2026:HHC:70

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

Cr. Revision No.543 of 2025

Reserved on: 15.12.2025

Date of Decision: 01.01.2026

Rajeev Kumar ...Petitioner

Versus

Arpana Devi ...Respondent

Coram

Hon’ble Mr Justice Rakesh Kainthla, Judge.

Whether approved for reporting?

1

No.

For the Petitioner : Mr Dixit Sahotra, Advocate.

For the Respondent : Nemo.

Rakesh Kainthla, Judge

The present revision is directed against the judgment

dated 04.07.2025, passed by learned Additional Sessions Judge,

Chamba, District Chamba, H.P. (learned Appellate Court) vide

which the appeal filed by the petitioner (accused before learned

Trial Court) was dismissed and the judgment of conviction dated

3.10.2024 and order of sentence dated 30.10.2024, passed by

learned Judicial Magistrate First Class, Dalhosuie, District Chamba

H.P. (learned Trial Court), were upheld. (Parties shall hereinafter be

1

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

P a g e | 2

2026:HHC:70

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

petition are that the complainant filed a complaint against the

accused before the learned Trial Court for the commission of an

offence punishable under Section 138 of the Negotiable

Instruments Act (in short, ‘NI Act’). It was asserted that the

parties were known to each other. The complainant advanced a

loan of ₹85,000/- to the accused. The accused issued a cheque of

₹85,000/- drawn on State Bank of India, Branch Sihunta, to repay

the debt. The complainant presented the cheque to h er bank;

however, the cheque was dishonoured with an endorsement

‘funds insufficient’. The complainant sent a notice to the accused

asking him to repay the amount within fifteen days of the receipt

of the notice; however, the accused failed to repay the money.

Hence, the complaint was filed before the learned Trial Court

against the accused for taking action as per the law.

3. The 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

P a g e | 3

2026:HHC:70

punishable under Section 138 of the NI Act, to which he pleaded

not guilty and claimed to be tried.

4. The complainant examined herself (CW1) to prove her

complaint.

5. The accused, in his statement recorded under Section

313 of CrPC, admitted his signature on the cheque. He claimed that

he had issued a blank, signed cheque in favour of the complainant

as security. He stated that he wanted to lead defence evidence, but

failed to produce any evidence despite repeated opportunities, and

the learned Trial Court closed the opportunity to lead defence

evidence on 24.09.2024.

6. Learned Trial Court held that the accused admitted his

signature on the cheque, and a presumption would arise that the

cheque was issued for consideration to discharge the liability. The

burden would shift upon the accused to rebut the presumption.

The plea taken by the accused that he had issued the cheque as

security would not help him because a security cheque also

attracts the provisions of Section 138 of the NI Act. The accused

failed to lead any evidence to rebut the presumption. The cheque

was dishonoured with an endorsement ‘funds insufficient’. A

P a g e | 4

2026:HHC:70

notice was served upon the accused, but he failed to repay the

money. 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 three

months, pay a compensation of ₹1,20,000/- and in default of

payment of compensation to undergo further simple

imprisonment for 30 days.

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 Additional Sessions Judge, Chamba, District

Chamba, H.P. (learned Appellate Court). Learned Appellate Court

concurred with the findings recorded by the learned Trial Court

that the accused admitted his signature on the cheque , and a

presumption under Sections 118(a) and 139 of the NI Act would be

triggered that the cheque was issued for consideration to

discharge debt/liability. The accused suggested to the

complainant that he had obtained the cheque from one Yaumna ;

however, he failed to examine Yaumna. He did not appear before

the Court as his witness; therefore, he had not rebutted the

P a g e | 5

2026:HHC:70

presumption attached to the cheque. The plea taken by the accused

that the cheque was issued as security was also of no help to the

accused because a cheque issued towards the security also attracts

the provisions of Section 138 of the NI Act. The cheque was

dishonoured with an endorsement ‘funds insufficient’. The notice

was duly served upon the accused. The accused failed to repay the

amount despite receipt of the notice of demand; hence, all the

ingredients of the commission of an offence punishable under

Section 138 of the NI Act were duly satisfied. The learned Trial

Court had rightly convicted the accused, and the sentence imposed

by the learned Trial Court was adequate . No interference was

required with the judgment and order passed by the learned Trial

Court. Consequently, the appeal filed by the accused was

dismissed.

