Himachal Pradesh High Court
Reserved On: 18.07.2025 vs Kusum Sharma on 31 July, 2025
2025:HHC:25491
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr. Revision No. 380 of 2025
Reserved on: 18.07.2025
.
Date of Decision: 31.7.2025.
Mohan Kaundal ...Petitioner
Versus
Kusum Sharma ...Respondent
Coram
Hon'ble Mr Justice Rakesh Kainthla, Judge.
Whether approved for reporting?1 No
For the Petitioner : Mr. Ajay Sipahiya, Advocate.
For the Respondent : Mr. Abhimanyu Rathore & Ms.
Poonam Gehlot, Advocates.
Rakesh Kainthla, Judge
The present revision is directed against the judgment
dated 13.02.2025, passed by learned Additional Sessions Judge
(I), Solan, District Solan, H.P. (learned Appellate Court), vide
which the judgment dated 08.03.2022 of conviction and order of
sentence dated 16.03.2022, passed by learned Judicial Magistrate
First Class, Court No.1, Solan, H.P. (learned Trial Court) were
Whether reporters of Local Papers may be allowed to see the judgment? Yes.
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upheld. (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
revision are that the complainant filed a complaint before the
learned Trial Court against the accused for the commission of an
offence punishable under Section 138 of the Negotiable
Instruments Act (NI Act). It was alleged that the accused is
known to the complainant. The complainant was having family
relations with the accused and his wife. The accused requested
the complainant for the friendly loan for investment of money
in property. The complainant paid ₹31,00,000/- to the accused,
out of which an amount of ₹29,27,500/- was paid through
different cheques, and the remaining amount was paid through
cash. The accused assured to return the money to the
complainant after some months. He issued the following post-
dated cheques, all drawn at State Bank of India, Solan, Branch,
in favour of the complainant.
i. Cheque No. 826759 dated 01.06.2018 amounting to
₹1,00,000/-
ii. Cheque No. 826783 dated 30.06.2018 amounting to
₹1,00,000/-
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iii. Cheque No. 826784 dated 31.08.2018 amounting to
₹5,10,000/-
iv Cheque No. 826765 dated 11.09.2018 amounting to
.
₹7,00,000/-
v. Cheque No. 826771 dated 18.09.2018 amounting to
₹3,00,000/-
vi. Cheque No. 826775 dated 03.10.2018 amounting to
₹1,90,000/-
vii. Cheque No. 826776 dated 18.10.2018 amounting to
₹1,00,000/-
viii.
ix.
r to
Cheque No. 826785 dated 31.10.2018 amounting to
₹4,00,000/-
Cheque No. 826787 dated 31.12.2018 amounting to
₹1,50,000/-
x. Cheque No. 826786 dated 31.12.2018 amounting to
₹2,50,000/-
xi. Cheque No. 826781 dated 15.01.2019 amounting to
₹1,00,000/-
xii. Cheque No. 826782 dated 23.01.2019 amounting to
₹2,00,000/-
3. The complainant presented the cheque bearing
826781 dated 15.01.2019 drawn on State Bank of India, Solan
Branch amounting to ₹1,00,000, however, the same was
dishonoured with an endorsement "insufficient balance". The
complainant issued a legal notice to the accused asking him to
pay the amount. This notice was issued on 23.03.2019, posted on
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1.04.2019, and served upon the accused on 3.04.2019. The
accused failed to pay the money despite the receipt of the notice
.
of demand. Hence, the complaint was filed before the learned
Trial Court to take action as per law.
4. The learned Trial Court found sufficient reasons to
summon the accused. When the accused appeared, notice of
accusation was put to him for the commission of an offence
punishable under Section 138 of the NI Act, to which he pleaded
not guilty and claimed to be tried.
5. The complainant examined herself (CW1) to prove
her complaint
6. The accused, in his statement recorded under Section
313 of Cr.P.C., stated that money was paid by the complainant to
him for being invested in the share market. The cheques were
issued as security for the repayment of the money so invested.
He had not taken any friendly loan from the complainant. No
evidence was led in defence.
7. Learned Trial Court held that the version of the
complainant that she had advanced money to the accused was
duly corroborated by the statement of account of the accused in
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which the entries of credit were made. The accused failed to
provide any explanation for the deposit of the money in his
.
account. He admitted his signature on the cheque, and a
presumption arose that the cheque was issued for consideration
in discharge of the legal liability. The accused did not produce
any evidence to establish his version that the complainant had
handed over the money to him for investing in the share market.
This version was inherently improbable because the investment
in the share market is subject to market risk, and no person can
guarantee any profit in it. The issuance of the security cheque
can only mean that it was only to discharge the liability;
therefore, the version of the accused was not believable that
money was deposited with him as an investment. The cheque
was dishonoured with an endorsement 'insufficient balance'
and the accused failed to pay the amount despite the receipt of
valid notice of demand; therefore, the accused was convicted for
the commission of an offence punishable under Section 138 of
the NI Act. No sentence of imprisonment was passed, however,
the accused was ordered to pay a compensation of ₹1,10,000/-
and in default of payment of compensation to undergo simple
imprisonment of six months.
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8. Being aggrieved by the judgment and order passed by
the learned Trial Court, the accused preferred an appeal which
.
was decided by the learned Appellate Court. Learned Appellate
Court concurred with the findings recorded by the learned Trial
Court that the version of the complainant regarding the
advancement of loan was duly corroborated by the statement of
account of the accused. The issuance of a cheque was admitted
by the accused, and the learned Trial Court had applied the
presumption to the cheque. The post-dated cheque is valid and
would attract the provisions of Section 138 of the NI Act. The
cheque was dishonoured with an endorsement of 'insufficiency
of funds. ' The notice was served upon the accused, and the
accused failed to repay the amount despite the receipt of the
valid notice of demand. Therefore, the learned Trial Court had
rightly convicted the accused. The sentence was adequate, and
no interference was required with it. Hence, the appeal was
dismissed. A revision for enhancement of sentence passed by
the learned Trial Court was also dismissed.
9. Being aggrieved by the judgments and order passed
by the learned Courts below, the petitioner/accused has filed the
present petition, asserting that the learned Courts below erred
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in appreciating and drawing proper inferences from the material
placed before them. The complainant had failed to prove that
.
notice was served upon the accused. No official from the postal
department was examined by the complainant to prove this fact.
