Delhi District Court
M/S Innovative Educational And Welfare … vs M/S Five Pillars Infrastructure P Ltd on 17 February, 2026
Ct case no. 635441/2016
M/s Innovative Educational & Welfare Society Vs. M/s Five Pillars Infrastructure 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)
DLSE020107602016
Criminal Complaint No. 635441/2016
Innovative Educational & Welfare Society ....................... Complainant
Vs.
M/s Five Pillars Infrastructure Pvt. Ltd. .......................Accused
Sr.No Particulars Details
A. Name and address of the M/s Innovative Educational & Welfare Society
Complainant: through its AR Sh. Ajay Chikersal.
Office at L-25, Lajpat Nagar-2, New
Delh-110024.
B. Name and address of the M/s Five Pillars Infrastructure Pvt. Ltd.
Accused. through Sh. Salahuddin and Director Mohd
Imran R/o 101, Basement, Pocket-1, Jasola
Vihar, New Delhi-110025.
C. Offence complained of U/s 138 NIAct
D. Plea of the accused Pleaded not guilty.
E. Final order ACQUITTAL
F. Date of institution 24.09.2016
G. Date of pronouncement 17.02.2026.
Digitally signed
by SHRUTI
SHARMA
SHRUTI Date:
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JUDGMENT
1. By way of the present judgment, this Court proceeds to adjudicate upon and finally
dispose of the complaint instituted by M/s Innovative Educational & Welfare
Society, acting through its authorized representative (hereinafter referred to as “the
complainant”), against M/s Five Pillars Infrastructure Pvt. Ltd., through Mr.
Salahuddin and Sh. Mohd Imran, Director (hereinafter referred to as “the accused
no. 1 and accused no. 2”), alleging commission of an offence punishable under
Section 138 read with Section 142 of the Negotiable Instruments Act, 1881
(hereinafter referred to as “the NI Act“). The present proceedings have arisen from
the dishonour of cheque bearing no. 057690 dated 02.08.2016, drawn on the bank
account of the accused maintained with Oriental Bank of Commerce, for an amount
of ₹3,50,000/-. It is the case of the complainant that the said cheque was issued
towards discharge of a legally enforceable liability, being the refund of excess
advance payment after adjustment against the bill raised for a mock-up room.
2. It has been specifically averred that the complainant is a duly registered society,
engaged in the construction of an old age home titled “Maa Assisted Home” at
Faridabad, in furtherance of its charitable objects as set out in its Memorandum and
Articles of Association. Pursuant to a detailed tender process, the complainant
awarded a construction contract dated 23.09.2015 to the accused company, a
corporate entity registered under the Companies Act, 1956. The agreement
stipulated that the project was to be completed within eight months, with an
additional grace period of ten weeks, time being the essence of the contract,
particularly in view of the welfare nature of the project intended to serve destitute
senior citizens. In order to facilitate timely execution, the complainant advanced a
sum of ₹10,27,500/- plus applicable taxes, vide account payee cheque no. 798750
dated 24.09.2015, which was to be adjustable against running bills. However, the
Digitally signed
by SHRUTI
SHARMA
SHRUTI Date:
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accused allegedly failed to maintain the agreed pace of work and delivered only a
substandard mock-up room by April 2016, which was assertedly far below
contractual specifications. Thereafter, the accused raised a consolidated bill dated
22.04.2016 for ₹7,52,866/- (inclusive of taxes). In an attempt to avoid litigation, the
parties mutually adjusted the principal amount of the bill against the advance,
leaving an outstanding refundable balance of approximately ₹3,49,530/-.
3. In partial discharge of the aforesaid liability, the accused issued an undated cheque
bearing no. 057690, drawn on Oriental Bank of Commerce, for a sum of
₹3,50,000/-, towards satisfaction of the legally enforceable obligation. It is stated
that Director Mohd. Imran, who was handling the financial affairs of the accused
company and was the authorised signatory of the cheque, assured the complainant
that the cheque would be duly honoured upon presentation. It is further asserted that
at no point thereafter did the accused raise any demand for additional payment,
thereby affirming that no dues remained payable by the complainant. Acting upon
such assurance, the complainant presented the cheque on 02.08.2016, however, the
same was returned unpaid with the remarks “Payment stopped by drawer.”
4. Following the dishonour of the cheque, and in compliance with the statutory
mandate of Section 138 of the NI Act, the complainant, through counsel, issued a
legal demand notice dated 10.08.2016, calling upon the accused to make payment
of the cheque amount within fifteen days from the date of receipt of the notice. The
notice was duly addressed to the accused at the official address reiterated in the
complaint.
5. As per the postal records placed on record, the said notice was dispatched to the
accused on 12.08.2016. Complainant avers that despite the service of notice and
expiry of the prescribed statutory period, the accused failed to make payment of the
cheque amount and did not issue any reply disputing the liability. The deliberate
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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inaction on part of the accused constrained the complainant to invoke the penal
provisions of the NI Act, and consequently, the present complaint under Sections
138 and 142 was instituted seeking prosecution of the accused for wilful default.
