Delhi District Court
Sumit Khurana vs M/S Vcare Technologies Pvt Ltd on 12 February, 2026
Ct Case no. 123/2020 Sumit Khurana Vs. M/s Vcare Technologies Pvt Ltd.
IN THE COURT OF JUDICIAL MAGISTRATE FIRST CLASS (NI
ACT-02), SOUTH EAST DISTRICT, SAKET COURT COMPLEX, NEW
DELHI
(Presided over by Ms. Shruti Sharma-I)
DLSE020494522019
Criminal Complaint No. 123/2020
Sumit Khurana ....................... Complainant
Vs.
M/s Vcare Technologies Pvt. Ltd ................. Accused
Sr.No Particulars Details
A. Name and address of the Sumit Khurana R/o H. No. 6, 2nd Floor, Birbal
Complainant: Road, Jangpura Extn., New Delhi-110014.
B. Name and address of the 1. M/s Vcare Technologies Pvt. Ltd. office at
Accused. I-10, Lajpat Nagar-II, New Delhi
through its Director.
2.Sh. Vishal Gupta
Director of accused no. 1 R/o House no. 21,
Sunder Nagar, New Delhi-110003.
3. Sh. Sumeet Singh,
R/o C-34, Hauz Khas, New Delhi-110016.
C. Offence complained of U/s 138 NIAct
D. Plea of the accused Pleaded not guilty.
E. Final order Conviction of Accused no. 1 and 2 and
Acquittal of Accused Sumeet Singh.
F. Date of institution 24.12.2019
G. Date of pronouncement 12.02.2026
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SHRUTI SHRUTI SHARMA
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Ct Case no. 123/2020 Sumit Khurana Vs. M/s Vcare Technologies Pvt Ltd.
JUDGMENT
1. This Court, by way of the present detailed judgment, adjudicates the complaint
instituted by Sh. Sumit Khurana (hereinafter referred to as the “Complainant”)
against M/s Vcare Technologies Pvt. Ltd., represented by its Director Sh. Vishal
Gupta, Vishal Gupta, and Sh. Sumeet Singh (hereinafter referred to as the “Accused
No. 1, 2 and 4 respectively”), for the offence punishable under Section 138 of the
Negotiable Instruments Act, 1881 (hereinafter “NI Act“), arising out of the
dishonour of three cheques issued by the Accused company in purported discharge
of a legally enforceable debt or liability, namely Cheque No. 000251 dated
31.10.2019 for ₹20,00,000/-, Cheque No. 000252 dated 31.10.2019 for
₹20,00,000/-, and Cheque No. 000253 dated 31.10.2019 for ₹73,334/-, all drawn on
HDFC Bank, Mohan Co-operative Industrial Estate, New Delhi, which, according
to the Complainant, were handed over towards repayment of an accumulated
liability arising from an unsecured financial loan; however, upon presentation for
encashment through IndusInd Bank, Jhandewalan Extension, the said cheques were
returned unpaid on 02.11.2019 with the endorsement “Funds Insufficient,” and
despite issuance of the statutory legal demand notice, the Accused failed to remit
the cheque amounts within the prescribed period of fifteen days, thereby causing the
cause of action to accrue in favour of the Complainant and necessitating the
institution of the present complaint under the penal provisions of the NI Act.
2. The case of the Complainant, in brief, is that Accused No. 1 is a company registered
under the Companies Act, 1956, having its registered office at 1-10, Lajpat Nagar
II, New Delhi-110024. The said company is engaged in the business of software
publishing, consultancy, and supply. Accused No. 2 is a director of Accused No. 1.
Accused No. 4 is its Chief Finance Officer and Key Managerial Personnel. Accused
Nos. 2 oversees the day-to-day operations of Accused No. 1, including the acts of
its employees. Accused No. 4 manages the financial affairs of the company.
Digitally signed
by SHRUTI
SHRUTI SHARMA
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Accused No. 2 is also an authorised signatory of Accused No. 1. The Complainant
advanced an unsecured loan of INR 40,00,000/- to Accused No. 1 vide an MOU
dated 10.04.2017, which was repayable within five months along with interest at the
rate of 22% per annum, payable monthly.
3. It is further the case of the Complainant that Accused No. 2 signed the MOU and
also furnished a personal guarantee dated 10.04.2017. Pursuant to the said loan
transaction, Accused No. 1 issued five cheques drawn on Account No.
04842560000919 maintained with HDFC Bank, Mathura Road, New Delhi (IFSC:
HDFC0002034). The Complainant presented three cheques for encashment on
01.11.2019, namely: Cheque No. 000251 for INR 20,00,000/-, Cheque No. 000252
for INR 20,00,000/-, and Cheque No. 000253 for INR 73,334/-, aggregating to a
total sum of INR 40,73,334/-. All three cheques were returned unpaid on 02.11.2019
with the remarks “Funds Insufficient.”
4. Adhering scrupulously to the requirements of Section 138 of the NI Act, counsel for
the Complainant dispatched a comprehensive legal demand notice dated 26.11.2019
through speed post to the declared addresses of the Accused persons. The said notice
categorically demanded repayment of the cheque amount within fifteen days of its
receipt, along with interest at the rate of 24%. Accused Nos. 1 to 2 did not send any
reply to the said notice. Accused No. 4, however, replied on 11.12.2019, denying
liability on the ground of his alleged non-involvement in the day-to-day operations
of Accused No. 1. The notices were received by Accused Nos. 1 to 4 by 13.12.2019,
and despite the same, no payment was made within the stipulated period.
5. The complainant contends that the deliberate issuance of cheques foreseeably
unbacked by funds, their dishonour for funds insufficient, and defiant non-
compliance post-notice collectively constitute wilful default. This sequence
repudiates any defence of bona fides, portraying calculated circumvention of a
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SHRUTI by SHRUTI
SHARMA
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proven commercial obligation, squarely indictable under Section 138 NI Act. The
Complainant’s unimpugned averments and documents establish the foundational
ingredients: cheques issued in debt discharge, dishonour for funds insufficient, and
failed notice redressal.
6. Upon a careful perusal of the material placed on record along with the complaint,
and after due examination of the complainant by way of pre-summoning evidence
in accordance with the mandate of Section 200 of the Code of Criminal Procedure,
this Court was satisfied that a prima facie case was made out against the accused(s)
for the commission of an offence punishable under Section 138 of the Negotiable
Instruments Act, 1881. The evidence adduced at the pre-summoning stage
sufficiently disclosed the existence of a legally enforceable liability and the issuance
of the cheques in question by the accused(s) towards its discharge, followed by its
dishonour due to payment stopped by drawer. Accordingly, vide order dated
07.01.2020, this Court was pleased to take cognizance of the offence and summoned
the accused no. 1, 2 and 4 to face trial for the alleged dishonour of cheques issued
in discharge of a debt or liability, as contemplated under the statutory scheme of the
NI Act.
7. Accused Nos. 1, 2 and 4 appeared through counsel, with Accused Nos. 2 and 4
present in person, on 10.10.2022. Consequently, Accused Nos. 2 and 4 were
admitted to bail. Subsequently, upon satisfaction that a prima facie case existed
warranting trial, this Court proceeded to frame notice under Section 251 of the Code
of Criminal Procedure, 1973 (CrPC), which was duly served upon the accused(s) on
the same day. Upon being apprised of the substance of accusation, including the
specific allegations pertaining to issuance and dishonour of the cheque in question,
accused (s) pleaded not guilty and claimed trial, thereby necessitating the recording
of evidence in the matter in accordance with law.
Digitally signed
by SHRUTI
SHARMA
SHRUTI Date:
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8. In support of his case, the complainant adopted his pre-summoning by way of
evidence affidavit and relied on the following documents in support of his case:-
Sr. Exhibits Particulars
No.
1. Ex.CW-1/9 Evidence by way of Affidavit
2. Ex.CW-1/1 Master Data of accused no. 1 company.
3. Ex.CW-1/2 MoU Executed between accused no. 1 and
complainant.
4. Ex.CW-1/3 Personal Guarantee Letter dated 10.04.2017.
5. Ex.CW-1/4 (Colly.) Original Cheques bearing no. 000251 dated
31.10.2019 for ₹20,00,000/-, Cheque No.
000252 dated 31.10.2019 for ₹20,00,000/-,
and Cheque No. 000253 dated 31.10.2019 for
₹73,334/-, all drawn on the HDFC Bank,
Mohan Co-operative Industrial Estate, New
Delhi.
6. Ex.CW-1/5 (Colly.) Return memo dated 02.11.2019 with remarks
"Funds Insufficient".
