Daleep Singh vs PNB And Anr

Rakesh Kainthla, J

The petitioner has filed the present petition against the judgment dated 03.09.2024 passed by the learned Sessions Judge, Mandi (learned Appellate Court), vide which the judgment of conviction and order of sentence dated 30.04.2024 passed by learned Judicial Magistrate, First Class, Chachiot, at Gohar, District Mandi, (learned Trial Court) were upheld. (Parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.)

Briefly stated, the facts giving rise to the present petition are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (in short ‘NI Act’). It was asserted that the complainant is a body corporate engaged in banking activities. The complainant has its branches throughout India, and one s ch branch is located at Badhu, Tehsil Chachiot, District Mandi, H.P. The accused approached the complainant for a loan. The complainant sanctioned a loan of ₹9,00,000/- in favour of the accused. The accused defaulted in the payment of the loan amount, and he issued a cheque of ₹9,39,675/- to discharge his legal liability. The complainant presented the cheque for realisation, but it was dishonoured with an endorsement ‘funds insufficient’. The complainant issued a notice to the accused, asking him to pay the money within 15 days of receiving the notice. This notice was returned undelivered and is deemed to be served. The accused failed to pay the amount despite the deemed receipt of the notice of demand; hence, a complaint was filed to take action against the accused.

The learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried.

The complainant examined Himat Ram (CW1) to prove its case.

The accused, in his s a ement recorded under Section 313 of Cr.P.C., admitted that he had taken a loan of ₹9,00,000/-. He denied that he had agreed to return the amount in instalments or that he had issued a cheque of ₹9,39,675/- to discharge his legal liability. He examined himself in defence.

Learned Trial Court held that the accused admitted in h s statement on oath that his signatures appeared on the cheque. e admitted that he had taken the loan from the Bank. The plea taken by the accused that a blank signed undated cheque was taken from him, which was misused by the complainant, was not proved. There is a presumption that the cheque was issued in discharge of legal liability for valuable consideration, and the burden is upon the accused to rebut the presumption. He failed to rebut the presumption. The cheque was dishonoured with an endorsement ‘insufficient funds’. The notice was returned undelivered as unclaimed, which is a deemed service. The accused had failed to pay the money; hence, all the ingredients of Section 138 of the NI Act were satisfied. Accordingly, the accused was convicted of the commission of an offence punishable under Section 138 of the NI Act and was sentenced to undergo simple imprisonment for six months, pay a compensation of ₹13,00,000/- and in default of payment of compensation to undergo further simple imprisonment for one month.

Being aggrieved by the judgments and order passed by the learned Trial ourt, the accused filed an appeal, which was decided by t e learned Sessions Judge, Mandi (learned Appellate Court). Learned Appellate Court concurred with the findings recorded by the learned Trial Court that the accused admitted his signature on the cheque. A presumption arose that the cheque was issued for consideration in discharge of the legal liability, and the burden shifted upon the accused to rebut this presumption. The evidence of the accused was not sufficient to rebut the presumption. The cheque was dishonoured with an endorsement ‘insufficient funds’. The notice was undelivered as unclaimed, which is a deemed service. The accused failed to pay the amount; therefore, he was rightly convicted by the learned Trial Court Keeping in view the deterrent nature of the crime, the sentence of six months was not excessive, and compensation of ₹13,00,000/-was sufficient to compensate the petitioner; therefore, the appeal was dismissed.

Being aggrieved by the judgment and order passed by the learned Courts below, the pe i ioner/accused has filed the present petition, asserting that the learned Courts below erred in convicting and sentencing the accused. It was clear from the memo of the parties that Bhima Kali Enterprises was a firm that was not arrayed as a party; hence, the complaint was not maintainable. The complainant did not examine Hari Singh Kaundal, who was authorised to file the complaint. Rather, one Himat Ram was examined, who was not conversant with the facts of the case. He could not say how much amount was deposited by the accused, who had filled the cheque, and who was the guarantor of the accused. An adverse inference should have been drawn against the complainant for withholding the evidence. There was no evidence to prove that the cheque was issued in discharge of the legal liability and the plea taken by the accused that he had issued a blank signed undated cheque was highly probable, therefore, it was prayed that the present revision be allowed and the judgment and order passed by learned Courts below be set aside.

I have heard Mr. G.R. Palsra, learned counsel for the petitioner, Mr. Arvind Sharma, learned counsel for respondent No.1, and Mr. Tarun Pathak, learned Deputy Advocate General, for respondent No.2/State.

Mr. G.R. Palsra, lea ned counsel for the petitioner, submitted that the learned Co rts below erred in appreciating the evidence. The complaint was filed against Daleep Singh, Proprietor of Bhima Kali Enterprises. Bhima Kali Enterprises was not arrayed as a party. An authorised person did not appear before the Court, and t e statement of CW1 was not satisfactory to establish the n redients of Section 138 of the NI Act; therefore, he prayed that the present petition be allowed and the judgments and order passed by the learned Courts below be set aside. He relied upon the judgments in Dilip Hariramani vs. Bank of Baroda in Cr. Appeal No. 767 of 2022 decided on 09.05.2022 in support of his submission.

Mr. Arvind Sharma, learned counsel for respondent No.1/complainant, submitted that the complaint was filed against Daleep Singh, being the sole proprietor of Bhima Kali Enterprises. There is no distinction between a proprietorship concern and a natural person. Therefore, there was no necessity to implead Bhima Kali Enterprises. The accused admitted his signature on the cheque. He also admitted that he had taken the loan from the Bank. There is no evidence that the loan was repaid, and even if the cheque was filled by the complainant bank, there is no infirmity. Learned Courts below had righ ly appreciated the material placed before them, and this Cou t should not interfere with the concurrent findings of fact recorded by learned Courts below while exercising revisi nal jurisdiction; therefore, he prayed that the present petition be dismissed.

Mr. Tarun Pathak, learned Deputy Advocate General, for respondent No.2/State, supported the judgments and order passed by the learned Courts below and submitted that no interference is required with the same.

I have given considerable thought to the submissions made at the bar and have gone through the records carefully.

It was laid down by the Hon’ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204: (2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that a revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed at page 207: -

“10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like the appellate court, and the sc pe f interference in revision is extremely narrow. Sec ion 397 of the Criminal Procedure Code (in short “C PC”) ves s jurisdiction to satisfy itself or himself as to the co ectness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object f the pr vision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error which is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings.

This position was reiterated in State  of  Gujarat  v. Dilipsinh Kishorsinh Rao, (2023) 17 SCC 688: 2023 SCC OnLine SC 1294, wherein it was observed at page 695:

The power and jurisdiction of the Higher Court under Section 397CrPC, which vests the court with the power to call for and examine records of an inferior court, is for the purposes of satisfying itself as to the legality and regularities of any proceeding or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law or the perversity which has crept in such proceedings.

It would be apposite to refer to the judgment of this Court in Amit Kapoor v. Ramesh Chander [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460: (2012) 4 SCC (Civ) 687: (2013) 1 SCC (Cri) 986], where scope of Section 397 has been considered and succinctly explained as under: (SCC p. 475, paras 12-13)

“12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provisi n is to set right a patent defect or an error of jurisdicti n r law. There has to be a well-founded error, and it may not be appropriate for the court to scrutinise the o de s, which, upon the face of it, bear a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdicti n can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits.

Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even framing of charge is a much-advanced stage in the proceedings under CrPC.”

This Court in the aforesaid judgment in Amit Kapoor case [Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460 : (2012) 4 SCC (Civ) 687 : (2013) 1 SCC (Cri) 986] has also laid down principles to be considered for exercise of jurisdiction under Section 397 particularly in the context of prayer for quashing of charge framed under Section 228Cr C is sought for as under : (Amit Kapoor case [Amit Kapoor v Ramesh Chander, (2012) 9 SCC 460 : (2012) 4 SCC (Civ) 687 : (2013) 1 SCC (Cri) 986], SCC pp. 482-83, para 27)

“27. Having discussed the scope of jurisdiction under these two provisions, i.e. Secti n 397 and Section 482 of the Code, and the fine line f jurisdictional distinction, it will now be appropria e for us to enlist the principles with reference to which he courts should exercise such jurisdiction. Howeve , it is not only difficult but inherently impossible to state such principles with precision. At best and upon objective analysis of various judgments f this Court, we are able to cull out some of the principles to be considered for proper exercise of jurisdiction, particularly, with regard to quashing of charge either in exercise of jurisdiction under Section 397 or Section 482 of the Code or together, as the case may be:

27.1. Though there are no limits to the powers of the Court under Section 482 of the Code but the more the power, the more due care and caution is to be exercised in invoking these powers. The power of quashing criminal proceedings, particularly, the charge framed in terms of Section 228 of the Code, should be exercised very sparingly and with circumspection and that too in the rarest of rare cases.

27.2. The Court should apply the test as to whether the uncontroverted allegations as made from the record of the case and the documents submitted therewith prima facie establish the offence or not. If the allegations are so patently absurd and inherently improbable that no prudent person can ever reach such a conclusion, and where the basic ingredients of a criminal offence are not satisfied, then the Court may interfere.

27.3. The High Court should not unduly interfere No meticulous examination of the evidence is needed for considering whether the case would end in conviction or not at the stage of framing of charge or quashing of charge.

***

27.9. Another very significant caution that the courts have to observe is that it cannot examine the facts, evidence and materials n rec rd to determine whether there is sufficient material n the basis of which the case would end in a convic ion; the court is concerned primarily with the allega ions taken as a whole whether they will constitute an offence and, if so, is it an abuse of the process of co rt leading to injustice.

***

27.13. Quashing of a charge is an exception to the rule of continuous prosecution. Where the offence is even broadly satisfied, the Court should be more inclined to permit continuation of prosecution rather than its quashing at that initial stage. The Court is not expected to marshal the records with a view to decide admissibility and reliability of the documents or records, but is an opinion formed prima facie.”

The revisional court cannot sit as an appellate court and start appreciating the evidence by finding out inconsistencies in the statement of witnesses, and it is not legally permissible. The High Courts ought to be cognizant of the fact that the trial court was dealing with an application for discharge.

