Himachal Pradesh High Court
Reserved On: 11.09.2025 vs Ajay Kumar And Another on 23 September, 2025
1 Neutral Citation No.
( 2025:HHC:33010 )
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Revision No.21 of 2025 Reserved on: 11.09.2025 .
Decided on: 23 .09.2025
Sunil Kumar ....... Petitioner
Versus
Ajay Kumar and another .... Respondents
Coram
The Hon'ble Mr. Justice Rakesh Kainthla, Judge.
Whether approved for reporting?1 Yes.
For the Petitioner: Mr. Vijay Singh Bhatia, Advocate. For the Respondents: Mr. Kamal Sharma, Advocate, vice Mr. Naresh K. Sharma, Advocate, for respondent No.1.
Mr. Tarun Pathak, Deputy Advocate General, for respondent No.2- State.
Rakesh Kainthla, Judge The present revision is directed against the judgment dated 04.12.2024 passed by learned Sessions Judge, Hamirpur (learned Appellate Court) vide which the judgment of conviction and order of sentence dated 27.06.2024 passed by learned Judicial Magistrate, First Class, Court No. III, Hamirpur, District Hamirpur, H.P. (learned Trial Court) were upheld.
1Whether the reporters of the local papers may be allowed to see the Judgment?Yes.
::: Downloaded on - 23/09/2025 21:29:30 :::CIS2 Neutral Citation No. ( 2025:HHC:33010 ) (Parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.) .
2. Briefly stated, the facts giving rise to the present petition are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). It was asserted that the complainant and the accused had cordial relations with each other. The accused required some money for his domestic needs. He approached the complainant. The complainant advanced ₹1,50,000/- to the accused. The accused issued a cheque of ₹50,000/- drawn on Punjab National Bank, Bhota to the complainant to discharge part of his liability. The complainant presented the cheque to the bank, but it was dishonoured with the remarks 'account closed'. The complainant issued a legal notice to the accused but it was returned undelivered. Hence, the complaint was filed before the learned Trial Court for taking action as per the law.
3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation was put to him for the commission of an offence ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 3 Neutral Citation No. ( 2025:HHC:33010 ) punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried.
4. The complainant examined himself (CW1).
.
5. The accused, in his statement recorded under Section 313 of CrPC, admitted that he had borrowed ₹1,50,000/-
from the complainant. He stated that he had issued a security cheque at the time of taking the loan. He had repaid the amount but failed to r produce to in cash. He stated that he wanted to lead evidence in defence the evidence despite repeated adjournments. Hence, the evidence was closed on 20.05.2024.
6. Learned Trial Court held that the issuance of the cheque was not disputed, therefore, presumption under Section 118(a) and 139 would arise that the cheque was issued for consideration and in discharge of debt/liability. The burden would shift upon the accused to rebut the presumption. He failed to produce any evidence to rebut the presumption. The cheque was dishonoured with an endorsement 'account closed'.
The complainant served a notice upon the accused, which was returned undelivered. This is treated as deemed service in law.
The accused failed to repay the amount to the complainant. All the ingredients of commission of an offence punishable under ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 4 Neutral Citation No. ( 2025:HHC:33010 ) Section 138 of the NI Act were duly satisfied. Consequently, the accused was convicted of the commission of an offence punishable under Section 138 of the NI Act and was sentenced to .
undergo simple imprisonment for three months, pay a fine of ₹70,000/- and in default of payment of fine, to undergo additional 15 days simple imprisonment. It was further ordered that the amount of ₹68,000/- would be disbursed to the complainant as compensation.
7. Being aggrieved by the judgment and order passed by the learned Trial Court, the accused filed an appeal, which was decided by the learned Sessions Judge, Hamirpur (learned Appellate Court). Learned Appellate Court concurred with the findings recorded by the learned Trial Court that issuance of cheque was not disputed and a presumption under Section 118(a) and 139 of NI Act would get attracted. The cheque was issued as security, which gave rise to a liability under Section 138 of the NI Act. The cheque was dishonoured with an endorsement 'account closed'. The notice was deemed to have been served upon the accused, but he failed to repay the amount. Hence, he was rightly convicted and sentenced.
Accordingly, the appeal was dismissed.
::: Downloaded on - 23/09/2025 21:29:30 :::CIS5 Neutral Citation No. ( 2025:HHC:33010 )
8. Being aggrieved by the judgments and order passed by the learned Courts below, the petitioner/accused has filed the present revision asserting that the learned Courts below .
erred in appreciating the material placed before them. The complainant was required to prove the sources of his income.
The complainant failed to prove the existence of a legally enforceable debt. No receipt of payment was filed. The accused had issued a signed blank cheque to the complainant as security, which was misused by the complainant. Therefore, it was prayed that the present petition be allowed and judgments and order passed by the learned Courts below be set aside.
9. I have heard Mr. Vijay Singh Bhatia, learned counsel for the petitioner, Mr. Kamal Sharma, learned counsel for the respondent No.1 and Mr. Tarun Pathak, learned Deputy Advocate General, for respondent No.2-State.
10. Mr. Vijay Singh Bhatia, learned counsel for the petitioner, submitted that the learned Courts below erred in appreciating the material placed before them. The complainant failed to prove the source of income and the advancement of the loan to the accused. Notice was also not served upon the accused. Therefore, he prayed that the present revision be ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 6 Neutral Citation No. ( 2025:HHC:33010 ) allowed and the judgments and order passed by the learned Courts below be set aside. He relied upon the judgment of the Hon'ble Supreme Court in K. Subramani v. K. Damodara Naidu, .
(2015) 1 SCC 99, in support of his submission.
11. Mr. Kamal Sharma, learned counsel for respondent No.1/complainant, submitted that the issuance of the cheque was not disputed and the learned Courts below had rightly applied the presumption in the present case. The accused had failed to rebut the presumption by leading any satisfactory evidence. Therefore, he prayed that the present petition be dismissed.