7. Ex.CW-1/6 Copy of Legal demand notice dated
26.11.2019
8. Ex.CW-1/7 Reply issued by accused no. 4 dated
11.12.2019.
9. Ex.CW-1/7A Statement of account of the complainant.
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10. Ex.CW-1/8 Postal receipts and tracking reports.
9. Thereafter, the matter proceeded to the stage of complainant evidence; where the
complainant during cross examination produced more documents on record as
follows:-
Sr. Exhibits Particulars
No.
11. Ex.CW-1/10(Colly.) Email communication between the
complainant and accused no. 2.
12. Ex.CW-1/11 Certificate u/s 65 IEA.
13. Mark Copy of minutes of EGM dated 21.10.2019
CW-1/12(Colly.)
14. Mark Ex.CW-1/13 Application filed by accused no. 2 before
NCLT under rule 49(2) of NCLT Rules,
2016.
15. Ex.CW-1/14(Colly) Photographs in respect of event
16. Ex.CW-1/15 & Petition before NCLT and copy of order
Ex.CW-1/16 dated 22.10.2019 passed by Hon'ble NCLT.
17. Ex.CW-1/17(Colly) Copy of Email dated 12.01.2023 sent by
accused no. 2 along with attachments and
certificate u/s 65 Indian Evidence Act.
10. CW-1/Complainant was subsequently examined in detail and was cross-
examined by the Ld. Counsel for Accused Nos. 1 and 2 on 24.11.2022,
17.03.2023, 01.04.2023, 01.04.2023, 29.04.2023, and 24.06.2023. Since CW-1
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did not wish to examine any other witness in support of his case, the
Complainant’s Evidence was closed vide order dated 24.06.2023.
11. Thereafter, the statements of Accused Nos. 1, 2 and 4 under Section 313 CrPC
were recorded on 27.09.2023. At that stage, the Ld. Counsel for Accused No.
4 expressed that he did not wish to lead any Defence Evidence on behalf of
Accused No. 4, and accordingly, Defence Evidence was closed qua Accused
No. 4. No Defence Evidence was led by Accused Nos. 1 and 2 either. The
matter thereafter proceeded to the stage of final arguments.
Final Arguments
12. Final arguments were heard on behalf of the parties at length. Written arguments
were filed on behalf of the complainant and accused no. 1 and 2.
13. Ld. Counsel for the Complainant submits that the Complainant has duly established
all the essential ingredients of the offence punishable under Section 138 of the NI
Act against the Accused persons. It is argued that the loan transaction is admitted
and stands proved through documentary evidence, including the MOU dated
10.04.2017 and the personal guarantee executed by Accused No. 2, pursuant to
which the Accused issued the cheques in question towards discharge of a legally
enforceable liability. It is submitted that the Accused persons failed to repay the
principal amount despite repeated requests, and the cheques were issued towards
part payment of the outstanding debt.
14. Ld. Counsel for the Complainant submits that the Complainant advanced an
unsecured loan of INR 40,00,000/- to Accused No. 1 under the agreed terms of the
MOU, carrying interest at the rate of 22% per annum payable monthly, and that
Accused No. 2 executed a personal guarantee in favour of the Complainant. It is
contended that security cheques, including the cheques forming the subject matter
of the present complaint, were duly handed over by the Accused persons at the
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inception of the transaction, and the loan amount was actually disbursed in two
instalments, which is corroborated by the Complainant’s bank statements placed on
record.
15. Ld. Counsel for the Complainant submits that despite payment of interest till August
2019, the principal amount remained unpaid, and the Accused persons continued to
extend the loan period on one pretext or another, allegedly attempting to devise
schemes to avoid repayment and to force conversion of the Complainant’s loan into
equity. It is argued that during the Extraordinary General Meeting dated 21.10.2019,
the Accused persons refused to repay the loan amount unless the Complainant
agreed to their alleged unlawful demands, and Accused No. 2 even instigated the
Complainant to initiate proceedings under Section 138 of the NI Act.
16. Ld. Counsel for the Complainant submits that the Complainant was compelled to
present the cheques in question, namely Cheque Nos. 000251, 000252 and 000253,
aggregating to INR 40,73,334/-, which were dishonoured on 02.11.2019 with the
remarks “Funds Insufficient.” It is submitted that the dishonour memos have been
duly exhibited and the reason for dishonour clearly establishes the culpability of the
Accused.
17. Ld. Counsel for the Complainant submits that the statutory legal demand notice
dated 26.11.2019 was duly issued within the prescribed period and was served upon
the Accused persons through post as well as email. It is argued that despite service,
the Accused failed to make payment within the statutory period, thereby completing
the offence under Section 138 NI Act. It is further submitted that the complaint was
instituted within limitation and all procedural compliances have been fulfilled.
18. Ld. Counsel for the Complainant submits that the signatures on the cheques have
been admitted by Accused No. 2, and once execution of the cheques is admitted, the
statutory presumptions under Sections 118 and 139 of the NI Act operate in favour
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of the Complainant. Reliance is placed on the judgment of the Hon’ble Supreme
Court in Bir Singh v. Mukesh Kumar, wherein it has been held that even a signed
blank cheque voluntarily handed over attracts presumption of liability, and the
burden lies upon the Accused to rebut the same by cogent evidence, which has not
been done in the present case.
19. Ld. Counsel for the Complainant submits that the defence raised by the Accused
that the cheques were security cheques or were manipulated is wholly untenable, as
the law is settled that even security cheques fall within the ambit of Section 138
once the debt has matured and become payable. Reliance is placed on Sripati Singh
v. State of Jharkhand as well as M/s MOJJ Engineering Systems Ltd. v. M/s A.B.
Sugars Ltd., wherein it has been held that undated or security cheques, when
presented after the debt becomes due, attract penal consequences under Section 138
NI Act.
20. Ld. Counsel for the Complainant submits that the plea sought to be raised regarding
the NCLT status quo order is merely an afterthought and does not absolve the
Accused of liability, particularly when the dishonour was on account of
insufficiency of funds and not on account of any judicial restraint. It is further argued
that the Complainant was not a party to the NCLT proceedings, and the Accused
persons have failed for several years to have the said order vacated, thereby using it
only as an excuse to evade repayment. Reliance is placed on Kusum Ingots and
Alloys Ltd. v. Pennar Peterson Securities Ltd. to contend that even pendency of
company proceedings does not bar prosecution under Section 138 when the
ingredients of the offence are satisfied.
21. Ld. Counsel for the Complainant submits that Accused No. 2 is personally and
jointly liable not only as the director in charge of the affairs of Accused No. 1, but
also as a guarantor who executed a personal guarantee and is a signatory to the
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cheques in question. Reliance is placed on Anju Devi v. Mukesh, wherein it has
been held that the liability of a guarantor is co-extensive with that of the principal
debtor, and issuance of a cheque by a guarantor attracts Section 138 NI Act.
22. Ld. Counsel for the Complainant submits that Accused No. 4 is also liable as he was
the Chief Financial Officer and Key Managerial Personnel actively involved in the
financial affairs of Accused No. 1 at the time of the transaction and dishonour, and
his participation is reflected from the documentary record, emails, and proceedings
of the EGM. It is argued that Accused No. 4 failed to prove his alleged resignation
and chose not to lead any defence evidence, thereby rendering his defence
unsubstantiated.
23. Ld. Counsel for the Complainant submits that the Accused persons have failed to
establish any credible defence, have not led any defence evidence, and have been
unable to rebut the statutory presumptions even on the scale of preponderance of
probabilities. It is contended that the Complainant has proved the offence beyond
reasonable doubt, and therefore the Accused persons are liable to be convicted and
punished in accordance with law.
24. Ld. Counsel for the Complainant submits that in view of the conduct of the Accused
and the prolonged pendency of the matter, the Complainant is entitled not only to
the cheque amount but also to appropriate compensation and maximum fine
permissible, as the outstanding liability along with interest and litigation costs has
effectively become nearly double of the cheque amount, warranting imposition of
the maximum punishment under the NI Act.
25. Per Contra, Ld. Counsel for Accused Nos. 1 and 2 submits that the present complaint
is false, mala fide, vexatious, and unsustainable in law, as the Complainant has
deliberately concealed material facts and has not approached this Court with clean
hands. It is argued that the Complainant has attempted to mislead this Court by
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suppressing crucial circumstances surrounding the transaction and by portraying a
distorted narrative with the sole intent to harass Accused Nos. 1 and 2 through abuse
of the criminal process under Section 138 of the NI Act.
