2026:HHC:38126

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

Cr. Appeal No. 4171 of 2013

Reserved on: 24.8.2026

Date of Decision: 09.09.2026

Naresh Kumar ...Appellant

Versus

Anil Kumar ...Respondent

Coram

Hon’ble Mr Justice Rakesh Kainthla, Judge.

Whether approved for reporting?

1

No

For the Appellant : Mr Rajesh Kashyap, Advocate.

For the Respondent : Mr Vishwas Kaushal, Advocate.

Rakesh Kainthla, Judge

The present appeal is directed against the judgment

dated 21.11.2011, passed by learned Sessions Judge, Kullu, H.P.

(learned Appellate Court), vide which the judgment of conviction

dated 15.03.2011 and order of sentence dated 20.04.2011, passed

by learned Chief Judicial Magistrate, District Kullu, H.P. (learned

Trial Court) were set aside. (The parties shall hereinafter be

referred to in the same manner as they were arrayed before the

Learned Trial Court for convenience).

1

Whether reporters of Local Papers may be allowed to see the judgment? Yes.

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2. Briefly stated, the facts giving rise to the present

appeal are that the complainant filed a complaint before the

learned Trial Court against the accused for the commission of an

offence punishable under Section 138 of the Negotiable

Instruments Act (NI Act). It was asserted that the complainant

and accused were known to each other. The accused demanded

₹5,00,000/- from the complainant for taking a fruit orchard on

lease. He promised to repay the money to the complainant in the

second week of April. The complainant advanced ₹5,00,000/- to

the accused in cash. The accused handed over a post-dated

cheque to the complainant to repay the money. The complainant

presented the cheque at his bank, but it was dishonoured with

the endorsement “insufficient funds”. The complainant sent a

legal notice to the accused, which was served upon him. The

accused failed to repay the money. Hence, the complaint was

filed for taking action as per the law.

3. Learned Trial Court found sufficient reasons to

summon the accused. When the accused appeared, a notice of

accusation 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.

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4. The complainant examined himself (CW1) and Ram

Lok Sharma (CW2) to prove his complaint.

5. The accused, in his statement recorded under Section

313 of the Code of Criminal Procedure (CrPC), denied the

complainant's case in its entirety. He claimed that the cheque

book was lost by him and he had lodged an FIR to this effect. He

has not issued any cheque in the complainant’s favour. The

complainant misused the cheque. He examined Lal Singh (DW1)

and Sher Singh (DW2) to prove his 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 the

debt/liability. The evidence led by the accused was not sufficient

to rebut the presumption. The cheque was dishonoured with an

endorsement “insufficient funds”, and the accused failed to

repay the money despite the receipt of valid notice of demand.

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 6

months, pay a fine of ₹10,000 and compensation of ₹5,00,000/-.

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It was ordered that in case of default in the payment of fine, the

accused would undergo simple imprisonment for one month.

7. Being aggrieved by the judgment and order passed by

the learned Trial Court, the accused filed an appeal which was

decided by the learned Sessions Judge, Kullu, H.P. (learned

Appellate Court). The learned Appellate Court held that the

statements of HHC Lal Singh (DW1) and Sher Singh (DW2)

established that the accused had lost the cheque book. The

complainant asserted that the loan was advanced in the presence

of Vishwajeet. However, Vishwajeet was not examined. The

complainant has also not proved the advancing of the loan. The

accused has to establish his defence on the balance of

probabilities, and the cross-examination of the complainant's

witnesses and the statements of defence witnesses rebutted the

presumption. Learned Trial Court erred in convicting and

sentencing the accused; hence the appeal was allowed, and

judgment and order passed by learned Trial Court were set aside.

8. Being aggrieved by the judgment passed by learned

Appellate Court, the complainant has filed the present appeal

asserting that learned Appellate Court erred in acquitting the

accused. A cheque carries with it a presumption of consideration

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and the burden is upon the accused to rebut the presumption.

The defence taken by the accused that he had lost the cheque

book was highly improbable. It was suggested to the

complainant's witnesses that the cheque was handed over to

Vishwajeet, who had handed it over to the complainant.

However, this version was changed while recording the

statements of defence witnesses. Learned Appellate Court erred

in relying upon this version. Therefore, it was prayed that the

present appeal be allowed and the judgment passed by the

learned Appellate Court be set aside.

9. I have heard Mr Rajesh Kashyap, learned counsel for

the appellant/complainant and Mr Vishwas Kashwal, learned

counsel for the respondent/accused.

10. Mr Rajesh Kashyap, learned counsel for the

appellant/complainant, submitted that the accused had failed to

rebut the presumption attached to the cheque. The accused had

taken contradictory pleas while leading the evidence and cross-

examining the witnesses, which made the defence version highly

improbable. The complainant was not required to lead any

evidence to show that the cheque was issued for consideration

because of the presumption attached to the cheque. Learned

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Appellate Court ignored the presumption. Therefore, he prayed

that the present appeal be allowed and the judgment passed by

learned Appellate Court be set aside.

11. Mr Vishwas Kaushal, learned counsel for the

respondent/accused, submitted that the accused had reported

the loss of the cheque book to the police and the bank, which

corroborates his version that he had lost the cheque book. The

complainant did not produce any evidence to show that he had

advanced any loan to the accused. The loan was advanced in the

presence of Vishwajeet as per the complainant; however, he was

not examined. The learned Appellate Court had taken a

reasonable view while acquitting the accused, and this Court

should not interfere with the reasonable view of the Court

acquitting the accused even if another view is possible.

