Himachal Pradesh High Court
Manoj Kumar vs Shankar Dass And Another on 23 April, 2026
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr. Revision No. 385 of 2015
Reserved on: 20.03.2026.
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Decided on: 23 .04.2026
Manoj Kumar ....... Petitioner
Versus
Shankar Dass and another .... Respondent
of
Coram
The Hon'ble Mr Justice Rakesh Kainthla, Judge.
rt
Whether approved for reporting?1 No.
For the Petitioner : Mr Surya Chauhan, Advocate.
For the Respondent no. 1 : Mr H S Rangra, Advocate
For the Respondent no. 2 : Mr Lokender Kutlehria,
Additional Advocate General
Rakesh Kainthla, Judge
The present revision is directed against the judgment
dated 21.09.2015 passed by the learned Sessions Judge, Mandi,
District Mandi, H.P. (learned Appellate Court) vide which
judgment of conviction and order of sentence dated 12.03.2015
passed by the learned Special Judicial Magistrate, Mandi, District
Mandi, H.P. (learned Trial Court) were upheld. (Parties shall
1
Whether the reporters of the local papers may be allowed to see the Judgment?Yes.
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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
.
revision 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 Negotiable
Instruments Act, 1881 (in short, ‘NI Act‘). It was asserted that the
of
complainant is a proprietor of M/s Shankar Dass and Sons,
Purani Mandi, District Mandi, H.P. and is running a business of
rt
confectioneries. The accused is also running the business of
confectionery and other articles under the name and style of M/s
Mahalaxmi Traders at Village and post office Bajora, Tehsil and
District Kullu, H.P., and he used to purchase the material from
the complainant for sale. The accused had purchased the
material worth ₹ 95,000 from the complainant in June 2008, and
he issued a cheque dated 12/07/2008 for ₹ 50,000 drawn on the
Union Bank of India branch office at Bhuntar. The complainant
deposited the cheque at his bank, and it was dishonoured with an
endorsement “insufficient funds’. The complainant issued a
demand notice to the accused asking him to pay the amount
within 15 days. Notice was served upon the accused, but he failed
to pay the money. Hence, a complaint was filed before the
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learned Trial Court against the accused for taking action as per
law.
3. Learned Trial Court found sufficient reasons to
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summon the accused. When the accused appeared, a notice of
accusation was put to him for the commission of an offence
punishable under Section 138 of the NI Act, to which he pleaded
not guilty and claimed to be tried.
of
4. The complainant examined himself (CW1) to prove
his complaint.rt
5. The accused, in his statement recorded under section
313 Cr. P.C., admitted that the complainant is a proprietor of M/s
Shanker Dass and Sons, and he was running a confectionery
business at Purani Mandi. He stated that he had issued a blank
security cheque to the complainant. He denied the rest of the
complainant’s case. He stated that he owed no legal liability
towards the complainant, and the complainant deposed falsely
against him. He did not produce any evidence in defence.
6. Learned Trial Court held that the issuance of the
cheque was not disputed, and a presumption arose that the
cheque was issued for consideration to discharge debt/liability.
The accused failed to produce any evidence to rebut the
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presumption. The cheque was dishonoured with endorsement
“insufficient funds”, and the notice was duly served upon the
accused. All the ingredients of the commission of an offence
.
punishable under Section 138 of the NI Act were duly satisfied.
Hence, the learned Trial Court convicted the accused of the
commission of an offence punishable under Section 138 of the NI
Act, and sentenced him to undergo simple imprisonment for six
of
months and pay a compensation of ₹50,000/-.
7. Being aggrieved by the judgment and order passed by
rt
the learned Trial Court, the accused filed an appeal, which was
decided by the learned Sessions Judge, Mandi (learned Appellate
Court). The learned Appellate Court concurred with the findings
recorded by the learned Trial Court that the issuance of the
cheque was not disputed, and a presumption arose that the
cheque was issued for consideration to discharge the
debt/liability. The accused did not lead any evidence to rebut the
presumption. The cheque was dishonoured with the
endorsement “insufficient funds”. Notice was duly served upon
the accused, and he failed to repay the amount despite receipt of
a valid notice of demand. The learned Trial Court had rightly
convicted the accused. The sentence imposed by the learned Trial
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Court was adequate, and no interference was required with it.
Hence, the appeal was dismissed.
8. Being aggrieved by the judgments and order passed
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by the learned Courts below, the accused has filed the present
revision asserting that the learned Courts below erred in
appreciating the material placed before them. The complainant
failed to prove the existence of a legally enforceable
of
debt/liability. He did not examine the material witnesses in the
Court. The accused had specifically stated that a blank cheque
rt
was issued as security, but this aspect was not considered by the
learned Courts below. The amount of compensation awarded by
the Court was excessive. The complaint was not filed by the
payee because the cheque was issued in favour of M/s Shanker
Dass and Sons, but the complaint was filed by Shankar Dass. The
cheque was issued at Kullu and was payable at Kullu, and the
Courts at Mandi had no jurisdiction to hear and entertain the
present complaint. Therefore, it was prayed that the present
revision be allowed and the judgments and order passed by the
learned Courts below be set aside.
9. I have heard Mr Surya Chauhan, learned counsel for
the petitioner/accused, Mr H S Rangra, learned counsel for the
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respondent/complainat, and Mr Lokender Kutlheria, learned
Additional Advocate General for the Respondent/State.
10. Mr Surya Chauhan, learned counsel for the
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petitioner/accused, submitted that the learned Courts below
erred in appreciating the material placed before them. The
complaint was not filed by the payee. The Courts at Mandi had no
jurisdiction to hear and entertain the present complaint, and the
of
defence taken by the accused that the cheque was issued as
security was highly probable. The learned courts below failed to
rt
appreciate all these aspects. Hence, he prayed that the present
revision be allowed and the judgments and order passed by the
learned Courts below be set aside.
11. Mr HS Rangra, Ld. counsel for the
respondent/complainant, submitted that the issuance of the
cheque was not disputed. The learned courts below had rightly
applied the presumption to the present case. The accused had
failed to rebut the presumption. A proprietorship concern does
not have any legal identity, and Shankar Dass was competent to
file the complaint. The learned Trial Court had only awarded the
cheque amount, which cannot be said to be excessive. Hence, he
prayed that the present revision be dismissed.
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12. Mr Lokender Kutlehria, Ld. additional Advocate
General for the respondent State, submitted that the dispute is
between private persons and the State has no submission to
.
make.
