MS HIMALAYAN PLASTICS LTD. vs ANOOP KUMAR
- Court
- High Court of Himachal Pradesh
2026:HHC:37770
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
High Court of H.P.
Cr. Appeal No. 28 of 2014
Reserved on: 27.08.2026
Date of Decision: 07.09.2026
M/s Himalayan Plastics Ltd. ..Appellant
Versus
Anoop Kumar ...Respondent
Coram
Hon’ble Mr Justice Rakesh Kainthla , Judge.
1
Whether approved for reporting? Yes.
For the Appellant :
Mr O.C. Sharma, Advocate.
For the Respondent/ : Mr Mukul Sood, Advocate.
Rakesh Kainthla, Judge
The present appeal is directed against the judgment
dated 14.10.2013, passed by learned Judicial Magistrate, First
Class, Solan, District Solan, H.P. (learned trial Court), vide which
the respondent (accused before the learned trial Court) was
acquitted of the commission of an offence punishable under
Section 138 of the Negotiable Instruments Act (NI Act). (The
parties shall hereinafter be referred to in the same manner as they
were arrayed before the learned Trial Court for convenience).
1
Whether reporters of Local Papers may be allowed to see the judgment? Yes.
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2. Briefly stated, the facts giving rise to the present
High Court of H.P.
appeal are that the complainant presented a complaint before the
learned Trial Court against the accused for the commission of an
offence punishable under Section 138 of the NI Act. It was
asserted that the complainant deals with the manufacture and
sale of HDPE pipes, fittings, sprinkler, drip irrigation system, PIB
(silicon coated) and HDPE Telecom Duct. The accused had been
purchasing the material from the complainant on a credit basis.
He issued a cheque of ₹ 14,79,374/- to repay the amount due to
the complainant. The complainant presented the cheque before
its bank for realisation, but it was dishonoured with an
endorsement ‘funds insufficient’. The complainant issued a legal
notice. The notice was duly served upon the accused, but the
accused failed to repay the amount. Hence, the complaint was
filed before the learned trial Court for taking action against the
accused as per the law.
3. The learned trial Court found sufficient reasons to
summon the accused. When the accused appeared, a notice of
accusation was put to him for the commission of an offence
punishable under Section 138 of the NI Act, to which he pleaded
not guilty and claimed to be tried.
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4. The complainant examined Sita Ram (CW-1), Anil
High Court of H.P.
Sharma (CW-2), M.L. Marwari (CW-3), Sita Ram (CW-4) and
Dharam Pal (CW-5) to prove its complaint.
5. The accused, in his statement recorded under Section
313 of the Code of Criminal Procedure (CrPC), admitted that he is
a proprietor of Baba Company, the cheque bears his signature,
and he had received the notice. He claimed that the cheque was
blank, he had sent a reply to the notice, he is not liable to pay any
amount to the complainant and that he is innocent. He examined
himself (DW-1), Kanwar Singh (DW-2), Satish Kumar (DW-3),
Virender Singh (DW-4) and Sant Kumar (DW-5) to prove his
defence.
6. The learned trial Court held that the complainant
failed to prove the business relationship between the parties. The
authorised person of the complainant admitted that the account
of the sale and purchase of the items is maintained. However, no
sale and purchase record was produced before the Court. The
statements of the defence witnesses proved that the complainant
company used to receive the entire payment directly from the
farmers through the bank. The copies of the challan reflected
that the accused acted as an agent to the complainant company.
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This evidence was sufficient to rebut the presumption attached
High Court of H.P.
to the cheque. Hence, the learned trial Court acquitted the
accused.
7. Being aggrieved by the judgment passed by the
learned trial Court, the complainant filed the present appeal
asserting that the learned trial Court erred in acquitting the
accused. There is a presumption that the cheque was issued for
consideration to discharge the debt/liability. The complaint was
to be tried as a summary case, and it was not permissible for the
successor to rely upon the evidence recorded before his
predecessor. The accused sent a reply (Ext.D-13) to the legal
notice in which he admitted the receipt of the material through
some of the challans, which proved the business and commercial
transactions between the parties. The learned trial Court failed to
consider this reply. A blank cheque issued as a security would
give rise to liability. Therefore, it was prayed that the present
appeal be allowed and the judgment passed by the learned trial
Court be set aside.
8. I have heard Mr O.C. Sharma, learned counsel for the
appellant and Mr Mukul Sood, learned counsel for the
respondent.
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9. Mr O.C. Sharma, learned counsel for the appellant,
High Court of H.P.
submitted that the case was to be tried as a summary case and it
was impermissible for the learned Magistrate to rely upon the
evidence recorded by his predecessor. The learned Magistrate
erred in considering the evidence recorded by his predecessor.
The accused admitted the transaction between the parties in the
reply to the notice, and the learned Trial Court erred in holding
that the complainant had failed to prove the business transaction
between the parties. Therefore, he prayed that the present appeal
be allowed and the judgment passed by the learned Trial Court be
set aside.
10. Mr Mukul Sood, learned counsel for the
respondent/accused, submitted that the case was tried as a
summons case. Notice of accusation was put to the accused and
complete record of the evidence was maintained; therefore, the
provisions of Section 326(3) of the CrPC do not apply to the
present case. The learned trial Court had rightly held that the
accused was an agent of the complainant. The money was paid by
the farmers through the bank from which the loan was taken.
The accused was not required to pay any money to the
complainant. The learned trial Court had taken a reasonable view
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while acquitting the accused, and this Court should not interfere
High Court of H.P.
with the reasonable view of the learned Trial Court. Therefore, he
prayed that the present appeal be dismissed. He relied upon the
following judgments in support of his submissions:
Rangappa vs. Sri Mohan (2010) 11 SCC 441 ;
Basalingappa vs. Mudibasappa (2019) 5 SCC 418; and
Rajesh Jain vs. Ajay Singh (2023) 10 SCC 148.
11. I have given considerable thought to the submissions
made at the bar and have gone through the records carefully.
12. The present appeal has been filed against a judgment
of acquittal. It was laid down by the Hon’ble Supreme Court in
Sanjay Kumar v. State of Bihar, 2026 SCC OnLine SC 1373, that the
Court can interfere with a judgment of acquittal only if it is
impossible, perverse, wholly unsustainable, or manifestly illegal.
It was observed:
Scope of interference with an acquittal:
26. At the outset, it is necessary to remind ourselves of
the settled principles governing interference with an order
of acquittal. An accused is presumed innocent until proven
guilty. When a court of competent jurisdiction acquits the
accused, the presumption of innocence is not weakened
but reinforced. Where such acquittal is affirmed by the
High Court, the caution to be exercised by this Court under
Article 136 is even greater.
