Himachal Pradesh High Court
Chhaju Ram Verma vs Sandeep Kumar Walia on 6 July, 2026
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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr. Appeal No. 516 of 2012
Reserved on: 20.06.2026
Date of Decision: 06.07.2026
.
Chhaju Ram Verma ...Appellant
Versus
of
Sandeep Kumar Walia ...Respondent
Coram rt
Hon'ble Mr Justice Rakesh Kainthla, Judge.
Whether approved for reporting?1 No.
For the Appellant : Mr Rahul Gathania, Advocate.
For the Respondent : Mr Dinesh Bhanot, Advocate.
Rakesh Kainthla, Judge
The present appeal is directed against the judgment
dated 29.09.2012, passed by the learned Judicial Magistrate, First
Class, Nahan, District Sirmour, H.P (learned Trial Court) vide which
the respondent (accused before the learned Trial Court) was
acquitted of the commission of an offence punishable under
Section 138 of the Negotiable Instruments Act (NI Act). (The parties
1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.
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shall hereinafter be referred to in the same manner as they were
arrayed before the learned Trial Court for convenience).
2. Briefly stated, the facts giving rise to the present appeal
.
are that the complainant filed a complaint before the Learned Trial
Court against the accused for the commission of an offence
punishable under Section 138 of the NI Act. It was asserted that the
accused is a close friend of the complainant’s son. He developed a
of
good family relationship with the complainant. The accused
borrowed ₹ 2,50,000/- from the complainant in 2007 for running
rt
his business. The complainant paid ₹2,50,000/- to the accused,
and the accused issued a cheque of ₹2,50,000/- drawn on
19.06.2008 at Punjab National Bank, Nahan, H.P. The complainant
presented the cheque to the bank, but it was dishonoured with the
endorsement ‘funds insufficient’. The complainant served the
notice upon the accused, asking him to repay the amount within 15
days of the receipt of the notice. The notice was duly served upon
the accused, but the accused failed to repay the money. Hence, the
complaint was filed against the accused for taking action as per the
law.
3. Learned Trial Court found sufficient reasons to summon
the accused. When the accused appeared, a notice of accusation
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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 Ranjana Thakur (CW-1),
Parkash Chand (CW-2) and himself (CW-3).
5. The accused, in his statement recorded under Section
313 of the Code of Criminal Procedure (Cr.P.C), admitted that he
of
had an acquaintance with the complainant’s son. He asserted that
he had no bank account in Punjab National Bank at the time of
rt
presentation of the cheque, and that he had closed the account in
the year 2005. The complainant deposed falsely that he had dealt
with the accused. Complainant’s son had paid ₹50,000/- to the
accused, which were returned. However, there was a delay in
returning the money, and the complainant’s son demanded
₹1,000/- per month as the penal amount. He was not entitled to
this amount. He (the accused) had issued one blank cheque and one
blank affidavit in favour of the complainant’s son on 16.05.2005.
The complainant misused the cheque issued to his son. He
examined himself (DW-1).
6. The learned Trial Court held that the accused had not
disputed his signatures on the cheque, and a presumption would
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arise under Section 118(a) and 139 of the NI Act that the cheque was
issued for consideration to discharge the debt/liability. The defence
taken by the accused that he had borrowed ₹50,000/- from the
.
complainant’s son was highly probable. The accused is not required
to prove his defence beyond a reasonable doubt, and it is sufficient
that he creates a doubt in the complainant’s case. The complainant
had also not mentioned the date and month of lending money to
of
the complainant. He had given contradictory suggestions to
various witnesses, which made the prosecution’s case highly
rt
suspect. He claimed that he had withdrawn the money from the
bank, but failed to produce his statement of account to corroborate
this version. Therefore, the learned Trial Court acquitted the
accused.
7. Being aggrieved by the judgment passed by the learned
Trial Court, the complainant has filed the present appeal asserting
that the learned trial Court erred in ignoring the presumption
attached to the cheque. It was wrongly held that the accused had
succeeded in establishing his defence on the balance of probability.