6. The complainant has categorically asserted that the conduct of the accused(s), in
issuing a cheque that was returned unpaid on the ground of “Payment stopped by
the drawer,” squarely attracts the penal provisions of Section 138 of the Negotiable
Instruments Act, 1881. It is further alleged that the act of the accused(s) reflects a
deliberate failure to honour their financial commitment despite due notice, thereby
constituting a clear breach of the statutory mandate envisaged under the Act.
7. It is the complainant’s case that the sequence of events, beginning from issuance of
the cheque and culminating in its dishonour, reflects a conscious and deliberate
evasion of a legally enforceable liability. According to the complainant, the conduct
of the accused cannot be construed as a mere inadvertent lapse, but rather
demonstrates wilful default, thereby bringing the matter squarely within the
mischief of Section 138 of the NI Act.
8. 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 cheque in question by the accused towards its discharge, followed by its
dishonour due to payment stopped by the drawer. Accordingly, vide order dated
09.12.2016, this Court was pleased to take cognizance of the offence and summoned
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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the accused(s) to face trial for the alleged dishonour of cheque issued in discharge
of a debt or liability, as contemplated under the statutory scheme of the NI Act.
9. The accused(s) appeared on 27.10.2017 with counsel, and was granted bail by this
Court on the very same date. Pursuant to the grant of bail, the accused(s) were
directed to furnish requisite bail bonds, and accordingly, they had furnished their
bail bonds which were accepted. 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 no. 1 and 2 on 04.12.2018. Upon being apprised of the substance of
accusation, including the specific allegations pertaining to issuance and dishonour
of the cheque in question, the accused(s) pleaded not guilty and claimed trial,
thereby necessitating the recording of evidence in the matter in accordance with law.
10. Thereafter, in order to substantiate its case, the complainant adopted its pre-
summoning evidence at the stage of post-summoning evidence and tendered the
affidavit of evidence through its authorised representative. The complainant
examined only its authorised representative, Sh. Ajay Chikersal, who was examined
as CW-1. CW-1 entered the witness box and, in support of the allegations made in
the complaint, placed reliance upon the following documents:-
Sr. No. Exhibits Particulars
1. Ex.CW-1/A Evidence by way of Affidavit
2. Mark A Copy of amended certificate of registration of
affidavit.
3. Ex.CW-1/1 Copy of agreement dated 23.09.2015.
4. Mark B Copy of Mock up bill dated 22.04.2016.
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5. Mark C Copy of statement of account of complainant for
September 2015.
6. Ex.CW-1/2 Original cheque bearing No. 057690 dated 02.08.2016
7. Ex.CW1/3 Original return memo dated 02.08.2016.
8. Ex.CW1/4 Copy of legal notice.
9. Ex.CW1/5 Postal receipt.
10. Mark D Tracking report.
11. During the course of trial, CW-1 was examined and thereafter subjected to extensive
cross-examination on behalf of the accused. Upon completion of his testimony,
CW-1 was duly discharged on 07.03.2019. Thereafter, upon conclusion of the
complainant’s evidence, the complainant did not seek to examine any other witness
in support of its case. Accordingly, the complainant evidence was closed vide order
dated 08.05.2019.
12. As the complainant did not wish to examine any other witness, hence the matter
fixed for recording of statement of accused u/s 313 CrPC and subsequent to the
conclusion of the complainant’s evidence, and in compliance with the procedural
mandate under Section 313 of the Code of Criminal Procedure, 1973, the statements
of the accused(s) were recorded by the Court on 18.08.2022, thereby affording them
an opportunity to personally explain the incriminating circumstances appearing
against them in the prosecution evidence. The accused(s) reiterated their defence as
taken in their earlier statements recorded under section 251 CrPC. Accused(s) chose
to lead DE.
13. Accused no. 2, Sh. Salahuddin, entered the witness box and was examined as DW-1
on 16.02.2023, wherein he tendered his testimony and relied upon various
Digitally signed
by SHRUTI
SHARMA
SHRUTI Date:
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documents in support of the defence. He exhibited Ex. DW-1/1, being an internet
printout from the website “iewsindia.org” reflecting Ms. Rachna Kumar as Whole
Time Director of the complainant entity, and Ex. DW-1/2, being a copy of his
cheque book pertaining to the relevant period to substantiate the defence relating to
cheque handling. DW-1 further relied upon a series of email communications
exchanged between the parties and other stakeholders, including Ex. DW-1/3, an
email dated 10.10.2015 issued by the accused confirming mobilisation at the site by
27.09.2015, along with reference to an email dated 30.10.2015 issued by the
complainant acknowledging that substantial work by other vendors such as
electrical, HVAC and plumbing remained pending before the accused could
commence their work. He also relied upon Ex. DW-1/4, an email dated 26.11.2015
sent by the Architect forwarding drawings of the mock-up room, Ex. DW-1/6, an
email dated 30.11.2015 issued by the complainant seeking an estimate, Ex. DW-1/7,
the accused’s reply dated 03.12.2015 furnishing the revised estimate, Ex. DW-1/8
and Ex. DW-1/9 emails dated 07.12.2015 and 17.12.2015 requesting hardware
specifications, Ex. DW-1/10, an email dated 17.12.2015 issued by Architect Mr.
