Delhi District Court
Kraft Corporation vs Seema Garg Anr on 21 February, 2026
Ct Case no. 626120/2016 M/s Kraft Corporation Vs. Seema Garg & Anr.
IN THE COURT OF JUDICIAL MAGISTRATE FIRST CLASS(NI ACT-02),
SOUTH EAST DISTRICT, SAKET COURT COMPLEX, NEW DELHI
(Presided over by Ms. Shruti Sharma-I)
DLSE020071862015
Criminal Complaint No. 626120/2016
M/s Kraft Corporation ....................... Complainant
Vs.
Seema Garg & Anr. .......................Accused
Sr.No Particulars Details
A. Name and address of the M/s Kraft Corporation, a sole proprietorship
Complainant: concern having its office at F-14, First Floor,
Kalkaji, New Delhi-110019, through its
authorised representative and attorney Mr.
Surinder Mohan, duly authorised vide Power
of Attorney dated 25.02.2014 executed by the
sole proprietor Ms. Madhu Jain.
B. Name and address of the 1. Ms. Seema Garg, Proprietor of M/s S.S.
Accused. Trader (India), having its office at A-56, First
Floor, Swasthya Vihar, Delhi-110092 and also
at 1251, M.I.E., Bahadurgarh,
Haryana-124507, being the signatory of the
cheques in question.
2. Mr. Sudhir Garg, Authorised
Representative of M/s S.S. Trader (India),
having the same addresses as above.
C. Offence complained of U/s 138 NIAct
D. Plea of the accused Pleaded not guilty.
E. Final order Accused Seema Garg Convicted.
Accused Sudhir Garg Acquitted.
F. Date of institution 01.03.2014.
G. Date of pronouncement 21.02.2026.
Digitally signed
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SHRUTI SHARMA
SHARMA Date:
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JUDGMENT
1. By way of the present judgment, this Court proceeds to adjudicate upon and finally dispose of the complaint instituted by M/s Kraft Corporation represented by its AR (hereinafter referred to as "the complainant") against Seema Garg, proprietor of M/s SS Trader (India) and Mr Sudhir Garg, AR of M/s SS Trader (India) (hereinafter referred to as "the accused no. 1 and accused no. 2"), alleging commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter, "the NI Act"). The proceedings emanate from the alleged dishonour of
(i) cheque bearing no.321742 dated 25.09.2013 for Rs. 3,00,000/-, (ii) cheque bearing no. 321743 dated 15.10.2013 for Rs. 3,00,000/- and (iii) cheque bearing no. 321744 dated 30.10.2013 for Rs. 3,05,500/-, drawn by the accused no.1 on bank account of SS Trader(India) maintained with Oriental Bank of Commerce, Surajmal Vihar Branch. It is the case of the complainant that the said cheques were issued by the accused in her favour towards discharge of a legally enforceable liability arising out of payments for business dealings as the accused used to procure the products from the complainant from time to time.
2. The present complaint has been instituted by the complainant, M/s Kraft Corporation, a sole proprietorship concern of Ms. Madhu Jain, engaged in the business of trading of papers and boards, through its authorised representative Mr. Surinder Mohan, duly empowered vide Power of Attorney dated 25.02.2014.
3. It has been categorically averred by the complainant that the accused persons, namely Ms. Seema Garg, Proprietor of M/s S.S. Trader (India), and Mr. Sudhir Garg, its authorised representative responsible for the day-to-day affairs of the firm, had business dealings with the complainant and used to purchase goods from time to time. Pursuant to orders placed by the accused, the complainant supplied goods Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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and maintained a running account in the name of the accused firm. Against the supplies made, invoices amounting to a total sum of ₹12,52,616/- were raised.
4. Towards part discharge of the aforesaid legally enforceable liability, the accused issued three cheques bearing Nos. 321742 dated 25.09.2013 for ₹3,00,000/-, 321743 dated 15.10.2013 for ₹3,00,000/- and 321744 dated 30.10.2013 for ₹3,05,500/-, all drawn on Oriental Bank of Commerce, Suraj Mal Vihar, Delhi, in favour of the complainant. The accused requested the complainant to present the cheques at a later stage assuring that sufficient funds would be maintained. Upon presentation through its banker, ICICI Bank Ltd., the said cheques were repeatedly returned unpaid with remarks such as "Exceeds Arrangement", "Funds Insufficient" and "Outdated". Despite repeated requests and assurances extended by the accused, payment was not made.
5. Subsequent to the dishonour of the cheques, and in adherence to the statutory requirements enshrined under Section 138 of the Negotiable Instruments Act, 1881, the complainant, through its engaged counsel, caused to be issued a legal demand notice dated 17.01.2014, which was dispatched to the accused(s) via speed post. Through the said notice, the accused(s) were unequivocally called upon to pay the dishonoured cheques amount within the prescribed statutory period of fifteen days from the date of receipt. The legal notice was addressed to the residential address of the accused(s), as furnished by them and reiterated in the body of the complaint.
