The Himachal Pradesh High Court has ruled that any payment made by an accused after the cause of action has arisen under Section 138 of the Negotiable Instruments Act (NI Act) does not absolve them of criminal liability. Justice Rakesh Kainthla dismissed a petition seeking to quash a criminal complaint, affirming that a cheque issued as security attracts liability if a debt exists on the date of the cheque.
Background of the Case
The case stems from a complaint filed by Utkarsh Sharma against M/s New JCO and another. According to the complaint, the accused purchased an apple crop from the complainant worth ₹4,46,472. To discharge this liability, the accused issued cheque No. 508284 dated April 21, 2025, for the said amount.
When the complainant presented the cheque to his bank, it was dishonoured on May 16, 2025, with the remarks “insufficient funds.” Consequently, the complainant served a legal notice upon the accused on June 13, 2025. Upon the accused’s failure to repay the amount within the statutory period, a complaint was filed before the Additional Chief Judicial Magistrate, Theog. The Trial Court found sufficient grounds to summon the accused vide an order dated August 5, 2025.
Aggrieved by the summoning order, the accused approached the High Court under Section 482 of the Criminal Procedure Code (CrPC) to quash the complaint and consequential proceedings.
Arguments of the Parties
The counsel for the petitioner (accused) contended that the dispute had been compromised. It was submitted that the complainant had filed a parallel complaint before the Agricultural Produce Market Committee (Shimla & Kinnaur), where a compromise was effected on July 11, 2025, leading to the closure of those proceedings.
The petitioner argued that the cheque in question was a blank security cheque which was misused. Furthermore, the counsel asserted that since the entire amount was paid on July 11, 2025, prior to the institution of the complaint on July 26, 2025, there was no legally enforceable debt or liability subsisting at the time of filing. The petitioner relied on the judgment of the Supreme Court in Rekha Sharad Ushir vs Saptashrungi Mahila Nagari Sahkari Patsansta Ltd (2025) to support the plea for quashing.
No one appeared on behalf of the respondent (complainant).
Court’s Analysis
Justice Rakesh Kainthla analyzed the parameters for quashing a criminal complaint, referring to the principles laid down by the Supreme Court in B.N. John v. State of U.P. (2025) and Ajay Malik v. State of Uttarakhand (2025). The Court reiterated that the power under Section 482 CrPC should be exercised sparingly and only when the allegations, even if accepted in their entirety, do not prima facie constitute an offence.
On Security Cheques
Addressing the petitioner’s argument that the cheque was issued as security, the Court rejected the contention that such a cheque does not attract liability under Section 138 of the NI Act. Relying on the Supreme Court’s decision in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited (2016), the Court observed:
“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 cited Sripati Singh v. State of Jharkhand (2021), stating:
“A cheque issued as security pursuant to a financial transaction cannot be considered a worthless piece of paper under every circumstance… If in a transaction, a loan is advanced… and issues a cheque as security to secure such repayment… the cheque which is issued as security would mature for presentation.”
On Payment After Cause of Action
The crux of the Court’s decision rested on the timing of the payment relative to the cause of action. The Court noted that the demand notice was served on the accused on June 13, 2025. Under the NI Act, the accused had 15 days to make the payment, meaning they could have validly paid the amount until June 28, 2025.
The Court held that any payment made after this statutory period does not extinguish the offence. Referring to the Supreme Court judgment in Rajneesh Aggarwal v. Amit J. Bhalla (2001), the Court quoted:
“So far as the criminal complaint is concerned, once the offence is committed, any payment made subsequent thereto will not absolve the accused of the liability of criminal offence, though in the matter of awarding of sentence, it may have some effect on the court trying the offence. But by no stretch of imagination, a criminal proceeding could be quashed on account of the deposit of money in the court…”
Justice Kainthla observed that the alleged payment made on July 11, 2025, was subsequent to the accrual of the cause of action. The Court stated:
“No advantage can be derived from the payment made on 11.07.2025.”
On Pre-Trial Quashing
Finally, the Court emphasized that factual controversies should be decided at trial. Citing Rathish Babu Unnikrishnan v. State (NCT of Delhi) (2022), the Court noted that quashing proceedings at a preliminary stage could give an “unmerited advantage” to the accused and that the balance of convenience lies with the complainant due to the legal presumption against the accused.
Decision
The High Court found no merit in the petition. Justice Rakesh Kainthla held that the payment made after the notice period expired did not negate the offence and that the defense regarding the security cheque was a matter for trial.
The Court ordered:
“The present petition fails, and it is dismissed.”
The Court clarified that these observations are strictly for the disposal of the petition and will not bear on the merits of the case during the trial.
Case Details:
- Case Title: M/s New JCO & another vs Utkarsh Sharma
- Case Number: Cr.MMO No.1109 of 2025
- Coram: Justice Rakesh Kainthla
- Citation: 2025:HHC:43245