26. Ld. Counsel for Accused Nos. 1 and 2 submits that Accused No. 1 is a company
engaged in the business of software publishing, consultancy, and supply, and
Accused No. 2 is one of its directors. It is contended that the Complainant, who was
introduced to the company through the ex-director, had advanced a loan of INR 40
lakhs at an interest rate of 22% per annum, and the company continued paying
monthly interest till August 2019. However, due to severe financial constraints
thereafter, the company was unable to continue payments, and the circumstances
leading to dishonour were beyond the control of the Accused.
27. Ld. Counsel for Accused Nos. 1 and 2 submits that the most material fact concealed
by the Complainant is that the Hon’ble NCLT had passed an order dated 22.10.2019
directing Accused No. 1 to maintain status quo with respect to its shareholding,
assets, and liabilities. It is argued that this restraint order directly impacted the
company’s ability to discharge its liabilities, including the alleged liability towards
the Complainant, and therefore the company was legally restrained from honouring
the cheques or making payment pursuant to the demand notice without risking
contempt of the Hon’ble NCLT.
28. Ld. Counsel for Accused Nos. 1 and 2 submits that Accused No. 2 had repeatedly
informed the Complainant through contemporaneous emails even prior to dishonour
that if a restraint order was granted by the NCLT, the company would be compelled
to refrain from clearing liabilities. It is further contended that after dishonour,
Accused No. 2 again communicated the inability of the company to honour the
cheques due to the NCLT status quo order, and the Complainant himself admitted
during cross-examination that such communications were received. Despite being
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fully aware of these restrictions, the Complainant chose to present the cheques and
thereafter instituted the present complaint while suppressing these material facts.
29. Ld. Counsel for Accused Nos. 1 and 2 submits that in view of the NCLT restraint
order operating prior to the date of presentation and within the statutory period, the
alleged debt was not legally recoverable at the relevant time, and therefore the
foundational ingredient of Section 138 NI Act, namely the existence of a legally
enforceable debt on the date of maturity and encashment, is not satisfied. Reliance
is placed on the decision of the Hon’ble Supreme Court in Kusum Ingots and Alloys
Ltd. v. Pennar Peterson Securities Ltd., wherein it has been held that where payment
is prevented due to a restraint order beyond the control of the accused, the offence
under Section 138 may not be said to have been completed. It is argued that the
principles applicable to BIFR restraint orders apply equally to NCLT orders, since
NCLT exercises equivalent jurisdiction and contempt powers.
30. Ld. Counsel for Accused Nos. 1 and 2 submits that the Complainant has also made
false statements in the complaint by asserting that he was under a bona fide belief
that the cheques would be honoured, whereas the record clearly demonstrates that
he was aware of the impending NCLT proceedings and the consequent impossibility
of repayment. It is argued that suppression and misrepresentation of such material
facts renders the complaint liable to dismissal, and reliance is placed on the
judgments of the Hon’ble Supreme Court in K.D. Sharma v. Steel Authority of India
Ltd. and Vijay Syal v. State of Punjab, emphasising that concealment of material
particulars amounts to abuse of the judicial process.
31. Ld. Counsel for Accused Nos. 1 and 2 submits that the Complainant himself
obstructed repayment of the loan by abstaining and dissenting during the
Extraordinary General Meeting dated 21.10.2019, despite being informed that the
purpose of raising funds was to settle outstanding liabilities including repayment of
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his loan. It is contended that the transcript reflects Accused No. 2’s willingness to
repay the Complainant upon raising funds, but the Complainant’s conduct
contributed to stalling the process, thereby leading to the eventual dishonour.
32. Ld. Counsel for Accused Nos. 1 and 2 submits that the cheques in question were
never lawfully issued or handed over by Accused Nos. 1 and 2, and it is alleged that
blank signed cheques were fraudulently misused by an ex-director in collusion with
the Complainant. It is further argued that the Complainant’s testimony is riddled
with inconsistencies and contradictions regarding the nature of the cheques, the
alleged security arrangement, and his acquaintance with the parties, thereby
rendering his version unreliable.
33. Ld. Counsel for Accused Nos. 1 and 2 submits that for all the aforesaid reasons, the
present complaint is liable to be dismissed as the essential ingredients of Section
138 NI Act are not fulfilled, the debt was not legally recoverable at the relevant time
due to the NCLT restraint order, and the Complainant has indulged in suppression
of material facts and misuse of the criminal process to vex and harass the Accused.
34. Lastly, Counsel for Accused No. 4 submits that Accused No. 4 has been falsely
implicated in the present complaint merely on account of his designation as the
Chief Financial Officer of Accused No. 1 company, and that he had no concern
whatsoever with the loan transaction alleged by the Complainant. It is contended
that Accused No. 4 was neither a party to the MOU nor a signatory to the cheques
in question, and no material has been placed on record to demonstrate that he was
responsible for the conduct of the business of the company at the relevant time so
as to attract vicarious liability under Section 141 of the NI Act. It is further argued
that the loan was advanced exclusively between the Complainant and Accused Nos.
1 and 2, and Accused No. 4 had no role in negotiating, accepting, or assuring
repayment of the said loan, nor did he participate in issuance of the cheques alleged
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to have been dishonoured. Ld. Counsel submits that mere holding of an office or
designation in the company does not automatically render an individual liable under
Section 138 read with Section 141 of the NI Act unless specific averments and
evidence establish that such person was in charge of and responsible for the day-to-
day affairs of the company in relation to the transaction in question. It is thus urged
that Accused No. 4 had no direct involvement, no mens rea, and no active
participation in the alleged offence, and therefore no criminal liability can be
fastened upon him in the absence of any legally sustainable material connecting him
with the issuance or dishonour of the cheques forming the subject matter of the
present complaint.
Legal Analysis & Findings:-
35. I have heard at considerable length the detailed arguments advanced by the learned
counsel appearing for the complainant as well as the learned counsels representing
the accused(s). Their respective submissions have been carefully analyzed in the
context of the factual matrix and the legal principles applicable to the case. This
Court has also undertaken a thorough and meticulous scrutiny of the entire judicial
record, which includes the contents of the complaint, the affidavits and supporting
documents annexed thereto, the oral testimonies of the complainant’s and the
defence witnesses, if any, recorded during the course of trial, and all exhibits relied
upon by the respective parties. Each piece of evidence has been examined
individually as well as in conjunction with the other evidence on record so as to
assess its evidentiary value, credibility, and probative strength. The rival
submissions have been objectively evaluated against the backdrop of the statutory
framework and the well-settled legal position governing proceedings under Section
138 of the Negotiable Instruments Act, 1881. The Court has, therefore, endeavored
to reach a reasoned and just determination by adopting a holistic and balanced
appreciation of the evidence and circumstances presented before it.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
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36. Before embarking upon a discussion on the merits of the present case, it is
considered apposite to first delineate the legal framework governing the offence of
dishonour of cheque, as encapsulated under Section 138 of the Negotiable
Instruments Act, 1881. The legislative intent behind enacting Section 138 is to instill
greater financial discipline and sanctity in contractual obligations by deterring the
issuance of cheques without sufficient funds or without adequate arrangements with
the banker. The provision prescribes penal consequences in the event of dishonor of
a cheque on grounds of insufficiency of funds or if the amount exceeds the
arrangement with the bank, thereby recognizing the cheque as a legitimate
instrument of payment in the eyes of the law.
37. In order to fasten criminal liability upon an accused under Section 138 of the
Negotiable Instruments Act, 1881, it is incumbent upon the complainant to plead
and prove the existence of certain foundational ingredients through the averments
made in the complaint and the evidence led during the course of trial. The essential
ingredients that must be cumulatively satisfied are as follows:
a. That the accused must have drawn a cheque on an account maintained by him
with a banker, for the payment of a certain sum of money to another person, and
such payment must have been intended for the discharge, in whole or in part, of a
legally enforceable debt or other liability;
b. That the said cheque must have been presented to the bank within a period of
three months from the date on which it was drawn, or within the period of its
validity, whichever is earlier;
c. That upon such presentation, the cheque must have been returned unpaid by the
bank, either due to insufficiency of funds in the drawer’s account or because the
amount exceeded the arrangement made by the drawer with the bank;
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d. That the payee or the holder in due course of the cheque must have issued a
written statutory demand notice to the drawer, seeking payment of the cheque
amount, within 30 days from the date of receipt of information from the bank
regarding the return of the cheque unpaid;
e. That the drawer of the cheque, despite the receipt of such legal notice, failed to
make payment of the cheque amount to the payee or holder in due course within 15
days from the date of such receipt.
