A reasonable acquittal under Section 138 cannot be disturbed absent perversity or legal error.

The complainant alleged that he advanced Rs. 3,40,000 to the accused, who issued three cheques; two cheques totalling Rs. 40,000 were encashed, while the cheque for Rs. 3,00,000 was dishonoured for insufficient funds.

The trial court convicted the accused under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), but the Sessions Court allowed the accused’s appeal and acquitted him.

The complainant challenged that acquittal before the High Court under Section 378 CrPC.

The High Court noted omissions in the statutory notice concerning the transaction and repayment, the complainant’s failure to produce a receipt or account entry for the advance, and the lack of supporting evidence from the agreement’s witness.

1. Whether the complainant established that the dishonoured cheque was issued in discharge of a legally enforceable debt or liability under Section 138 of the NI Act.

2. Whether the First Appellate Court’s acquittal disclosed an error or perversity warranting interference in the complainant’s appeal.

Sections 138 and 139 of the NI Act make dishonour of a cheque issued for a legally enforceable debt an offence, subject to the statutory conditions, and raise a presumption in favour of the cheque-holder; that presumption is rebuttable on a preponderance of probabilities.

The accused may rely on the record and surrounding circumstances and need not disprove the complainant’s case in its entirety (*Kamala S. v. Vidhyadharan M.J.*, paras. 16–17; *Basalingappa v. Mudibasappa* and *Rangappa v. Sri Mohan*, para. 24).

The court also relied on *Kuntegowda v. Thurubaiah* concerning the accused’s burden to raise and support a financial-capacity defence, while emphasising that the evidence must be considered as a whole.

On appeal against acquittal, the appellate court may review the evidence, but the reinforced presumption of innocence requires restraint; where two reasonable views are possible, the acquittal should not be disturbed, absent perversity or manifest error (*Chandrappa v. State of Karnataka*, quoted in *Ramesh v. State of Karnataka*, para. 26; *Dattatraya v. Sharanappa*, para. 22).

Although the cheque bore the accused’s signature and the statutory presumptions were relevant, the High Court considered the evidence as a whole and found material gaps in proof of the alleged debt.

The notice omitted key particulars, including the earlier encashment of the two cheques; the complainant did not establish when or how the alleged advance was made, produce a receipt or relevant account entry, or examine the agreement’s witness.

The witness relied on by the complainant lacked personal knowledge of the Rs. 3,40,000 transaction.

The evidence concerning the complainant’s financial circumstances was also considered, but the decision rested on the overall deficiencies in proving the transaction and liability.

The First Appellate Court’s assessment was a reasonable view of the evidence and was not shown to be perverse or legally erroneous; the High Court therefore found no basis to interfere with the acquittal.

It dismissed the appeal and confirmed the First Appellate Court’s order acquitting the accused; the bail bond was cancelled and the record and proceedings were directed to be returned to the trial court.