12. I have given considerable thought to the submissions made at the bar and have gone through the records carefully.
13. It was laid down by the Hon'ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh , (2022) 8 SCC 204:
(2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that a revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed at page 207: -
"10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 7 Neutral Citation No. ( 2025:HHC:33010 ) findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like the appellate court, and the scope of .
interference in revision is extremely narrow. Section 397 of the Criminal Procedure Code (in short "CrPC") vests jurisdiction to satisfy itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error which is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings.
14. This position was reiterated in State of Gujarat v.
Dilipsinh Kishorsinh Rao, (2023) 17 SCC 688: 2023 SCC OnLine SC 1294, wherein it was observed at page 695:
14. The power and jurisdiction of the Higher Court under Section 397CrPC, which vests the court with the power to call for and examine records of an inferior court, is for the purposes of satisfying itself as to the legality and regularities of any proceeding or order made in a case.
The object of this provision is to set right a patent defect or an error of jurisdiction or law or the perversity which has crept in such proceedings.
15. It would be apposite to refer to the judgment of this Court in Amit Kapoor v. Ramesh Chander [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460: (2012) 4 SCC (Civ) 687: (2013) 1 SCC (Cri) 986], where scope of Section 397 has been considered and succinctly explained as under: (SCC p. 475, paras 12-13) "12. Section 397 of the Code vests the court with the power to call for and examine the records of an ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 8 Neutral Citation No. ( 2025:HHC:33010 ) inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded .
error, and it may not be appropriate for the court to scrutinise the orders, which, upon the face of it, bear a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored, or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits.
13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even the framing of the charge is a much-advanced stage in the proceedings under CrPC."
15. It was held in Kishan Rao v. Shankargouda, (2018) 8 SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC OnLine SC 651 that it is impermissible for the High Court to ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 9 Neutral Citation No. ( 2025:HHC:33010 ) reappreciate the evidence and come to its conclusions in the absence of any perversity. It was observed at page 169:
"12. This Court has time and again examined the scope of .
Sections 397/401 CrPC and the grounds for exercising the revisional jurisdiction by the High Court. In State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC 452: 1999 SCC (Cri) 275], while considering the scope of the revisional jurisdiction of the High Court, this Court has laid down the following: (SCC pp. 454-55, para 5)
5. ... In its revisional jurisdiction, the High Court can call for and examine the record of any proceedings to satisfy itself as to the correctness, legality or propriety of any finding, sentence or order. In other words, the jurisdiction is one of supervisory jurisdiction exercised by the High Court for correcting a miscarriage of justice. But the said revisional power cannot be equated with the power of an appellate court, nor can it be treated even as a second appellate jurisdiction. Ordinarily, therefore, it would not be appropriate for the High Court to reappreciate the evidence and come to its conclusion on the same when the evidence has already been appreciated by the Magistrate as well as the Sessions Judge in appeal, unless any glaring feature is brought to the notice of the High Court which would otherwise tantamount to a gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in concluding that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. ..."
13. Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19] . This Court held that the High Court, in the exercise of ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 10 Neutral Citation No. ( 2025:HHC:33010 ) revisional jurisdiction, shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. The following .
has been laid down in para 14: (SCC p. 135) "14. ... Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non-consideration of any relevant material or there is palpable misreading of records, the Revisional Court is not justified in setting aside the order, merely because another view is possible. The Revisional Court is not meant to act as an appellate court. The whole purpose of the revisional jurisdiction is to preserve the power in the court to do justice in accordance with the principles of criminal jurisprudence. The revisional power of the court under Sections 397 to 401 CrPC is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction."
16. This position was reiterated in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 13, wherein it was observed at page 205:
"16. It is well settled that in the exercise of revisional jurisdiction under Section 482 of the Criminal Procedure Code, the High Court does not, in the absence of perversity, upset concurrent factual findings. It is not for ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 11 Neutral Citation No. ( 2025:HHC:33010 ) the Revisional Court to re-analyse and re-interpret the evidence on record.
17. As held by this Court in Southern Sales & Services v. Sauermilch Design and Handels GmbH [Southern Sales & Services v. Sauermilch Design .
and Handels GmbH, (2008) 14 SCC 457], it is a well-
established principle of law that the Revisional Court will not interfere even if a wrong order is passed by a court having jurisdiction, in the absence of a jurisdictional error. The answer to the first question is, therefore, in the negative."
17. The present revision has to be decided as per the
18. to parameters laid down by the Hon'ble Supreme Court.
The accused admitted in reply to question No.2 that he had borrowed ₹1,50,000/- from the complainant. He stated that he had issued a security cheque at the time of taking the loan. It was also asserted in para 3 (iv) of the revision that the accused had issued a signed blank cheque to the respondent/complainant as security, which was misused by the complainant. Therefore, the accused had not disputed the taking of a loan and the issuance of a cheque. It was laid down by the Hon'ble Supreme Court in APS Forex Services (P) Ltd. v.
Shakti International Fashion Linkers (2020) 12 SCC 724, that when the issuance of a cheque and signature on the cheque are not disputed, a presumption would arise that the cheque was issued in discharge of the legal liability. It was observed: -
::: Downloaded on - 23/09/2025 21:29:30 :::CIS12 Neutral Citation No. ( 2025:HHC:33010 ) "7.2. What is emerging from the material on record is that the issuance of a cheque by the accused and the signature of the accused on the said cheque are not disputed by the accused. The accused has also not disputed that there were transactions between the .
parties. Even as per the statement of the accused, which was recorded at the time of the framing of the charge, he has admitted that some amount was due and payable. However, it was the case on behalf of the accused that the cheque was given by way of security, and the same has been misused by the complainant. However, nothing is on record that in the reply to the statutory notice, it was the case on behalf of the accused that the cheque was given by way of security. Be that as it may, however, it is required to be noted that earlier the accused issued cheques which came to be dishonoured on the ground of "insufficient funds" and thereafter a fresh consolidated cheque of ₹9,55,574 was given which has been returned unpaid on the ground of "STOP PAYMENT". Therefore, the cheque in question was issued for the second time. Therefore, once the accused has admitted the issuance of a cheque which bears his signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. However, such a presumption is rebuttable in nature, and the accused is required to lead evidence to rebut such a presumption.
