Landmark Judgments I: Kusum Ingots, Rangappa, Basalingappa and Bir Singh

📖 Kusum Ingots and Alloys Ltd. v. Pennar Peterson Securities Ltd. (Supreme Court, 2000)

Held: A prosecution under Section 138 against a company is not barred by the protection for sick companies under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, which suspends suits and recovery proceedings but not criminal prosecutions. The Court set out the ingredients of the offence: a cheque drawn on the drawer's account for a debt or liability; presentation within the period of validity; return unpaid for insufficiency of funds or exceeding arrangement; a written demand within the prescribed time; and failure to pay within 15 days of receipt of the notice.

📖 Rangappa v. Sri Mohan (Supreme Court, three judges, 2010)

Held: The presumption under Section 139 includes the existence of a legally enforceable debt or liability; Krishna Janardhan Bhat was incorrect on this point. Section 139 is a reverse onus clause serving the object of the Chapter, but the accused's burden is not heavy: he need only raise a probable defence, on a preponderance of probabilities, and may rely on the complainant's own materials. On the facts, the accused's story that a lost blank cheque had been misused was not probable, and his conviction was upheld.

📖 Basalingappa v. Mudibasappa (Supreme Court, 2019)

Held: The complainant claimed to have lent a large sum in cash. The accused questioned his financial capacity, pointing to the complainant's own evidence of other large transactions around the same time and the absence of any explanation of the source of funds. The Court held that the accused may rebut the presumption by relying on materials submitted by the complainant and on circumstances, without necessarily entering the witness box; where he raises a plausible doubt about the complainant's capacity to lend, the complainant must establish it. The presumption was held rebutted and the acquittal restored.

📖 Bir Singh v. Mukesh Kumar (Supreme Court, 2019)

Held: The accused admitted signing the cheque but said he had given it in blank to the complainant, who was his tax consultant. The Court held that a person who signs a cheque and hands it over remains liable unless he proves it was not issued for a debt. If a signed blank cheque is voluntarily given towards some payment, the payee may fill in the amount and particulars; the presumption under Section 139 applies even if the details were filled in by someone else. A fiduciary relationship between the parties does not by itself rebut the presumption. The High Court had also erred in re-appreciating evidence in revision to reverse concurrent findings; the conviction was restored.

⚠ Key point

Kusum Ingots (2000) set out the ingredients of Section 138 and held that sick company protection does not bar prosecution. Rangappa (2010, three judges) held that the Section 139 presumption includes a legally enforceable debt, overruling Krishna Janardhan Bhat, with a light preponderance of probabilities burden on the accused. Basalingappa (2019) allowed rebuttal from the complainant's own materials and circumstances, including doubts about financial capacity. Bir Singh (2019) held that a signed blank cheque may be completed by the payee and the presumption still applies, and discouraged re-appreciation of evidence in revision.