6. As per the postal records placed on record, the notice was duly dispatched to the accused (s) on 17.01.2014. However, despite the dispatch of the legal notice and the lapse of the mandatory statutory period, the accused(s) neither made the payment of the cheques amount nor issued any written reply or response controverting the liability. The deliberate failure of the accused(s) to comply with the legal demand notice, even after the dishonour of the cheques, prompted the complainant to invoke Digitally signed by SHRUTI SHRUTI SHARMA Page no.3/27 SHARMA Date:
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the penal provisions of the NI Act. Accordingly, the complainant instituted the present complaint under Sections 138 and 142 of the Negotiable Instruments Act, 1881, seeking penal consequences against the accused(s) for wilful default and for the enforcement of the statutory presumption of liability arising from the dishonoured negotiable instrument.
7. The complainant has categorically asserted that the conduct of the accused(s), in issuing a cheques that were returned unpaid on the grounds as aforementioned, squarely attracts the penal provisions of Section 138 of the Negotiable Instruments Act, 1881. It is further alleged that the act of the accused(s) reflects a deliberate failure to honour his financial commitment despite due notice, thereby constituting a clear breach of the statutory mandate envisaged under the Act.
8. The complainant contends that this deliberate act of default, when viewed in conjunction with the dishonour of the cheques on the grounds as aforementioned, made the complainant believe that the accused(s) never possessed a bona fide intention to honour their financial commitments. The complainant has asserted that the sequence of events, from the issuance of the cheques to its eventual dishonour, unmistakably reveals a conscious and wilful breach of a legally enforceable obligation by the accused(s). Such conduct, as per the complainant, is not a mere instance of inadvertence or financial mismanagement but a deliberate evasion of liability, thereby squarely attracting the penal provisions of Section 138 of the Negotiable Instruments Act, 1881.
9. Upon a careful perusal of the material placed on record along with the complaint, and after due examination of the complainant by way of pre-summoning evidence in accordance with the mandate of Section 200 of the Code of Criminal Procedure, this Court was satisfied that a prima facie case was made out against the accused(s) for the commission of an offence punishable under Section 138 of Digitally the Negotiable signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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Instruments Act, 1881. The evidence adduced at the pre-summoning stage sufficiently disclosed the existence of a legally enforceable liability and the issuance of the cheques in question by the accused towards its discharge, followed by its dishonour due to the reasons mentioned in the return memos. Accordingly, vide order dated 27.04.2015, this Court was pleased to take cognizance of the offence and summoned the accused(s) to face trial for the alleged dishonour of cheques issued in discharge of a debt or liability, as contemplated under the statutory scheme of the NI Act.
10. Subsequently, upon satisfaction that a prima facie case existed warranting trial, this Court proceeded to frame notice under Section 251 of the Code of Criminal Procedure, 1973 (CrPC), which was duly served upon the accused no. 1 and 2(through counsel) on 14.10.2017. Upon being apprised of the substance of accusation, including the specific allegations pertaining to issuance and dishonour of the cheques in question, the accused(s) pleaded not guilty and claimed trial, thereby necessitating the recording of evidence in the matter in accordance with law. The accused Seema Garg admitted his signatures on the cheque in question.
11. Thereafter, in order to substantiate its case, the AR of the complainant, entered the witness box and adopted his pre-summoning evidence at the stage of post- summoning evidence and tendered the affidavit of evidence. The complainant examined only its authorised representative, Sh. Surinder Mohan, who was examined as CW-1. CW-1 entered the witness box and, in support of the allegations made in the complaint, placed reliance upon the following documents:-
Sr. No. Exhibits Particulars
1. Ex.CW-1/B Evidence by way of affidavit of CW-1 (Surinder
Mohan), authorised representative of the
complainant.
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SHRUTI by SHRUTI
SHARMA
SHARMA Date: 2026.02.21
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2. Ex.CW-1/1 Power of Attorney dated 25.02.2014 executed by
Ms. Madhu Jain in favour of Mr. Surinder Mohan
authorising him to institute and pursue the present complaint.
3. Ex.CW-1/2(Colly Office copies of invoices raised by the complainant .) upon the accused against supply of goods.
4. Ex.CW1/3 Computer generated ledger account of M/s S.S. Trader (India) maintained by the complainant reflecting outstanding liability.
5. Ex.CW1/4 Original cheque bearing No. 321742 dated 25.09.2013 for ₹3,00,000/-.
6. Ex.CW1/5 Original cheque bearing No. 321743 dated 15.10.2013 for ₹3,00,000/-.
7. Ex.CW-1/6 Original cheque bearing No. 321744 dated 30.10.2013 for ₹3,05,500/-.
8. Ex.CW-1/7(Colly Cheque return memos issued by the banker showing .) dishonour of the cheques with remarks such as "Exceeds Arrangement", "Funds Insufficient" and "Outdated".
9. Ex.CW1/8 Copy of statutory legal demand notice dated (Colly) 17.01.2014 along with postal receipts and delivery reports.
10. Ex.CW1/9 Returned postal envelopes containing endorsement (Colly) "Refused".
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11. Ex.CW-1/A Complaint under Section 138 of the Negotiable Instruments Act filed by the complainant.
12. During the course of trial, CW-1 was examined and thereafter subjected to extensive cross-examination on behalf of the accused. Upon completion of his testimony, CW-1 was duly discharged on 27.04.2022. Thereafter, upon conclusion of the complainant's evidence, the complainant did not seek to examine any other witness in support of its case. Accordingly, the complainant evidence was closed vide order dated 27.04.2022.