The accused was required to lead evidence that the entire amount due and payable to the complainant was paid.
9. Coming back to the facts in the present case and considering the fact that the accused has admitted the issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability. Of course, such a presumption is rebuttable. However, to rebut the presumption, the accused was required to lead evidence that the full amount due and payable to the complainant had been paid. In the present ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 13 Neutral Citation No. ( 2025:HHC:33010 ) case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence of further evidence to rebut the presumption, and more particularly, the cheque in question was issued for the .
second time after the earlier cheques were dishonoured.
Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists a legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both the learned trial court as well as the High Court have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI Act. As observed above, Section 139 of the Act is an example of reverse onus clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence."
19. The presumption under Section 139 of the NI Act was explained by the Hon'ble Supreme Court in N. Vijay Kumar v.
Vishwanath Rao N., 2025 SCC OnLine SC 873 as under:
"5. The NI Act raises two presumptions, one under Section 118 and the other in Section 139 thereof. The Sections read as under:
"118. Presumptions as to negotiable instruments. -- Until the contrary is proved, the following presumptions shall be made: --
(a) of consideration: --that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 14 Neutral Citation No. ( 2025:HHC:33010 ) accepted, indorsed, negotiated or transferred for consideration;
xxx
139. Presumption in favour of the holder. -- It .
shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
6. Section 118 (a) assumes that every negotiable instrument is made or drawn for consideration, while Section 139 creates a presumption that the holder of a cheque has received the cheque in discharge of a debt or liability. Presumptions under both are rebuttable, meaning they can be rebutted by the accused by raising a probable defence. This Court, through various pronouncements, has consistently clarified the nature and extent of these presumptions and the standard of proof required by the accused to rebut them. We may consider a few such pronouncements.
6.1. In Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm (2008) 7 SCC 655, this Court observed as under:
"17. Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe the non- existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal. In this connection, reference may be made to a decision of this Court in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [(1999) 3 SCC ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 15 Neutral Citation No. ( 2025:HHC:33010 ) 35]. In para 12 of the said decision, this Court observed as under: (SCC pp. 50-51) "12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once .
execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to rthe plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case, including that of the plaintiff as well. In cases where the defendant fails to discharge the initial onus of proof by showing the nonexistence of the consideration, the plaintiff would invariably be held entitled to the benefit of the presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence, as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 16 Neutral Citation No. ( 2025:HHC:33010 ) with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of .
proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its nonexistence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist."
From the above decision of this Court, it is pellucid that if the defendant is proved to have r discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who would be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. It is also discernible from the above decision that if the defendant fails to discharge the initial onus of proof by showing the non-
existence of the consideration, the plaintiff would invariably be held entitled to the benefit of the presumption arising under Section 118( a) in his favour." (Emphasis Supplied) 6.2. In Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, this Court examined the presumptions raised by the N.I. Act, and held as follows:
"18. Applying the definition of the word "proved" in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 17 Neutral Citation No. ( 2025:HHC:33010 ) executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the .
accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that, under the particular circumstances of the case, the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions, an accused is not expected to prove his defence beyond a reasonable doubt, as is expected of the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 18 Neutral Citation No. ( 2025:HHC:33010 ) complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the .
court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently, would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence, and if the circumstances so relied upon are compelling, the burden may likewise shift again onto the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act, to rebut the presumptions arising under Sections 118 and 139 of the Act.
21. The accused also has an option to prove the nonexistence of consideration and debt or liability either by letting in evidence or, in some clear and exceptional cases, from the case set ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 19 Neutral Citation No. ( 2025:HHC:33010 ) out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, .
having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue."
(Emphasis Supplied) 6.3. A three-Judge Bench of this Court in Rangappa (supra) had the occasion to consider Section 139 elaborately. The Court reiterated that where the signature on the cheque is acknowledged, a presumption has to be raised that the cheque pertained to a legally enforceable debt or liability; however, this presumption is of a rebuttable nature and the onus is then on the accused to raise a probable defence. It was further stated that:
"27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses, and the defendant-accused cannot be ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 20 Neutral Citation No. ( 2025:HHC:33010 ) expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden.
.
Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence, and it is r conceivable that in some cases the accused may not need to adduce evidence of his/her own."
6.4. T.S. Thakur J., (as his lordship then was) in his supplementing opinion in Vijay v. Laxman (2013) 3 SCC 86, observed as under:
"20. The High Court has rightly accepted the version given by the respondent-accused herein. We say so for more than one reason. In the first place, the story of the complainant that he advanced a loan to the respondent-accused is unsupported by any material, let alone any documentary evidence that any such loan transaction had ever taken place. So much so, the complaint does not even indicate the date on which the loan was demanded and advanced. It is blissfully silent about these aspects, thereby making the entire story suspect. We are not unmindful of the fact that there is a presumption that the issue of a cheque is for consideration. Sections 118 and 139 of the Negotiable Instruments Act make that abundantly clear. That presumption is, however, rebuttable in nature. What is most important is that the standard of proof required ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 21 Neutral Citation No. ( 2025:HHC:33010 ) for rebutting any such presumption is not as high as that required of the prosecution. So long as the accused can make his version reasonably probable, the burden of rebutting the presumption would stand discharged. Whether .
or not it is so in a given case depends upon the facts and circumstances of that case. It is trite that the courts can take into consideration the circumstances appearing in the evidence to determine whether the presumption should be held to be sufficiently rebutted. The legal position regarding the standard of proof required for rebutting a presumption is fairly well settled by a long line of decisions of this Court."