Therefore, he prayed that the present appeal be dismissed.

12. I have given considerable thought to the submissions

made at the bar and have gone through the records carefully.

13. The present appeal has been filed against a judgment

of acquittal. It was laid down by the Hon’ble Supreme Court in

Sanjay Kumar v. State of Bihar, 2026 SCC OnLine SC 1373, that the

Court can interfere with a judgment of acquittal only if it is

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impossible, perverse, wholly unsustainable, or manifestly illegal.

It was observed:

Scope of interference with an acquittal:

26. At the outset, it is necessary to remind ourselves of

the settled principles governing interference with an order

of acquittal. An accused is presumed innocent until proven

guilty. When a court of competent jurisdiction acquits the

accused, the presumption of innocence is not weakened

but reinforced. Where such acquittal is affirmed by the

High Court, the caution to be exercised by this Court under

Article 136 is even greater.

27. In Kali Ram v. State of Himachal Pradesh (1973) 2 SCC

808: 1973 SCC (Cri) 1048, this Court explained the golden

thread running through criminal jurisprudence in the

following words:

“25. Another golden thread which runs through the web

of the administration of justice in criminal cases is that if

two views are possible on the evidence adduced in the case,

one pointing to the guilt of the accused and the other to his

innocence, the view which is favourable to the accused

should be adopted. This principle has a special relevance in

cases wherein the guilt of the accused is sought to be

established by circumstantial evidence. A rule has

accordingly been laid down that unless the evidence

adduced in the case is consistent only with the hypothesis

of the guilt of the accused and is inconsistent with that of

his innocence, the Court should refrain from recording a

finding of guilt of the accused. It is also an accepted rule

that in case the Court entertains reasonable doubt

regarding the guilt of the accused, the accused must have

the benefit of that doubt. Of course, the doubt regarding the

guilt of the accused should be reasonable; it is not the

doubt of a mind which is either so vacillating that it is

incapable of reaching a firm conclusion or so timid that it is

hesitant and afraid to take things to their natural

consequences. The rule regarding the benefit of doubt also

does not warrant acquittal of the accused by resort to

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surmises, conjectures or fanciful considerations. As

mentioned by us recently in the case of State of Punjab v.

Jagir Singh, a criminal trial is not like a fairy tale wherein

one is free to give flight to one's imagination and fantasy.

It concerns itself with the question as to whether the

accused arraigned at the trial is guilty of the offence with

which he is charged. Crime is an event in real life and is the

product of the interplay of different human emotions. In

arriving at the conclusion about the guilt of the accused

charged with the commission of a crime, the Court has to

judge the evidence by the yardstick of probabilities,

intrinsic worth and the animus of witnesses. Every case in

the final analysis would have to depend upon its own facts.

Although the benefit of every reasonable doubt should be

given to the accused, the Courts should not at the same

time reject evidence which is ex facie trustworthy on

grounds which are fanciful or in the nature of conjectures.”

28. The decision in Kali Ram (supra) further cautions

that wrongful acquittal and wrongful conviction do not

stand on the same footing, for conviction of an innocent

person causes grave injustice and shakes public

confidence in the administration of criminal justice. The

rule of benefit of doubt, therefore, is not a technical rule; it

is a substantive safeguard flowing from the presumption

of innocence.

29. In Ghurey Lal v. State of Uttar Pradesh (2008) 10 SCC

450: (2009) 1 SCC (Cri) 60, this Court reiterated the limited

scope of interference with acquittals. This Court observed:

“75. The Trial Court has the advantage of watching

the demeanour of the witnesses who have given

evidence; therefore, the appellate court should be slow

to interfere with the decisions of the Trial Court. An

acquittal by the Trial Court should not be interfered

with unless it is totally perverse or wholly

unsustainable.”

30. The decision in Ghurey Lal (supra) also crystallised

certain propositions: first, there is a double presumption

of innocence in favour of an acquitted accused; secondly, if

two views are possible, the view favourable to the accused

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must prevail; thirdly, though the appellate court has the

power to reappreciate evidence, it should interfere only

when the acquittal is manifestly illegal, perverse or results

in miscarriage of justice; and fourthly, due weight must be

given to the Trial Court's findings, particularly because

the trial judge had the advantage of observing the

demeanour of witnesses.

31. In Chandrappa v. State of Karnataka (2007) 4 SCC 415:

(2007) 2 SCC (Cri) 325, this Court held that though the

appellate court has full power to review and reappreciate

the evidence, the presumption of innocence is

strengthened by an order of acquittal. It was held that

when two reasonable conclusions are possible on the basis

of evidence on record, the appellate court should not

disturb the finding of acquittal.

32. The same principle was restated in Mrinal Das v.

State of Tripura (2011) 9 SCC 479, wherein this Court held

that an order of acquittal is to be interfered with only

when there are compelling and substantial reasons for

doing so. If two reasonable views are possible on the basis

of the evidence on record, the appellate court should not

disturb the finding of acquittal.

33. Therefore, the question before us is not whether

another view on the evidence is possible. The question is

whether the view taken by the Trial Court and affirmed by

the High Court is impossible, perverse, wholly

unsustainable, or manifestly illegal. Having examined the

record, we are unable to hold so.