Vivek Puri approving the material for the mock-up room, Ex. DW-1/11, an email
dated 29.12.2015 issued by the complainant noting delays attributable to other
vendors, Ex. DW-1/12, an email dated 09.01.2016 sent by the accused requesting
the material sample board, and Ex. DW-1/13, an email dated 15.01.2016 issued by
the complainant’s Architect providing hardware details. DW-1 further placed
reliance upon Ex. DW-1/14 to Ex. DW-1/26, being a series of further emails
reflecting project-related communications, and tendered Ex. DW-1/A, an affidavit
under Section 65B of the Indian Evidence Act bearing his signatures at points ‘A’
and ‘B’. DW-1 was thereafter extensively cross-examined by the learned counsel
for the complainant on 14.07.2023 and 16.08.2023, and finally, on 30.11.2023,
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accused no. 2/DW-1 as well as accused no. 1 through its authorised representative
closed their defence evidence, whereafter the matter proceeded for final
arguments.
Final Arguments
14. Thereafter, this Court heard the final arguments advanced on behalf of both parties
on 17.01.2026, and the matter was thereafter reserved for pronouncement of
judgment. Written submissions were also filed by both sides, and the same have
been duly perused and considered.
15. The counsel for the complainant contended that it is a duly registered society and
that its authorised representative, Sh. Ajay Chikersal, was validly empowered
through a resolution dated 03.12.2025 to institute and pursue the present
proceedings. It was argued that the accused were engaged under an agreement dated
23.09.2015 for execution of interior works at the project “Maa Assisted Home” at
Faridabad, and that an advance amount of ₹10,64,490/- was paid to the accused
towards mobilisation, which fact has been admitted by the accused in their statement
under Section 313 CrPC. The complainant submitted that despite the contractual
stipulation requiring completion of work within eight months, the accused failed to
complete the project within the agreed or extended time, thereby attracting the
penalty and liquidated damages clauses contained in the agreement and tender
documents. It was further argued that the cheque in question, though claimed by the
accused to be a security cheque, was presented for encashment towards recovery of
damages and loss caused due to such delay, and its dishonour resulted in the present
complaint.
16. The counsel for the complainant emphasized that the accused have admitted their
signatures on the cheque as well as receipt of the legal demand notice, and that no
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reply was ever issued disputing liability. It was also submitted that at the stage of
notice under Section 251 CrPC, the accused admitted issuance of the cheque after a
mutual settlement, but subsequently took contradictory defenses during trial. The
complainant argued that the accused failed to establish any contractual stipulation
showing that delay was attributable to the complainant or that the cheque was not
meant to be acted upon. Reliance was placed upon the statutory presumption under
Section 139 of the NI Act, which, according to the complainant, remains unrebutted
as the accused failed to raise a probable defense or lead evidence sufficient to
displace the presumption of legally enforceable liability. Accordingly, the
complainant prayed that the accused be convicted for the offense under Section 138
of the NI Act.
17. Per Contra, the counsel for the accused contended that the present complaint under
Section 138 read with Section 141 of the NI Act is not maintainable, as no legally
enforceable debt or liability existed on the date of presentation of the cheque. It was
argued that even as per the complainant’s own case, after deducting the invoice
amount of ₹7,52,886/- from the alleged advance payment of ₹10,27,500/-, the
outstanding amount would have been ₹2,74,614/- and not ₹3,50,000/-, thereby
rendering the cheque amount inconsistent and excessive. Reliance was placed on
judicial precedents to submit that where the cheque amount exceeds the actual
liability, the offence under Section 138 NI Act is not attracted.
18. The counsel for the accused further raised an objection regarding the competence
and authority of the complainant’s authorized representative, contending that no
valid board resolution or power of attorney was filed at the time of institution of the
complaint, and that CW-1 lacked personal knowledge of the transaction, having not
been privy to the contemporaneous communications exchanged during execution of
the project. It was also argued that the complaint suffered from defects under Section
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141 NI Act, as the company was not properly impleaded as the principal accused
and no specific averments were made to attract vicarious liability of the directors,
reliance being placed on SMS Pharmaceuticals Ltd. v. Neeta Bhalla.
19. The counsel for accused submitted that the complainant’s version suffered from
material inconsistencies, including contradictions regarding the nature and purpose
of the cheque, the value and scope of the agreement, and the alleged calculation of
liquidated damages, which was never placed or proved on record. It was argued that
the cheque was taken as a security instrument at the inception of the contract and
was misused subsequently without crystallisation of any liability or quantified
damages. The accused also challenged the service of legal notice on the ground that
no certificate under Section 65B of the Evidence Act was filed in support of the
electronic delivery report, rendering such proof inadmissible.
20. On merits, the counsel for the accused asserted that the delay in execution of the
mock-up room was attributable to the complainant, as essential drawings, approvals,
and completion of HVAC, plumbing, and electrical works by other vendors were
pending, without which interior work could not commence. In support, reliance was
placed on a series of emails exhibited as Ex. DW-1/3 to Ex. DW-1/26 demonstrating
repeated requests by the accused and delays at the complainant’s end. The accused
submitted that they had raised a probable defence sufficient to rebut the statutory
presumption under Sections 118 and 139 NI Act on the standard of preponderance
of probabilities, placing reliance upon Kumar Exports v. Sharma Carpets and
Rangappa v. Sri Mohan. Accordingly, it was prayed that the accused be acquitted
of the offence under Section 138 NI Act.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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Legal Analysis & Findings:-
21. I have heard at considerable length the detailed arguments advanced by the learned
counsel appearing for the complainant as well as the learned counsel representing
the accused. 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 recorded during the course of trial, if any, 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, endeavoured
to reach a reasoned and just determination by adopting a holistic and balanced
appreciation of the evidence and circumstances presented before it.