It was held in Kishan Rao v. Shankargouda, (2018) 8 SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC OnLine SC 651 that it is impermissible for the High Court to reappreciate the  evidence and come to its conclusions in the absence of any perversity. It was observed on page 169:

“12. This Court has time and again examined the scope of Sections 397/401 CrPC and the ground for exercising the revisional jurisdiction by the High Court In State of Kerala v. Puttumana Illath Jathavedan Namboodiri [State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC 452: 1999 SCC (Cri) 275], while considering the scope of the revisional jurisdiction of the High Court, this Court has laid down the following: (SCC pp. 454-55, para 5)

“5. … In its revisional jurisdiction, the High Court can call for and examine the ecord of any proceedings to satisfy itself as to the co ectness, legality or propriety of any finding, sentence or order. In other words, the jurisdiction is one of supervisory jurisdiction exercised by the High C urt for correcting a miscarriage of justice. But the said revisional power cannot be equated with the power of an appellate court, nor can it be treated even as a second appellate jurisdiction. Ordinarily, therefore, it would not be appropriate for the High Court to reappreciate the evidence and come to its conclusion on the same when the evidence has already been appreciated by the Magistrate as well as the Sessions Judge in appeal unless any glaring feature is brought to the notice of the High Court which would otherwise tantamount to a gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in concluding that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. …”

Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke [Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that the High Court, in the exercise of revisional jurisdiction, shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. The following has been laid down in para 14: (SCC p. 135)

“14. … Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non -consideration of any relevant material or there is palpable misreading of records, the Revisional C urt is not justified in setting aside the order, merely because another view is possible. The Revisional Cou is not meant to act as an appellate court. The whole pu pose of the revisional jurisdiction is to preserve the power in the court to do justice in accordance with the principles of criminal jurisprudence. The revisi nal power of the court under Sections 397 to 401 CrPC is n t to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction.”

In the above case, also conviction of the accused was recorded, and the High Court set aside [Dattatray Gulabrao Phalke v. Sanjaysinh Ramrao Chavan, 2013 SCC OnLine Bom 1753] the order of conviction by substituting its view. This Court set aside the High Court's order holding that the High Court exceeded its jurisdiction in substituting its views, and that too without any legal basis.

This position was reiterated in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 13, wherein it was observed at page 205:

“16. It is well settled that in the exercise of revisional jurisdiction under Section 482 of the Criminal Procedure Code, the High Court does not, in the absence of perversity, upset concurrent factual findings. It is not for the Revisional Court to re-analyse and re-interpret the evidence on record.

As held   by this  Court in Southern Sales & Services v. Sauermilch Design and Handels GmbH [Southern Sales &  Services v. Saue milch  Design  and Handels  GmbH, (2008) 14 SCC 457], it is a well-established principle of law that the Revisional Co rt will not interfere even if a wrong order is passed by a co rt having jurisdiction, in the absence of a jurisdicti nal error. The answer to the first question is, therefore, in the negative.”

The present revision has to be decided as per the parameters laid down by the Hon’ble Supreme Court.

T e complaint was filed against Daleep Singh, son of Kunje Ram, proprietor of Bhima Kali Enterprises. It was laid down by the Hon’ble Supreme Court in Shankar Finance & Investments v. State of A.P., (2008) 8 SCC 536: (2008) 3 SCC (Cri) 558: 2008 SCC OnLine SC 997, that there is no distinction in law between a proprietary concern and individual trading under a trading name. It was observed at page 540: -

As contrasted with a company incorporated under the Companies Act, 1956, which is a legal entity distinct from its shareholders, a proprietary concern is not a legal entity distinct from its proprietor. A proprietary concern is nothing but an individual trading under a trade name. In civil law, where an individual carries on business in a name or style other than his name, he cannot sue in the trading name but must sue in his name, though others can sue him in the trading name. Therefore, if the appellant in this case had to file a civil suit, the proper description of the plaintiff should be “Atmakuri Sankara Rao carrying on business under the name and style of M/s Shankar Finance & Investments, a sole proprietary concern”. But we are not dealing with a civil suit. We are dealing wi h a criminal complaint to which the special requirements of Sec ion 142 of the Act apply. Section 142 requires that the complainant be the payee. The payee is M/s Shankar Finance & Investments. Therefore, in a criminal complaint relating to an offence under Section 138 of the Act, it is permissible to complain about the name of the proprietary concern itself.

The next question is where a proprietary concern carries on business through an attorney holder, and whether the attorney holder can lodge the complaint. The attorney older is the agent of the grantor. When the grantor authorises the attorney holder to initiate legal proceedings and  the  attorney  holder  accordingly  initiates  legal proceedings, he does so as the agent of the grantor, and the initiation is by the grantor represented by his attorney holder, and not by the attorney holder in his personal capacity.  Therefore  where  the  payee  is  a  proprietary concern, the complaint can be filed: (i) by the proprietor of the proprietary concern, describing himself as the sole proprietor of the “payee”; (ii) the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor; and (iii) the proprietor  or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. It follows that in this case, the complaint could have been validly filed by describing the complainant in any one of the following four methods:

“Atmakuri Shankara Rao, sole proprietor of M/s Shankar Finance & Investments”

or

“M/s Shankar Finance & Investments, a sole proprietary concern represented by its proprietor Atmakuri Shankara Rao”

or

“Atmakuri Shankara Ra , s le proprietor of M/s Shankar Finance & Investments, represented by his attorney holder Thamada Satyanarayana”

or

“M/s Shankar Finance & Investments, a proprietary concern of Atmakuri Shankara Rao, represented by his att rney h lder Thamada Satyanarayana”.

What w uld have been improper is for the attorney holder Thamada Satyanarayana to file the complaint in his own name as if he was the complainant.”

A similar view was taken in Nexus Health & Beauty Care (P) Ltd. v. National Electrical Office, 2012 SCC OnLine HP 5383, wherein it was observed: -

“26. The complaint is not happily worded, no doubt, in the memo of parties, the complainant has referred to the complainant's ‘M/s National Electrical Office’, but in para 2 it has been pleaded that the complainant is providing services of Industrial Electrical fitting under the name and style of ‘National Electrical’. Again, in the memo of parties, Subhash Bharwal has been referred to as the proprietor, but in para 1 of the complaint, the complainant has described itself as a firm. In evidence by way of affidavit Ex.CW-1/A, it has been stated that the complainant is providing services of Industrial Electrical fitting under the name and style of ‘National Electrical’. Subhash Pharwal is its sole proprietor. The cheque Ex.C-1 has been issued in the name of ‘National Electricals’. The complaint is loosely drafted. But in the complaint, the complainant has described itself as ‘National Electrical’ in the body of the complaint.

On the face of the complaint and affidavit, Ex CW-1/A, prima facie, it cannot be said that the complainant is a firm, namely M/s National Electrical Office. The complainant in the body of the complaint has described the complainant as ‘National Electrical’, a sole proprietorship concern of Subhash Bharwal. It will be t technical to throw out the complaint due to loose drafting. At this stage, if the pleadings of the peti ion are seen, the petition is also not less loosely drafted. It s a s with the sentence ‘complainant issued a cheque for ₹ 2.00 lacs’. The complainant did not issue a cheq e of ₹ 2,00,000/-. The cheque was allegedly issued by the acc sed petitioners. Not only in the opening para of the petition, but also in other places also the petitioners have used loose expressions. In para 3 of the petition before grounds, it has been pleaded that the “complainant aggrieved and dissatisfied with the order summoning the accused and taking cognisance of the case by Judicial Magistrate, files this petition”. The substance of the complaint or petition is to be seen, and it should not be thrown out merely on technicalities of loose drafting. It emerges from the complaint that the complainant is the ‘National Electrical’ sole proprietorship concern of Subhash Bharwal. In view of Milind Shripad Chandurkar (supra), it cannot be said that the complaint is not maintainable.”

Therefore, the submission that Bhima Kali Enterprises should have been impleaded as a party is not acceptable. Since Bhima Kali Enterprises is not a juristic person; hence, the judgment in Dilip Hariramani (supra) will not apply to the present case.

It was submitted that the complaint was filed through its Branch Manager, Hari Kaundal. The complainant examined Himat Ram, Deputy Manager. The Branch Manager, who had filed the complaint, was not examined, and this is a serious infirmity in the complainant's case. This submission is not acceptable. It was laid down by the Hon’ble Supreme Court in Associated Company Limited versus Keshvanand, 1998 (1) SCC 687, that the company is a juristic persona and has to act hrough a natural person in a proceedings before the Cou t. It is not necessary that the person who had filed the complaint should continue to represent it throughout the trial. It was observed:

“23. The above scheme of the new Code makes it clear that the complainant must be a corporeal person who is capable of making a physical presence in the court. Its corollary is that even if a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a natural person represents such a juristic person in the court and it is that natural person who is looked upon, for all practical purposes, to be the complainant in the case. In other words, when the complainant is a body corporate, it is the de jure complainant, and it must necessarily associate a human being as a de facto complainant to represent the former in court proceedings.

xxxxxx

Be that so, we suggest as a pragmatic proposition that no magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. There may be occasions when a different person can represent the company, e.g. the particular person who represents the company at the first instance may either retire from the company's services or may otherwise cease to associate therewith, or he may be transferred to a distant place. In such cases, it would be practically difficult for the company to continue to make the same person represent the company in court. In any such eventuality, it is open to the de jure complainant company to seek permission from the court for sending any ther person to represent the company in court. At any rate, the absence of the complainant envisaged in Section 249 or Section 256 of the new Code would include the absence of the corporeal person representing the incorporeal complainant.”