The accused had failed to prove the return of the money as claimed
by him, and the Learned Trial Court erred in accepting the defence
of the accused. Hence, it was prayed that the present appeal be
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allowed and the judgment passed by the learned trial Court be set
aside.
8. I have heard Mr Rahul Gathania, learned counsel for the
.
appellant/complainant and Mr Dinesh Bhanot, learned counsel for
the respondents/accused.
9 Mr Rahul Gathania, learned counsel for the
appellant/complainant, submitted that the accused had failed to
of
prove his defence on the balance of probability. His testimony that
he had handed over the blank security cheque to the complainant’s
rt
son was highly improbable because he had not made any complaint
to the bank or the police regarding the misuse of the cheque.
Learned Trial Court ignored the presumption attached to the
cheque. Therefore, he prayed that the present appeal be allowed
and the judgment passed by the learned Trial Court be set aside.
10. Mr Dinesh Bhanot, learned counsel for the
respondent/accused, submitted that the complainant’s witnesses
contradicted each other. The learned counsel for the complainant
had also given contradictory suggestions to the accused in his
cross-examination, which made the complainant’s case highly
suspect. The learned Trial Court had taken a reasonable view while
acquitting the accused, and this Court should not interfere with the
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reasonable view of the learned Trial Court while deciding an appeal
against acquittal. Hence, he prayed that the present appeal be
dismissed.
.
11. I have given a considerable thought to the submission
made at the bar and have gone through the records carefully.
12. The present appeal has been filed against a judgment of
acquittal. It was laid down by the Hon’ble Supreme Court in
of
Surendra Singh v. State of Uttarakhand, 2025 SCC OnLine SC 176:
(2025) 5 SCC 433 that the Court can interfere with a judgment of
rt
acquittal if it is patently perverse, is based on misreading/omissionto consider the material evidence and reached at a conclusion
which no reasonable person could have reached. It was observed at
page 440:
“12. It could thus be seen that it is a settled legal position
that the interference with the finding of acquittal recorded
by the learned trial judge would be warranted by the HighCourt only if the judgment of acquittal suffers from patent
perversity; that the same is based on a misreading/omission
to consider material evidence on record; and that no tworeasonable views are possible and only the view consistent
with the guilt of the accused is possible from the evidence
available on record.”
13. This position was reiterated in P. Somaraju v. State of
A.P., 2025 SCC OnLine SC 2291, wherein it was observed:
“12. To summarise, an Appellate Court undoubtedly has full
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against acquittal under Sections 378 and 386 of the Criminal
Procedure Code, 1973. However, due to the reinforced or
‘double’ presumption of innocence after acquittal,
interference must be limited. If two reasonable views are
possible on the basis of the record, the acquittal should not
be disturbed. Judicial intervention is only warranted where.
the Trial Court’s view is perverse, based on misreading or
ignoring material evidence, or results in a manifest
miscarriage of justice. Moreover, the Appellate Court must
address the reasons given by the Trial Court for acquittalbefore reversing it and assigning its own. A catena of the
recent judgments of this Court has more firmly entrenched
this position, including, inter alia, Mallappa v. State ofof
Karnataka 2024 INSC 104, Ballu @ Balram @ Balmukund v.
The State of Madhya Pradesh 2024 INSC 258, Babu
Sahebagouda Rudragoudar v. State of Karnataka 2024 INSC
320, and Constable 907 Surendra Singh v. State of Uttarakhand
rt
2025 INSC 114.”
14. A similar view was taken in Tulasareddi v. State of
Karnataka, 2026 SCC OnLine SC 89, wherein it was observed:
“29. From the aforesaid decisions rendered by this Court, it
can be said that if two reasonable conclusions are possible on
the basis of the evidence on record, the Appellate Court
should not disturb the findings of acquittal recorded by theTrial Court. Further, if the view taken is a possible view, the
Appellate Court cannot overturn the order of acquittal on theground that another view was also possible. The following
principles have to be kept in mind by the Appellate Court
while dealing with the appeals against an order of acquittal:
(a) whether the judgment of acquittal suffers from
patent perversity;
(b) whether the judgment is based on
misreading/omission to consider the material evidence
on record;
(c) an order of acquittal is to be interfered with only
when there are “compelling and substantial reasons”
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for doing so. If the order is “clearly unreasonable”, it is
a compelling reason for interference.’
