2026:HHC:36

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

Cr. Revision No. 591 of 2022

Reserved on: 19.12.2025

Date of Decision: 1.1.2026.

Sandeep Kumar Sharma ...Petitioner

Versus

PNB ...Respondent

Coram

Hon’ble Mr Justice Rakesh Kainthla, Judge.

Whether approved for reporting?

1

No.

For the Petitioner : Mr. Nishant Khidtta, Advocate,

Legal Aid Counsel.

For the Respondent : Mr. Sanjay Dalmia, Advocate.

Rakesh Kainthla, Judge

The present revision is directed against the judgment

dated 21.10.2022, passed by learned Sessions Judge, Bilaspur,

H.P. (learned Appellate Court), vide which the judgment of

conviction dated 5.1.20022 and order of sentence dated 7.5.2022,

passed by learned Chief Judicial Magistrate, Bilaspur, District

Bilaspur, HP (learned Trial Court) were upheld (Parties shall

1

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

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hereinafter be referred to in the same manner as they were arrayed

before the learned Trial Court for convenience.)

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

revision are that the complainant filed a complaint before the

learned Trial Court against the accused for the commission of an

offence punishable under Section 138 of the Negotiable

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

body corporate constituted under the Banking Companies

(Acquisition and Transfer of Undertaking) Act. It is engaged in

banking activities through various branches, and one such

branch is located at Bilaspur. The accused approached the

complainant for a term loan of ₹26,66,000/- for the purchase of

a new AMW 2518 Tipper. The complainant sanctioned the loan

and advanced a sum of ₹26,66,000/- to the accused. The

amount was to be repaid in 58 equated monthly instalments of

₹45,966/- along with a contractual interest at the rate of 12.5%

per annum with monthly rests. It was agreed that in case of

default, a penal interest at the rate of 2% would be charged,

subject to the change as per the RBI Guidelines issued from time

to time. The accused defaulted on the repayment of the loan. He

issued a cheque of ₹9,95,000/- to discharge part of his liability.

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The complainant presented the cheque to the Bank, but it was

dishonoured with an endorsement ‘insufficient funds’. The

complainant sent a legal notice to the accused, but it was

returned with an endorsement ‘unclaimed’ and is deemed to be

served. The accused failed to repay the amount. Hence, the

complaint was filed before the learned Trial Court for taking

action against the accused 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

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

not guilty and claimed to be tried.

4. The complainant examined Ludar Ram (CW1) to

prove its complaint.

5. The accused, in his statement recorded under Section

313 of Cr.P.C., admitted that he had approached the bank for the

term loan of ₹26,66,000/-. He admitted that the loan was to be

repaid in 58 equated monthly instalments along with the

contractual interest at the rate of 12.5% per annum with

monthly rests, and 2% penal interest was to be charged in case

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of default. He admitted that the cheque was dishonoured with

the remarks ‘insufficient funds’. He stated that the complainant

had taken the vehicle into possession. He was told that the

cheque case would be withdrawn. He stated that he wanted to

lead the defence evidence; however, he failed to produce the

evidence despite repeated opportunities, and the learned Trial

Court closed the evidence of the accused on 22.12.2021. He filed

an application under Section 311 of Cr.P.C. for placing the

statement of account on record, which was allowed.

6. Learned Trial Court held that the accused had

admitted the taking of a loan from the complainant. The

statement of Ludar Ram (CW1) that the accused had issued a

cheque in discharge of the partial liability was not challenged in

the cross-examination. The statement of account proved the

liability of the accused. The cheque was dishonoured with an

endorsement ‘insufficient funds’. The notice was deemed to be

served upon the accused, and he failed to repay the amount

despite the deemed service of notice. 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

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undergo simple imprisonment for two years and pay a

compensation of ₹13.00 lacs.

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, Bilaspur, HP (learned

Appellate Court). The learned Appellate Court concurred with

the findings recorded by the learned Trial Court that the

issuance of the cheque by the accused was not disputed in the

cross-examination. The accused admitted that he had taken a

loan from the complainant in his statement recorded under

Section 313 of Cr.P.C. The statement of account (Ex.D1) shows

that an amount of ₹35,35,506/- was due on 28.2.2017. The plea

taken by the accused that the cheque was issued as a security

would not assist the accused because a security cheque also

attracts the liability under Section 138 of the NI Act. The

sentence imposed by the learned Trial Court was adequate, and

no interference was required with it. Hence, the appeal was

dismissed.

