P&H HC Refuses To Quash HDFC Cheque Case Over Borrower’s Disputed Claim That Vehicle Sale Cleared Loan

In brief

The question

1. Whether the complaint under Section 138 of the NI Act disclosed a prima facie case against Singh.

The court held

The Court held that the disputed questions concerning the vehicle’s sale and adjustment of proceeds were for the trial court to determine, and that the complaint and consequential proceedings could not be quashed under Section 482 CrPC.

It also directed

The petition was dismissed; any pending applications were also disposed of.

01Facts

HDFC Bank filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that Preetpal Singh’s cheque for ₹1,78,470, issued towards a commercial vehicle loan, was dishonoured for insufficient funds and remained unpaid after demand notice.

pp. 3–5 · ¶ 4, 6

Singh sought to quash the complaint under Section 482 CrPC, contending that the bank had seized and sold the vehicle, adjusted the proceeds against the loan, and that the account statement showed a nil balance.

pp. 1–2 · ¶ 1–2

The bank disputed the statement and asserted that ₹1,78,470 remained outstanding.

p. 2 · ¶ 3

02Issues

i.1. Whether the complaint under Section 138 of the NI Act disclosed a prima facie case against Singh.

p. 4 · ¶ 6

ii.2. Whether the complaint could be quashed under Section 482 CrPC where the asserted adjustment of vehicle-sale proceeds and the loan-account balance were disputed questions of fact.

pp. 5–7 · ¶ 8–11

03Law Applied

Section 138 of the NI Act applies where a cheque drawn towards a legally enforceable debt or liability is dishonoured, the payee gives the required written demand notice, and the drawer fails to pay within the statutory period; the Court set out the ingredients stated in Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745.

pp. 3–4 · ¶ 5

The statutory presumptions relating to the cheque, including the presumption under Section 139 of the NI Act, support restraint in quashing proceedings where the defence depends on disputed facts.

pp. 5–7 · ¶ 8, 10

Under Section 482 CrPC, the High Court should not assess the genuineness of disputed allegations requiring evidence; a Section 138 complaint may be quashed on appropriate legal grounds, but not where material factual disputes require trial. The Court relied on Sumit Bansal v. M/s MGI Developers and Promoters, 2026(2) SCC (Cri) 12, and Rajeshbhai Muljibhai Patel v. State of Gujarat, (2020) 3 SCC 794.

pp. 5–7 · ¶ 9–10

Provisions in the judgment · 3 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 482

Negotiable Instruments Act, 1881 Section 138 Section 139

04Reasoning

The complaint alleged that Singh issued the cheque towards his loan liability, that it was dishonoured for insufficient funds, and that he failed to pay after receiving the demand notice; these allegations disclosed a prima facie case under Section 138.

pp. 3–5 · ¶ 4, 6

Singh’s claim that the vehicle had been sold and the proceeds adjusted rested on a statement of account that the bank disputed. Whether the sale occurred and whether its proceeds discharged the outstanding loan therefore required adjudication on evidence, rather than determination in a Section 482 proceeding.

p. 5 · ¶ 8 · p. 7 · ¶ 11

In light of the statutory presumptions and the factual disputes, quashing was not warranted.

pp. 5–7 · ¶ 8–11