(d) the appellate court, while deciding an appeal
against acquittal, after reappreciating the evidence, is
required to consider whether the view taken by the
trial court is a possible view which could have been
.
taken on the basis of the evidence on record;
(e) if the view taken is a possible view, the appellate
court cannot overturn the order of acquittal on the
ground that another view was also possible; and
(f) the appellate court can interfere with the order of
acquittal only if it comes to a finding that the only
of
conclusion which can be recorded on the basis of the
evidence on record was that the guilt of the accused
was proved beyond a reasonable doubt and no other
rt conclusion was possible.”
15. While dealing with the appeal against the acquittal in a
complaint filed for the commission of an offence punishable under
Section 138 of the NI Act, the Hon’ble Supreme Court held in
Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 that the
normal rules with same rigour cannot be applied to the cases under
Negotiable Instruments Act because there is a presumption that
the holder had received the cheque for consideration to discharge
the debt/liability. The Appellate Court is entitled to look into the
evidence to determine whether the accused has discharged the
burden or not. It was observed: –
“12…. The principles aforesaid are not of much debate. In
other words, ordinarily, the appellate court will not be
upsetting the judgment of acquittal, if the view taken by the
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unless the appellate court arrives at a clear finding that the
judgment of the trial court is perverse i.e. not supported by
evidence on record or contrary to what is regarded as normal
or reasonable; or is wholly unsustainable in law. Such
general restrictions are essential to remind the appellate
court that an accused is presumed to be innocent unless.
proven guilty beyond a reasonable doubt, and a judgment of
acquittal further strengthens such presumption in favour of
the accused. However, such restrictions need to be visualised
in the context of the particular matter before the appellatecourt and the nature of the inquiry therein. The same rule
with the same rigour cannot be applied in a matter relating
to the offence under Section 138 of the NI Act, particularlyof
where a presumption is drawn that the holder has received
the cheque for the discharge, wholly or in part, of any debt
or liability. Of course, the accused is entitled to bring on
record the relevant material to rebut such presumption and
rt
to show that preponderance of probabilities are in favour of
his defence but while examining if the accused has brought
about a probable defence so as to rebut the presumption, theappellate court is certainly entitled to examine the evidence
on record in order to find if preponderance indeed leans in
favour of the accused.
13. For determination of the point as to whether the High
Court was justified in reversing the judgment and orders of
the trial court and convicting the appellant for the offence
under Section 138 of the NI Act, the basic questions to beaddressed are twofold: as to whether the complainant
Respondent 2 had established the ingredients of Sections 118and 139 of the NI Act, so as to justify drawing of the
presumption envisaged therein; and if so, as to whether theappellant-accused had been able to displace such
presumption and to establish a probable defence whereby,
the onus would again shift to the complainant?”
16. The present appeal has to be decided as per the
parameters laid down by the Hon’ble Supreme Court.
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17. The ingredients of the 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, theconcatenation 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 aof
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
rt
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 inwriting 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) failure of the drawer to makepayment to the payee or the holder in due course of the
cheque, of the amount covered by the cheque, within 15 days
of the receipt of the notice.”
18. The accused admitted in his cross-examination that the
cheque (Ext. C-1) bears his signature. It was laid down by the
Hon’ble Supreme Court in APS Forex Services (P) Ltd. v. Shakti
International Fashion Linkers (2020) 12 SCC 724, that when the
issuance of a cheque and signature on the cheque are not disputed,
a presumption would arise that the cheque was issued in discharge
of the legal liability. It was observed: –
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“9. Coming back to the facts in the present case and because
the accused has admitted the issuance of the cheques and his
signature on the cheque and that the cheque in question was
issued for the second time after the earlier cheques were
dishonoured and that even according to the accused some
amount was due and payable, there is a presumption under.
