1. Appeal against acquittal in a criminal complaint regarding cheque dishonour under the Negotiable Instruments Act, allegedly issued towards repayment of a chitty prize amount. (Para 1 , 4 )
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2026 Supreme(Online)(Ker) 68181
IN THE HIGH COURT OF KERALA AT ERNAKULAM
A. Badharudeen, J
A.M. GOPALAN MANAGING DIRECTOR – Appellant
Versus
STATE OF KERALA – Respondent
CRL.A 1414/2011
Important Points
Under Section 138 of the NI Act, the complainant must convincingly prove the underlying transaction and legally enforceable debt; producing a dishonored cheque is insufficient if the transaction is improbable or unsupported by essential documentary evidence.
Subject
Criminal Law - Negotiable Instruments Act
Act Referred
Headnote
(A) Negotiable Instruments Act, 1881 - Section 138 - Legally enforceable debt - Initial burden of proof - Mere tendering of a dishonored cheque in evidence is not sufficient to hold that the complainant discharged the initial burden of proving the transaction which ushered the issuance of the cheque - The transaction must be fully established in a convincing manner to be accepted by a court of law. (Para 13)
(B) Evidence - Probabilities - Where the date of the cheque is prior to the date on which the alleged debt was incurred, the claim that the cheque was issued in discharge of said debt is an absolute improbability and not digestible to prudence. (Paras 11 and 13)
Facts of the case:
A complaint was filed alleging that the accused defaulted on installments of a chitty after availing the prize amount and issued a cheque for the outstanding balance. The cheque was subsequently dishonored for insufficiency of funds. The trial court acquitted the accused on the grounds that the cheque was dated prior to the date the accused had auctioned the chitty and availed the funds, and that no account statements were produced to substantiate the liability.
Findings of Court:
The court observed that the complainant failed to produce the chitty agreement or statement of accounts to prove the specific amount due. The chronological contradiction—where the cheque date preceded the date the debt was allegedly created—rendered the complainant's version improbable and insufficient to establish a legally enforceable debt.
Issues: Whether the trial court was correct in acquitting the accused on the basis that the complainant failed to prove a legally enforceable debt due to the improbability of the cheque date and lack of documentary evidence.
Ratio Decidendi: The initial burden of proof in a proceeding under Section 138 of the NI Act includes proving the transaction that led to the issuance of the cheque. Mere production of a dishonored cheque is insufficient to discharge this burden if the underlying transaction is not convincingly established or is contradicted by the facts on record.
Result: Appeal dismissed.
(B) Evidence - Probabilities - Where the date of the cheque is prior to the date on which the alleged debt was incurred, the claim that the cheque was issued in discharge of said debt is an absolute improbability and not digestible to prudence. (Paras 11 and 13)
Facts of the case:
A complaint was filed alleging that the accused defaulted on installments of a chitty after availing the prize amount and issued a cheque for the outstanding balance. The cheque was subsequently dishonored for insufficiency of funds. The trial court acquitted the accused on the grounds that the cheque was dated prior to the date the accused had auctioned the chitty and availed the funds, and that no account statements were produced to substantiate the liability.
Findings of Court:
The court observed that the complainant failed to produce the chitty agreement or statement of accounts to prove the specific amount due. The chronological contradiction—where the cheque date preceded the date the debt was allegedly created—rendered the complainant's version improbable and insufficient to establish a legally enforceable debt.
Issues: Whether the trial court was correct in acquitting the accused on the basis that the complainant failed to prove a legally enforceable debt due to the improbability of the cheque date and lack of documentary evidence.
Ratio Decidendi: The initial burden of proof in a proceeding under Section 138 of the NI Act includes proving the transaction that led to the issuance of the cheque. Mere production of a dishonored cheque is insufficient to discharge this burden if the underlying transaction is not convincingly established or is contradicted by the facts on record.
Result: Appeal dismissed.
Legal Category Hierarchy
Advocates:
For the Appellants/Petitioners: Mahesh V Ramakrishnan
For the Respondents: Sajeev P, M. Manjusri, K. Pradepan (Vengalam), K.P. Pradepan, K.R. Ranjith, R. Sudhish
For the Appellants/Petitioners: Mahesh V Ramakrishnan
For the Respondents: Sajeev P, M. Manjusri, K. Pradepan (Vengalam), K.P. Pradepan, K.R. Ranjith, R. Sudhish
Table of Contents
2. Appellant contended the trial court erred in ignoring evidence of debt, while the respondent argued the lack of documentary proof for the alleged liability necessitated acquittal. (Para 7 , 8 )
3. The court observed that the complainant failed to substantiate the existence of a legally enforceable debt as the cheque date preceded the transaction date, rendering the claim improbable. (Para 11 , 12 , 13 )
4. Mere production of a dishonoured cheque is insufficient to establish liability; the complainant bears the initial burden to prove the underlying transaction creating a legally enforceable debt. (Para 13 )
5. The appeal is dismissed, and the trial court's order of acquittal is confirmed. (Para 13 )
6. Does the production of a dishonoured cheque alone satisfy the complainant’s burden of proof under Section 138 of the NI Act?
