1. Dishonour of cheque issued towards discharge of hand loan liability leading to conviction for offence under Section 138 of Negotiable Instruments Act, 1881. (Para 1 , 4 )
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2026 Supreme(Online)(Bom) 5748
IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD
SUSHIL M.GHODESWAR, J
SURESH SUDHAKARRAO DESHMUKH – Appellant
Versus
MANISH MADHUKARRAO POKALE – Respondent
CRIMINAL REVISION APPLICATION NO. 188 OF 2018
Important Points
A clerical error in the cheque number within a statutory notice under Section 138 of the Negotiable Instruments Act does not vitiate proceedings, and compensation may be realistically enhanced based on the duration the complainant was deprived of the funds.
Subject
Criminal - Negotiable Instruments Act
Act Referred
Negotiable Instruments Act, 1881: S.118, S.138, S.139
Code of Criminal Procedure, 1973: S.313, S.357, S.397, S.401
General Clauses Act, 1897: S.27
Code of Criminal Procedure, 1973: S.313, S.357, S.397, S.401
General Clauses Act, 1897: S.27
Headnote
(A) Negotiable Instruments Act, 1881 - Sections 118, 138, and 139 - Dishonour of cheque - Clerical mistake in cheque number in statutory notice - Whether such mistake vitiates the proceedings - It is held that under Section 138(b), mentioning the correct cheque number in the statutory notice is not mandatory; a clerical or accidental mistake in mentioning the cheque number does not invalidate the prosecution provided the notice, read as a whole, satisfies statutory requirements (Paras 17, 18).
(B) Negotiable Instruments Act, 1881 - Section 139 - Statutory Presumption - Burden of proof - Once the signature on the cheque is admitted, the presumption that the cheque was issued for the discharge of a legally enforceable debt arises - The burden lies on the accused to rebut this presumption based on the preponderance of probabilities; failure to explain the circumstances of the cheque's issuance justifies conviction (Paras 15, 18).
(C) Quantum of Compensation - Realistic Compensation - The court emphasised the need for realistic compensation in Section 138 proceedings, taking into account the cheque amount and reasonable interest, especially when the complainant has been deprived of the amount for a considerable period (Para 19).
Facts of the case:
The complainant advanced a loan of Rs. 6 Lakhs to the accused, for which a cheque was issued. The cheque was returned dishonoured due to insufficient funds. In the statutory notice issued by the complainant, the cheque number was incorrectly mentioned as 630063 instead of 636606. The trial court convicted the accused and awarded compensation of Rs. 6 Lakhs. The sessions court maintained the conviction and enhanced the compensation to Rs. 8 Lakhs. The parties approached the High Court through cross-revision applications regarding the validity of the notice, the financial capacity of the complainant, and the adequacy of the compensation.
Findings of Court:
The court found that the clerical error in the notice did not prejudice the accused or vitiate the trial. Since the accused admitted the signature and failed to rebut the statutory presumption under Section 139, the conviction was upheld. The court further held that compensation of Rs. 8 Lakhs was inadequate given the 20-year delay in payment.
Issues: Whether a clerical error in the cheque number in the statutory notice under Section 138 vitiates the proceedings; whether the complainant was required to prove financial capacity when the statutory presumption is active; and whether the compensation awarded by the lower courts was adequate.
Ratio Decidendi: A clerical mistake in the cheque number in a statutory notice does not invalidate a prosecution under Section 138 of the Negotiable Instruments Act, and compensation should be realistic, reflecting the period of deprivation of funds.
Result: Criminal Revision Application Nos. 179 of 2018 and 183 of 2018 dismissed; Criminal Revision Application No. 188 of 2018 partly allowed, enhancing the total compensation to Rs. 12 Lakhs.
(B) Negotiable Instruments Act, 1881 - Section 139 - Statutory Presumption - Burden of proof - Once the signature on the cheque is admitted, the presumption that the cheque was issued for the discharge of a legally enforceable debt arises - The burden lies on the accused to rebut this presumption based on the preponderance of probabilities; failure to explain the circumstances of the cheque's issuance justifies conviction (Paras 15, 18).
