The High Court at Calcutta has affirmed the acquittal of an accused in a check bounce case under Section 138 of the Negotiable Instruments Act, 1881. Justice Chaitali Chatterjee Das dismissed the criminal appeal, holding that the complainant failed to establish that the cheques were drawn to discharge any legally enforceable debt or liability. The Court observed that the transaction arose from their mutual involvement in a Ponzi scheme (Chit Fund) rather than a friendly loan. Additionally, the Court ruled that the statutory demand notice was not duly served on the accused, as the accused successfully demonstrated his absence due to his mother’s illness during the period of delivery, thus rebutting the presumption of service.
Background of the Case
The case originated from a complaint filed by the appellant, Anup Agarwala, against the respondent before the Court of the Assistant Additional Chief Judicial Magistrate (ACJM), Tehatta, Nadia, under Sections 138 and 142 of the Negotiable Instruments Act.
According to the appellant, a friendly relationship existed between the parties. At the request of the respondent, the appellant allegedly advanced a personal loan of ₹3,00,000/- in cash, given in the presence of two witnesses. The respondent assured repayment within three months but delayed doing so. On June 25, 2012, the respondent allegedly went to the appellant’s residence and issued two cheques drawn on HDFC Bank Limited (Berhampore Branch): Cheque No. 294127 dated June 26, 2012, for ₹1,00,000/-, and Cheque No. 294126 dated June 26, 2012, for ₹2,00,000/-.
The appellant deposited both cheques on June 26, 2012, at the State Bank of India, Krishnanagar (Gopinathpur) Branch. They were subsequently returned unpaid by the bank due to “insufficiency of funds.”
On July 20, 2012, the appellant dispatched a demand notice through registered post with A/D. The postal envelope was returned on August 7, 2012, with the endorsement “7 days absent.” Because the respondent failed to make the payment, the complaint was initiated. The respondent surrendered, obtained bail, pleaded not guilty under Section 251 of the Code of Criminal Procedure (CrPC), and claimed to be tried.
To prove his case, the appellant examined himself and one Swapan Kumar Ranu (P.W. 2). The respondent was examined under Section 313 of the CrPC, and Ananta Mondal deposed as a defense witness (D.W. 2). Upon hearing both sides, the Judicial Magistrate, Tehatta, passed an order of acquittal on December 19, 2013. This acquittal was challenged by the appellant in the present appeal.
Arguments of the Parties
Appellant’s Submissions
The Learned Advocate for the appellant argued that:
- The respondent never denied the execution of the two cheques, which were dishonoured on June 26, 2012.
- The statutory demand notice was sent within the required timeframe, fulfilling the initial requirements to raise the presumption under Section 139 of the NI Act.
- The notice was deliberately avoided by the respondent, resulting in the postal endorsement of “7 days absent.”
- The respondent failed to adduce any prima facie evidence to show that the cheques were not issued in discharge of an existing debt.
The appellant placed reliance on the following rulings:
- Hiten P. Dalal vs. Bratindranath Banerjee (AIR 2001 SC 3987)
- D. Vinod Shivappa vs. Nanda Bellappa ((2006) 2 SCC 114)
- Subrata Mitra vs. Alpana Das (2025 (2) AICLR 273 (Cal))
- An unreported judgment in Sanjay Agarwala vs. Ajoy Sarkar (CRA 20 of 2021)
Respondent’s Submissions
Conversely, the Learned Advocate representing the respondent argued that:
- Because this was an appeal against acquittal, the High Court must exercise extreme caution before reversing the trial court’s order.
- The cheques were allegedly issued on June 25, 2012, and presented immediately on June 26, 2012, reflecting an unusual hurry.
- The complainant did not produce any written loan agreement or acknowledgement receipt.
- The complainant admitted during the trial that the cheques were issued for “promoting business” and not against any loan.
- Both parties were agents of a Chit Fund business named “TVI Express,” a Ponzi scheme. The respondent asserted that the blank, undated cheques were handed over two years prior for business purposes and were misused by the complainant after the business shut down.
- The respondent proved his absence between July 21, 2012, and early August 2012, due to visiting his ailing mother in Siliguri, proving that he did not intentionally avoid the demand notice.
The respondent placed reliance on N. Vijay Kumar vs. Vishwanath Rao N. (2025 SCC Online SC 873).
Court’s Analysis
The High Court evaluated the evidence on two main pillars: the service of the statutory demand notice and the existence of a legally enforceable debt.
1. Service of the Demand Notice
The Court analyzed the application of Section 27 of the General Clauses Act regarding the presumption of service. Referencing the Supreme Court’s ruling in D. Vinod Shivappa v. Nanda Belliappa, the Court noted that while a drawer cannot be allowed to bypass prosecution by deliberately avoiding notice, the presumption of service is rebuttable.
In this case, the respondent successfully established through evidence (specifically the corroborative testimony of D.W. 2, Ananta Mondal) that he was away in Siliguri for 15 days from July 21, 2012, to attend to his sick mother. The Court remarked:
“The postal endorsement was that for 7 days the person concerned was absent and therefore it cannot be deemed as ‘served’. The accused person at the time of trial established that because of his mother’s illness he was not present therefore it cannot be considered that he had deliberately and wilfully avoided the said service. The appellant did not make any further attempt to send the notice further.”
The Court also highlighted that the appellant failed to adduce any evidence from the postal authorities to contest the respondent’s rebuttal.
2. Legally Enforceable Debt vs. Chit Fund Transactions
The Court scrutinized the appellant’s claim of a friendly cash loan of ₹3,00,000/-. Under cross-examination, the appellant’s key witness, Swapan Kumar Ranu (P.W. 2), denied witnessing any money transfer and could not verify the time or date. The appellant himself failed to state the exact date, month, or personal necessity for which the loan was advanced.
The Court observed:
“…in absence of any agreement and when the complainant failed to substantiate the date time or month when he gave such loan coupled with the hurriedness shown in presenting the cheque certainly creates a doubt in the mind of the court that the amount at all was given or not…”
The High Court upheld the trial court’s finding that both parties were involved in the “TVI Express” Ponzi scheme. The Court accepted the probability that the cheques were issued as part of their Chit Fund dealings where investors were promised unreasonable growth.
3. Shifting Burden of Presumption
The Court analyzed Section 118(a) and Section 139 of the NI Act, citing Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu and others Firm and Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal. It reiterated that once execution is admitted, the initial presumption shifts to the defendant, who can discharge it by showing the non-existence of consideration through a “preponderance of probabilities.”
Referencing the Three-Judge Bench decision in Rangappa vs. Srimohan, the Court noted:
“Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail.”
Applying these principles to the facts, the Court held:
“Section 138 of Negotiable Instrument Act cannot be attracted since the complainant/ appellant failed to prove that the cheque was drawn by the drawer for discharge of any enforceable debt or other liability.”
Decision of the Court
The High Court concluded that the respondent successfully rebutted the statutory presumption under Section 139 of the Negotiable Instruments Act. Consequently, the Court found no merit in the appeal.
The Criminal Appellate Court ordered:
“Accordingly this CRA is stands dismissed. The judgement and order passed by the Learned Additional Chief Judicial Magistrate is affirmed.”
All connected applications were subsequently disposed of, and the trial court records were ordered to be sent back.
Case Details
- Case Title: Anup Agarwala vs. Yotons Biswas
- Case No.: CRA 94 OF 2014
- Bench: Justice Chaitali Chatterjee Das
- Date: 18.05.2026