8. Being aggrieved by the judgments and order passed

by the learned Courts below, the accused has filed the present

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revision, asserting that the learned Courts below failed to

appreciate the fact that the bank had repossessed the

hypothecated vehicle. The loan was secured under CGTSME, and

the insurance amount was claimed by the Bank. This amount

was not deducted by the bank while calculating the balance. The

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

security is highly probable. Learned Courts below erred in

rejecting this plea. The loan amount has been recovered by the

bank, and no further payment is to be made. Therefore, it was

prayed that the present revision be allowed and the judgments

and order passed by the learned Courts below be set aside.

9. I have heard Mr Nishant Khidtta, learned Legal Aid

Counsel for the petitioner/accused and Mr Sanjay Dalmia,

learned counsel for the respondent/complainant.

10. Mr Nishant Khidtta, learned Legal Aid Counsel for

the petitioner/accused, submitted that the learned Courts below

erred in convicting and sentencing the accused. Ludar Ram

admitted that the bank had sold the hypothecated vehicle. The

bank had also received the money under the CGTSME Scheme.

Neither of these amounts was credited by the bank to the

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account of the accused. The accused has no subsisting liability.

Learned Trial Court had imposed two years imprisonment,

which is the maximum sentence, and no justification for

imposing the maximum sentence was given. Hence, he prayed

that the present revision be allowed and judgments and order

passed by learned Courts below be set aside.

11. Mr Sanjay Dalmia, learned counsel for the

respondent/complainant, submitted that the accused admitted

in his statement recorded under Section 313 Cr.P.C. that he had

taken the loan for purchasing the vehicle. The statement of

account shows that the sale was made after the dishonour of the

cheque. The amount was duly credited to the account of the

accused. The plea taken by the accused that the whole amount

has been paid to the bank is falsified by the statement of

account. Learned Courts below have concurrently held that the

accused had committed an offence punishable under Section 138

of the NI Act. This Court should not reappreciate the evidence

while exercising revisional jurisdiction. Hence, he prayed that

the present petition be dismissed.

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12. I have given considerable thought to the submissions

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

13. 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 a 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.”

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

Dilipsinh Kishorsinh Rao, (2023) 17 SCC 688: 2023 SCC OnLine SC

1294, wherein it was observed at page 695:

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

Section 397 CrPC, which vests the court with the power 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 in such proceedings.

15. It would be apposite to refer to the judgment of this

Court in Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460:

(2012) 4 SCC (Civ) 687: (2013) 1 SCC (Cri) 986, where scope

of Section 397 has been considered and succinctly

explained as under: (SCC p. 475, paras 12-13)

“12. Section 397 of the Code vests the court with the

power to call for and examine the records of an

inferior court for the purposes of satisfying itself as

to the legality and regularity of any proceedings or

order made in a case. The object of this provision is

to set right a patent defect or an error of jurisdiction

or law. There has to be a well-founded error, and it

may not be appropriate for the court to scrutinise

the orders, which, upon the face of it, bear a token

of careful consideration and appear to be in

accordance with law. If one looks into the various

judgments of this Court, it emerges that the

revisional jurisdiction can be invoked where the

decisions under challenge are grossly erroneous,

there is no compliance with the provisions of law,

the finding recorded is based on no evidence,

material evidence is ignored, or judicial discretion is

exercised arbitrarily or perversely. These are not

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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 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 the charge is a much-advanced stage in the

proceedings under CrPC.”