6.5. This Court, in the case of Baslingappa v. Mudibasappa (2019) 5 SCC 418, summarised the principles on Sections 118(a) and 139 of the N.I. Act. The same is reproduced with profit as under:
"25. We having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in the following manner:
25.1. Once the execution of a cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
25.2. The presumption under Section 139 is a rebuttable presumption, and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him, or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 22 Neutral Citation No. ( 2025:HHC:33010 ) materials brought on record by the parties but also by reference to the circumstances upon which they rely.
25.4. That it is not necessary for the accused to come into the witness box in support of his .
defence, Section 139 imposed an evidentiary burden and not a persuasive burden.
25.5. It is not necessary for the accused to come into the witness box to support his defence." 6.6. Recently, a coordinate Bench of this Court in Rajaram v. Maruthachalam (2023) 16 SCC 125, through Gavai J., observed as under:
"27. It can thus be seen that this Court has held that once the execution of a cheque is admitted, Section 139 of the N.I. Act mandates a r presumption that the cheque was for the discharge of any debt or other liability. It has, however, been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. It has further been held that to rebut the presumption, it is open for the accused to rely on evidence led by him, or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely."
7. The position of law, as is evident from the above, is clear.
20. Thus, the learned Courts below were justified in raising the presumption that the cheque was issued in discharge of the liability for consideration.
::: Downloaded on - 23/09/2025 21:29:30 :::CIS23 Neutral Citation No. ( 2025:HHC:33010 )
21. It was submitted that the presumption under Section 139 of the NI Act does not cover the presumption of consideration. Reliance was placed upon K. Subramani's case .
(supra). This submission is not correct. The Hon'ble Supreme Court specifically held in K. Subramani v. K. Damodara Naidu, (2015) 1 SCC 99: (2015) 1 SCC (Cri) 576: (2015) 1 SCC (Civ) 429:
2014 SCC OnLine SC 899 that the presumption mandated by Section 139 of the NI Act includes a presumption that there exists a legally enforceable debt or liability. It was observed at page 101:
"8. A three-Judge Bench of this Court in the decision in Rangappa case [(2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] laid down that the presump- tion mandated by Section 139 of the NI Act includes a presumption that there exists a legally enforceable debt or liability and that is a rebuttable presumption and it is open to the accused to raise a defence wherein the exis-
tence of a legally enforceable debt or liability can be con- tested. Relying on the said ratio, the High Court an- swered the two legal issues raised by it in the impugned judgment [K. Damodara Naidu v. K. Subramani, Criminal Appeal No. 368 of 2009, decided on 10-10-2013 (KAR) . Though the criminal appeals were preferred against the judgment of acquittal passed in all the cases arising un- der Section 138 of the NI Act, the factual matrix and the evidence adduced were different. The High Court, after answering the two legal issues, did not consider the mer- its of each case individually and simply remanded the matter to the trial court for fresh consideration."::: Downloaded on - 23/09/2025 21:29:30 :::CIS
24 Neutral Citation No. ( 2025:HHC:33010 )
22. Therefore, the earned Courts below had rightly held that the presumption under Section 139 of the NI Act would include a presumption regarding the existence of enforceable .
debt/liability.
23. In any case, once the presumption under Section 139 of the NI Act is attracted, the complainant is not supposed to prove the existence of consideration. This position was recognised in Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: (2020) 1 SCC (Cri) 154: (2020) 1 SCC (Civ) 126: 2019 SCC OnLine SC 1361, wherein it was observed: -
"20. The trial court and the High Court proceeded as if the appellant was to prove a debt before the civil court, wherein the plaintiff is required to prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due. An dishonour of a cheque carries a statutory presumption of consideration. The holder of the cheque in due course is required to prove that the cheque was issued by the accused and that when the same was presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability."
24. This position was reiterated in Ashok Singh v. State of U.P., 2025 SCC OnLine SC 706, wherein it was observed:
22. The High Court while allowing the criminal revision has primarily proceeded on the presumption that it was obligatory on the part of the complainant to establish his case on the basis of evidence by giving the details of the bank account as well as the date and time of the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS
25 Neutral Citation No. ( 2025:HHC:33010 ) withdrawal of the said amount which was given to the accused and also the date and time of the payment made to the accused, including the date and time of receiving of the cheque, which has not been done in the present case. Pausing here, such presumption on the .
complainant, by the High Court, appears to be erroneous. The onus is not on the complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is alleged to have been issued in his favour. Only if an objection is raised that the complainant was not in a financial position to pay the amount so claimed by him to have been given as a loan to the accused, only then the complainant would have to bring before the Court cogent material to indicate that he had the financial capacity and had actually advanced the amount in question by way of loan. In the case at hand, the appellant had categorically stated in his deposition and reiterated in the cross-examination that he had withdrawn the amount from the bank in Faizabad (Typed Copy of his deposition in the paperbook wrongly mentions this as 'Firozabad'). The Court ought not to have summarily rejected such a stand, more so when respondent no. 2 did not make any serious attempt to dispel/negate such a stand/statement of the appellant. Thus, on the one hand, the statement made before the Court, both in examination-in-chief and cross-examination, by the appellant with regard to withdrawing the money from the bank for giving it to the accused has been disbelieved, whereas the argument on behalf of the accused that he had not received any payment of any loan amount has been accepted. In our decision in S. S. Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we opined:
'8. From the order impugned, it is clear that though the contention of the petitioners was that the said amounts were given for producing a film and were not by way of return of any loan taken, which may have been a probable defence for the petitioners in the case, but rightly, the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS
26 Neutral Citation No. ( 2025:HHC:33010 ) High Court has taken the view that evidence had to be adduced on this point which has not been done by the petitioners. Pausing here, the Court would only comment that the reasoning of the High Court, as well as the First Appellate Court .