22. 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
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SHRUTI
SHRUTI SHARMA
SHARMA Date:
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arrangement with the bank, thereby recognizing the cheque as a legitimate
instrument of payment in the eyes of the law.
23. 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;
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;
Digitally
signed by
SHRUTI
SHRUTI SHARMA
SHARMA Date:
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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.
24. 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.
25. 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 dishonored 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.
26. 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
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.
Digitally signed
by SHRUTI
SHARMA
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27. 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.
28. 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;
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; Digitally
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SHRUTI
SHRUTI SHARMA
SHARMA Date:
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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.
29. CW-1, Sh. Ajay Chikersal, who is the President and authorised representative of the
complainant society, tendered his evidence by way of affidavit and adopted his pre-
summoning evidence as post-summoning evidence. In his examination-in-chief,
CW-1 deposed that the complainant is a duly registered society engaged in
charitable activities and had undertaken the construction of an old age home project
titled “Maa Assisted Home” at Faridabad. He stated that an agreement dated
23.09.2015 was executed with the accused company for interior works, pursuant to
which an advance amount of ₹10,27,500/- plus taxes was paid to the accused vide
cheque dated 24.09.2015, to be adjusted against running bills. CW-1 further stated
that the accused failed to execute the work within the stipulated time and could only
complete a mock-up room, for which a consolidated bill dated 22.04.2016 for
₹7,52,866/- was raised. According to CW-1, the parties mutually adjusted the
principal bill amount against the advance, leaving a refundable balance of
approximately ₹3,49,530/-, towards which the accused issued the cheque in
question for ₹3,50,000/-. CW-1 stated that the cheque was presented on 02.08.2016
Digitally signed
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but was dishonoured with remarks “payment stopped by drawer”. He further relied
on the cheque, return memo, legal demand notice dated 10.08.2016, postal receipt
and tracking report, and deposed that despite receipt of notice, the accused failed to
make payment, thereby committing an offence under Section 138 NI Act.
30. During cross-examination, CW-1 admitted that although he was authorised through
a resolution of the society to file the complaint, he could not recall the exact date of
such resolution and had not produced the minutes of the meeting on record at that
stage, though he stated that the same could be produced. He stated that the total
value of work proposed to be awarded was ₹1.37 crores, but conceded that the
agreement reflected an amount of approximately ₹68 lakhs, explaining that the
scope was later upgraded, though no such document was filed. CW-1 admitted that
the agreement did not mention a specific start date. He also conceded that at the time
the mock-up room was assigned, electrical, AC and sanitary work was incomplete,
though he volunteered that such work was also to be executed by the accused as per
trade practice, despite the same not being expressly mentioned in the agreement.
31. CW-1 further admitted that the cheque in question was obtained as an undated
cheque at the time of execution of the agreement, as security towards liquidated
damages or penalty in case of default, and that the cheque details were not recorded
in the agreement. He acknowledged that no document quantifying or crystallising
the alleged damages or penalty had been filed with the complaint, though he claimed
that the accused was informed orally about such liability. Importantly, CW-1
admitted that the cheque amount was arrived at by deducting the mock-up room bill
amount from the advance payment made to the accused. He denied the suggestion
that the cheque was misused or that the complaint was false, and maintained that the
accused remained liable for the cheque amount. Digitally
signed by
SHRUTI
SHRUTI SHARMA
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32. 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
cheque within validity period, (c) dishonor by the bank due to payment stopped by
drawer, (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 cheque, the cheque return memo, the legal demand 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.
33. 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.
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.
34. 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
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SHRUTI SHARMA
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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.
35. 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.
36. 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
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.
37. For ready reference, the relevant provisions are reproduced as under:
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.”
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.”
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38. 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.
39. 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 favor 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.
40. 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.
41. 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
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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.
42. 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)
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.
43. 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.
44. 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
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explanations tendered by the accused, to assess whether the statutory presumption
stands effectively rebutted in the present case.
45. 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 Mohd.
Imran This fact stands acknowledged by the accused Mohd. Imran 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 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.
46. Despite having admitted the issuance of the cheque in question and the affixation of
signature thereon, the accused(s) have 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, statement recorded u/s 313 CrPC and their deposition recorded before
this court.
47. At the stage of framing of notice under Section 251 CrPC, both accused pleaded
not guilty and claimed trial. Accused no.1, through its AR Mohd. Imran, admitted
that the cheque in question bore his signatures and stated that the cheque was issued
after a mutual settlement of dispute; however, since the complainant subsequently
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denied the settlement, payment of the cheque was stopped. He further stated that
the company had received the legal notice and a reply had been sent, while denying
any liability towards the complainant. Accused no.2 Salahuddin also took a similar
defence that the cheque was issued pursuant to a settlement which was later denied
by the complainant, leading to stoppage of payment. He claimed that the cheque
did not bear his signatures and denied being a director of the accused company,
though he admitted that he was executing the project on behalf of the company.