This judgment was followed in MMTC Limited versus M/s Medchl Chemicals and Pharma Private Limited, 2002 (1) SCC 234, wherein it was observed:

“12. In the case of Associated Cement Co. Ltd. v. Keshvanand [(1998) 1 SCC 687: 1998 SCC (Cri) 475], it has been held by this Court that the complainant has to be a corporeal person who is capable of making a physical appearance in the court. It has been held that if a complaint is made in the name of an incorporeal person (like a company or corporation), it is necessary that a natural person represents such juristic person in the court. It is held that the court looks upon the natural person to be the complainant for all practical purposes. It is held that when the complainant is a body corporate, it is the de jure complainant, and it must necessarily associate a human being as a de facto complainant to represent the former in court proceedings. It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company It has been held that it is open to the de jure complainant company to seek permission from the court for sending any other person to represent the company in court Thus, even presuming that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage, the company can send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground.” (Emphasis supplied)

A similar view was taken by this Court in Uttam Traders Ranghri versus Tule Ram, Menu/HP/1499/2018, and it was observed:

“12. In M.M.T.C.Ltd. And another vs. Medchl Chemicals and Pharma (P)Ltd. And another (2002) 1 SCC 234, the Hon’ble Supreme C urt held that the only eligibility criteria prescribed by Section 142 for maintaining a complaint under Section 138are that the complaint must be by the payee or the holder in due course and once this criterion is satisfied as the complaint is in the name and on behalf of the appellant-Company. Therefore, even presuming that initially there was no authority, still, the company can, at any stage, rectify that defect at a subsequent stage, and the company can send a person who is competent to represent the Company. It is apt to reproduce the relevant observations as contained in paras 11 and 12 of the judgment, which reads thus:

“11. This Court has, as far back as, in the case of Vishwa Mitter v. O. P. Poddar reported in (1983) 4 SCC 701, held that it is clear that anyone can set the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognisance. It has been held that no court can decline to take cognisance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any special statute prescribes offences and makes any special provision for taking cognisance of such offences under the statute, then the complainant requesting the Magistrate to take cognisance of the offence must satisfy the eligibility criterion prescribed by the statute. In the present case, the only eligibility criterion prescribed by Section 142 is that the complaint must be by the payee or the holder in due course. This criterion is satisfied as the complaint is in the name and on behalf of the appellant company.

In the case of Associated Cement Co. Ltd. v. Keshvanand (1998) 1 SCC 687, it has been held by this Court that the complainant has to be a corporeal person who is capable of making a physical appearance in the court. It has been held that if a complaint is made in the name of an incorporeal person (like a company or corporation), it is necessary that a natural person represents such juristic person in the c urt. It is held that the court looks upon the natural person to be the complainant for all practical purposes. It is held that when the complainant is a body corporate, it is the de jure complainant, and it must necessarily associate a human being as a de facto complainant to represent the former in court proceedings. It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission from the court to send any other person to represent the company in court. Thus, even presuming that initially there was no authority, still the Company can, at any stage, rectify that defect. At a subsequent stage, the Company can send a person who is  competent to represent the company. The complaints could thus not have been quashed on this ground.”

Likewise in Samrat Shipping Co. Pvt. Ltd. vs. Dolly George (2002) 9 SCC 455, the Hon’ble Supreme Court termed the dismissal of the complaint at the threshold by the Magistrate on the ground that the individual through whom the complaint was filed had not produced the certified copy of the resolution of the Board of Directors of the Company authorising him to represent the Company before the Magistrate has also not justified and termed this exercise to be “too hasty an action”. It is apt to reproduce the observation as contained in para 3 f the judgment, which reads thus:

“3. Having hea d bo h sides, we find it difficult to support the o de s challenged before us. A Company can file a complaint only through a human agency. The person who presented the complaint on behalf of the C mpany claimed that he was the authorised representative of the company. Prima facie, the trial court should have accepted it at the time when a complaint was presented. If it is a matter of evidence when the accused disputed the authority of the said individual to present the complaint, the opportunity should have been given to the complainant to prove the same, but that opportunity needs to be given only when the trial commences. The dismissal of the complaint at the threshold on the premise that the individual has not produced a certified copy of the resolution appears to be too hasty an action. We, therefore, set aside the impugned orders and directed the trial court to proceed with the trial and dispose of it in accordance with the law. Parties are directed to appear before the trial court on 31.01.2000.”

A similar matter of dishonour of cheque came before a three-judge Bench of the Hon’ble Supreme Court in M/s Haryana State Co.Op., Supply and Marketing Federation Ltd. vs. M/s Jayam Textiles and another AIR 2014 SC 1926 wherein it was held that the dismissal of the complaint for mere failure to produce authorisation would not be proper and an opportunity ought to be granted to produce and prove the authorisation. It is apt to reproduce the apposite observations as contained in paras 6 and 7 of the judgment, which read thus:

“6. Having heard learned counsel for the parties and after perusing the material on record, we find that admittedly, authorisation by the Board of Directors of the appellant federation was not placed before the Courts below. But, we may notice that a specific averment was made by the appellant- Federation before the learned Judicial Magistrate that the said General Power of A orney has been filed in a connected case being CC No. 1409/1995, which has neither been denied nor disputed by the respondents. In any case, in our opinion, if the Courts below were not satisfied, an opportunity ought to have been granted to the appellant Federation to place the d cument containing authorisation on record and prove the same in accordance with the law. This is so because procedural defects and irregularities, which are curable, should not be allowed to defeat substantive rights or to cause injustice. The procedure, a handmaiden to justice, should never be made a tool to deny justice or perpetuate injustice by any oppressive or punitive use. {See Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh, (2006) 1 SCC 75. (AIR 2006 SC 269: 2005 AIR SCW 5851).

In view of the fact that in spite of the arbitration award against the respondents, there was non-payment of amount by the respondents to the appellant-Federation, and also in the light of authorisation contained in Annexure–P/7, we are of the opinion that, in the facts and circumstances of the case, an opportunity should be given to the appellant-Federation to produce and prove the authorisation before the Trial Court, more so, when money involved is public money. We, therefore, set aside the judgments of the Courts below and remit the matters back to the Trial Court with a direction to conduct the trial afresh, taking into consideration the authorisation placed before us and dispose of the matter as expeditiously as possible in accordance with the law.”

Bearing in mind the aforesaid exposition of the law, I am of the considered view that the appellant- applicant ought to be granted one chance to place and prove on record the partnership deed. Accordingly, Cr.M.P. No. 464 of 2018 is allowed.”

This position was reiterated in Naresh Potteries v. Aarti Industries, (2025) 256 Comp Cas 606: 2025 SCC OnLine SC 18, wherein it was observed:

This  c urt  in  the  case  of  National  Small  Industries Corporati n Ltd v. State (NCT of Delhi) [(2009) 147 Comp Cas 11 (S ); (2009) 1 SCC 407; (2009) 1 SCC (Civ) 192; (2009) 1 SCC ( ri) 513; 2008 SCC OnLine SC 1710; [2008] INSC 1308.] had an occasion to consider the validity of a complaint under section 138 of the Negotiable Instruments Act and the satisfaction of the requirement under section 142 thereof, as well as to determine as to who could be considered to be the complainant/representative in a case where the complaint is to be filed by an incorporated body. This court held as follows [ See page 18 of 147 Comp Cas.]:

“The term ‘complainant’ is not defined under the Code. Section 142 of the Negotiable Instruments Act requires a complaint under section 138 of that Act to be made by the payee (or by the holder in due course). It is thus evident that in a complaint relating to dishonour of a cheque (which has not been endorsed by the payee in favour of anyone), it is the payee alone who can be the complainant. The Negotiable Instruments Act only provides that dishonour of a cheque would be an offence and the manner of taking cognisance of offences punishable under section 138 of that Act. However, the procedure relating to the initiation of proceedings, trial and disposal of such complaints is governed by the Code. Section 200 of the Code requires that the Magistrate, on taking cognisance of an offence on complaint, shall examine upon oath the complainant and the witnesses present, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses. The requirement of section 142 of the Neg tiable Instruments Act that the payee should be he complainant is met if the complaint is in he name of the payee. If the payee is a company, necessa ily the complaint should be filed in the name of the company. Section 142 of the Negotiable Instr ments Act does not specify who sh uld represent the company if a company is the c mplainant. A company can be represented by an employee or even by a non-employee authorised and empowered to represent the company either by a resolution or by a power of attorney…

Resultantly, when in a complaint in regard to dishonour of a cheque issued in favour of a company or corporation, for the purpose of section 142 of the Negotiable Instruments Act, the company will be the complainant, and for purposes of section 200 of the Code, its employee who represents the company or corporation, will be the de facto complainant. In such a complaint, the de jure complainant, namely, the company or corporation, will remain the same, but the de facto complainant (employee) representing such de jure complainant can change from time to time. And if the de facto complainant is a public servant, the benefit of exemption under clause (a) of the proviso to section 200 of the Code will be available, even though the complaint is made in the name of a company or corporation.” (emphasis supplied)

While this court was primarily concerned with the issue relating to the exemption available against examining a public servant in view of section 200(a) of the Code of Criminal Procedure, this court nevertheless clarified that the requirement of section 142 of the Negotiable Instruments Act that the payee should be the complainant would be met if the complaint is in the name of the payee. Where the payee is a company, this court observed that the complaint should necessarily be filed in the name of the company if the company is the c mplainant. In such cases, this court held that a company can be represented by an employee or even a non-employee authorised and empowered to rep esent the company either by a resolution or by a power of attorney. As a consequence of the aforesaid discussi n, this co rt concluded that for the purposes of section 142 f the Negotiable Instruments Act, the company will be the complainant and for the purposes of section 200 of the ode of Criminal Procedure, its employee who represents the company, will be the de facto complainant w ile the company will remain the de jure complainant, regardless of any change in the de facto complainant.

Having discussed as to who could file a complaint on behalf of an incorporated body, it would be apposite to consider the legal validity of a complaint by the power of attorney holder of such an incorporated body. A three-judge Bench of this court in the case of A.C. Narayanan [A.C. Narayanan v. State of Maharashtra, (2013) 180 Comp Cas 258 (SC); (2014) 11 SCC 790; (2014) 4 SCC (Civ) 343; 2013 SCC OnLine SC 839; [2015] INSC 69.] was called upon to answer a reference with regard to the conflicting decisions delivered by two Division Benches of this court in M.M. T.C. Ltd. v. Medchl Chemicals and Pharma P. Ltd. [(2002) 108 Comp Cas 48 (SC); (2002) 1 SCC 234; 2002 SCC (Cri) 121; 2001 SCC OnLine SC 1364; [2001] INSC 572.] and Janki Vashdeo Bhojwani v. IndusInd Bank Ltd. [(2005) 123 Comp Cas 154 (SC); (2005) 2 SCC 217; 2004 SCC OnLine SC 1538; [2004] INSC 695.]