The accused had made a part payment of ₹3,61,720/-, which
amount was not endorsed, and the presentation of the whole
amount is bad. The plea taken by the accused that the money
was deposited with the accused as investment is highly
probable, and learned Courts below erred in rejecting this plea.
There were various contradictions in the statement of the
complainant, and she had concealed material facts from the
Court. The documents marked D-2 to D-6 clearly showing the
investment in the stock market under the name of Karvey Stock
Broking Ltd. The complainant asked the accused to deposit her
money in the stock market to make a profit. Therefore, it was
prayed that the present reivision be allowed and the judgments
and order passed by the learned Courts below be set aside.
10. I have heard Mr. Ajay Sipahiya, learned counsel for
the petitioner and Mr. Abhimanyu Rathore & Ms. Poonam
Gehlot, learned counsel for the respondent.
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11. Mr. Ajay Sipahiya, learned counsel for the petitioner,
submitted that the petitioner/accused is innocent. He had not
.
taken any loan from the complainant; rather complainant had
asked him to invest her money in the stock market. However,
the market crashed, and the accused could not return the money
invested by the complainant. He had handed over the security
cheques to the complainant to ensure that the profit obtained by
the accused is duly shared with her. These cheques were
misused by the complainant. There were various contradictions
in the statement of the complainant. Money paid by the accused
to the complainant was not credited. Therefore, he prayed that
the present petition be allowed and the judgments and order
passed by learned Courts below be set aside.
12. Mr. Abhimanyu Rathore, learned counsel for the
respondent, submitted that issuance of cheque is not disputed
and the learned Courts below had rightly held that a
presumption would arise in the present case regarding the
consideration. The accused did not lead any evidence, and the
plea taken by him that money was invested by the accused in the
stock market through the complainant appears to be highly
improbable, as pointed out by the learned Trial Court. The
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cheque was dishonoured with an endorsement 'insufficient
balance', and the accused failed to repay the cheque amount
.
despite receipt of the valid notice. He prayed that the present
revision be dismissed.
13. I have given considerable thought to the submissions
made at the bar and have gone through the records carefully.
14. 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 the revisional
court does not exercise an appellate jurisdiction 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
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 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
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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.
.
15. 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
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
2025:HHC:25491
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 framing of charge is a
much-advanced stage in the proceedings under CrPC."
16. This Court in the aforesaid judgment in Amit Kapoor
case [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460 :
(2012) 4 SCC (Civ) 687 : (2013) 1 SCC (Cri) 986] has also laid
down principles to be considered for exercise of
jurisdiction under Section 397 particularly in the context
of prayer for quashing of charge framed under Section
228CrPC is sought for as under : (Amit Kapoor case [Amit
Kapoor v. Ramesh Chander, (2012) 9 SCC 460 : (2012) 4 SCC
(Civ) 687 : (2013) 1 SCC (Cri) 986], SCC pp. 482-83, para 27)
"27. Having discussed the scope of jurisdiction under
these two provisions, i.e., Section 397 and Section 482
of the Code, and the fine line of jurisdictional
distinction, it will now be appropriate for us to enlist
the principles with reference to which the courts
should exercise such jurisdiction. However, it is not
only difficult but inherently impossible to state such
principles with precision. At best and upon objective
analysis of various judgments of this Court, we are
able to cull out some of the principles to be considered
2025:HHC:25491
for proper exercise of jurisdiction, particularly, with
regard to quashing of charge either in exercise of
jurisdiction under Section 397 or Section 482 of the
Code or together, as the case may be.
.
27.1. Though there are no limits to the powers of the
Court under Section 482 of the Code but the more the
power, the more due care and caution is to be
exercised in invoking these powers. The power of
quashing criminal proceedings, particularly the charge
framed in terms of Section 228 of the Code, should be
exercised very sparingly and with circumspection, and
that too in the rarest of rare cases.
27.2. The Court should apply the test as to whether the
uncontroverted allegations as made from the record of
the case and the documents submitted therewith
prima facie establish the offence or not. If the
allegations are so patently absurd and inherently
improbable that no prudent person can ever reach
such a conclusion, and where the basic ingredients of a
criminal offence are not satisfied, then the Court may
interfere.
27.3. The High Court should not unduly interfere. No
meticulous examination of the evidence is needed for
considering whether the case would end in conviction
or not at the stage of framing of charge or quashing of
charge.
***
27.9. Another very significant caution that the courts
have to observe is that it cannot examine the facts,
evidence and materials on record to determine
whether there is sufficient material on the basis of
which the case would end in a conviction; the court is
concerned primarily with the allegations taken as a
whole whether they will constitute an offence and, if
so, is it an abuse of the process of court leading to
injustice.
***
2025:HHC:25491
27.13. Quashing of a charge is an exception to the rule
of continuous prosecution. Where the offence is even
broadly satisfied, the Court should be more inclined to
permit continuation of prosecution rather than its
.
quashing at that initial stage. The Court is not
expected to marshal the records with a view to decide
admissibility and reliability of the documents or
records, but is an opinion formed prima facie."
17. The revisional court cannot sit as an appellate court
and start appreciating the evidence by finding out
inconsistencies in the statement of witnesses, and it is
not legally permissible. The High Courts ought to be
cognizant of the fact that the trial court was dealing with
an application for discharge.
16. 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
inferior court for the purposes of satisfying itself as to
2025:HHC:25491
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 framing of charge is a
much-advanced stage in the proceedings under CrPC."
16. This Court in the aforesaid judgment in Amit Kapoor
case [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460 :
(2012) 4 SCC (Civ) 687 : (2013) 1 SCC (Cri) 986] has also laid
down principles to be considered for exercise of
jurisdiction under Section 397 particularly in the context
of prayer for quashing of charge framed under Section
228CrPC is sought for as under : (Amit Kapoor case [Amit
2025:HHC:25491
Kapoor v. Ramesh Chander, (2012) 9 SCC 460 : (2012) 4 SCC
(Civ) 687 : (2013) 1 SCC (Cri) 986], SCC pp. 482-83, para 27)
"27. Having discussed the scope of jurisdiction under
these two provisions, i.e. Section 397 and Section 482
.
of the Code, and the fine line of jurisdictional
distinction, it will now be appropriate for us to enlist
the principles with reference to which the courts
should exercise such jurisdiction. However, it is not
only difficult but inherently impossible to state such
principles with precision. At best and upon objective
analysis of various judgments of this Court, we are
able to cull out some of the principles to be considered
for proper exercise of jurisdiction, particularly, with
regard to quashing of charge either in exercise of
jurisdiction under Section 397 or Section 482 of the
Code or together, as the case may be.