27. In Kali Ram v. State of Himachal Pradesh (1973) 2 SCC
808: 1973 SCC (Cri) 1048 , this Court explained the golden
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thread running through criminal jurisprudence in the
following words:
High Court of H.P.
“25. Another golden thread which runs through the web
of the administration of justice in criminal cases is that if
two views are possible on the evidence adduced in the case,
one pointing to the guilt of the accused and the other to his
innocence, the view which is favourable to the accused
should be adopted. This principle has a special relevance in
cases wherein the guilt of the accused is sought to be
established by circumstantial evidence. A rule has
accordingly been laid down that unless the evidence
adduced in the case is consistent only with the hypothesis
of the guilt of the accused and is inconsistent with that of
his innocence, the Court should refrain from recording a
finding of guilt of the accused. It is also an accepted rule
that in case the Court entertains reasonable doubt
regarding the guilt of the accused, the accused must have
the benefit of that doubt. Of course, the doubt regarding the
guilt of the accused should be reasonable; it is not the
doubt of a mind which is either so vacillating that it is
incapable of reaching a firm conclusion or so timid that it is
hesitant and afraid to take things to their natural
consequences. The rule regarding the benefit of doubt also
does not warrant acquittal of the accused by resort to
surmises, conjectures or fanciful considerations. As
mentioned by us recently in the case of State of Punjab v.
Jagir Singh, a criminal trial is not like a fairy tale wherein
one is free to give flight to one's imagination and fantasy.
It concerns itself with the question as to whether the
accused arraigned at the trial is guilty of the offence with
which he is charged. Crime is an event in real life and is the
product of the interplay of different human emotions. In
arriving at the conclusion about the guilt of the accused
charged with the commission of a crime, the Court has to
judge the evidence by the yardstick of probabilities,
intrinsic worth and the animus of witnesses. Every case in
the final analysis would have to depend upon its own facts.
Although the benefit of every reasonable doubt should be
given to the accused, the Courts should not at the same
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time reject evidence which is ex facie trustworthy on
grounds which are fanciful or in the nature of conjectures.”
High Court of H.P.
28. The decision in Kali Ram (supra) further cautions
that wrongful acquittal and wrongful conviction do not
stand on the same footing, for conviction of an innocent
person causes grave injustice and shakes public
confidence in the administration of criminal justice. The
rule of benefit of doubt, therefore, is not a technical rule; it
is a substantive safeguard flowing from the presumption
of innocence.
29. In Ghurey Lal v. State of Uttar Pradesh (2008) 10 SCC
450: (2009) 1 SCC (Cri) 60 , this Court reiterated the limited
scope of interference with acquittals. This Court observed:
“75. The Trial Court has the advantage of watching
the demeanour of the witnesses who have given
evidence; therefore, the appellate court should be slow
to interfere with the decisions of the Trial Court. An
acquittal by the Trial Court should not be interfered
with unless it is totally perverse or wholly
unsustainable.”
30. The decision in Ghurey Lal (supra) also crystallised
certain propositions: first, there is a double presumption
of innocence in favour of an acquitted accused; secondly, if
two views are possible, the view favourable to the accused
must prevail; thirdly, though the appellate court has the
power to reappreciate evidence, it should interfere only
when the acquittal is manifestly illegal, perverse or results
in miscarriage of justice; and fourthly, due weight must be
given to the Trial Court's findings, particularly because
the trial judge had the advantage of observing the
demeanour of witnesses.
31. In Chandrappa v. State of Karnataka (2007) 4 SCC 415:
(2007) 2 SCC (Cri) 325 , this Court held that though the
appellate court has full power to review and reappreciate
the evidence, the presumption of innocence is
strengthened by an order of acquittal. It was held that
when two reasonable conclusions are possible on the basis
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of evidence on record, the appellate court should not
disturb the finding of acquittal.
High Court of H.P.
32. The same principle was restated in Mrinal Das v.
State of Tripur a (2011) 9 SCC 479 , wherein this Court held
that an order of acquittal is to be interfered with only
when there are compelling and substantial reasons for
doing so. If two reasonable views are possible on the basis
of the evidence on record, the appellate court should not
disturb the finding of acquittal.
33. Therefore, the question before us is not whether
another view on the evidence is possible. The question is
whether the view taken by the Trial Court and affirmed by
the High Court is impossible, perverse, wholly
unsustainable, or manifestly illegal. Having examined the
record, we are unable to hold so.
13. While dealing with the appeal against the acquittal in
a complaint filed for the commission of an offence punishable
under Section 138 of the NI Act the Hon’ble Supreme Court held
in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 that
the normal rules with same rigour cannot be applied to the cases
under Negotiable Instruments Act because there is a
presumption that the holder had received the cheque for
consideration to discharge the debt/liability. The Appellate Court
is entitled to look into the evidence to determine whether the
accused has discharged the burden or not. It was observed: -
“12…. The principles aforesaid are not of much debate. In
other words, ordinarily, the appellate court will not be
upsetting the judgment of acquittal, if the view taken by
the trial court is one of the possible views of the matter
and unless the appellate court arrives at a clear finding
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that the judgment of the trial court is perverse i.e. not
supported by evidence on record or contrary to what is
regarded as normal or reasonable; or is wholly
unsustainable in law. Such general restrictions are
essential to remind the appellate court that an accused is
presumed to be innocent unless proven guilty beyond a
reasonable doubt, and a judgment of acquittal further
strengthens such presumption in favour of the accused.
However, such restrictions need to be visualised in the
context of the particular matter before the appellate court
and the nature of the inquiry therein. The same rule with
the same rigour cannot be applied in a matter relating to
the offence under Section 138 of the NI Act, particularly
where a presumption is drawn that the holder has received
the cheque for the discharge, wholly or in part, of any debt
or liability. Of course, the accused is entitled to bring on
record the relevant material to rebut such presumption
and to show that preponderance of probabilities are in
favour of his defence but while examining if the accused
has brought about a probable defence so as to rebut the
presumption, the appellate court is certainly entitled to
examine the evidence on record in order to find if
preponderance indeed leans in favour of the accused.
High Court of H.P.
13. For determination of the point as to whether the High
Court was justified in reversing the judgment and orders
of the trial court and convicting the appellant for the
offence under Section 138 of the NI Act, the basic
questions to be addressed are twofold: as to whether the
complainant Respondent 2 had established the ingredients
of Sections 118 and 139 of the NI Act, so as to justify
drawing of the presumption envisaged therein; and if so,
as to whether the appellant-accused had been able to
displace such presumption and to establish a probable
defence whereby, the onus would again shift to the
complainant?”
14. The ingredients of the commission of an offence
punishable under Section 138 of the NI Act were explained in
Kuntegowda v. Thurubaiah, 2026 SCC OnLine SC 1485 as under:
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5.3. At this juncture, it is pertinent to highlight the key
ingredients as highlighted by this Court in the case of
Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd.,
(2000) 2 SCC 745: 2000 SCC (Cri) 546: (2000) 100 COMP CAS
755 .
