Mr. Ajay Singh (respondent in the present appeal), along with his wife had approached the appellant Mr. Rajesh Jain requesting to lend him money. According to the appellant Mr. Rajesh Jain, he had lent a sum of Rs. 6 lacs and some further sums thereafter the respondent had promised to repay his money. The Appellant had lent the money under the genuine belief that Mr. Ajay Singh would honour his promise of timely repayment and return the sum borrowed with interest, as agreed. The respondent failed to reimburse the borrowed sum of money within the agreed-upon time frame. The complainant’s efforts to retrieve his money were met with avoidance and delay techniques. The accused (respondent) changed his cellular phone number without notifying the complainant in order to avoid his financial commitments. In 2017, the complainant managed to locate the respondent, who then pleaded for pardon and pledged to refund the sums borrowed along with interest, within three months, to the appellant. The accused issued a post-dated Cheque for Rs.6,95,204/- towards partial repayment of outstanding debts. The accused informed the complaint that the remaining sum will be refunded by issuing a second cheque in December 2017.

The Cheque was returned because of insufficiency of funds in account with an endorsement 'Funds Insufficient' when it was presented. The complainant issued the accused with a demand notice, requiring him to reimburse the Cheque amount (Rs. 6,95,204) and additional expenses incurred within 15 days. As the demand was not met, a complaint was filed with the Court of Judicial Magistrate First Class under Section 138 of the NI Act. The trial Court held that the complainant had failed to prove his case beyond reasonable doubt. Aggrieved by the decision the complainant approached the Punjab and Haryana High Court in appeal Section 378 (4) CrPC before the High Court of Punjab and Haryana. On reappreciating the evidence on record, the High Court has found no merit in the appeal and has upheld the order of acquittal passed by the Trial Court. Aggrieved by the decision of the high Court the complainant appealed before the Supreme Court.

Issues: ◦ Whether the respondent (accused) has discharged the evidentiary burden for rebuttal of presumption under Section 139 Negotiable Instruments Act? ◦ Whether the complainant has proved beyond reasonable doubt that the cheque issued by him was given for the purpose of debt independent of application of presumption under Section 139 Negotiable Instrument Act?

The Supreme Court observed that "Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the Court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking aid of the presumption. The Court would then take an overall view based on the evidence on record and decide accordingly". The fundamental error in the approach lies in the fact that the High Court has questioned the want of evidence on part of the complainant in order to support his allegation of having extended loan to the accused, when it ought to have instead concerned itself with the case set up by the accused and whether he had discharged his evidential burden by proving that there existed no debt/liability at the time of issuance of cheque."

The Supreme Court overturned the decisions of the Trial Court and the Punjab and Haryana High Court and sentenced the respondent-accused to a fine of twice the amount of the Cheque, or Rs. 13,90,408/- (Rupees thirteen thousand nine hundred and eight only), failing which he would be sentenced to a year of simple imprisonment.