27.1. Though there are no limits to the powers of the
Court under Section 482 of the Code but the more the
power, the more due care and caution is to be
exercised in invoking these powers. The power of
quashing criminal proceedings, particularly, the
charge framed in terms of Section 228 of the Code,
should be exercised very sparingly and with
circumspection and that too in the rarest of rare cases.
27.2. The Court should apply the test as to whether the
uncontroverted allegations as made from the record of
the case and the documents submitted therewith
prima facie establish the offence or not. If the
allegations are so patently absurd and inherently
improbable that no prudent person can ever reach
such a conclusion, and where the basic ingredients of a
criminal offence are not satisfied, then the Court may
interfere.
27.3. The High Court should not unduly interfere. No
meticulous examination of the evidence is needed for
considering whether the case would end in conviction
2025:HHC:25491
or not at the stage of framing of charge or quashing of
charge.
***
.
27.9. Another very significant caution that the courts
have to observe is that it cannot examine the facts,
evidence and materials on record to determine
whether there is sufficient material on the basis of
which the case would end in a conviction; the court is
concerned primarily with the allegations taken as a
whole whether they will constitute an offence and, if
so, is it an abuse of the process of court leading to
injustice.
***
27.13. Quashing of a charge is an exception to the rule
of continuous prosecution. Where the offence is even
broadly satisfied, the Court should be more inclined to
permit continuation of prosecution rather than its
quashing at that initial stage. The Court is not
expected to marshal the records with a view to decide
admissibility and reliability of the documents or
records, but is an opinion formed prima facie."
17. The revisional court cannot sit as an appellate court
and start appreciating the evidence by finding out
inconsistencies in the statement of witnesses, and it is
not legally permissible. The High Courts ought to be
cognizant of the fact that the trial court was dealing with
an application for discharge.
17. 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
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reappreciate the evidence and come to its conclusions in the
absence of any perversity. It was observed on page 169:
.
"12. This Court has time and again examined the scope of
Sections 397/401 CrPC and the ground for exercising the
revisional jurisdiction by the High Court. In State of
Kerala v. Puttumana Illath Jathavedan Namboodiri [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 [Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao
Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court
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held that the High Court, in the exercise of 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."
14. In the above case, also conviction of the accused was
recorded, and the High Court set aside [Dattatray Gulabrao
Phalke v. Sanjaysinh Ramrao Chavan, 2013 SCC OnLine Bom
1753] the order of conviction by substituting its view. This
Court set aside the High Court's order holding that the
High Court exceeded its jurisdiction in substituting its
views, and that too without any legal basis.
2025:HHC:25491
18. 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
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."
19. The present revision has to be decided as per the
parameters laid down by the Hon'ble Supreme Court.
20. The accused admitted his signatures on the cheque in
his statement recorded under Section 313 of Cr.P.C. It was laid
down by this Court in Naresh Verma vs. Narinder Chauhan 2020(1)
Shim. L.C. 398 that where the accused had not disputed his
signatures on the cheque, the Court has to presume that it was
issued in discharge of legal liability, and the burden would shift
upon the accused to rebut the presumption. It was observed: -
2025:HHC:25491
"8. Once signatures on the cheque are not disputed, the
plea with regard to the cheque having not been issued
towards discharge of lawful liability, rightly came to be
rejected by learned Courts below. Reliance is placed upon
.
Hiten P. Dalal v. Bartender Nath Bannerji, 2001 (6) SCC 16,
wherein it has been held as under:
"The words 'unless the contrary is proved' which
occur in this provision make it clear that the
presumption has to be rebutted by 'proof' and not
by a bare explanation which is merely plausible. A
fact is said to be proved when its existence is
directly established or when, upon the material
before it, the Court finds its existence to be so
probable that a reasonable man would act on the
supposition that it exists. Unless, therefore, the
explanation is supported by proof, the presumption
r created by the provision cannot be said to be
rebutted......"
9. S.139 of the Act provides that it shall be
presumed, unless the contrary is proved, that the
holder of a cheque received the cheque of nature
referred to in section 138 for the discharge, in whole
or in part, of any debt or other liability.
21. Similar is the judgment in Basalingappa vs.
Mudibasappa 2019 (5) SCC 418, wherein it was held:
"26. Applying the proposition of law as noted above, in
the facts of the present case, it is clear that the signature
on the cheque, having been admitted, a presumption shall
be raised under Section 139 that the cheque was issued in
discharge of debt or liability."
22. This position was reiterated in Kalamani Tex v. P.
Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2
2025:HHC:25491
SCC (Cri) 555: 2021 SCC OnLine SC 75, wherein it was held at page
289.
.
"14. Once the 2nd appellant had admitted his signatures
on the cheque and the deed, the trial court ought to have
presumed that the cheque was issued as consideration for
a legally enforceable debt. The trial court fell in error
when it called upon the respondent complainant to
explain the circumstances under which the appellants
were liable to pay. Such an approach of the trial court was
directly in the teeth of the established legal position as
discussed above, and amounts to a patent error of law."
23. Similar is the judgment in APS Forex Services (P) Ltd.
v. Shakti International Fashion Linkers (2020) 12 SCC 724, wherein
it was observed: -
"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
2025:HHC:25491
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 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 presumption is rebuttable in
nature. 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 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
2025:HHC:25491
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."
24. The presumption under Section 139 of the NI Act was
explained by the Hon'ble Supreme Court in Triyambak S. Hegde v.
Sripad, (2022) 1 SCC 742: (2022) 1 SCC (Civ) 512: 2021 SCC OnLine
SC 788 as under at page 747:
"12. From the facts arising in this case and the nature of
the rival contentions, the record would disclose that the
signature on the documents at Exts. P-6 and P-2 are not
disputed. Ext. P-2 is the dishonoured cheque based on
which the complaint was filed. From the evidence
tendered before the JMFC, it is clear that the respondent
has not disputed the signature on the cheque. If that be
the position, as noted by the courts below, a presumption
would arise under Section 139 in favour of the appellant
who was the holder of the cheque. Section 139 of the NI
Act reads as hereunder:
"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."