13. I have given a considerable thought to the
submissions made at the bar and have gone through the records
carefully.
of
14. It was laid down by the Hon’ble Supreme Court in
Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204:
rt
(2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that a revisionalcourt is not an appellate court and it can only rectify the patent
defect, errors of jurisdiction or the law. It was observed at page
207-
“10. Before adverting to the merits of the contentions, at
the outset, it is apt to mention that there are concurrent
findings of conviction arrived at by two courts after adetailed appreciation of the material and evidence brought
on record. The High Court in criminal revision against
conviction is not supposed to exercise the jurisdiction likethe appellate court, and the scope of interference in
revision is extremely narrow. Section 397 of the Criminal
Procedure Code (in short “CrPC“) vests jurisdiction to
satisfy itself or himself as to the correctness, legality or
propriety of any finding, sentence or order, recorded or
passed, and as to the regularity of any proceedings of such
inferior court. The object of the provision is to set right a
patent defect or an error of jurisdiction or law. There has
to be a well-founded error which is to be determined on::: Downloaded on – 25/04/2026 09:07:59 :::CIS
8the merits of individual cases. It is also well settled that
while considering the same, the Revisional Court does not
dwell at length upon the facts and evidence of the case to
reverse those findings.
15. This position was reiterated in State of Gujarat v.
.
Dilipsinh Kishorsinh Rao, (2023) 17 SCC 688: 2023 SCC OnLine SC
1294, wherein it was observed at page 695:
“14. The power and jurisdiction of the Higher Court under
Section 397 CrPC, which vests the court with the power toof
call for and examine records of an inferior court, is for the
purposes of satisfying itself as to the legality and
regularities of any proceeding or order made in a case. The
object of this provision is to set right a patent defect or an
rt
error of jurisdiction or law or the perversity which has
crept in such proceedings.
15. It would be apposite to refer to the judgment of this
Court in Amit Kapoor v. Ramesh Chander [Amit Kapoor v.
Ramesh Chander, (2012) 9 SCC 460: (2012) 4 SCC (Civ) 687:
(2013) 1 SCC (Cri) 986], where scope of Section 397 has
been considered and succinctly explained as under: (SCC p.
475, paras 12-13)
“12. Section 397 of the Code vests the court with the
power to call for and examine the records of an
inferior court for the purposes of satisfying itself as
to the legality and regularity of any proceedings or
order made in a case. The object of this provision is
to set right a patent defect or an error of jurisdiction
or law. There has to be a well-founded error, and it
may not be appropriate for the court to scrutinise
the orders, which, upon the face of it, bear a token
of careful consideration and appear to be in
accordance with law. If one looks into the various
judgments of this Court, it emerges that the
revisional jurisdiction can be invoked where the
decisions under challenge are grossly erroneous,
there is no compliance with the provisions of law,
the finding recorded is based on no evidence,
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material evidence is ignored, or judicial discretion is
exercised arbitrarily or perversely. These are not
exhaustive classes, but are merely indicative. Each
case would have to be determined on its own merits.
13. Another well-accepted norm is that the
.
revisional jurisdiction of the higher court is a very
limited one and cannot be exercised in a routine
manner. One of the inbuilt restrictions is that it
should not be against an interim or interlocutory
order. The Court has to keep in mind that the
exercise of revisional jurisdiction itself should not
lead to injustice ex facie. Where the Court is dealing
of
with the question as to whether the charge has been
framed properly and in accordance with law in a
given case, it may be reluctant to interfere in the
exercise of its revisional jurisdiction unless the case
rt substantially falls within the categories aforestated.
Even the framing of the charge is a much-advanced
stage in the proceedings under CrPC.”
16. It was held in Kishan Rao v. Shankargouda, (2018) 8
SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC
OnLine SC 651 that it is impermissible for the High Court to
reappreciate the evidence and come to its conclusions in the
absence of any perversity. It was observed at page 169:
“12. This Court has time and again examined the scope of
Sections 397/401 CrPC and the grounds for exercising therevisional jurisdiction by the High Court. In State of Kerala
v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC
452: 1999 SCC (Cri) 275], while considering the scope of the
revisional jurisdiction of the High Court, this Court has
laid down the following: (SCC pp. 454-55, para 5)
5. … In its revisional jurisdiction, the High Court can
call for and examine the record of any proceedings
to satisfy itself as to the correctness, legality or
propriety of any finding, sentence or order. In other::: Downloaded on – 25/04/2026 09:07:59 :::CIS
10words, the jurisdiction is one of supervisory
jurisdiction exercised by the High Court for
correcting a miscarriage of justice. But the said
revisional power cannot be equated with the power
of an appellate court, nor can it be treated even as a
second appellate jurisdiction. Ordinarily, therefore,.
it would not be appropriate for the High Court to
reappreciate the evidence and come to its
conclusion on the same when the evidence has
already been appreciated by the Magistrate as wellas the Sessions Judge in appeal, unless any glaring
feature is brought to the notice of the High Court
which would otherwise amount to a grossof
miscarriage of justice. On scrutinising the impugned
judgment of the High Court from the aforesaid
standpoint, we have no hesitation in concluding
rt that the High Court exceeded its jurisdiction in
interfering with the conviction of the respondent by
reappreciating the oral evidence. …”
13. Another judgment which has also been referred to and
relied on by the High Court is the judgment of this Court in
Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke,
(2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that
the High Court, in the exercise of revisional jurisdiction,
shall not interfere with the order of the Magistrate unless
it is perverse or wholly unreasonable or there is non-
consideration of any relevant material, the order cannot
be set aside merely on the ground that another view is
possible. The following has been laid down in para 14:
(SCC p. 135)
“14. … Unless the order passed by the Magistrate is
perverse or the view taken by the court is wholly
unreasonable or there is non-consideration of any
relevant material or there is palpable misreading of
records, the Revisional Court is not justified in
setting aside the order, merely because another
view is possible. The Revisional Court is not meant
to act as an appellate court. The whole purpose of
the revisional jurisdiction is to preserve the power
in the court to do justice in accordance with the
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principles of criminal jurisprudence. The revisional
power of the court under Sections 397 to 401 CrPC is
not to be equated with that of an appeal. Unless the
finding of the court, whose decision is sought to be
revised, is shown to be perverse or untenable in law
or is grossly erroneous or glaringly unreasonable or
.
where the decision is based on no material or where
the material facts are wholly ignored or where the
judicial discretion is exercised arbitrarily or
capriciously, the courts may not interfere with the
decision in exercise of their revisional jurisdiction.”
17. This position was reiterated in Bir Singh v. Mukesh
of
Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ)
309: 2019 SCC OnLine SC 13, wherein it was observed at page 205:
rt
“16. It is well settled that in the exercise of revisional
jurisdiction under Section 482 of the Criminal ProcedureCode, the High Court does not, in the absence of
perversity, upset concurrent factual findings. It is not for
the Revisional Court to re-analyse and re-interpret the
evidence on record.