15. It was held in Kishan Rao v. Shankargouda, (2018) 8

SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC

OnLine SC 651 that it is impermissible for the High Court to

reappreciate the evidence and come to its conclusions in the

absence of any perversity. It was observed at page 169:

“12. This Court has time and again examined the scope of

Sections 397/401 CrPC and the grounds for exercising the

revisional jurisdiction by the High Court. In State of Kerala

v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC

452: 1999 SCC (Cri) 275], while considering the scope of

the revisional jurisdiction of the High Court, this Court

has laid down the following: (SCC pp. 454-55, para 5)

5. … In its revisional jurisdiction, the High Court can

call for and examine the record of any proceedings

to satisfy itself as to the correctness, legality or

propriety of any finding, sentence or order. In other

words, the jurisdiction is one of supervisory

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jurisdiction exercised by the High Court for

correcting a miscarriage of justice. But the said

revisional power cannot be equated with the power

of an appellate court, nor can it be treated even as a

second appellate jurisdiction. Ordinarily, therefore,

it would not be appropriate for the High Court to

reappreciate the evidence and come to its

conclusion on the same when the evidence has

already been appreciated by the Magistrate as well

as the Sessions Judge in appeal, unless any glaring

feature is brought to the notice of the High Court

which would otherwise amount to a gross

miscarriage of justice. On scrutinising the

impugned judgment of the High Court from the

aforesaid standpoint, we have no hesitation in

concluding that the High Court exceeded its

jurisdiction in interfering with the conviction of the

respondent by reappreciating the oral evidence. …”

13. Another judgment which has also been referred

to and relied on by the High Court is the judgment

of this Court in Sanjaysinh Ramrao Chavan v.

Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2

SCC (Cri) 19. This Court held that the High Court, in

the exercise of revisional jurisdiction, shall not

interfere with the order of the Magistrate unless it

is perverse or wholly unreasonable or there is non-

consideration of any relevant material, the order

cannot be set aside merely on the ground that

another view is possible. The following has been

laid down in para 14: (SCC p. 135)

“14. … Unless the order passed by the

Magistrate is perverse or the view taken by the

court is wholly unreasonable or there is non-

consideration of any relevant material or there

is palpable misreading of records, the

Revisional Court is not justified in setting aside

the order, merely because another view is

possible. The Revisional Court is not meant to

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act as an appellate court. The whole purpose of

the revisional jurisdiction is to preserve the

power in the court to do justice in accordance

with the principles of criminal jurisprudence.

The revisional power of the court under

Sections 397 to 401 CrPC is not to be equated

with that of an appeal. Unless the finding of the

court, whose decision is sought to be revised, is

shown to be perverse or untenable in law or is

grossly erroneous or glaringly unreasonable or

where the decision is based on no material or

where the material facts are wholly ignored or

where the judicial discretion is exercised

arbitrarily or capriciously, the courts may not

interfere with the decision in exercise of their

revisional jurisdiction.”

16. This position was reiterated in Bir Singh v. Mukesh

Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ)

309: 2019 SCC OnLine SC 13, wherein it was observed at page 205:

“16. It is well settled that in the exercise of revisional

jurisdiction under Section 482 of the Criminal Procedure

Code, the High Court does not, in the absence of

perversity, upset concurrent factual findings. It is not for

the Revisional Court to re-analyse and re-interpret the

evidence on record.

17. As held by this Court in Southern Sales & Services v.

Sauermilch Design and Handels GmbH, (2008) 14 SCC 457, it

is a well-established principle of law that the Revisional

Court will not interfere even if a wrong order is passed by

a court having jurisdiction, in the absence of a

jurisdictional error. The answer to the first question is,

therefore, in the negative.”

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

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

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“27. It is well settled that in exercise of revisional juris-

diction, the High Court does not, in the absence of per-

versity, upset concurrent factual findings [See: Bir

Singh(supra)]. This Court is of the view that it is not for

the Revisional Court to re-analyse and re-interpret the

evidence on record. As held by this Court in Southern Sales

& Services v. Sauermilch Design and Handels GMBH, (2008)

14 SCC 457, it is a well-established principle of law that

the Revisional Court will not interfere, even if a wrong or-

der is passed by a Court having jurisdiction, in the ab-

sence of a jurisdictional error.

28. Consequently, this Court is of the view that in the ab-

sence of perversity, it was not open to the High Court in

the present case, in revisional jurisdiction, to upset the

concurrent findings of the Trial Court and the Sessions

Court.

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

parameters laid down by the Hon’ble Supreme Court.

19. The ingredients of the offence punishable under

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

Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul,

2025 SCC OnLine SC 2019 as under: -

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

this Court enlisted the components, aspects and the acts,

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

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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.”