High Court of H.P.
“10. On a reading of the provisions of Section 138 of
the NI Act, it is clear that the ingredients which are to
be satisfied for making out a case under the provision
are:
(i) a person must have drawn a cheque on an
account maintained by him in a bank for
payment of a certain amount of money to
another person from out of that account for the
discharge of any debt or other liability;
(ii) that cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its
validity, whichever is earlier;
(iii) that cheque is returned by the bank unpaid,
either because the amount of money standing to
the credit of the account is insufficient to honour
the cheque or that it exceeds the amount
arranged to be paid from that account by an
agreement made with the bank;
(iv) the payee or the holder in due course of the
cheque makes a demand for the payment of the
said amount of money by giving a notice in
writing to the drawer of the cheque, within 15
days of the receipt of information by him from
the bank regarding the return of the cheque as
unpaid;
(v) the drawer of such cheque fails to make payment
of the said amount of money to the payee or the
holder in due course of the cheque within 15 days
of the receipt of the said notice.
11. If the aforementioned ingredients are satisfied,
then the person who has drawn the cheque shall be
deemed to have committed an offence. In the
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explanation to the section, clarification is made that
the phrase “debt or other liability” means a legally
enforceable debt or other liability.
High Court of H.P.
5.4. The ingredients of the offence under Section 138 are as
follows:
i. The drawing of a cheque by a person on an account
maintained by him with the banker for the payment
of any amount of money to another from that
account.
ii. The cheque being drawn for the discharge in whole
or in part of any debt or other liability.
iii. Presentation of the cheque to the bank within the
period of six months or within the period of its
validity.
iv. The return of the cheque by the drawee bank as
unpaid either because the amount of money
standing to the credit of that account is insufficient
to honour the cheque or that it exceeds the amount
arranged to be paid from that account.
v. A notice by the payee or the holder in due course
making a demand for the payment of the amount to
the drawer of the cheque within thirty days of the
receipt of information from the bank in regard to
the return of the cheque.
vi. Failure of the drawer of the cheque to make payment
of the amount of money to the payee or the holder in
due course within fifteen days of the receipt of the
notice.
vii. Filing of the complaint within a month from the
date of expiry of the grace period of fifteen days
before a Metropolitan Magistrate or a Judicial
Magistrate not below first class.
15 . The present appeal has to be decided as per the
parameters laid down by the Hon’ble Supreme Court
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16. It was submitted that the case was to be tried as a
High Court of H.P.
summary case and learned Magistrate erred in relying upon the
evidence recorded before his predecessor. This submission is
only stated to be rejected. The record of the learned trial Court
shows that a notice of accusation was put to the accused. The
summary of the statements of the witnesses was not recorded,
but the evidence was recorded in full. It was laid down by a
Division Bench of the Andhra Pradesh High Court in Food
Inspector, Cir. V.M.C.H. v. Y. Babji, 2001 SCC OnLine AP 799: (2001) 3
AP LJ 45, that Section 326 (3) of CrPC does not apply where the
complete record of the evidence was maintained. It was observed
at page 48:
“6. It is not in dispute, in the instant case, that the
summary of deposition of the witnesses had not been
recorded, and the entire depositions of the witnesses were
recorded. The witnesses had also been cross-examined.
Section 16A of the Act provides for a trial in a summary
way. In a case where the second proviso is appended to
Sec. 16A of the Act applies, summons trial may be taken
recourse to.
7. Even in a summary trial, in terms of Section 262 of the
Code, the procedure specified in the Code for the trial of
summons cases would be followed. In the event that the
procedure specified under sub-sec. (1) of Sec. 262 had
been followed, we are of the opinion that sub-section (3)
of Sec. 326 will have no application.”
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17. A similar view was taken by the Rajasthan High Court
High Court of H.P.
in Tripti Vyas v. State of Rajasthan , 2013 SCC OnLine Raj 1030:
(2014) 3 RLW 1980 wherein it was observed:
“27. Coming to the facts of these cases, I find that the
courts below are trying these cases by summons trial. The
facts aforesaid are coming out as the accused cross-
examined the complainant extensively, and it was
recorded by the court word to word. It does not happen in
the summary trial where only the substance of the
evidence is to be recorded. In the background aforesaid,
Sec. 326(3) CrPC has no application to the facts of these
cases. ….”
18. Allahabad High Court also held in Manoj Kumar
Agrawal v. State of U.P. , 2014 SCC OnLine All 14904: (2014) 87 ACC 7
that when the case was tried as a summons case, the successor
magistrate can act upon the evidence recorded by his
predecessor. It was observed at page 9:
“7. I find myself in complete agreement with the findings
given by the Revisional Court and am of the opinion that
had it been a case where the trial would have taken place in
a summary manner, the situation would have been
different. The judicial rationale of section 326(3) Cr.P.C. is
also not difficult to discern out. When the accused is tried
summarily, the presiding officer is not required to record
the evidence word by word, and it is only the substance of
the evidence which is required to be recorded. The Judicial
Officer who records the substance of the evidence himself
knows best as to how and in what manner he has
summarised and abridged the statements given before
him. If and when a succeeding officer comes and takes
over, who is then required to look into the same evidence,
and is also required to draw out inference out of the same,
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it may be a hazardous exercise and may have a misleading
effect. Therefore, it was found very much desirable that
the same judicial officer who had recorded the evidence
should also decide the same matter. It was also presumed
that the matters which were tried summarily should also
get concluded in a short period and would not get
procrastinated for an unduly prolix period of time. But
nowadays the gross reality is that only as a matter of
exception we may find cases where the same judicial
officer could have recorded the evidence and pronounced
the verdict also. The prolonged interregnum between the
outset and conclusion of the trial is often, if not always,
intercepted by change of presiding officers. May be once,
may be more than once even. In the present matter, the
complaint was lodged in 2006, and the major part of the
evidence was recorded in the year 2008, and since then the
matter is lingering on, and we are in the year 2014 now. If
section 326(3) Cr.P.C. is brought into operation
unmindfully, in matters like this, men probably it may not
be possible to conclude any trial at all. The dockets of the
pending cases are already bursting at the seams, and it has
become a daily feature to see that the trials do not get
concluded for years and years together. Even the special
provisions of the Negotiable Instruments Act have not
proved to be of much avail. In the wake of this woeful
reality staring in our face, the aforesaid provisions cannot
be unmindfully brought into application, and there has to
be a strict, not liberal, construction of this statute. It shall
have to be seen with a deft judicial vigil that the procedure
of a summary trial has actually been adopted or not.
High Court of H.P.