17. As held by this Court in Southern Sales & Services v.
Sauermilch Design and Handels GmbH, (2008) 14 SCC 457, it
is a well-established principle of law that the Revisional
Court will not interfere even if a wrong order is passed by a
court having jurisdiction, in the absence of a jurisdictional
error. The answer to the first question is, therefore, in the
negative.”
18. The present revision has to be decided as per the
parameters laid down by the Hon’ble Supreme Court.
19. The ingredients of an offence punishable under
Section 138 of the NI Act were explained by the Hon’ble Supreme
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Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul, 2025
SCC OnLine SC 2019 as under: –
5.1.1. In K.R. Indira v. Dr. G. Adinarayana (2003) 8 SCC 300,
.
this Court enlisted the components, aspects and the acts,
the concatenation of which would make the offence under
Section 138 of the Act complete, to be these (i) drawing of
the cheque by a person on an account maintained by him
with a banker, for payment to another person from out of
that account for discharge in whole/in part of any debt or
liability, (ii) presentation of the cheque by the payee or the
holder in due course to the bank, (iii) returning the cheque
of
unpaid by the drawee bank for want of sufficient funds to
the credit of the drawer or any arrangement with the
banker to pay the sum covered by the cheque, (iv) giving
notice in writing to the drawer of the cheque within 15
rt
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 make payment 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.
20. It was submitted that the complaint was filed in the
name of Shankar Dass, but the cheque was issued in the name of
M/s Shankar Dass and Sons; hence, the complaint was not filed
by the payee and it was not maintainable. This submission
cannot be accepted. It was laid down by the Hon’ble Supreme
Court in Shankar Finance & Investments v. State of A.P., (2008) 8
SCC 536: (2008) 3 SCC (Cri) 558: 2008 SCC OnLine SC 997, that
there is no distinction in law between a proprietary concern and
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an individual trading under a trading name. It was observed at
page 540: –
10. As contrasted with a company incorporated under the
.
Companies Act, 1956, which is a legal entity distinct from
its shareholders, a proprietary concern is not a legal entity
distinct from its proprietor. A proprietary concern is
nothing but an individual trading under a trade name. In
civil law, where an individual carries on business in a
name or style other than his name, he cannot sue in the
trading name but must sue in his name, though others can
sue him in the trading name. Therefore, if the appellant in
of
this case had to file a civil suit, the proper description of
the plaintiff should be “Atmakuri Sankara Rao carrying on
business under the name and style of M/s Shankar Finance
& Investments, a sole proprietary concern. But we are not
rt
dealing with a civil suit. We are dealing with a criminal
complaint to which the special requirements of Section
142 of the Act apply. Section 142 requires that the
complainant should be the payee. The payee is M/s
Shankar Finance & Investments. Therefore, in a criminal
complaint relating to an offence under Section 138 of the
Act, it is permissible to lodge the complaint in the name of
the proprietary concern itself.
11. The next question is where a proprietary concern
carries on business through an attorney holder, and
whether the attorney holder can lodge the complaint. The
attorney holder is the agent of the grantor. When the
grantor authorises the attorney holder to initiate legal
proceedings and the attorney holder accordingly initiates
legal proceedings, he does so as the agent of the grantor,
and the initiation is by the grantor represented by his
attorney holder, and not by the attorney holder in his
personal capacity. Therefore where the payee is a
proprietary concern, the complaint can be filed: (i) by the
proprietor of the proprietary concern, describing himself
as the sole proprietor of the “payee”; (ii) the proprietary
concern, describing itself as a sole proprietary concern,
represented by its sole proprietor; and (iii) the proprietor
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or the proprietary concern represented by the attorney
holder under a power of attorney executed by the sole
proprietor. It follows that in this case, the complaint could
have been validly filed by describing the complainant in
any one of the following four methods:
.
“Atmakuri Shankara Rao, sole proprietor of M/s
Shankar Finance & Investments”
or
“M/s Shankar Finance & Investments, a sole
proprietary concern represented by its proprietor,
Atmakuri Shankara Rao”
of
or
“Atmakuri Shankara Rao, sole proprietor of M/s
Shankar Finance & Investments, represented by his
rt attorney holder Thamada Satyanarayana”
or
“M/s Shankar Finance & Investments, a proprietary
concern of Atmakuri Shankara Rao, represented by
his attorney, holder Thamada Satyanarayana.
What would have been improper is for the attorney holder
Thamada Satyanarayana to file the complaint in his own
name as if he was the complainant.”
21. A similar view was taken in Nexus Health & Beauty
Care (P) Ltd. v. National Electrical Office, 2012 SCC OnLine HP 5383,
wherein it was observed: –
“26. The complaint is not happily worded. No doubt, in
the memo of parties, the complainant has referred to the
complainant’s ‘M/s National Electrical Office’, but in para
2, it has been pleaded that the complainant is providing
services of Industrial Electrical fitting under the name and
style of ‘National Electrical’. Again, in the memo of
parties, Subhash Bharwal has been referred to as
proprietor, but in para 1 of the complaint, the complainant
has described itself as a firm. In evidence by way of
affidavit Ex.CW-1/A, it has been stated that the::: Downloaded on – 25/04/2026 09:07:59 :::CIS
15complainant is providing services of Industrial Electrical
fitting under the name and style of ‘National Electrical’.
Subhash Pharwal is its sole proprietor. The cheque Ex.C-1
has been issued in the name of ‘National Electricals’. The
complaint is loosely drafted. But in the complaint, the
complainant has described itself as ‘National Electrical’ in.
the body of the complaint.
27. On the face of the complaint and affidavit, Ex. CW-1/A,
prima facie, it cannot be said that the complainant is afirm, namely M/s National Electrical Office. The
complainant in the body of the complaint has described
the complainant as ‘National Electrical’, a soleof
proprietorship concern of Subhash Bharwal. It will be too
technical to throw out the complaint due to loose drafting.
At this stage, if the pleadings of the petition are seen, the
petition is also not less loosely drafted. It starts with the
rt
sentence ‘complainant issued a cheque for Rs. 2.00 lacs’.
The complainant did not issue a cheque of Rs. 2,00,000/-.
The cheque was allegedly issued by the accusedpetitioners. Not only in the opening para of the petition,
but in other places also, the petitioners have used loose
expressions. In para 3 of the petition before grounds, it
has been pleaded that the “complainant aggrieved anddissatisfied with the order summoning the accused and
taking cognisance of the case by the Judicial Magistrate,
files this petition”. The substance of the complaint orpetition is to be seen, and it should not be thrown out
merely on technicalities of loose drafting. It emerges fromthe complaint that the complainant is the ‘National
Electrical’ sole proprietorship concern of Subhash
Bharwal. In view of Milind Shripad Chandurkar (supra), itcannot be said that the complaint is not maintainable.”