13. Insofar as the payment of the amount by the appellant
in the context of the cheque having been signed by the
respondent, the presumption for passing of the
consideration would arise as provided under Section
118(a) of the NI Act, which reads as hereunder:
"118. Presumptions as to negotiable instruments. --
Until the contrary is proved, the following
presumptions shall be made:
2025:HHC:25491
(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
.
accepted, indorsed, negotiated or transferred for
consideration."
14. The above-noted provisions are explicit to the effect
that such presumption would remain until the contrary is
proved. The learned counsel for the appellant in that
regard has relied on the decision of this Court in K.
Bhaskaran v. Sankaran Vaidhyan Balan [K.
Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510:
1999 SCC (Cri) 1284] wherein it is held as hereunder: (SCC
pp. 516-17, para 9)
"9. As the signature in the cheque is admitted to be
that of the accused, the presumption envisaged in
Section 118 of the Act can legally be inferred that
the cheque was made or drawn for consideration on
the date which the cheque bears. Section 139 of the
Act enjoins the Court to presume that the holder of
the cheque received it for the discharge of any debt
or liability. The burden was on the accused to rebut
the aforesaid presumption. The trial court was not
persuaded to rely on the interested testimony of
DW 1 to rebut the presumption. The said finding
was upheld [Sankaran Vaidhyan Balan v. K.
Bhaskaran, Criminal Appeal No. 234 of 1995, order
dated 23-10-1998 (Ker)] by the High Court. It is not
now open to the accused to contend differently on
that aspect."
15. The learned counsel for the respondent has, however,
referred to the decision of this
Court in Basalingappa v. Mudibasappa [Basalingappa v.
Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571]
wherein it is held as hereunder: (SCC pp. 432-33, paras
25-26)
2025:HHC:25491
"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 the 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
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.
26. Applying the preposition of law as noted above,
in the facts of the present case, it is clear that the
signature on the cheque, having been admitted, a
presumption shall be raised under Section 139 that
the cheque was issued in discharge of debt or
liability. The question to be looked into is as to
whether any probable defence was raised by the
accused. In the cross-examination of PW 1, when
the specific question was put that a cheque was
2025:HHC:25491
issued in relation to a loan of Rs 25,000 taken by
the accused, PW 1 said that he does not remember.
PW 1 in his evidence admitted that he retired in
1997, on which date he received a monetary benefit
.
of Rs 8 lakhs, which was encashed by the
complainant. It was also brought in evidence that in
the year 2010, the complainant entered into a sale
agreement for which he paid an amount of Rs
4,50,000 to Balana Gouda towards sale
consideration. Payment of Rs 4,50,000 being
admitted in the year 2010 and further payment of
loan of Rs 50,000 with regard to which Complaint
No. 119 of 2012 was filed by the complainant, a copy
of which complaint was also filed as Ext. D-2, there
was a burden on the complainant to prove his
financial capacity. In the years 2010-2011, as per
r own case of the complainant, he made a payment of
Rs 18 lakhs. During his cross-examination, when
the financial capacity to pay Rs 6 lakhs to the
accused was questioned, there was no satisfactory
reply given by the complainant. The evidence on
record, thus, is a probable defence on behalf of the
accused, which shifted the burden on the
complainant to prove his financial capacity and
other facts."
16. In that light, it is contended that the very materials
produced by the appellant and the answers relating to
lack of knowledge of property details by PW 1 in his cross-
examination would indicate that the transaction is
doubtful, and no evidence is tendered to indicate that the
amount was paid. In such an event, it was not necessary
for the respondent to tender rebuttal evidence, but the
case put forth would be sufficient to indicate that the
respondent has successfully rebutted the presumption.
17. On the position of law, the provisions referred to in
Sections 118 and 139 of the NI Act, as also the enunciation
of law as made by this Court, need no reiteration as there
is no ambiguity whatsoever. In Basalingappav.
2025:HHC:25491
Mudibasappa [Basalingappa v. Mudibasappa, (2019) 5 SCC
418 : (2019) 2 SCC (Cri) 571] relied on by the learned
counsel for the respondent, though on facts the ultimate
conclusion therein was against raising presumption, the
.
facts and circumstances are entirely different as the
transaction between the parties as claimed in the said
case is peculiar to the facts of that case where the
consideration claimed to have been paid did not find
favour with the Court keeping in view the various
transactions and extent of amount involved. However, the
legal position relating to the presumption arising under
Sections 118 and 139 of the NI Act on signature being
admitted has been reiterated. Hence, whether there is a
rebuttal or not would depend on the facts and
circumstances of each case."
25. This position was reiterated in Tedhi Singh v. Narayan
Dass Mahant, (2022) 6 SCC 735: (2022) 2 SCC (Cri) 726: (2022) 3
SCC (Civ) 442: 2022 SCC OnLine SC 302, wherein it was held at
page 739.
"8. It is true that this is a case under Section 138 of the
Negotiable Instruments Act. Section 139 of the NI Act
provides that the court shall presume 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. This presumption, however, is
expressly made subject to the position being proved to
the contrary. In other words, it is open to the accused to
establish that there is no consideration received. It is in
the context of this provision that the theory of "probable
defence" has grown. In an earlier judgment, in fact,
which has also been adverted to in Basalingappa
[Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2
SCC (Cri) 571], this Court notes that Section 139 of the NI
Act is an example of reverse onus (see Rangappa v. Sri
Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4
2025:HHC:25491
SCC (Civ) 477: (2011) 1 SCC (Cri) 184]). It is also true that
this Court has found that the accused is not expected to
discharge an unduly high standard of proof. It is
accordingly that the principle has developed that all
.
which the accused needs to establish is a probable
defence. As to whether a probable defence has been
established is a matter to be decided on the facts of each
case on the conspectus of evidence and circumstances
that exist..."
26. Similar is the judgment in P. Rasiya v. Abdul Nazer,
2022 SCC OnLine SC 1131, wherein it was observed:
"As per Section 139 of the N.I. Act, 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 discharge, in whole or in part, of any debt or other
liability. Therefore, once the initial burden is discharged
by the Complainant that the cheque was issued by the
accused and the signature and the issuance of the cheque
are not disputed by the accused, in that case, the onus will
shift upon the accused to prove the contrary that the
cheque was not for any debt or other liability. The
presumption under Section 139 of the N.I. Act is a
statutory presumption and thereafter, once it is
presumed that the cheque is issued in whole or in part of
any debt or other liability which is in favour of the
Complainant/holder of the cheque, in that case, it is for
the accused to prove the contrary."