8. In any view, so far as the facts of the present case are
concerned, when the factual basis of the argument itself is
not sustainable and has scuttled down, and the trial had
actually not proceeded as a summary trial, there is hardly
any question of 326 (3) Cr.P.C. to be brought into
application. It is also true that if the Trial Court had
adopted a different procedure and tried the case not in a
summary manner, then he ought to have recorded a
special finding to that effect. But even if it is presumed
that there is no such specific finding given by the Court as
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was required, if the record itself proves that the Court
never proceeded in the matter as a summary trial, then the
absence of the aforesaid finding will be a curable
irregularity which may hardly be said to have caused any
prejudice to the accused. All the while the trial took place,
the accused was very much in the know of the fact that the
procedure of summary trial was never being adopted. He
neither held any objection nor raised the same.”
High Court of H.P.
19. Kerala High Court also took a similar view in Indira
Gandhi Memorial General Marketing Society Ltd. v. Abraham
Varghese & Co. , 2014 SCC OnLine Ker 16802: (2014) 3 MWN (Cri)
DCC 8 and observed at page 15:
“4. Considering the above legal proposition, it is clear that
the Trial Magistrate had recorded the evidence of PW1
following a summons trial and thereafter he was
transferred from his office. When a new Magistrate took
charge remitted the case to a de novo trial. When the case
is not tried in a Summary manner, the provisions of
Section 326(1) are squarely applicable in this case. The
only reason stated by the Second Respondent is that since
it is a case under Section 138 of the N.I. Act based upon a
special statute, it will give privilege over the general
statute, and the trial can be only summary. I cannot agree
with that ratio since a summons trial was ordered and
adopted; it cannot be changed into another way in the
midst of the trial. Therefore, half a Summons trial and half
a Summary trial is not possible in a Criminal case. The
Magistrate has to either follow the procedure in a
Summons trial or follow the Summary trial. If a Summons
trial is ordered, the Magistrate shall complete the trial
according to that procedure. Since the procedure of a
summons trial is adopted, there is no question of getting
the benefit of the exception of Section 326(3), Cr.P.C.”
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20. A similar view was taken in Rakeshbhai Ambalal Patel
High Court of H.P.
v. State of Gujarat, 2025 ACD 593 (GUJ) = AIROnline 2025 GUJ 349
wherein it was observed:
“5. Having heard learned advocate appearing for the
applicant and perusing the material on record, it is evident
that the complaint was filed in the year 2007. Thereafter,
the plea of the applicant was recorded below Exhibit '7'.
Thereafter, documentary evidence was produced by the
present applicant by way of Exhibit '9'. The testimony of
two witnesses was recorded at Exhibit '18' and Exhibit '55'
and thereafter, the trial proceeded as a normal trial, which
is clear from the bare perusal of the record and
proceedings. It is pertinent to note that the prayers made
in the application preferred by the present applicant are
for conducting a de novo trial. It has been categorically
recorded by the learned appellate court that the plea has
been recorded by the learned trial court below, Exhibit '7 ',
as a summons triable case and not as a summary triable
case. It has further been recorded by the appellate court
that there is no argument on behalf of the revisionist -
applicant before the trial court during the course of the
trial regarding the aspect that the case has to be conducted
as a summary triable case.
Xxxx
7. In view of the same, the issue of de novo trial is now no
more res intigra. The order passed by the appellate court
dated 21.06.2013 in Criminal Appeal No.25 of 2013 below
Exhibit '7' by the 5th Sessions Court cannot be interfered
with. The appellate court is hereby directed to hear
Criminal Appeal No.25 of 2013 on merits and dispose of the
same in accordance with law within a period of 6 months
from today.”
21. Therefore, learned Magistrate did not err in relying
upon the statements recorded by his predecessor.
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22. The accused admitted in his statement recorded
High Court of H.P.
under Section 313 of Cr.P.C. that the cheque bears his signatures.
He stated on oath while appearing as DW-1 that the cheque
(Ext.CW-1/D) was issued by him and it was signed by him as the
proprietor. Therefore, the issuance of the cheque and signatures
on the cheque were not disputed. It was laid down by the Hon'ble
Supreme Court in APS Forex Services (P) Ltd. v. Shakti International
Fashion Linkers (2020) 12 SCC 724 that when the issuance of a
cheque and signature on the cheque are not disputed, a
presumption would arise that the cheque was issued in discharge
of the legal liability. It was observed: -
“9. Coming back to the facts in the present case and
considering the fact that the accused has admitted the
issuance of the cheques and his signature on the cheque
and that the cheque in question was issued for the second
time after the earlier cheques were dishonoured and that
even according to the accused some amount was due and
payable, there is a presumption under Section 139 of the
NI Act that there exists a legally enforceable debt or
liability. Of course, such a presumption is rebuttable.
However, to rebut the presumption, the accused was
required to lead evidence that the full amount due and
payable to the complainant had been paid. In the present
case, no such evidence has been led by the accused. The
story put forward by the accused that the cheques were
given by way of security is not believable in the absence of
further evidence to rebut the presumption, and more
particularly, the cheque in question was issued for the
second time after the earlier cheques were dishonoured.
Therefore, both the courts below have materially erred in
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not properly appreciating and considering the
presumption in favour of the complainant that there exists
a legally enforceable debt or liability as per Section 139 of
the NI Act. It appears that both the learned trial court as
well as the High Court have committed an error in shifting
the burden upon the complainant to prove the debt or
liability, without appreciating the presumption under
Section 139 of the NI Act. As observed above, Section 139 of
the Act is an example of a reverse onus clause and
therefore, once the issuance of the cheque has been
admitted and even the signature on the cheque has been
admitted, there is always a presumption in favour of the
complainant that there exists legally enforceable debt or
liability and thereafter, it is for the accused to rebut such
presumption by leading evidence.”
High Court of H.P.
23. This position was reiterated in N. Vijay Kumar v.
Vishwanath Rao N., 2025 SCC OnLine SC 873 , wherein it was held as
under:
“6. Section 118 (a) assumes that every negotiable
instrument is made or drawn for consideration, while
Section 139 creates a presumption that the holder of a
cheque has received the cheque in discharge of a debt or
liability. Presumptions under both are rebuttable,
meaning they can be rebutted by the accused by raising a
probable defence.”
24. A similar view was taken in Sanjabij Tari v. Kishore S.
Borcar, 2025 SCC OnLine SC 2069 , wherein it was observed:
“ONCE EXECUTION OF A CHEQUE IS ADMITTED,
PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI
ACT ARISE
15. In the present case, the cheque in question has
admittedly been signed by the Respondent No. 1-Accused.