22. In the present case, the complainant had specifically
stated in para 1 of his proof affidavit that he is a proprietor of M/s
Shankar Dass and Sons. The accused also admitted this fact in his
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statement recorded under Section 313 CrPC. Hence, the
complaint was rightly filed by Shankar Dass.
23. It was submitted that the courts at Mandi had no
.
jurisdiction to hear and entertain the present complaint as the
cheque was dishonoured at Kullu. Reliance was placed upon the
judgment of the Hon’ble Supreme Court in Dashrath Rupsingh
Rathod v. State of Maharashtra, (2014) 9 SCC 129, in support of this
of
submission. This submission cannot be accepted. The legislature
amended Section 142 of the NI Act and conferred jurisdiction
rt
upon the Courts where the complainant’s bank is located and the
notice of dishonour is communicated. It was laid down by the
Hon’ble Supreme Court in Bridgestone India (P) Ltd. v. Inderpal
Singh, (2016) 2 SCC 75: 2015 SCC OnLine SC 1301 that the Courts at
place where the account of the accused is located will have
territorial jurisdiction. It was observed at page 80:
“13. A perusal of the amended Section 142(2), extracted
above, leaves no room for any doubt, specially in view ofthe Explanation thereunder, that with reference to an
offence under Section 138 of the Negotiable Instruments
Act, 1881, the place where a cheque is delivered for
collection i.e. the branch of the bank of the payee or holder
in due course, where the drawee maintains an account,
would be determinative of the place of territorial
jurisdiction.
14. It is, however, imperative for the present controversy
that the appellant overcomes the legal position declared::: Downloaded on – 25/04/2026 09:07:59 :::CIS
17by this Court, as well as the provisions of the Code of
Criminal Procedure. Insofar as the instant aspect of the
matter is concerned, a reference may be made to Section 4
of the Negotiable Instruments (Amendment) Second
Ordinance, 2015, whereby Section 142-A was inserted into
the Negotiable Instruments Act. A perusal of sub-section.
(1) thereof leaves no room for any doubt, that insofar as
the offence under Section 138 of the Negotiable
Instruments Act is concerned, on the issue of jurisdiction,
the provisions of the Code of Criminal Procedure, 1973,would have to give way to the provisions of the instant
enactment on account of the non obstante clause in sub-
section (1) of Section 142-A. Likewise, any judgment,
of
decree, order or direction issued by a court would have no
effect insofar as the territorial jurisdiction for initiating
proceedings under Section 138 of the Negotiable
Instruments Act is concerned. In the above view of the
rt
matter, we are satisfied that the judgment rendered by
this Court in Dashrath Rupsingh Rathod case [Dashrath
Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 :
(2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673] would also
not non-suit the appellant for the relief claimed.
15. We are in complete agreement with the contention
advanced at the hands of the learned counsel for the
appellant. We are satisfied, that Section 142(2)(a),
amended through the Negotiable Instruments
(Amendment) Second Ordinance, 2015, vests jurisdiction
for initiating proceedings for the offence under Section
138 of the Negotiable Instruments Act, inter alia, in the
territorial jurisdiction of the court, where the cheque is
delivered for collection (through an account of the branch
of the bank where the payee or holder in due course
maintains an account). We are also satisfied, based on
Section 142-A(1) to the effect, that the judgment rendered
by this Court in Dashrath Rupsingh Rathod case [Dashrath
Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 :
(2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673], would not
stand in the way of the appellant, insofar as the territorial
jurisdiction for initiating proceedings emerging from the
dishonour of the cheque in the present case arises.
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16. Since Cheque No. 1950, in the sum of Rs 26,958, drawn
on Union Bank of India, Chandigarh, dated 2-5-2006, was
presented for encashment at IDBI Bank, Indore, which
intimated its dishonour to the appellant on 4-8-2006, we
are of the view that the Judicial Magistrate, First Class,
Indore, would have the territorial jurisdiction to take
.
cognizance of the proceedings initiated by the appellant
under Section 138 of the Negotiable Instruments Act, 1881,
after the promulgation of the Negotiable Instruments
(Amendment) Second Ordinance, 2015. The words “… as if
that sub-section had been in force at all material times…”
used with reference to Section 142(2), in Section 142-A(1),
give retrospectivity to the provision.
of
24. This position was reiterated in Yogesh Upadhyay v.
Atlanta Ltd., (2023) 19 SCC 404: 2023 SCC OnLine SC 170, wherein it
rt
was observed at page 408:
12. Perusal of the Statement of Objects and Reasons in
Amendment Act 26 of 2015 makes it amply clear that
insertion of Sections 142(2) and 142-A in the 1881 Act was
a direct consequence of the judgment of this Court inDashrath Rupsingh Rathod [Dashrath Rupsingh Rathod v.
State of Maharashtra, (2014) 9 SCC 129 : (2014) 4 SCC (Civ)
676 : (2014) 3 SCC (Cri) 673]. Therefore, the use of thephrase: “shall be inquired into and tried only by a court
within whose local jurisdiction …” in Section 142(2) of the1881 Act is contextual to the ratio laid down in Dashrath
Rupsingh Rathod [Dashrath Rupsingh Rathod v. State of
Maharashtra, (2014) 9 SCC 129 : (2014) 4 SCC (Civ) 676 :
(2014) 3 SCC (Cri) 673] to the contrary, whereby territorial
jurisdiction to try an offence under Section 138 of the 1881
Act vested in the court having jurisdiction over the drawee
bank and not the complainant’s bank where he had
presented the cheque. Section 142(2) now makes it clear
that the jurisdiction to try such an offence would vest only
in the court within whose jurisdiction the branch of the
Bank where the cheque was delivered for collection,
through the account of the payee or holder in due course,::: Downloaded on – 25/04/2026 09:07:59 :::CIS
19is situated. The newly inserted Section 142-A further
clarifies this position by validating the transfer of pending
cases to the courts conferred with such jurisdiction after
the amendment.
13. The later decision of this Court in Bridgestone India (P)
.
Ltd. v. Inderpal Singh [Bridgestone India (P) Ltd. v. Inderpal
Singh, (2016) 2 SCC 75 : (2016) 1 SCC (Civ) 588 : (2016) 1 SCC
(Cri) 472] affirmed the legal position obtaining after the
amendment of the 1881 Act and endorsed that Section
142(2)(a) of the 1881 Act vests jurisdiction for initiating
proceedings for an offence under Section 138 in the court
where the cheque is delivered for collection i.e. through an
of
account in the branch of the bank where the payee or
holder in due course maintains an account. This Court also
affirmed that Dashrath Rupsingh Rathod [Dashrath
Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 :
rt
(2014) 4 SCC (Civ) 676: (2014) 3 SCC (Cri) 673] would not
non-suit the company insofar as territorial jurisdiction
for initiating proceedings under Section 138 of the 1881Act was concerned.
