TaxTMI 
TaxTMI 
2026 (6) TMI 944
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....nstruments Act, 1881 (in short, 'NI Act'). It was asserted that the complainant and the accused were known to each other, and the relationship between them was very cordial. The accused borrowed Rs.8,00,000/- from the complainant. He issued a cheque of Rs.8,00,000/- on 3.5.2016, drawn on Bank of Baroda, Kullu, to return the amount. The complainant presented the cheque to his bank, but it was dishonoured with an endorsement of 'insufficient funds'. The complainant issued a legal notice to the accused asking him to pay the amount. The notice was duly served upon the accused, but the accused failed to repay the amount. Hence, the complaint was filed against the accused for taking action against him 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) to prove his complaint. 5. The accused, in his statement recorded under Section 313 of the Code of Criminal Procedure (CrPC), admitted that he and the ....
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....ith it. Hence, the learned Appellate Court dismissed the appeal. 8. Being aggrieved by the judgments and order passed by the learned courts below, the accused has filed the present revision asserting that the learned Courts below erred in appreciating the evidence on record. The complainant had not produced any evidence to show that he had advanced Rs.8,00,000/-to the accused. Learned Trial Court had wrongly awarded the compensation. Therefore, it was prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside. 9. I have heard Ms Srishti Chauhan, Advocate, learned Legal Aid Counsel for the petitioner/accused, and Mr Virender Singh Rathore, learned counsel for the respondent/complainant. 10. Ms Srishti Chauhan, Advocate, learned Legal Aid Counsel for the petitioner/accused, submitted that the learned Courts below erred in appreciating the material on record. The complainant has not produced any satisfactory evidence of the debt/liability, and the learned courts below erred in relying upon the presumption to convict the accused. No conviction could have been recorded based on the presumption alone. Therefore, she pr....
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....tate 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 397 CrPC, 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....
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.... 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 amount 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, ....
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....he Hon'ble Supreme Court. 18. The ingredients of an offence punishable under Section 138 of the NI Act were explained by the Hon'ble Supreme Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul, 2025 SCC OnLine SC 2019 as under:- 5.1.1. In K.R. Indira v. Dr. G. Adinarayana (2003) 8 SCC 300, this Court enlisted the components, aspects and the acts, the concatenation of which would make the offence under Section 138 of the Act complete, to be these (i) drawing of the cheque by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/in part of any debt or liability, (ii) presentation of the cheque by the payee or the holder in due course to the bank, (iii) returning the cheque unpaid by the drawee bank for want of sufficient funds to the credit of the drawer or any arrangement with the banker to pay the sum covered by the cheque, (iv) giving notice in writing to the drawer of the cheque within 15 days of the receipt of information by the payee from the bank regarding the return of the cheque as unpaid demanding payment of the cheque amount, and (v....
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....the Act is an example of a reverse onus clause and therefore, 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." 20. This position was reiterated in N. Vijay Kumar v. Vishwanath Rao N., 2025 SCC OnLine SC 873, wherein it was held as under: "6. Section 118 (a) assumes that every negotiable instrument is made or drawn for consideration, while Section 139 creates a presumption that the holder of a cheque has received the cheque in discharge of a debt or liability. Presumptions under both are rebuttable, meaning they can be rebutted by the accused by raising a probable defence." 21. A similar view was taken in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed: "ONCE EXECUTION OF A CHEQUE IS ADMITTED, PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI ACT ARISE 15. In the present case, the cheque in question has admittedly been signed by the Respondent No. 1-Accused. Th....
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....ould be noticed that the amount in the said case was Rs. 9 lacs, and it is in that background that the Court observed as under:- "9. I find myself in agreement with the reasoning given by the learned ACMM that before a person is convicted for having committed an offence under Section 138 of the Act, it must be proved beyond a reasonable doubt that the cheque in question, which has been made as a basis for prosecuting the respondent/accused, must have been issued by him in the discharge of his liability or a legally recoverable debt. In the facts and circumstances of this case, there is every reason to doubt the version given by the appellant that the cheque was issued in the discharge of a liability or a legally recoverable debt. The reasons for this are a number of factors which have been enumerated by the learned ACMM also. Some of them are that non-mentioning by the appellant in his Income Tax Return or the Books of Accounts, the factum of the loan having been given by him because by no measure, an amount of Rs. 9,00,000/- can be said to be a small amount which a person would not reflect in his Books of Accounts or the Income Tax Return, in case the same has been lent t....