20. It was specifically stated in para-3 (iii) of the

Revision Petition that the accused had issued the cheque as

security while executing the agreement, and the bank had

assured the accused that it was a process of raising the loan. The

statement of Ludar Ram (CW1) in his affidavit that the accused

had issued a cheque to discharge part of the liability was not

challenged in the cross-examination. Therefore, both the

learned Courts below had rightly held that the issuance of the

cheque and the signatures on the cheque were not in dispute. It

was laid down by the Hon'ble Supreme Court in APS Forex

Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12

SCC 724, that when the issuance of a cheque and signature on the

cheque are not disputed, a presumption would arise that the

cheque was issued in discharge of the legal liability. It was

observed: -

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

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 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.”

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

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

as under:

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“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.”

22. 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 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 a

rebuttable presumption. 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].

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23. Thus, the learned Courts below were justified in

raising the presumption that the cheque was issued in discharge

of the liability for consideration.

24. The complainant admitted in his statement recorded

under Section 313 of Cr.P.C. that he had taken the loan of

₹26,66,000/-, which was to be repaid in 58 equal monthly

instalments along with a contractual interest at the rate of 12.5%

per annum. Thus, the taking of a loan and the rate of interest are

not in dispute.

25. The accused filed a statement of account (Ex. D1)

which shows that an amount of ₹35,35,506/- was due on

28.2.2017. Thus, the accused had a subsisting liability of more

than ₹9,95,000/- on 7.3.2017, the date of issuance of the cheque.

Thus, the defence evidence supports the complainant’s version

that the accused was liable to pay the amount mentioned in the

cheque.

26. It was submitted that the cheque was issued as

security. This plea will not help the accused. It has been found

above that the accused had a liability of more than the cheque

amount on the date of issuance of the cheque. Therefore, the

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complainant had the authority to present the cheque even if it

was issued as security. 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. 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.”

27. 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: -

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“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 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 distin-

guishable. As already noted, it was held therein that lia-

bility 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 lia-

bility towards discharge of acknowledged and admitted

debt under a loan transaction. Dishonour of a cheque is-

sued 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 pur -

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chase 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 dis-

tinction, 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 ap-

plying the judgment in Indus Airways (supra), one cannot

lose sight of the difference between a transaction of the

purchase order which is cancelled and that of a loan

transaction where the loan has actually been advanced,

and its repayment is due on the date of the cheque.

13. The crucial question to determine the applicability of

Section 138 of the Act is whether the cheque represents

the discharge of existing enforceable debt or liability, or

whether it represents an advance payment without there

being a subsisting debt or liability. While approving the

views of different High Courts noted earlier, this is the

underlying principle as can be discerned from the discus-

sion of the said cases in the judgment of this Court.”

(Emphasis supplied)

28. 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

21

2026:HHC:36

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 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 understanding between the parties is a sine qua non

to not present the cheque which was issued as security.

These are only the defences that would be available to the

drawer of the cheque in proceedings initiated under

Section 138 of the N.I. 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.

22

2026:HHC:36

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.”

29. Therefore, the accused cannot escape from the

liability on the ground that he had issued the cheque as security

to the complainant.

30. It was submitted that the bank had sold the vehicle,

and the payment was not credited to the account. This

submission is incorrect. The statement of account (Ex. D1)

shows that ₹3,02,000/- and ₹9,08,000/- were credited in the

account of the accused on 15.12.2017 and 29.12.2017,

respectively, towards the sale proceeds. Further, this amount

was realised after the dishonour of the cheque and will not affect

the liability of the accused. It was laid down by the Hon’ble

Supreme Court in Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 1

SCC 631, that any payment made after the cause of action had

arisen would not wipe out the offence. It was observed:-

23

2026:HHC:36

“7. So far as the question of deposit of the money during

the pendency of these appeals is concerned, we may state

that in course of hearing the parties wanted to settle the

matter in Court and it is in that connection, to prove the

bona fides, the respondent deposited the amount covered

under all the three cheques in the Court, but the

complainant's counsel insisted that if there is going to be

a settlement, then all the pending cases between the

parties should be settled, which was, however not agreed

to by the respondent and, therefore, the matter could not

be settled. So far as the criminal complaint is concerned,

once the offence is committed, any payment made

subsequent thereto will not absolve the accused of the

liability of criminal offence, though in the matter of

awarding of sentence, it may have some effect on the

court trying the offence. But by no stretch of imagination,

a criminal proceeding could be quashed on account of the

deposit of money in the court or that an order of quashing

of a criminal proceeding, which is otherwise

unsustainable in law, could be sustained because of the

deposit of money in this Court. In this view of the matter,

the so-called deposit of money by the respondent in this

Court is of no consequence.”