14. Therefore, institution of the first two complaint cases
before the courts at Nagpur is in keeping with the legal
position obtaining now.
25. The complainant presented the cheque before his
bank at Mandi, and the communication of dishonour was also
conveyed to him at Mandi. Therefore, the courts at Mandi were
competent to entertain the present complaint.
26. It was submitted that the complainant failed to
implead M/s Mahalakshmi Traders and the complaint is not
maintainable. This submission cannot be accepted. It is not
disputed that M/s Mahalakshmi Traders is a proprietorship
concern; hence, it is not a juristic entity as per the judgment of
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
20
the Hon’ble Supreme Court in Shankar Finance (supra). It was
laid down in Parvesh Kaur v. State of Punjab, 2022 SCC OnLine P&H
4065, that a proprietorship concern has no legal identity and
.
cannot be impleaded as a party. It was observed: –
“8. Furthermore, in fact, the law as enunciated by the
Hon’ble Supreme Court of India in the case of RaghuLakshminarayanan v. Fine Tubes (2007) 5 SCC 103, draws a
clear distinction emerging therefrom that only the
proprietor can be held liable under Section 138 of the Act,of
as the proprietorship concern has no separate legal
identity, it means and includes sole proprietor and vice
versa. Thus, a sole proprietorship firm would not fall
within the ambit and scope of Section 141 of the Act, the
rt
proprietor and the firm being one and the same. The para
as relevant reads thus: —
“It is a settled position in law that the concept of
vicarious liability introduced in the Negotiable
Instruments Act is attracted only against the Directors,
partners or other persons in charge and control of thebusiness of the company, or otherwise responsible for
its affairs. Section 141 of the NI Act not covers within
its ambit the proprietary concern. The proprietaryconcern is not a juristic person so as to attract the
concept of vicarious liability. The concept of vicariousliability is attracted only in the case of a juristic
person, such as a company registered under the
provisions of the Companies Act, 1956, a partnershipfirm registered under the provisions of the Partnership
Act, 1932 or an association of persons, which
ordinarily would mean a body of persons which is not
incorporated under any statute. The proprietary
concern stands absolutely on a different footing. A
person may carry on a business in the name of the
business concern, being the proprietor of such
proprietary concern. In such a case, the proprietor of a
proprietary concern alone can be held responsible for::: Downloaded on – 25/04/2026 09:07:59 :::CIS
21the conduct of business carried on in the name of such
proprietary concern. Therefore, Section 141 of the
Negotiable Instruments Act has no applicability in a
case involving the offence committed by a proprietary
concern.”
.
9. Still further, in M. M. Lal v. State NCT of Delhi, 2012 (4)
JCC 284, the High Court of Delhi, while following the
dictum of the Hon’ble Supreme Court of India, held that
“it is well settled that a sole proprietorship firm has no
separate legal identity and, in fact, is a business name
of the sole proprietor. Thus, any reference to a sole
proprietorship firm means and includes the sole
of
proprietor thereof and vice versa. Sole proprietorship
firm would not fall within the ambit and scope of
Section 141 of the Act, which envisages that if the
person committing an offence under Section 138 is a
rt
company, every person who, at the time of offence was
committed, was in charge of, and was responsible to
the company for the conduct of the business of the
company, as well as the company, shall be deemed to
be guilty of the offence and shall be liable to be
proceeded against and punished accordingly. The
company includes a partnership firm and any other
association of individuals. The sole proprietorship firm
would not fall within the meaning of a partnership
firm or association of individuals. Thus, in the case of a
proprietorship concern, only the proprietor can be
held liable under Section 138 NI Act as the
proprietorship concern and the proprietor are one and
the same.”
10. In view of the law as enunciated above, there was no
legal requirement of the proprietorship firm to have been
arrayed as an accused.
27. A similar view was taken by the Allahabad High Court
in Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, and it
was held that a proprietorship concern is not a juristic person
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
22
that can be impleaded under Section 141 of the Negotiable
Instruments Act. It was observed: –
“10. A plain reading of the provision makes it clear that if
.
the person committing the offence is a “company”, in that
event every natural person responsible for such
commission, as also the artificial person, namely the
company, shall be deemed to be guilty of the offence andbe liable to be proceeded against and punished
accordingly. Also, certain other natural persons may be
held guilty, if so proved.
of
11. Perusal of the registration of the firm, Annexure
no. 1, it transpires that the petitioner is the
proprietor of the firm, namely M/S. Rashmi
rt Arosole& Chemical Avas Vikas Colony, Sector 10,
Sikandara Agra. Perusal of the registration
certificate of the firm, petitioner Dhirendra Singh, is
the proprietor of the firm, and it is clear that this is asole proprietorship firm. Thus, the main question
arises whether in a sole proprietorship firm
indictment of the firm arraign as a party is
necessary or not.
12. Thus, the phrase “association of individuals”
necessarily requires such an entity to be constituted
by two or more individuals, i.e. natural persons. On
the contrary, a sole-proprietorship concern, by its
very description, does not allow for ownership to be
shared or be joint, and it defines, restricts and
dictates the ownership to remain with one person
only. Thus, “associations of individuals” are
absolutely opposed to sole-proprietorship concerns,
in that sense and aspect.
13. A ‘partnership’, on the other hand, is a
relationship formed between persons who willfully
form such a relationship with each other.
Individually, in the context of that relationship, they
are called ‘partners’, and collectively, they are called
the ‘firm’, while the name under which they set up
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
23
and conduct their business/activity (under such
relationship) is called their ‘firm name’.
14. While a partnership results in the collective
identity of a firm coming into existence, a
proprietorship is nothing more than a cloak or a
.
trading name acquired by an individual or a person
for the purpose of conducting a particular activity.
With or without such a trade name, it (sole
proprietary concern) remains identified to the
individual who owns it. It does not bring to life any
new or other legal identity or entity. No rights or
liabilities arise or are incurred by any person
of
(whether natural or artificial), except that otherwise
attach to the natural person who owns it. Thus, it is
only a ‘concern’ of the individual who owns it. The
trade name remains the shadow of the natural
rt
person or a mere projection or an identity that
springs from and vanishes with the individual. It has
no independent existence or continuity.
15. In the context of an offence under section 138 of
the Act, by virtue of Explanation (b) to section 141 of
the Act, only a partner of a ‘firm’ has been
artificially equated to a ‘director’ of a ‘company’. Its
a legal fiction created in a penal statute. It must be
confined to the limited to the purpose for which it
has been created. Thus, a partner of a ‘firm’ entails
the same vicarious liability towards his ‘firm’ as a
director does towards his ‘company’, though a
partnership is not an artificial person. So also, upon
being thus equated, the partnership ‘firm’ and its
partner/s has/have to be impleaded as an accused
person in any criminal complaint that may be filed
alleging offence committed by the firm. However,
there is no indication in the statute to stretch that
legal fiction to a sole proprietary concern.