13. As the complainant did not wish to examine any other witness, hence the matter fixed for recording of statement of accused(s) u/s 313 CrPC and subsequent to the conclusion of the complainant's evidence, and in compliance with the procedural mandate under Section 313 of the Code of Criminal Procedure, 1973, the statement of the accused Sudhir and Seema were recorded by the Court on 01.03.2023 and 30.04.2024 respectively, thereby affording them an opportunity to personally explain the incriminating circumstances appearing against them in the prosecution evidence. The accused(s) reiterated their defence as taken in their earlier statements recorded under section 251 CrPC. Accused(s) chose to lead DE.
14. Only one witness ie DW-1 Ms Mohini Aggarwal from Punjab and National Bank was examined on behalf of the defense. Thereafter, defense evidence was closed vide submission made on behalf of accused (s) on 09.05.2025. Thereafter, the matter was proceeded for hearing of final arguments.
Final Arguments
15. Thereafter, this Court heard the final arguments advanced on behalf of the complainant on 09.01.2026.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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16. Learned counsel for the complainant has argued that the complainant has duly proved its case by establishing that the accused persons were maintaining regular commercial dealings with the complainant firm and had purchased goods against various invoices, pursuant to which an outstanding liability of ₹12,52,616/- accrued in the running account maintained in the ordinary course of business. It is submitted that in partial discharge of the said legally enforceable liability, Accused No.1, being the proprietor and signatory of M/s S.S. Trader (India), issued three cheques in question amounting to ₹9,05,500/- in favour of the complainant, which upon presentation were dishonoured repeatedly for reasons such as "Funds Insufficient"
and "Exceeds Arrangement". Despite due service of statutory legal demand notice dated 17.01.2014, the accused failed to make payment within the stipulated period, thereby completing the ingredients of offence under Section 138 of the Negotiable Instruments Act.
17. It is further contended that execution and signatures on the cheques stand admitted by Accused No.1 in her statement under Section 313 Cr.P.C., thus attracting statutory presumptions under Sections 118(a) and 139 of the NI Act in favour of the complainant, which the accused has failed to rebut by leading any cogent or reliable evidence. The testimony of CW-1 along with documentary evidence including invoices, ledger account, dishonour memos and legal notice has remained unshaken during cross-examination and sufficiently establishes existence of legally recoverable debt. It is argued that the defence taken by the accused regarding issuance of blank security cheques and non-supply of goods is vague, inconsistent and unsupported by any documentary proof and hence incapable of rebutting the statutory presumption. Accordingly, it is prayed that the accused persons be held guilty and convicted for the offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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18. The accused persons were granted sufficient and repeated opportunities to advance final arguments. Despite the grant of such opportunities, the accused failed to address oral submissions before this Court. Nevertheless, in the interest of fairness and to afford complete opportunity, the right of the accused to file written submissions was kept open. However, no written submissions have been filed on record on behalf of the accused till date. Accordingly, there being no further assistance forthcoming from the side of the accused, this Court proceeds to decide the present matter on the basis of the material available on record and on merits.
Legal Analysis & Findings:-
19. I have heard at considerable length the detailed arguments advanced by the learned counsel appearing for the complainant as well as the learned counsel representing the accused. Their respective submissions have been carefully analyzed in the context of the factual matrix and the legal principles applicable to the case. This Court has also undertaken a thorough and meticulous scrutiny of the entire judicial record, which includes the contents of the complaint, the affidavits and supporting documents annexed thereto, the oral testimonies of the complainant's and the defence witnesses recorded during the course of trial, if any, and all exhibits relied upon by the respective parties. Each piece of evidence has been examined individually as well as in conjunction with the other evidence on record so as to assess its evidentiary value, credibility, and probative strength. The rival submissions have been objectively evaluated against the backdrop of the statutory framework and the well-settled legal position governing proceedings under Section 138 of the Negotiable Instruments Act, 1881. The Court has, therefore, endeavoured to reach a reasoned and just determination by adopting a holistic and balanced appreciation of the evidence and circumstances presented before it.
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20. Before embarking upon a discussion on the merits of the present case, it is considered apposite to first delineate the legal framework governing the offence of dishonour of cheque, as encapsulated under Section 138 of the Negotiable Instruments Act, 1881. The legislative intent behind enacting Section 138 is to instill greater financial discipline and sanctity in contractual obligations by deterring the issuance of cheques without sufficient funds or without adequate arrangements with the banker. The provision prescribes penal consequences in the event of dishonor of a cheque on grounds of insufficiency of funds or if the amount exceeds the arrangement with the bank, thereby recognizing the cheque as a legitimate instrument of payment in the eyes of the law.
21. In order to fasten criminal liability upon an accused under Section 138 of the Negotiable Instruments Act, 1881, it is incumbent upon the complainant to plead and prove the existence of certain foundational ingredients through the averments made in the complaint and the evidence led during the course of trial. The essential ingredients that must be cumulatively satisfied are as follows:
a. That the accused must have drawn a cheque on an account maintained by him with a banker, for the payment of a certain sum of money to another person, and such payment must have been intended for the discharge, in whole or in part, of a legally enforceable debt or other liability;
b. That the said cheque must have been presented to the bank within a period of three months from the date on which it was drawn, or within the period of its validity, whichever is earlier;
c. That upon such presentation, the cheque must have been returned unpaid by the bank, either due to insufficiency of funds in the drawer's account or because the amount exceeded the arrangement made by the drawer with the bank;
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d. That the payee or the holder in due course of the cheque must have issued a written statutory demand notice to the drawer, seeking payment of the cheque amount, within 30 days from the date of receipt of information from the bank regarding the return of the cheque unpaid;
e. That the drawer of the cheque, despite the receipt of such legal notice, failed to make payment of the cheque amount to the payee or holder in due course within 15 days from the date of such receipt.