31. Therefore, no advantage can be derived from the sale

proceeds recovered by the complainant after the dishonour of

the cheque.

32. The statement of account (Ex.D1) shows that the

CGTMSE claim was credited on 27.11.2017 and was debited on

30.12.2017 and 23.1.2018. It was submitted that this amount was

realised by the complainant and should not have been debited

from the account of the accused. This submission cannot be

24

2026:HHC:36

accepted. It was laid down by the Kerala High Court in Ajeet

Kumar Kurup v. State Bank of Travancore WP (c) No. 25332 of 2016,

decided on 19.08.2016, that the CGTMSE Scheme is an insurance

scheme to protect the interest of the bank, and the benefits are

to be reimbursed after realising the dues from the borrower. It

was observed:

“3. As noted above, the case of the petitioners is that since

the credit facility availed by the second petitioner is

covered by the CGTMSE Scheme, they have no liability to

liquidate the outstanding in the account. The petitioners,

having obtained a judgment from this Court earlier

permitting them to liquidate the liability in the loan

account in instalments, according to me, are not entitled

to file a fresh writ petition on the aforesaid ground. In

other words, this is a contention which might, and ought

to have been raised in the earlier writ petition. Further,

there is also no substance in the contention of the

petitioners that they have no liability to liquidate the

outstanding in the loan account since the credit facility

availed by the second petitioner is covered by the

CGTMSE Scheme. CGTMSE Scheme is an insurance

scheme to protect the interest of the banks in the event of

default by the borrowers, and the premium payable for

the coverage of the loan under the scheme is debited from

the account of the borrowers based on the terms of the

agreements executed by the borrowers. The benefits of

the Scheme are to be reimbursed by the banks after

realising the dues from the borrowers concerned. If the

contention of the petitioners is accepted, the borrowers

will have no obligation to repay the loans/credit facilities

availed.”

25

2026:HHC:36

33. A similar view was taken by this Court in Jeet Ram Vs.

HP Gramin Bank 2023:HHC:2849, wherein it was observed:-

“11. During proceedings of the case, Ms. Devyani Sharma,

learned senior counsel appearing for the respondent-

complainant/bank invited attention of this court to Credit

Guarantee Fund Scheme for Micro and Small Enterprises,

under which, some amount is alleged to have been

recovered, to state that amount, if any, recovered under

this scheme is liable to be repaid to the Central

Government.”

34. A similar view was taken in Indian Overseas Bank vs.

Global Marine Products 2003 STPL 580 Kerala, wherein it was

observed:

“9. The appellant has contended that though the total

loss claimed by the appellant was much more, the ECGC

of India Ltd. admitted only a lesser amount and paid the

same. It is clear from Clause 18 of Ext. A65 agreement

entered into between the appellant and the ECGC of India

Ltd. that the amount paid by the Corporation to the

appellant is on condition that the appellant should

institute recovery proceedings against exporter or any

other person from whom such recovery can be effected

towards the insured debt and after recovery the amount

as well as the cost incurred for recovery should be

apportioned between the appellant and the ECGC of India

Ltd. in accordance with the proportion stipulated in the

agreement. Therefore, the payments made by the ECGC to

the appellant, being insured is only for the purpose of

making good the proportionate loss admitted by the

ECGC, subject to recovery of the same under due process

of law from the exporter or from any other person from

whom such amount can be recovered and apportioned as

per the ratio provided in the insurance agreement. Hence,

26

2026:HHC:36

that amount paid by the ECGC to the appellant in terms of

the insurance agreement cannot be credited to the

account of the first defendant exporter from whom the

amounts are due and to be recovered by the appellant

towards the claim.”

35. Therefore, the submission that the accused is

entitled to the benefit of the money under the CGTMSE Scheme

cannot be accepted.