16. Besides, in the case of a sole proprietary concern,
there are no two persons in existence. Therefore, no
vicarious liability may ever arise on any other
person. The identity of the sole proprietor and that
of his ‘concern’ remain one, even though the sole
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
24
proprietor may adopt a trade name different from
his own, for such ‘concern’. Thus, even otherwise,
conceptually, the principle contained in section 141
of the Act is not applicable to a sole-proprietary
concern.”
.
28. The accused did not dispute his signature or the
issuance of the cheque in his statement recorded under Section
313 of Cr.P.C. He claimed that a blank cheque was issued. It was
laid down by the Hon’ble Supreme Court in APS Forex Services (P)
of
Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, that
when the issuance of a cheque and signature on the cheque are
rt
not disputed, a presumption would arise that the cheque was
issued in discharge of the legal liability. It was observed: –
“9. Coming back to the facts in the present case and
considering the fact that the accused has admitted theissuance 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 andpayable, there is a presumption under Section 139 of the
NI Act that there exists a legally enforceable debt orliability. Of course, such a presumption is rebuttable.
However, to rebut the presumption, the accused wasrequired 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 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 courts below have materially erred in
not properly appreciating and considering the::: Downloaded on – 25/04/2026 09:07:59 :::CIS
25presumption 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 reverse onus clause and therefore,
once the issuance of the cheque has been admitted and
even the signature on the cheque has been admitted, thereis 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 presumptionof
by leading evidence.”
29. It was laid down in N. Vijay Kumar v. Vishwanath Rao
N., 2025 SCC OnLine SC 873, wherein it was held as under:
rt
“6. Section 118 (a) assumes that every negotiableinstrument is made or drawn for consideration, while
Section 139 creates a presumption that the holder of a
cheque has received the cheque in discharge of a debt or
liability. Presumptions under both are rebuttable,meaning they can be rebutted by the accused by raising a
probable defence.”
30. A similar view was taken in Sanjabij Tari v. Kishore S.
Borcar, 2025 SCC OnLine SC 2069, wherein it was observed:
“ONCE EXECUTION OF A CHEQUE IS ADMITTED,
PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI
ACT ARISE
15. In the present case, the cheque in question has
admittedly been signed by the Respondent No. 1-Accused.
This Court is of the view that once the execution of the
cheque is admitted, the presumption under Section 118 of
the 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::: Downloaded on – 25/04/2026 09:07:59 :::CIS
26cheque 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 in Krishna 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, the initial onus of proving that the cheque is not
of
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].
31. Thus, the Court has to start with the presumption
rt
that the cheque was issued in discharge of the liability for
consideration, and the burden is upon the accused to rebut this
presumption.
32. The complainant stated in his cross-examination
that he had not produced any documents regarding the sale of
the confectionery. It was submitted that the existence of
debt/liability was not proved. This submission cannot be
accepted. It was laid down by the Hon’ble Supreme Court in
Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: 2019 SCC
OnLine SC 1361, that a presumption under Section 139 of the NI
Act would obviate the requirement to prove the existence of
consideration. It was observed:
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
27
“20. Th̨ e trial court and the High Court proceeded as if the
appellant was to prove a debt before the civil court,
wherein the plaintiff is required to prove his claim on the
basis of evidence to be laid in support of his claim for the
recovery of the amount due. An dishonour of a cheque
carries a 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 presumption of consideration, the burden is onthe accused to rebut the presumption that the cheque was
issued not for any debt or other liability.”
of
33. This position was reiterated in Ashok Singh v. State of
U.P., 2025 SCC OnLine SC 706, wherein it was observed:
rt
“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 the said amount which was given to the
accused and also the date and time of the payment madeto the accused, including the 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 to pay the
amount so claimed by him to have been given as a loan to
the accused, only then would the complainant would 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 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
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
28
(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 not make 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-chief and cross-
examination, by the appellant with regard to withdrawing
the money from the bank for giving it to the accused has
been disbelieved, whereas the argument on behalf of the
accused that he had not received any payment of any loan
amount has been accepted. In our decision in S. S.
Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we
of
opined:
‘8. From the order impugned, it is clear that though the
contention of the petitioners was that the said amounts
rt were given for producing a film and were not by way of
return of any loan taken, which may have been a
probable defence for the petitioners in the case, butrightly, the High Court has taken the view that evidence
had to be adduced on this point which has not been
done by the petitioners. Pausing here, the Court would
only comment that the reasoning of the High Court, aswell 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 thecomplainant in such a case, for the plea of defence has
to be buttressed by evidence, either oral ordocumentary, 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 moneygiven 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 led to show that the respondent
lacked capacity to provide the amount(s) in question.
In this regard, we may make profitable reference to the::: Downloaded on – 25/04/2026 09:07:59 :::CIS
29decision 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 thestatutory notice sent, that the complainant did not
have the wherewithal, it cannot be expected of the
complainant to initially lead evidence to show thatof
he had the financial capacity. To that extent, the
courts in our view were right in holding on those
lines. However, the accused has the right to
demonstrate that the complainant in a particular
rt case did not have the capacity and therefore, the
case of the accused is acceptable, which he can do
by producing independent materials, namely, byexamining his witnesses and producing documents.
It is also open to him to establish the very same
aspect by pointing to the materials produced by the
complainant himself. He can further, moreimportantly, further achieve this result through the
cross-examination of the witnesses of the
complainant. Ultimately, it becomes the duty of thecourts to consider carefully and appreciate the
totality of the evidence and then come to aconclusion whether, in the given case, the accused
has shown that the case of the complainant is in
peril for the reason that the accused has establisheda probable defence.'(emphasis supplied)’
(underlining in original; emphasis supplied by
us in bold).
34. A similar view was taken in Sanjay Sanjabij Tari v.
Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was
observed:
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
30
“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 139 of the NI Act and are treating the proceedings
under the NI Act as another civil recovery proceedings and
are directing the complainant to prove the antecedent debt.
or liability. This Court is of the view that such an approach
is not only prolonging the trial but is also contrary to the
mandate of Parliament, namely, that the drawer and the
bank must honour the cheque; otherwise, trust in chequeswould be irreparably damaged.”
35. Therefore, the complaint cannot be dismissed
of
because no document of sale was produced on record.