38. Only upon proof of the aforementioned ingredients does the offence under Section
138 stand attracted, subject to the operation of statutory presumptions under
Sections 118 and 139 of the NI Act. These presumptions, however, are rebuttable
and impose a reverse burden upon the accused to dislodge the same on a
preponderance of probabilities.
39. It is also pertinent to note that, as per the Explanation appended to Section 138 of
the Negotiable Instruments Act, the expression “debt or other liability” refers
exclusively to a legally enforceable debt or other liability. This legal clarification is
of critical significance, as it makes clear that mere issuance of a cheque is not
sufficient to attract penal liability under the statute. The dishonoured cheque must
have been issued in discharge of a debt or liability which is subsisting and legally
enforceable at the time of its issuance. A cheque issued as a gift, donation, or
towards a time-barred or non-existent liability will not fall within the purview of
Section 138. Thus, the complainant must establish that at the time the cheque was
drawn, there existed a valid and enforceable obligation in law for which the cheque
was issued.
40. It is well-settled in law that the aforementioned ingredients must co-exist and be
satisfied cumulatively in order to constitute the offence punishable under Section
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138 of the Negotiable Instruments Act, 1881. The absence or non-fulfilment of even
one of these statutory requirements is fatal to the prosecution’s case and would
disentitle the complainant from invoking penal liability against the drawer of the
cheque.
41. Having delineated the essential ingredients of the offence under Section 138 of the
NI Act, it is equally apposite to advert to the legal position governing offences
committed by companies, as encapsulated under Section 141 of the Negotiable
Instruments Act, 1881. Section 141 is a provision which extends the penal liability
for an offence under Section 138 to juristic entities such as companies, and
simultaneously provides for vicarious liability of those individuals who, at the time
of commission of the offence, were in charge of and responsible for the conduct of
the business of the company. The legislative intent behind incorporating Section
141 is to ensure that the corporate veil is not misused as a shield to evade criminal
accountability, and that those who are actually controlling and managing the affairs
of the company do not escape liability merely because the cheque was issued in the
name of the corporate entity. However, being a penal provision creating vicarious
liability, Section 141 is required to be construed strictly, and liability cannot be
fastened mechanically upon every officer or employee of the company solely on
account of their designation.
42. In order to attract the provisions of Section 141 of the NI Act and to hold individuals
associated with a company liable for an offence under Section 138, it is incumbent
upon the complainant to plead and establish the satisfaction of certain foundational
requirements. The essential conditions which must be cumulatively fulfilled are as
follows:
a. That the person sought to be prosecuted must be connected with the
company at the relevant time when the offence under Section 138 was
committed, and the company must be arrayed as an accused as the
principal offender; Digitally
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b. That such person must have been in charge of and responsible for the
conduct of the business of the company at the time of issuance and
dishonour of the cheque, and this must be specifically averred in the
complaint and supported by evidence;
c. That in case of a director, officer, or key managerial personnel, mere
holding of an office or designation is not sufficient, unless it is shown
that such individual had a role in the day-to-day affairs and decision-
making process relating to the transaction in question;
d. That persons who have signed the dishonoured cheque on behalf of
the company are deemed to fall within the ambit of Section 141, as they
are directly connected with the issuance of the cheque and the act
leading to dishonour;
e. That the vicarious liability under Section 141 being an exception to
the general rule of criminal jurisprudence, cannot be presumed, and
must be established through clear pleadings and proof demonstrating
active responsibility or consent, connivance, or neglect, as
contemplated under the said provision.
43. CW-1, Sh. Sumit Khurana, tendered his evidence by way of affidavit wherein he
deposed that he is the Complainant in the present case and is fully competent to
swear the affidavit. He stated that the complaint has been filed under Section 138
read with Section 141 of the NI Act against the Accused persons named in the
memo of parties. CW-1 deposed that Accused No. 1 is a company registered under
the Companies Act, 1956, having its registered office at Lajpat Nagar-II, New Delhi.
He further stated that Accused Nos. 2 and 3 are directors of Accused No. 1 company,
while Accused No. 4 is its Chief Financial Officer. The master data of the company
was placed on record and exhibited as Ex. CW1/1. He also stated that Accused No.
2 is an authorised signatory of Accused No. 1 and had signed the cheques issued in
favour of the Complainant. CW-1 further deposed that he is a reputed businessman
and was introduced to Accused No. 2 through Accused No. 4. He stated that
Accused No. 2 approached him seeking a loan for the business requirements of
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Accused No. 1 company. Believing the representations made, CW-1 advanced an
unsecured loan of INR 40,00,000/- to Accused No. 1 vide a Memorandum of
Understanding dated 10.04.2017, repayable within five months along with interest
at the rate of 22% per annum payable monthly. The said MOU was exhibited as Ex.
CW1/2. CW-1 further stated that in furtherance of the loan transaction, Accused No.
2 also executed a personal guarantee letter dated 10.04.2017 in favour of the
Complainant, which was exhibited as Ex. CW1/3. He deposed that Accused No. 1,
through Accused No. 2, issued five cheques, out of which three cheques bearing
Nos. 000251, 000252 and 000253, all dated 31.10.2019, drawn on HDFC Bank,
Mathura Road, New Delhi, were deposited by him for encashment. The cheques
were exhibited collectively as Ex. CW1/4. CW-1 stated that he presented the said
cheques on 01.11.2019 under the bona fide belief that they would be honoured, as
assured by Accused Nos. 2, 3 and 4. However, all three cheques were dishonoured
and returned unpaid vide return memo dated 02.11.2019 with the remarks “Funds
Insufficient.” The return memos were exhibited collectively as Ex. CW1/5. CW-1
further deposed that thereafter, he issued a statutory legal demand notice dated
26.11.2019 through counsel to the Accused persons, calling upon them to make
payment of the cheque amount along with interest at 24%. Accused Nos. 1 to 3 did
not reply to the notice, whereas Accused No. 4 sent a reply dated 11.12.2019
denying liability. The legal notice and reply were exhibited as Ex. CW1/6 and Ex.
CW1/7 respectively.
44. CW-1 also deposed regarding territorial jurisdiction, stating that his bank account is
maintained with IndusInd Bank, Jasola, New Delhi, falling within the jurisdiction
of this Court. The relevant bank documents were exhibited as Ex. CW1/7A. Postal
receipts and tracking reports evidencing dispatch and service of the statutory notice
were exhibited as Ex. CW1/8. CW-1 concluded by stating that despite service of the
legal notice, the Accused persons failed to make payment within the statutory
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period, thereby committing the offence under Section 138 NI Act. He prayed that
the Accused persons be summoned, tried, and punished in accordance with law. The
complaint was exhibited as Ex. CW1/9.
45. CW-1 was extensively cross-examined by the Ld. Counsel for Accused Nos. 1 and
2 on multiple dates. During his cross-examination, CW-1 disclosed his educational
and professional background, stating that he is a postgraduate and runs an
investment banking company as well as a manufacturing business. He admitted that
prior to the alleged loan transaction of INR 40 lakhs, he had no financial dealings
with Accused No. 1 company. He further stated that he had known Accused No. 2
since 2012-2013 through Round Table India, a charitable organisation, and that he
was also acquainted with one Nikhil Rai through the same platform. CW-1 admitted
that he was informed by Accused No. 2 through an email dated 21.10.2019 about
the pendency of proceedings before the Hon’ble NCLT filed by Nikhil Rai. He
further stated that after dishonour of the cheques, he received another email dated
04.11.2019 informing him about an NCLT order directing status quo. He exhibited
the email communications as Ex. CW1/10 (colly) along with the certificate under
Section 65B of the Indian Evidence Act as Ex. CW1/11. He conceded that the NCLT
order and related communications were not mentioned in the complaint and were
not filed prior to the cross-examination.
46. CW-1 stated that the cheques in question were handed over by Accused No. 2 at the
time of signing of the MOU dated 10.04.2017. He clarified that the cheques were
security cheques and were undated at the time of handing over, and that the date was
filled by him later. He explained that the cheque amount of INR 73,334/-
represented one month’s interest calculated at 22% per annum on INR 40 lakhs. He
denied the suggestion that he filled all particulars on the cheques or that the cheques
were forged or manipulated. CW-1 was questioned regarding the presence of a
second signature on the cheques, which was suggested to be of Nikhil Rai. CW-1
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denied knowledge of the second signatory and refuted allegations that the cheques
were procured through Nikhil Rai. He also relied upon the minutes of the
Extraordinary General Meeting dated 21.10.2019, Mark CW1/12 (colly), and an
NCLT application Mark CW1/13 (colly), though both were objected to on the
ground of mode of proof. CW-1 further stated that Accused Nos. 2 and 4 had
suggested conversion of the loan into equity, which he refused. He maintained that
the transaction was purely a loan and not intended to be converted into shareholding.