While answering the reference, what fell for consideration before this court was the maintainability of a complaint under section 138 of the Negotiable Instruments Act filed by the power of attorney holder on behalf of the original complainant and the necessity of specific averments as to the knowledge of the power of attorney holder with respect to the facts and circumstances leading to the dishonour of the cheque(s) and the pre erence of the criminal proceedings. This court held as f ll ws [ See page 269 of 180 Comp Cas.] :

“In terms of he reference order, the following questions have to be decided by this Bench:

Whether a power of attorney holder can sign and file a complaint petition on behalf of the c mplainant?/whether the eligibility criteria prescribed by section 142(a) of the Negotiable Instruments Act would stand satisfied if the complaint petition itself is filed in the name of the payee or the holder in due course of the cheque?

Whether a power of attorney holder can be verified on oath under section 200 of the Code?

Whether specific averments as to the knowledge of the power of attorney holder in the impugned transaction must be explicitly asserted in the complaint?

If the power of attorney holder fails to assert explicitly his knowledge in the complaint, then can the power of attorney holder verify the complaint on oath on such presumption of knowledge?

Whether the proceedings contemplated under section 200 of the Code can be dispensed with in the light of section 145 of the Negotiable Instruments Act, which was introduced by an amendment in the year 2002?

The power of attorney holder is the agent of the grantor. When the grantor authorises the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates such legal proceedings, he does so as the agent of the grantor, and the initiation is by the grantor represented by his attorney holder and not by the attorney holder in his personal capacity. Therefore, where the payee is a proprietary concern, the complaint can be filed by the proprietor of the proprietary concern, describing himself as the sole proprietor of he payee, the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor, and the proprietor or the pr prietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. However, we make it clear that the power of attorney holder cannot file a complaint in his own name as if he was the complainant. In other words, he can initiate criminal proceedings on behalf of the principal.

From a conjoint reading of sections 138, 142 and 145 of the Negotiable Instruments Act as well as section 200 of the Code, it is clear that it is open to the Magistrate to issue process on the basis of the contents of the complaint, documents in support thereof and the affidavit submitted by the complainant in support of the complaint. Once the complainant files an affidavit in support of the complaint before issuance of the process under section 200 of the Code, it is thereafter open to the Magistrate, if he thinks fit, to call upon the complainant to remain present and to examine him as to the facts contained in the affidavit submitted by the complainant in support of his complaint. However, it is a matter of discretion and the Magistrate is not bound to call upon the complainant to remain present before the court and to examine him upon oath for taking a decision whether or not to issue process on the complaint under section 138 of the Negotiable Instruments Act. For the purpose of issuing a process under section 200 of the Code, it is open to the Magistrate to rely upon the verification in the form of an affidavit filed by the complainant in support of the complaint under section 138 of the Negotiable Instruments Act. It is only if and where the Magistrate, after considering the c mplaint under section 138 of the Negotiable Instruments Act, documents produced in support thereof and he verification in the form of affidavit of the complainant, is of the view that examination of the complainant or his witness(s) is required, the Magistrate may call upon the complainant to remain present before the court and examine the complainant and/or his witness upon oath f r taking a decision whether or not to issue process on the complaint under section 138 of the Negotiable Instruments Act…

While holding that there is no serious conflict between the decisions in M.M. T.C. Ltd. v. Medchl Chemicals and Pharma P. Ltd. [(2002) 108 Comp Cas 48 (SC); (2002) 1 SCC 234; 2002 SCC (Cri) 121; 2001 SCC OnLine SC 1364; [2001] INSC 572.] and Janki Vashdeo Bhojwani v. IndusInd Bank Ltd. [(2005) 123 Comp Cas 154 (SC); (2005) 2 SCC 217; 2004 SCC OnLine SC 1538; [2004] INSC 695.], we clarify the position and answer the questions in the following manner:

Filing of a complaint petition under section 138 of the Negotiable Instruments Act through a power of attorney is perfectly legal and competent.

The power of attorney holder can depose and verify on oath before the court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions.

It is required by the complainant to make a specific assertion as to the knowledge of the power of attorney holder in the said transaction explicitly in the complaint, and the power of attorney holder who has no knowledge regarding the transacti ns cannot be examined as a witness in the case.

In the light of section 145 of the Negotiable Instruments Act, it is open to the Magistrate to rely pon the verification in the form of affidavit filed by the complainant in support of the c mplaint under section 138 of the Negotiable Instruments Act and the Magistrate is neither mandatorily obliged to call upon the complainant to remain present before the court, nor to examine the complainant of his witness upon oath for taking the decision whether or not to issue process on the complaint under section 138 of the Negotiable Instruments Act.

The functions under the general power of attorney cannot be delegated to another person without a specific clause permitting the same in the power of attorney. Nevertheless, the general power of attorney itself can be cancelled and be given to another person.

We answer the reference on the above terms and remit the matter to the appropriate Bench for deciding the case on merits.” (emphasis supplied)

This court, while answering the reference, has thoroughly considered the scope and requirement of section 142(1)(a) of the Negotiable Instruments Act. This court held that from a conjoint reading of sections 138, 142 and 145 of the Negotiable Instruments Act as well as section 200 of the Code of Criminal Procedure, it is clear that calling upon the complainant to remain present and to examine him as to the facts contained in the affidavit submitted by the complainant to support his complaint, is a matter of discretion on the part of the Magistrate. This court clarified that it is only if and where the Magistrate, after considering all the relevant documents, is of the view that examination of the complainant or his witness(s) is required, the Magistrate may call upon the c mplainant to remain present before the court and examine the complainant and/or his witness upon oath for aking a decision whether or not to issue process on the complaint under section 138 of the Negotiable Instr ments Act.

After disc ssing the discretionary powers of the Magistrate, this court went on to hold that the power of attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under section 138 of the Negotiable Instruments Act. This court, however, cautioned that an exception to the above would be when the power of attorney holder does not have personal knowledge about the transactions, in which case, he cannot be examined. Nevertheless, this court clarified that where the power of attorney holder of the complainant is in charge of the business of the complainant payee and the power of attorney holder alone is personally aware of the transactions, there is no reason why he cannot depose as a witness, however, such personal knowledge must be explicitly asserted in the complaint and a power of attorney holder who has no personal knowledge of the transactions cannot be examined as a witness in the case.

More recently, in the case of TRL Krosaki Refractories Ltd. [TRL Krosaki Refractories Ltd. v. SMS Asia P. Ltd., (2022) 7 SCC 612; (2022) 3 SCC (Cri) 224; (2022) 3 SCC (Civ) 782; 2022 SCC OnLine SC 217.] similar facts as the present matter arose for consideration by this court. In the said case, a complaint came to be filed by the payee company through its general manager (accounting) under sections 138 and 142 of the Negotiable Instruments Act. The complaint was registered based on the affidavit filed on behalf of the complainant, in lieu of an oral sworn statement. Upon being satisfied that there was sufficient material and the complaint under section 138 of the Negotiable Instruments Act against the accused was in accordance with law, the SDJM took cognisance of the complaint and issued a summons to the accused firm therein. Assailing the summoning order, the accused-firm filed a petiti n bef re the High Court under section 482 of the Code of Criminal Procedure for quashing of the summoning o de , being aggrieved by the fact that the complaint had been filed by an incompetent person inasmuch as the complainant neither had knowledge about the alleged transaction, nor had he witnessed the same, nor was there any averment in the complaint that the complainant had been duly authorised by the payee-firm to initiate criminal proceedings on its behalf. The High Court had allowed the petition under section 482 of the Code of Criminal Procedure and set aside the summoning order, which led to an appeal being filed before this court. A three-judge Bench of this court, upon a thorough consideration of the judgments of this court by which the law on the subject matter at hand has been crystallised, allowed the appeal and set aside the judgment of the High Court. This court held as follows [ See page 623 of (2022) 7 SCC] :

“21. A meaningful reading of the above would indicate that the company having authorised the general manager (accounting) and the general manager (accounting) having personal knowledge, had in fact been averred. What can be treated as an explicit averment cannot be put in a straitjacket, but within therein was the background of the complainant being an individual, and the complaint filed was based on the power of attorney issued by the ‘payee’ who was also an individual. In such an event, the manner in which the power was being exercised was to be explicitly stated so as to establish the right of the person prosecuting the complaint to represent the payee, i e , the complainant. The position that would emerge when the complainant is a company or a corporate entity will have to be viewed from a different standpoint.

