2026 (2) TMI 2 - HC - Indian Laws

Dishonour of cheque: locus standi and statutory presumption sustained; conviction under Negotiable Instruments Act left undisturbed.

Locus standi of a sole proprietorship complainant and the effect of statutory presumptions under the Negotiable Instruments Act were central. Bank records ... Dishonour of cheque - Locus standi of the complainant - maintainability of complaint in sole proprietorship - rebuttal of statutory presumptions - revisional jurisdiction - concurrent findings of trial and appellate courts - Offence u/s 138 of the Negotiable Instruments Act, 1881 - Sections 118(a) and 139 of the Negotiable Instruments Act, 1881 - HELD THAT:- It is well-settled that the High Court in criminal revision against conviction is not supposed to exercise the jurisdiction akin to the appellate court and the scope of interference is limited. Section 397 of the Cr.P.C. vests jurisdiction for the purpose of satisfying the Court 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. 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. It is urged that since the cheque in question was issued in the name of M/s Yashman Diamonds and not in the individual name of the respondent, the respondent lacked the authority to institute the complaint under Section 138 of the NI Act. The dishonour of the cheque on account of “payment stopped by drawer” is duly proved through bank records, and the statutory demand notice was issued within the prescribed period and admittedly replied to by the accused. These facts, once established, triggered the statutory presumptions under Sections 118(a) and 139 of the NI Act in favour of the complainant. The burden thereafter shifted upon the petitioners to rebut the presumption by raising a probable defence, not by mere assertions, but by material on record. This Court finds that the objection regarding the complainant’s locus standi was rightly rejected by the learned Trial Court. No perversity or legal infirmity is discernible in the findings returned on this aspect. The contention raised by the petitioners is accordingly rejected. No attempt was made to clarify what fees were allegedly payable, to whom such fees were due, or on what occasion the cheque was retained for that purpose. The accused also did not explain where the cheque was kept, under what circumstances the complainant allegedly gained access to it, or when the cheque was purportedly taken away. These crucial aspects remained completely unexplained. The learned Appellate Court has also correctly noted that the petitioners never lodged any complaint with the police or any other authority alleging misuse of the cheque, nor was any such complaint proved during trial. In view of the above, this Court finds no infirmity in the concurrent findings of the learned Trial Court and the learned Appellate Court rejecting the defence of misuse of cheque. In the totality of the circumstances, this Court finds no perversity or illegality in the concurrent findings recorded by the learned Trial Court and the learned Appellate Court. Accordingly, this Court holds that the conviction of the petitioners u/s 138 of the NI Act calls for no interference in revisional jurisdiction. Issues: (i) Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 is maintainable by an individual proprietor where the cheque is issued in the trade name of his sole proprietorship; (ii) Whether the convictions under Section 138 NI Act recorded by the Trial Court and upheld by the Appellate Court suffer from illegality or perversity warranting interference in revisional jurisdiction.Issue (i): Whether the complainant (individual) has locus standi to maintain a Section 138 NI Act complaint where the cheque was issued in the name of M/s Yashman Diamonds (a sole proprietorship).Analysis: The record shows the complainant consistently disclosed proprietorship of the trade name in the legal notice and in evidence, and the defence did not produce documentary proof to displace that position. It is a settled legal principle that a sole proprietorship lacks separate legal personality and transactions in the trade name are transactions of the proprietor. The courts below recorded concurrent findings on proprietorship and the absence of any effective attempt by the accused to summon documents to disprove proprietorship.Conclusion: The complaint is maintainable; the objection to locus standi is rejected and is against the complainant.Issue (ii): Whether the convictions under Section 138 NI Act are vitiated by illegality or perversity and therefore liable to be set aside in revision.Analysis: Essential ingredients of Section 138 were found established: issuance of the cheques (signatures not disputed), dishonour proven by bank records with remark 'payment stopped by drawer', and issuance of statutory demand notice within time. These facts attracted statutory presumptions under Sections 118(a) and 139 NI Act, shifting the burden to the petitioners to rebut by cogent material. The petitioners' defences (misuse, blank signed cheque, denial of transaction) were inconsistent and unsupported by credible evidence; no police complaint or documents were produced. The revisional scope under Section 397 CrPC is limited and concurrent findings of fact by the Trial and Appellate Courts showed no perversity or illegality warranting interference.Conclusion: The convictions under Section 138 NI Act are sustainable; there is no ground for interference in revisional jurisdiction and the petitioners' challenge fails.Final Conclusion: The High Court dismisses the petitions and upholds the concurrent findings of the Trial and Appellate Courts, leaving the conviction and sentences intact.Ratio Decidendi: A cheque issued in the trade name of a sole proprietorship is the cheque of the proprietor and a complaint by the proprietor is maintainable; where bank records show cheque dishonour and statutory presumptions under Sections 118(a) and 139 NI Act apply, the accused must rebut those presumptions by credible material or the conviction under Section 138 is sustainable.