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....r failure to comply with the provisions of Section 269-SS- (1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269-SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty impossible under sub-section (1) shall be imposed by the Joint Commissioner." 7. A collective reading of both the aforesaid Sections would go to show that even though contravention of Section 269-SS of the IT Act would be visited with a strict penalty on the person taking the loan or deposit. However, Section 271D does not in any manner suggest or even provide that such a transaction would be null and void. The payer of money in cash, in violation of Section 269 SS of the IT Act, can always have the money recovered. 8. The object of introducing Section 269 of the IT Act has been succinctly set out by the Hon'ble Supreme Court in Asstt. Director of Inspection Investigation vs. A.B. Shanthi (2002) 6 SCC 259, wherein it was observed as under:- "8. The object of introducing Section 269-SS is to ensure that a taxpayer is not allowed to give a false expla....
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....es Twenty Thousand) is illegal and void and therefore does not fall within the definition of 'legally enforceable debt' cannot be countenanced. Accordingly, the conclusion of law in P.C. Hari (supra) is set aside." 26. This position was reiterated in Shine Varghese Koipurathu v State of Kerala, Crl. A. No. 5385 of 2025 decided on 8th December 2025. 27. The complainant stated in his cross-examination that only he and the accused were present at the time of the disbursal of the amount. He further stated that no document was prepared regarding the transaction. He volunteered to say that the accused had issued a post-dated cheque in his favour. It was submitted that the complainant's version of the disbursal of the amount was not corroborated by any material on record, and his version should be discarded. This submission cannot be accepted. It was laid down by the Hon'ble Supreme Court in Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: 2019 SCC OnLine SC 1361, that a presumption under Section 139 of the NI Act would obviate the requirement to prove the existence of consideration. It was observed: "20. The trial court and the High Court proceeded as if the appellant....
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.... in examination-in-chief and cross-examination, by the appellant with regard to withdrawing the money from the bank for 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. M....
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....esumptions incorporated in Sections 118 and 139 of the NI Act and are treating the proceedings under the NI Act as another civil recovery proceedings and are directing the complainant to prove the antecedent debt or liability. This Court is of the view that such an approach is not only prolonging the trial but is also contrary to the mandate of Parliament, namely, that the drawer and the bank must honour the cheque; otherwise, trust in cheques would be irreparably damaged." 30. Thus, the complainant's version could not have been doubted simply because no document or evidence was produced to establish this version. 31. The complainant denied in his cross-examination that he had advanced Rs.4,00,000/- to the accused, and the accused had issued a security cheque of Rs.8,00,000/-. The accused has also taken such a defence in his statement recorded under Section 313 of Cr.PC. However, he did not produce any evidence to support the plea taken by him. Denied suggestions do not amount to any proof, and the statement recorded under Section 313 of the Cr.PC is not a substantive piece of evidence. It was held in Sumeti Vij v. Paramount Tech Fab Industries, (2022) 15 SCC 689: 2021 SCC On....
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....umption, and the learned Courts below had rightly held that the cheque was dishonoured with an endorsement 'insufficient funds.' 35. The complainant stated that he had issued the legal notice to the accused, asking him to pay the money within 15 days of receipt. The notice was duly served upon the accused. The accused admitted in his statement recorded under Section 313 Cr.PC that he had received the notice from the complainant. Thus, this fact was also not in dispute. The accused has not claimed that he has repaid the money after the receipt of the notice, and the complainant's version that the accused had failed to pay the money despite the receipt of a notice of demand has to be accepted as correct. 36. Therefore, it was duly proved on record that the accused had issued a cheque of Rs.8,00,000/- to the complainant to discharge his debt/liability, which was dishonoured with an endorsement 'funds insufficient', and the accused had failed to repay the money despite the receipt of the notice of demand upon the accused. Therefore, all the ingredients of commission of an offence punishable under Section 138 of the NI Act were duly satisfied. 37. The learned Trial Court convic....