In this regard, in Samrat Shipping Co. P. Ltd. v. Dolly George [(2002) 9 SCC 455; 2003 SCC (Cri) 1224; 1999 SCC OnLine SC 1309], While disappr ving of the manner in which cognisance was refused to be taken and the complaint had been dismissed by the learned Magistrate at he hreshold, this court has held as hereunder : (SCC page 456, paragraph 3)

‘3. Having heard both sides, we find it difficult to supp rt the orders challenged before us. A c mpany can file a complaint only through a human agency. The person who presented the complaint on behalf of the company claimed that he is the authorised representative of the company. Prima facie, the trial court should have accepted it at the time when a complaint was presented. If it is a matter of evidence when the accused disputed the authority of the said individual to present the complaint, opportunity should have been given to the complainant to prove the same, but that opportunity need be given only when the trial commences. The dismissal of the complaint at the threshold on the premise that the individual has not produced a certified copy of the resolution appears to be too hasty an action. We, therefore, set aside the impugned orders and direct the trial court to proceed with the trial and dispose of it in accordance with law. Parties are directed to appear before the trial court on January 31, 2000.’…

In that view, the position that would emerge is that when a company is the payee of the cheque based on which a complaint is filed under section 138 of the Negotiable Instruments Act, the complainant necessarily should be the company which would be represented by an employee who is authorised. Prima facie, in such a situation, the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the c mplainant (company) is represented by an auth rised person who has knowledge would be sufficient. The employment of the terms ‘specific asse ion as to the knowledge of the power of atto ney holder’ and such assertion about knowledge sho ld be ‘said explicitly’ as stated in A.C. Narayanan v. State of Maharashtra [(2013) 180 Comp Cas 258 (SC); (2014) 11 SCC 790; (2014) 4 SCC (Civ) 343; 2013 SCC OnLine SC 839; [2015] INSC 69.], cannot be understood to mean that the assertion should be in any particular manner, much less only in the manner understood by the accused in the case. All that is necessary is to demonstrate before the learned Magistrate that the complaint filed is in the name of the ‘payee’ and if the person who is prosecuting the complaint is different from the payee, the authorisation therefor and that the contents of the complaint are within his knowledge. When the complainant/payee is a company, an authorised employee can represent the company. Such averment and prima facie material is sufficient for the learned Magistrate to take cognizance and issue process. If at all, there is any serious dispute with regard to the person prosecuting the complaint not being authorised or if it is to be demonstrated that the person who filed the complaint has no knowledge of the transaction and, as such that person could not have instituted and prosecuted the complaint, it would be open for the accused to dispute the position and establish the same during the trial. As noted in Samrat Shipping Co. P. Ltd. v. Dolly George [(2002) 9 SCC 455; 2003 SCC (Cri) 1224; 1999 SCC OnLine SC 1309], dismissal of a complaint at the threshold by the Magistrate on the question of authorisation would not be justified. Similarly, we are of the view that in such circumstances, entertaining a petition under section 482 to quash the order taking cognisance by the Magistrate would be unjustified when the issue of proper authorisation and kn wledge can only be an issue for trial.

In that view of he matter, we are of the opinion that the High Cou t was not justified in entertaining the petition filed under section 482 of the Code of Criminal Procedure and quashing the order dated N vember 5, 2015, taking cognisance of the complaint filed by the appellant.” (emphasis supplied)

It could thus be seen that this court distinguished the position of a complainant filing a complaint on behalf of an individual from the position of a complainant filing a complaint on behalf of a company. This court clarified that although the decision in the case of A.C. Narayanan [A.C. Narayanan v. State of Maharashtra, (2013) 180 Comp Cas 258 (SC); (2014) 11 SCC 790; (2014) 4 SCC (Civ) 343; 2013 SCC OnLine SC 839; [2015] INSC 69.] had taken centre stage, the facts involved in that case were in the background that the complaint filed was based on the power of attorney issued by the “payee” who was also an individual. In such cases, the manner in which the power was being exercised had to be explicitly stated. However, this court clarified that the position that would emerge when the complainant is a company or a corporate entity will have to be viewed from a different standpoint. This court held that when the company is the payee of the cheque based on which a complaint is filed under section 138 of the Negotiable Instruments Act, the complainant should necessarily be the company which is to be represented by an authorised employee and in such a situation, the indication in the complaint and the sworn statement, oral or by affidavit, to the effect that complainant is represented by an authorised person who has knowledge, would be sufficient. Drawing a distinction from the “specific assertion as to the knowledge of the power of attorney holder” which is to be “stated explicitly” as categorically laid down in A.C. Narayanan [A.C. Narayanan v. State of Maharashtra, (2013) 180 Comp Cas 258 (SC); (2014) 11 SCC 790; (2014) 4 SCC (Civ) 343; 2013 SCC OnLine SC 839; [2015] INSC 69.], this court held that in cases where the payee/complainant is he company, all that is necessary to be demonstrated befo e he Magistrate is that the complaint is filed in the name of the payee and if the complaint is being prosecuted by someone other than the payee, he has knowledge of the contents of the complaint and he is duly authorised to pr secute the complaint. This court further clarified that if there is any dispute with regard to the person prosecuting the complaint not being authorised or it is to be demonstrated that the complainant had no knowledge of the transaction, and as such could not have instituted and prosecuted the complaint, it would be open for the accused person to dispute the position and establish the same during the course of the trial. However, dismissal or quashing of the complaint at the threshold would not be justified. It was held that the issue of proper authorisation and knowledge can only be an issue for trial.”

In the present case, the authority of Hari Kaundal to file the complaint was not disputed. Therefore, the complaint cannot be dismissed on the ground that the person, who had filed the complaint did not step into the witness box.

Himat Ram stated in his cross-examination that he was not aware of the amount deposited by the accused or who had filled the cheque. It was submitted that failure to state the amount deposited by the accused or name the person who had filled the cheque shows that he did not know the material facts and an adverse inference should be drawn against the complainant. This submission cannot be accepted. The failure to state the amount deposited by the accused does not show that he was not a competent witness especially when the statement of account was filed to prove the details of the amount deposited by the accused. Even the accused c uld n t give the details of the amount paid by him. Himat Ram stated that the cheque was filled when it was handed over to him; therefore, he could not have stated who had filled the cheque because it was not filled in his presence. Therefore, an adverse inference cannot be drawn against the complainant.

The accused admitted while appearing as DW1 that the cheque (Ext. CW1/B) contains his signatures. It was laid down by this Court in Naresh Verma vs. Narinder Chauhan 2020(1) Shim. L.C.398 that where the accused had not disputed his signatures on the cheque, the Court has to presume that it was issued in discharge of legal liability, and the burden would shift upon the accused to rebut the presumption. It was observed: -

“8. Once signatures on the cheque are not disputed, the plea with regard to the cheque having not been issued towards discharge of lawful liability, rightly came to be rejected by learned Courts below. Reliance is placed upon Hiten P. Dalal v. Bartender Nath Bannerji, 2001 (6) SCC 16, wherein it has been held as under:

"The words 'unless the c ntrary is proved' which occur in this provisi n make it clear that the presumption has o be rebutted by 'proof' and not by a bare explanation which is merely plausible. A fact is said to be p oved when its existence is directly established or when, upon the material before it, the Court finds its existence to be so probable that a reas nable man would act on the supposition that it exists. Unless, therefore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted......"

S.139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.

Similar is the judgment in Basalingappa vs. Mudibasappa 2019 (5) SCC 418 wherein it was held:

“26. Applying the proposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability.”

This position was reiterated in Kalamani  Tex  v.  P. Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 wherein it was held at page 289:

“13. Adverting to the case in hand, we find on a plain reading of its judgment that the trial court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The statute mandates that once the signature(s) of an accused on the cheque/neg tiable instrument are established, then these “reverse nus” clauses become operative. In such a si ua ion, the obligation shifts upon the accused to discha ge he presumption imposed upon him. This point of law has been crystallised by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat [Rohitbhai Jivanlal Patel v. State of G jarat, (2019) 18 SCC 106, para 18: (2020) 3 SCC (Civ) 800: (2020) 3 SCC (Cri) 575] in the following words : (SCC pp. 120-21, para 18)

“18. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused.”

Once the 2nd appellant had admitted his signatures on the cheque and the deed, the trial court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt. The trial court fell in error when it called upon the respondent complainant to explain the circumstances under which the appellants were liable to pay. Such an approach of the trial court was directly in the teeth of the established legal position as discussed above, and amounts to a patent error of law.”

Similar is the judgment in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, wherein it was observed: -

7.2. What is emerging f om the material on record is that the issuance of a cheq e by the accused and the signature of the accused on the said cheque are not disputed by the accused. The accused has also not disputed that there were transacti ns between the parties. Even as per the statement of the accused, which was recorded at the time of the framing of the charge, he has admitted that some amount was due and payable. However, it was the case on behalf of the accused that the cheque was given by way of security, and the same has been misused by the complainant. However, nothing is on record that in the reply to the statutory notice, it was the case on behalf of the accused that the cheque was given by way of security. Be that as it may, however, it is required to be noted that earlier the accused issued cheques which came to be dishonoured on the ground of “insufficient funds” and thereafter a fresh consolidated cheque of ₹9,55,574 was given which has been returned unpaid on the ground of “STOP PAYMENT”. Therefore, the cheque in question was issued for the second time. Therefore, once the accused has admitted the issuance of a cheque which bears his signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. However, such a presumption is rebuttable in nature, and the accused is required to lead evidence to rebut such presumption. The accused was required to lead evidence that the entire amount due and payable to the complainant was paid.

Coming back to the facts in the present case and considering the fact that the accused has admitted the issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability. Of course, such presumption is rebuttable in nature. However, to rebut the presumption, the accused was required to lead evidence that the full amount due and payable to the complainant had been paid. In the p esent case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence f further evidence to rebut the presumption, and more particularly, the cheque in question was issued for the second time after the earlier cheques were dishonoured. Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists a legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both the learned trial court as well as the High Court have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI Act. As observed above, Section 139 of the Act is an example of reverse onus clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence.

Learned Courts below had rightly held that there is a presumption under Section 139 of the N.I. Act that the cheque was issued in the discharge of the legal liability. This presumption was explained by the Hon’ble Supreme Court in Triyambak S. Hegde v Sripad, (2022) 1 SCC 742: (2022) 1 SCC (Civ) 512: 2021 SCC OnLine SC 788 as under at page 747:

“12. From the facts arising in this case and the nature of the rival contentions, the record would disclose that the signature on the documents at Exts. P-6 and P-2 are not disputed. Ext. P-2 is the dish n ured cheque based on which the complaint was filed. Fr m the evidence tendered before the JMFC, it is clear that he respondent has not disputed the signature on the cheque. If hat be the position, as noted by the courts below, a p esumption would arise under Section 139 in favour of the appellant who was the holder of the cheque. Section 139 of the NI Act reads as hereunder:

“139. Presumption in favour of the holder. —It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.”

Insofar as the payment of the amount by the appellant in the context of the cheque having been signed by the respondent, the presumption for passing of the consideration would arise as provided under Section 118(a) of the NI Act, which reads as hereunder:

“118. Presumptions as to negotiable instruments. —Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.”

