The High Court of Himachal Pradesh, presided over by Justice Rakesh Kainthla, has held that a cheque issued towards an existing loan liability attracts criminal liability under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), even if the drawer claims it was given as a security cheque, filled in by the payee, or drawn on a closed account. Dismissing a criminal revision petition filed by an accused against his conviction, the High Court affirmed that once the execution of a cheque and borrowing of funds are admitted, mandatory statutory presumptions arise in favour of the holder under Sections 118(a) and 139 of the NI Act, which cannot be rebutted by mere unsubstantiated oral claims of repayment.
Background of the Case
The case originated from a complaint filed by Ambal Khan against Khushinder Singh under Section 138 of the NI Act. Ambal Khan asserted that Khushinder Singh had borrowed ₹1,40,000 for personal requirements on July 15, 2016, promising to repay the sum within two months. To discharge the liability, the accused issued a cheque of ₹1,40,000. However, when presented at the bank, the cheque was dishonoured with the memo endorsement ‘account closed’. Ambal Khan sent a legal notice via registered post, which was duly served upon the accused, but he failed to pay the amount, prompting the complaint.
During the trial before the Additional Chief Judicial Magistrate, Nalagarh, the accused in his statement under Section 313 of the Code of Criminal Procedure (CrPC) admitted borrowing ₹1,40,000 on July 15, 2016, and issuing a blank signed cheque. However, he claimed that the cheque was given as security and that he had repaid the money in 2016, alleging that the complainant misused the instrument. In his defense, the accused examined Naresh Kumar (DW-1).
The Trial Court held that since the borrowing and execution of the cheque were admitted, the statutory presumptions under Sections 118(a) and 139 of the NI Act applied. Finding no evidence of repayment, the Trial Court convicted the accused under Section 138 of the NI Act, sentencing him to three months simple imprisonment and ordering him to pay ₹1,70,000 as compensation to the complainant. The Additional Sessions Judge, Nalagarh, dismissed the appeal on April 1, 2024, observing that an agreement produced by the accused pertained to a separate transaction of ₹3,00,000 and that even if issued as security, the complainant had the authority to present the cheque upon default.
Arguments of the Parties
In the revision petition before the High Court, Advocate K.S. Chandel, representing the petitioner-accused Khushinder Singh, submitted that there was a discrepancy between the legal notice (which mentioned a repayment period of one year) and the complaint (which mentioned two months). Counsel argued that the land and building had been mortgaged and security cheques handed over, which were subsequently misused and filled in by the complainant. It was further argued that the return memo lacked a bank seal and signature, no bank official was examined, and advancing cash above ₹20,000 violated Section 269SS of the Income Tax Act, 1961. The petitioner placed reliance on the decisions in Govind Ram vs. State of H.P. & another and Sri Sai Sapthagiri Sponge Pvt. Ltd. vs. The State (GNCT of Delhi) & another.
Opposing the petition, Advocate Dinesh Bhanot, appearing for respondent-complainant Ambal Khan, contended that both lower courts correctly applied the statutory presumptions under Sections 118(a) and 139 of the NI Act since loan acceptance and cheque signatures were admitted. Counsel argued that the accused led no cogent evidence to establish repayment, thereby failing to rebut the statutory presumption.
Court’s Analysis
Addressing the scope of revisional jurisdiction under Section 397 CrPC, Justice Rakesh Kainthla referred to Supreme Court rulings in Malkeet Singh Gill v. State of Chhattisgarh, State of Gujarat v. Dilipsinh Kishorsinh Rao, Amit Kapoor v. Ramesh Chander, Kishan Rao v. Shankargouda, Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, Bir Singh v. Mukesh Kumar, and Sanjabij Tari v. Kishore S. Borcar. The Court noted that revisional power is narrow and meant only to rectify patent defects, jurisdictional errors, or perversity, rather than re-appreciating evidence.
On the reliance placed on the accused’s admissions during examination under Section 313 CrPC, the Court cited State of Maharashtra v. Sukhdev Singh, Mohan Singh v. Prem Singh, Ramnaresh v. State of Chhattisgarh, and Ashok Debbarma v. State of Tripura, clarifying that answers given under Section 313 CrPC can be used to lend corroboration to prosecution evidence.
Regarding the rebuttal of statutory presumptions, the Court referenced APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers, N. Vijay Kumar v. Vishwanath Rao N., and Sanjabij Tari v. Kishore S. Borcar. The Court emphasized that mere denial under Section 313 CrPC does not discharge the burden of proof, citing Sumeti Vij v. Paramount Tech Fab Industries, where the Supreme Court observed:
“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 rebut the presumption that the cheques were issued for consideration.”
On the argument that the cheque was given merely as security, the High Court relied on Hamid Mohammad v. Jaimal Dass, Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited, and Sripati Singh v. State of Jharkhand. The Court reiterated that a cheque issued as security for an existing financial transaction matures for presentation if the loan is not repaid by the due date. The Court quoted Sampelly Satyanarayana Rao, stating:
“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.”
The Court also quoted Sripati Singh:
“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.”
Addressing the contention that the complainant filled in the cheque details, the High Court cited Bir Singh v. Mukesh Kumar and Oriental Bank of Commerce v. Prabodh Kumar Tewari, noting that handing over a signed blank cheque authorizes the payee to fill in the amount to recover an existing debt. The Court quoted from Bir Singh:
“A meaningful reading of the provisions of the Negotiable Instruments Act, including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer if the cheque is duly signed by the drawer.”
Responding to the argument regarding Section 269SS of the Income Tax Act, the Court cited Surinder Singh vs. State of H.P. and Sanjabij Tari v. Kishore S. Borcar (which set aside P.C. Hari v. Shine Varghese and was reiterated in Shine Varghese Koipurathu v. State of Kerala), holding that a breach of Section 269SS attracts penalty under Section 271D of the Income Tax Act but does not render the loan transaction illegal, void, or unenforceable under Section 138 of the NI Act.
Regarding dishonour due to ‘account closed’, the High Court cited NEPC Micon Ltd. v. Magma Leasing Ltd., Bal Krishan Sharma v. Tek Ram, and N.A. Issac v. Jeemon P. Abraham. The Court noted that even though the return memo lacked a bank seal, the accused specifically admitted receiving notice and that the cheque was returned for ‘account closed’. The Court quoted NEPC Micon Ltd.:
“The expression ‘the amount of money standing to the credit of that account is insufficient to honour the cheque’ is a genus of which the expression ‘that account being closed’ is a species.”
Evaluating the sentence and compensation, the Court noted that Section 138 is deterrent in nature, quoting Bir Singh v. Mukesh Kumar:
“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.”
Referring to Kalamani Tex v. P. Balasubramanian, which directs courts to uniformly levy fines up to twice the cheque amount along with interest, the Court held that awarding ₹1,70,000 compensation (including ₹30,000 towards interest loss for over four years) alongside three months simple imprisonment was balanced and justified.
Final Decision
The High Court held that all essential ingredients of Section 138 of the NI Act were satisfied and found no illegality or perversity in the findings of the lower courts. Consequently, the criminal revision petition was dismissed, affirming the conviction and sentence passed against the petitioner.
Case Details:
Case Title: Khushinder Singh v. Ambal Khan
Case No.: Cr. Revision No. 554 of 2024
Bench: Justice Rakesh Kainthla
Date: 27.07.2026