Both accused denied existence of any legally enforceable liability.
48. The statements of the accused were recorded under Section 313 CrPC on
18.08.2022. Accused Salahuddin stated that the complainant had engaged the
accused company for interior decoration work and that a mock/sample room was
prepared under the contract. He admitted receipt of approximately ₹10 lakhs as
advance and issuance of a bill of about ₹7 lakhs for the mock room. He claimed
that the project was delayed because the complainant failed to provide necessary
drawings and that he demanded further funds to proceed. He stated that a cheque
of ₹3.5 lakhs was issued only as a security, as the complainant was supposed to
provide an additional advance of the same amount, which was never paid.
Consequently, he instructed the bank to stop payment of the cheque. He denied any
legal liability and claimed to have suffered losses due to non-execution of the
contract.
49. Accused no.1 company, through Mohd. Imran, stated that he knew the complainant
through his father (Sh. Salahuddin) and claimed no direct knowledge of the
transaction. He admitted that the cheque bore his signatures but asserted that it was
issued only for the purpose of security. He admitted receipt of the legal notice and
stated that the complainant had filed a false case. Both accused expressed their
intention to lead defense evidence. Digitally
signed by
SHRUTI
SHRUTI SHARMA
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50. Accused Salahuddin Saify entered the witness box as DW-1 on 16.02.2023. In his
examination-in-chief, DW-1 deposed that he was looking after the project on behalf
of accused no.1 company and that the complainant, through Ms. Rachna Kumar,
had awarded the interior work contract in September 2015. He stated that an advance
of approximately ₹10.25 lakhs was received as security advance. He claimed that
the cheque in question was handed over in partially filled form to the complainant’s
architect, Mr. Vivek Puri, only to secure the advance and demonstrate bona fides,
and that neither the name of the complainant nor the date was filled by him. DW-1
further deposed that the cheque was not meant to discharge any liability, as accounts
between the parties were yet to be settled. He relied upon a series of emails (Ex.
DW-1/3 to Ex. DW-1/26) to contend that delay occurred due to non-provision of
drawings, approvals, and pendency of HVAC, plumbing and electrical works by
other vendors, thereby preventing timely commencement and completion of interior
work. He also filed a Section 65B certificate (Ex. DW-1/A).
51. During cross-examination on 14.07.2023, DW-1 admitted execution of the
agreement dated 23.09.2015, the contract value being around ₹68 lakhs, and receipt
of mobilisation advance of ₹10,64,490/-. He admitted that the mock room was
completed and that invoice dated 22.04.2016 (Ex. CW-1/3) was raised, though he
volunteered that an earlier invoice of a higher amount was revised at the
complainant’s request. He admitted that the accused company could not complete
the work within the agreed time, but attributed the delay to the complainant’s
failure to provide drawings, material approvals and completion of miscellaneous
works by other vendors. He also admitted that material for the mock room was to
be mobilised by the accused. In further cross-examination on 16.08.2023, DW-1
admitted receipt of the legal demand notice, though he stated that he did not recollect
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its contents. He denied that the cheque was issued in discharge of any liability and
maintained that he was deposing truthfully.
52. At the outset, it is reiterated and trite to observe that proceedings under Section 138
of the Negotiable Instruments Act, 1881, though fortified by statutory
presumptions, are nevertheless criminal in nature, and the ultimate burden resting
upon the complainant is not wholly effaced merely because Sections 118 and 139
incorporate a reverse onus clause. The presumptions, though mandatory at the
threshold, remain rebuttable, and the accused is not required to establish his defence
beyond reasonable doubt. It is well settled that the accused may rebut the
presumption on the touchstone of preponderance of probabilities, either by leading
direct evidence or by demonstrating inherent infirmities and improbabilities in the
complainant’s own case. This principle has been authoritatively laid down by the
Hon’ble Supreme Court in Kumar Exports v. Sharma Carpets (2009) 2 SCC 513
and has been reiterated in Rangappa v. Sri Mohan , (2010) 11 SCC 441 wherein it
has been clarified that while the presumption under Section 139 is a strong one, it
does not dispense with the requirement that the complainant must first establish the
foundational facts, and the accused can discharge his burden by raising a probable
defence from the material on record.
53. In the present matter, the defence raised by the accused cannot be brushed aside as
a mere bald or evasive denial. The accused have consistently maintained that the
cheque in question was not issued towards discharge of any ascertained or
crystallised legally enforceable liability, but was handed over only as a security
instrument in the backdrop of an ongoing contractual arrangement between the
parties, where the accounts had not been finally settled or conclusively determined.
It has been contended that the complainant has sought to convert what was
essentially a security cheque into an instrument of recovery, without demonstrating
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that any quantified liability had matured and become payable in praesenti. The
accused have further argued that the foundational requirement of Section 138 NI
Act, namely the existence of a legally enforceable debt or liability as on the date of
presentation of the cheque, remains unproved, and therefore the penal
consequences of dishonour cannot be mechanically attracted in the absence of clear
crystallisation of liability at the relevant time.