The above-noted provisions are explicit to the effect that such presumption would remain until the contrary is proved. The learned counsel for the appellant in that regard has relied on the decision of this Court in K Bhaskaran v. Sankaran Vaidhyan Balan [K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510: 1999 SCC (Cri) 1284] wherein it is held as hereunder: (SCC pp. 516-17, para 9)

“9. As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn f r consideration on the date which the cheque bears. Section 139 of the Act enjoins the Cou o presume that the holder of the cheque received it for the discharge of any debt or liability. The b rden was on the accused to rebut the aforesaid pres mption. The trial court was not persuaded to rely on the interested testimony of DW 1 to rebut the presumption. The said finding was upheld [Sankaran Vaidhyan Balan v. K. Bhaskaran, Criminal Appeal No. 234 of 1995, order dated 23-10-1998 (Ker)] by the High Court. It is not now open to the accused to contend differently on that aspect.”

The learned counsel for the respondent has, however, referred to the decision of this Court in Basalingappa v. Mudibasappa [Basalingappa v. Mudibasapp a, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571] wherein it is held as hereunder: (SCC pp. 432-33, paras 25-26)

“25. We having noticed the ratio laid down by this Court in the above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in the following manner:

25.1. Once the execution of the cheque is admitted, Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.

25.2. The presumption under Section 139 is a rebuttable presumption, and the onus is on the accused to raise the probable defence The standard of proof for rebutting the presumption is that of preponderance of probabilities.

25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought n record by the parties but also by reference to the circumstances upon which they ely.

25.4. That it is not necessary for the accused to come into the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.

25.5. It is not necessary for the accused to come into the witness box to support his defence.

Applying the preposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability. The question to be looked into is as to whether any probable defence was raised by the accused. In the cross-examination of PW 1, when the specific question was put that a cheque was issued in relation to a loan of Rs 25,000 taken by the accused, PW 1 said that he does not remember. PW 1 in his evidence admitted that he retired in 1997, on which date he received a monetary benefit of Rs 8 lakhs, which was encashed by the complainant. It was also brought in evidence that in the year 2010, the complainant entered into a sale agreement for which he paid an amount of Rs 4,50,000 to Balana Gouda towards sale consideration.

Payment of Rs 4,50,000 being admitted in the year 2010 and further payment of loan of Rs 50,000 with regard to which Complaint No. 119 of 2012 was filed by the complainant, a copy of which complaint was also filed as Ext. D-2, there was a burden on the complainant to prove his financial capacity In the years 2010-2011, as per own case of the complainant, he made a payment of Rs 18 lakhs. During his cross-examination, when the financial capacity to pay Rs 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.”

In that light, it is contended that the very materials produced by the appellant and the answers relating to lack of knowledge f property details by PW 1 in his cross-examinati n w uld indicate that the transaction is doubtful, and no evidence is tendered to indicate that the amount was paid. In such an event, it was not necessary for the respondent to tender rebuttal evidence, but the case put forth would be sufficient to indicate that the respondent has successfully rebutted the presumption.

On the position of law, the provisions referred to in Sections 118 and 139 of the NI Act, as also the enunciation of law as made by this Court, need no reiteration as there is no ambiguity whatsoever. In Basalingappav. Mudibasappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418 : (2019) 2 SCC (Cri) 571] relied on by the learned counsel for the respondent, though on facts the ultimate conclusion therein was against raising presumption, the facts and circumstances are entirely different as the transaction between the parties as claimed in the said case is peculiar to the facts of that case where the consideration claimed to have been paid did not find favour with the Court keeping in view the various transactions and extent of amount involved. However, the legal position relating to the presumption arising under Sections 118 and 139 of the NI Act on signature being admitted has been reiterated. Hence, whether there is a rebuttal or not would depend on the facts and circumstances of each case.”

This position was reiterated in Tedhi Singh v Narayan  Dass Mahant, (2022) 6 SCC 735: (2022) 2 SCC (Cri) 726: (2022) 3 SCC (Civ) 442: 2022 SCC OnLine SC 302 wherein it was held at page 739:

“8. It is true that this is a case under Section 138 of the Negotiable Instruments Act. Secti n 139 of the NI Act provides that the court shall presume that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discha ge, in whole or in part, of any debt or other liability. This presumption, however, is expressly made subject to the position being proved to the contrary. In other w rds, it is pen to the accused to establish that there is no c nsiderati n received. It is in the context of this provision that the theory of “probable defence” has grown. In an earlier judgment, in fact, which has also been adverted to in Basalingappa [Basalingappa v. Mudibasappa, (2019) 5 SCC 418: (2019) 2 SCC (Cri) 571], this Court notes that Section 139 of the NI Act is an example of reverse onus (see Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC (Civ) 477: (2011) 1 SCC (Cri) 184]). It is also true that this Court has found that the accused is not expected to discharge an unduly high standard of proof. It is accordingly that the principle has developed that all which the accused needs to establish is a probable defence. As to whether a probable defence has been established is a matter to be decided on the facts of each case on the conspectus of evidence and circumstances that exist...”

Similar is the judgment in P. Rasiya v. Abdul Nazer, 2022 SCC OnLine SC 1131, wherein it was observed:

“As per Section 139 of the N.I. Act, it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. Therefore, once the initial burden is discharged by the Complainant that the cheque was issued by the accused and the signature and the issuance of the cheque are not disputed by the accused, in that case, the onus will shift upon the accused to prove the contrary that the cheque was not for any debt or other liability. The presumption under Section 139 of the N.I. Act is a statutory presumption and thereafter, once it is presumed that the cheque is issued in whole or in part of any debt r ther liability which is in favour of the Complainan /holder of the cheque, in that case, it is for the accused to p ove he contrary.”

This position was reiterated in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275, wherein it was observed at page 161:

The NI Act provides for two presumptions: Section 118 and Section 139. Section 118 of the Act inter alia directs that it s all be presumed until the contrary is proved that every negotiable instrument was made or drawn for consideration. Section 139 of the Act stipulates that “unless the contrary is proved, it shall be presumed that the holder of the cheque received the cheque for the discharge of, whole or part of any debt or liability”. It will be seen that the “presumed fact” directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138. [The rules discussed hereinbelow are common to both the presumptions under Section 139 and Section 118 and are hence not repeated— reference to one can be taken as reference to another]

Section 139 of the NI Act, which takes the form of a “shall presume” clause, is illustrative of a presumption of law. Because Section 139 requires that the Court “shall presume” the fact stated therein, it is obligatory for the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. But this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary, as is clear from the use of the phrase “unless the contrary is proved”.

The Court will necessarily presume that the cheque had been issued towards the discharge of a legally enforceable debt/liability in two circumstances. Firstly , when the drawer of the cheque admits issuance/execution of the cheque and secondly, in the event where the c mplainant proves that the cheque was issued/executed in his favour by the drawer. The circumstances set out above form the fact(s) which bring about the activa ion of he presumptive clause. [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35] ]

Recently, this Co rt has gone to the extent of holding that presumpti n takes effect even in a situation where the accused c ntends that a blank cheque leaf was voluntarily signed and handed over by him to the complainant. [Bir Singh v. Mukesh Kumar [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Civ) 309: (2019) 2 SCC (Cri) 40] ]. T erefore, the mere admission of the drawer's signature, wit out admitting the execution of the entire contents in the cheque, is now sufficient to trigger the presumption.

As soon as the complainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the burden on the accused. The effect of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further.

John Henry Wigmore [John Henry Wigmore and the Rules of Evidence: The Hidden Origins of Modern Law] on Evidence states as follows:

“The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufficient to satisfy the Judge's requirement of some evidence), the presumption ‘disappears as a rule of law and the case is in the Jury's hands free from any rule’.”

The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is requi ed o prove the guilt of an accused. The accused is not expected to prove the non-existence of the presumed fact beyond a reasonable doubt. The accused must meet the standard of “preponderance of probabilities”, similar to a defendant in a civil proceeding. [Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441: (2010) 4 SCC ( iv) 477: (2011) 1 SCC (Cri) 184: AIR 2010 SC 1898]]

Therefore, the Court has to start with the presumption that the cheque was issued in discharge of legal liability, and the burden is upon the accused to prove the contrary.

The accused admitted in his cross-examination that he had taken the loan. He stated that he had returned some money, but did not remember the details. He admitted that he wanted to repay the loan; therefore, the accused has not disputed his liability to pay the amount. The statement of account (Ext. CW1/G) shows that an amount of ₹9,39,675.20/- was due on 06.04.2019. The cheque was issued for an amount of ₹9,39,675/- and is dated 08.04.2019. Thus, the accused had a subsisting liability of ₹9,39,675/- on the date of the issuance of the cheque. Since the accused has not disputed his liability to pay the amount, therefore learned Courts below had rightly held that the accused had failed to rebut the presumption attached to the cheque.

The accused claimed that a blank signed cheque was taken from him. Even if this plea is accepted as correct, the accused had a liability to pay ₹9,39,675/- on the date of the issuance of the cheque. It was laid d wn by this Court in Hamid Mohammad Versus Jaimal Dass 2016 (1) HLJ 456, that even if the cheque was issued towards the security, the accused will be liable. It was observed:

“9. Submission of learned Advocate appearing on behalf of the revisionist that the cheque in question was issued to the complainant as security and on this ground, criminal revision petition be accepted is rejected being devoid of any force for the reasons hereinafter mentioned. As per Section 138 of the Negotiable Instruments Act 1881, if any cheque is issued on account of other liability, then the provisions of Section 138 of the Negotiable Instruments Act 1881 would be attracted. The court has perused the original cheque, Ext. C-1 dated 30.10.2008, placed on record. There is no recital in the cheque Ext. C-1, that cheque was issued as a security cheque. It is well-settled law that a cheque issued as security would also come under the provision of Section 138 of the Negotiable Instruments Act 1881. See 2016 (3) SCC page 1 titled Don Ayengia v. State of Assam & another. It is well-settled law that where there is a conflict between former law and subsequent law, then subsequent law always prevails.”

