Facts
The complainant alleged that the accused had borrowed ₹50,000 on 6 February 2007 and ₹1,00,000 on 13 June 2007. According to her, the accused issued a cheque for ₹1,50,000 dated 15 January 2010 towards repayment. The cheque was dishonoured for “insufficient funds”; despite service of the statutory demand notice, the accused failed to make payment, leading to a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
Source reference: p.2 / para. 2The accused admitted knowledge of the complainant and issuance of a blank signed cheque, but claimed that it had been given as security for a loan of ₹50,000, which had already been repaid. He led defence evidence.
Source reference: p.3 / para. 5The Trial Court dismissed the complaint on the ground that the underlying loan had become time-barred, holding that the complaint filed on 15 June 2010 was beyond the three-year limitation period. The complainant challenged the acquittal in appeal.
Source reference: p.3–4 / paras. 6–9Issues
Whether the complaint under Section 138 of the NI Act was liable to be dismissed as time-barred because the loans had been advanced in February and June 2007?
Source reference: p.12–14 / paras. 16–18Whether issuance of the cheque dated 15 January 2010 constituted an acknowledgment of liability and consequently extended or saved the limitation period?
Source reference: p.4, p.12–14 / paras. 9, 16–18Whether the statutory presumptions under Sections 118(a) and 139 of the NI Act stood rebutted by the complainant’s own evidence and bank records concerning the alleged advancement of ₹1,50,000?
Source reference: p.14–19 / paras. 19–25Whether the Trial Court’s acquittal warranted appellate interference?
Source reference: p.5–10 / paras. 12–14Law Applied
Section 138 of the NI Act applies where a cheque is drawn towards a legally enforceable debt or liability, presented within its validity period, dishonoured for specified reasons, followed by a valid demand notice and failure to pay within fifteen days; the complaint must thereafter be filed within the prescribed period.
Source reference: p.10–12 / para. 15Sections 118(a) and 139 create rebuttable presumptions that a negotiable instrument was made for consideration and that the cheque was received towards discharge of a debt or liability; once execution and signature are admitted, the accused bears the evidentiary burden of raising a probable defence, on a preponderance of probabilities: APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers, (2020) 12 SCC 724; N. Vijay Kumar v. Vishwanath Rao N., 2025 SCC OnLine SC 873; Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069.
Source reference: p.15–17 / paras. 19–22Under Article 19 of the Limitation Act, 1963, a money claim based on a loan carries a three-year limitation period, while an acknowledgment made within the limitation period can save or extend limitation under the applicable provisions of the Limitation Act; issuance of a cheque may constitute such acknowledgment: Hindustan Apparel Industries v. Fair Deal Corpn., AIR 2000 Guj 261.
Source reference: p.12–14 / paras. 16–18In an appeal against acquittal, interference is justified only where the Trial Court’s view is perverse, impossible, wholly unsustainable or manifestly illegal; however, in Section 138 cases, the appellate court may scrutinize whether the accused has rebutted the statutory presumptions: Sanjay Kumar v. State of Bihar, 2026 SCC OnLine SC 1373; Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106.
Source reference: p.5–10 / paras. 12–14Reasoning
The High Court rejected the Trial Court’s limitation reasoning. Since the later loan was allegedly advanced on 13 June 2007, the three-year period would expire on 12 June 2010; the cheque was issued on 15 January 2010, within the limitation period. Applying Hindustan Apparel Industries, the Court held that issuance of the cheque operated as an acknowledgment of liability and that the complaint could not be dismissed merely as time-barred.
Source reference: p.12–14 / paras. 16–18However, the accused had admitted the cheque and his signature, thereby attracting the presumptions under Sections 118(a) and 139 of the NI Act.
Source reference: p.14–17 / paras. 19–22Those presumptions were nevertheless rebutted by the complainant’s own documentary evidence. She claimed to have withdrawn ₹50,000 and ₹1,00,000 from her bank accounts for advancing the loans, but the passbook entries showed withdrawals aggregating only ₹80,000, not ₹1,00,000, and did not corroborate her specific account of the alleged advance.
Source reference: p.17–18 / para. 23Applying the principle that the statutory presumption is rebuttable and disappears as a rule of law once credible contrary evidence is produced, the Court concluded that the complainant had failed to establish the legally enforceable liability beyond the rebutted presumption.
Source reference: p.18–19 / paras. 24–25The acquittal was therefore sustainable, although on grounds different from those assigned by the Trial Court.
Source reference: p.19 / para. 26Holding
The High Court held that the complaint was not time-barred, because the cheque had been issued within the limitation period and constituted an acknowledgment of liability.
Nevertheless, the complainant’s bank records rebutted the presumptions under Sections 118(a) and 139 of the NI Act by failing to support her assertion that ₹1,50,000 had been advanced to the accused.
Source reference: p.17–19 / paras. 23–26The appeal against acquittal was accordingly dismissed, and the Trial Court’s judgment was upheld on different reasoning.
Source reference: p.19 / para. 29The respondent was directed to furnish bail bonds of ₹50,000 with one surety for six months under Section 437-A Cr.P.C.
Source reference: p.20 / para. 30Original Court PDF
VEENA DEVIvsPARKASH VASHISHT
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