8. Being aggrieved by the judgments and order passed by

the learned Courts below, the accused filed the present revision

asserting that the learned Trial Court erred in appreciating the

evidence on record. It was not explained how an unnatural amount

of ₹85,000/- is due towards the complainant. The plea taken by

the accused that he had issued a security cheque was highly

probable. The complainant failed to prove the advancement of

P a g e | 6

2026:HHC:70

₹85,000/- to the accused. The accused had issued the security

cheque to Yaumna Devi. The complainant procured the cheque

from Yamuna Devi and misused it. This fact was not appreciated

by the learned Courts below; 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. Mr Dixit Sahotra, learned counsel for the

petitioner/accused, submitted that the learned Courts below erred

in appreciating the evidence on record. The complainant failed to

prove the advancement of ₹85,000/- to the accused. The plea

taken by the accused that he had issued a blank security cheque to

Yaumna Devi, which was obtained by the complainant from her,

was highly probable, and the learned Courts below erred in

rejecting this plea. The notice was not served upon the accused;

the learned Courts below erred in holding that the ingredients of

the commission of an offence punishable under Section 138 of the

NI Act were duly satisfied. The sentence imposed upon the accused

is excessive; therefore, he prayed that the present revision be

allowed and the judgments and order passed by the learned Courts

below be set aside.

P a g e | 7

2026:HHC:70

10. I have given considerable thought to his submissions

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

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

Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204: (2022)

3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that the revisional court 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 a

detailed appreciation of the material and evidence brought

on record. The High Court in criminal revision against

conviction is not supposed to exercise the jurisdiction like

the 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 that is to be determined on the 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.

12. This position was reiterated in State of Gujarat v.

Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294, wherein it was

observed:

P a g e | 8

2026:HHC:70

“13. The power and jurisdiction of the Higher Court under

Section 397 Cr. P.C., which vests the court with the power to

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

error of jurisdiction or law or the perversity which has crept

into such proceedings. It would be apposite to refer to the

judgment of this court in Amit Kapoor v. Ramesh Chandra,

(2012) 9 SCC 460, where the scope of Section 397 has been

considered and succinctly explained as under:

“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 the 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, 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 with the

P a g e | 9

2026:HHC:70

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 substantially falls within the

categories aforestated. Even the framing of a charge is a

much-advanced stage in the proceedings under the CrPC.”

13. The present revision has to be decided as per the

parameters laid down by the Hon’ble Supreme Court.

14. The ingredients of the offence punish able under

Section 138 of the NI Act were explained by the Hon’ble Supreme

Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul, 2025

SCC OnLine SC 2019 as under:-

“5.1.1. In K.R. Indira v. Dr. G. Adinarayana (2003) 8 SCC 300,

this Court enlisted the components, aspects and the acts,

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

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 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.”

P a g e | 10

2026:HHC:70

15. The accused admitted his signature on the cheque in

his statement recorded under Section 313 of Cr.P.C. He claimed

that he had issued the cheque as security. 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 cas e 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

P a g e | 11

2026:HHC:70

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, 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.”

16. A similar view was taken in N. Vijay Kumar v.

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

under:

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

instrument is made or drawn for considerat ion, 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.”

17. This position was reiterated in Sanjabij Tari v. Kishore S.

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

“ONCE EXECUTION OF A CHEQUE IS ADMITTED,

PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI ACT

ARISE

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

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

This Court is of the view that once the execution of the

cheque is admitted, the presumption under Section 118 of

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 arises

against the accused. It is pertinent to mention that

P a g e | 12

2026:HHC:70

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 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].

18. Thus, the learned Courts below were justified in raising

the presumption that the cheque was issued in discharge of the

liability for consideration.

19. It was submitted that the complainant did not examine

any person or producing any document to prove the advancement

of the loan to the accused. The burden to prove the existence of

debt/liability was upon the complainant, and the learned Courts

below erred in ignoring this aspect. This submission is not

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

Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: (2020) 1 SCC

(Cri) 154: (2020) 1 SCC (Civ) 126: 2019 SCC OnLine SC 1361, that a

presumption under Section 139 of NI Act would obviate the

requirement to prove the existence of consideration. It was

observed:

P a g e | 13

2026:HHC:70

“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 on the accused

to rebut the presumption that the cheque was issued not for

any debt or other liability.”