and Trial Court, on this issue is sound. Just by taking a counter-stand to raise a probable defence would not shift the onus on the complainant in such a case, for the plea of defence has to be buttressed by evidence, either oral or documentary, which in the present case has not been done. Moreover, even if it is presumed that the complainant had not proved the source of the money given to the petitioners by way of loan by producing statement of accounts and/or Income Tax Returns, the same ipso facto, would not negate such claim for the reason that the cheques having being issued and signed by the petitioners has not been denied, and no evidence has been led to show that the respondent lacked capacity to provide the amount(s) in question. In this regard, we may make profitable reference to the decision in Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735:
'10. The trial court and the first appellate court have noted that in the case under Section 138 of the NI Act, the complainant need not show in the first instance that he had the capacity. The proceedings under Section 138 of the NI Act are not a civil suit. At the time, when the complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. To that extent, the courts in our view were right in holding on those lines. However, the accused has the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 27 Neutral Citation No. ( 2025:HHC:33010 ) right to demonstrate that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable, which he can do by producing independent materials, namely, by .
examining his witnesses and producing documents. It is also open to him to establish the very same aspect by pointing to the materials produced by the complainant himself. He can further, more importantly, further achieve this result through the cross-examination of the witnesses of the complainant. Ultimately, it becomes the duty of the courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether, in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.' (emphasis supplied)' (underlining in original; emphasis supplied by us in bold).
25. Therefore, no advantage can be derived from the fact that no receipt has been produced on record.
26. In the present case, the accused admitted borrowing of ₹1,50,000/-. He claimed that he had paid the amount in cash.
The complainant denied in his cross-examination that the accused had made the payment of ₹50,000/-. A denied suggestion does not amount to any proof, and the cross-
examination of the complainant does not establish the defence ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 28 Neutral Citation No. ( 2025:HHC:33010 ) taken by the accused regarding the repayment of the loan. The accused did not lead any evidence and relied upon his statement recorded under Section 313 of the Cr. P.C. to prove his defence.
.
It was held in Sumeti Vij v. Paramount Tech Fab Industries, (2022) 15 SCC 689: 2021 SCC OnLine SC 201 that the accused has to lead defence evidence to rebut the presumption and mere denial in his statement under Section 313 of Cr.P.C is not sufficient. It was observed at page 700:
"20. That apart, when the complainant exhibited all these documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant recorded her statement under Section 313 of the Code but failed to record evidence to disprove or rebut the presumption in support of her defence available under Section 139 of the Act. The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity for the accused to explain the incriminating circumstances appearing in the prosecution's case against the accused. Therefore, there is no evidence to rebut the presumption that the cheques were issued for consideration." (Emphasis supplied)"
27. Therefore, the statement of the accused recorded under Section 313 of Cr.P.C. was not a legally admissible statement, and the accused cannot derive any advantage from it.
28. It was submitted that the accused had issued a security cheque, and he was not liable. This submission will not ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 29 Neutral Citation No. ( 2025:HHC:33010 ) help the accused. Once the accused admitted that he had borrowed ₹1,50,000/-, the burden shifted upon him to prove the repayment. He had not led any evidence, and the cross-
.
examination of the complainant also did not establish the repayment. Therefore, the accused had a subsisting liability of ₹50,000/-, the cheque amount.
29. It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited 2016(10) SCC 458 that issuing a cheque towards security will also attract the liability for the commission of an offence punishable under Section 138 of the NI Act. It was observed: -
"10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways Private Limited versus Magnum Aviation Private Limited (2014) 12 SCC 53 with reference to the explanation to Section 138 of the Act and the expression "for the discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question of whether a post- dated cheque is for "discharge of debt or liability"
depends on the nature of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.
11. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 30 Neutral Citation No. ( 2025:HHC:33010 ) repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February 2002, which was prior to the date of the cheques. Once the loan was disbursed and instalments .
had fallen due on the date of the cheque as per the agreement, the dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of a claim for breach of contract under Section 138, which arises on account of dishonour of a cheque issued, was not by itself at par with a criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of a cheque issued for the discharge of a later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of the loan agreement, as against the case of Indus Airways (supra), where the purchase order had been cancelled and a cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for the discharge of liability but as an advance for the purchase order, which was cancelled. Keeping in mind this fine, but the real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was for repayment of a loan instalment which had fallen due, though such deposit of cheques towards repayment of instalments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of the purchase order which is cancelled and that of a loan transaction where the loan has actually been advanced and its repayment is due on the date of the cheque.
13. The crucial question to determine the applicability of Section 138 of the Act is whether the cheque represents the discharge of existing enforceable debt or liability, or ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 31 Neutral Citation No. ( 2025:HHC:33010 ) whether it represents an advance payment without there being a subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from the discussion of the said cases in the judgment of this .
Court." (Emphasis supplied)
30. This position was reiterated in Sripati Singh v. State of Jharkhand, 2021 SCC OnLine SC 1002: AIR 2021 SC 5732 , and it was held that a cheque issued as security is not waste paper and a complaint under Section 138 of the NI Act can be filed on its dishonour. It was observed:
r to "17. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe, and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of the amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such a presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of the NI Act would flow.
18. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such a cheque, which is issued as 'security, cannot be presented prior to the loan or the instalment maturing ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 32 Neutral Citation No. ( 2025:HHC:33010 ) for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form, and in that manner, if the amount of the loan due and payable has been discharged within the .
agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be an understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque, which is issued as security, can never be presented by the drawee of the cheque. If such is the understanding, a cheque would also be reduced to an 'on-demand promissory note' and in all circumstances, it would only be civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation."
31. Therefore, learned Courts below had rightly held that the plea taken by the accused that the cheque was issued as security will not help him.
