Presumption Under NI Act Sections 118 & 139 Not Rebutted by Accused; Revisional Court Role Limited: HP High Court Upholds S. 138 Conviction (Compensation Reduced) - 2025-04-27

HP High Court Upholds Cheque Dishonour Conviction, Reduces Compensation Amount

Shimla: The Himachal Pradesh High Court has largely affirmed the conviction of an individual under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) in a case involving the dishonour of a cheque issued following a failed land sale agreement. While upholding the conviction and the one-year simple imprisonment sentence, the Court, however, reduced the compensation amount payable to the complainant.

The judgment was delivered by the bench of Justice RakeshKainthla in a criminal revision petition (Cr. Revision No. 531 of 2023) filed by the accused, Gillu @ Gulab Chand , challenging the concurrent findings of the lower courts.

Case Background

The case originated from a complaint filed by Krishna Devi (the complainant) against Gillu @ Gulab Chand (the accused) under Section 138 of the NI Act. According to the complainant, she and the accused were known to each other. In June 2015, the accused agreed to sell a piece of land to the complainant for ₹8.00 lacs. An agreement to sell was executed, and the complainant paid an advance of ₹6.00 lacs (₹1.00 lac cash and ₹5.00 lacs by cheque).

The agreement stipulated that the balance amount would be paid upon execution of the sale deed by a specific date (initially 15.9.2015), but the accused repeatedly failed to execute the deed, extending the date several times until December 2016. Despite receiving an additional ₹60,000 in November 2016, the accused did not attend the Tehsil office on the final agreed date (17.12.2016) to execute the sale deed.

When requested to either execute the deed or return the advance money, the accused issued a cheque of ₹6.00 lacs drawn on Kangra Central Cooperative Bank to discharge part of his liability. This cheque was presented by the complainant but was dishonoured on 17.11.2017 with the remark "funds insufficient." The complainant sent a legal notice, which was duly served, demanding payment within 15 days. The accused failed to pay, leading to the criminal complaint under Section 138 of the NI Act.

Lower Court Decisions

The Judicial Magistrate First Class, Manali, found sufficient grounds to summon the accused. The accused pleaded not guilty and claimed trial. During the trial, the complainant testified and produced the agreement to sell. The accused, in his statement under Section 313 Cr.P.C., claimed he had only taken a ₹1.00 lac loan and issued a blank cheque, asserting he had returned the ₹1.00 lac. He also presented a defence witness (DW1) who testified that the accused had withdrawn ₹1.00 lac from his account in 2013.

The Trial Court, on 9.9.2022, held that the issuance of the cheque was undisputed and the accused failed to rebut the presumption of consideration under the NI Act. The court found the complainant's version corroborated by the agreement to sell. The defence witness's testimony regarding a 2013 withdrawal was deemed irrelevant to the 2016 transaction. Consequently, the court convicted the accused under Section 138 NI Act and sentenced him to one year simple imprisonment and compensation of ₹12.00 lacs (double the cheque amount), with a default sentence of one month imprisonment.

The accused appealed this decision to the Sessions Judge, Kullu. On 25.5.2023, the learned Sessions Judge concurred with the Trial Court's findings, upholding the conviction and sentence and dismissing the appeal.

Arguments in Revision

Aggrieved by the concurrent judgments, the accused filed the present criminal revision petition before the High Court. The petitioner argued that the lower courts did not properly appreciate the evidence, misread witness statements, and wrongly ignored the defence witness. It was also submitted that the ₹2.00 lacs allegedly paid by the accused at the time of the conviction judgment was not considered by the appellate court. The petitioner also contended that the cheque was a blank security cheque that was misused.

The respondent complainant countered that the issuance of the cheque was admitted, and the lower courts had correctly applied the presumptions under Sections 139 and 118 of the NI Act, which the accused failed to rebut with satisfactory evidence.

High Court's Analysis and Decision

Justice Kainthla , referring to Supreme Court judgments like Malkeet Singh Gill and State of Gujarat v. Dilipsinh Kishorsinh Rao , reiterated the limited scope of revisional jurisdiction, emphasizing that it is not an appellate jurisdiction and is confined to rectifying patent defects, errors of jurisdiction, or law.

The Court noted that the accused had admitted issuing the cheque in his Section 313 statement, albeit claiming it was blank and for a different amount (₹1 lac loan). The High Court cited several precedents ( Naresh Verma , Basalingappa, Kalamani Tex, APS Forex Services, Triyambak S. Hegde, Tedhi Singh, P. Rasiya , Rajesh Jain , Bir Singh , Oriental Bank of Commerce ) establishing that once the signature on the cheque or its issuance is admitted, a presumption arises under Sections 118 and 139 of the NI Act that it was issued for consideration and towards a legally enforceable debt or liability. This presumption is rebuttable, but the accused must provide probable defence evidence, and a mere denial in the Section 313 statement is insufficient ( Sumeti Vij ).

The Court found that the defence witness's testimony about a 2013 withdrawal was unrelated to the 2015 transaction. The plea that it was a blank or security cheque was also rejected, noting the absence of evidence like a handwriting expert report and reaffirming that even cheques issued as security or filled by another person (if signed by the drawer) attract liability under Section 138 NI Act when the underlying obligation exists ( Hamid Mohammad , Sampelly Satyanarayana Rao , Sripati Singh, Bir Singh , Oriental Bank of Commerce ). The agreement to sell supported the complainant's claim of ₹6.00 lacs advance.

The Court also upheld the findings regarding the cheque dishonour (confirmed by the memo and presumption under S. 146 NI Act) and the service of legal notice (deemed served under S. 27 General Clauses Act, further solidified by the accused's failure to pay after receiving court summons, as per C.C. Allavi Haji ).

Based on this analysis, the High Court concluded that the concurrent findings of the lower courts regarding the accused's guilt under Section 138 NI Act were correct.

Regarding the sentence, the Court found the one-year simple imprisonment not excessive, citing the deterrent nature of Section 138 NI Act ( Bir Singh ). However, the Court reviewed the compensation amount. Citing the Supreme Court in M/S Kalamani Tex , which recommended a consistent approach of levying a fine up to twice the cheque amount along with simple interest at 9% per annum, the High Court calculated the interest on ₹6.00 lacs for five years (from cheque date 21.8.2017 to trial court judgment 9.9.2022) at ₹2.70 lacs. The Trial Court's award of ₹12.00 lacs (double the cheque amount) was deemed not fully justified in light of the recommended formula. The High Court accordingly reduced the compensation amount from ₹12.00 lacs to ₹9.00 lacs (₹6 lac principal + ₹2.7 lac interest approx., rounded up).

Finally, the Court confirmed that imposing a sentence of imprisonment in default of compensation payment is permissible under law, citing Supreme Court judgments including K.A. Abbas and R. Mohan , stating it is a mode of enforcement to ensure the victim receives compensation.

Conclusion

The High Court partly allowed the criminal revision petition, modifying only the compensation amount. The conviction under Section 138 of the NI Act and the sentence of one year simple imprisonment were upheld. The compensation amount payable by the accused to the complainant was reduced from ₹12.00 lacs to ₹9.00 lacs. The rest of the trial court's judgment, including the default sentence for non-payment of compensation, was affirmed.

The court records of the lower courts were ordered to be sent back.