This Court is of the view that once the execution of the
cheque is admitted, the presumption under Section 118 of
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the NI Act that the cheque in question was drawn for
consideration and the presumption under Section 139 of
the NI Act that the holder of the cheque received the said
cheque in discharge of a legally enforceable debt or
liability arise against the accused. It is pertinent to
mention that observations to the contrary by a two-Judge
Bench in Krishna Janardhan Bhat v. Dattatraya G. Hegde,
(2008) 4 SCC 54 , have been set aside by a three-Judge
Bench in Rangappa (supra).
High Court of H.P.
16. This Court is further of the view that by creating this
presumption, the law reinforces the reliability of cheques
as a mode of payment in commercial transactions.
17. Needless to mention that the presumption
contemplated under Section 139 of the NI Act is rebuttable.
However, the initial onus of proving that the cheque is not
in discharge of any debt or other liability is on the
accused/drawer of the cheque [See: Bir Singh v. Mukesh
Kumar, (2019) 4 SCC 197 ].
25. Thus, the Court has to start with the presumption that
the cheque was issued in discharge of the liability for
consideration, and the burden is upon the accused to rebut this
presumption.
26. The accused admitted that he had received a notice
from the complainant and had issued a reply to it. Reply (Ext.D-
13) mentions that blank cheques were obtained by the
complainant at the time of taking the agency. The accused
received the articles worth ₹23,78,128/-. The accused had paid
₹28,42,850/- by means of cheque. In this manner, the accused
had overpaid the money. This reply shows that the transactions
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between the parties are not disputed. The accused did not dispute
High Court of H.P.
that he had received the articles worth ₹23,78,128/-. He claimed
that he had paid ₹ 28,42,850/- by means of the cheque. However,
no such cheque was produced on record.
27. The statement of account (Ext.CW-5/A) does not
show that the accused ever had money in lakhs, and it falsifies
the plea taken by the accused in the reply that a cheque of
₹28,42,850/- was issued in the complainant’s favour.
28. The accused Anoop Kumar (DW-1) stated that he was
appointed as a commission agent. He used to supply the articles
to the farmers, who used to directly pay the money to the
complainant. The company had sent the articles mentioned in
the Challan (Ext.D-1 to Ext. D-11). The complainant sent the
statement marked DX-1 to mark DX-6, in which his commission
was shown as ₹6,31,969/-. He had instructed his bank not to
honour the cheque.
29. The statement of the accused does not mention that
he had paid the money by means of a cheque as was claimed by
him in the reply to the notice. Thus, the plea taken by the accused
in the notice was not substantiated on oath.
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30. The statement of account (Mark DX1 to Mark DX4)
High Court of H.P.
shows the commission due, amount received and amount
recoverable. It does not mention the amount paid by the accused
to the complainant. This statement is not signed by any person,
and it cannot be said that it was issued by the complainant.
Sita Ram (CW-4) was not asked anything about these statements.
Thus, these statements of account are not sufficient to rebut the
presumption attached to the cheque.
31. Kanwar Singh (DW-2) and Satish Kumar (DW-3)
stated that the loan was sanctioned to different persons, and the
money was paid to the complainant by account payee cheque.
They admitted in their cross-examination that the record
brought by them does not pertain to the accused or his concern.
Therefore, the statements of these witnesses do not show that
the money paid on behalf of the farmers is being claimed from
the accused.
32. Sant Kumar (DW-5) stated that his father had taken
the loan and the money was paid to the complainant by the bank.
The accused used to work as the complainant’s agent. He stated
in his cross-examination that the company itself used to supply
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the articles. He admitted that the accused is a resident of his
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village.
33. The statement of this witness does not disprove the
complainant's case. Even if the accused had acted as an agent of
the complainant on some occasion, it does not disprove the effect
of the admission made by him in reply to the notice that he had
received the articles from the complainant, for which he was
liable to pay money and had paid the money by means of a
cheque. Therefore, no advantage can be derived from the
statement of this witness.
34. Varinder Singh (DW-4) proved the reply to the notice,
which corroborates the complainant's version and does not rebut
it. Therefore, his testimony will not help the accused.
35. Sita Ram (CW-4) stated in his cross-examination that
the company sends the bill for the articles sold by it and the
company maintains the record. The record of the articles sold to
the accused was available with the complainant. The learned trial
Court held that the complainant was required to produce the
record, and the absence of the record makes the complainant's
version doubtful. This finding cannot be sustained. It was laid
down by the Hon’ble Supreme Court in Uttam Ram Versus
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Devinder Singh Hudan and another (2019) 10 SCC 287 that the
High Court of H.P.
complainant is not to prove the debt as in a civil court in view of
the presumption, but only to prove that the cheque was issued by
the accused. It was observed:
“20. The Trial Court and the High Court proceeded as if the
appellant were to prove a debt before a civil court; the
plaintiff is required to prove his claim on the basis of
evidence to be laid in support of his claim for the recovery
of the amount due. Dishonour of a cheque carries a
statutory presumption of consideration. The holder of the
cheque in due course is required to prove that the cheque
was issued by the accused and that when the same was
presented, it was not honoured. Since there is a statutory
presumption of consideration, the burden is on the
accused to rebut the presumption that the cheque was
issued not for any debt or other liability.”
36. It was laid down in P. Rasiya v. Abdul Nazer, 2022 SCC
OnLine SC 1131, that the complainant is not to state the nature of
the transaction or the source of funds. It was observed:
“By the impugned common judgment and order, the High
Court has reversed the concurrent findings recorded by
both the courts below and has acquitted the accused on the
ground that, in the complaint, the Complainant has not
specifically stated the nature of transactions and the
source of funds. However, the High Court has failed to
note the presumption under Section 139 of the N.I. Act. As
per Section 139 of the N.I. Act, it shall be presumed, unless
the contrary is proved, that the holder of a cheque received
the cheque of the nature referred to in Section 138 for
discharge, in whole or in part, of any debt or other
liability. Therefore, once the initial burden is discharged
by the Complainant that the cheque was issued by the
accused and the signature and the issuance of the cheque
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are not disputed by the accused, in that case, the onus will
shift upon the accused to prove the contrary, that the
cheque was not for any debt or other liability. The
presumption under Section 139 of the N.I. Act is a statutory
presumption, and thereafter, once it is presumed that the
cheque is issued in whole or in part of any debt or other
liability which is in favour of the Complainant/holder of
the cheque, in that case, it is for the accused to prove the
contrary. The aforesaid has not been dealt with and
considered by the High Court.”
High Court of H.P.
37. Therefore, no adverse inference could have been
drawn against the complainant for not producing the record,
especially in the present case when the accused admitted in reply
to the notice that articles were received by him from the
complainant.