54. A significant and substantial defence raised by the accused pertains to the glaring
inconsistency in the cheque amount itself, which strikes at the very foundation of
the complainant’s claim. Even if one were to accept the complainant’s own
narration at face value, the complainant asserts that an amount of ₹10,27,500/- was
advanced, and thereafter an invoice of ₹7,52,886/- was adjusted towards the alleged
mock-up room. On a plain and undisputed arithmetical deduction, the refundable
balance, if any, would work out to approximately ₹2,74,614/- and not ₹3,50,000/-,
which is the amount for which the cheque in question was allegedly issued. Even
in the complaint, it has been mentioned that the remaining amount came out to be
₹3,49,530/-. The complainant has not placed on record any cogent material or
convincing explanation to demonstrate how the cheque amount came to exceed the
alleged outstanding balance, nor has any reconciliation or statement of account
been produced to justify the higher figure.
55. This discrepancy cannot be treated as a minor irregularity or a mere clerical
variation. Rather, it goes to the root of the matter, because Section 138 NI Act is
attracted only when the cheque is drawn “for the discharge, in whole or in part, of
any debt or other liability” which is legally enforceable and ascertainable on the date
of presentation. Where the cheque amount is demonstrably higher than the liability
claimed to be due, the instrument cannot be presumed to represent a legally
enforceable debt to that extent, and the very existence and quantification of liability
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becomes doubtful.
56. The accused have rightly relied upon decisions such as Alliance Infrastructure
Projects Pvt. Ltd. v. Vinay Mittal and Angu Parameswari Textiles Pvt. Ltd. v. Sri
Rajan, Crl. M.C. No. 2224/2009, wherein it has been held that presentation of a
cheque for an amount exceeding the actual legally recoverable dues militates against
the maintainability of a complaint under Section 138, since the cheque cannot be
said to have been issued strictly towards discharge of a subsisting enforceable
liability. Thus, the complainant’s own version renders the alleged debt uncertain,
unascertained, and incapable of precise determination. Once the liability itself
becomes doubtful, the statutory presumption under Sections 118 and 139 stands
substantially weakened, and the accused succeed in raising a probable defence
sufficient to rebut the presumption on the scale of preponderance of probabilities.
57. The complainant sought to justify the presentation of the cheque amount by
contending that the excess represented damages or penalty allegedly payable under
certain contractual clauses. However, this explanation does not withstand scrutiny.
CW-1, during cross-examination, admitted that no document quantifying the
alleged damages or penalty was filed along with the complaint. He merely stated
that the damages were “in percentage.” This Court finds that such a vague assertion
is wholly insufficient. Unless such percentage is applied to a clearly determined
contractual base, and unless a final quantified figure is arrived at through
computation, the alleged liability remains indeterminate and speculative.
58. It is a settled principle that criminal prosecution under Section 138 NI Act cannot
be invoked as a tool for recovery of uncertain, unliquidated, or unascertained
contractual claims. The provision is attracted only when the cheque is issued
towards discharge of a legally enforceable debt or liability which is crystallised and
ascertainable on the date of presentation. A cheque cannot be treated asDigitally
enforceable
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merely because damages are alleged in the abstract, without any computation,
adjudication, or documentary substantiation. In the absence of a quantified and
legally recoverable liability, the invocation of Section 138 would amount to
converting a penal provision into an instrument for enforcing speculative civil
claims, which is impermissible in law.
59. The accused, in order to probabilise their defence, entered the witness box through
DW-1 and relied upon a series of contemporaneous email communications exhibited
as Ex. DW-1/3 to Ex. DW-1/26. These emails reflect repeated communications
addressed to the complainant and its representatives, seeking architectural drawings,
technical approvals, site clearances, and confirmation regarding completion of
prerequisite works such as HVAC installation, plumbing layout, and electrical
fittings by other vendors. The documentary record, therefore, does not appear to be
an afterthought created for the purposes of litigation but consists of regular business
correspondence exchanged during the subsistence of the contractual relationship.
60. DW-1 deposed that the progress of the mock-up room work was hindered due to the
complainant’s failure to provide necessary drawings and approvals, and due to the
site not being ready on account of incomplete electrical, air-conditioning and
sanitary installations. This version finds corroboration from the emails placed on
record. Significantly, during cross-examination, the complainant’s own witness
admitted that at the time when the mock-up room work was assigned, certain
electrical, AC and sanitary works were incomplete. This admission lends credence
to the defence version that the delay was not solely attributable to the accused.
61. The testimony of DW-1, supported by contemporaneous documentary material,
remained substantially unshaken on material particulars. No effective contradiction
was elicited to discredit the genuineness of the emails or to demonstrate that the
accused were solely responsible for delay. In these circumstances, the defence raised
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by the accused that the delay was attributable to the complainant and that damages
or penalties were neither contractually justified nor crystallised assumes a ring of
probability.
62. Where the alleged liability itself is premised upon imposition of damages for delay,
and the defence demonstrates that responsibility for delay is disputed and factually
contested, the claim of damages becomes uncertain and unascertained.
