AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1398
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). It was asserted that the complainant and the accused had cordial relations with each other. The accused required some money for his domestic needs. He approached the complainant. The complainant advanced Rs. 1,50,000/- to the accused. The accused issued a cheque of Rs. 50,000/- drawn on Punjab National Bank, Bhota to the complainant to discharge part of his liability. The complainant presented the cheque to the bank, but it was dishonoured with the remarks 'account closed'. The complainant issued a legal notice to the accused but it was returned undelivered. Hence, the complaint was filed before the learned Trial Court for taking action as per the law. 3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried. 4. The complainant examined himself (CW1). 5. The accused, in his statement recorded under Section 313 of CrPC, admitted that he had borrowed Rs. 1,50....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al placed before them. The complainant was required to prove the sources of his income. The complainant failed to prove the existence of a legally enforceable debt. No receipt of payment was filed. The accused had issued a signed blank cheque to the complainant as security, which was misused by the complainant. Therefore, it was prayed that the present petition be allowed and judgments and order passed by the learned Courts below be set aside. 9. I have heard Mr. Vijay Singh Bhatia, learned counsel for the petitioner, Mr. Kamal Sharma, learned counsel for the respondent No.1 and Mr. Tarun Pathak, learned Deputy Advocate General, for respondent No.2-State. 10. Mr. Vijay Singh Bhatia, learned counsel for the petitioner, submitted that the learned Courts below erred in appreciating the material placed before them. The complainant failed to prove the source of income and the advancement of the loan to the accused. Notice was also not served upon the accused. Therefore, he prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside. He relied upon the judgment of the Hon'ble Supreme Court in K. Subramani v. K. Damodar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... conclusion on the same when the evidence has already been appreciated by the Magistrate as well as the Sessions Judge in appeal, unless any glaring feature is brought to the notice of the High Court which would otherwise tantamount to a gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in concluding that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. ..." 13. Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that the High Court, in the exercise of 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 perver....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plainant as security, which was misused by the complainant. Therefore, the accused had not disputed the taking of a loan and the issuance of a cheque. It was laid down by the Hon'ble Supreme Court in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, that when the issuance of a cheque and signature on the cheque are not disputed, a presumption would arise that the cheque was issued in discharge of the legal liability. It was observed: - "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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence." 19. The presumption under Section 139 of the NI Act was explained by the Hon'ble Supreme Court in N. Vijay Kumar v. Vishwanath Rao N., 2025 SCC OnLine SC 873 as under: "5. The NI Act raises two presumptions, one under Section 118 and the other in Section 139 thereof. The Sections read as under: "118. Presumptions as to negotiable instruments. - Until the contrary is proved, the following presumptions shall be made: - (a) of consideration: -that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; x x x 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case, including that of the plaintiff as well. In cases where the defendant fails to discharge the initial onus of proof by showing the nonexistence of the consideration, the plaintiff would invariably be held entitled to the benefit of the presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence, as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. 20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that, under the particular circumstances of the case, the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions, an accused is not expected to prove his defence beyond a reasonable doubt, as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses, and the defendant-accused cannot be expected to discharge an unduly high standard of proof. 28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "prepond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rise the principles enumerated by this Court in the following manner: 25.1. Once the execution of a cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. 25.2. The presumption under Section 139 is a rebuttable presumption, and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him, or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely. 25.4. That it is not necessary for the accused to come into the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden. 25.5. It is not necessary for the accused to come into the witness box to support his defence." 6.6. Recently, a coordinate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idu v. K. Subramani, Criminal Appeal No. 368 of 2009, decided on 10-10-2013 (KAR). Though the criminal appeals were preferred against the judgment of acquittal passed in all the cases arising un- der Section 138 of the NI Act, the factual matrix and the evidence adduced were different. The High Court, after answering the two legal issues, did not consider the merits of each case individually and simply remanded the matter to the trial court for fresh consideration." 22. Therefore, the earned Courts below had rightly held that the presumption under Section 139 of the NI Act would include a presumption regarding the existence of enforceable debt/liability. 23. In any case, once the presumption under Section 139 of the NI Act is attracted, the complainant is not supposed to prove the existence of consideration. This position was recognised in Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: (2020) 1 SCC (Cri) 154: (2020) 1 SCC (Civ) 126: 2019 SCC OnLine SC 1361, wherein it was observed: - "20. The trial court and the High Court proceeded as if the appellant was to prove a debt before the civil court, wherein the plaintiff is required to prove his claim on the basis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... giving it to the accused has been disbelieved, whereas the argument on behalf of the accused that he had not received any payment of any loan amount has been accepted. In our decision in S. S. Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we opined: '8. From the order impugned, it is clear that though the contention of the petitioners was that the said amounts were given for producing a film and were not by way of return of any loan taken, which may have been a probable defence for the petitioners in the case, but rightly, the High Court has taken the view that evidence had to be adduced on this point which has not been done by the petitioners. Pausing here, the Court would only comment that the reasoning of the High Court, as well as the First Appellate Court and Trial Court, on this issue is sound. Just by taking a counter-stand to raise a probable defence would not shift the onus on the complainant in such a case, for the plea of defence has to be buttressed by evidence, either oral or documentary, which in the present case has not been done. Moreover, even if it is presumed that the complainant had not proved the source of the money given to the petitioners by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny proof, and the cross- examination of the complainant does not establish the defence taken by the accused regarding the repayment of the loan. The accused did not lead any evidence and relied upon his statement recorded under Section 313 of the Cr. P.C. to prove his defence. It was held in Sumeti Vij v. Paramount Tech Fab Industries, (2022) 15 SCC 689: 2021 SCC OnLine SC 201 that the accused has to lead defence evidence to rebut the presumption and mere denial in his statement under Section 313 of Cr.P.C is not sufficient. It was observed at page 700: "20. That apart, when the complainant exhibited all these documents in support of his complaints and recorded the statement of three witnesses in support thereof, the appellant recorded her statement under Section 313 of the Code but failed to record evidence to disprove or rebut the presumption in support of her defence available under Section 139 of the Act. The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity for the accused to explain the incriminating circumstances appearing in the prosecution's case against the accused. Therefore, there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ques undoubtedly represent the outstanding liability. 12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of a claim for breach of contract under Section 138, which arises on account of dishonour of a cheque issued, was not by itself at par with a criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of a cheque issued for the discharge of a later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of the loan agreement, as against the case of Indus Airways (supra), where the purchase order had been cancelled and a cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for the discharge of liability but as an advance for the purchase order, which was cancelled. Keeping in mind this fine, but the real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was for repayment of a loan instalment which had fallen due, though such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat such a 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 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e amount of money standing to the credit of that account is insufficient to honour the cheque"? In our view, the answer would obviously be in the affirmative because the cheque is dishonoured as the amount of money standing to the credit of "that account" was "nil" at the relevant time, apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of "that account" on the relevant date when the cheque was presented for honouring the same. The expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression "that account being closed" is a species. After issuing the cheque drawn on an account maintained, a person, if he closes "that account" apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138, as there were insufficient or no funds to honour the cheque in "that account". Further, the cheque is to be drawn by a person for payment of any amount of money due to him "on an account maintained by him" with a banker and only on "that account" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bringing Section 138 on statute is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Looking at the object of incorporating Chapter VIII in the Act, the expression "on account maintained by him" used in Section 138 of the Act, as noticed above, cannot be interpreted to give it an artificial or unrealistic meaning. What the provision says is that the cheque must be drawn on the account which the accused maintained with the Bank. The status of the account, when the cheque was drawn, whether it was live or dead, is irrelevant. What the provision says is that the accused must have an account which is maintained or has been maintained with the Bank. The Legislature has not used the present continuous tense. The expression used is "on an account maintained by him" and not "maintained by him". The cheque, in my view, should have a reference to an account of the accused, irrespective of the fact whether such an account was live or dead on the date of issuance of the cheque. The interpretation of the expression "on an account maintained by him" as given by the learned Trial Magistrate and contended by the learned Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t which it has prohibited or enjoined: 'quando aliquid prohibetur, prohibetur et omne pe quod devenitur ad illud.' 11. This manner of construction has two aspects. One is that the Courts, mindful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its purview to escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outside the Act. When the Courts find an attempt at concealment, they will, in the words of Wilmot, C.J., 'brush away the cobweb varnish, and show the transactions in their true light'." 12. Their Lordships proceeded to observe: "15. In view of the aforesaid discussion, we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistently with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence, and the legislative purpose is to promote the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 15. The Supreme Court in N.A. Issac v. Jeemon P. Abraham, III (2006) BC 422 (SC): VI (2004) SLT 154: IV (2004) CCR 124 (SC): 2005 (1) Civil Court Cases 690 (SC), interpreted Section 138 of the Act and observed that contention that this provision will not be applicable when the cheque is issued from an already closed account cannot be upheld as such an interpretation would defeat the object of insertion of the provision in the Act. Their Lordships observed: "Section 138 does not call for such a narrow construction". Their Lordships approved that the expression used in Section 138 of the Act includes the cheques issued on a closed account. 16. For the reasons recorded above, the findings recorded by the Trial Magistrate holding that Section 138 of the Act is not applicable to a cheque drawn on a closed account, cannot be upheld." 35. Thus, the accused would be liable for the commission of an offence punishable under Section 138 of N.I. Act when the cheque was dishonoured with an endorsement of the account closed. 36. The complainant asserted that he had issued a notice to the accused. The envelope (Ex.C5) reads that the addressee was not at home and his family....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business." 38. A similar view was taken in Krishna Swaroop Agarwal v. Arvind Kumar, 2025 SCC OnLine SC 1458, wherein it was observed: "13. Section 27 of the General Clauses Act, 1887, deals with service by post: "27. Meaning of Service by post.- Where any [Central Act] or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre- paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post". 14. The concept of deemed service has been discussed by this Court on various occasions. It shall be useful to refer to some instances: 14.1 In Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....haratv. DDA (2008) 17 SCC 321. 39. In the present case, the accused has not proved that he was not responsible for non-service; therefore, the learned Courts below had rightly held that the notice was deemed to be served upon the accused. 40. Therefore, it was duly proved on record that the accused had issued a cheque in discharge of his liability, which was dishonoured with an endorsement 'account closed', and he failed to repay the amount despite the deemed service of notice upon him. Hence, all the ingredients of commission of an offence punishable under Section 138 of the NI Act were duly satisfied. 41. Learned Trial Court sentenced the accused to undergo simple imprisonment of three months. It was laid down by the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 138 that the penal provisions of Section 138 of the NI Act is a deterrent in nature. It was observed at page 203: "6. The object of Section 138 of the Negotiable Instruments Act is to infuse credibility into negotiable instruments, including cheques, and to encourage and promote the use of negotiable instrum....