38. The accused claimed that a blank cheque was issued
as a security in the complainant’s favour. This plea will not help
the accused. He admitted in the reply to the notice that the
complainant had supplied the articles worth ₹23,78,128/-. He
claimed that he had repaid the money by means of a cheque;
however, he had not produced the cheque. His statement of
account does not prove his version. The cheque was issued for
₹14,79,374/-. Therefore, even if it was a security cheque, the
accused was liable to pay the amount mentioned in the cheque. It
was laid down by this Court in Hamid Mohammad Versus Jaimal
Dass 2016 (1) HLJ 456 , that the accused is liable for the dishonour
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of the cheque even if the cheque is issued towards security. It was
High Court of H.P.
observed:
“9. Submission of learned Advocate appearing on behalf of
the revisionist that the cheque in question was issued to
the complainant as security, and on this ground, the
criminal revision petition is rejected as being devoid of any
force for the reasons hereinafter mentioned. As per Section
138 of the Negotiable Instruments Act, 1881, if any cheque
is issued on account of other liability, then the provisions
of Section 138 of the Negotiable Instruments Act, 1881
would be attracted. The court has perused the original
cheque, Ext. C-1 dated 30.10.2008, placed on record. There
is no recital in the cheque, Ext. C-1, that the cheque was
issued as a security cheque. It is well-settled law that a
cheque issued as security would also come under the
provisions of Section 138 of the Negotiable Instruments
Act, 1881. See 2016 (3) SCC page 1 titled Don Ayengia v. State
of Assam & another . It is well-settled law that where there
is a conflict between former law and subsequent law, then
subsequent law always prevails.”
39. It was laid down by the Hon'ble Supreme Court in
Sampelly Satyanarayana Rao vs. Indian Renewable Energy
Development Agency Limited 2016(10) SCC 458 that issuing a
cheque toward security also attracts the liability for the
commission of an offence punishable under Section 138 of the NI
Act. It was observed: -
“10. We have given due consideration to the submission
advanced on behalf of the appellant as well as the
observations of this Court in Indus Airways Private Limited
versus Magnum Aviation Private Limited (2014) 12 SCC 53
with reference to the explanation to Section 138 of the Act
and the expression “for the discharge of any debt or other
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liability” occurring in Section 138 of the Act. We are of the
view that the question of whether a post-dated cheque is
for “discharge of debt or liability” depends on the nature
of the transaction. If, on the date of the cheque, liability or
debt exists or the amount has become legally recoverable, the
Section is attracted and not otherwise .
High Court of H.P.
11. Reference to the facts of the present case clearly shows
that though the word “security” is used in clause 3.1(iii) of
the agreement, the said expression refers to the cheques
being towards repayment of instalments. The repayment
becomes due under the agreement the moment the loan is
advanced, and the instalment falls due. It is undisputed
that the loan was duly disbursed on 28th February 2002,
which was prior to the date of the cheques. Once the loan
was disbursed and instalments had fallen due on the date
of the cheque as per the agreement, the dishonour of such
cheques would fall under Section 138 of the Act. The
cheques undoubtedly represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly
distinguishable. As already noted, it was held therein that
liability arising out of a claim for breach of contract under
Section 138, which arises on account of dishonour of a
cheque issued, was not by itself at par with a criminal
liability towards discharge of acknowledged and admitted
debt under a loan transaction. Dishonour of a cheque
issued for the discharge of a later liability is clearly
covered by the statute in question. Admittedly, on the date
of the cheque, there was a debt/liability in praesenti in
terms of the loan agreement, as against the case of Indus
Airways (supra), where the purchase order had been
cancelled, and a cheque issued towards advance payment
for the purchase order was dishonoured. In that case, it
was found that the cheque had not been issued for the
discharge of liability but as an advance for the purchase
order, which was cancelled. Keeping in mind this fine, but
the real distinction, the said judgment cannot be applied
to a case of the present nature, where the cheque was for
repayment of a loan instalment which had fallen due,
though such a deposit of cheques towards repayment of
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instalments was also described as “security” in the loan
agreement. In applying the judgment in Indus Airways
(supra), one cannot lose sight of the difference between a
transaction of the purchase order which is cancelled and
that of a loan transaction where the loan has actually been
advanced, and its repayment is due on the date of the
cheque.
High Court of H.P.
13. The crucial question to determine the applicability of
Section 138 of the Act is whether the cheque represents the
discharge of existing enforceable debt or liability, or
whether it represents an advance payment without there
being a subsisting debt or liability. While approving the
views of different High Courts noted earlier, this is the
underlying principle as can be discerned from the
discussion of the said cases in the judgment of this Court.”
(Emphasis supplied)
40. This position was reiterated in Sripati Singh v. State of
Jharkhand, 2021 SCC OnLine SC 1002: AIR 2021 SC 5732 , and it was
held that a cheque issued as security is not waste paper and a
complaint under section 138 of the NI Act can be filed on its
dishonour. It was observed:
“17. A cheque issued as security pursuant to a financial
transaction cannot be considered a worthless piece of
paper under every circumstance. 'Security' in its true sense
is the state of being safe, and the security given for a loan
is something given as a pledge of payment. It is given,
deposited or pledged to make certain the fulfilment of an
obligation to which the parties to the transaction are
bound. If in a transaction, a loan is advanced and the
borrower agrees to repay the amount in a specified
timeframe and issues a cheque as security to secure such
repayment; if the loan amount is not repaid in any other
form before the due date or if there is no other
understanding or agreement between the parties to defer
the payment of the amount, the cheque which is issued as
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security would mature for presentation and the drawee of
the cheque would be entitled to present the same. On such
a presentation, if the same is dishonoured, the
consequences contemplated under Section 138 and the
other provisions of the NI Act would flow.
High Court of H.P.
18. When a cheque is issued and is treated as 'security'
towards repayment of an amount with a time period being
stipulated for repayment, all that it ensures is that such a
cheque, which is issued as 'security ', cannot be presented
prior to the loan or the instalment maturing for repayment
towards which such cheque is issued as security. Further,
the borrower would have the option of repaying the loan
amount or such financial liability in any other form, and in
that manner, if the amount of the loan due and payable has
been discharged within the agreed period, the cheque
issued as security cannot thereafter be presented.
Therefore, the prior discharge of the loan or there being an
altered situation due to which there would be an
understanding between the parties is a sine qua non to not
present the cheque which was issued as security. These are
only the defences that would be available to the drawer of
the cheque in proceedings initiated under Section 138 of
the NI Act. Therefore, there cannot be a hard and fast rule
that a cheque, which is issued as security, can never be
presented by the drawee of the cheque. If such is the
understanding, a cheque would also be reduced to an 'on-
demand promissory note', and in all circumstances, it
would only be civil litigation to recover the amount, which
is not the intention of the statute. When a cheque is issued
even though as 'security' the consequence flowing
therefrom is also known to the drawer of the cheque and in
the circumstance stated above if the cheque is presented
and dishonoured, the holder of the cheque/drawee would
have the option of initiating the civil proceedings for
recovery or the criminal proceedings for punishment in
the fact situation, but in any event, it is not for the drawer
of the cheque to dictate terms with regard to the nature of
litigation.”