Section 139 of the NI Act that there exists a legally
enforceable debt or liability. Of course, such a presumption is
rebuttable. However, to rebut the presumption, the accused
was required to lead evidence that the full amount due and
payable to the complainant had been paid. In the present
case, no such evidence has been led by the accused. The story
put forward by the accused that the cheques were given by
of
way of security is not believable in the absence of further
evidence to rebut the presumption, and more particularly,
the cheque in question was issued for the second time after
the earlier cheques were dishonoured. Therefore, both the
rt
courts below have materially erred in not properly
appreciating and considering the presumption in favour of
the complainant that there exists a legally enforceable debt
or liability as per Section 139 of the NI Act. It appears that
both the learned trial court as well as the High Court have
committed an error in shifting the burden upon the
complainant to prove the debt or liability, without
appreciating the presumption under Section 139 of the NI
Act. As observed above, Section 139 of 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.”
19. A similar view was taken 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
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under both are rebuttable, meaning they can be rebutted by
the accused by raising a probable defence.”
20. This position was reiterated 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.
This Court is of the view that once the execution of the
cheque is admitted, the presumption under Section 118 of theof
NI Act that the cheque in question was drawn for
consideration and the presumption under Section 139 of the
NI Act that the holder of the cheque received the said cheque
rt
in discharge of a legally enforceable debt or liability arises
against the accused. It is pertinent to mention that
observations to the contrary by a two-Judge Bench inKrishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC
54, have been set aside by a three-Judge Bench in Rangappa
(supra).
16. This Court is further of the view that by creating this
presumption, the law reinforces the reliability of cheques as
a mode of payment in commercial transactions.
17. Needless to mention that the presumption contemplated
under Section 139 of the NI Act is rebuttable. However, theinitial onus of proving that the cheque is not in discharge of
any debt or other liability is on the accused/drawer of the
cheque [See: Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197].
21. Therefore, the Court has to start with the presumption
that the cheque was issued for consideration to discharge the
debt/liability.
22. The complainant stated that the accused was a friend of
his son. The accused borrowed ₹2,50,000/- for his business and
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issued a cheque to repay the amount. He stated in his cross-
examination that he had retired on 31.10.2005 as an Assistant
Account Officer from the Electricity Board. His son was running a
.
family business, and he used to assist him. Some of the money was
deposited in the bank, and some of it was invested in the business.
The cheque was already filled before it was handed over to him, and
the accused had not put the signatures on the cheque in his
of
presence. He had paid the money to the accused in two instalments
of ₹1,00,000/- and ₹ 1,50,000/-. Some of the money was
rt
withdrawn from the bank, and some was lying at home. Some
money was taken from the service dues of the complainant’s wife,
and some money was taken from the business of the complainant’s
son. He could not say whether the amount was reflected in the
income tax return or not. He denied that his son was working as a
financier, and that two affidavits were still lying with his son.
23. Accused Sandeep Kumar (DW-1) stated that he had
borrowed ₹50,000/- from the complainant’s son and handed over
a blank cheque to him. He had returned the money to the
complainant’s son. But the cheque and stamp papers were not
returned. He never visited the house of the complainant. He stated
in his cross-examination that Dadahu was a small town where
everybody knew each other. He was not aware that the complainant
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had retired in the year 2007 and was residing with his family
members. He did not have any record of a transaction with the
complainant’s son. He had not issued the cheque to any person,
.
and a false complaint was made against him. He denied that he had
taken the money for purchasing the raw material and that he had
issued the cheque to repay the amount.
24. Learned Trial Court held that the complainant had not
of
stated in his complaint that the money was paid in two instalments
of ₹1,00,000/- and ₹1,50,000/-. The complainant’s statement in
rt
his cross-examination that he had retired in the year 2005 was
contrary to the suggestion made to the accused that he had retired
in the year 2007. The complainant had not specified the dates when
the amount was advanced. The complainant’s son and wife did not
step into the witness box to corroborate his version that he had
taken the money from them.