He admitted that interest payments were received till August 2019, but asserted that
these payments did not discard the agreed loan tenure and that the principal
remained outstanding.
47. CW-1 was also questioned at length regarding the EGM held on 21.10.2019. He
stated that he abstained from voting as he was not provided clarity regarding
repayment and because his loan was allegedly shown under promoter debt in the
agenda papers. He denied obstructing the company’s fund-raising efforts in
collusion with Nikhil Rai. He stated that Accused No. 2 assured him repeatedly that
repayment would be made shortly and also referred to discussions regarding raising
funds through various means, including unlocking bitcoin assets. CW-1 admitted
that he demanded a personal cheque from Accused No. 2 during the meeting, as
Accused No. 2 was a personal guarantor. He denied acting under advice or collusion
with Nikhil Rai and reiterated that his only objective was repayment of the loan
amount. He further stated that an FIR had been lodged at PS Lajpat Nagar in relation
to the alleged fraud.
48. CW-1 was separately cross-examined by the Ld. Counsel for Accused No. 4. During
this cross-examination, CW-1 admitted that Nikhil Rai was a director of Accused
No. 1 company at the time of disbursement of the loan. He was confronted with the
inconsistency regarding his introduction to Accused No. 2, wherein he had stated in
the complaint that Accused No. 4 introduced him to Accused No. 2, while in earlier
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cross-examination he stated that he met Accused No. 2 through Round Table India.
CW-1 clarified that both statements were correct, as he met both Accused Nos. 2
and 4 at the same event. CW-1 was questioned about the second signatory on the
cheques and whether it was Nikhil Rai. CW-1 stated that he was not aware of the
identity of the second signatory and that the signature was not identifiable. He
denied having confirmed knowledge that the second signature belonged to Nikhil
Rai and stated that the cheques were dishonoured due to insufficiency of funds and
not due to signature mismatch.
49. CW-1 was questioned regarding the resignation of Accused No. 4 from the
company. He stated that he was unaware at the relevant time that Accused No. 4
had resigned in March 2019 and asserted that Accused No. 4 continued discussions
regarding repayment till April 2019. He admitted that after July 2019, Accused No.
4 did not respond to his messages. CW-1 stated that he came to know about Accused
No. 4’s resignation only at the time of the EGM in October 2019. Suggestions were
put to CW-1 regarding alleged collusion with Nikhil Rai and deliberate non-
impleadment of Nikhil Rai as an accused, which CW-1 denied. He admitted that
Nikhil Rai and his brother Salil Rai were present in Round Table India and that he
had been in contact with Salil Rai prior to the loan transaction.
50. Insofar as the statutory ingredients (b), (c), (d), and (e) under Section 138 of the
Negotiable Instruments Act are concerned–namely, (b) the presentation of the
cheques within their validity period, (c) their dishonour by the bank due to
insufficiency of funds, (d) the issuance of a legal demand notice within 30 days of
receiving intimation of dishonor, and (e) the drawer’s failure to make payment
within 15 days of receipt of the said notice–this Court finds that the complainant
has successfully discharged the burden of proof in respect thereof. These facts stand
duly established through unimpeached documentary evidence placed on record,
which includes the original cheques, the cheques return memo, the legal demand
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notice, the postal receipts confirming dispatch. There is no rebuttal to the
presumption of service, and hence, the requirements under clauses (b) to (e) of
Section 138 stand conclusively fulfilled.
51. It is also not in dispute that the accused failed to make payment of the cheque
amount to the complainant within the statutory period of 15 days from the date of
receipt of the legal demand notice. The record clearly reflects that the notice was
dispatched to the accused(s), as evidenced by the postal receipts placed on record.
Significantly, the accused no.2, during his statement recorded under Section 313
CrPC, admitted that the notice was received by him. Furthermore, the accused no.
4 also admitted the receipt of the notice and had issued a reply to it as well. Hence,
service of the legal notice stands proved. Despite being afforded the statutory
opportunity under the mandate of Section 138 of the NI Act, the accused(s) did not
tender the cheque amount within the prescribed period of 15 days, thereby fulfilling
the last statutory condition for attracting penal liability under the said provision.
52. The Court shall now proceed to examine the most crucial ingredient under Section
138 of the Negotiable Instruments Act, 1881, which constitutes the very foundation
of the present prosecution–namely, whether the impugned cheque was issued by
the accused in discharge of a legally enforceable debt or other liability. This aspect
is of paramount significance, as the existence of such a liability is the sine qua non
for attracting the statutory presumption under Section 139 of the NI Act.
53. In this background, this Court now undertakes a detailed and careful evaluation of
the rival contentions and the evidence on record, to determine whether the said
essential ingredient stands proved to the requisite standard in the present matter.
54. It is well-settled that once the complainant establishes that the cheque was drawn
by the accused and that it was returned unpaid, a presumption arises under Sections
118(a) and 139 of the Act that the cheque was issued for the discharge of a legally
enforceable debt or liability. The initial burden upon the complainant is merely to
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prove the foundational facts–namely, the execution and dishonour of the cheque.
Once this is done, the burden shifts upon the accused to rebut the presumption.
Such rebuttal may be established either by leading positive evidence or by pointing
out inconsistencies, improbabilities, or material contradictions in the complainant’s
case, which may raise a reasonable doubt as to the existence of the alleged
liability.
55. For ready reference, the relevant provisions are reproduced as under:
ï‚· Section 118(a), NI Act – “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.”
ï‚· Section 139, NI Act – “Presumption in favour of 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.
56. This presumption, though statutory, is rebuttable in nature. The law places the initial
evidentiary burden upon the accused to dislodge this presumption by raising a
probable defence. It is now well-settled that the accused is not required to rebut the
presumption beyond reasonable doubt; rather, the standard of rebuttal is that of
preponderance of probabilities. The accused may discharge this burden either by
adducing direct evidence or by relying on material inconsistencies, improbabilities,
or contradictions in the complainant’s case, elicited during cross-examination or
otherwise. However, unless such rebuttal is successfully established, the
presumption continues to operate in favour of the complainant.
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57. This is a classic illustration of the principle of ‘reverse onus’ in operation, wherein
the statutory scheme obligates the accused to rebut the presumption in favour of the
complainant by leading what may be termed as ‘negative evidence’. The accused is
not required to affirmatively prove a particular fact; rather, he must bring on record
material to demonstrate the non-existence of a legally enforceable debt or liability.
58. Since this reverse burden deviates from the general principle of criminal
jurisprudence–namely, the presumption of innocence in favour of the accused–
the law has correspondingly tempered the standard of rebuttal. Recognizing the
inherent difficulty in leading negative evidence, the standard prescribed is not that
of proof beyond reasonable doubt, but of preponderance of probabilities. As held by
the Hon’ble Supreme Court in Sangappa v. Mohan, (2010) 11 SCC 441, the accused
need not conclusively disprove the existence of consideration or liability; it is
sufficient if he can raise a probable defence which renders the existence of such
liability doubtful or improbable in the mind of the Court.
59. In order to discharge the burden cast upon him under the reverse onus clause, the
accused is required to either prove the non-existence of the alleged liability or
demonstrate that the existence of such liability is so improbable or doubtful that a
prudent person would conclude that no such obligation existed. This can be achieved
by the accused either by leading direct evidence or relying upon circumstantial
evidence in his defence. Alternatively, the accused may choose to effectively
challenge the complainant’s case by eliciting material contradictions or
inconsistencies during cross-examination, thereby undermining the credibility of the
prosecution’s version.
60. If the accused succeeds in creating such a doubt, the burden then shifts back to the
complainant, who must establish the existence of liability independent of the
statutory presumptions. In such a scenario, the presumptions under Sections 118(a)
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and 139 of the NI Act would cease to operate in favour of the complainant and
cannot be relied upon as conclusive proof. The complainant would then have to
establish the liability on the strength of his own evidence.
61. In the light of the foregoing statutory provisions and the settled principles of law
governing the operation and rebuttal of presumptions under Sections 118(a) and 139
of the Negotiable Instruments Act, this Court shall now proceed to critically
examine the defence set up by the accused. The pivotal issue for consideration at
this stage is whether the defence raised by the accused is plausible, probable, and
legally sustainable–such as would be sufficient to rebut the presumption regarding
the existence of a legally enforceable debt or liability.