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41. Therefore, the accused cannot escape from the
High Court of H.P.
liability by taking a plea that he had issued the cheque as security.
42. The accused asserted that the cheque was blank and
the complainant had filled in the amount. There is no evidence of
this fact, as Sita Ram (CW4) denied in his cross-examination that
a blank cheque was issued by the accused, and a denied
suggestion does not amount to any proof in any case. In any case,
it was laid down by the Hon’ble Supreme Court in Bir Singh v.
Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2
SCC (Civ) 309: 2019 SCC OnLine SC 138 , that a person is liable for
the commission of an offence punishable under section 138 of the
Negotiable Instruments Act even if some other person fills the
cheque. It was observed:
“ 33. A meaningful reading of the provisions of the
Negotiable Instruments Act, including, in particular,
Sections 20, 87 and 139, makes it amply clear that a person
who signs a cheque and makes it over to the payee remains
liable unless he adduces evidence to rebut the
presumption that the cheque had been issued for payment
of a debt or in discharge of a liability. It is immaterial that
the cheque may have been filled in by any person other
than the drawer if the cheque is duly signed by the drawer.
If the cheque is otherwise valid, the penal provisions of
Section 138 would be attracted.
34. If a signed blank cheque is voluntarily presented to a
payee, towards some payment, the payee may fill in the
amount and other particulars. This in itself would not
invalidate the cheque. The onus would still be on the
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accused to prove that the cheque was not in discharge of a
debt or liability by adducing evidence.
High Court of H.P.
35. It is not the case that the respondent accused him of
either signing the cheque or parting with it under any
threat or coercion. Nor is it the case that the respondent
accused that the unfilled signed cheque had been stolen.
The existence of a fiduciary relationship between the
payee of a cheque and its drawer would not disentitle the
payee to the benefit of the presumption under Section 139
of the Negotiable Instruments Act, in the absence of
evidence of exercise of undue influence or coercion. The
second question is also answered in the negative.
36. Even a blank cheque leaf, voluntarily signed and
handed over by the accused, which is towards some
payment, would attract presumption under Section 139 of
the Negotiable Instruments Act, in the absence of any
cogent evidence to show that the cheque was not issued in
discharge of a debt.”
43. This position was reiterated in Oriental Bank of
Commerce v. Prabodh Kumar Tewari, 2022 SCC OnLine SC 1089,
wherein it was observed:
“12. The submission, which has been urged on behalf of
the appellant, is that even assuming, as the first
respondent submits, that the details in the cheque were
not filled in by the drawer, this would not make any
difference to the liability of the drawer.
xxxxxx
32. A drawer who signs a cheque and hands it over to the
payee is presumed to be liable unless the drawer adduces
evidence to rebut the presumption that the cheque has
been issued towards payment of a debt or in the discharge
of a liability. The presumption arises under Section 139.
44. Therefore, the cheque is not bad even if it is not filled
in by the drawer.
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45. The accused claimed that he was appointed as a
High Court of H.P.
commission agent by the complainant. Sita Ram (CW-4) denied
in his cross-examination that the accused was appointed as an
agent. He stated in his cross-examination that there were many
dealers of the company in Haryana. He volunteered to say that
they were not dealers, but purchasers, who used to purchase the
article from the complainant and thereafter sell it to the public.
He admitted that the record of the purchaser was available with
the company, but he had not produced the record. He specifically
denied that the accused was appointed as a commission agent,
who was to be paid commission on the sale made by him.
Therefore, the cross-examination of this witness does not
establish the plea taken by the accused that the accused was
appointed as a commission agent. The accused has not produced
any letter of appointment as commission agent, and the plea of
the accused that he was a commission agent is not acceptable.
46. There was no other evidence to rebut the presumption
attached to the cheque, and the learned trial Court erred in
holding that the accused had successfully rebutted the
presumption attached to the cheque. The learned trial Court
failed to notice the contents of the reply, which had material
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bearing in the present case, and this adversely affected the
High Court of H.P.
reasoning of the learned trial Court.
47. The judgments in Basalingappa (supra) , Rajesh Jain
(supra) and Rangappa (supra) deal with the rebuttal of
presumption and that the presumption can be rebutted by
preponderance of probability, regarding which there is no
dispute. However, the accused had failed to rebut the presumption
even on the preponderance of probability. Hence, these
judgments will not help the accused.
48. The complainant stated that the cheque was
dishonoured with an endorsement ‘insufficient funds’. This was
proved by M.L. Marwari (CW-3), who stated that the cheque was
presented before the bank and it was sent for realisation, but it
was dishonoured with an endorsement ‘insufficient funds’.
49. Dharam Pal (CW5) stated that the cheque (Ext.
CW1/D) was received in the bank, but the accused did not have
sufficient money. Therefore, the cheque was dishonoured. He
proved the statement of account (Ext.CW-5/A), which shows that
an amount of ₹9,90/- was available on 21.09.2002.
50. Dharam Pal (CW-5) admitted in his cross-
examination that the accused had issued a letter, stating that the
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cheque was wrongly issued and it should not be honoured. This
High Court of H.P.
letter and the admission made by this witness will not help the
accused. The letter written by the complainant that the cheque
was wrongly issued was an admission in favour of the accused
and was inadmissible as per Section 21 of the Indian Evidence Act.
51. It was submitted that the cheque should have been
dishonoured with an endorsement ‘stop payment’ and not
‘insufficient funds’. This submission will not make any
difference because the statement of this witness shows that the
accused did not have any money in his account to honour the
cheque. Therefore, even if the cheque was dishonoured with an
endorsement ‘stop payment’, it would have attracted the
provisions of Section 138 of the NI Act. It was laid down by the
Hon’ble Supreme Court in Laxmi Dyechem v. State of Gujarat ,
(2012) 13 SCC 375: (2012) 4 SCC (Cri) 283: 2012 SCC OnLine SC 970
that the dishonour of a cheque on the ground that the drawer
stopped the payment attracted the provisions of Section 138 of
the NI Act. It was observed at page 388:
12. In Modi Cements Ltd. [(1998) 3 SCC 249: 1999 SCC (Cri)
252], a similar question had arisen for the consideration of
this Court. The question was whether dishonour of a
cheque on the ground that the drawer had stopped
payment was a dishonour punishable under Section 138 of
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the Act. Relying upon two earlier decisions of this Court in
Electronics Trade & Technology Development Corpn. Ltd. v.
Indian Technologists and Engineers (Electronics) (P) Ltd.
[(1996) 2 SCC 739: 1996 SCC (Cri) 454] and K.K. Sidharthan v.