14. While dealing with the appeal against the acquittal in

a complaint filed for the commission of an offence punishable

under Section 138 of the NI Act the Hon’ble Supreme Court held

in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 that

the normal rules with same rigour cannot be applied to the cases

under Negotiable Instruments Act because there is a

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presumption that the holder had received the cheque for

consideration to discharge the debt/liability. The Appellate Court

is entitled to look into the evidence to determine whether the

accused has discharged the burden or not. It was observed: -

“12…. The principles aforesaid are not of much debate. In

other words, ordinarily, the appellate court will not be

upsetting the judgment of acquittal, if the view taken by

the trial court is one of the possible views of the matter

and unless the appellate court arrives at a clear finding

that the judgment of the trial court is perverse i.e. not

supported by evidence on record or contrary to what is

regarded as normal or reasonable; or is wholly

unsustainable in law. Such general restrictions are

essential to remind the appellate court that an accused is

presumed to be innocent unless proven guilty beyond a

reasonable doubt, and a judgment of acquittal further

strengthens such presumption in favour of the accused.

However, such restrictions need to be visualised in the

context of the particular matter before the appellate court

and the nature of the inquiry therein. The same rule with

the same rigour cannot be applied in a matter relating to

the offence under Section 138 of the NI Act, particularly

where a presumption is drawn that the holder has received

the cheque for the discharge, wholly or in part, of any debt

or liability. Of course, the accused is entitled to bring on

record the relevant material to rebut such presumption

and to show that preponderance of probabilities are in

favour of his defence but while examining if the accused

has brought about a probable defence so as to rebut the

presumption, the appellate court is certainly entitled to

examine the evidence on record in order to find if

preponderance indeed leans in favour of the accused.

13. For determination of the point as to whether the High

Court was justified in reversing the judgment and orders

of the trial court and convicting the appellant for the

offence under Section 138 of the NI Act, the basic

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questions to be addressed are twofold: as to whether the

complainant Respondent 2 had established the ingredients

of Sections 118 and 139 of the NI Act, so as to justify

drawing of the presumption envisaged therein; and if so,

as to whether the appellant-accused had been able to

displace such presumption and to establish a probable

defence whereby, the onus would again shift to the

complainant?”

15. The ingredients of the commission of an offence

punishable under Section 138 of the NI Act were explained in

Kuntegowda v. Thurubaiah, 2026 SCC OnLine SC 1485 as under:

5.3. At this juncture, it is pertinent to highlight the key

ingredients as highlighted by this Court in the case of

Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd.,

(2000) 2 SCC 745: 2000 SCC (Cri) 546: (2000) 100 COMP CAS

755.

“10. On a reading of the provisions of Section 138 of

the NI Act, it is clear that the ingredients which are to

be satisfied for making out a case under the provision

are:

(i) a person must have drawn a cheque on an

account maintained by him in a bank for

payment of a certain amount of money to

another person from out of that account for the

discharge of any debt or other liability;

(ii) that cheque has been presented to the bank

within a period of six months from the date on

which it is drawn or within the period of its

validity, whichever is earlier;

(iii) that cheque is returned by the bank unpaid,

either because the amount of money standing to

the credit of the account is insufficient to honour

the cheque or that it exceeds the amount

arranged to be paid from that account by an

agreement made with the bank;

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(iv) the payee or the holder in due course of the

cheque makes a demand for the payment of the

said amount of money by giving a notice in

writing to the drawer of the cheque, within 15

days of the receipt of information by him from

the bank regarding the return of the cheque as

unpaid;

(v) the drawer of such cheque fails to make payment

of the said amount of money to the payee or the

holder in due course of the cheque within 15 days

of the receipt of the said notice.

11. If the aforementioned ingredients are satisfied,

then the person who has drawn the cheque shall be

deemed to have committed an offence. In the

explanation to the section, clarification is made that

the phrase “debt or other liability” means a legally

enforceable debt or other liability.

5.4. The ingredients of the offence under Section 138 are as

follows:

i. The drawing of a cheque by a person on an account

maintained by him with the banker for the payment

of any amount of money to another from that

account.

ii. The cheque being drawn for the discharge in whole

or in part of any debt or other liability.

iii. Presentation of the cheque to the bank within the

period of six months or within the period of its

validity.

iv. The return of the cheque by the drawee bank as

unpaid either because the amount of money

standing to the credit of that account is insufficient

to honour the cheque or that it exceeds the amount

arranged to be paid from that account.

v. A notice by the payee or the holder in due course

making a demand for the payment of the amount to

the drawer of the cheque within thirty days of the

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receipt of information from the bank in regard to

the return of the cheque.

vi. Failure of the drawer of the cheque to make payment

of the amount of money to the payee or the holder in

due course within fifteen days of the receipt of the

notice.

vii. Filing of the complaint within a month from the

date of expiry of the grace period of fifteen days

before a Metropolitan Magistrate or a Judicial

Magistrate not below first class.

16. The present appeal has to be decided as per the

parameters laid down by the Hon’ble Supreme Court.

