Kuntegowda v. Thurubaiah (2026): Burden of Proof, Financial Capacity and Section 138 NI Act
A Fortified Analysis of Kuntegowda v. Thurubaiah (2026) and the Governing Precedent Chain
In a significant reaffirmation of settled jurisprudence under the Negotiable Instruments Act, 1881, the Supreme Court in Kuntegowda v. Thurubaiah 2026 INSC 790 (date of decision on 04.08.2026) has authoritatively held that the initial burden to raise a defence challenging the complainant’s financial capacity to advance a loan lies squarely on the accused, and such a plea must ordinarily be specifically taken in the reply to the statutory demand notice under Section 138.
This judgement, delivered by a bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan on 4 August 2026, sets aside the Karnataka High Court’s revisional order acquitting the accused and restores the conviction, while crystallising important principles governing the burden of proof, statutory presumptions, and the limits of revisional jurisdiction in cheque dishonour cases.
Factual Matrix and Procedural History
The case arose from a complaint alleging that the accused had borrowed ₹4.5 lakh as a hand loan in December 2010 towards the purchase of a house site, repayable within a year at 16% interest, and had subsequently issued a cheque in discharge of the said liability. The cheque was dishonoured on presentation due to “insufficient funds”, prompting the complainant to initiate proceedings under Section 138 of the NI Act.
| Stage | Finding |
|---|---|
| Trial Court | Convicted the accused under Section 138 and imposed a sentence. |
| First Appellate Court | Affirmed conviction, albeit with a modification of sentence. |
| Karnataka High Court (Revision) | Acquitted the accused, holding that the complainant had failed to establish his financial capacity to lend ₹4.5 lakh. |
| Supreme Court (Appeal) | Reversed the High Court, restored conviction, and laid down definitive propositions on the burden of proof. |
Core Legal Issue
Whether, in a prosecution under Section 138 of the NI Act, the complainant is required to prove his financial capacity to advance the loan at the threshold, or whether such an issue arises only when specifically raised by the accused, preferably in the reply to the statutory notice.
Supreme Court’s Reasoning and Key Holdings
Statutory Presumptions Under Sections 118 and 139, NI Act
The Court reiterated that once the execution of the cheque (including the accused’s signature) is admitted or proved, the mandatory presumptions under Sections 118 and 139 of the NI Act spring into operation. Section 118 presumes that every negotiable instrument was made or drawn for consideration; Section 139 presumes that the cheque was issued for the discharge, in whole or in part, of a debt or other liability. These presumptions are rebuttable, but the burden to rebut them rests on the accused, and the standard is preponderance of probabilities, not proof beyond reasonable doubt.
Once the accused admitted his signature on the cheque, the statutory presumptions under Sections 118 and 139 came into operation. These presumptions shift the burden to the accused to rebut the existence of a legally enforceable debt. — Kuntegowda v. Thurubaiah, 2026 LiveLaw (SC) 765
No Initial Onus on Complainant to Prove Financial Capacity
The Supreme Court held that proof of financial capacity is not a sine qua non for invoking Section 138. The essential ingredients to set the criminal machinery in motion are:
- Cheque drawn by the accused on an account maintained by him;
- Presentation within six months, or within its validity period;
- Dishonour for insufficiency of funds or breach of arrangement;
- Statutory demand notice within 30 days of dishonour;
- Non-payment within 15 days of receipt of notice.
Once these foundational facts are established through documents such as the cheque return memo and legal demand notice, the court is bound to proceed under Section 138.
Accused’s Duty to Raise the Capacity Defence Timely
A pivotal aspect of the judgement is its emphasis on procedural fairness and timely pleading. The Court held that if the accused intends to challenge the complainant’s capacity to lend, such a defence must be specifically pleaded in the reply to the statutory notice under Section 138. The rationale is twofold: first, failure to respond to the statutory notice gives rise to an inference that the complainant’s version carries merit; and second, in the absence of such a plea, the complainant cannot be expected to lead evidence on his financial capacity while presenting his case.
The Court clarified that the accused may discharge this burden by producing independent witnesses or documentary evidence or by relying on the complainant’s own evidence through effective cross-examination. In the present case, no contra material was placed on record to show that the complainant lacked the means to extend the hand loan.
Corroborative Evidence and Rejection of the “Security Cheque” Defence
The complainant had consistently maintained that he had arranged the loan amount with financial assistance from relatives and acquaintances, a version corroborated by prosecution witnesses whose testimony remained unshaken in cross-examination. The accused’s alternative defence — that the cheque was issued as a blank security cheque in connection with a separate loan of ₹40,000 — was rejected as an afterthought, since no documentary evidence supported it and the notice demanding return of the cheque was issued only after the prosecution had commenced.
