respondent appealed the dismissal to the High Court. The High Court took a different view, pointing out that Appellant 2 had explicitly admitted to his signatures on both the cheque and the deed of undertaking, effectively acknowledging the debt. The High Court overturned the trial court’s decision, convicted both appellants under Section 138 of the NIA, and handed down sentences accordingly.
Aggrieved by the conviction, the appellants moved the Supreme Court. During the initial Special Leave Petition (SLP) hearing on 12 March 2018, the appellants’ counsel agreed to deposit the disputed amount. In compliance with this commitment, the appellants deposited the entire sum of ₹11.20 lakhs with the Supreme Court Registry on 11 April 2018.
3. Issues Raised
1. Whether the High Court erred in reversing the findings of the trial court in exercise of its powers under Section 378 CrPC.
2. Whether a legally enforceable debt existed at the time the cheque was issued.
4. Arguments on Behalf of the Appellants
Senior Counsel for the appellants argued that no legally enforceable liability existed on the date the cheque was issued, and that the respondent had misused blank stamp papers signed by Appellant 2 to forge the deed of undertaking dated 7 November 2000.
Relying on the precedent Murugesan v. State,[3] counsel argued that the trial court’s view acquitting the appellants was a perfectly “possible view,” and that the High Court committed a patent illegality and exceeded its jurisdiction by overturning that acquittal. Citing Reena Hazarika v. State of Assam,[4] counsel argued that the High Court had completely ignored the defence raised by the appellants, causing them serious prejudice. Additionally, drawing upon the legal principles in Basalingappa v. Mudibasappa[5] and Kumar Exports v. Sharma Carpets,[6] counsel submitted that the statutory presumptions against an accused under Sections 118 and 139 of the NIA are rebuttable.[7] He asserted that the appellants had successfully met this burden through a standard of “preponderance of probability.”
5. Arguments on Behalf of the Respondent
Counsel for the respondent strongly defended the High Court’s judgment, maintaining that the decision to convict the appellants was thoroughly reasoned and founded upon proper consideration of all relevant factors. It was emphasised that the signatures on both the cheque and the deed of undertaking (dated 7 November 2000) were undisputed, and that the appellants had clearly admitted to their existing liability of ₹11.20 lakhs.
Finally, counsel highlighted the significant financial loss suffered by the respondent and the resulting adverse impact on his business.
6. Judgment and Ratio
The Supreme Court declined to interfere with the High Court’s judgment convicting the appellants. It ruled that the trial court had committed a “patent error of law” by failing to apply the mandatory statutory presumptions under the Negotiable Instruments Act. The Court noted that since Appellant 2 had admitted his signatures on the cheque and the deed of undertaking, the burden of proof shifted completely to the defence. The appellants’ reliance on the oral testimony of a bank official (DW 1) and their bare denials of forgery did not meet the required standard of “preponderance of probability” to displace the legal presumption. Even where the cheque leaf was given blank, its voluntary signing attracted the statutory presumption.
While the Court recognised that the objective of Chapter XVII of the NIA[8] is both punitive and compensatory, it rejected the respondent’s fresh request for additional compensation, since the respondent had neither sought compensation before the High Court nor challenged its final order. The respondent was held entitled only to the original cheque amount of ₹11.20 lakhs already deposited in the Court Registry.
The judgment establishes two clear legal ratios:
1. Once the signature on a cheque or negotiable instrument is admitted or established, the statutory presumptions under Sections 118 and 139 of the NIA[9] become automatically operative. This shifts the “reverse onus” to the accused, mandating that the court presume the cheque was issued for a legally enforceable debt. The complainant is not required to independently prove the source of funds or circumstances of liability until this presumption is successfully rebutted by the accused.
2. A blank cheque leaf that is voluntarily signed and handed over by an accused towards a payment attracts the same statutory presumption under Section 139 of the NIA.[10] A bare denial of the underlying debt, or a claim of missing details, does not obliterate this presumption in the absence of cogent, evidentiary proof.
7. Critical Analysis
Tracing the trajectory of this case from the trial court up to the Supreme Court, the entire dispute hinges on a single pivotal question: who carries the burden of proof, and when exactly does it shift? Examining how the courts evaluated the same set of facts exposes a significant gap between the trial court’s traditional approach to criminal law and the specialised “reverse onus” mechanism demanded by the Negotiable Instruments Act.
The trial court treated this case like a standard criminal prosecution, mistakenly requiring the complainant to prove his case from scratch, and effectively ignored the statutory mandates of Sections 118 and 139 of the NIA.[11] This approach amounted to a clear error of law, forcing the respondent to explain the background circumstances of the liability despite holding an instrument with established signatures. Once Appellant 2 admitted his signatures on both the cheque and the deed of undertaking, the legal landscape shifted completely, automatically triggering the statutory presumption that the cheque was issued for a legally enforceable debt.
The appellants’ defence collapsed because a bare denial does not satisfy the required standard of “preponderance of probability” needed to displace this statutory presumption. Their claim that blank stamp papers were misused to forge the deed of undertaking lacked any supporting documentary evidence. Furthermore, as established by the Supreme Court, even a voluntarily signed blank cheque leaf attracts the statutory presumption of an underlying debt in the absence of cogent rebuttal evidence. The defence’s reliance on a bank official’s testimony (DW 1) regarding the respondent’s separate debt recovery proceedings merely highlighted his difficult financial position but entirely failed to disprove the appellants’ specific liability.
8. Conclusion
The critical error committed by the trial court lies in its disregard for the strict, verbatim text of the statute. Under the Negotiable Instruments Act 1881, s 118(a),[12] the law explicitly provides that “until the contrary is proved, the following presumptions shall be made:— (a) of consideration;— that every negotiable instrument was made or drawn for consideration…” This is reinforced by s 139,[13] which mandates that “it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque… for the discharge, in whole or in part, of any debt or other liability.” Taken together, these provisions create a strict “reverse onus” mechanism. The moment Appellant 2 admitted his signatures on the cheque and the deed of undertaking, these exact statutory presumptions became legally operative.
Ultimately, this case underscores the strict-liability framework built into the Negotiable Instruments Act. By upholding the conviction while limiting the final remedy to the original disputed amount of ₹11.20 lakhs already deposited, the Court struck a pragmatic balance — ensuring commercial discipline and debt recovery without allowing the legal mechanism to be exploited for excess compensation.
References
[1] Negotiable Instruments Act 1881, ss 138 and 142, read with Code of Criminal Procedure 1973, s 200.
[2] P. Balasubramanian v. Kalamani Tex, 2017 SCC OnLine Mad 35499.
[3] Murugesan v. State, (2012) 10 SCC 383, para 32.
[4] Reena Hazarika v. State of Assam, (2019) 13 SCC 289, para 20.
[5] Basalingappa v. Mudibasappa, (2019) 5 SCC 418.
[6] Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513.
[7] Negotiable Instruments Act 1881, ss 118 and 139.
[8] Negotiable Instruments Act 1881, ch XVII.
[9] Negotiable Instruments Act 1881, ss 118 and 139.
[10] Negotiable Instruments Act 1881, s 139.
[11] Negotiable Instruments Act 1881, ss 118 and 139.
[12] Negotiable Instruments Act 1881, s 118(a).
[13] Negotiable Instruments Act 1881, s 139.