22. Only upon proof of the aforementioned ingredients does the offence under Section 138 stand attracted, subject to the operation of statutory presumptions under Sections 118 and 139 of the NI Act. These presumptions, however, are rebuttable and impose a reverse burden upon the accused to dislodge the same on a preponderance of probabilities.
23. It is also pertinent to note that, as per the Explanation appended to Section 138 of the Negotiable Instruments Act, the expression "debt or other liability" refers exclusively to a legally enforceable debt or other liability. This legal clarification is of critical significance, as it makes clear that mere issuance of a cheque is not sufficient to attract penal liability under the statute. The dishonored cheque must have been issued in discharge of a debt or liability which is subsisting and legally enforceable at the time of its issuance. A cheque issued as a gift, donation, or towards a time-barred or non-existent liability will not fall within the purview of Section 138. Thus, the complainant must establish that at the time the cheque was drawn, there existed a valid and enforceable obligation in law for which the cheque was issued.
24. It is well-settled in law that the aforementioned ingredients must co-exist and be satisfied cumulatively in order to constitute the offence punishable under Section Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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138 of the Negotiable Instruments Act, 1881. The absence or non-fulfilment of even one of these statutory requirements is fatal to the prosecution's case and would disentitle the complainant from invoking penal liability against the drawer of the cheque.
25. CW-1, Mr. Surinder Mohan, authorised representative and attorney of the complainant firm deposed in his examination-in-chief that the complainant firm, engaged in the business of trading of paper products, had business dealings with the accused firm M/s S.S. Trader (India), pursuant to which goods were supplied against orders placed by the accused and corresponding invoices were raised. He stated that a running account was maintained reflecting an outstanding liability of ₹12,52,616/-. Towards partial discharge of the said liability, the accused issued three cheques in question in favour of the complainant, which upon presentation were dishonoured for reasons including "Funds Insufficient" and "Exceeds Arrangement". CW-1 further deposed that despite service of statutory legal demand notice, the accused failed to make payment within the prescribed period, thereby necessitating institution of the present complaint.
26. During cross-examination, CW-1 stated that he had been working with the complainant firm since the year 2010 and was primarily responsible for maintaining accounts and depositing cheques, though he was not personally involved in placement of orders. He deposed that business relations between the parties commenced in the year 2013 and that no written agreement governing terms and conditions existed between them. He admitted that invoices Ex. CW1/2 (Colly) did not bear acknowledgment or receiving signatures of the accused and that no record regarding vehicle details, delivery receipts or weight slips of supplied goods was maintained by the complainant. He further stated that goods were collected by the accused through their own vehicle and therefore "self" was mentioned in the invoices. CW-1 admitted that the date of one cheque preceded the first invoice but Digitally signed by SHRUTI SHRUTI SHARMA Page no.12/27 SHARMA Date: 2026.02.21 16:46:49 +0530 Ct Case no. 626120/2016 M/s Kraft Corporation Vs. Seema Garg & Anr.
denied the suggestion that the cheques were issued merely as security or that no goods were supplied. He categorically refuted the defence suggestion that the cheques had been misused or that the complaint was false. CW-1 maintained that sufficient inventory was available with the complainant for supply of goods and reiterated that liability existed against the accused. After completion of cross- examination, CW-1 closed the complainant evidence stating that no further witness was required to be examined.
27. The testimony of CW-1, Mr. Surinder Mohan, who appeared as the authorised representative of the complainant firm, has been carefully examined. CW-1 deposed on the strength of a valid Power of Attorney executed by the sole proprietor of the complainant firm, Ms. Madhu Jain, which has been proved on record as Ex. CW1/1, thereby establishing his due authorisation to institute and pursue the present complaint as well as to depose on behalf of the complainant. During his cross- examination, CW-1 specifically stated that he had been working with the complainant firm since the year 2010 and was associated with the accounts department, being responsible for maintaining accounts and depositing cheques, thus demonstrating his competence and familiarity with the transactions forming subject matter of the present case.
28. CW-1 has consistently supported the case of the complainant and proved the foundational facts relating to business dealings between the parties, issuance of the cheques in question, their dishonour and service of statutory legal demand notice. The witness duly proved the relevant documentary record including invoices, ledger account, cheques, return memos and legal notice. Nothing material could be elicited during his cross-examination so as to discredit his testimony on the material particulars of the case. Though CW-1 admitted that he was not personally involved in placement of orders and that invoices did not bear acknowledgment of delivery or vehicle details, such admissions do not materially affect the complainant's case, Digitally signed by SHRUTI Page no.13/27 SHRUTI SHARMA SHARMA Date:
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particularly in view of the admitted signatures of Accused No.1 on the cheques in question. The defence suggestions regarding non-supply of goods and misuse of blank security cheques remained unsubstantiated and were categorically denied by the witness.
29. The testimony of CW-1 has remained coherent, consistent and trustworthy and stands duly corroborated by documentary evidence placed on record. Accordingly, this Court finds no reason to disbelieve the deposition of CW-1, which satisfactorily establishes the business transactions between the parties and issuance of the cheques in question towards discharge of liability.
