What are the rights available to the holder of a cheque?

What is the presumption which stands in favour of the holder under the Negotiable Instruments Act?

Under Section 139 of the said Act states that it will be presumed that the holder of a cheque had received the cheque for discharge, unless the contrary is proved. The holder of the said cheque received the cheque as per Section 138 of the Act for discharge in whole or in part of any debt under the said Act. In Vijay Vs Laxman&Anr on (7 February, 2013) Court considered that, it is presumed that the cheque was issued for discharge of the debt which need not be proved by the complainant. Under the Section 139 of Negotiable Instrument Act therefore it is clearly presumable that the issue of cheque is for a consideration. Effect of this presumption is to put the evidential burden on the accused of proving that the complainant did not receive the cheque to discharge liability.

Section 139 can be termed as special rule of evidence i.e. the cheque was for discharge of the existing debt and not to create a new debt. The words “shall presume” has to be understood as per Indian Evidence Act 1872 where in it states that if anything is directed under this Act, Court will presume a fact unless and until it is disapproved. Such a presumption can be rebutted also. So the onus is always on the drawer to prove that the:

  • Cheque was not received by holder for discharge;
  • Person in possession of cheque is not the real holder;
  • Cheque represent for payment was a gift or donation.

Under this section plaintiff need not generally prove that he gave value for instrument and want of consideration should be proved by defendant but still there may be a shift in case of fraud and undue influence wherein plaintiff has to prove his matter. Under Section 139 words used like “holder of a cheque” where in the word “Holder” has been explained in Section 8 of the Act. Holder is a person entitled in his own name to possession to receive the amount due from the other party. A person who is not a holder cannot have a right to recover the amount due on the instrument/cheque. Holder has the right to claim his amount in case or dishonour of cheque by the drawee. Holder has the right to sue the person who is in default of payment of his money. All the party to negotiable instrument are liable to the holder until the instrument is duly satisfied.

by Sushma Javare.