17. The complainant reiterated the contents of the

complaint in his proof affidavit. He stated in his cross-

examination that he had also handed over ₹5,00,000/- to

Parveen Gupta. He was not aware that Vishwajeet was running

Alpine Finance Agency. He admitted that he had handed over the

money to the accused for purchasing the apple orchard at the

instance of Vishwajeet. He used to file an income tax return. He

denied that the accused had taken a loan from Alpine Finance

Agency and had handed over a blank cheque. He denied that he

had taken the blank cheque from Vishwajeet and misused it. He

denied that he was taking advantage of the cheques handed over

to Vishwajeet.

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18. The cross-examination of the complainant shows

that the accused has not disputed the issuance of the cheque and

it was suggested to the complainant that the cheque was issued

to Vishwajeet. It was laid down by the Hon’ble Supreme Court in

Balu Sudam Khalde v. State of Maharashtra, (2023) 13 SCC 365:

2023 SCC OnLine SC 355 that the suggestion put to the witness can

be taken into consideration while determining the innocence or

guilt of the accused. It was observed at page 383: -

“38. Thus, from the above, it is evident that the suggestion

made by the defence counsel to a witness in the cross-

examination, if found to be incriminating in nature in any

manner, would definitely bind the accused, and the

accused cannot get away on the plea that his counsel had

no implied authority to make suggestions in the nature of

admissions against his client.

39. Any concession or admission of a fact by a defence

counsel would definitely be binding on his client, except

for the concession on the point of law. As a legal

proposition, we cannot agree with the submission

canvassed on behalf of the appellants that an answer by a

witness to a suggestion made by the defence counsel in the

cross-examination does not deserve any value or utility if

it incriminates the accused in any manner.

****

42. Therefore, we are of the opinion that suggestions made

to the witness by the defence counsel and the reply to such

suggestions would definitely form part of the evidence and

can be relied upon by the Court along with other evidence

on record to determine the guilt of the accused.”

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19. It was laid down by the Hon'ble Supreme Court in APS

Forex Services (P) Ltd. v. Shakti International Fashion Linkers

(2020) 12 SCC 724, that when the issuance of a cheque and

signature on the cheque are not disputed, a presumption would

arise that the cheque was issued in discharge of the legal liability.

It was observed: -

“9. Coming back to the facts in the present case and

considering the fact that the accused has admitted the

issuance of the cheques and his signature on the cheque

and that the cheque in question was issued for the second

time after the earlier cheques were dishonoured and that

even according to the accused some amount was due and

payable, there is a presumption under Section 139 of the

NI Act that there exists a legally enforceable debt or

liability. Of course, such a presumption is rebuttable.

However, to rebut the presumption, the accused was

required to lead evidence that the full amount due and

payable to the complainant had been paid. In the present

case, no such evidence has been led by the accused. The

story put forward by the accused that the cheques were

given by 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

presumption in favour of the complainant that there exists

a legally enforceable debt or liability as per Section 139 of

the NI Act. It appears that both the learned trial court as

well as the High Court have committed an error in shifting

the burden upon the complainant to prove the debt or

liability, without appreciating the presumption under

Section 139 of the NI Act. As observed above, Section 139 of

the Act is an example of a reverse onus clause and

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therefore, once the issuance of the cheque has been

admitted and even the signature on the cheque has been

admitted, there is always a presumption in favour of the

complainant that there exists legally enforceable debt or

liability and thereafter, it is for the accused to rebut such

presumption by leading evidence.”

20. This position was reiterated in N. Vijay Kumar v.

Vishwanath Rao N., 2025 SCC OnLine SC 873, wherein it was held as

under:

“6. Section 118 (a) assumes that every negotiable

instrument is made or drawn for consideration, while

Section 139 creates a presumption that the holder of a

cheque has received the cheque in discharge of a debt or

liability. Presumptions under both are rebuttable,

meaning they can be rebutted by the accused by raising a

probable defence.”

21. A similar view was taken in Sanjabij Tari v. Kishore S.

Borcar, 2025 SCC OnLine SC 2069, wherein it was observed:

“ONCE EXECUTION OF A CHEQUE IS ADMITTED,

PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI

ACT ARISE

15. In the present case, the cheque in question has

admittedly been signed by the Respondent No. 1-Accused.

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

cheque in discharge of a legally enforceable debt or

liability arise 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).

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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

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].

22. It was laid down by the Hon’ble Supreme Court in

Kuntegowda (supra) that the Court has to start with the

presumption that the cheque was issued in discharge of the

liability for consideration, and the burden is upon the accused to

rebut this presumption. It was observed:

5.7. A conjoint and harmonious reading of the aforesaid

provisions clearly indicates towards the statutory

presumption that every negotiable instrument was made

or drawn for consideration and that it was executed for

discharge of debt or liability once the execution of the

negotiable instrument is either proved or admitted. As

soon as the complainant discharges the burden to prove

that the instrument was executed by the drawer, the rules

of presumption under Sections 118 and 139 of the NI Act

help him and shift the burden of rebutting the said

presumptions upon the said drawer. Since these

presumptions are rebuttable, the accused has the burden

of disproving the same by leading evidence, either direct

or indirect, to the effect that there did not exist any

consideration or debt or that the non-existence of the said

debt or consideration is so probable that a prudent man

ought to suppose that no consideration or debt existed.

However, a bare denial of the passing of any consideration

or existence of any debt does not support the defence of

the accused and therefore to disprove the presumptions,

something which is probable has to be brought on record

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for getting the burden of proof shifted back to the

complainant. The accused has to bring on record such

facts and circumstances, upon consideration of which the

court may either believe that the consideration and the

debt did not exist or their non-existence was so probable

that a prudent man would, under the circumstances of the

case, act upon the plea that it did not exist.

