Reserved On: 18.06.2025 vs M/S Sai Agro Chemicals & Another ...
2025 Latest Caselaw 6751 HP

Himachal Pradesh High Court

Reserved On: 18.06.2025 vs M/S Sai Agro Chemicals & Another ... on 25 June, 2025

2025:HHC:19711

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

Cr. MP (M) No. 1364 of 2025 Reserved on: 18.06.2025 Date of Decision: 25.06.2025

M/s Soni Enterprises ...Applicant Versus

M/s Sai Agro Chemicals & another ...Non-applicant

Coram Hon'ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1.

For the applicant/ appellant : Mr. Vijay Singh Bhatia, Advocate.

    For the non-applicant/
    respondents                                        :       Nemo

    Rakesh Kainthla, Judge

                    The      applicant/appellant               has      filed     the     present

application for the grant of special leave to appeal against the

judgment dated 28.11.2024, passed by the learned Judicial

Magistrate First Class, Court No.3, Shimla, H.P. (learned Trial

Court) vide which the complaint filed by the applicant/ appellant

was dismissed. (Parties shall hereinafter be referred to in the same

manner as they were arrayed before the learned Trial Court for

convenience.)

Whether reporters of Local Papers may be allowed to see the judgment? Yes.

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2. Briefly stated, the facts giving rise to the present

application are that the complainant filed a complaint before the

learned Trial Court for the commission of an offence punishable

under Section 138 of the Negotiable Instruments Act (NI Act). It

was asserted that the accused was running a retail business in

the name and style of M/S Sai Agro Chemicals, Dhabas, Tehsil

Chopal, District Shimla, H.P. He procured the seeds, pesticides,

fungicides and other horticultural items from the complainant

for ₹9,68,633.99. He issued two cheques- one of ₹1,00,000/-

and another cheque of ₹6,68,600/- drawn on UCO Bank,

Chopal, District Shimla, H.P., to discharge his liability. The

complainant presented the cheques to his banker and they were

dishonoured with an endorsement "insufficient funds'. The

complainant issued a demand notice to the accused asking him

to pay the amount. Notice was served upon the accused, but he

failed to pay the amount despite receipt of the notice. Hence, the

complaint.

3. 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

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punishable under Section 138 of the NI Act, to which he pleaded

not guilty and claimed to be tried.

4 The complainant examined himself (CW-1) to prove

his case.

5. The accused, in his statement recorded under Section

313 of Cr.P.C., stated that he had issued a blank cheque to the

complainant as security. He examined himself (DW-1) and

Shewata Shekhari (DW-2).

6. Learned Trial Court held that the accused admitted

the issuance of the cheque. Therefore, a presumption under

Section 118(a) and 139 of the NI Act would arise that the cheques

were issued in discharge of his legal liability for consideration.

The complainant admitted in his cross-examination that the

accused had issued security cheques. He stated in his

examination-in-chief that cheques were issued in the year

2020, but stated in his cross-examination that cheques were

issued in the year 2017. The bills produced by the complainant

were not signed by the accused, even though they contained a

column for the customer's signatures. This made the

complainant's case highly doubtful, and the accused was able to

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rebut the presumption attached to the cheques. The

requirement that the cheques were issued to discharge the legal

liability was not established. Consequently, the complaint was

dismissed.

7. Being aggrieved by the judgment passed by the

learned Trial Court, the accused filed the present appeal and the

present application for seeking special leave to appeal. It was

asserted that findings recorded by the learned Trial Court were

not correct. The accused had failed to rebut the presumption

contained in Section 139 of the NI Act. The accused admitted his

signatures on the cheque, and the presumption under Section

118 (a) and 139 of the NI Act would attach to the cheques.

Learned Trial Court erred in not raising the presumption under

the NI Act. The testimony of the complainant was trustworthy

and believable, and the learned Trial Court erred in rejecting it.

Therefore, it was prayed that the present application be allowed

and leave to appeal be granted to the applicant

8. I have heard Mr. Vijay Singh Bhatia, learned counsel

for the petitioner. He submitted that the issuance of cheques by

the applicant was not disputed. A presumption arises under

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Section 118(a) and 139 of the NI Act that the cheques were issued

in discharge of legal liability. The minor contradictions in the

statements were not sufficient to rebut the presumption.

Learned Trial Court erred in dismissing the complaint.

Therefore, he prayed that the present application be allowed and

the special leave to appeal be granted to the

applicant/complainant.

9. I have given considerable thought to his submissions

made at the bar and have gone through the records carefully.

10. It was laid down by the Hon'ble Supreme Court in

Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri)

571: 2019 SCC OnLine SC 491 that the admission of signatures

raises the presumption under Sections 118 (a) and 139 of the NI

Act that the cheque was issued for consideration in the

discharge of the legal liability but the accused can rebut the

presumption by leading the evidence or cross-examining the

complainant and his witnesses to show that his version is not

reliable. It was observed at page 432:

"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:

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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.