Consequently, the accused(s) succeed in raising a credible and probable defence
sufficient to rebut the statutory presumption under Sections 118 and 139 of the NI
Act.
63. Another substantial infirmity pertains to the very competence of CW-1 to institute
and prosecute the present complaint on behalf of the complainant society. It is the
specific defence that the complaint was not filed and pursued by a duly authorised
person, and that no valid resolution or authority letter was proved on record at the
relevant stage of trial. The record reveals that during cross-examination, CW-1
stated that he had been authorised by a resolution of the society; however, he was
unable to recall the exact date of such resolution and candidly admitted that the
minutes of the meeting or copy of the resolution had not been brought on record at
the time of his testimony. He further stated that the same could be produced later.
Admittedly, no such resolution was ever exhibited or formally proved during the
course of complainant evidence. The alleged resolution appears to have been filed
only subsequently along with written submissions, without being tendered and
proved in accordance with law.
64. It is a fundamental principle of criminal trial that documents must be proved during
the stage of evidence so as to afford the opposite party an opportunity to test their
veracity and scope through cross-examination. A document which is neither
tendered nor exhibited during trial cannot be read in evidence at the stage of final
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arguments. Written submissions are not evidence, and procedural fairness demands
that the accused be given an opportunity to confront the witness with any document
relied upon to establish authority.
65. In prosecutions under Section 138 NI Act instituted by juristic entities, the authority
of the person instituting and prosecuting the complaint is not a mere technical
formality. The complainant must establish that the complaint has been filed and
pursued by a person duly authorised by the competent body of the entity. In the
absence of proof of such authorisation, the very locus standi of the witness to depose
and prosecute the complaint stands undermined.
66. In the present case, the alleged board resolution or authorisation was never proved
during trial. The accused were not afforded an opportunity to cross-examine CW-1
on the contents, scope, or validity of such resolution. The defect, therefore, is not
procedural but foundational. Once the competence of CW-1 to represent the
complainant is not established through admissible evidence, the substratum of the
complaint itself becomes doubtful. It is well settled that where the authority of the
authorised representative is seriously disputed and not proved through admissible
evidence, the complaint becomes vulnerable. Criminal liability cannot be fastened
on the accused on the basis of testimony of a person whose authority to represent
the complainant has not been legally established. The defect goes to the root of
maintainability and cannot be cured by subsequently filing a document at the stage
of arguments.
67. Accordingly, this Court is of the considered view that in the absence of production
and proof of the resolution or authorisation during evidence, the locus standi of
CW-1 to institute and prosecute the complaint remains unproved. This infirmity
strikes at the very foundation of the prosecution case and entitles the accused to the
benefit of doubt.
Digitally
signed by
SHRUTI
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68. Even otherwise, a careful scrutiny of the record reveals that the testimony of CW-1
suffers from material inconsistencies which strike at the root of the complainant’s
case and materially affect its credibility. At the very threshold, the agreement dated
23.09.2015 (Ex. CW-1/1), which constitutes the foundational document of the
complainant’s claim, records the estimated contract value at approximately ₹68.50
lakhs. However, during cross-examination, CW-1 stated that the proposed value of
work to be awarded to the accused was ₹1.37 crores and volunteered that the value
was subsequently upgraded. Significantly, no document evidencing such
enhancement or revision was ever placed on record. In the absence of any
amendment, addendum, revised bill of quantity, or supplementary agreement, this
material variation remains unexplained and renders the complainant’s version
internally inconsistent.
69. Further, though reference was made to a Bill of Quantity allegedly signed by the
accused, the same was admittedly never filed before the Court. The agreement itself
stipulates that the execution of work would be governed by technical provisions, bill
of quantities, rates and drawings; yet none of these documents, forming the
substratum of the contractual arrangement, were proved in evidence. The omission
assumes significance when the dispute pertains to alleged breach, delay, and
damages under that very contract.
70. Another contradiction emerges with respect to the timeline of execution. While the
complaint asserts that the accused were obligated to complete the work within eight
months, the agreement (Ex. CW-1/1) contains no specific start date, and CW-1
admitted in cross-examination that no commencement date was mentioned therein.
In contractual matters where time is claimed to be of the essence, the absence of a
defined commencement date introduces ambiguity regarding computation of delay
and consequential liability.
Digitally
signed by
SHRUTI
SHRUTI SHARMA
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71. Most importantly, the complainant has taken mutually inconsistent stands regarding
the nature of the cheque in question. In the complaint, it is averred that the cheque
was issued after adjustment of the principal invoice amount against the advance and
represented the refundable balance. However, during cross-examination, CW-1
categorically stated that the cheque was obtained as an undated security cheque at
the time of execution of the agreement, to secure liquidated damages or penalty in
the event of default. These two versions are fundamentally irreconcilable. A cheque
issued after final adjustment of accounts cannot simultaneously be a security cheque
taken at inception. This contradiction goes to the core issue , whether the cheque
was issued in discharge of an existing liability or merely held as security.
72. Equally significant is the admission of CW-1 that although liquidated damages or
penalty were allegedly calculated by the complainant, no document quantifying
such damages was placed before the Court. He further admitted that no calculation
of damages was filed along with the complaint. In the absence of any computation
or crystallisation of liability, the alleged penalty remains notional and
unascertained.
