Cash-loan violations under Section 269SS do not invalidate the debt or defeat Section 138 prosecution.

The complainant alleged that he had advanced a friendly loan of ₹60,000 to the accused, who issued a cheque for ₹50,000 towards partial discharge of the liability. The cheque was dishonoured for “insufficient funds”; a statutory demand notice was served, but the accused failed to make payment

The Trial Court convicted the accused under Section 138 of the Negotiable Instruments Act, 1881, sentencing him to six months’ simple imprisonment, compensation of ₹80,000, and one month’s imprisonment in default.

The Appellate Court affirmed the conviction and sentence.

In revision, the accused challenged the complainant’s failure to specify the loan date, his financial capacity, the discrepancy between “Jatinder Singh” in the cheque and “Jitender Singh” in the complaint, the alleged non-issuance and alteration of the cheque, and service of notice.

The complainant maintained that the statutory presumptions had not been rebutted and that the concurrent findings required no interference.

1. Whether the complainant proved the foundational facts necessary to invoke the presumptions under Sections 118(a) and 139 of the NI Act, notwithstanding the accused’s denial, the discrepancy in the payee’s name, and the absence of documentary proof of the loan transaction?

2. Whether the alleged cash transaction, absence of proof of financial capacity, and failure to specify the precise date and purpose of the loan rendered the debt legally unenforceable or rebutted the statutory presumptions?

3. Whether dishonour, service of statutory notice, failure to pay, and the sentence including compensation and imprisonment in default were legally established and valid?

Section 138 of the NI Act requires proof of drawing of the cheque for a legally enforceable debt or liability, presentation within validity, dishonour, issuance of a demand notice within the statutory period, and failure to pay within fifteen days.

Sections 118(a) and 139 create rebuttable presumptions that a negotiable instrument was issued for consideration and that the cheque was received in discharge of a debt or liability; once execution is proved or admitted, the accused must raise a probable defence, and a bare denial is insufficient.

The complainant is not required, at the threshold, to prove the antecedent debt or financial capacity where the accused fails to raise a credible challenge; the accused may rebut the presumption through cross-examination, oral evidence, or documents.

Breach of Section 269SS of the Income Tax Act may attract penalty but does not render a cash loan transaction void or unenforceable.

A mere spelling or naming discrepancy in the payee’s name does not invalidate the cheque where the complainant’s identity is otherwise established.

Imprisonment may be imposed in default of payment of compensation under Section 357(3) CrPC.

The Court found that the complainant specifically asserted that the accused had handed over the cheque, while the accused merely denied issuance in his Section 313 CrPC statement and did not enter the witness box to substantiate his defence; such a statement was not substantive evidence sufficient to rebut the statutory presumption.

The accused also failed to challenge the alleged inoperative status of his bank account before the bank witness.

The complainant’s inability to recall the precise loan period was treated as a minor discrepancy attributable to the passage of time and not a material contradiction.

His oral evidence regarding income and assets, coupled with the accused’s failure to raise a specific financial-capacity challenge in reply to the notice or produce contrary material, was sufficient to reject that defence.

The Court further held that the cash nature of the loan did not invalidate the transaction.

The difference between “Jatinder” and “Jitender” was only a spelling discrepancy; the pay-in slip and acceptance of the cheque by the complainant’s bank supported his status as payee or holder in due course, and the accused never asserted that Jatinder Singh was a different person.

Dishonour for insufficient funds, service of notice, and non-payment were established, thereby satisfying all ingredients of Section 138.

The sentence was not excessive, and compensation with a default sentence was legally permissible.

The omissions regarding the exact loan date, absence of documentary proof, cash payment, alleged lack of financial capacity, and spelling discrepancy in the payee’s name did not defeat the complaint.

The conviction under Section 138 of the NI Act and the sentence of six months’ simple imprisonment, compensation of ₹80,000, and one month’s simple imprisonment in default were upheld.

The criminal revision was dismissed, and the records were directed to be returned to the courts below.