36. The accused did not produce any evidence to rebut

the presumption. He relied upon his statement recorded under

Section 313 Cr.P.C. to establish 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:

“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

27

2026:HHC:36

rebut the presumption that the cheques were issued for

consideration." (Emphasis supplied)”

37. Therefore, no advantage can be derived from the

statement of the accused recorded under Section 313 of Cr.P.C.

38. There is no other evidence to show that the cheque

was not issued in discharge of the debt/liability, hence the

learned Courts below had rightly held that the accused had failed

to rebut the presumption contained under Section 118 (a) and

Section 139 of the NI Act.

39. Ludar Ram (CW1) stated that the cheque was

dishonoured with an endorsement ‘insufficient funds’. He filed

the return memo (Ex.C3). The accused admitted in his statement

recorded under Section 313 Cr.P.C. that the cheque was

dishonoured with the remarks ‘insufficient funds’. Therefore,

the plea of the complainant that the cheque was dishonoured

because of insufficient funds has to be accepted as correct.

40. Ludar Ram (CW1) stated that a notice was issued to

the accused, which was returned with the report ‘unclaimed’.

His statement is corroborated by the envelope (Ex.C6) in which

an endorsement was made that ‘the addressee was not residing

at the address mentioned in the notice.’ This was the same

28

2026:HHC:36

address upon which the service of the accused was effected. The

accused also furnished the same address in his statement

recorded under Section 313 Cr.P.C. and the notice of accusation.

Therefore, the notice was sent to the correct address. It was laid

down by the Hon’ble Supreme Court in D. Vinod Shivappa v.

Nanda Belliappa, (2006) 6 SCC 456: (2006) 3 SCC (Cri) 114: 2006

SCC OnLine SC 629, that a notice returned with an endorsement

“house locked” would lead to a presumption that the notice was

validly served and the burden would be upon the accused to

show that the report is incorrect. It was observed at page 462:

“14. If a notice is issued and served upon the drawer of

the cheque, no controversy arises. Similarly, if the notice

is refused by the addressee, it may be presumed to have

been served. This is also not disputed. This leaves us with

the third situation where the notice could not be served

on the addressee for one or the other reason, such as his

non-availability at the time of delivery, or premises re-

maining locked on account of his having gone elsewhere,

etc. etc. If in each such case the law is understood to mean

that there has been no service of notice, it would com-

pletely defeat the very purpose of the Act. It would then be

very easy for an unscrupulous and dishonest drawer of a

cheque to make himself scarce for some time after issuing

the cheque so that the requisite statutory notice can never

be served upon him, and consequently, he can never be

prosecuted. There is good authority to support the propo-

sition that once the complainant, the payee of the cheque,

issues notice to the drawer of the cheque, the cause of ac-

tion to file a complaint arises on the expiry of the period

prescribed for payment by the drawer of the cheque. If he

29

2026:HHC:36

does not file a complaint within one month of the date on

which the cause of action arises under clause (c) of the

proviso to Section 138 of the Act, his complaint gets

barred by time. Thus, a person who can dodge the post-

man for about a month or two, or a person who can get a

fake endorsement made regarding his non-availability,

can successfully avoid his prosecution because the payee

is bound to issue notice to him within a period of 30 days

from the date of receipt of information from the bank re-

garding the return of the cheque as unpaid. He is, there-

fore, bound to issue the legal notice, which may be re-

turned with an endorsement that the addressee is not

available at the given address.

xxxxx

18. This Court noticed the position well settled in law that

the notice refused to be accepted by the drawer can be

presumed to have been served on him. In that case, the

notice was returned as “unclaimed” and not as refused.

The Court posed the question, “Will there be any signifi-

cant difference between the two so far as the presumption

of service is concerned?” Their Lordships referred to Sec-

tion 27 of the General Clauses Act and observed that the

principle incorporated therein could profitably be im-

ported in a case where the sender had dispatched the no-

tice by post with the correct address written on it. Then it

can be deemed to have been served on the sendee, unless

he proves that it was not really served and that he was not

responsible for such non-service. This Court dismissed

the appeal preferred by the drawer, holding that where

the notice is returned by the addressee as unclaimed, such

date of return to the sender would be the commencing

date in reckoning the period of 15 days contemplated in

clause (c) of the proviso to Section 138 of the Act. This

would be without prejudice to the right of the drawer of

the cheque to show that he had no knowledge that the

notice was brought to his address. Since the appellant did

not attempt to discharge the burden to rebut the aforesaid

presumption, the appeal was dismissed by this Court. The

aforesaid decision is significant for two reasons. Firstly, it

30

2026:HHC:36

was held that the principle incorporated in Section 27 of

the General Clauses Act would apply in a case where the

sender dispatched the notice by post with the correct ad-

dress written on it, but that would be without prejudice to

the right of the drawer of the cheque to show that he had

no knowledge that the notice was brought to his ad -

dress.”