25. Learned Trial Court ignored the fact that once a
presumption is raised that the cheque was issued for consideration
to discharge the debt/liability, the complainant is not required to
prove the existence of consideration or the debt/liability, and the
burden is upon the accused to rebut the presumption. It was laid
down by the Hon’ble Supreme Court in Uttam Ram v. Devinder Singh
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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 was to prove a debt before the civil court, whereinthe plaintiff is required to prove his claim on the basis of
evidence to be laid in support of his claim for the recovery of
the amount due, and the dishonour of a cheque carries aof
statutory presumption of consideration. The holder of the
cheque in due course is required to prove that the cheque
was issued by the accused and that when the same was
presented, it was not honoured. Since there is a statutory
rt
presumption of consideration, the burden is on the accused
to rebut the presumption that the cheque was issued not for
any debt or other liability.”
26 This position was reiterated in Ashok Singh v. State of
U.P., 2025 SCC OnLine SC 706, wherein it was observed:
“22. The High Court while allowing the criminal revision has
primarily proceeded on the presumption that it was
obligatory on the part of the complainant to establish hiscase on the basis of evidence by giving the details of the bank
account as well as the date and time of the withdrawal of thesaid amount which was given to the accused and also the
date and time of the payment made to the accused, includingthe date and time of receiving of the cheque, which has not
been done in the present case. Pausing here, such
presumption on the complainant, by the High Court, appears
to be erroneous. The onus is not on the complainant at the
threshold to prove his capacity/financial wherewithal to
make the payment in discharge of which the cheque is
alleged to have been issued in his favour. Only if an objection
is raised that the complainant was not in a financial position
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loan to the accused, only then would the complainant have
to bring before the Court cogent material to indicate that he
had the financial capacity and had actually advanced the
amount in question by way of a loan. In the case at hand, the
appellant had categorically stated in his deposition and
reiterated in the cross-examination that he had withdrawn.
the amount from the bank in Faizabad (Typed Copy of his
deposition in the paperbook wrongly mentions this as
‘Firozabad’). The Court ought not to have summarily
rejected such a stand, more so when respondent no. 2 did notmake any serious attempt to dispel/negate such a
stand/statement of the appellant. Thus, on the one hand, the
statement made before the Court, both in examination-in-
of
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
rt
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 anyloan 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 wouldonly 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, forthe plea of defence has to be buttressed by evidence, either oral
or documentary, which in the present case has not been done.
Moreover, even if it is presumed that the complainant had not
proved the source of the money given to the petitioners by way
of loan by producing statement of accounts and/or Income Tax
Returns, the same ipso facto, would not negate such claim for
the reason that the cheques having being issued and signed by
the petitioners has not been denied, and no evidence has been
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amount(s) in question. In this regard, we may make profitable
reference to the decision in Tedhi Singh v. Narayan Dass
Mahant, (2022) 6 SCC 735:
’10. The trial court and the first appellate court have noted
that in the case under Section 138 of the NI Act, the
complainant need not show in the first instance that he had.
the capacity. The proceedings under Section 138 of the NI Act
are not a civil suit. At the time, when the complainant gives
his evidence, unless a case is set up in the reply notice to the
statutory notice sent, that the complainant did not have thewherewithal, it cannot be expected of the complainant to
initially lead evidence to show that he had the financial
capacity. To that extent, the courts in our view were right inof
holding on those lines. However, the accused has the right to
demonstrate that the complainant in a particular case did
not have the capacity and therefore, the case of the accused
is acceptable, which he can do by producing independent
rt
materials, namely, by examining his witnesses and
producing documents. It is also open to him to establish thevery same aspect by pointing to the materials produced by
the complainant himself. He can further, more importantly,
achieve this result through the cross-examination of the
witnesses of the complainant. Ultimately, it becomes theduty of the courts to consider carefully and appreciate the
totality of the evidence and then come to a conclusion
whether, in the given case, the accused has shown that the
case of the complainant is in peril for the reason that theaccused has established a probable defence.'(emphasis
supplied)’ (underlining in original; emphasis supplied by
us in bold).
27. A similar view was taken in Sanjay Sanjabij Tari v.
Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was
observed:
“21. This Court also takes judicial notice of the fact that
some District Courts and some High Courts are not giving
effect to the presumptions incorporated in Sections 118 and
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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.”
