Madras HC Upholds One-Year Jail Term For Borrower Who Failed To Prove Rs 4.5 Lakh Loan Was Repaid

The respondent filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that the petitioner had borrowed a total of ₹4,50,000, executed two promissory notes, and later issued a cheque for that amount pursuant to a settlement.

The cheque was dishonoured for insufficient funds, and the petitioner did not pay after service of the statutory demand notice.

The Trial Court convicted the petitioner, sentencing him to one year’s simple imprisonment and directing payment of ₹4,50,000 as compensation, with three months’ simple imprisonment in default.

The appellate court dismissed his appeal and affirmed the conviction and sentence.

In revision, the petitioner argued, among other things, that the loan had been repaid, the cheque had been misused, the complainant’s financial capacity was unproved, and the evidence contained material contradictions.

Section 138 of the NI Act criminalises dishonour of a cheque for an enforceable debt or liability when the statutory requirements are met.

Once execution of the cheque and the foundational facts are established, Sections 118(a) and 139 raise presumptions in the holder’s favour; the accused may rebut them by raising a probable defence on a preponderance of probabilities, and a bare denial or unsupported assertion that a cheque was given as security is insufficient.

Relying on Ashok Singh v. State of Uttar Pradesh and Another, 2025 INSC 427, the Court stated that a challenge to the complainant’s financial capacity, without material supporting a probable defence, does not displace the presumption.

Under Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197, a voluntarily signed blank cheque may attract Section 139’s presumption even if later completed by the holder; under Sripati Singh v. State of Jharkhand and Another, 2021 SCC OnLine SC 1002, a cheque described as security may attract Section 138 where the underlying liability has become due and remains unpaid.

The Court also relied on Bijoy Kumar Moni v. Paresh Manna and Another, 2024 INSC 1024, concerning the statutory presumptions and the need to substantiate a security-cheque defence.

Revisional interference with concurrent findings is limited to cases involving patent illegality, perversity, material irregularity, or manifest error causing a miscarriage of justice.

The respondent’s evidence, including testimony from two supporting witnesses and the promissory notes, supported the alleged borrowings; the petitioner’s insolvency petition also referred to a blank cheque being with the respondent.

The petitioner produced no evidence of repayment or misuse and did not reply to the demand notice; the Court therefore found his defence insufficient to rebut the statutory presumptions.

It held that the objections concerning financial capacity, tax-return disclosure, and witness contradictions had been considered and rejected by the appellate court, and did not establish a basis for revisional interference.

It directed the Trial Court to take steps to secure the petitioner’s presence, execute the sentence, and recover the compensation if unpaid; connected miscellaneous petitions were closed, with no order as to costs.