30. Insofar as the statutory ingredients (b), (c), (d), and (e) under Section 138 of the Negotiable Instruments Act are concerned namely, (b) the presentation of the cheque within validity period, (c) dishonor by the bank due to the reason "exceeds arrangement" (d) the issuance of a legal demand notice within 30 days of receiving intimation of dishonor, and (e) the drawer's failure to make payment within 15 days of receipt of the said notice, this Court finds that the complainant has successfully discharged the burden of proof in respect thereof. These facts stand duly established through unimpeached documentary evidence placed on record, which includes the original cheques, the cheque return memos, the legal demand notice, the postal receipts confirming dispatch. There is no rebuttal to the presumption of service, and hence, the requirements under clauses (b) to (e) of Section 138 stand conclusively fulfilled.
31. It is also not in dispute that the accused(s) failed to make payment of the cheque amount to the complainant within the statutory period of 15 days from the date of receipt of the legal demand notice. The record clearly reflects that the notice was dispatched to the accused(s), as evidenced by the postal receipts placed on record. The accused no. 1 and 3 have clearly admitted that the address mentioned on the notice is her correct address. Hence, service of the legal notice stands proved.
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Despite being afforded the statutory opportunity under the mandate of Section 138 of the NI Act, the accused(s) did not tender the cheque amount within the prescribed period of 15 days, thereby fulfilling the last statutory condition for attracting penal liability under the said provision.
32. The Court shall now proceed to examine the most crucial ingredient under Section 138 of the Negotiable Instruments Act, 1881, which constitutes the very foundation of the present prosecution namely, whether the impugned cheque was issued by the accused in discharge of a legally enforceable debt or other liability. This aspect is of paramount significance, as the existence of such a liability is the sine qua non for attracting the statutory presumption under Section 139 of the NI Act.
33. In this background, this Court now undertakes a detailed and careful evaluation of the rival contentions and the evidence on record, to determine whether the said essential ingredient stands proved to the requisite standard in the present matter.
34. It is well-settled that once the complainant establishes that the cheque was drawn by the accused and that it was returned unpaid, a presumption arises under Sections 118(a) and 139 of the Act that the cheque was issued for the discharge of a legally enforceable debt or liability. The initial burden upon the complainant is merely to prove the foundational facts namely, the execution and dishonour of the cheque. Once this is done, the burden shifts upon the accused to rebut the presumption. Such rebuttal may be established either by leading positive evidence or by pointing out inconsistencies, improbabilities, or material contradictions in the complainant's case, which may raise a reasonable doubt as to the existence of the alleged liability.
35. For ready reference, the relevant provisions are reproduced as under:
Section 118(a), NI Act - "Presumptions as to negotiable instruments: Until the contrary is proved, the following presumptions shall be made: (a) of Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date: 2026.02.21 16:46:54 +0530 Page no.15/27 Ct Case no. 626120/2016 M/s Kraft Corporation Vs. Seema Garg & Anr.
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 accepted, indorsed, negotiated or transferred for consideration."
Section 139, NI Act - "Presumption in favour of 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."
36. This presumption, though statutory, is rebuttable in nature. The law places the initial evidentiary burden upon the accused to dislodge this presumption by raising a probable defence. It is now well-settled that the accused is not required to rebut the presumption beyond reasonable doubt; rather, the standard of rebuttal is that of preponderance of probabilities. The accused may discharge this burden either by adducing direct evidence or by relying on material inconsistencies, improbabilities, or contradictions in the complainant's case, elicited during cross-examination or otherwise. However, unless such rebuttal is successfully established, the presumption continues to operate in favour of the complainant.
37. This is a classic illustration of the principle of 'reverse onus' in operation, wherein the statutory scheme obligates the accused to rebut the presumption in favor of the complainant by leading what may be termed as 'negative evidence'. The accused is not required to affirmatively prove a particular fact; rather, he must bring on record material to demonstrate the non-existence of a legally enforceable debt or liability.
38. Since this reverse burden deviates from the general principle of criminal jurisprudence namely, the presumption of innocence in favour of the accused, the law has correspondingly tempered the standard of rebuttal. Recognizing the inherent difficulty in leading negative evidence, the standard prescribed is not that of proof Digitally signed by SHRUTI SHARMA Page no.16/27 SHRUTI Date:
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beyond reasonable doubt, but of preponderance of probabilities. As held by the Hon'ble Supreme Court in Sangappa v. Mohan, (2010) 11 SCC 441, the accused need not conclusively disprove the existence of consideration or liability; it is sufficient if he can raise a probable defence which renders the existence of such liability doubtful or improbable in the mind of the Court.
39. In order to discharge the burden cast upon him under the reverse onus clause, the accused is required to either prove the non-existence of the alleged liability or demonstrate that the existence of such liability is so improbable or doubtful that a prudent person would conclude that no such obligation existed. This can be achieved by the accused either by leading direct evidence or relying upon circumstantial evidence in his defence. Alternatively, the accused may choose to effectively challenge the complainant's case by eliciting material contradictions or inconsistencies during cross-examination, thereby undermining the credibility of the prosecution's version.
