Section 138 does not apply where the cheque exceeds the legally enforceable debt at presentation.

The complainant, a partnership firm, alleged that the accused proprietorship firm owed ₹70,00,000 for pulses purchased on credit and issued a cheque for that amount. The cheque was dishonoured for insufficient funds, and the complainant commenced proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

The trial court convicted the accused and ordered payment of ₹70,10,000, including ₹70,00,000 as compensation. On appeal, the Sessions Court found that the accused had paid an additional ₹23,40,000 and reduced the amount payable to ₹46,70,000.

The accused sought acquittal in Crl.R.P. No. 265/2023, while the complainant sought restoration of the trial court’s award in Crl.R.P. No. 725/2023.

1. Whether the accused rebutted the statutory presumption by showing that the legally enforceable debt at the time of presentation was less than the cheque amount of ₹70,00,000.

2. Whether the courts below committed a reviewable error by failing to consider material evidence, warranting interference in revision.

Sections 118 and 139 of the NI Act raise rebuttable presumptions in favour of the holder of a cheque; the accused may rebut them on a preponderance of probabilities, after which the complainant must establish the legally enforceable debt.

The Court applied Sections 56 and 138 of the NI Act, relying on Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, (2023) 1 SCC 578, for the rule that where part-payment is made after a cheque is drawn but before encashment, it must be endorsed on the instrument and the cheque presented for the balance; otherwise, the cheque does not represent the legally enforceable debt at encashment.

Under Sections 397 and 401 Cr.P.C., revisional interference is supervisory and is warranted where, among other grounds, the lower court’s decision is perverse or materially fails to consider relevant evidence; it is not a second appellate review.

The Court found that the complainant’s ledger, Ex.P.8, recorded payments of ₹54,00,000, whereas the accused’s admitted bank statement, Ex.D.3, showed transfers to the complainant totalling ₹77,40,634. The ledger also recorded a balance of ₹59,63,500 in one year and ₹66,71,700 in the following year, neither of which substantiated a debt of ₹70,00,000 on the relevant date.

The Court held that this evidence rebutted the Section 139 presumption and that the complainant had produced no cogent evidence establishing a legally enforceable debt equal to the cheque amount.

Because the courts below had not considered Ex.D.3 and the complainant’s admission concerning it, the Court found a material evidentiary omission sufficient to justify revision.

Applying Dashrathbhai, it concluded that the cheque for the full amount could not support a Section 138 conviction when the enforceable debt was less than the cheque amount.

It directed that any amount deposited by the accused be refunded upon proper identification.