27. This position was reiterated in Rajesh Jain v. Ajay
Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275, wherein it was
observed at page 161:
33. The NI Act provides for two presumptions: Section 118
and Section 139. Section 118 of the Act inter alia directs
that it shall be presumed until the contrary is proved that
2025:HHC:25491
every negotiable instrument was made or drawn for
consideration. Section 139 of the Act stipulates that
"unless the contrary is proved, it shall be presumed that
the holder of the cheque received the cheque for the
.
discharge of, whole or part of any debt or liability". It will
be seen that the "presumed fact" directly relates to one of
the crucial ingredients necessary to sustain a conviction
under Section 138. [The rules discussed hereinbelow are
common to both the presumptions under Section 139 and
Section 118 and are hence not repeated--reference to one
can be taken as reference to another.]
34. Section 139 of the NI Act, which takes the form of a
"shall presume" clause, is illustrative of a presumption of
law. Because Section 139 requires that the Court "shall
presume" the fact stated therein, it is obligatory for the
Court to raise this presumption in every case where the
factual basis for the raising of the presumption had been
established. But this does not preclude the person against
whom the presumption is drawn from rebutting it and
proving the contrary, as is clear from the use of the
phrase "unless the contrary is proved".
35. The Court will necessarily presume that the cheque
had been issued towards the discharge of a legally
enforceable debt/liability in two circumstances. Firstly,
when the drawer of the cheque admits issuance/execution
of the cheque and secondly, in the event where the
complainant proves that the cheque was issued/executed
in his favour by the drawer. The circumstances set out
above form the fact(s) which bring about the activation of
the presumptive clause. [Bharat Barrel & Drum Mfg.
Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg.
Co. v. Amin Chand Payrelal, (1999) 3 SCC 35]]
36. Recently, this Court has gone to the extent of holding
that presumption takes effect even in a situation where
the accused contends that a blank cheque leaf was
voluntarily signed and handed over by him to the
complainant. [Bir Singh v. Mukesh Kumar [Bir
Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC
2025:HHC:25491
(Civ) 309: (2019) 2 SCC (Cri) 40] ]. Therefore, the mere
admission of the drawer's signature, without admitting
the execution of the entire contents in the cheque, is now
sufficient to trigger the presumption.
.
37. As soon as the complainant discharges the burden to
prove that the instrument, say a cheque, was issued by
the accused for discharge of debt, the presumptive device
under Section 139 of the Act helps shifting the burden on
the accused. The effect of the presumption, in that sense,
is to transfer the evidential burden on the accused of
proving that the cheque was not received by the Bank
towards the discharge of any liability. Until this evidential
burden is discharged by the accused, the presumed fact
will have to be taken to be true, without expecting the
complainant to do anything further.
38. John Henry Wigmore [John Henry Wigmore and the Rules of
Evidence: The Hidden Origins of Modern Law] on Evidence states
as follows:
"The peculiar effect of the presumption of law is
merely to invoke a rule of law compelling the Jury
to reach the conclusion in the absence of evidence
to the contrary from the opponent but if the
opponent does offer evidence to the contrary
(sufficient to satisfy the Judge's requirement of
some evidence), the presumption 'disappears as a
rule of law and the case is in the Jury's hands free
from any rule'."
39. The standard of proof to discharge this evidential
burden is not as heavy as that usually seen in situations
where the prosecution is required to prove the guilt of an
accused. The accused is not expected to prove the non-
existence of the presumed fact beyond a reasonable
doubt. The accused must meet the standard of
"preponderance of probabilities", similar to a defendant in
a civil proceeding. [Rangappa v. Sri Mohan
[Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC
(Civ) 477: (2011) 1 SCC (Cri) 184: AIR 2010 SC 1898]]28.
2025:HHC:25491
28. Therefore, the Court has to start with the
presumption that the cheque was issued for valuable
.
consideration in discharge of the legal liability, and the burden is
upon the accused to rebut this presumption.
29. The accused did not dispute in his statement
recorded under Section 313 of Cr.P.C., as well as cross-
examination of the complainant, that money was paid to him by
the complainant. He stated that money was paid for investment
in the share market. The statement of account of the accused
w.e.f.01.04.2016 to 31.03.2018 also shows the transfer of the
money from the account of the complainant to the account of
the accused. Thus, the fact that money was paid to the accused
was duly proved.
30. The accused claimed that money was paid as
investment in the stock market; however, he did not lead any
evidence to establish this fact. The complainant denied in her
cross-examination that money was paid to the accused for
investment in the share market. A denied suggestion does not
amount to any proof, and the cross-examination of the
complainant does not establish the version of the accused. It
2025:HHC:25491
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 is not sufficient to rebut the
presumption. 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)".
31. Therefore, the learned Courts below had rightly held
that the version of the accused that money was paid to him for
investing it in the stock market is not established by any oral
evidence.
32. The accused filed a loss and gain statement mark
D-2 to D-6. The learned Courts below had rightly held that these
documents were not legally proved. Further, these statements
do not show that the investment was made on behalf of the
complainant. No letter/document written by the complainant
2025:HHC:25491
authorising the accused to invest money on her behalf was
placed on record. Therefore, this version was also not proved by
.
any documentary evidence.
33. The learned Trial Court had rightly pointed out that
the accused would not have issued the security cheque for the
investment made on behalf of the complainant because the
investment in the share market is subject to market risk. No
person can predict with certainty that such an investment would
lead to a gain or a loss. When the gain was not certain, the
accused would not have issued any security cheque to ensure the
payment to the complainant.
34. The whole defence of the accused is highly
improbable. The capital gains are subject to the income tax. It is
difficult to believe that the accused would have paid the income
tax on the capital gains for the money invested on the
complainant's behalf and shared profits with the complainant.
The accused would have suffered a loss in such a transaction,
and he had no reason to enter into such a transaction on behalf
2025:HHC:25491
of the complainant. He has not even stated that any share of the
profit was paid to him or that the complainant was to bear the
.
income tax on capital gains. Hence, this version of the accused
could not have been accepted.