40. If the accused succeeds in creating such a doubt, the burden then shifts back to the complainant, who must establish the existence of liability independent of the statutory presumptions. In such a scenario, the presumptions under Sections 118(a) and 139 of the NI Act would cease to operate in favour of the complainant and cannot be relied upon as conclusive proof. The complainant would then have to establish the liability on the strength of his own evidence.
41. In the light of the foregoing statutory provisions and the settled principles of law governing the operation and rebuttal of presumptions under Sections 118(a) and 139 of the Negotiable Instruments Act, this Court shall now proceed to critically examine the defence set up by the accused. The pivotal issue for consideration at this stage is whether the defence raised by the accused is plausible, probable, and Digitally signed by SHRUTI SHRUTI SHARMA Page no.17/27 SHARMA Date:
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legally sustainable, such as would be sufficient to rebut the presumption regarding the existence of a legally enforceable debt or liability.
42. The defence may be founded either on direct evidence adduced by the accused or may emerge from material inconsistencies, omissions, or inherent improbabilities discernible within the complainant's version, particularly as elicited during cross- examination. However, to succeed, the defence must be cogent enough to inspire confidence and must raise a credible doubt regarding the true purpose behind the issuance of the impugned cheque. In this context, the Court now undertakes a holistic and careful analysis of the defence evidence on record, as well as the explanations tendered by the accused, to assess whether the statutory presumption stands effectively rebutted in the present case.
43. It is an admitted position on record that the cheque in question pertains to the bank account of the accused no. 1 firm and bears the admitted signatures of accused Seema. This fact stands acknowledged by the accused Seema herself during her statement recorded under Section 251 CrPC and u/s 313 CrPC. Once the execution of the cheques and its ownership are admitted, the statutory presumption under Sections 118(a) and 139 of the Negotiable Instruments Act automatically comes into play. The law mandates that the court shall presume, unless the contrary is proved, that the cheque was issued for the discharge, in whole or in part, of a legally enforceable debt or liability. Thus, by admission of execution by accused Seema, it is clear that the cheques in question were duly signed by accused Seema and were drawn in favour of the complainant towards satisfaction of an existing liability, and the initial burden of proof shifts upon the accused(s) to rebut the said presumption by leading cogent, credible, and convincing evidence. Mere denial or ipse dixit assertions are legally insufficient to discharge this onus.
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44. Despite having admitted the issuance of the cheques in question and the affixation of signature thereon, the accused(s) have sought to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act by projecting the defence which has been examined in the light of their statement recorded under Section 251 of the Code and statement recorded u/s 313 CrPC.
45. In the statement recorded u/s 251 CrPC, accused No.2, Mr. Sudhir Garg, stated that he was not the signatory to all the cheques in question and asserted that no material had been purchased from the complainant and no goods were ever received against the alleged invoices. It was further stated that the cheques had been handed over in blank after being signed for the purpose of commencing business dealings, which allegedly never materialised. He also denied receipt of the statutory legal demand notice and contended that proceedings under Section 138 of the Negotiable Instruments Act were not maintainable against a proprietorship concern.
46. Similarly, Accused No.1, Ms. Seema Garg, while admitting her signatures on the cheques in question, pleaded not guilty and claimed trial. She stated that no goods were purchased from the complainant and that there was no acknowledgment of delivery on the invoices. It was her defence that the cheques were issued in blank for business purposes which never fructified and that she had not received the legal demand notice.
47. In their statements recorded under Section 313 Cr.P.C., the accused persons denied the liability alleged by the complainant. Accused No.2 stated that the invoices were never issued to him and claimed that the cheques might have been handed over by some staff member from the factory premises at Bahadurgarh where signed cheque books were kept, though he admitted that the cheques stood dishonoured. He further denied receipt of legal notice and asserted that no goods were supplied by Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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the complainant, contending that issuance of statutory Form-38 would have been mandatory had any interstate supply taken place.
48. Accused No.1, in her statement under Section 313 Cr.P.C., admitted that she was the proprietor of M/s S.S. Trader (India) and that the cheques bore her signatures; however, she stated that the same had been issued as security cheques and denied existence of any outstanding liability. She further stated that she had not received the legal demand notice and claimed lack of knowledge regarding the transaction, asserting that the business affairs were handled by her husband. Both accused persons denied liability towards the complainant, with Accused No.1 choosing not to lead defence evidence.
49. DW-1, Ms. Mohini Aggarwal, Bank Official from Punjab National Bank, Surajmal Vihar Branch, produced the status report of the bank account of M/s S.S. Traders (India) exhibited as Ex. DW-1/A and the statement of account for the period 05.12.2008 to 16.12.2022 exhibited as Ex. DW-1/B. She deposed that the said account was earlier maintained with Oriental Bank of Commerce and stood transferred to Punjab National Bank after merger in the year 2020. During cross- examination, she stated that she could not specify the authorised signatory of the account or exact KYC details. Her testimony was confined to production of bank records and did not pertain to the underlying transaction between the parties or issuance of the cheques in question.