28. Therefore, the complainant’s version cannot be doubted
because he had not produced the statement of account or examined
his wife or son.
of
29. The complainant asserted that he had retired in the
year 2005, and it was suggested to the accused that the
rt
complainant had retired in the year 2007. Learned Trial Court held
that it was a major contradiction, which made the complainant’s
case highly suspect. This finding cannot be sustained. A suggestion
was given to a witness by the learned counsel and it cannot
override the complainant’s testimony on oath.
30. It was submitted that the complainant had not
mentioned the amount in his income tax return, which would make
his version highly doubtful. This submission cannot be accepted. It
was laid down by this Court in Surinder Singh vs. State of H.P. 2018(1)
D.C.R. 45 that the failure to mention the loan in the income tax
return will not entitle the accused to acquittal. It was observed: –
10. It would further be noticed that the learned trial
Magistrate has acquitted the accused on the ground that the::: Downloaded on – 06/07/2026 20:35:53 :::CIS
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loan has not been shown in the Income Tax Return furnished
by the complainant, and while recording such finding, has
placed reliance upon the judgment of the Hon’ble Delhi High
Court in Vipul Kumar Gupta vs. Vipin Gupta 2012 (V) AD (CRI)
189. However, after having perused the said judgment, it
would be noticed that the amount in the said case was ₹ 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 forhaving 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 prosecutingof
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
rt
cheque was issued in the discharge of a liability or a legally
recoverable debt. The reasons for this are a number offactors that have been enumerated by the learned ACMM.
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 ₹ 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 to a
person. The appellant, neither in the complaint nor in hisevidence, has mentioned the date, time or year when the
loan was sought or given. The appellant has presented acheque, which obviously is written with two different inks,
as the signature appears in one ink, while the remainingportion, which has been filled in the cheque, is in a different
ink. All these factors prove the defence of the respondent to
be plausible to the effect that he had issued these cheques by
way of security to the appellant for getting a loan from the
Prime Minister Rojgar Yojana. The respondent/accused has
only to create doubt in the version of the appellant, while the
appellant has to prove the guilt of the accused beyond a
reasonable doubt, in which, in my opinion, he has failed
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by the appellant which will persuade this Court to grant
leave to appeal against the impugned order, as there is no
infirmity in the impugned order.”
31. Therefore, the complainant’s case cannot be doubted
because the amount was not mentioned in the income tax return.
.
32. The complainant asserted that he had withdrawn some
money from the bank, and some money was lying with him. It was
submitted that the payment of the money in cash violates Section
of
269SS of the Income Tax Act, and the complaint was not
maintainable. This submission cannot be accepted. It was laid
rt
down by this Court in Surinder Singh vs. State of H.P. 2018(1) D.C.R.
45 that contravention of Section 269 SS of the Income Tax Act will
give rise to a penalty, but will not invalidate the transaction. It was
observed:
5. The relevant portion of Section 269 SS of the IT Act reads
thus: –
“(a) the amount of such loan or deposit or the aggregate
amount of such loan and deposit’ or
(b) on the date of taking or accepting such loan or
deposit, any loan or deposit taken or accepted earlier bysuch person from the depositor is remaining unpaid
(whether repayment has fallen due or not), the amount
or the aggregate amount remaining unpaid; or
(c) The amount or the aggregate amount referred to in
clause (a) together with the amount or the aggregate
amount referred to in clause (b), is (twenty) thousand
rupees or more. Provided……”
6. Section 271D provides for a penalty for failure to comply
with the aforesaid provisions, which reads thus:
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“271D. Penalty for 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
of
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.
rt
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 explanation forhis unaccounted money, or if he has given some false entries
in his accounts, he shall not escape by giving false entries in
his accounts, or by giving a false explanation for the same.
During search and seizures, unaccounted money is
unearthed, and the taxpayer would usually give theexplanation that he had borrowed or received deposits from
his relatives or friends, and it is easy for the so-called lender
also to manipulate his records later to suit the plea of thetaxpayer. The main objection of Section 269-SS was to curb
this menace.”