23. The accused changed the version suggested to the

complainant in his statement recorded under Section 313 CrPC

and the defence evidence. He claimed in his statement recorded

under Section 313 CrPC that he had lost the cheque book. He

examined HHC Lal Singh, who proved the entry (Ext.D1) lodged

by Jeeto Devi stating that she was running a shop. The owner,

Vikram Kamboj, was threatening to evict her from the shop. She

had obtained an injunction order from the Court. However,

Vikram Kamboj and his son Gagan Kamboj were threatening to

forcibly evict her. The lock of the shop was broken, and the

articles were stolen. It is not explained how this report made by

Jeeto Devi would assist the accused. She has not mentioned

anything about the accused Anil Kumar or the cheque book of

Anil Kumar. Thus, learned Appellate Court erred in relying upon

this report.

24. Sher Singh (DW2) stated that accused Anil Kumar had

made a complaint regarding the theft of the cheque book and

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other articles. He had also supplied the copy of the report to the

bank. He also referred to the report marked “D”, which is the

same report proved by HHC Lal Singh (DW1). It has already been

found out above that the report mark “D” does not refer to the

accused, but to Vijay Kamboj and Jeeto Devi. Thus, it is difficult to

see how this report would have established the defence of the

accused.

25. Therefore, learned Appellate Court misread the report

to hold that this report probablized the version of the accused

and rebutted the presumption attached to the cheque. Such a

conclusion could not have been drawn by any reasonable person

reading the report.

26. Learned Trial Court also held that the complainant

had not produced any evidence regarding the advancing of the

loan. He did not examine Vishwajeet, who was stated to be

present at the time of advancing of the loan and handing over of

the cheque. This finding cannot be sustained. A cheque carries

with it a presumption that it was issued for valid consideration to

discharge the debt/liability. Therefore, the complainant is not

under any obligation to produce the evidence of advancing of the

loan. It was laid down by the Hon’ble Supreme Court in Uttam

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Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: 2019 SCC OnLine

SC 1361, that a presumption under Section 139 of the NI Act would

obviate the requirement to prove the existence of consideration.

It was observed:

“20. The trial court and the High Court proceeded as if the

appellant 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, and the 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 on

the accused to rebut the presumption that the cheque was

issued not for any debt or other liability.”

27. This position was reiterated in Ashok Singh v. State of

U.P., 2025 SCC OnLine SC 706, wherein it was observed:

“22. The High Court while allowing the criminal revision

has primarily proceeded on the presumption that it was

obligatory on the part of the complainant to establish his

case 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 made to

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

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amount so claimed by him to have been given as a loan to

the accused, only then would the complainant have to

bring before the Court cogent material to indicate that he

had the financial capacity and had actually advanced the

amount in question by way of a loan. In the case at hand,

the appellant had categorically stated in his deposition

and reiterated in the cross-examination that he had

withdrawn the amount from the bank in Faizabad (Typed

Copy of his deposition in the paperbook wrongly mentions

this as ‘Firozabad’). The Court ought not to have

summarily rejected such a stand, more so when

respondent no. 2 did 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

opined:

‘8. From the order impugned, it is clear that though the

contention of the petitioners was that the said amounts

were given for producing a film and were not by way of

return of any loan taken, which may have been a probable

defence for the petitioners in the case, but rightly, the High

Court has taken the view that evidence had to be adduced

on this point which has not been done by the petitioners.

Pausing here, the Court would only comment that the

reasoning of the High Court, as well as the First Appellate

Court and Trial Court, on this issue is sound. Just by taking

a counter-stand to raise a probable defence would not

shift the onus on the complainant in such a case, for the

plea of defence has to be buttressed by evidence, either

oral or documentary, which in the present case has not

been done. Moreover, even if it is presumed that the

complainant had not proved the source of the money

given to the petitioners by way of loan by producing

statement of accounts and/or Income Tax Returns, the

22

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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 decision in Tedhi Singh v.

Narayan Dass Mahant, (2022) 6 SCC 735:

‘10. The trial court and the first appellate court have

noted that in the case under Section 138 of the NI Act,

the complainant need not show in the first instance

that he had the capacity. The proceedings under

Section 138 of the NI Act are not a civil suit. At the time

when the complainant gives his evidence, unless a case

is set up in the reply notice to the statutory notice sent,

that the complainant did not have the wherewithal, it

cannot be expected of the complainant to initially lead

evidence to show that he had the financial capacity. To

that extent, the courts, in our view, were right in

holding on those lines. However, the accused has the

right to demonstrate that the complainant in a

particular case did not have the capacity and therefore,

the case of the accused is acceptable, which he can do

by producing independent materials, namely, by

examining 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, more importantly, further

achieve this result through the cross-examination of

the witnesses of the complainant. Ultimately, it

becomes the duty of the courts to consider carefully and

appreciate the totality of the evidence and then come to

a conclusion whether, in the given case, the accused

has shown that the case of the complainant is in peril

for the reason that the accused has established a

probable defence.’(emphasis supplied)’ (underlining

in original; emphasis supplied by us in bold).

23

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28. A similar view was taken in Sanjay Sanjabij Tari v.