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

India in C.C. Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555, that

when a notice is returned unclaimed, it is deemed to be served. It

was observed:

“8. Since in Bhaskaran's case (supra), the notice issued in

terms of Clause (b) had been returned unclaimed and not

as refused, the Court, posed the question: "Will there be

any significant difference between the two so far as the

presumption of service is concerned?" It was observed

that though Section 138 of the Act does not require that

the notice should be given only by "post", yet in a case

where the sender has dispatched the notice by post with

the correct address written on it, the principle

incorporated in Section 27 of the General Clauses Act,

1897 (for short 'G.C. Act') could profitably be imported in

such a case. It was held that in this situation service of

notice is deemed to have been effected on the sendee

unless he proves that it was not really served and that he

was not responsible for such non-service.”

42. This position was reiterated in Priyanka Kumari vs.

Shailendra Kumar (13.10.2023- SC Order): MANU/ SCOR/ 133284/

2023, wherein it was observed:

“As it was held by the Hon'ble Supreme Court in K.

Bhaskaran Vs. Sankaran Vaidhyan Balan and Another,

31

2026:HHC:36

(1999) 7 Supreme Court Cases 510, that when notice is

returned as 'unclaimed', it shall be deemed to be duly

served upon the addressee, and it is a proper service of

notice. In the case of Ajeet Seeds Limited Vs. K. Gopala

Krishnaiah (2014) 12 SCC 685 (2014), the Hon'ble Court,

while interpreting Section 27 of the General Clauses Act

1897 and also Section 114 of the Evidence Act 1872, held

as under: -

"Section 114 of the Evidence Act, 1872, enables

the court to presume that in the common

course of natural events, the communication

sent by post would have been delivered at the

address of the addressee. Further, Section 27 of

the General Clauses Act, 1897 gives rise to a

presumption that service of notice has been

effected when it is sent to the correct address by

registered post. It is not necessary to aver in the

complaint that, despite the return of the notice

unserved, it is deemed to have been served or

that the addressee is deemed to have knowledge

of the notice. Unless and until the contrary is

proved by the addressee, service of notice is

deemed to have been effected at the time at

which the letter would have been delivered in

the ordinary course of business."

43. A similar view was taken in Krishna Swaroop Agarwal

v. Arvind Kumar, 2025 SCC OnLine SC 1458, wherein it was

observed:

“13. Section 27 of the General Clauses Act, 1887, deals

with service by post:

“27. Meaning of Service by post.-Where any

[Central Act] or Regulation made after the

commencement of this Act authorizes or

requires any document to be served by post,

whether the expression “serve” or either of the

32

2026:HHC:36

expressions “give” or “send” or any other

expression is used, then, unless a different

intention appears, the service shall be deemed to

be effected by properly addressing, pre-paying

and posting by registered post, a letter

containing the document, and, unless the

contrary is proved, to have been effected at the

time at which the letter would be delivered in the

ordinary course of post”.

14. The concept of deemed service has been discussed by

this Court on various occasions. It shall be useful to refer

to some instances:

14.1 In Madan and Co. v. Wazir Jaivir Chand (1989)

1 SCC 264, which was a case concerned with the

payment of arrears of rent under the J&K Houses

and Shops Rent Control Act, 1966. The proviso to

Section 11, which is titled “Protection of a

Tenant against Eviction”, states that unless the

landlord serves notice upon the rent becoming

due, through the Post Office under a registered

cover, no amount shall be deemed to be in

arrears. Regarding service of notice by post, it

was observed that in order to comply with the

proviso, all that is within the landlord's domain

to do is to post a pre-paid registered letter

containing the correct address and nothing

further. It is then presumed to be delivered

under Section 27 of the GC Act. Irrespective of

whether the addressee accepts or rejects, “there

is no difficulty, for the acceptance or refusal can be

treated as a service on, and receipt by the

addressee.”