62. The defence may be founded either on direct evidence adduced by the accused or
may emerge from material inconsistencies, omissions, or inherent improbabilities
discernible within the complainant’s version, particularly as elicited during cross-
examination. However, to succeed, the defence must be cogent enough to inspire
confidence and must raise a credible doubt regarding the true purpose behind the
issuance of the impugned cheque. In this context, the Court now undertakes a
holistic and careful analysis of the defence evidence on record, as well as the
explanations tendered by the accused, to assess whether the statutory presumption
stands effectively rebutted in the present case.
63. It is an admitted position on record that the cheque in question pertains to the bank
account of the accused company and bears the admitted signatures of accused no. 2.
This fact stands acknowledged by the accused no.2 himself during the his statement
recorded under Section 251 CrPC and u/s 313 CrPC. Once the execution of the
cheques and its ownership are admitted, the statutory presumption under Sections
118(a) and 139 of the Negotiable Instruments Act automatically comes into play.
The law mandates that the court shall presume, unless the contrary is proved, that
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the cheque was issued for the discharge, in whole or in part, of a legally enforceable
debt or liability. Thus, by admission of execution by accused no. 2, the accused no.
1 is deemed to have drawn the cheque in favour of the complainant towards
satisfaction of an existing liability, and the initial burden of proof shifts upon the
accused(s) to rebut the said presumption by leading cogent, credible, and convincing
evidence. Mere denial or ipse dixit assertions are legally insufficient to discharge
this onus.
64. Despite having admitted the issuance of the cheque in question and the affixation of
his signature thereon, the accused(s) has sought to rebut the statutory presumption
under Section 139 of the Negotiable Instruments Act by projecting the defence
which has been examined in the light of their statement recorded under Section 251
of the Code and statement recorded u/s 313 CrPC.
65. At the stage of framing of notice under Section 251 CrPC, accused no.1
represented by accused no.2, admitted that a loan of Rs. 40 lakhs was taken from
the complainant in 2017 and that interest was paid for about 29-30 months. The
accused stated that the complainant was introduced by one Nikhil Rai, who was
also a director of the company. It was further claimed that the cheques were signed
by Accused No. 2 and Nikhil Rai, and that the particulars were not filled by the
accused. Accused No. 1 denied receipt of legal notice, though admitted that the
address mentioned therein was correct till 2020-2021. As defence, Accused No. 1
alleged manipulation of the cheques by Nikhil Rai, claiming that the cheques were
issued without its knowledge and were stolen in connivance with the complainant.
It was also stated that due to NCLT proceedings and a status quo order, the
company suffered losses, and criminal complaints had been filed against the
complainant. Under Section 294 CrPC, Accused No. 1 admitted the cheque and
return memo, denied receipt of legal notice, admitted signatures on Ex. CW1/2 and
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Ex. CW1/3, and acknowledged receipt of Rs. 40 lakhs by the company as reflected
in Ex. CW1/7A. The same was reiterated by accused no.2 as well.
66. Accused No. 4 pleaded not guilty and claimed trial. He admitted knowing the
complainant and stated that the complainant was introduced through Nikhil Rai. He
denied his signatures on the cheques and also denied filling any particulars.
Accused No. 4 admitted receipt of the legal notice and stated that he had replied to
the same. In his defence, he asserted that he was never a director of Accused No. 1
company, had not signed the cheques, and was only the CFO till 2018. He stated
that he submitted his resignation in March 2019, having first intimated Accused No.
2 in November 2018, and claimed no liability towards the complainant. Under
Section 294 CrPC, Accused No. 4 denied the cheque being from his account,
admitted the return memo, and admitted receipt of legal notice along with his reply,
exhibited as Ex. CW1/7.
67. In his statement recorded under Section 313 CrPC through Accused No. 2, Accused
No. 1 admitted that Accused Nos. 2 and 3 were directors of the company and that
Nikhil Rai was also a director at the time the loan was advanced. The accused
acknowledged the execution of the MOU dated 10.04.2017 and the personal
guarantee letter. However, it was stated that the repayment period of five months
was mutually extended and that post-dated cheques were not agreed upon at the
time of advancement of the loan. The accused further admitted the dishonour of the
cheques but contended that the complainant was aware of the NCLT status quo
order concerning the assets and liabilities of the company. It was asserted that the
cheques were lying with Nikhil Rai, who failed to return the signed cheques upon
leaving the company. The accused also alleged collusion between the
complainant and Nikhil Rai to trap the company by initiating proceedings before
the NCLT as well as under Section 138 NI Act, causing financial loss and
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harassment. Accused No. 1 declined to lead any defence evidence. Same position
was reiterated by accused no.2 as well.
68. Accused No. 4 stated that he had informed Accused No. 2 in November 2018 of his
inability to continue due to non-payment of salary, and that his resignation was
accepted in March 2019 after partial settlement of his outstanding dues. He asserted
that he was not reflected as CFO in the company master data. Accused No. 4
admitted the loan transaction and stated that interest was serviced till the time of his
resignation, but denied any involvement in issuance or dishonour of the cheques,
contending that the cheque books remained in possession of the directors Vishal
Gupta and Nikhil Rai. He admitted receipt of the legal notice and his reply thereto.
He further stated that the emails and settlement discussions were between the
complainant, Vishal Gupta and Nikhil Rai, and that he was not a party to such
communications. He maintained that he was unnecessarily implicated in December
2019 despite having resigned prior to the dishonour of the cheques and having no
role in the transaction. Accused No. 4 expressed his intention to lead defence
evidence.
69. At the outset, the present case emanates from an admitted loan transaction, duly
reduced into writing through a Memorandum of Understanding dated 10.04.2017
(Ex. CW1/2), whereby a sum of ₹40,00,000/- was advanced by the complainant to
Accused No. 1 company, acting through Accused No. 2. The said document
constitutes the foundational contractual framework governing the rights and
obligations of the parties and leaves no manner of doubt regarding the advancement
of financial assistance and the corresponding repayment commitment undertaken by
the accused. The complainant has further placed reliance upon the personal
guarantee dated 10.04.2017 (Ex. CW1/3), executed by Accused No. 2, which
unequivocally establishes that Accused No. 2 was not merely acting in a
representative capacity as an officer of the company, but had personally assured
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repayment of the loan amount and voluntarily undertaken individual responsibility
in the event of default. Additionally, the company master data exhibited as Ex.
CW1/1 clearly reflects the status of Accused No. 2 as a director of Accused No. 1
company during the relevant period, thereby demonstrating that he was in charge of
and responsible for the conduct of the business of the company. These documents,
when read conjointly, conclusively show that the transaction in question was entered
into by the complainant with Accused No. 1 company through Accused No. 2, who
not only managed its affairs but also assumed personal liability by executing the
guarantee, thereby attracting the vicarious and individual responsibility
contemplated under Section 141 of the Negotiable Instruments Act.
70. The cheques in question, namely Cheque Nos. 000251, 000252 and 000253 dated
31.10.2019, have been duly exhibited as Ex. CW1/4 (colly). The complainant has
rightly emphasized that Accused No. 2 has admitted his signatures on the said
cheques at multiple stages of the proceedings, including at the time of framing of
notice under Section 251 CrPC as well as during the admission/denial of documents
under Section 294 CrPC. Such admission conclusively establishes the execution of
the cheques and attracts the statutory presumptions under Sections 118(a) and 139
of the Negotiable Instruments Act. The dishonour of the cheques stands proved
through the bank return memos dated 02.11.2019, exhibited as Ex. CW1/5, which
clearly record the reason for dishonour as “Funds Insufficient”. The said memos
have not been disputed and constitute unimpeached documentary evidence of
dishonour. Thus, the complainant has successfully established that the cheques were
drawn on the account of Accused No. 1 company, duly signed and issued through
Accused No. 2, presented within the statutory period, and returned unpaid for
insufficiency of funds, thereby satisfying one of the core ingredients of the offence
under Section 138 of the NI Act.
71. The complainant has further relied upon the statutory legal demand notice dated
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26.11.2019, exhibited as Ex. CW1/6, along with the supporting postal receipts and
tracking reports exhibited as Ex. CW1/8 (colly), thereby establishing that the notice
was dispatched within the prescribed period in accordance with Section 138(b) of
the NI Act. The complainant has also placed reliance upon the reply dated
11.12.2019 sent on behalf of Accused No. 4, exhibited as Ex. CW1/7, which in itself
constitutes a clear acknowledgment that the legal notice was duly received by the
accused persons.
72. A significant aspect which merits consideration is the contradictory position adopted
by Accused No. 2 with respect to receipt of the demand notice. While Accused No.