Kishore S. Borcar, 2025 SCC OnLine SC 2069 , wherein it was

observed:

“21. This Court also takes judicial notice of the fact that

some District Courts and some High Courts are not giving

effect to the presumptions incorporated in Sections 118

and 139 of the NI Act and are treating the proceedings

under the NI Act as another civil recovery proceeding and

are directing the complainant to prove the antecedent debt

or liability. This Court is of the view that such an approach

is not only prolonging the trial but is also contrary to the

mandate of Parliament, namely, that the drawer and the

bank must honour the cheque; otherwise, trust in cheques

would be irreparably damaged.”

29. Therefore, the complainant's version cannot be

doubted because no evidence of advancing the loan was

produced.

30. The accused did not appear in the witness box to

prove the version that he had lost his cheque book. The document

produced by him does not support such an inference. Therefore,

the version of the accused could not have been relied upon in the

absence of evidence. 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 is not

sufficient to rebut the presumption. It was observed at page 700:

24

2026:HHC:38126

“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

Section 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)”

31. Therefore, learned Appellate Court erred in relying

upon the statement of the accused to hold that it was sufficient to

rebut the presumption.

32. The complainant admitted that he was an income tax

payee. It was submitted that the complainant had not filed the

income tax return to show that he had mentioned the amount in

the income tax return. This submission will not help the accused.

It was laid down by this Court in Surinder Singh vs. State of H.P.

2018(1) D.C.R. 45 that the failure to mention the loan in the

income tax return will not entitle the accused to acquittal. It was

observed: -

10. It would further be noticed that the learned trial Magistrate

has acquitted the accused on the ground that the loan has not

been shown in the Income Tax Return furnished by the

complainant, and while recording such finding, has placed

reliance upon the judgment of the Hon'ble Delhi High Court in

25

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Vipul Kumar Gupta vs. Vipin Gupta 2012 (V) AD (CRI) 189. However,

after having perused the said judgment, it would be noticed that

the amount in the said case was ₹ 9 lacs, and it is in that

background that the Court observed as under: -

"9. I find myself in agreement with the reasoning given by

the learned ACMM that before a person is convicted for

having committed an offence under Section 138 of the Act,

it must be proved beyond a reasonable doubt that the

cheque in question, which has been made as a basis for

prosecuting the respondent/accused, must have been

issued by him in the discharge of his liability or a legally

recoverable debt. In the facts and circumstances of this

case, there is every reason to doubt the version given by

the appellant that the cheque was issued in the discharge

of a liability or a legally recoverable debt. The reasons for

this are a number of factors that have been enumerated by

the learned ACMM also. Some of them are that non-

mentioning by the appellant in his Income Tax Return or

the Books of Accounts, the factum of the loan having been

given by him because by no measure, an amount of ₹

9,00,000/- can be said to be a small amount which a

person would not reflect in his Books of Accounts or the

Income Tax Return, in case the same has been lent to a

person. The appellant, neither in the complaint nor in his

evidence, has mentioned the date, time or year when the

loan was sought or given. The appellant has presented a

cheque, which obviously is written with two different inks,

as the signature appears in one ink, while the remaining

portion, which has been filled in the cheque, is in a

different ink. All these factors prove the defence of the

respondent to be plausible to the effect that he had issued

these cheques by way of security to the appellant for

getting a loan from the Prime Minister Rojgar Yojana. The

respondent/accused has only to create doubt in the

version of the appellant, while the appellant has to prove

the guilt of the accused beyond a reasonable doubt, in

which, in my opinion, he has failed miserably. There is no

cogent reason which has been shown by the appellant

which will persuade this Court to grant leave to appeal

26

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against the impugned order, as there is no infirmity in the

impugned order."

33. It was laid down by this Court in Surinder Singh vs.

State of H.P. 2018(1) D.C.R. 45 that contravention of Section 269

SS of the Income Tax Act will give rise to a penalty, but will not

invalidate the transaction. It was observed: -

5. The relevant portion of Section 269 SS of the IT Act

reads thus: -

"(a) the amount of such loan or deposit or the

aggregate amount of such loan and deposit; or

(b) on the date of taking or accepting such loan or

deposit, any loan or deposit taken or accepted earlier

by such person from the depositor is remaining

unpaid (whether repayment has fallen due or not), the

amount or the aggregate amount remaining unpaid;

or

(c) The amount or the aggregate amount referred to in

clause (a) together with the amount or the aggregate

amount referred to in clause (b), is (twenty) thousand

rupees or more. Provided......"

6. Section 271D provides for a penalty for failure to comply

with the aforesaid provisions, which reads thus:

"271D. Penalty for failure to comply with the

provisions of Section 269-SS - (1) If a person takes or

accepts any loan or deposit in contravention of the

provisions of Section 269-SS, he shall be liable to pay,

by way of penalty, a sum equal to the amount of the

loan or deposit so taken or accepted.

(2) Any penalty impossible under sub-section (1) shall

be imposed by the Joint Commissioner."

7. A collective reading of both the aforesaid Sections would

go to show that even though contravention of Section

269-SS of the IT Act would be visited with a strict penalty

27

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on the person taking the loan or deposit. However, Section

271D does not in any manner suggest or even provide that

such a transaction would be null and void. The payer of

money in cash, in violation of Section 269 SS of the IT Act,

can always have the money recovered.