9. In light of the aforesaid observations, it cannot but be said
that Section 269-SS only provides for the mode of accepting
payment or repayment in certain cases so as to counteract
evasion of tax. However, Section 269-SS does not declare all
transactions of loans by cash in excess of ₹20,000/- as
invalid, illegal or null and void, as the main object of
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introducing the provision was to curb and unearth black
money.
33. A similar view was taken by the Hon’ble Supreme Court
in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069,
.
wherein it was observed:
“19. Recently, the Kerala High Court in P.C. Hari v. Shine
Varghese, 2025 SCC OnLine Ker 5535 has taken the view that adebt created by a cash transaction above ₹20,000/- (Rupees
Twenty Thousand) in violation of the provisions of Section
269SS of the Income Tax Act, 1961 (for short ‘IT Act, 1961‘) isof
not a ‘legally enforceable debt’ unless there is a valid
explanation for the same, meaning thereby that the
presumption under Section 139 of the Act will not be
attracted in cash transactions above ₹ 20,000/- (Rupees
rt
Twenty Thousand).
20. However, this Court is of the view that any breach of
Section 269SS of the IT Act, 1961, is subject to a penalty only
under Section 271D of the IT Act, 1961. Further, neither
Section 269SS nor 271D of the IT Act, 1961 states that any
transaction in breach thereof will be illegal, invalid orstatutorily void. Therefore, any violation of Section 269SS
would not render the transaction unenforceable under
Section 138 of the NI Act or rebut the presumptions underSections 118 and 139 of the NI Act because such a person,
assuming him/her to be the payee/holder in due course, isliable to be visited by a penalty only as prescribed.
Consequently, the view that any transaction above Rs.
20,000/- (Rupees Twenty Thousand) is illegal and void andtherefore 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.”
34. This position was reiterated in Shine Varghese
Koipurathu v State of Kerala, Crl. A. No. 5385 of 2025 decided on 8th
December 2025.
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35. Therefore, the complainant’s case cannot be discarded
because he had paid the money in cash.
36. The accused claimed that he had borrowed ₹50,000/-
.
from the complainant’s son and returned the amount. However, he
could not produce any record of such a transaction. He did not file
his bank transaction to prove that he had returned the money to
the complainant’s son. This was necessary because he was aware of
of
the fact that his cheque and two affidavits were lying with the
complainant’s son. Hence, any prudent person would have taken
rt
precautions to ensure that the repayment of the money is well
documented to avoid any embarrassment in future. The fact that
the accused had no such evidence would make his version highly
suspect.
37. Learned Trial Court had proceeded as if the
presumption did not exist, and the complainant was required to
prove the existence of the consideration by leading satisfactory
evidence. This approach vitiated the judgment of the learned Trial
Court. It was laid down in Rajesh Jain v. Ajay Singh, (2023) 10 SCC
148: 2023 SCC OnLine SC 1275 that when the court failed to consider
the presumption under section 139 of the Negotiable Instruments
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Act, its judgment could be interfered with. It was observed at page
166:
54. As rightly contended by the appellant, there is a
fundamental flaw in the way both the courts below have.
proceeded to appreciate the evidence on record. Once the
presumption under Section 139 was given effect to, the
courts ought to have proceeded on the premise that the
cheque was, indeed, issued in discharge of a debt/liability.
The entire focus would then necessarily have to shift to the
case set up by the accused, since the activation of the
presumption has the effect of shifting the evidential burden
of
on the accused. The nature of inquiry would then be to see
whether the accused has discharged his onus of rebutting
the presumption. If he fails to do so, the court can
straightaway proceed to convict him, subject to the
rt
satisfaction of the other ingredients of Section 138. If the
court finds that the evidential burden placed on the accused
has been discharged, the complainant would be expected to
prove the said fact independently, without taking the aid of
the presumption. The court would then take an overall view
based on the evidence on record and decide accordingly.
55. At the stage when the courts concluded that the
signature had been admitted, the court ought to have
inquired into either of the two questions (depending on the
method in which the accused has chosen to rebut the
presumption): Has the accused led any defence evidence to
prove and conclusively establish that there existed no
debt/liability at the time of issuance of the cheque? In the
absence of rebuttal evidence being led, the inquiry would
entail: Has the accused proved the non-existence of
debt/liability by a preponderance of probabilities by
referring to the “particular circumstances of the case”?