T.P. Praveena Chandran [(1996) 6 SCC 369: 1996 SCC (Cri)
1340] , it was contended by the drawer of the cheque that if
the payment was stopped by the drawer, the dishonour of
the cheque could not constitute an offence under Section
138 of the Act. That contention was specifically rejected by
this Court. Not only that, the decision in Electronics Trade
& Technology Development Corpn. Ltd. [(1996) 2 SCC 739:
1996 SCC (Cri) 454] to the extent that the same held that
dishonour of the cheque by the bank after the drawer had
issued a notice to the holder not to present the same would
not constitute an offence, was overruled. This Court
observed: ( Modi Cements Ltd. case [(1998) 3 SCC 249: 1999
SCC (Cri) 252 ], SCC pp. 257-58, paras 18 & 20)
High Court of H.P.
“ 18. The aforesaid propositions in both these reported
judgments, in our considered view, with great respect,
are contrary to the spirit and object of Sections 138 and
139 of the Act. If we are to accept this proposition, it
will make Section 138 a dead letter, for, by giving
instructions to the bank to stop payment immediately
after issuing a cheque against a debt or liability, the
drawer can easily get rid of the penal consequences,
notwithstanding the fact that a deemed offence was
committed. Further, the following observations in para
6 in Electronics Trade & Technology Development Corpn.
Ltd. [(1996) 2 SCC 739: 1996 SCC (Cri) 454] (SCC p. 742)
Section 138 is intended to prevent dishonesty on the
part of the drawer of a negotiable instrument to
draw a cheque without sufficient funds in his
account maintained by him in a bank and induce the
payee or holder in due course to act upon it. Section
138 draws the presumption that one commits the
offence if one issues the cheque dishonestly .
In our opinion, do not also lay down the law correctly.
*
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20. On a careful reading of Section 138 of the Act, we are
unable to subscribe to the view that Section 138 of the
Act draws a presumption of dishonesty against the
drawer of the cheque if he, without sufficient funds to
his credit in his bank account to honour the cheque,
issues the same and, therefore, this amounts to an
offence under Section 138 of the Act. For the reasons
stated hereinabove, we are unable to share the views
expressed by this Court in the above two cases, and we
respectfully differ with the same regarding the
interpretation of Section 138 of the Act to the limited
extent as indicated above.” (emphasis in original)
High Court of H.P.
13. We may also, at this stage, refer to the decisions of this
Court in M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P)
Ltd. [(2002) 1 SCC 234: 2002 SCC (Cri) 121] , where to this
Court considering an analogous question held that even in
cases where the dishonour was on account of “stop-
payment” instructions of the drawer, a presumption
regarding the cheque being for consideration would arise
under Section 139 of the Act. The Court observed: (SCC p.
240, para 19)
“ 19. Just such a contention has been negatived by this
Court in Modi Cements Ltd. v. Kuchil Kumar Nandi
[(1998) 3 SCC 249: 1999 SCC (Cri) 252] . It has been held
that even though the cheque is dishonoured by reason
of a ‘stop-payment’ instruction, an offence under
Section 138 could still be made out. It is held that the
presumption under Section 139 is also attracted in such
a case. The authority shows that even when the cheque
is dishonoured by reason of ‘stop-payment’
instructions by virtue of Section 139, the court has to
presume that the cheque was received by the holder for
the discharge, in whole or in part, of any debt or
liability. Of course, this is a rebuttable presumption.
The accused can thus show that the ‘stop-payment’
instructions were not issued because of insufficiency or
paucity of funds. If the accused shows that in his
account there were sufficient funds to clear the amount
of the cheque at the time of presentation of the cheque
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for encashment at the drawer bank and that the stop-
payment notice had been issued because of other valid
reasons, including that there was no existing debt or
liability at the time of presentation of a cheque for
encashment, then offence under Section 138 would not
be made out. The important thing is that the burden of
so proving would be on the accused. Thus, a court
cannot quash a complaint on this ground.”
High Court of H.P.
14. To the same effect is the decision of this Court in
Goaplast (P) Ltd. v. Chico Ursula D'Souza [(2003) 3 SCC 232:
2003 SCC (Cri) 603: 2003 Cri LJ 1723] where this Court held
that “stop-payment instructions” and consequent
dishonour of a post-dated cheque attract the provision of
Section 138. This Court observed: (SCC pp. 232 g -233 c )
“Chapter XVII, containing Sections 138 to 142, was
introduced in the Act by Act 66 of 1988 with the object
of inculcating faith in the efficacy of banking
operations and giving credibility to negotiable
instruments in business transactions. The said
provisions were intended to discourage people from
not honouring their commitments by way of payment
through cheques. The court should lean in favour of an
interpretation which serves the object of the statute. A
post-dated cheque will lose its credibility and acceptability
if its payment can be stopped routinely. The purpose of a
post-dated cheque is to provide some accommodation to
the drawer of the cheque. Therefore, it is all the more
necessary that the drawer of the cheque should not be
allowed to abuse the accommodation given to him by a
creditor by way of acceptance of a post-dated cheque .
In view of Section 139, it has to be presumed that a
cheque is issued in the discharge of any debt or other
liability. The presumption can be rebutted by adducing
evidence, and the burden of proof is on the person who
wants to rebut the presumption. This presumption,
coupled with the object of Chapter XVII of the Act, leads to
the conclusion that by countermanding payment of a post-
dated cheque, a party should not be allowed to get away
from the penal provision of Section 138 of the Act. A
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contrary view would render Section 138 a dead letter and
will provide a handle to persons trying to avoid payment
under legal obligations undertaken by them through their
own acts, which, in other words, can be said to be
taking advantage of one's own wrong.” (emphasis
supplied)
High Court of H.P.
52. The accused admitted that the notice was received by
him. He had sent a reply to the notice(Ext.D-13) and examined
Virender Singh, his Advocate, (DW4) to prove the reply.
Therefore, it was duly proved that the accused had received the
notice. The accused never claimed that he had paid the money
after the receipt of the notice, and it was proved that the accused
had failed to repay the money despite the receipt of the notice of
demand.
53. Therefore, it was duly proved on record that the
accused had issued a cheque in favour of the complainant to
discharge his debt/liability which was dishonoured with an
endorsement ‘insufficient funds’ and the accused had failed to
pay the amount despite the receipt of valid notice of demand.
Hence, all the ingredients of the commission of an offence
punishable under Section 138 of NI Act were duly satisfied, and
the learned trial Court erred in acquitting the accused.
54. No other point was urged
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55. In view of the above, the present appeal is allowed and
High Court of H.P.
the judgment passed by the learned trial Court, acquitting the
accused, is set aside and the accused is convicted for the
commission of an offence punishable under Section 138 of N I Act.
56. Let the accused be produced on 23.09.2026 for
hearing him on the quantum of sentence.
(Rakesh Kainthla)
Judge
th
07 September, 2026.
(Ravinder )
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