It was laid down by the Hon'ble Supreme Court in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited 2016(10) SCC 458 that issuing a cheque toward security will also attract the liability for the commission of an offence punishable under Section 138 of the NI Act. It was observed: -

“10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways Private Limited versus Magn m Aviation Private Limited (2014) 12 SCC 53 with reference to the explanation to Section 138 of the Act and the expressi n “f r the discharge of any debt or other liability” occurring in Section 138 of the Act. We are of the view that the question of whether a post-dated cheque is for “discharge of debt or liability” depends on the nature of the transaction. 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.

Reference to the facts of the present case clearly shows that though the word “security” is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February 2002, which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, the dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.

Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of a claim for breach of contract under Section 138, which arises on account of dishonour of a cheque issued, was not by itself at par with a criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of a cheque issued for discharge of a later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque, there was a debt/liability in praesenti in terms of the loan agreement, as against the case of Indus Airways (supra), where the purchase order had been cancelled and a cheque issued towards advance payment f r the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as an advance for the purchase o de , which was cancelled. Keeping in mind this fine, b t the real distinction, the said judgment cannot be applied to a case of the present nature where the cheque was f r repayment of a loan instalment which had fallen due, th ugh such deposit of cheques towards repayment of instalments was also described as “security” in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of the purchase order which is cancelled and that of a loan transaction where the loan has actually been advanced and its repayment is due on the date of the cheque.

The crucial question to determine the applicability of Section 138 of the Act is whether the cheque represents the discharge of existing enforceable debt or liability, or whether it represents an advance payment without there being a subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from the discussion of the said cases in the judgment of this Court.” (Emphasis supplied)

This position was reiterated in Sripati Singh v. State of Jharkhand, 2021 SCC OnLine SC 1002: AIR 2021 SC 5732, and it was held that a cheque issued as security is not waste paper and a complaint under Section 138 of the NI Act can be filed on its dishonour. It was observed:

“17. A cheque issued as security pursuant to a financial transaction cannot be considered as 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. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of the amount, the c eque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow.

When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form, and in that manner, if the amount of the loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be an understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque, which is issued as security, can never be presented by the drawee of the cheque. If such is the understanding, a cheque would also be reduced to an 'on-demand promissory note' and in all circumstances, it would only be civil litigation to recover the amount, which is not the intenti n f the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circums ance s ated above if the cheque is presented and dishonou ed, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situati n, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.”

Hence, the accused cannot escape from the liability by taking a plea that he had handed over a blank signed security cheque to the complainant.

Himat Ram (CW1) stated that the cheque was dishonoured with an endorsement ‘insufficient funds’. This is corroborated by the memo (Ext. CW1/C) in which the reason for dishonour has been mentioned as ‘funds insufficient’. The accused did not claim that he had a sufficient amount in his bank account, and the cheque was wrongly dishonoured. It was laid down by the Hon’ble Supreme Court in Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1: 2010 SCC OnLine SC 155 that the memo issued by the Bank is presumed to be correct and the burden is upon the accused to rebut the presumption. It was observed at page 95:

Section 146, making a major departure from the principles of the Evidence Act, pr vides that the bank's slip or memo with the official mark sh wing that the cheque was dishonoured would, by i self, give rise to the presumption of dishonour of the cheque, unless and until that fact was disproved. Section 147 makes the offences punishable under the Act compo ndable.

Theref re, it was duly proved that the cheque was dishonoured with an endorsement ‘funds insufficient’.

Himat Ram (CW1) stated that the notice was issued to the accused, which was received undelivered. The notice was sent to the same address where the summons was sent and delivered. This address was furnished by the accused in his statement recorded under Section 313 of Cr.P.C., the notice of accusation, the personal bond furnished by him, and the statement on oath. Thus, notice was sent to the correct address. The notice was returned unclaimed. It was laid down by the Hon’ble Supreme Court of India in C.C. Allavi Haji vs. Pala Pelly Mohd. 2007(6) SCC 555, that when a notice is returned unclaimed, it is deemed to be served. It was observed:

“8. Since in Bhaskaran's case (supra), the notice issued in terms of Clause (b) had been returned unclaimed and not as refused, the Court, posed the question: "Will there be any significant difference between the two so far as the presumption of service is concerned?" It was observed that though Section 138 of the Act does not require that the notice should be given only by "post", yet in a case where the sender has dispatched the n tice by post with the correct address written on it, the principle incorporated in Section 27 of the General Clauses Act, 1897 (for short 'G.C. Act') could profitably be impo ted in such a case. It was held that in this situation se vice of notice is deemed to have been effected on the sendee nless he proves that it was not really served and that he was not responsible for such non-service.”

This position was reiterated in Priyanka Kumari vs. Shailendra Kumar (13.10.2023- SC Order): MANU/ SCOR/ 133284/2023 wherein it was observed:

“As it was held by the Hon'ble Supreme Court in K. Bhaskaran Vs. Sankaran Vaidhyan Balan and Another, (1999) 7 Supreme Court Cases 510, that when notice is returned as 'unclaimed', it shall be deemed to be duly served upon the addressee, and it is a proper service of notice. In the case of Ajeet Seeds Limited Vs. K. Gopala Krishnaiah (2014) 12 SCC 685 (2014), the Hon'ble Court, while interpreting Section 27 of the General Clauses Act 1897 and also Section 114 of the Evidence Act 1872, held as under: -

"Section 114 of the Evidence Act, 1872 enables the court to presume that in the common course of natural events, the communication sent by post would have been delivered at the address of the addressee.

Further, Section 27 of the General Clauses Act, 1897 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. It is not necessary to aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business."

In the present case, the accused has not proved that he was not responsible for non-service; herefore, the learned Courts below had rightly held that the notice was duly served upon the accused.

Therefore, it was duly proved on record that the accused had issued a cheque to discharge his legal liability, which cheque was dis onoured with an endorsement ‘funds insufficient’ and the accused failed to pay the amount despite the deemed receipt of notice of demand; hence, the complainant had proved all the ingredients of the commission of an offence punishable under Section 138 of NI Act and the learned Trial Court had rightly convicted the accused for the commission of an offence punishable under Section 138 of NI Act.

The learned Trial Court sentenced the accused to undergo simple imprisonment for six months. It was laid down by the Hon’ble Supreme Court in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 138 that the penal provisions of Section 138 is deterrent in nature. It was observed at page 203:

“6. The object of Section 138 f the Negotiable Instruments Act is to infuse credibili y into negotiable instruments, including cheques, and o encourage and promote the use of negotiable instruments, including cheques, in financial transactions. The penal provision of Section 138 of the Negotiable Instr ments Act is intended to be a deterrent to callous issuance f negotiable instruments such as cheques without seri us intention to honour the promise implicit in the issuance of the same.”

Keeping in view the deterrent nature of the sentence to be awarded, t e sentence of six months’ imprisonment cannot be sa d to be excessive, and no interference is required with it.

Learned Trial Court had ordered the accused to pay a compensation of ₹13,00,000/- to the complainant. The cheque was issued on 08.04.2019. The sentence was imposed on 30.04.2024 after a lapse of 05 years. The complainant lost interest that it would have gained by advancing the loan to various persons. The complainant had to engage an Advocate and incur the expenses for the litigation. It was entitled to be compensated for the same. It was laid down by the Hon’ble Supreme Court in Kalamani Tex v P Balasubramanian, (2021) 5 SCC 283: (2021) 3 SCC (Civ) 25: (2021) 2 SCC (Cri) 555: 2021 SCC OnLine SC 75 that the Courts should uniformly levy a fine up to twice the cheque amount along with simple interest at the rate of 9% per annum. It was observed at page 291: -

As regards the claim of compensation raised on behalf of the respondent, we a e conscious of the settled principles that the object of Chapter XVII of NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for the dishon ur f a cheque as well as civil liability for the realisation of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation, and unless there exist special circumstances, t e courts should uniformly levy fines up to twice the cheque amount along with simple interest @ 9% p.a. [R. Vijayan v. Baby, (2012) 1 SCC 260, para 20: (2012) 1 SCC (Civ) 79: (2012) 1 SCC (Cri) 520]”

The interest on ₹13,00,000/- for five years at the rate of 9 % per annum is ₹5,85,000/-, and the compensation of ₹3,60,325/- is not excessive, but inadequate.

The learned Trial Court had imposed a default sentence of one month on failure to pay compensation. It was submitted that no sentence of imprisonment in case of default of payment of compensation could have been awarded. This submission is not acceptable. It was laid down by the Hon’ble Supreme Court in K A Abbas v. Sabu Joseph, (2010) 6 SCC 230: (2010) 3 SCC (Civ) 744: (2010) 3 SCC (Cri) 127: 2010 SCC OnLine SC 612, that the Courts can impose a sentence of imprisonment in default of payment of compensation.It was observed at page 237:

“20. Moving over to the questi n, whether a default sentence can be imposed on default of payment of compensation, this Court in Hari Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC 2127] and in Balraj v. State of U.P. [(1994) 4 SCC 29: 1994 SCC (Cri) 823: AIR 1995 SC 1935], has held that it was open to all the courts in India to impose a sentence on default of payment of compensati n under sub-section (3) of Section 357.

In Hari Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC ( ri) 984: AIR 1988 SC 2127], this Court has noticed certain factors which are required to be taken into consideration w ile passing an order under the section: (SCC p. 558, para 11)

“11. The payment by way of compensation must, however, be reasonable. What is reasonable may depend upon the facts and circumstances of each case. The quantum of compensation may be determined by taking into account the nature of the crime, the justness of the claim by the victim and the ability of the accused to pay. If there is more than one accused, they may be asked to pay on equal terms unless their capacity to pay varies considerably. The payment may also vary depending on the acts of each accused. A reasonable period for payment of compensation, if necessary, by instalments, may also be given. The court may enforce the order by imposing a sentence in default.”