50. The principal defence taken by the accused is that the cheques in question were issued as blank security cheques and that no goods were ever supplied by the complainant. However, this defence does not inspire confidence upon judicial scrutiny. Accused No. 1 has unequivocally admitted her signatures on the cheques, thereby acknowledging execution of the negotiable instruments. Once such admission is made, it was incumbent upon the accused to furnish a plausible and Digitally signed by SHRUTI Page no.20/27 SHRUTI SHARMA SHARMA Date:
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credible explanation as to the circumstances under which duly signed cheques came into the possession of the complainant. The accused has failed to offer any satisfactory explanation in this regard. No contemporaneous communication, complaint, or protest has been produced to show that the cheques were handed over for a limited purpose, or that their retention or presentation by the complainant was unauthorised. In the absence of such explanation, the plea that the cheques were merely blank security instruments remains a bald assertion, insufficient to rebut the statutory presumption that the cheques were issued towards discharge of a legally enforceable liability.
51. The accused has further failed to substantiate his defence through any credible or affirmative evidence. Notably, the accused did not produce the relevant books of accounts or financial records which could have demonstrated absence of liability or reflected settlement of accounts between the parties. No material has been placed on record to show any payment, adjustment, or discharge of the alleged dues. The accused also chose not to examine any employee, accountant, or other person connected with the business who could have supported the plea that no goods were supplied or that the transaction stood settled.
52. Equally significant is the fact that the accused has failed to prove the alleged theft or misuse of the cheques. No complaint was lodged with the police, no stop- payment instructions were issued to the bank, and no contemporaneous protest or legal action was initiated against the complainant alleging unauthorised possession or misuse of the cheques. Such omissions are inconsistent with the conduct expected of a prudent person whose signed cheques are allegedly misused.
53. It is well settled that mere suggestions put to a witness during cross-examination do not amount to proof of a defence. In the absence of substantive evidence supporting the stand taken by the accused, the defence remains unsubstantiated and Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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incapable of rebutting the statutory presumptions operating in favour of the complainant.
54. The testimony of DW-1, Ms. Mohini Aggarwal, who appeared as an official witness from Punjab National Bank, requires careful scrutiny. A perusal of her deposition reflects that the witness was examined solely for the limited purpose of producing banking records pertaining to Account No. 07675011000580 maintained in the name of M/s S.S. Trader (India). The witness placed on record the status report of the said account as Ex. DW-1/A and the statement of account as Ex. DW-1/B. Her evidence, therefore, remained purely formal and documentary in nature and confined to production of records maintained by the bank in ordinary course of business.
55. Significantly, during the course of her examination as well as cross-examination, DW-1 categorically expressed inability to state as to who was the authorised signatory of the said account at the relevant time. She also could not depose regarding issuance, execution or handling of the cheques in question, nor could she throw any light upon the circumstances under which the impugned cheques came to be issued. The witness admittedly possessed no personal knowledge of the transactions between the complainant and the accused and her testimony was not connected with the underlying commercial dealings forming subject matter of the present complaint.
56. It is further noteworthy that DW-1 nowhere disputed the factum of dishonour of the cheques in question. The bank records produced by her do not contradict or impeach the cheque return memos already proved by the complainant. The evidence led through DW-1 also does not demonstrate insufficiency of funds being incorrectly recorded, nor does it suggest any banking irregularity, forgery, manipulation or unauthorised presentation of the cheques. Thus, the documentary Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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material brought by DW-1 neither undermines the complainant's version nor probabilises the defence set up by the accused.
57. Equally important is the fact that the statement of account produced through DW-1 does not establish absence of liability towards the complainant, repayment of dues, closure of transactions, or any circumstance capable of rebutting the presumption arising under Sections 118(a) and 139 of the Negotiable Instruments Act. Production of a bank statement, in absence of correlating evidence explaining transactions vis-à-vis the complainant, cannot by itself negate legally enforceable debt.
58. The law is well settled that the statutory presumption attached to a negotiable instrument can be rebutted only through cogent and probable evidence showing non-existence of liability. The testimony of DW-1, being confined merely to mechanical production of banking records without substantive linkage to the defence plea, falls far short of the evidentiary threshold required for rebuttal of such presumption.
59. Accordingly, this Court finds that the evidence of DW-1 is purely formal in character, does not advance the defence of the accused in any material manner, and fails to create even a probable doubt regarding existence of legally enforceable liability. Consequently, the testimony of DW-1 does not in any manner dilute or rebut the statutory presumptions operating in favour of the complainant under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881.
60. The defence taken by the accused has also remained internally inconsistent and mutually contradictory. At one stage of the proceedings, the accused sought to deny issuance of the cheques altogether, whereas at another stage he admitted the signatures but alleged that the cheques were issued merely as security instruments and were subsequently misused by the complainant. Such shifting and self-
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contradictory stands materially undermine the credibility of the defence. A party cannot simultaneously dispute issuance of cheques and, in the same breath, contend that duly signed security cheques were misused. These inconsistent pleas reveal absence of a coherent defence and suggest an afterthought introduced to evade liability, thereby failing to rebut the statutory presumptions arising under Sections 118 and 139 of the Negotiable Instruments Act.
61. It is trite law that a bare denial of liability or an explanation unsupported by cogent and reliable evidence is insufficient to rebut the statutory presumptions operating under the Negotiable Instruments Act. Once execution of the cheque is admitted, the accused is required to raise a probable defence on the touchstone of preponderance of probabilities, either by leading affirmative evidence or by demonstrating serious infirmities in the complainant's case. Mere assertions or unsubstantiated explanations do not meet this legal threshold. In the present case, the accused has failed to bring on record any material capable of probabilising the defence or displacing the presumption of legally enforceable liability.