20. 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 amount so claimed by him to

have been given as a loan to the accused, only then 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 b y way of

loan. In the case at hand, the appellant had categorically

stated in his deposition and reiterated in the cross -

P a g e | 14

2026:HHC:70

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 petitione₹ 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 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

P a g e | 15

2026:HHC:70

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).

21. A similar view was taken in 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

P a g e | 16

2026:HHC:70

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 cheques

would be irreparably damaged.”

22. Thus, the complainant was not required to prove the

advancement of the loan by examining any person or producing

any document.

23. The accused suggested to the complainant in her cross-

examination that he had issued a cheque in favour of Yamuna

Devi, and the complainant obtained the cheque from her and

misused it. Learned Courts below had rightly pointed out that the

accused did not examine any witness to prove this fact. He did not

produce Yamuna to prove that any cheque was handed over to her

by the accused. He also did not appear before the learned Trial

Court and relied upon his statement recorded under Section 313 of

Cr.P.C. to prove his defence. 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. It was observed at page 700:

P a g e | 17

2026:HHC:70

“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)”

24. Therefore, the statement of the accused recorded under

Section 313 of Cr.P.C. was not a legally admissible statement, and

the accused cannot derive any advantage from it.

25. 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 to the

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.

P a g e | 18

2026:HHC:70

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 law 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.”

26. 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 commission of

an offence punishable under Section 138 of the NI Act. It was

observed: -

“10. We have given due consideration to the submission

advanced 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 Act and 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 is for

“discharge of debt or liability” depends on the nature of the

transaction. If on the date of the cheque, liability or debt 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

P a g e | 19

2026:HHC:70

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 cheques

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 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 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

P a g e | 20

2026:HHC:70

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)

27. 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 true 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 bound.

If in a transaction, a loan is advanced and the borrower

agrees to repay the amount in a specified timeframe 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 defer the 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, the consequences 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 being

stipulated 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

P a g e | 21

2026:HHC:70

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 there being an altered

situation due to which there would be an und erstanding

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 all circumstances, 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' the 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

civil proceedings for recovery or the criminal proceedings

for punishment in the fact situation, but in any event, it is

not for the drawer of the cheque to dictate terms with regard

to the nature of litigation.”

28. Therefore, the learned Courts below had rightly held

that the accused cannot escape from the liability on the ground

that he had issued the cheque as security to the complainant.

29. The complainant stated that the cheque was

dishonoured with the endorsement ‘funds insufficient’. She relied

upon a memo of dishonour (Ext. CW-1/C) in which the reason for

P a g e | 22

2026:HHC:70

dishonour was mentioned as ‘funds insufficient’. It was laid down

by the Hon’ble Supreme Court in Mandvi Cooperative Bank Ltd. v.

Nimesh B. Thakore, (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2

SCC (Cri) 1: 2010 SCC OnLine SC 155 that the memo issued by the

Bank is presumed to be correct and the 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 itse lf, give rise to the

presumption of dishonour of the cheque, unless and until

that fact was disproved. Section 147 makes the offences

punishable under the Act compoundable.”

30. 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’.

31. The complainant asserted that she had issued a notice

to the accused. Both the learned Courts below have concurrently

held that notice was sent on the correct address and was not

returned undelivered; therefore, it is deemed to be served under

Section 27 of the General Clauses Act. 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

P a g e | 23

2026:HHC:70

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, the 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 and escape from the legal consequences of

Section 138 of the Act.” (Emphasis supplied)

32. In the present case, no payment was made, and the plea

that notice was not received by the accused w ill not help the

accused.

P a g e | 24

2026:HHC:70

33. Thus, it was duly proved on record that the accused

had issued a cheque in favour of the complainant to discharge his

debt/liability, which was dishonoured with an endorsement ‘funds

insufficient’ and the accused failed to repay the amount despite

receipt of a valid legal notice. All the ingredients of the

commission of an 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 an offence

punishable under Section 138 of the NI Act.

34. Learned Trial Court sentenced the accused to undergo

simple imprisonment for three months. 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 provisions of section 138 of the N.I.Act 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 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.”

P a g e | 25

2026:HHC:70

35. Therefore, the sentence of three months is not

excessive.

36. Learned Trial Court ordered the a ccused to pay a

compensation of ₹1,20,000/-, which means that ₹35,000/- was

awarded as compensation on the cheque amount of ₹85,000/-.