36. The accused claimed that the cheque was issued as
rt
security. Learned Courts below had rightly held that even if a
cheque was issued as a security, the accused would be liable for
the dishonour of the security cheque. It was laid down by this
Court in Hamid Mohammad Versus Jaimal Dass 2016 (1) HLJ 456,
that even if the cheque is issued towards the security, the
accused is liable. It was observed:
“9. Submission of learned Advocate appearing on behalf
of the revisionist that the cheque in question was issued tothe complainant as security, and on this ground, the
criminal revision petition is rejected as being devoid of
any force for the reasons hereinafter mentioned. As per
Section 138 of the Negotiable Instruments Act 1881, if any
cheque is issued on account of other liability, then the
provisions of Section 138 of the Negotiable Instruments
Act 1881 would be attracted. The court has perused the
original cheque, Ext. C-1 dated 30.10.2008, placed on
record. There is no recital in the cheque Ext. C-1, that
cheque was issued as a security cheque. It is well-settled::: Downloaded on – 25/04/2026 09:07:59 :::CIS
31law that a cheque issued as security would also come
under the provisions of Section 138 of the Negotiable
Instruments Act 1881. See 2016 (3) SCC page 1 titled Don
Ayengia v. State of Assam & another. It is well-settled law
that where there is a conflict between former law and
subsequent law, then subsequent law always prevails.”
.
37. It was laid down by the Hon’ble Supreme Court in
Sampelly Satyanarayana Rao vs. Indian Renewable Energy
Development Agency Limited 2016(10) SCC 458 that issuing a
cheque toward security will also attract the liability for the
of
commission of an offence punishable under Section 138 of the NI
Act. It was observed: –
rt
“10. We have given due consideration to the submissionadvanced on behalf of the appellant as well as the
observations of this Court in Indus Airways Private Limited
versus Magnum Aviation Private Limited (2014) 12 SCC 53
with reference to the explanation to Section 138 of the Actand the expression “for the discharge of any debt or other
liability” occurring in Section 138 of the Act. We are of the
view that the question of whether a post-dated cheque isfor “discharge of debt or liability” depends on the nature
of the transaction. If on the date of the cheque, liability ordebt exists or the amount has become legally recoverable, the
Section is attracted and not otherwise.
11. Reference to the facts of the present case clearly shows
that though the word “security” is used in clause 3.1(iii) of
the agreement, the said expression refers to the cheques
being towards repayment of instalments. The repayment
becomes due under the agreement, the moment the loan
is advanced, and the instalment falls due. It is undisputed
that the loan was duly disbursed on 28th February 2002,
which was prior to the date of the cheques. Once the loan
was disbursed and instalments had fallen due on the date
of the cheque as per the agreement, the dishonour of such::: Downloaded on – 25/04/2026 09:07:59 :::CIS
32cheques would fall under Section 138 of the Act. The
cheques undoubtedly represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly
distinguishable. As already noted, it was held therein that
liability arising out of a claim for breach of contract under.
Section 138, which arises on account of dishonour of a
cheque issued, was not by itself at par with a criminal
liability towards discharge of acknowledged and admitted
debt under a loan transaction. Dishonour of a cheque
issued for the discharge of a later liability is clearly
covered by the statute in question. Admittedly, on the date
of the cheque, there was a debt/liability in praesenti in
of
terms of the loan agreement, as against the case of Indus
Airways (supra), where the purchase order had been
cancelled, and a cheque issued towards advance payment
for the purchase order was dishonoured. In that case, it
rt
was found that the cheque had not been issued for the
discharge of liability but as an advance for the purchase
order, which was cancelled. Keeping in mind this fine, but
the real distinction, the said judgment cannot be applied
to a case of the present nature, where the cheque was for
repayment of a loan instalment which had fallen due,
though such a deposit of cheques towards repayment of
instalments was also described as “security” in the loan
agreement. In applying the judgment in Indus Airways
(supra), one cannot lose sight of the difference between a
transaction of the purchase order which is cancelled and
that of a loan transaction where the loan has actually been
advanced, and its repayment is due on the date of the
cheque.
13. The crucial question to determine the applicability of
Section 138 of the Act is whether the cheque represents the
discharge of existing enforceable debt or liability, or
whether it represents an advance payment without there
being a subsisting debt or liability. While approving the
views of different High Courts noted earlier, this is the
underlying principle as can be discerned from the
discussion of the said cases in the judgment of this Court.”
(Emphasis supplied)
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
33
38. This position was reiterated in Sripati Singh v. State of
Jharkhand, 2021 SCC OnLine SC 1002: AIR 2021 SC 5732, and it was
held that a cheque issued as security is not waste paper and a
.
complaint under section 138 of the NI Act can be filed on its
dishonour. It was observed:
“17. A cheque issued as security pursuant to a financial
transaction cannot be considered a worthless piece of
paper under every circumstance. ‘Security’ in its trueof
sense is the state of being safe, and the security given for a
loan is something given as a pledge of payment. It is given,
deposited or pledged to make certain the fulfilment of an
obligation to which the parties to the transaction are
rt
bound. If in a transaction, a loan is advanced and the
borrower agrees to repay the amount in a specifiedtimeframe and issues a cheque as security to secure such
repayment; if the loan amount is not repaid in any other
form before the due date or if there is no other
understanding or agreement between the parties to deferthe payment of the amount, the cheque which is issued as
security would mature for presentation and the drawee of
the cheque would be entitled to present the same. On such
a presentation, if the same is dishonoured, theconsequences contemplated under Section 138 and the
other provisions of the NI Act would flow.
18. When a cheque is issued and is treated as ‘security’
towards repayment of an amount with a time period beingstipulated for repayment, all that it ensures is that such a
cheque, which is issued as ‘security, cannot be presented
prior to the loan or the instalment maturing for
repayment towards which such cheque is issued as
security. Further, the borrower would have the option of
repaying the loan amount or such financial liability in any
other form, and in that manner, if the amount of the loan
due and payable has been discharged within the agreed
period, the cheque issued as security cannot thereafter be
presented. Therefore, the prior discharge of the loan or::: Downloaded on – 25/04/2026 09:07:59 :::CIS
34there being an altered situation due to which there would
be an understanding between the parties is a sine qua non
to not present the cheque which was issued as security.
These are only the defences that would be available to the
drawer of the cheque in proceedings initiated under
Section 138 of the NI Act. Therefore, there cannot be a.
hard and fast rule that a cheque, which is issued as
security, can never be presented by the drawee of the
cheque. If such is the understanding, a cheque would also
be reduced to an ‘on-demand promissory note’, and in allcircumstances, it would only be civil litigation to recover
the amount, which is not the intention of the statute.
When a cheque is issued even though as ‘security’ theof
consequence flowing therefrom is also known to the
drawer of the cheque and in the circumstance stated above
if the cheque is presented and dishonoured, the holder of
the cheque/drawee would have the option of initiating the
rt
civil proceedings for recovery or the criminal proceedings
for punishment in the fact situation, but in any event, it isnot for the drawer of the cheque to dictate terms with
regard to the nature of litigation.”