2 denied receipt of the notice at the stage of framing of notice under Section 251
CrPC, he subsequently admitted the correctness and existence of the notice during
his statement under Section 313 CrPC. Such inconsistency in the stand of the
accused not only weakens the credibility of the defence but also lends further
assurance to the complainant’s version that the statutory notice was duly served. In
any event, even assuming arguendo that the accused disputes actual receipt, the
complainant has correctly relied upon the judgment of the Hon’ble Supreme Court
in C.C. Alavi Haji v. Palapetty Muhammed , wherein it has been held that once the
demand notice is sent to the correct address by registered post or recognised mode,
a presumption of deemed service arises in law. The drawer cannot defeat the
proceedings by a mere denial of receipt, particularly when no payment is made even
after receipt of summons from the Court. Accordingly, the requirement of service
of statutory demand notice stands duly satisfied in the present case.
73. The complainant has forcefully contended, and in the considered opinion of this
Court, rightly so, that once the issuance of the cheque and the signature thereon are
admitted by the accused, the statutory presumption under Section 139 of the
Negotiable Instruments Act necessarily comes into operation. The Court is then
obliged to presume, unless the contrary is proved, that the cheque was issued
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towards discharge of a legally enforceable debt or liability. This presumption is a
rule of law enacted to strengthen the credibility of negotiable instruments and cannot
be lightly displaced by a mere denial. In support of this proposition, reliance has
been placed upon the judgment of the Hon’ble Supreme Court in Bir Singh v.
Mukesh Kumar, wherein it was categorically held that even a blank signed cheque,
if voluntarily handed over by the drawer, would attract the presumption under
Sections 118(a) and 139 of the NI Act, and the burden squarely lies upon the accused
to rebut the same through cogent and credible evidence. The Supreme Court
clarified that the drawer cannot escape liability merely by asserting that particulars
were not filled by him or that the cheque was issued under different circumstances,
unless such defence is substantiated by probable material.
74. The complainant has further relied upon Sripati Singh v. State of Jharkhand, wherein
the Hon’ble Supreme Court reiterated that even cheques described as “security
cheques” do not fall outside the ambit of Section 138 of the NI Act once the
underlying debt has matured and become due. The Court held that the crucial
consideration is whether, on the date of presentation, there existed a legally
enforceable liability, and not the nomenclature attached to the cheque at the time of
its issuance. Applying the aforesaid settled principles to the facts of the present case,
it is evident that the loan was admittedly advanced in the year 2017 and was
repayable within a period of five months. The accused continued paying interest till
August 2019 but failed to repay the principal amount. Consequently, by the time the
cheques were presented for encashment in November 2019, the liability had clearly
crystallised, matured, and become legally enforceable. The cheques, therefore, were
presented against a subsisting debt, and their dishonour squarely attracts the penal
consequences contemplated under Section 138 of the NI Act. In these
circumstances, the defence sought to be raised by the accused that the cheques were
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merely “security cheques” is legally unsustainable and does not rebut the statutory
presumption operating in favour of the complainant.
75. One of the most crucial and determinative aspects of the complainant’s case is the
reliance placed upon the minutes of the Extra Ordinary General Meeting dated
21.10.2019, exhibited as Ex. CW1/12, as well as the detailed transcripts annexed
with the application moved by Accused No. 2 before the Hon’ble National Company
Law Tribunal, exhibited as Ex. CW1/13 (colly). These documents assume
considerable evidentiary significance, not merely because they form part of the
corporate record, but because they contain clear, contemporaneous, and voluntary
admissions emanating directly from Accused No. 2 at a point of time proximate to
the dishonour of the cheques. The complainant has drawn the attention of this Court
to several portions of the transcript wherein Accused No. 2 is recorded as making
repeated and unequivocal statements to the effect that the cheques were duly signed
and handed over, that the company remained liable to repay the complainant, that
the complainant “has the cheque” and “has the personal guarantee”, and further that
the complainant was well within his rights to initiate proceedings under Section 138
of the NI Act. Such statements, made in the context of an official meeting and in
proceedings before a judicial forum, constitute strong admissions within the
meaning of the Evidence Act and carry substantial probative value.
76. These admissions are wholly inconsistent with the subsequent defence sought to be
raised during trial regarding theft, manipulation, misuse of cheques, or absence of
liability. The defence version, when juxtaposed against these contemporaneous
acknowledgments, appears to be an afterthought and lacks credibility. This Court
finds considerable force in the complainant’s submission that the minutes of the
meeting and the transcripts expose the mala fide conduct of Accused No. 2, who
was fully conscious of the outstanding debt, acknowledged the existence of the
cheques and personal guarantee, yet failed to honour the repayment obligation. The
Digitally
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documentary admissions contained in Ex. CW1/12 and Ex. CW1/13 thus provide
compelling corroboration to the complainant’s case and further weaken the defence
sought to be projected by the accused.
77. The accused have attempted to deflect liability by attributing blame to one Nikhil
Rai, alleging manipulation, collusion, and misuse of cheques at his instance.
However, this plea remains wholly unsubstantiated and does not inspire confidence.
Not an iota of evidence has been led to support this allegation. No complaint,
contemporaneous correspondence, police report, or any independent material has
been produced to even prima facie demonstrate that the cheques were stolen,
coerced, or unauthorisedly issued. Most significantly, despite repeatedly asserting
that Nikhil Rai was the alleged mastermind behind the misuse of the cheques,
Accused No. 2 did not summon him as a witness, nor did the accused take any
effective steps to examine him or place his version on record. In a criminal trial,
where the burden upon the accused is to rebut the statutory presumption on the
touchstone of probability, a defence founded upon the alleged acts of a third person
cannot remain a mere allegation. If Nikhil Rai was indeed the cornerstone of the
defence, the accused were expected, in the ordinary course of prudence, to summon
him and substantiate the plea through admissible evidence. The failure of the
accused to do so, despite ample opportunity, warrants drawing of an adverse
inference namely that had such witness been produced, his testimony would not
have supported the defence. Accordingly, this Court finds that the plea of
manipulation or collusion involving Nikhil Rai is a bald afterthought, unsupported
by proof, and insufficient to rebut the statutory presumptions operating in favour of
the complainant.
78. The accused have sought to contend that no offence under Section 138 of the
Negotiable Instruments Act arose in view of an order passed by the Hon’ble NCLT
directing maintenance of status quo with respect to the assets and liabilities of the
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company. However, this defence is misconceived and does not withstand judicial
scrutiny. At the outset, the dishonour memos placed on record clearly record the
reason for return of the cheques as “Funds Insufficient” and not “payment stayed”
or “operation prohibited”. Thus, as a matter of fact, the dishonour was occasioned
due to insufficiency of funds in the drawer’s account, squarely attracting the rigour
of Section 138 NI Act. The accused cannot seek to retrospectively dilute the
statutory consequence of dishonour by placing reliance upon a status quo direction
which neither prevented presentation of the cheque nor constituted the reason for its
return.
79. It is a settled position that pendency of winding-up, insolvency, or restructuring
proceedings does not ipso facto bar prosecution under Section 138 NI Act. Reliance
in this regard may be placed upon Kusum Ingots and Alloys Ltd. v. Pennar Peterson
Securities Ltd., wherein the Hon’ble Supreme Court categorically held that criminal
liability arising from dishonour of a cheque is distinct from civil proceedings
relating to corporate debt and that such prosecution is not barred merely because
proceedings under company law are pending. The remedy under Section 138 is
penal in nature and intended to uphold the credibility of negotiable instruments, and
therefore operates independently of parallel civil or corporate processes.
80. Further, the order relied upon by the accused is not shown to be a comprehensive
moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. A
direction to maintain status quo regarding assets and liabilities cannot be equated
with the statutory moratorium contemplated under the IBC. The Hon’ble Supreme
Court in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. AIR 2021 SUPREME
COURT 1308, clarified that while Section 14 moratorium may bar continuation of
proceedings against the corporate debtor, the same does not automatically extend to
individuals such as directors or authorised signatories proceeded against under
Section 141 NI Act. The Court further explained that the moratorium is not a blanket
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shield against penal consequences, and criminal prosecutions may continue unless
a specific statutory bar is attracted.
81. In the present case, the accused have failed to demonstrate that any moratorium
order under the IBC was in force in the manner contemplated by Section 14, or that
the NCLT had expressly restrained the complainant from presenting the cheques or
from initiating proceedings under Section 138 NI Act. A mere status quo order,
without an explicit prohibition against cheque-related prosecution, cannot
extinguish or suspend the penal liability arising from dishonour. The position has
been further reinforced in the recent decision of the Hon’ble Supreme Court in
Rakesh Bhanot v. Gurdas Agro (P) Ltd. (2025) SCC 781, wherein it has been
clarified that insolvency-related moratorium provisions, including interim
moratoriums, primarily operate in the domain of civil debt recovery and do not
extend to criminal proceedings under Section 138 NI Act, which are punitive and
aimed at enforcing commercial morality and accountability. The Court cautioned
against the misuse of insolvency proceedings as a device to stall cheque dishonour
prosecutions and reiterated that criminal liability for dishonesty cannot be diluted
under the guise of insolvency protection.