35. It was submitted that there were various
discrepancies in the statement of the complainant, which made
her version highly suspect. These discrepancies are not material.
the complainant
r to
Further, the accused has not disputed the taking of the money
from and issuing of cheques to the
complainant. The only dispute is whether the payment was
made for investment in the share market on behalf of the
complainant or not. Any discrepancy in the statement of the
complainant will not help the Court in determining this dispute,
and the discrepancies in the complainant's statement are not
sufficient to establish the version of the accused. Thus, no
advantage can be derived from the discrepancy in the statement
of the complainant.
36. The plea taken by the accused that the cheque was
issued as a security cheque will not help him. The payment of
2025:HHC:25491
money to the accused is admitted. The plea taken by the accused
.
that money was paid for investment into the share market is not
probable. There is no evidence that the accused had repaid the
money. Therefore, even if the cheque was issued as a security
cheque, the complainant was entitled to present it to the bank. It
was laid down by this Court in Hamid Mohammad Versus Jaimal
Dass 2016 (1) HLJ 456, that even if the cheque was issued towards
the security, the accused will be liable. It was observed:
"9. Submission of learned Advocate appearing on
behalf of the revisionist that the cheque in
question was issued to the complainant as security,
and on this ground, criminal revision
petition be accepted is rejected being devoid of any
force for the reasons hereinafter mentioned. As per
Section 138 of the Negotiable Instruments Act 1881, if
any cheque is issued on account of other liability, then
the provisions of Section 138 of the Negotiable
Instruments Act 1881 would be attracted. The court has
perused the original cheque, Ext. C-1 dated 30.10.2008,
placed on record. There is no recital in the cheque
Ext. C-1, that cheque was issued as a security cheque. It
is well-settled law that a cheque issued as
security would also come under the provision of Section
2025:HHC:25491
138 of the Negotiable Instruments Act 1881. See 2016 (3)
SCC page 1 titled Don Ayengia v. State of Assam & another. It
is well-settled law that where there is a conflict between
former law and subsequent law, then subsequent law
.
always prevails."
37. 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 toward security will also attract the liability for the
commission of an offence punishable under Section 138 of N.I.
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 used towards repayment of instalments.
The 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
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have 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 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 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
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
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underlying principle as can be discerned from the
discussion of the said cases in the judgment of this
Court." (Emphasis supplied)
38. 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 N.I. Act can be filed on its
dishonour. It was observed:
"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
presentation, if the same is dishonoured, the
consequences contemplated under Section 138 and the
other provisions of N.I.. 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 cheque which is issued as 'security cannot be
presented prior to the loan or the instalment maturing for
repayment towards which such cheque is issued as
security. Further, the borrower would have the option of
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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."
39. There is no evidence that the accused had paid the
amount to the complainant, and the accused would be liable
even if the cheque was issued as a security.
40. Thus, the learned Courts below were justified in
drawing the presumption under Section 118(a) and Section 139 of
the NI Act that the cheque was issued by the accused in
discharge of the legal liability for consideration and holding that
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the accused had failed to rebut the presumption attached to the
cheque.
.
41. The complainant stated that the cheque was
dishonoured with an endorsement 'funds insufficient'. This is
duly corroborated by the cheque return memo (Ext.CW-1/C) in
which the reason for dishonour has been mentioned as 'funds
insufficient. ' 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.
42. 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
'insufficient funds'.
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43. The complainant stated that she had sent a notice.
(Ext.CW-1/D) to the accused. This notice was sent to the proper
.
address and is deemed to be served. It was laid down in C.C.
Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555 that the person
who claims that he had not received the notice has to pay the
amount within 15 days from the date of the receipt of the
summons from the Court, and in case of failure to do so, he
cannot take the advantage of the fact that notice was not
received by him. It was observed:
"It is also to be borne in mind that the requirement of
giving of notice is a clear departure from the rule of
Criminal Law, where there is no stipulation of giving of
notice before filing a complaint. Any drawer who claims
that he did not receive the notice sent by post, can, within 15
days of receipt of summons from the court in respect of the
complaint under Section 138 of the Act, make payment of the
cheque amount and submit to the Court that he had made
payment within 15 days of receipt of summons (by receiving a
copy of the complaint with the summons) and, therefore, the
complaint is liable to be rejected. A person who does not pay
within 15 days of receipt of the summons from the Court
along with the copy of the complaint under Section 138 of the
Act, cannot obviously contend that there was no proper
service of notice as required under Section 138, by ignoring
statutory presumption to the contrary under Section 27 of the
G.C. Act and Section 114 of the Evidence Act. In our view, any
other interpretation of the proviso would defeat the very
object of the legislation. As observed in Bhaskaran's case
(supra), if the giving of notice in the context of Clause (b)
of the proviso was the same as the receipt of notice, a
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trickster cheque drawer would get the premium to avoid
receiving the notice by adopting different strategies and
escape from legal consequences of Section 138 of the Act."
(Emphasis supplied)
.
44. The accused has not paid any money to the
complainant; hence, it was duly proved that the accused had
failed to pay the money despite the receipt of the notice.
45. Therefore, it was duly proved before the learned Trial
Court that the cheque was issued in discharge of legal liability. It
was dishonoured with an endorsement 'funds balance', and the
accused had failed to pay the amount despite the receipt of the
notice of demand. Hence, the complainant had proved his case
beyond a reasonable doubt, and the learned Trial Court had
rightly convicted the accused of the commission of an offence
punishable under Section 138 of the NI Act.
46. Learned Trial Court had ordered the accused to pay a
compensation of ₹1,10,000 The cheque of ₹1,00,000/- was
issued on 15.01.2019. The compensation was ordered to be paid
on 16.03.2022 after the expiry of about four years. The
complainant lost interest on the amount, and she had to pay the
litigation expenses for filing the complaint. She was entitled to
be compensated for the same. It was laid down by the Hon'ble
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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 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]"
47. Therefore, the compensation of ₹1,10,000/- on the
principal amount of ₹1,00,000/- is not excessive.
48. Learned Trial Court ordered the sentence of
imprisonment of six months in default of payment of
compensation.
49. It was submitted that the learned Trial Court erred in
imposing the sentence in default of the payment of
compensation. This submission is not acceptable. It was laid
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down by the Hon'ble Supreme Court in K.A. Abbas v. Sabu Joseph,
(2010) 6 SCC 230: (2010) 3 SCC (Civ) 744: (2010) 3 SCC (Cri) 127:
.