32. The complainant stated that the cheque was dishonoured with an endorsement 'account closed'. The memo of dishonour (Ex. C2) mentions a reason of dishonour as ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 33 Neutral Citation No. ( 2025:HHC:33010 ) 'account closed'. It was laid down by the Hon'ble Supreme Court in Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore , (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1:
.
2010 SCC OnLine SC 155 that the memo issued by the Bank is presumed to be correct and the burden is upon the accused to rebut the presumption. It was observed at page 95:
24. Section 146, making a major departure from the principles of the Evidence Act, provides that the bank's slip or memo with the official mark showing that the cheque was dishonoured would, by itself, give rise to the presumption of dishonour of the cheque, unless and until that fact was disproved. Section 147 makes the offences punishable under the Act compoundable.
33. In the present case, no evidence was produced to rebut the presumption, and the learned Courts below had rightly held that the cheque was dishonoured with an endorsement 'account closed'. It was laid down by the Hon'ble Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253: 1999 SCC (Cri) 524: 1999 SCC OnLine SC 508, that when a cheque is dishonoured due to the account being closed, it will attract the provisions of Section 138 of N.I. Act. It was observed at page 258:
7. Further, the offence will be complete only when the conditions in provisos (a), (b) and (c) are complied with.
Hence, the question is, in a case where a cheque is returned by the bank unpaid on the ground that the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 34 Neutral Citation No. ( 2025:HHC:33010 ) "account is closed", would it mean that the cheque is returned as unpaid on the ground that "the amount of money standing to the credit of that account is insufficient to honour the cheque"? In our view, the answer would obviously be in the affirmative because the .
cheque is dishonoured as the amount of money standing to the credit of "that account" was "nil" at the relevant time, apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of "that account" on the relevant date when the cheque was presented for honouring the same. The expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression "that account being closed" is a species. After issuing the cheque drawn on an account maintained, a person, if he closes "that account"
apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138, as there were insufficient or no funds to honour the cheque in "that account". Further, the cheque is to be drawn by a person for payment of any amount of money due to him "on an account maintained by him" with a banker and only on "that account" the cheque should be drawn. This would be clear by reading the section along with provisos (a), (b) and (c).
********
15. In view of the aforesaid discussion, we are of the opinion that even though Section 138 is a penal statute, it is the duty of the court to interpret it consistently with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence, and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions, cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb ::: Downloaded on - 23/09/2025 21:29:30 :::CIS
35 Neutral Citation No. ( 2025:HHC:33010 ) varnish, and shew the transactions in their true light"
(Wilmot, C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited". Hence, .
when the cheque is returned by a bank with an endorsement "account closed", it would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act.
34. This Court also took the same view in Bal Krishan Sharma v. Tek Ram, 2006 SCC OnLine HP 105: 2006 Cri LJ 1993 and observed:
"9. The provisions contained in this chapter are primarily designed to provide an additional criminal remedy, over and above the civil remedies available to the payee or holder in due course of a cheque. This chapter protects the interests of a payee or holder in due course of a dishonoured cheque. The object of the chapter is to enhance the acceptability of the cheque in the settlement of financial liabilities by making the drawer liable for penalties. It is noticed that for establishing the requirements of Section 138, there is no burden on the part of the complainant to prove before a Court the entire details of the transactions resulting in the issuance of the cheque. As observed by the Apex Court in Kusum Ingots and Alloys Limited v. Pennar Peterson Securities Ltd., II (2000) SLT 375: I (2000) CCR 260 (SC): I (2000) BC 300: (2000) 2 SCC 745, the object of bringing Section 138 on statute is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Looking at the object of incorporating Chapter VIII in the Act, the expression "on account maintained by him" used in Section 138 of the Act, as noticed above, cannot be interpreted to give it an artificial or unrealistic meaning. What the provision says ::: Downloaded on - 23/09/2025 21:29:30 :::CIS
36 Neutral Citation No. ( 2025:HHC:33010 ) is that the cheque must be drawn on the account which the accused maintained with the Bank. The status of the account, when the cheque was drawn, whether it was live or dead, is irrelevant. What the provision says is that the accused must have an account which is .
maintained or has been maintained with the Bank. The Legislature has not used the present continuous tense. The expression used is "on an account maintained by him" and not "maintained by him". The cheque, in my view, should have a reference to an account of the accused, irrespective of the fact whether such an account was live or dead on the date of issuance of the cheque. The interpretation of the expression "on an account maintained by him" as given by the learned Trial Magistrate and contended by the learned Counsel for the accused is artificial and beyond the legislative intent. While interpreting the provision, the legislative purpose and goal have to be kept in mind. We cannot lose sight of the fact that in this era, financial transactions are not dependent on cash and therefore financial transactions by other modes, including "cheques", have to be attached to credibility.
10. The following observations of the Supreme Court in NEPC Micon Ltd. v. Magma Leasing Ltd., II (2006) BC 316 (SC): IV (1999) SLT 254: III (1999) CCR 4 (SC) :
(1999) 4 SCC 253, are apposite:
"10. This Court in the case of Kanwar Singh v. Delhi Admn. While construing Section 418(i) of the Delhi Municipal Corporation Act, 1959, observed--
'It is the duty of the Court in construing a statute to give effect to the intention of the legislature. If, therefore, giving a literal meaning to a word used by the draftsman, particularly in a penal statute, would defeat the object of the Legislature, which is to suppress mischief, the Court can depart from the dictionary meaning or even the popular meaning of the word and instead give it a ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 37 Neutral Citation No. ( 2025:HHC:33010 ) meaning which will advance the remedy and suppress the mischief.