82. Accordingly, this Court is of the considered view that the defence founded upon the
NCLT status quo order is legally untenable. The accused have not established any
express restraint against presentation of the cheques or initiation of proceedings, nor
have they shown that the dishonour occurred due to any legal prohibition. The
statutory ingredients of Section 138 NI Act stand independently satisfied, and the
complainant’s right to prosecute remains unaffected. The plea raised by the accused,
therefore, deserves outright rejection.
83. That the accused no.1 and 2 have led no defence evidence whatsoever to probabilise
their version. It is again reiterated that statutory presumptions can be displaced only
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by raising a credible and probable defence supported by cogent material. Mere
allegations of collusion, theft, coercion, or manipulation, without any supporting
documentary proof or independent testimony, do not meet the threshold required to
rebut a presumption of law, even on the comparatively lighter standard of
preponderance of probabilities. In the present case, the complainant has duly proved
the loan transaction, the issuance of the cheques towards discharge of liability, their
dishonour upon presentation, issuance and service of the statutory legal demand
notice, and the failure of the accused no. 1 and 2 to make payment within the
prescribed period. On the other hand, the accused no. 2 has not only admitted the
underlying transaction and his signatures on the cheques, but has also failed to bring
on record any reliable evidence to support his shifting and inconsistent defence. The
defence remains unsubstantiated, speculative, and incapable of dislodging the
statutory presumptions. Consequently, the presumptions under Sections 118 and
139 remain unrebutted and continue to operate in favour of the complainant.
84. Accused No. 2, being the director and authorised signatory of Accused No. 1
company, is squarely covered within the ambit of Section 141 of the Negotiable
Instruments Act. The material on record clearly establishes that Accused No. 2 was
not a mere nominal officer but was actively in charge of and responsible for the
conduct of the business of the company at the relevant time. He has admittedly
signed the cheques in question, executed the Memorandum of Understanding, and
further furnished a personal guarantee assuring repayment of the loan amount. In
these circumstances, his liability is not confined to a case of technical vicarious
responsibility, but assumes the character of direct and personal involvement in the
transaction and the issuance of the dishonoured instruments. Accused No. 1
company, being the drawer of the cheques, is the principal offender under Section
138 of the NI Act. Once the offence by the company stands established, the statutory
scheme of Section 141 fastens liability upon those who were in charge of and
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responsible for its affairs. Accused No. 2, having actively participated in the
transaction, issued the cheques as authorised signatory, and undertaken personal
responsibility through guarantee, is therefore liable to be convicted alongside
Accused No. 1 company.
85. In view of the evidence led on record and the judicial precedents governing the field,
this Court is satisfied that the complainant has successfully established all the
essential ingredients of the offence punishable under Section 138 of the Negotiable
Instruments Act beyond reasonable doubt. Accordingly, the liability of Accused No.
1 company as the drawer of the dishonoured cheques, as well as that of Accused No.
2 as the person responsible for the conduct of its business and the authorised
signatory, stands duly proved.
86. Having held Accused No. 1 company and Accused No. 2 liable for the offence
punishable under Section 138 of the Negotiable Instruments Act, 1881, this Court
now proceeds to examine the role and liability, if any, of Accused No. 4, namely
Sh. Sumeet Singh, who has been arrayed as an accused on the ground that he was
stated to be the Chief Financial Officer and Key Managerial Personnel of Accused
No. 1 company. At the outset, it is pertinent to note that the liability of persons other
than the drawer company in cheque dishonour cases is governed by Section 141 of
the NI Act, which creates a deeming fiction of vicarious criminal liability. However,
it is equally well settled that vicarious liability, being an exception to the general
rule of criminal jurisprudence, must be strictly construed, and the complainant must
establish through specific averments as well as evidence that such person was in
charge of and responsible for the conduct of the business of the company at the
relevant time, and that the offence occurred with his knowledge, consent,
connivance or attributable neglect. Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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87. In the present case, the complainant has relied primarily upon the designation of
Accused No. 4 as CFO of the company. However, mere holding of an office or
designation does not automatically attract criminal liability under Section 138 read
with Section 141 NI Act. A crucial circumstance is that Accused No. 4 has
consistently denied having signed or issued the cheques in question. At the stage of
notice under Section 251 CrPC, he clearly stated that he had not signed the cheques
nor filled in any particulars therein, and this stand has remained consistent in his
statement under Section 313 CrPC, wherein he categorically asserted that the cheque
books were always in possession of the directors and that he had no involvement in
the dishonour of the cheques. The complainant has not produced any material to
show that Accused No. 4 was a signatory to the cheques or that he exercised
authority over their issuance. Thus, unlike Accused No. 2, who admittedly signed
the cheques, Accused No. 4 is not shown to have played any direct role in execution
of the negotiable instruments forming the basis of prosecution.
88. Further, Accused No. 4 has taken a specific defence that he had resigned from the
company much prior to the dishonour of the cheques. In his statement under Section
313 CrPC, he stated that he had intimated Accused No. 2 in November 2018
regarding his inability to continue due to non-payment of salary, and that his
resignation was accepted in March 2019 after settlement of part of his dues. The
dishonour of cheques occurred on 02.11.2019, substantially after the alleged
resignation. The complainant has also admitted that he became aware of the
resignation of Accused No. 4 prior to the accrual of cause of action. Therefore, even
assuming that Accused No. 4 held some position earlier, the complainant has failed
to establish that he was in charge of and responsible for the conduct of business of
the company at the time when the offence was committed, which is a sine qua non
for fastening liability under Section 141 NI Act.
89. It is also pertinent that the complainant has not led any specific evidence to show
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that Accused No. 4 was responsible for the day-to-day affairs of the company in
relation to the loan transaction or issuance of cheques. While CW-1 has deposed
that Accused No. 4 introduced him to Accused No. 2 and may have been present
during discussions, such general assertions do not satisfy the strict statutory
requirement of Section 141 NI Act. The law is clear that for fastening vicarious
liability, it is not sufficient to merely state that a person was an officer of the
company; there must be material indicating active control and responsibility for the
conduct of business at the relevant time.
90. Unlike Accused No. 1 and Accused No. 2, whose defence was marred by
contradictions and unsupported allegations, Accused No. 4 has taken a consistent
stand throughout that he was not a director, that he did not sign the cheques, that he
resigned prior to dishonour, and that the transaction was between the complainant
and the company through Accused No. 2. In the absence of any signature on the
cheques, absence of clear evidence establishing his responsibility, and in view of
his resignation prior to dishonour, this Court is of the considered opinion that the
requirements of Section 141 NI Act are not satisfied qua Accused No. 4. Criminal
liability cannot be imposed on the basis of assumptions or mere designation, and
therefore, Accused No. 4 is entitled to the benefit of reasonable doubt.
91. Accordingly, while Accused No. 1 company and Accused No. 2 are held guilty for
the offence punishable under Section 138 of the NI Act, Accused No. 4, Sh. Sumeet
Singh, cannot be held vicariously liable in the absence of cogent evidence
establishing that he was in charge of and responsible for the conduct of the business
of the company at the relevant time. He is therefore acquitted of the offence
punishable under Section 138 read with Section 141 of the Negotiable Instruments
Act, 1881. Digitally
signed by
SHRUTI
SHRUTI SHARMA
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Conclusion
92. In the light of the aforementioned discussion, Accused M/ Vcare Technologies Pvt.
Ltd. and Accused Vishal Gupta are hereby held guilty and stand convicted for the
offence punishable under Section 138 of the Negotiable Instruments Act, 1881 and
the accused Sh. Sumeet Singh is hereby acquitted for the offence punishable under
Section 138 of the Negotiable Instruments Act, 1881.
93. The judgment duly digitally signed be uploaded on CIS and and a copy of the
judgment be given dasti to the convicts free of cost forthwith.
Announced in the open Digitally signed
on 12.02.2026 SHRUTI by SHRUTI
SHARMA
SHARMA Date: 2026.02.12
16:48:12 +0530
(Shruti Sharma-I)
JMFC (NI Act)-02, South-East,
Saket Courts, New Delhi 12.02.2026
Certified that this judgment contains 41 pages and each page bears my signature.
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