(C) Quantum of Compensation - Realistic Compensation - The court emphasised the need for realistic compensation in Section 138 proceedings, taking into account the cheque amount and reasonable interest, especially when the complainant has been deprived of the amount for a considerable period (Para 19).
Facts of the case:
The complainant advanced a loan of Rs. 6 Lakhs to the accused, for which a cheque was issued. The cheque was returned dishonoured due to insufficient funds. In the statutory notice issued by the complainant, the cheque number was incorrectly mentioned as 630063 instead of 636606. The trial court convicted the accused and awarded compensation of Rs. 6 Lakhs. The sessions court maintained the conviction and enhanced the compensation to Rs. 8 Lakhs. The parties approached the High Court through cross-revision applications regarding the validity of the notice, the financial capacity of the complainant, and the adequacy of the compensation.
Findings of Court:
The court found that the clerical error in the notice did not prejudice the accused or vitiate the trial. Since the accused admitted the signature and failed to rebut the statutory presumption under Section 139, the conviction was upheld. The court further held that compensation of Rs. 8 Lakhs was inadequate given the 20-year delay in payment.
Issues: Whether a clerical error in the cheque number in the statutory notice under Section 138 vitiates the proceedings; whether the complainant was required to prove financial capacity when the statutory presumption is active; and whether the compensation awarded by the lower courts was adequate.
Ratio Decidendi: A clerical mistake in the cheque number in a statutory notice does not invalidate a prosecution under Section 138 of the Negotiable Instruments Act, and compensation should be realistic, reflecting the period of deprivation of funds.
Result: Criminal Revision Application Nos. 179 of 2018 and 183 of 2018 dismissed; Criminal Revision Application No. 188 of 2018 partly allowed, enhancing the total compensation to Rs. 12 Lakhs.
Legal Category Hierarchy
Table of Contents
2. Accused challenged notice validity due to discrepancy in cheque number, lack of service, and absence of proof regarding financial capacity, while complainant sought enhanced compensation. (Para 5 , 7 , 8 , 9 , 10 , 11 , 12 )
3. Court noted statutory presumption under Section 139 stands unrebutted, clerical error in notice does not invalidate proceedings, and prolonged deprivation of funds necessitates enhanced compensation. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 )
4. Clerical errors in mentioning cheque numbers in demand notices do not vitiate Section 138 proceedings, and compensation should reflect prolonged deprivation of funds. (Para 17 , 18 , 19 )
5. Conviction and imprisonment maintained, but compensation amount enhanced and revision applications by accused dismissed. (Para 18 , 19 , 20 )
6. Does a clerical error, such as a wrong cheque number in a statutory notice, vitiate proceedings under Section 138 of the Negotiable Instruments Act?
No. The court held that an accidental or clerical mistake in mentioning the cheque number in a demand notice does not vitiate the proceedings, provided the notice as a whole satisfies the statutory requirements and causes no prejudice to the accused. (Para 5 , 10 , 17 , 18 )
7. What is the effect of the statutory presumption under Section 139 regarding the financial capacity of a complainant in a cheque dishonour case?
The statutory presumption of a legally enforceable debt exists once the signature on the cheque is admitted. The burden of proof to rebut this presumption lies on the accused, and failure to provide evidence regarding the complainant's alleged financial incapacity constitutes a failure to rebut the presumption. (Para 9 , 11 , 14 , 15 )
8. What principles should guide the determination of compensation in Section 138 proceedings?
Compensation should be realistic, considering the cheque amount, the period of deprivation, and the intent of the Act. The court may award compensation up to twice the cheque amount to adequately reflect the loss suffered due to the prolonged unavailability of funds. (Para 12 , 19 , 20 )
9. Does a postal remark 'refused to accept' constitute valid service of a demand notice under Section 138?
Yes. A notice sent to the correct address which is returned with the endorsement 'refused to accept' is legally treated as served, relieving the complainant of the need to perform further acts such as examining the postman. (Para 7 , 11 , 16 )
JUDGMENT :-
1. All these three Criminal Revision Applications arise out of the common judgment and order dated 18.06.2018 passed by the learned Additional Sessions Judge-5, Nanded, in Criminal Appeal No. 36 of 2014 and Criminal Appeal No. 68 of 2015. As such, these revisions are being decided by this common judgment.