11. Further, while interpreting the statutory provision rule dealing with penalty under the Drugs and Cosmetics Act, 1940 and the rules in .
the case of Swantraj v. State of Maharashtra, this Court held that every legislation is a social document and judicial construction seeks to decipher the statutory mission, language permitting, taking the one from the rule in Heydon's case of suppressing the evil and advancing the remedy. The Court held that what must tilt the balance is the purpose of the statute, its potential frustration and judicial avoidance of the mischief by a construction whereby the means of licensing meet the ends r of ensuring pure and potent remedies for the people. The Court observed that this liberty with language is sanctified by great Judges and textbooks. Maxwell instructs us in these words
--
"There is no doubt that the office of the Judge is to make such construction as will suppress the mischief, and advance the remedy, and suppress all evasions for the continuance of the mischief. To carry out effectively the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined: 'quando aliquid prohibetur, prohibetur et omne pe quod devenitur ad illud.'
11. This manner of construction has two aspects. One is that the Courts, mindful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its purview to escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 38 Neutral Citation No. ( 2025:HHC:33010 ) in the hope of thereby falling outside the Act. When the Courts find an attempt at concealment, they will, in the words of Wilmot, C.J., 'brush away the cobweb varnish, and show the transactions in their true light'."
12. Their Lordships proceeded to observe:
.
"15. In view of the aforesaid discussion, we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistently with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence, and the legislative purpose is to promote the efficacy of banking and of ensuring that in commercial or contractual transactions, cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above "brush away the cobweb varnish, and show the transactions in their true light" (Wilmot C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited"
Hence when the cheque is returned by a Bank with an endorsement "account closed". It would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act."
13. If the interpretation as contended by the learned Counsel for the accused and the Trial Court is to be accepted, then a person who receives the cheque will have to ensure that the account is alive. If he does not, he runs the risk of losing his money and the denial of benefits under Section 138 of the Act. This certainly cannot be the legislative intent. Any account holder with the intent to defeat the provisions of Section 138 of the Act may retain a cheque leaf after closing his account with the Bank to ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 39 Neutral Citation No. ( 2025:HHC:33010 ) defraud any honest payee. Should such a dishonest account holder be permitted to escape the proceedings under Section 138 of the Act?
14. Learned Counsel for the accused would contend that the observations in NEPC Micon Limited were that if a .
cheque is dishonoured on the ground that the account is closed then it would come within the sweep of Section 138 of the Act but if the cheque is issued on a closed account, then such an act of a dishonest person would not fall within the mischief of Section 138 of the Act. It is true that the NEPC case does not specifically deal with the cheques issued on accounts closed prior to the date of issuance of the cheque. Nevertheless, this case does not indicate that such cases are intended to be taken out of the sweep of Section 138 of the Act. In my opinion, the expression "on an account maintained by him"
necessarily includes an account which was maintained by him, i.e., the account which has been closed, as also the account which is still maintained by him.
15. The Supreme Court in N.A. Issac v. Jeemon P. Abraham, III (2006) BC 422 (SC): VI (2004) SLT 154: IV (2004) CCR 124 (SC): 2005 (1) Civil Court Cases 690 (SC) , interpreted Section 138 of the Act and observed that contention that this provision will not be applicable when the cheque is issued from an already closed account cannot be upheld as such an interpretation would defeat the object of insertion of the provision in the Act. Their Lordships observed: "Section 138 does not call for such a narrow construction". Their Lordships approved that the expression used in Section 138 of the Act includes the cheques issued on a closed account.
16. For the reasons recorded above, the findings recorded by the Trial Magistrate holding that Section 138 of the Act is not applicable to a cheque drawn on a closed account, cannot be upheld."
35. Thus, the accused would be liable for the commission of an offence punishable under Section 138 of N.I. ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 40 Neutral Citation No. ( 2025:HHC:33010 ) Act when the cheque was dishonoured with an endorsement of the account closed.
36. The complainant asserted that he had issued a .
notice to the accused. The envelope (Ex.C5) reads that the addressee was not at home and his family members had not disclosed his address. Hence, it was returned to the sender. It was laid down by the Hon'ble Supreme Court of India in C.C. Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555, that when a notice is returned unclaimed, it is deemed to be served. It was observed:
"8. Since in Bhaskaran's case (supra), the notice issued in terms of Clause (b) had been returned unclaimed and not as refused, the Court, posed the question: "Will there be any significant difference between the two so far as the presumption of service is concerned?" It was observed that though Section 138 of the Act does not require that the notice should be given only by "post", yet in a case where the sender has dispatched the notice by post with the correct address written on it, the principle incorporated in Section 27 of the General Clauses Act, 1897 (for short 'G.C. Act') could profitably be imported in such a case. It was held that in this situation service of notice is deemed to have been effected on the sendee unless he proves that it was not really served and that he was not responsible for such non-service."
37. This position was reiterated in Priyanka Kumari vs. Shailendra Kumar (13.10.2023- SC Order): MANU/ SCOR/ 133284/ 2023, wherein it was observed:
::: Downloaded on - 23/09/2025 21:29:30 :::CIS41 Neutral Citation No. ( 2025:HHC:33010 ) "As it was held by the Hon'ble Supreme Court in K. Bhaskaran Vs. Sankaran Vaidhyan Balan and Another, (1999) 7 Supreme Court Cases 510, that when notice is returned as 'unclaimed', it shall be deemed to be duly served upon the addressee, and it is a proper service of .
notice. In the case of Ajeet Seeds Limited Vs. K. Gopala Krishnaiah (2014) 12 SCC 685 (2014) , the Hon'ble Court, while interpreting Section 27 of the General Clauses Act 1897 and also Section 114 of the Evidence Act 1872, held as under: -
"Section 114 of the Evidence Act, 1872, enables the court to presume that in the common course of natural events, the communication sent by post would have been delivered at the address of the addressee. Further, Section 27 of the General Clauses Act, 1897 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. It is not necessary to aver in the complaint that, despite the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business."
38. A similar view was taken in Krishna Swaroop Agarwal v. Arvind Kumar, 2025 SCC OnLine SC 1458, wherein it was observed:
"13. Section 27 of the General Clauses Act, 1887, deals with service by post:
"27. Meaning of Service by post.- Where any [Central Act] or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 42 Neutral Citation No. ( 2025:HHC:33010 ) expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre- paying and posting by registered post, a letter .
containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post".