8. The object of introducing Section 269 of the IT Act has

been succinctly set out by the Hon'ble Supreme Court in

Asstt. Director of Inspection Investigation vs. A.B. Shanthi

(2002) 6 SCC 259, wherein it was observed as under: -

"8. The object of introducing Section 269-SS is to

ensure that a taxpayer is not allowed to give a false

explanation for his unaccounted money, or if he has

given some false entries in his accounts, he shall not

escape by giving false entries in his accounts; he shall

not escape by giving a false explanation for the same.

During search and seizures, unaccounted money is

unearthed, and the taxpayer would usually give the

explanation that he had borrowed or received deposits

from his relatives or friends, and it is easy for the so-

called lender also to manipulate his records later to

suit the plea of the taxpayer. The main objection of

Section 269-SS was to curb this menace."

9. In light of the aforesaid observations, it cannot but be

said that Section 269-SS only provides for the mode of

accepting payment or repayment in certain cases so as to

counteract evasion of tax. However, Section 269-SS does

not declare all transactions of loans by cash in excess of

₹20,000/- as invalid, illegal or null and void, as the main

object of introducing the provision was to curb and

unearth black money.

34. A similar view was taken by the Hon’ble Supreme

Court in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC

2069, wherein it was observed:

“19. Recently, the Kerala High Court in P.C. Hari v. Shine

Varghese, 2025 SCC OnLine Ker 5535 has taken the view that

a debt created by a cash transaction above ₹20,000/-

28

2026:HHC:38126

(Rupees Twenty Thousand) in violation of the provisions

of Section 269SS of the Income Tax Act, 1961 (for short ‘IT

Act, 1961’) is not a ‘legally enforceable debt’ unless there

is a valid explanation for the same, meaning thereby that

the presumption under Section 139 of the Act will not be

attracted in cash transactions above ₹ 20,000/- (Rupees

Twenty Thousand).

20. However, this Court is of the view that any breach of

Section 269SS of the IT Act, 1961, is subject to a penalty

only under Section 271D of the IT Act, 1961. Further,

neither Section 269SS nor Section 271D of the IT Act, 1961,

states that any transaction in breach thereof will be illegal,

invalid or statutorily void. Therefore, any violation of

Section 269SS would not render the transaction

unenforceable under Section 138 of the NI Act or rebut the

presumptions under Sections 118 and 139 of the NI Act

because such a person, assuming him/her to be the

payee/holder in due course, is liable to be visited with a

penalty only as prescribed. Consequently, the view that

any transaction above Rs. 20,000/- (Rupees Twenty

Thousand) is illegal and void and therefore does not fall

within the definition of ‘legally enforceable debt’ cannot

be countenanced. Accordingly, the conclusion of law in

P.C. Hari (supra) is set aside.”

35. Hence, the transaction cannot be doubted because it

was carried out in cash.

36. It was submitted that the complainant has not proved

his financial capacity to advance the loan. The submission will

not help the accused. First, it was suggested to the complainant

that he had advanced the loan at the instance of Vishwajeet

Singh, which shows that the advancing of the loan is not in

dispute. Further, the accused had not issued any reply to the

29

2026:HHC:38126

notice received by him challenging the complainant’s financial

capacity to advance the loan. It was laid down by the Hon’ble

Supreme Court in Tedhi Singh v. Narayan Dass Mahant, (2022) 6

SCC 735: 2022 SCC OnLine SC 302 that the complainant is not

required to show his financial capacity unless it is challenged by

sending a reply to the notice. It was observed at page 740:

“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 proceeding under Section 138 of the

NI Act is not a civil suit. At the time when the complainant

gives his evidence, unless a case is set up in the reply

notice to the statutory notice sent that the complainant

did not have the wherewithal, it cannot be expected of the

complainant to initially lead evidence to show that he had

the financial capacity. To that extent, the courts in our

view were right in holding on those lines….”

37. This position was reiterated in Kuntegowda (supra)

wherein it was observed:

6.7. Furthermore, the failure of the accused to respond to

the statutory notice issued under Section 138 of the NI Act

gives rise to an inference that the complainant's version

carries merit. The initial burden of raising a defence that

the complainant lacked the financial capacity to advance

the loan rests upon the accused and ought to have been

specifically pleaded in the reply to the demand notice. In

the absence of such a plea, the complainant cannot be

expected to adduce evidence establishing his financial

capacity to pay the loan to the accused while leading his

evidence. The accused may discharge this burden by

producing independent witnesses or documentary

evidence to demonstrate the complainant's lack of

30

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financial means. Alternatively, he may rely upon the

materials produced by the complainant himself or

establish the same through an effective cross-

examination of the complainant and his witnesses. In the

facts of the present case, no such contra material has been

placed on record before us to further the case of the

accused that the complainant did not have any means to

extend the hand loan and therefore the argument and

defence of the accused on this aspect falls flat.

38. In the present case, the accused had not sent any

reply to the notice questioning the complainant’s financial

capacity, and he is not entitled to say that the complainant did

not have the financial capacity to advance the loan.

39. Ram Lok Sharma (CW2) proved that the cheque was

received in the bank for realisation, but it was dishonoured with

endorsement “insufficient funds”. He admitted in his cross-

examination that, as per the statement of account, the accused

never had more than ₹200/- in his account, which shows that

the accused did not have sufficient balance to honour the cheque

and corroborates the memo of dishonour that the funds were

insufficient to honour the cheque.