62. Accused No. 1, being the proprietor of the concern and the admitted signatory of the cheques in question, is clearly liable for the dishonour thereof. The cheques having been drawn from the account maintained by her and bearing her admitted signatures, the statutory presumptions under Sections 118 and 139 of the NI Act operate squarely against her, and in the absence of any credible rebuttal, liability under Section 138 stands duly attracted.
63. Having held that the offence under Section 138 of the Negotiable Instruments Act stands proved qua issuance and dishonour of the cheques in question, this Court now proceeds to determine the criminal liability of Accused No.2, namely Mr. Sudhir Garg. At the outset, it is necessary to appreciate the legal character of the Digitally signed by SHRUTI SHARMA Page no.24/27 SHRUTI Date:
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drawer of the cheque and the nature of liability arising in cases involving a proprietorship concern.
64. The record reflects that M/s S.S. Trader (India) is not a company or partnership firm but a sole proprietorship concern, and Accused No.1 Ms. Seema Garg has admittedly been its sole proprietor. In her statement under Section 313 Cr.P.C., Accused No.1 herself admitted that she is the proprietor of the said concern and that the cheques in question bear her signatures. It is settled law that a proprietorship concern does not possess a legal identity separate and distinct from its proprietor. Unlike a company incorporated under statute, a proprietorship concern is merely a trade name through which the proprietor conducts business. Consequently, the liability of the proprietorship concern is, in law, the personal liability of the proprietor herself. Thus, where a cheque is issued from the account of a proprietorship concern and signed by the proprietor, the drawer of the cheque in the eyes of law is the proprietor personally.
65. Section 138 NI Act fastens criminal liability upon the drawer of the cheque.
Criminal prosecution under the said provision can therefore lie only against the person who has drawn the cheque; or a person statutorily made liable under Section 141 NI Act. In the present case, the cheques Ex. CW1/4 to Ex. CW1/6 have admittedly been signed by Accused No.1 alone. There is no allegation or evidence that Accused No.2 was a joint account holder or signatory to the cheques. Therefore, Accused No.2 cannot be treated as the "drawer" of the cheque within the meaning of Section 138 NI Act.
66. The complainant has sought to array Accused No.2 as an authorised representative allegedly involved in the affairs of M/s S.S. Trader (India). However, such impleadment cannot automatically attract criminal liability. Section 141 NI Act creates vicarious liability only in cases where the offence is committed by a Digitally signed by SHRUTI SHRUTI SHARMA SHARMA Date:
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company, and extends liability to persons in charge of and responsible for conduct of business of such company. The expression "company" under Section 141 includes: body corporate, firm, association of persons. However, a sole proprietorship concern does not fall within the ambit of Section 141, as there exists no juristic entity separate from its proprietor. It is a settled legal position that vicarious criminal liability cannot be extended by implication and must strictly fall within statutory framework. In prosecutions involving proprietorship concerns, liability cannot be fastened upon employees, representatives or relatives merely because they participated in business activities.
67. In view of the detailed discussion, appreciation of evidence and findings returned hereinabove, this Court arrives at the following conclusions: The complainant has successfully proved that the cheques in question bearing Nos. 321742 dated 25.09.2013, 321743 dated 15.10.2013 and 321744 dated 30.10.2013, drawn on Oriental Bank of Commerce, Suraj Mal Vihar, Delhi, were issued towards discharge of legally enforceable liability arising out of business transactions between the parties. The said cheques, upon presentation, were dishonoured for reasons including "Funds Insufficient" and "Exceeds Arrangement". The statutory legal demand notice was duly issued within the prescribed period and despite service thereof, payment was not made within the statutory time frame.
68. Accused No.1, Ms. Seema Garg, being the sole proprietor of M/s S.S. Trader (India) as well as the admitted signatory and drawer of the cheques in question, has failed to rebut the statutory presumptions arising under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881. The defence raised by her has remained unsubstantiated and insufficient to probabilise absence of liability. Accordingly, all ingredients constituting the offence under Section 138 of the Negotiable Instruments Act stand duly proved against Accused No.1.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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69. However, insofar as Accused No.2, Mr. Sudhir Garg, is concerned, this Court finds that he is neither the drawer nor the signatory of the cheques in question. The account from which the cheques were issued pertains to a sole proprietorship concern, which in law has no existence separate from its proprietor. Criminal liability under Section 138 NI Act primarily attaches to the drawer of the cheque, and the principle of vicarious liability embodied under Section 141 NI Act is inapplicable to proprietorship concerns. No independent evidence has been led to establish personal liability of Accused No.2. Consequently, continuation of criminal liability against him would be legally unsustainable.
Conclusion
70. Accused No.1 Ms. Seema Garg, Proprietor of M/s S.S. Trader (India), is hereby held guilty and convicted for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.
71. Accused No.2 Mr. Sudhir Garg is hereby acquitted of the offence under Section 138 of the Negotiable Instruments Act, 1881.
72. The judgment duly digitally signed be uploaded on CIS. Let copy of this judgment be given free of cost to the convict.
Digitally signed Announced in the open by SHRUTI
SHARMA
SHRUTI
on 21.02.2026 SHARMA
Date:
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+0530
(Shruti Sharma-I)
JMFC (NI Act)-02, South-East,
Saket Courts, New Delhi/ 21.02.2026
Certified that this judgment contains 27 pages and each page bears my signature.
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