14.2 In the context of Section 138 of the

Negotiable Instruments Act, 1881 it was held

that when the payee dispatches the notice by

registered post, the requirement under Clause

(b) of the proviso of Section 138 of the NI Act

stands complied with and the cause of action to

33

2026:HHC:36

file a complaint arises on the expiry of that

period prescribed in Clause (c) thereof. [See: C.C.

Alavi Haji v. Palapetty Mouhammed (2007) 6 SCC

555]

14.3 The findings in C.C. Alavi (supra) were

followed inVishwabandhu v. Srikrishna (2021) 19

SCC 549. In this case, the summons issued by the

Registered AD post was received back with

endorsement “refusal”. In accordance with Sub-

Rule (5) of Order V Rule 9 of CPC, refusal to

accept delivery of the summons would be

deemed to be due service in accordance with law.

To substantiate this view, a reference was made

to the judgment referred to supra.

14.4 A similar position as in C.C. Alavi (supra)

stands adopted by this Court in various

judgments of this Court in Greater Mohali Area

Development Authority v. Manju Jain (2010) 9 SCC

157; Gujarat Electricity Board v. Atmaram

Sungomal Posani (1989) 2 SCC 602; CIT v. V. K.

Gururaj (1996) 7 SCC 275; Poonam Verma v. DDA

(2007) 13 SCC 154; Sarav Investment & Financial

Consultancy (P) Ltd. v. Lloyds Register of Shipping

Indian Office Staff Provident Fund (2007) 14 SCC

753; Union of India v. S.P. Singh (2008) 5 SCC 438;

Municipal Corpn., Ludhiana v. Inderjit Singh

(2008) 13 SCC 506; and V.N. Bharat v. DDA (2008)

17 SCC 321.

44. In the present case, the accused has not proved that

he was not responsible for non-service; therefore, the learned

Courts below had rightly held that the notice was deemed to be

served upon the accused.

34

2026:HHC:36

45. Therefore, it was duly proved on record that the

accused had issued a cheque in discharge of his liability, which

was dishonoured with an endorsement ‘funds insufficient’, and

the accused failed to repay the amount despite the deemed

service of notice upon him. Hence, all the ingredients of

commission of an offence punishable under Section 138 of the

NI Act were duly satisfied. Thus, the learned Trial Court had

rightly convicted the accused of the commission of an offence

punishable under Section 138 of the NI Act.

46. The learned Trial Court sentenced the accused to

undergo simple imprisonment for two years, which is the

maximum sentence provided by the legislature for the

commission of an offence punishable under Section 138 of the NI

Act. 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 NI 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

35

2026:HHC:36

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.”

47. The learned Trial Court or the learned Appellate

Court have not assigned any reason as to why the maximum

sentence should have been awarded. No aggravating

circumstances justifying the imposition of the maximum

sentence were brought on record. Hence, the sentence of two

years cannot be upheld.

48. The cheque was issued in the year 2017. The accused

had to face the agony of trial. He pursued the remedy of appeal

and revision and has spent about eight years in litigation.

Keeping in view the time spent by the accused and the deterrent

nature of the crime, the sentence is reduced to six months’

imprisonment.

49. Learned Trial Court ordered the payment of

compensation of ₹13.00 lacs. The cheque amount was

₹9,95,000/- and the cheque was issued on 7.3.2017. The

sentence was imposed on 7.5.2022 after the lapse of more than

five years. The complainant had lost interest that it would have

gained by advancing the loan to other persons. It had to engage a

36

2026:HHC:36

counsel to pursue 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 cheque amount along with simple

interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260,

para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]”

50. Therefore, the amount of ₹13.00 lacs cannot be said

to be excessive, and no interference is required with it.

51. No other point was urged.

52. In view of the above, the revision is partly allowed,

and the sentence of two years imprisonment imposed by the

learned Trial Court is reduced to six months imprisonment.

37

2026:HHC:36

Subject to this modification, the rest of the judgments and order

passed by the learned Courts below are upheld.

53. A copy of this judgment along with records of the

learned Courts below be transmitted forthwith.

(Rakesh Kainthla)

Judge

1

st

January, 2026

(Chander)