2. By the aforesaid impugned common judgment, the learned Sessions Judge dismissed Criminal Appeal No.36 of 2014 preferred by the accused (Manish Pokale), thereby confirming his conviction and sentenced for the offence under Section 138 of the Negotiable Instruments Act, 1881, imposed by the learned 5th Judicial Magistrate, First Class, Nanded, in SCC No.2157/2007 whereby, the accused has been sentenced to suffer simple imprisonment for one month and to pay Rs.6 Lakhs towards compensation to the complainant within one month and in default, to suffer simple imprisonment for 15 days. By the same judgment dated 18.06.2018, the learned Sessions Judge partly allowed Criminal Appeal No.68 of 2015 preferred by the complainant (Suresh Deshmukh) to the extent of enhancing the compensation amount from Rs.6 Lakhs to Rs.8 Lakhs.
3. Criminal Revision Application No.179 of 2018 and Criminal Revision Application No.183 of 2018 have been preferred by the accused challenging the dismissal of his appeal and the enhancement of the compensation amount, respectively. Criminal Revision Application No.188 of 2018 has been preferred by the complainant seeking further enhancement of the compensation amount and the substantive sentence as well as the default sentence.
4. Brief facts of the case are as under:-
(a) The complainant (Suresh Sudhakarrao Deshmukh) was engaged in the real estate business. The accused, namely, Manish Madhukarrao Pokale was engaged in the finance business in the name and style of Shriniwas Finance. Both of them were acquainted with each other on account of their business dealings.
(b) In the month of March 2007, the complainant advanced an amount of Rs. 6 Lakhs to the accused for his finance business. It was agreed between them that the amount would not carry any interest, and an “Usanwar Chitti” (Hand Loan Receipt) was executed on 20.03.2007.
(c) In order to repay the said amount, the accused issued cheque No.636606 dated 23.05.2007 for Rs.6 Lakhs in favour of the complainant. The said cheque was drawn on Pusad Urban Co-operative Bank Limited, Pusad Branch.
(d) The cheque was returned dishonoured on 04.10.2007 with a memo stating "insufficient funds".
(e) The complainant issued the notice dated 18.10.2007 under Section 138 of the Negotiable Instruments Act, which was served on the accused on 23.10.2007. It is pertinent to mention that the said notice packet was returned with the postal remark "refused to accept".
(f) Thereafter, the complainant instituted Summary Criminal Case No.2157 of 2007 under Section 138 of the Negotiable Instruments Act before the learned Judicial Magistrate First Class, Nanded. The said complaint was registered on 17.11.2007.
(g) On 13.05.2014, the learned Judicial Magistrate First Class convicted the accused and sentenced him to suffer simple imprisonment for one month. The learned Magistrate also directed the accused to pay compensation of Rs.6 Lakhs to the complainant under Section 357 of the Code of Criminal Procedure, 1973. In default, the accused was directed to suffer simple imprisonment for 15 days.
(h) Being aggrieved by the said judgment of conviction and order of sentence, the accused preferred Criminal Appeal No.36 of 2014 before the learned Sessions Court at Nanded. The complainant also preferred Criminal Appeal No.68 of 2015, seeking enhancement of the substantive sentence as well as the compensation awarded by the learned Judicial Magistrate First Class.
(i) The learned Additional Sessions Judge, Nanded, by the common judgment dated 18.06.2018, dismissed Criminal Appeal No.36 of 2014 preferred by the accused and partly allowed Criminal Appeal No.68 of 2015 preferred by the complainant, t