2010 SCC OnLine SC 612 that the can impose a sentence of
imprisonment in default of payment of compensation. It was
observed at page 237:
"20. Moving over to the question, whether a default
sentence can be imposed on default of payment of
compensation, this Court in Hari Singh v. Sukhbir
Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC
2127] and in Balraj v. State of U.P. [(1994) 4 SCC 29: 1994
SCC (Cri) 823: AIR 1995 SC 1935], has held that it was open
to all the courts in India to impose a sentence on default
of payment of compensation under sub-section (3) of
Section 357. In Hari Singh v. Sukhbir Singh [(1988) 4 SCC
551: 1988 SCC (Cri) 984: AIR 1988 SC 2127], this Court has
noticed certain factors which are required to be taken into
consideration while passing an order under the section:
(SCC p. 558, para 11)
"11. The payment by way of compensation must,
however, be reasonable. What is reasonable may
depend upon the facts and circumstances of each
case. The quantum of compensation may be
determined by taking into account the nature of the
crime, the justness of the claim by the victim and
the ability of the accused to pay. If there is more
than one accused, they may be asked to pay on
equal terms unless their capacity to pay varies
considerably. The payment may also vary
depending on the acts of each accused. A reasonable
period for payment of compensation, if necessary,
by instalments, may also be given. The court may
enforce the order by imposing a sentence in
default."
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21. This position also finds support in R. v. Oliver John
Huish [(1985) 7 Cri App R (S) 272]. The Lord Justice Croom
Johnson, speaking for the Bench, has observed:
"When compensation orders may be made, the
.
most careful examination is required. Documents
should be obtained, and evidence, either on
affidavit or orally, should be given. The proceedings
should, if necessary, be adjourned to arrive at the
true state of the defendant's affairs.
Very often, a compensation order is made and a
very light sentence of imprisonment is imposed,
because the court recognises that if the defendant is
to have an opportunity of paying the compensation,
he must be enabled to earn the money with which
to do so. The result is therefore an extremely light
sentence of imprisonment. If the compensation
order turns out to be virtually worthless, the
defendant has got off with a very light sentence of
imprisonment as well as no order of compensation.
In other words, generally speaking, he has got off
with everything."
22. The law laid down in Hari Singh v. Sukhbir
Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC
2127] was reiterated by this Court in Suganthi Suresh
Kumar v. Jagdeeshan [(2002) 2 SCC 420: 2002 SCC (Cri)
344]. The Court observed: (SCC pp. 424-25, paras 5 & 10)
"5. In the said decision, this Court reminded all
concerned that it is well to remember the emphasis
laid on the need for making liberal use of Section
357(3) of the Code. This was observed by reference
to a decision of this Court in Hari Singh v. Sukhbir
Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988
SC 2127]. In the said decision, this Court held as
follows: (SCC p. 558, para 11)
'11. ... The quantum of compensation may be
determined by taking into account the nature of the
crime, the justness of the claim by the victim and
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the ability of the accused to pay. If there is more
than one accused, they may be asked to pay on
equal terms unless their capacity to pay varies
considerably. The payment may also vary
.
depending on the acts of each accused. A reasonable
period for payment of compensation, if necessary,
by instalments, may also be given. The court may
enforce the order by imposing a sentence in default.'
(emphasis in original)
***
10. That apart, Section 431 of the Code has only
prescribed that any money (other than fine)
payable by an order made under the Code shall be
recoverable 'as if it were fine'. Two modes of
recovery of the fine have been indicated in Section
r 421(1) of the Code. The proviso to the sub-section
says that if the sentence directs that in default of
payment of the fine, the offender shall be
imprisoned, and if such offender has undergone the
whole of such imprisonment in default, no court
shall issue such warrant for the levy of the
amount."
The Court further held: (Jagdeeshan case [(2002) 2 SCC
420: 2002 SCC (Cri) 344], SCC p. 425, para 11)
"11. When this Court pronounced in Hari
Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC
(Cri) 984: AIR 1988 SC 2127] that a court may enforce
an order to pay compensation 'by imposing a
sentence in default', it is open to all courts in India
to follow the said course. The said legal position
would continue to hold good until it is overruled by
a larger Bench of this Court. Hence, learned Single
Judge of the High Court of Kerala has committed an
impropriety by expressing that the said legal
direction of this Court should not be followed by the
subordinate courts in Kerala. We express our
disapproval of the course adopted by the said Judge
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in Rajendran v. Jose [(2001) 3 KLT 431]. It is
unfortunate that when the Sessions Judge has
correctly done a course in accordance with the
discipline, the Single Judge of the High Court has
.
incorrectly reversed it."
23. In order to set at rest the divergent opinion expressed
in Ahammedkutty case [(2009) 6 SCC 660 : (2009) 3 SCC
(Cri) 302], this Court in Vijayan v. Sadanandan K. [(2009) 6
SCC 652 : (2009) 3 SCC (Cri) 296], after noticing the
provision of Sections 421 and 431 CrPC, which dealt with
mode of recovery of fine and Section 64 IPC, which
empowered the courts to provide for a sentence of
imprisonment on default of payment of fine, the Court
stated: (Vijayan case [(2009) 6 SCC 652 : (2009) 3 SCC (Cri)
296], SCC p. 658, para 24)
"24. We have carefully considered the submissions
made on behalf of the respective parties. Since a
decision on the question raised in this petition is
still in a nebulous state, there appear to be two
views as to whether a default sentence of
imprisonment can be imposed in cases where
compensation is awarded to the complainant under
Section 357(3) CrPC. As pointed out by Mr Basant
in Dilip S. Dahanukar case [(2007) 6 SCC 528 : (2007)
3 SCC (Cri) 209], the distinction between a fine and
compensation as understood under Section
357(1)(b) and Section 357(3) CrPC had been
explained, but the question as to whether a default
sentence clause could be made in respect of
compensation payable under Section 357(3) CrPC,
which is central to the decision in this case, had not
been considered."
The Court further held: (Vijayan case [(2009) 6 SCC 652:
(2009) 3 SCC (Cri) 296], SCC p. 659, paras 31-32)
"31. The provisions of Sections 357(3) and 431 CrPC,
when read with Section 64 IPC, empower the court,
while making an order for payment of
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compensation, to also include a default sentence in
case of non-payment of the same.
32. The observations made by this Court in Hari
Singh case [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR
.