14. The concept of deemed service has been discussed by this Court on various occasions. It shall be useful to refer to some instances:
14.1 In Madan and Co. v. Wazir Jaivir Chand (1989) 1 SCC 264, which was a case concerned with the payment of arrears of rent under the J&K Houses and Shops Rent Control Act, 1966.
r The proviso to Section 11, which is titled "Protection of a Tenant against Eviction", states that unless the landlord serves notice upon the rent becoming due, through the Post Office under a registered cover, no amount shall be deemed to be in arrears. Regarding service of notice by post, it was observed that in order to comply with the proviso, all that is within the landlord's domain to do is to post a pre-paid registered letter containing the correct address and nothing further. It is then presumed to be delivered under Section 27 of the GC Act.
Irrespective of whether the addressee accepts or rejects, "there is no difficulty, for the acceptance or refusal can be treated as a service on, and receipt by the addressee."
14.2 In the context of Section 138 of the Negotiable Instruments Act, 1881 it was held that when the payee dispatches the notice by registered post, the requirement under Clause
(b) of the proviso of Section 138 of the NI Act stands complied with and the cause of action to file a complaint arises on the expiry of that period prescribed in Clause (c) thereof.
::: Downloaded on - 23/09/2025 21:29:30 :::CIS 43 Neutral Citation No. ( 2025:HHC:33010 ) [See: C.C. Alavi Haji v. Palapetty Mouhammed(2007) 6 SCC 555]
14.3 The findings in C.C. Alavi (supra) were followed in Vishwabandhu v. Srikrishna (2021) 19 SCC 549. In this case, the summons issued by .
the Registered AD post was received back with endorsement "refusal". In accordance with Sub-Rule (5) of Order V Rule 9 of CPC, refusal to accept delivery of the summons would be deemed to be due service in accordance with law. To substantiate this view, a reference was made to the judgment referred to supra.
14.4 A similar position as in C.C. Alavi (supra) stands adopted by this Court in various judgments of this Court in Greater Mohali Area Development Authority v. Manju Jain (2010) 9 r SCC 157; Gujarat Electricity Board v. Atmaram Sungomal Posani (1989) 2 SCC 602; CIT v. V. K. Gururaj (1996) 7 SCC 275; Poonam Verma v. DDA (2007) 13 SCC 154; Sarav Investment & Financial Consultancy (P) Ltd. v. Lloyds Register of Shipping Indian Office Staff Provident Fund (2007) 14 SCC 753; Union of India v. S.P. Singh (2008) 5 SCC 438; Municipal Corpn., Ludhiana v. Inderjit Singh (2008) 13 SCC 506 ; and V.N. Bharatv. DDA (2008) 17 SCC 321.
39. In the present case, the accused has not proved that he was not responsible for non-service; therefore, the learned Courts below had rightly held that the notice was deemed to be served upon the accused.
40. Therefore, it was duly proved on record that the accused had issued a cheque in discharge of his liability, which was dishonoured with an endorsement 'account closed', and he ::: Downloaded on - 23/09/2025 21:29:30 :::CIS 44 Neutral Citation No. ( 2025:HHC:33010 ) failed to repay the amount despite the deemed service of notice upon him. Hence, all the ingredients of commission of an offence punishable under Section 138 of the NI Act were duly .
satisfied.
41. Learned Trial Court sentenced the accused to undergo simple imprisonment of three months. It was laid down by the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 138 that the penal provisions of Section 138 of the NI Act is a deterrent in nature. It was observed at page 203:
"6. The object of Section 138 of the Negotiable Instruments Act is to infuse credibility into negotiable instruments, including cheques, and to encourage and promote the use of negotiable instruments, including cheques, in financial transactions. The penal provision of Section 138 of the Negotiable Instruments Act is intended to be a deterrent to callous issuance of negotiable instruments such as cheques without serious intention to honour the promise implicit in the issuance of the same."
42. Keeping in view the deterrent nature of the sentence to be awarded, the sentence of three months of simple imprisonment cannot be said to be excessive, and no interference is required with it.
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43. Learned Trial Court ordered the payment of compensation of ₹68,000/-. The cheque was issued on 04.12.2018. The sentence was imposed on 27.06.2024 after the .
lapse of more than five years. The complainant lost money that he would have gained by depositing the cheque amount in the bank or by investing it somewhere else. He had to engage a counsel to prosecute the complaint filed by him. Therefore, he was entitled to be compensated for the same. It was laid down by the Hon'ble Supreme Court in Kalamani Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25:
(2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 that the Courts should uniformly levy a fine up to twice the cheque amount along with simple interest at the rate of 9% per annum. It was observed at page 291: -
19. As regards the claim of compensation raised on behalf of the respondent, we are conscious of the settled principles that the object of Chapter XVII of NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for the dishonour of a cheque as well as civil liability for the realisation of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation, and unless there exist special circumstances, the courts should uniformly levy fines up to twice the cheque amount along with simple interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260, para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]"::: Downloaded on - 23/09/2025 21:29:30 :::CIS
46 Neutral Citation No. ( 2025:HHC:33010 )
44. The cheque was issued for ₹50,000/-, and the learned Trial Court ordered the compensation of ₹68,000/- on the cheque amount, which cannot be said to be excessive, .
keeping in view the time elapsed since the issuance of the cheque..
45. Therefore, no interference is required with the compensation awarded by the learned Trial Court.
46.
47.
r to No other point was urged.
In view of the above, the judgments and order passed by the learned Courts below are fully sustainable. Hence, the present revision fails, and it is dismissed, so also the pending application(s), if any.
48. Records of the learned Courts below be sent back forthwith, along with a copy of this judgment.
(Rakesh Kainthla) Judge 23 September, 2025.
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