The cheque was issued on 25.02.2019. The sentence was imposed

on 30.10.2024 after the lapse of more than 5 years . The

complainant lost interest that she would have gained by investing

the money. She had incurred the legal expenses for prosecuting

the complaint before the learned Trial Court. It was laid down by

the Hon’ble Supreme Court in Kalamani 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 only 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 well settled that

there needs to be a consistent approach towards awarding

compensation, and unless there exist special circumstances,

the courts should uniformly levy fines up to twice the

P a g e | 26

2026:HHC:70

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]”

37. Keeping in view these considerati ons, the

compensation of 35,000/- on the cheque amount of ₹85,000/- is

not excessive.

38. The learned Trial Court ordered the accused to undergo

simple imprisonment of thirty days in case of default in the

payment of compensation. It was submitted that there is no

provision for the awarding of a default sentence in case of failure

to deposit the compensation. This submission is not acceptable. It

was laid down by the Hon’ble Supreme Court in K.A. Abbas v. Sabu

Joseph, (2010) 6 SCC 230: (2010) 3 SCC (Civ) 744: (2010) 3 SCC (Cri)

127: 2010 SCC OnLine SC 612, that the Courts can impose a sentence

of imprisonment in default of payment of compensation. It was

observed:

“26. From the above line of cases, it becomes very clear that

a sentence of imprisonment can be granted for default in

payment of compensation awarded under Section 357(3)

CrPC. The whole purpose of the provision is to

accommodate the interests of the victims in the criminal

justice system. Sometimes the situation becomes such that

there is no purpose served by keeping a person behind bars.

Instead, directing the accused to pay an amount of

compensation to the victim or affected party can ensure the

delivery of total justice. Therefore, this grant of

P a g e | 27

2026:HHC:70

compensation is sometimes in lieu of sending a person to

bars or in addition to a very light sentence of imprisonment.

Hence, in default of payment of this compensation, there

must be a just recourse. Not imposing a sentence of

imprisonment would mean allowing the accused to get

away without paying the compensation, and imposing

another fine would be impractical, as it would mean

imposing a fine upon another fine and therefore would not

ensure proper enforcement of the order of compensation.

While passing an order under Section 357(3), it is

imperative for the courts to look at the ability and the

capacity of the accused to pay the same amount as has been

laid down by the cases above; otherwise, the very purpose of

granting an order of compensation would stand defeated.

39. This position was reiterated in R. Mohan v. A.K. Vijaya

Kumar, (2012) 8 SCC 721: (2012) 4 SCC (Civ) 585: (2012) 3 SCC (Cri)

1013: 2012 SCC OnLine SC 486, wherein it was observed at page 729:

29. The idea behind directing the accused to pay

compensation to the complainant is to give him immediate

relief so as to alleviate his grievance. In terms of Section

357(3), compensation is awarded for the loss or injury

suffered by the person due to the act of the accused for

which he is sentenced. If merely an order directing

compensation is passed, it would be totally ineffective. It

could be an order without any deterrence or apprehension

of immediate adverse consequences in case of its non -

observance. The whole purpose of giving relief to the

complainant under Section 357(3) of the Code would be

frustrated if he is driven to take recourse to Section 421 of

the Code. An order under Section 357(3) must have the

potential to secure its observance. Deterrence can only be

infused into the order by providing for a default sentence. If

Section 421 of the Code puts compensation ordered to be

paid by the court on a par with the fine so far as the mode of

recovery is concerned, then there is no reason why the court

P a g e | 28

2026:HHC:70

cannot impose a sentence in default of payment of

compensation, as it can be done in case of default in

payment of a fine under Section 64 IPC. It is obvious that in

view of this, in Vijayan [(2009) 6 SCC 652: (2009) 3 SCC (Cri)

296], this Court stated that the abovementioned provisions

enabled the court to impose a sentence in default of

payment of compensation and rejected the submission that

the recourse can only be had to Section 421 of the Code for

enforcing the order of compensation. Pertinently, it was

made clear that observations made by this Court in Hari

Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984] are as important

today as they were when they were made. The conclusion,

therefore, is that the order to pay compensation may be

enforced by awarding a sentence in default.”

40. Thus, there is no infirmity in imposing a sentence of

imprisonment in case of default in the payment of compensation.

41. No other point was urged.

42. In view of the above, the present revision fails, and it is

dismissed, so also the pending miscellaneous application(s), if

any.

(Rakesh Kainthla)

Judge

01

st

January, 2026.

(ravinder)