1988 SC 2127] are as important today as they were
when they were made and if, as submitted by Dr.
Pillay, recourse can only be had to Section 421 CrPC
for enforcing the same, the very object of sub-
section (3) of Section 357 would be frustrated and
the relief contemplated therein would be rendered
somewhat illusory."
24. In Shantilal v. State of M.P. [(2007) 11 SCC 243: (2008) 1
SCC (Cri) 1], it is stated that the sentence of imprisonment
for default in payment of a fine or compensation is
different from a normal sentence of imprisonment. The
Court also delved into the factors to be taken into
consideration while passing an order under Section
357(3) CrPC. This Court stated: (SCC pp. 255-56, para 31)
"31. ... The term of imprisonment in default of
payment of a fine is not a sentence. It is a penalty
which a person incurs on account of non-payment
of a fine. The sentence is something which an
offender must undergo unless it is set aside or
remitted in part or in whole, either in appeal or in
revision or other appropriate judicial proceedings,
or 'otherwise'. A term of imprisonment ordered in
default of payment of a fine stands on a different
footing. A person is required to undergo
imprisonment either because he is unable to pay
the amount of fine or refuses to pay such amount.
He, therefore, can always avoid undergoing
imprisonment in default of payment of the fine by
paying such amount. It is, therefore, not only
the power but the duty of the court to keep in view
the nature of the offence, circumstances under
which it was committed, the position of the
offender and other relevant considerations before
ordering the offender to suffer imprisonment in
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default of payment of a fine." (emphasis in
original)
25. In Kuldip Kaur v. Surinder Singh [(1989) 1 SCC 405: 1989
SCC (Cri) 171: AIR 1989 SC 232], in the context of Section
.
125 CrPC observed that sentencing a person to jail is
sometimes a mode of enforcement. In this regard, the
Court stated: (SCC p. 409, para 6)
"6. A distinction has to be drawn between a mode of
enforcing recovery on the one hand and effecting
actual recovery of the amount of monthly
allowance which has fallen in arrears on the other.
Sentencing a person to jail is a 'mode of
enforcement'. It is not a 'mode of satisfaction' of the
liability. The liability can be satisfied only by
making actual payment of the arrears. The whole
purpose of sending to jail is to oblige a person liable
to pay the monthly allowance who refuses to
comply with the order without sufficient cause, to
obey the order and to make the payment. The
purpose of sending him to jail is not to wipe out the
liability which he has refused to discharge. It
should also be realised that a person ordered to pay
a monthly allowance can be sent to jail only if he
fails to pay the monthly allowance 'without
sufficient cause' to comply with the order. It would
indeed be strange to hold that a person who,
without reasonable cause, refuses to comply with
the order of the court to maintain his neglected
wife or child would be absolved of his liability
merely because he prefers to go to jail. A sentence
of jail is no substitute for the recovery of the
amount of monthly allowance which has fallen in
arrears."
26. From the above line of cases, it becomes very clear
that a sentence of imprisonment can be granted for
default in payment of compensation awarded under
Section 357(3) CrPC. The whole purpose of the provision
is to accommodate the interests of the victims in the
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criminal justice system. Sometimes the situation becomes
such that there is no purpose served by keeping a person
behind bars. Instead, directing the accused to pay an
amount of compensation to the victim or affected party
.
can ensure the delivery of total justice. Therefore, this
grant of compensation is sometimes in lieu of sending a
person behind bars or in addition to a very light sentence
of imprisonment. Hence, in default of payment of this
compensation, there must be a just recourse. Not
imposing a sentence of imprisonment would mean
allowing the accused to get away without paying the
compensation, and imposing another fine would be
impractical, as it would mean imposing a fine upon
another fine and therefore would not ensure proper
enforcement of the order of compensation. While passing
an order under Section 357(3), it is imperative for the
courts to look at the ability and the capacity of the
accused to pay the same amount as has been laid down by
the cases above; otherwise, the very purpose of granting
an order of compensation would stand defeated.
50. This position was reiterated in R. Mohan v. A.K. Vijaya
Kumar, (2012) 8 SCC 721: (2012) 4 SCC (Civ) 585: (2012) 3 SCC (Cri)
1013: 2012 SCC OnLine SC 486, wherein it was observed at page
729:
29. The idea behind directing the accused to pay
compensation to the complainant is to give him
immediate relief so as to alleviate his grievance. In terms
of Section 357(3), compensation is awarded for the loss or
injury suffered by the person due to the act of the accused
for which he is sentenced. If merely an order directing
compensation is passed, it would be totally ineffective. It
could be an order without any deterrence or apprehension
of immediate adverse consequences in case of its non-
observance. The whole purpose of giving relief to the
complainant under Section 357(3) of the Code would be
2025:HHC:25491
frustrated if he is driven to take recourse to Section 421 of
the Code. An order under Section 357(3) must have the
potential to secure its observance. Deterrence can only be
infused into the order by providing for a default sentence.
.
If Section 421 of the Code puts compensation ordered to
be paid by the court on a par with the fine so far as the
mode of recovery is concerned, then there is no reason
why the court cannot impose a sentence in default of
payment of compensation as it can be done in case of
default in payment of fine under Section 64 IPC. It is
obvious that in view of this, in Vijayan [(2009) 6 SCC 652:
(2009) 3 SCC (Cri) 296], this Court stated that the
abovementioned provisions enabled the court to impose a
sentence in default of payment of compensation and
rejected the submission that the recourse can only be had
to Section 421 of the Code for enforcing the order of
compensation. Pertinently, it was made clear that
observations made by this Court in Hari Singh [(1988) 4
SCC 551: 1988 SCC (Cri) 984] are as important today as they
were when they were made. The conclusion, therefore, is
that the order to pay compensation may be enforced by
awarding a sentence in default.
30. In view of the above, we find no illegality in the order
passed by the learned Magistrate and confirmed by the
Sessions Court in awarding a sentence in default of
payment of compensation. The High Court was in error in
setting aside the sentence imposed in default of payment
of compensation.
51. Thus, there is no infirmity in imposing a sentence of
imprisonment in case of default in the payment of
compensation.
52. No other point was urged.
53. In view of the above, the present revision fails, and
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the same is dismissed.
54. Records of the learned Courts below be sent back
.
forthwith, along with a copy of this judgment.
(Rakesh Kainthla)
Judge
31st July, 2025
(ravinder)
r to
