The Supreme Court has reiterated that in proceedings under Section 138 of the Negotiable Instruments Act, 1881, a complainant is not required to prove financial capacity to lend money at the threshold. The burden of rebuttal lies on the accused—and only if a specific objection is raised regarding the complainant’s capacity does the onus shift.
The ruling came in Criminal Appeal No. 4171 of 2024, titled Ashok Singh vs. State of Uttar Pradesh & Anr., decided on April 2, 2025 by a Bench comprising Justice Ahsanuddin Amanullah and Justice Sudhanshu Dhulia.
Background of the Case
The complainant-appellant Ashok Singh filed Complaint Case No. 6650/2012 alleging that Ravindra Pratap Singh (Respondent No. 2) had borrowed ₹22 lakhs and issued a cheque (No. 726716 dated 17.03.2010, drawn on Bank of Baroda) in discharge of this loan.
When the cheque was presented to IDBI Bank, it was dishonoured on 07.05.2010 with the endorsement “payment stopped by drawer”. A statutory legal notice dated 18.05.2010 was served, but the accused did not reply or repay. This led to the filing of a complaint under Section 138 of the NI Act.
Trial Court & High Court Proceedings
- Trial Court Judgment (12.04.2019): Convicted Ravindra Pratap Singh and sentenced him to one year simple imprisonment with a fine of ₹35 lakhs (₹30 lakhs as compensation).
- Appellate Court Judgment (23.10.2020): Confirmed the conviction and sentence.
- High Court (21.02.2024, Criminal Revision No. 619/2020): Acquitted the accused, holding that the complainant failed to establish the loan transaction by not proving bank withdrawal, the date of cheque delivery, or business relations.
Key Legal Issues Before the Supreme Court
- Whether the High Court was justified in reversing concurrent findings of conviction under Section 138 NI Act.
- Whether the complainant is required to prove his financial capacity at the threshold to lend ₹22 lakhs.
- Whether the absence of the partnership firm (M/s Sun Enterprises) as an accused renders the complaint defective.
- Whether the accused successfully rebutted the statutory presumption under Sections 118 and 139 of the NI Act.
Supreme Court’s Analysis & Decision
On Financial Capacity:
The Court held that a complainant is not required to prove financial capacity at the threshold. The High Court’s insistence on details like date of bank withdrawal and money lending license at the first instance was legally erroneous.
“The onus is not on the complainant at the threshold… Only if an objection is raised that the complainant was not in a financial position… would he have to produce cogent material,” the Court said.
It relied on the precedent in Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106, stating that the presumption under Section 139 operates unless rebutted by the accused with substantive evidence.
On Statutory Presumption:
Since the accused admitted his signature on the cheque, the presumption of a legally enforceable debt stood. The accused failed to rebut this with credible evidence, such as his claim that the cheque was lost in 2010 but only reported to police in 2011—clearly raising suspicion of fabrication.
On Non-Arraignment of Partnership Firm:
Though the cheque was allegedly drawn by M/s Sun Enterprises, the Court held that the complaint was maintainable since the accused (Ravindra Pratap Singh) was a signatory to the cheque and a person in charge of the firm. It harmonised previous judgments, including Aneeta Hada v. Godfather Travels and Sunita Palita v. Panchami Stone Quarry.
“As the signatory of the cheque is arrayed as accused and is also the person in charge, the underlying complaint would be maintainable,” the Court clarified.
While restoring conviction, the Court showed leniency on sentencing due to the accused’s personal circumstances.
- Imprisonment Set Aside
- Fine Reduced to ₹32 Lakhs, to be paid within four months
- Default Clause: If unpaid, original sentence of 1-year imprisonment and ₹35 lakhs fine will be revived.