40. The complainant asserted that he had issued a notice

to the accused which was duly served upon him. He filed the

acknowledgement card (Ext.C5) which bears the signatures of

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the accused. This corroborates the complainant's version that

the notice was duly served upon the accused.

41. Therefore, learned Trial Court had rightly held that

the accused had issued a cheque in favour of the complainant to

discharge the debt, which was dishonoured with an endorsement

“insufficient funds” and the accused failed to pay the money

despite the receipt of valid notice of demand and all the

ingredients of the commission of an offence punishable under

Section 138 of NI Act were duly satisfied.

42. Learned Trial Court sentenced the accused to undergo

simple imprisonment for 6 months, pay a fine of ₹10,000/- and

₹5,00,000/- as compensation to the complainant, and in default

of payment of the fine to undergo further simple imprisonment

for one month. 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:

“6. The object of Section 138 of the Negotiable

Instruments Act is to infuse credibility into negotiable

instruments, including cheques, and to encourage and

promote the use of negotiable instruments, including

cheques, in financial transactions. The penal provision of

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Section 138 of the Negotiable Instruments Act is intended

to 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.”

43. Keeping in view the deterrent nature of the

punishment, the sentence of six months cannot be said to be

excessive.

44. Learned Trial Court sentenced the accused to pay

compensation of ₹5,00,000/- and pay a fine of ₹10,000/-. This

was not permissible. Section 357 of the Cr.P.C. provides that

when the Court imposes a sentence of which fine forms a part,

the Court may order the disbursement of the part of the fine as

compensation, inter alia. It was laid down by the Hon’ble

Supreme Court of India in R. Vijayan v. Baby, (2012) 1 SCC 260:

2011 SCC OnLine SC 1363 that where a fine has been imposed by

the Court, the compensation can be awarded out of it and it is

impermissible to award separate compensation. It was observed

at page 263:

7. Section 357(3) has been the subject-matter of judicial

interpretation by this Court in several decisions. In State of

Punjab v. Gurmej Singh [(2002) 6 SCC 663: 2002 SCC (Cri)

1460], this Court held: (SCC p. 669, para 9)

“9. … A reading of sub-section (3) of Section 357 would

show that the question of award of compensation

would arise where the court imposes a sentence of

which fine does not form a part.”

33

2026:HHC:38126

This Court also held that Section 357(3) will not apply

where a sentence of fine has been imposed.

8. In Sivasuriyan v. Thangavelu [(2004) 13 SCC 795 : (2006) 1

SCC (Cri) 532] this Court held: (SCC p. 796, para 4)

“4. In view of the submissions made, the only question

that arises for consideration is whether the court can

direct payment of compensation in exercise of power

under sub-section (3) of Section 357 in a case where

fine already forms a part of the sentence. Apart from

sub-section (3) of Section 357, there is no other

provision under the Code whereunder the court can

exercise such power:”

After extracting Section 357(3) of the Code, the Court

proceeded to hold thus: (SCC p. 796, para 5)

“5. On a plain reading of the aforesaid provision, it is

crystal clear that the power can be exercised only when

the court imposes sentence by which fine does not form

a part. In the case in hand, a court having sentenced to

imprisonment, as also fine, the power under sub-

section (3) of Section 357 could not have been

exercised. In that view of the matter, the impugned

direction of the High Court directing payment of

compensation to the tune of Rs One lakh by the

appellant is set aside.”

9. It is evident from sub-section (3) of Section 357 of the

Code, that where the sentence imposed does not include a

fine, that is, where the sentence relates to only

imprisonment, the court, when passing judgment, can

direct the accused to pay, by way of compensation, such

amount as may be specified in the order to the person who

has suffered any loss or injury by reason of the act for

which the accused person has been so sentenced. The

reason for this is obvious. Sub-section (1) of Section 357

provides that where the court imposes a sentence of fine

or a sentence of which fine forms a part, the court may

direct the fine amount to be applied in the payment to any

person of compensation for any loss or injury caused by

the offence, when the compensation is, in the opinion of

34

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the court, recoverable by such person in a civil court. Thus,

if compensation could be paid out of the fine, there is no

need to award separate compensation. Only where the

sentence does not include a fine but only imprisonment

and the court finds that the person who has suffered any

loss or injury by reason of the act of the accused person

requires to be compensated, it is permitted to award

compensation under Section 357(3).

45. Thus, the learned Trial Court could not have imposed

a fine and awarded the compensation at the same time.

46. The accused had issued a cheque of ₹5,00,000/-, and

he was entitled to be compensated for the loss sustained by him.

Thus, the amount of compensation cannot be set aside. However,

the amount of fine has to be set aside as it was wrongly imposed.

47. Therefore, in view of the above, the present appeal is

partly allowed; the judgment passed by learned Appellate Court

is ordered to be set aside while the judgment of conviction and

order of sentence of imprisonment and payment of

compensation awarded by learned Trial Court are ordered to be

restored. The order of payment of fine imposed by the learned

Trial Court is set aside and the fine amount, if deposited, be

adjusted towards the compensation awarded by the learned Trial

Court.

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48. A copy of this judgment, along with the record of the

learned Trial Court, be sent back forthwith. Pending applications,

if any, also stand disposed of.

(Rakesh Kainthla)

Judge

9

th

September, 2026

(Nikita)