56. The perversity in the approach of the trial court is
noticeable from the way it proceeded to frame a question at
trial. According to the trial court, the question to be decided
was “whether a legally valid and enforceable debt existed qua
the complainant and the cheque in question (Ext. CW I/A) was
issued in discharge of said liability/debt”. When the initial
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framing of the question itself being erroneous, one cannot
expect the outcome to be right. The onus, instead of being
fixed on the accused, has been fixed on the complainant. A
lack of proper understanding of the nature of the
presumption in Section 139 and its effect has resulted in an
erroneous order being passed.
.
57. Einstein had famously said:
“If I had an hour to solve a problem, I’d spend 55
minutes thinking about the problem and 5 minutesthinking about solutions.”
Exaggerated as it may sound, he is believed to have
suggested that the quality of the solution one generates is
of
directly proportionate to one’s ability to identify the
problem. A well-defined problem often contains its own
solution within it.
58. Drawing from Einstein’s quote, if the issue had been
rt
properly framed after careful thought and application of
judicial mind, and the onus correctly fixed, perhaps, the
outcome at trial would have been very different, and this
litigation might not have travelled all the way up to this
Court.”
38. The complainant asserted that he had presented the
cheque at his bank, but it was dishonoured with an endorsement
‘insufficient funds’. The accused claimed that he had closed the
account in the year 2005; however, Parkash Chand (CW-2) stated
that the accused had an account in the bank. The cheque was
received for payment on 21.06.2008 and was dishonoured with an
endorsement ‘insufficient funds’. Nothing was suggested to him in
the cross-examination that the account of the accused was closed
at the time of the presentation of the cheque. He is a public official
who has no interest in either the complainant or the accused, and
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his testimony is to be accepted as correct. His statement is duly
corroborated by the Memorandum of dishonour (Ext.C-3), in
which the reason for dishonour was mentioned as funds
.
insufficient. It was laid down by the Hon’ble Supreme Court in
Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83:
(2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1: 2010 SCC OnLine SC 155
that the memo issued by the Bank is presumed to be correct and the
of
burden is upon the accused to rebut the presumption. It wasobserved at page 95:
rt
24. Section 146, making a major departure from the
principles of the Evidence Act, provides that the bank’s slipor memo with the official mark showing that the cheque was
dishonoured would, by itself, give rise to the presumption of
dishonour of the cheque, unless and until that fact was
disproved. Section 147 makes the offences punishable underthe Act compoundable.
39. In the present case, no evidence was produced to rebut
the presumption, and it is held that the cheque was dishonoured
with an endorsement ‘insufficient funds.’
40. The complainant asserted that he had issued a notice to
the accused, which was duly served upon him. The complainant has
placed on record the acknowledgement, which bears the signature
of someone. The accused admitted in his statement on oath that
the acknowledgement was sent to the corrected address. Therefore,
a presumption would arise that the notice was duly served upon the
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accused, and the burden would shift upon the accused to rebut the
presumption. The accused failed to produce any evidence to rebut
the presumption; hence, it is held that the notice was duly served
.
upon the accused.
41. Therefore, it was duly proved on record that the accused
had issued a cheque in favour of the complainant to discharge his
debt/liability, which was dishonoured with an endorsement ‘funds
of
insufficient’ and the accused failed to repay the amount within 15
days from the date of the receipt of the notice. Hence, all the
rt
ingredients of the commission of an offence punishable under
Section 138 of the NI Act were duly satisfied, and the learned Trial
Court erred in acquitting the accused.
42. In view of the above, the present appeal is allowed, and
judgment passed by the learned Trial Court is ordered to be set
aside, and the accused is convicted of the commission of an offence
punishable under Section 138 of the NI Act.
43. Let he be produced for hearing him on the quantum of
sentence on27.07.2026
(Rakesh Kainthla)
Judge
06th July, 2026
(ravinder)
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