11. This position was reiterated in Rajaram v.

Maruthachalam, (2023) 16 SCC 125: 2023 SCC OnLine SC 48,

wherein it was observed at page 132:

25. It can thus be seen that this Court has held that once the execution of the cheque is admitted, Section 139 of the NI Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has, however, been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. It has further been held that to rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to

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raise a probable defence. It has been held that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.

12. A similar view was taken in S. Murugan v. M.K.

Karunagaran, 2023 SCC OnLine SC 2041, wherein it was observed:

6. It is well settled that to rebut the presumption under Section 139 of the Negotiable Instruments Act, 1881, it is open to the accused not only to rely on the evidence led by him, but he can also rely on the materials submitted by the complainant, in order to raise a probable defence. The respondent's counsel relied on the ratio in Basalingappa v. Mudibasappa reported in (2019) 5 SCC 418 to say that the complainant here failed to discharge his burden. The relevant paragraph is extracted hereunder:--

"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 or 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."

13. The complainant admitted in his cross-examination

that cheques were issued as security in the year 2017, which is

contrary to his statement in examination-in-chief that the

cheques were issued in the year 2020. It was laid down by

Hon'ble Supreme Court in Dattatraya v. Sharanappa, (2024) 8

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SCC 573, that where the accused had made contradictory

statement regarding the date of handing over of the cheque,

his statement could not be relied upon and this would shift the

burden upon the complainant to prove the legal liability. It

was observed: -

"30. Admittedly, the appellant was able to establish that the signature on the cheque in question was of the respondent and in regard to the decision of this Court in Bir Singh [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197:

(2019) 2 SCC (Civ) 309: (2019) 2 SCC (Cri) 40], a presumption is to ideally arise. However, in the above-

referred context of the factual matrix, the inability of the appellant to put forth the details of the loan advanced, and his contradictory statements, the ratio therein would not impact the present case to the effect of giving rise to the statutory presumption under Section 139 of the NI Act, 1881. The respondent has been able to shift the weight of the scales of justice in his favour through the preponderance of probabilities."

14. The complainant relied upon the bill (Ext. CW-1/C) to

show the sale of the articles to the accused. However, it did not

contain the signatures of the accused, even though it provided a

column for the signatures. Hence, the bill could not be connected

to the accused. Reliance was also placed upon the entries in the

ledger (Ext.D1/DW1), but mere entries by themselves are unable

to prove the legal liability. It was laid down by the Hon'ble

Supreme Court in Manohar Lal Sharma v. Union of India, (2017) 11

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SCC 731: 2017 SCC OnLine SC 41 that the entries in the books of

account are insufficient to charge a person with liability. It was

observed at page 787:

279. It has further been laid down in V.C. Shukla [CBI v. V.C. Shukla, (1998) 3 SCC 410: 1998 SCC (Cri) 761] as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held that even then, independent evidence is necessary as to the trustworthiness of those entries, which is a requirement to fasten the liability. xxxx

281. With respect to the evidentiary value of a regular account book, this Court has laid down in V.C. Shukla [CBI v. V.C. Shukla, (1998) 3 SCC 410: 1998 SCC (Cri) 761], thus: (SCC p. 433, para 37) "37. In Beni v. Bisan Dayal [Beni v. Bisan Dayal, 1925 SCC OnLine MP 37: AIR 1925 Nag 445] it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate, and in the absence of such evidence, no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha [Hira Lal v. Ram Rakha, AIR 1953 Pepsu 113] the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in

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the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct.

It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts."

15. Therefore, the version of the complainant that

accused had purchased the articles from him and he issued

cheques to return the amount to the complainant was not proved

on record.

16. Once the complainant admitted in his cross-

examination that the cheques were issued in the year 2017 as

security, the complainant was required to prove the existence of

legal liability for ₹7,68,600/- on the date of presentation of the

cheque. He could not have relied upon a mere presumption to

establish his case. 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 when the

cheque is issued as a security, it will attract Section 138 of the NI

Act only if the liability subsisted on the date of presentation of

the cheque and not otherwise. It was observed:

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"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." (Emphasis supplied)

17. A similar view was taken in Sripati Singh v. State of

Jharkhand, 2021 SCC OnLine SC 1002: AIR 2021 SC 5732, wherein 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 the NI Act would flow."

18. In the present case, the complainant failed to prove

the existence of the liability. He stated in his cross-examination

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that his accountant had filled in the amount and date in both the

cheques, but did not examine the accountant to show the

existence of liability on the date of presentation of the cheques.

19. Therefore, in these circumstances, the learned Trial

Court had taken a reasonable view while holding that the

existence of the legal liability was not proved and this Court will

not interfere with the reasonable view taken by the learned Trial

Court while deciding the appeal against the acquittal even, if

another view is possible.

20. In view above, there is no reason to grant leave to

appeal. Consequently, the present application fails, and the same

is dismissed.

In view of the dismissal of the application for grant

of special leave to appeal, the proposed appeal also stands

disposed of.

(Rakesh Kainthla) Judge 25th June, 2025 (ravinder)