39. The accused did not step into the witness box to
establish this version. It was held in Sumeti Vij v. Paramount Tech
Fab Industries, (2022) 15 SCC 689: 2021 SCC OnLine SC 201 that the
accused has to lead defence evidence to rebut the presumption
and mere denial in his statement under section 313 of Cr.P.C. is
not sufficient to rebut the presumption. It was observed at page
700:
“20. That apart, when the complainant exhibited all these
documents in support of his complaints and recorded the
statement of three witnesses in support thereof, the
appellant recorded her statement under Section 313 of the
Code but failed to record evidence to disprove or rebut the
presumption in support of her defence available under::: Downloaded on – 25/04/2026 09:07:59 :::CIS
35Section 139 of the Act. The statement of the accused recorded
under Section 313 of the Code is not substantive evidence of
defence, but only an opportunity for the accused to explain the
incriminating circumstances appearing in the prosecution’s
case against the accused. Therefore, there is no evidence to
rebut the presumption that the cheques were issued for.
consideration.” (Emphasis supplied)”
40. Therefore, the plea taken by the accused that the
cheque was issued as security was not established.
41. There is no other evidence to rebut the presumption
of
attached to the cheque, and the learned Courts below had rightly
held that the accused had failed to rebut the presumption
rt
attached to the cheque.
42. The complainant stated that the cheque had been
dishonoured with the endorsement “insufficient funds”. This
was duly proved by memo (Ex.C3) wherein the reason of
dishonour was mentioned as “insufficient funds.” 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 burden is upon the
accused to rebut the presumption. It was observed at page 95:
24. Section 146, making a major departure from the
principles of the Evidence Act, provides that the bank’s
slip or memo with the official mark showing that the
cheque was dishonoured would, by itself, give rise to the::: Downloaded on – 25/04/2026 09:07:59 :::CIS
36presumption of dishonour of the cheque, unless and until
that fact was disproved. Section 147 makes the offences
punishable under the Act compoundable.
43. In the present case, no evidence was produced to
.
rebut the presumption, and the learned Courts below had rightly
held that the cheque was dishonoured with an endorsement
‘insufficient funds.’
44. The complainant stated in his proof affidavit (Ex.
of
CW2/A) that the registered letter containing the notice was duly
served upon the accused. This was not challenged in the cross-
rt
examination. The accused denied that he had received the notice.
In any case, it was laid down in C.C. Allavi Haji vs. Pala Pelly Mohd.
2007(6) SCC 555, that the person who claims that he had not
received the notice has to pay the amount within 15 days from
the date of the receipt of the summons from the Court and in
case of failure to do so, he cannot take the advantage of the fact
that notice was not received by him. It was observed:
“It is also to be borne in mind that the requirement of
giving notice is a clear departure from the rule of
Criminal Law, where there is no stipulation of giving
notice before filing a complaint. Any drawer who claims
that he did not receive the notice sent by post, can, within 15
days of receipt of summons from the court in respect of the
complaint under Section 138 of the Act, make payment of the
cheque amount and submit to the Court that he had made
payment within 15 days of receipt of summons (by receiving
a copy of the complaint with the summons) and, therefore,::: Downloaded on – 25/04/2026 09:07:59 :::CIS
37the complaint is liable to be rejected. A person who does not
pay within 15 days of receipt of the summons from the Court
along with the copy of the complaint under Section 138 of the
Act, cannot obviously contend that there was no proper
service of notice as required under Section 138, by ignoring
statutory presumption to the contrary under Section 27 of the.
G.C. Act and Section 114 of the Evidence Act. In our view, any
other interpretation of the proviso would defeat the very
object of the legislation. As observed in Bhaskaran’s case
(supra), if the giving of notice in the context of Clause (b)of the proviso was the same as the receipt of notice, a
trickster cheque drawer would get the premium to avoid
receiving the notice by adopting different strategies andof
escape from the legal consequences of Section 138 of the
Act.” (Emphasis supplied)
45. The accused did not claim that he had repaid the
rt
amount to the complainant; therefore, it was duly proved on
record that the accused had failed to repay the amount despite
the receipt of the notice.
46. Therefore, it was duly proved before the learned Trial
Court that the accused had issued a cheque to discharge his legal
liability, the cheque was dishonoured with an endorsement
‘insufficient funds’, and the accused failed to pay the money
despite the receipt of a notice of demand. Hence, all the
ingredients of the offence punishable under Section 138 of the NI
Act were duly satisfied, and the learned Trial Court had rightly
convicted the accused for the commission of the offence
punishable under Section 138 of the NI Act.
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38
47. Learned Trial Court sentenced the accused to undergo
simple imprisonment for six months and pay compensation of
₹50,000/- to the complainant. It was laid down by the Hon’ble
.
Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197:
(2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC
138 that the penal provision of section 138 is deterrent in nature.
It was observed at page 203:
of
“6. The object of Section 138 of the Negotiable
Instruments Act is to infuse credibility into negotiable
instruments, including cheques, and to encourage and
rt
promote the use of negotiable instruments, including
cheques, in financial transactions. The penal provision of
Section 138 of the Negotiable Instruments Act is intendedto be a deterrent to callous issuance of negotiable
instruments such as cheques without serious intention to
honour the promise implicit in the issuance of the same.”
48. Keeping in view the deterrent nature of the
punishment, the sentence of six months cannot be said to be
excessive.
49. The learned Trial Court awarded the compensation of
₹50,000/-, which is the cheque amount. The complainant lost
money that it would have gained by lending the money to
someone. It had to engage a counsel to prosecute the complaint
filed by him. Therefore, it was entitled to be compensated for its
loss. It was laid down by the Hon’ble Supreme Court in Kalamani
::: Downloaded on – 25/04/2026 09:07:59 :::CIS
39
Tex v. P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25:
(2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 that the Courts
should uniformly levy a fine up to twice the cheque amount
.
along with simple interest at the rate of 9% per annum. It was
observed at page 291: –
19. As regards the claim of compensation raised on behalf
of the respondent, we are conscious of the settled
principles that the object of Chapter XVII of NIA is not onlyof
punitive but also compensatory and restitutive. The
provisions of NIA envision a single window for criminal
liability for the dishonour of a cheque as well as civil
liability for the realisation of the cheque amount. It is also
rt
well settled that there needs to be a consistent approach
towards awarding compensation, and unless there existspecial circumstances, the courts should uniformly levy
fines up to twice the cheque amount along with simple
interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260,
para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]”
50. Thus, the amount of ₹ 50,000/-cannot be said to be
excessive.
51. No other point was urged.
52. In view of the above, the present revision petition
fails, and it is dismissed.
53. The present revision petition stands disposed of, and
so are the pending applications, if any.
(Rakesh Kainthla)
Judge
23rd April,2026 (ravinder)
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