73. The testimony of CW-1 also reveals inconsistency regarding the purpose of the
advance payment. At one stage, he stated that the advance was generally paid at the
time of execution of the agreement and was not specifically towards the mock room.
Yet, when confronted directly, he admitted that the cheque amount was arrived at
by deducting the mock room bill from the advance amount. This shift in position
demonstrates uncertainty in the complainant’s own understanding of the financial
arrangement.
74. Further contradictions arise regarding scope of work. CW-1 admitted that at the time
the mock room work was assigned, electrical, AC and sanitary work were
incomplete. Though he volunteered that such works were also to be executed by the
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accused, he conceded that no such obligation is recorded in Ex. CW-1/1. The
agreement, on its face, refers only to “interior works.” The attempt to orally expand
the scope of work beyond what is recorded in the written contract appears as an
afterthought, particularly when no documentary support was produced.
75. When these inconsistencies are viewed cumulatively, discrepancy in contract value,
absence of supporting contractual documents, ambiguity in commencement date,
contradictory stand regarding the nature of the cheque, absence of quantified
damages, and shifting explanation regarding the advance, the complainant’s version
does not inspire the degree of confidence required in a criminal prosecution under
Section 138 of the NI Act. The contradictions are not minor embellishments but
pertain to the very genesis of liability and the character of the instrument.
76. This Court has also examined whether the statutory requirements under Section 141
of the Negotiable Instruments Act have been duly satisfied in the present case.
Section 141 contemplates vicarious criminal liability in respect of offences
committed by a company and provides that every person who, at the time the offence
was committed, was in charge of and responsible to the company for the conduct of
its business shall be deemed to be guilty of the offence. Being an exception to the
general rule of criminal law that liability is personal, the provision has been
consistently interpreted by courts to require strict compliance.
77. The Hon’ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr.,
AIR 2005 SC 3512, authoritatively held that it is mandatory for the complaint to
contain specific averments that the person sought to be made liable was in charge
of and responsible for the conduct of the business of the company at the relevant
time. It was observed that vicarious liability cannot be inferred merely from
designation or association with the company; rather, a clear case must be spelled out
in the complaint itself before criminal process is issued.
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78. Upon perusal of the present complaint, it is noticed that while the company has been
arrayed as accused no. 1 and Mr. Salahuddin has been shown in connection with it,
the complaint does not contain specific and unambiguous averments detailing how
and in what capacity he was in charge of and responsible for the day-to-day affairs
or conduct of the business of the company at the time of issuance and dishonour of
the cheque. The complaint does not articulate the role played by him in the
management of the company’s affairs beyond general references to his association
with the project.
79. Further, no documentary material such as master data from the Registrar of
Companies, board resolution, Form DIR filings, or any other corporate record has
been placed on record to demonstrate his designation, authority, or control over the
business operations of the company. In absence of such material, the Court is left
only with broad and unparticularised assertions, which do not satisfy the threshold
laid down by the Supreme Court for invoking vicarious liability. It is equally
important to note that a company, being a distinct juristic entity, must be
independently arraigned as the principal offender. The fastening of liability upon
individuals connected with the company can only follow upon strict compliance
with the statutory conditions. Where the complaint lacks clear pleadings regarding
the responsibility of such individual for the conduct of the business of the company,
the foundational requirement of Section 141 remains unfulfilled.
80. In the considered opinion of this Court, the absence of specific averments and
supporting material demonstrating that the said accused was in charge of and
responsible for the conduct of the company’s business at the relevant time creates a
substantive infirmity in the prosecution insofar as vicarious liability is concerned.
81. In view of the foregoing discussion and the cumulative effect of the material brought
on record, this Court is of the considered opinion that the accused have succeeded
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in raising a probable defence sufficient to rebut the statutory presumptions operating
under Sections 118 and 139 of the Negotiable Instruments Act. The defence is not
illusory or fanciful, but is founded upon contemporaneous documentary
correspondence, admissions elicited during cross-examination, and inconsistencies
in the complainant’s own version regarding the nature and quantum of liability.
82. In the present case, the complainant has failed to establish beyond reasonable doubt
that an enforceable liability of ₹3,50,000/- existed as on the date of presentation of
the cheque. The inconsistencies in computation of liability, the absence of quantified
damages, the contradictory stand regarding the nature of the cheque, and the defence
evidence indicating disputed responsibility for delay collectively render the alleged
debt uncertain and unascertained. Once such doubt arises, the penal consequences
under Section 138 NI Act cannot be mechanically imposed. The benefit of such
doubt must necessarily enure to the accused.
Conclusion
83. In the light of the aforementioned discussion, Accused(s) are hereby acquitted for
the offence punishable under Section 138 read with Section 142 of the Negotiable
Instruments Act, 1881.
84. The judgment duly digitally signed be uploaded on CIS.
Announced in the open
Digitally signed
on 17.02.2026 by SHRUTI
SHRUTI SHARMA
SHARMA Date:
2026.02.17
16:46:58 +0530
(Shruti Sharma-I)
JMFC (NI Act)-02, South-East,
Saket Courts, New Delhi/ 17.02.2026
Certified that this judgment contains 34 pages and each page bears my signature.
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