Limits of Revisional Jurisdiction
The Supreme Court faulted the Karnataka High Court for exceeding the limits of its revisional jurisdiction under Section 397/401 CrPC (now Sections 438/442, BNSS, and Section 452 BNSS on the specific power invoked). A revisional court cannot re-appreciate evidence as if it were a first appellate court, cannot substitute its own conclusions merely because another view is possible, and may interfere only where there is perversity, manifest illegality, or miscarriage of justice. Since both the trial court and the first appellate court had returned concurrent findings of guilt, and no perversity was demonstrated, the High Court was not justified in acquitting the accused.
Fortifying the Precedent Chain
1. Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513
Expressly relied upon within Kuntegowda itself, this decision is the foundational modern authority on the interplay between Sections 118 and 139: once the cheque and signature are proved, the presumption of a legally enforceable debt arises, but the accused need only raise a probable defence, not prove his case beyond reasonable doubt, to rebut it.
2. Rangappa v. Sri Mohan, (2010) 11 SCC 441
A three-judge bench settled that Section 139 is a reverse-onus clause that includes, within its sweep, the existence of a legally enforceable debt or liability. This is the bedrock authority for treating the presumption as covering the transaction as a whole, not merely the fact of issuance.
3. Basalingappa v. Mudibasappa, (2019) 5 SCC 418 — the necessary counterpoint
This addition is important for balance. In Basalingappa, the Supreme Court upheld an acquittal where the accused successfully raised a probable defence and the complainant’s own admissions exposed doubtful capacity to advance a large loan within a short span. The decision confirms that Kuntegowda does not immunise complainants from scrutiny altogether — it simply fixes the sequence in which that scrutiny must be triggered: through a timely, specific defence, after which the complainant’s evidence remains fully open to challenge. Practitioners citing Kuntegowda for the accused’s burden should read it alongside Basalingappa to avoid overstating the complainant’s immunity.
4. Ashok Singh v. State of U.P. & Anr., 2025 INSC 427 (corrected citation)
Decided on 2 April 2025 by Justices Sudhanshu Dhulia and Ahsanuddin Amanullah, this decision anticipated Kuntegowda almost verbatim: the onus is not on the complainant, at the threshold, to prove financial capacity, unless the accused expressly raises that defence — at least in the reply to the statutory demand notice. The original draft’s citation of “2025 LiveLaw (SC) 383” could not be verified and has been replaced with the confirmed neutral citation.
5. Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735
Relied upon in Ashok Singh, this decision independently confirms that the complainant need not show, in the first instance, that he possessed the financial capacity to advance the loan — the burden shifts only once the accused sets up a specific case to that effect.
Also Read: Sources of Hindu Law: Origins, Evolution, and Modern Relevance in Indian Jurisprudence
Practical Implications — Practitioner Checklist
For Complainants
- ☐ Ensure strict compliance with statutory timelines — presentation, notice, and filing.
- ☐ Preserve bank records, transaction history, and witness details in case capacity is challenged.
- ☐ Rely on the Sections 118 and 139 presumptions unless effectively rebutted; do not volunteer capacity evidence unprompted.
For Accused
- ☐ Reply to the statutory notice within 15 days and specifically plead lack of the complainant’s financial capacity, if intended — Kuntegowda and Ashok Singh both penalise belated pleas.
- ☐ Gather documentary evidence — income tax returns, bank statements, employment records — to support the defence, per Basalingappa.
- ☐ Use cross-examination strategically to elicit inconsistencies regarding the source of funds.
For Revisional Courts
- ☐ Exercise jurisdiction sparingly and only where there is a clear error of law or perversity.
- ☐ Avoid re-appreciating evidence where concurrent findings exist, absent a manifest miscarriage of justice.
Conclusion
Kuntegowda v. Thurubaiah stands as a landmark reaffirmation of the balanced framework under the NI Act: the complainant’s burden is limited to proving foundational facts; the accused bears the onus to raise and substantiate defences, including challenges to financial capacity; statutory presumptions operate robustly to protect the sanctity of negotiable instruments; and revisional courts must respect the boundaries of their jurisdiction. Read together with Basalingappa, the precedent chain is best understood not as foreclosing scrutiny of the complainant’s means, but as insisting that such scrutiny be earned through a timely and specific defence — failing which, the presumption does the complainant’s work for him.
Important Links
- Lawyers in India
- Copyright Registration in India
- Caveat Filing in Supreme Court of India
- Mutual Consent Divorce in Delhi NCR: WhatsApp 9650499965