No. The complainant must discharge the initial burden of proving the existence of a legally enforceable debt that led to the issuance of the cheque, which requires evidence of the underlying transaction. (Para 13 )
7. What is the legal implication when the date of a cheque is earlier than the date the debt is alleged to have been incurred?
If a cheque is dated before the underlying debt arises, and there is no evidence that the cheque was issued for a future liability, it creates a reasonable doubt regarding the genuineness of the debt, which weakens the complainant's case. (Para 11 )
8. Does the failure of a complainant to produce account statements regarding a chitty transaction affect the sustainability of a Section 138 complaint?
Yes. If the complainant fails to produce essential account statements to verify the outstanding liability claimed, it serves as a significant defect in evidence that can lead to the acquittal of the accused. (Para 12 , 13 )
JUDGMENT
This appeal has been filed under Section 378(4) of theCode of Criminal Procedure, 1973 (for short, ‘the Cr.P.C.’ hereinafter), challenging the judgment in S.T.No.153/2007, dated 11.06.2010 on the files of the Judicial First Class Magistrate Court, Vatakara, at the instance of the complainant in the said case, arraying the accused as the 2nd respondent herein and the State of Kerala as the 1st respondent.
2. Heard the learned counsel for the appellant/complainant as well as the learned Public Prosecutor, in detail. Perused the judgment and the trial court records.
3. The parties in this appeal will be referred to as ‘the complainant’ and ‘the accused’ hereinafter.
4. On tracing the genesis of this case, a complaint had been filed by the complainant before the Judicial First Class Magistrate Court, Vatakara on the allegation that the accused had committed offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, ‘the NI Act’ hereinafter). The summary of the allegation is that the accused subscribed a chitty having sala of Rs.3 Lakh on 28.05.2004 and availed the chitty prize amount on 01.09.2006 by auction. But he was not prompt in repaying the chitty instalments and accordingly, as on 01.08.2006, the amount accumulated to a sum of Rs.1,83,611/- (Rupees One Lakh Eighty-Three Thousand Six Hundred and Eleven only) (principal amount is Rs.1,48,075/- and interest is Rs.35,536/-). The further case of the complainant is that in discharge of the said sum, the accused issued cheque dated 01.08.2006 drawn on ICICI Bank, Vatakara branch on assurance of repayment. But the cheque got dishonoured for want of funds, and the accused failed to repay the amount even after receipt of notice.
5. The learned Magistrate took cognizance for the offence punishable under Section 138 of the NI Act and opted summary trial proceedings. During trial, PW1, the power of attorney holder of the Managing Director of Sree Gokulam Chits and Finance Company was examined and Exts.P1 to P7 were marked on the side of the complainant. No defence evidence was adduced.
6. On appreciation of the evidence, the learned Magistrate acquitted the accused, holding that the accused had succeeded in probabilising his defence that he had not issued Ext.P1 cheque towards any legally enforceable debt. The specific contention raised by the accused before the trial court was that he had issued a blank cheque to the complainant, when he had joined the chitty, by way of security, and that he had not issued the cheque in discharge of any debt or liability.
7. The learned counsel for the complainant argued that the said finding is erroneous. According to him, the evidence of PW1 ought to have been accepted by the trial court to prove the transaction and the execution of the cheque for the amount due from the accused towards the chitty transaction.
8. Whereas, the learned counsel for the accused submitted that, in the instant case, no documents were produced to show the existence of the chitty or the statements of account thereof to establish the balance amount due as on the date of issuance of the cheque and to substantiate the liability alleged by the complainant. Therefore, the verdict is liable to be confirmed.
9. In view of the rival contentions, the points arise for consideration are:
(i) Whether the learned Magistrate went wrong in holding that the accused did not commit the offence punishable under Section 138 of the NI Act?
(ii) Whether the verdict would require interference?
(iii) The order to be passed?
10. Point Nos.(i) to (iii)
Here, Ext.P7 is the copy of the power of attorney executed by A.M. Gopalan, Managing Director of Sree Gokulam Chits & Finance Co. (P) Ltd. (the complainant), in favour of PW1 authorising him to conduct the case. At the time of evidence, PW1 filed chief affidavit. He deposed that he was the power of attorney holder of the complainant as per Ext.P7. According to him, the accused joined for a chitty run by the complainant having s
