SHIMLA: The Himachal Pradesh High Court, presided over by Justice Rakesh Kainthla, has held that an offence under Section 138 of the Negotiable Instruments Act, 1881 is not attracted when a complainant presents a cheque for the full amount despite having received part payment from the drawer between the issuance and the presentation of the cheque. Setting aside the concurrent conviction and sentence recorded by the trial court and the appellate court, the High Court acquitted the petitioner-accused, noting that the legally enforceable liability had stood reduced before the instrument was presented to the bank.
Background of the Case
The matter originated from a complaint filed by the respondent-landlord under Section 138 of the Negotiable Instruments Act before the Court of Judicial Magistrate First Class, Manali, District Kullu. The complainant asserted that the accused was his tenant and had issued a cheque dated October 29, 2018, for a sum of Rs 1,40,000 towards room rent amounting to Rs 1,34,600 alongside electricity and maintenance/repair charges.
Upon presentation on January 23, 2019, the cheque was returned dishonoured by the bank with the endorsement “funds insufficient.” Following this, the complainant issued a statutory legal demand notice requiring payment within 15 days. Despite due service of the notice, the accused failed to make the payment, prompting the filing of the criminal complaint.
On May 30, 2023, the Judicial Magistrate First Class, Manali, held that execution of the cheque was not disputed and statutory presumptions under the law arose against the accused. The trial court convicted the accused under Section 138 of the NI Act, sentencing him to undergo simple imprisonment for six months and directing payment of compensation amounting to Rs 1,84,000, with a default sentence of one month simple imprisonment.
An appeal preferred by the accused was dismissed on December 12, 2023, by the Sessions Judge, Kullu, District Kullu, who affirmed the findings of conviction and the sentence passed by the trial court. The accused then preferred a criminal revision petition before the High Court.
Submissions of the Parties
Before the High Court, learned counsel for the petitioner-accused argued that both lower courts failed to appreciate that the cheque had been issued as a security instrument and that the underlying liability had already been discharged. It was highlighted that the complainant had admitted in his cross-examination to receiving Rs 1,20,000 on November 20, 2018, Rs 50,000 on November 29, 2018, and an online transfer of Rs 1,40,000 from the bank account of the petitioner’s wife on June 27, 2017. Counsel contended that since substantial payments were accepted by the complainant, the cheque could not have been presented for encashment, and the requisite ingredients of Section 138 were missing.
Opposing the revision, learned counsel for the complainant submitted that the accused had executed an affidavit acknowledging his rent liability and admitted to issuing the cheque in his examination under Section 313 of the Code of Criminal Procedure (CrPC). He argued that the High Court, exercising revisional jurisdiction, ought not to re-appreciate the evidence and prayed for the dismissal of the petition.
The Additional Advocate General appearing for the State submitted that the dispute pertained purely to private parties and that the State had no separate submissions to make.
Court’s Analysis and Observations
Examining the scope of revisional jurisdiction, Justice Rakesh Kainthla referred to the Supreme Court’s ruling in Kuntegowda v. Thurubaiah (2026), which reiterated that a revisional court does not sit as a court of appeal and its supervisory role under Section 397 CrPC (now Section 438 of the Bharatiya Nagarik Suraksha Sanhita, 2023) is confined to verifying the correctness, legality, and propriety of findings. Further citing State of Maharashtra v. Jagmohan Singh Kuldip Singh Anand (2004), State of Kerala v. Puttumana Illath Jathavedan Namboodiri (1999), Southern Sales & Services v. Sauermilch Design and Handels GMBH (2008), and Sanjabij Tari v. Kishore S. Borcar (2025), the Court recognized that concurrent findings of fact are not to be upset unless there is patent perversity, gross illegality, or an arbitrary exercise of discretion.
Addressing the statutory presumptions under the Negotiable Instruments Act, the High Court referred to the Supreme Court decisions in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020), N. Vijay Kumar v. Vishwanath Rao N. (2025), and Bir Singh v. Mukesh Kumar (2019), noting that once the issuance of the cheque and the signature thereon are admitted, reverse onus presumptions under Section 118(a) and Section 139 arise, placing the burden on the drawer to lead a probable defence.
However, upon reviewing the testimony on record, the High Court observed that the complainant himself admitted in his cross-examination to having received various amounts from the accused and his wife, including Rs 50,000 transferred directly to his account on November 29, 2018—a date falling specifically after the issuance of the cheque (October 29, 2018) and prior to its bank presentation (January 23, 2019). The complainant had not disclosed or accounted for these receipts in his complaint.
Applying the law laid down by the Supreme Court in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel (2023), the Court emphasized that a cheque must represent an existing, legally enforceable debt on the date of its maturity or presentation:
“34.1. For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation.”
“34.2. If the drawer of the cheque pays a part or the whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque.”
“34.3. When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted.”
Justice Kainthla observed that because Rs 50,000 had been transferred to the complainant after the cheque had been drawn, the petitioner’s liability had decreased:
“Therefore, the liability was reduced by the amount paid by the accused and the cheque could not have been presented for the whole amount.”
The Court turned down the complainant’s contention regarding the accused’s admission under Section 313 CrPC, stating:
“The accused had paid 50,000 out of the liability of 1,40,000/- on the date of issuance of the cheque, and the admission regarding the liability will not help the complainant.”
Holding that the courts below erred in failing to examine the legal effect of part-payment made prior to presentation:
“Learned Courts below failed to notice the effect of the payment received by the complainant after the issuance of the cheque and before its presentation and erred in holding that the cheque was valid and could have been presented for the whole of the amount. Therefore, the judgments and order passed by learned Courts below are not sustainable.”
Decision of the Court
Allowing the revision petition, the High Court set aside the judgments and orders of both the trial court and the appellate court, acquitting the petitioner-accused of the offence under Section 138 of the Negotiable Instruments Act. The Court directed that any fine amount deposited be refunded to the petitioner after the limitation period for filing an appeal expires, subject to any orders of the Supreme Court. In compliance with Section 437-A CrPC (Section 481 of the Bharatiya Nagarik Suraksha Sanhita, 2023), the petitioner was directed to furnish bail bonds in the sum of Rs 50,000 with one surety in the like amount to the satisfaction of the trial court.
Case Title: Chet Ram v. Ranjeet
Case No.: Cr. Revision No. 627 of 2024
Bench: Justice Rakesh Kainthla
Date: September 10, 2026