This position also finds support in R. v. Oliver John Huish [(1985) 7 Cri App R (S) 272]. The Lord Justice Croom Johnson, speaking for the Bench, has observed:

“When compensation orders may be made, the most careful examination is required. Documents should be obtained, and evidence, either on affidavit or orally, should be given. The proceedings should, if necessary, be adjourned to arrive at the true state of the defendant's affairs.

Very often, a compensation order is made and a very light sentence of impris nment is imposed, because the court recognises that if the defendant is to have an opportunity of paying he compensation, he must be enabled to ea n he money with which to do so. The result is the efo e an extremely light sentence of imprisonment. If the compensation order turns out to be virt ally worthless, the defendant has got off with a very light sentence of imprisonment as well as no order f c mpensation. In other words, generally speaking, he has got off with everything.”

The law laid down in Hari Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC 2127] was reiterated by this Court in Suganthi Suresh Kumar v. Jagdeeshan [(2002) 2 SCC 420: 2002 SCC (Cri) 344]. The Court observed: (SCC pp. 424-25, paras 5 & 10)

“5. In the said decision, this Court reminded all concerned that it is well to remember the emphasis laid on the need for making liberal use of Section 357(3) of the Code. This was observed by reference to a decision of this Court in Hari Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC 2127]. In the said decision, this Court held as follows:

(SCC p. 558, para 11)

‘11. … The quantum of compensation may be determined by taking into account the nature of the crime, the justness of the claim by the victim and the ability of the accused to pay. If there is more than one accused, they may be asked to pay on equal terms unless their capacity to pay varies considerably. The payment may also vary depending on the acts of each accused. A reasonable period for payment of compensation, if necessary, by instalments, may also be given. The court may enforce the order by imposing a sentence in default.’

(emphasis in original)

***

That apart, Section 431 of the Code has only prescribed that any m ney ( ther than fine) payable by virtue of an order made under the Code shall be recoverable ‘as if it were a fine’. Two modes of recovery of the fine have been indicated in Section 421(1) of the Code. The proviso to the sub-section says that if the sentence directs that in default of payment of the fine, the offender shall be imprisoned, and if such ffender has undergone the whole of such imprisonment in default, no court shall issue such warrant for the levy of the amount.”

The Court further held: (Jagdeeshan case [(2002) 2 SCC 420: 2002 SCC (Cri) 344], SCC p. 425, para 11)

“11. When this Court pronounced in Hari Singh v. Sukhbir Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC 2127] that a court may enforce an order to pay compensation ‘by imposing a sentence in default’ it is open to all courts in India to follow the said course. The said legal position would continue to hold good until it is overruled by a larger Bench of this Court. Hence learned Single Judge of the High Court of Kerala has committed an impropriety by expressing that the said legal direction of this Court should not be followed by the subordinate courts in Kerala. We express our disapproval of the course adopted by the said Judge in Rajendran v. Jose [(2001) 3 KLT 431]. It is unfortunate that when the Sessions Judge has correctly done a course in accordance with the discipline, the Single Judge of the High Court has incorrectly reversed it.”

In order to set at rest the divergent opinion expressed in Ahammedkutty case [(2009) 6 SCC 660 : (2009) 3 SCC (Cri) 302], this Court in Vijayan v. Sadanandan K [(2009) 6 SCC 652 : (2009) 3 SCC (Cri) 296], after noticing the provision of Sections 421 and 431 CrPC, which dealt with mode of recovery of fine and Section 64 IPC, which empowered the courts to provide for a sentence of imprisonment on default of payment of fine, the Court stated: ( Vijayan case [(2009) 6 SCC 652 : (2009) 3 SCC (Cri) 296 ], SCC p. 658, para 24)

“24. We have carefully considered the submissions made on behalf of he respective parties. Since a decision on the ques ion raised in this petition is still in a nebulous state, there appear to be two views as to whether a defa lt sentence of imprisonment can be imposed in cases where compensation is awarded to the c mplainant under Section 357(3) CrPC. As pointed out by Mr Basant in Dilip S. Dahanukar case [(2007) 6 SCC 528 : (2007) 3 SCC (Cri) 209], the distinction between a fine and compensation as understood under Section 357(1)(b) and Section 357(3) CrPC had been explained, but the question as to whether a default sentence clause could be made in respect of compensation payable under Section 357(3) CrPC, which is central to the decision in this case, had not been considered.”

The Court further held: (Vijayan case [(2009) 6 SCC 652: (2009) 3 SCC (Cri) 296], SCC p. 659, paras 31-32)

“31. The provisions of Sections 357(3) and 431 CrPC, when read with Section 64 IPC, empower the court, while making an order for payment of compensation, to also include a default sentence in case of non-payment of the same.

The observations made by this Court in Hari Singh case [(1988) 4 SCC 551: 1988 SCC (Cri) 984: AIR 1988 SC 2127] are as important today as they were when they were made and if, as submitted by Dr. Pillay, recourse can only be had to Section 421 CrPC for enforcing the same, the very object of sub-section (3) of Section 357 would be frustrated and the relief contemplated therein would be rendered somewhat illusory.”

In Shantilal v. State of M.P. [(2007) 11 SCC 243 : (2008) 1 SCC (Cri) 1], it is stated that the sentence of imprisonment for default in payment of a fine or compensation is different from a normal sentence of imprisonment. The Court also delved into the factors to be taken into consideration while passing an order under Secti n 357(3) CrPC. This Court stated: (SCC pp. 255-56, para 31)

“31. … The term of imprisonment in default of payment of a fine is not a sentence. It is a penalty which a person incu s on account of non-payment of a fine. The sentence is something which an offender must ndergo nless it is set aside or remitted in part or in wh le, either in appeal or in revision or other appr priate judicial proceedings, or ‘otherwise’. A term of imprisonment ordered in default of payment of a fine stands on a different footing. A person is required to undergo imprisonment either because he is unable to pay the amount of fine or refuse to pay such amount. He, therefore, can always avoid undergoing imprisonment in default of payment of the fine by paying such amount. It is, therefore, not only the power but the duty of the court to keep in view the nature of the offence, circumstances under which it was committed, the position of the offender and other relevant considerations before ordering the offender to suffer imprisonment in default of payment of a fine.” (emphasis in original)

In Kuldip Kaur v. Surinder Singh [(1989) 1 SCC 405: 1989 SCC (Cri) 171: AIR 1989 SC 232], in the context of Section 125 CrPC observed that sentencing a person to jail is sometimes a mode of enforcement. In this regard, the Court stated: (SCC p. 409, para 6)

“6. A distinction has to be drawn between a mode of enforcing recovery on the one hand and effecting actual recovery of the amount of monthly allowance which has fallen in arrears on the other. Sentencing a person to jail is a ‘mode of enforcement’. It is not a ‘mode of satisfaction’ of the liability. The liability can be satisfied only by making actual payment of the arrears. The whole purpose of sending to jail is to oblige a person liable to pay the monthly allowance who refuses to comply with the order without sufficient cause, to obey the order and to make the payment. The purpose f sending him to jail is not to wipe out the liability which he has refused to discharge. It should also be realised that a person ordered to pay a mon hly allowance can be sent to jail only if he fails to pay the monthly allowance ‘without sufficient ca se’ to comply with the order. It would indeed be strange to hold that a person who, without reas nable cause, refuses to comply with the order of the c urt to maintain his neglected wife or child would be absolved of his liability merely because he prefers to go to jail. A sentence of jail is no substitute for the recovery of the amount of monthly allowance which has fallen in arrears.”

From the above line of cases, it becomes very clear that a sentence of imprisonment can be granted for default in payment of compensation awarded under Section 357(3) CrPC. The whole purpose of the provision is to accommodate the interests of the victims in the criminal justice system. Sometimes the situation becomes such that there is no purpose served by keeping a person behind bars. Instead, directing the accused to pay an amount of compensation to the victim or affected party can ensure the delivery of total justice. Therefore, this grant of compensation is sometimes in lieu of sending a person behind bars or in addition to a very light sentence of imprisonment. Hence, in default of payment of this compensation, there must be a just recourse. Not imposing a sentence of imprisonment would mean allowing the accused to get away without paying the compensation, and imposing another fine would be impractical, as it would mean imposing a fine upon another fine and therefore would not ensure proper enforcement of the order of compensation. While passing an order under Section 357(3), it is imperative for the courts to look at the ability and the capacity of the accused to pay the same amount as has been laid down by the cases above; otherwise, the very purpose of granting an order of compensation would stand defeated.

This position was reiterated in R. Mohan v. A.K. Vijaya Kumar, (2012) 8 SCC 721: (2012) 4 SCC (Civ) 585: (2012) 3 SCC (Cri) 1013: 2012 SCC OnLine SC 486 whe ein it was observed at page 729:

The idea behind directing the accused to pay compensati n to the complainant is to give him immediate relief so as to alleviate his grievance. In terms of Section 357(3), compensation is awarded for the loss or injury suffered by the person due to the act of the accused for which he is sentenced. If merely an order directing compensation is passed, it would be totally ineffective. It could be an order without any deterrence or apprehension of immediate adverse consequences in case of its non-observance. The whole purpose of giving relief to the complainant under Section 357(3) of the Code would be frustrated if he is driven to take recourse to Section 421 of the Code. An order under Section 357(3) must have the potential to secure its observance. Deterrence can only be infused into the order by providing for a default sentence. If Section 421 of the Code puts compensation ordered to be paid by the court on a par with the fine so far as the mode of recovery is concerned, then there is no reason why the court cannot impose a sentence in default of payment of compensation as it can be done in case of default in payment of fine under Section 64 IPC. It is obvious that in view of this, in Vijayan [(2009) 6 SCC 652: (2009) 3 SCC (Cri) 296], this Court stated that the abovementioned provisions enabled the court to impose a sentence in default of payment of compensation and rejected the submission that the recourse can only be had to Section 421 of the Code for enforcing the order of compensation. Pertinently, it was made clear that observations made by this Court in Hari Singh [(1988) 4 SCC 551: 1988 SCC (Cri) 984] are as important today as they were when they were made. The conclusion, therefore, is that the order to pay compensation may be enforced by awarding a sentence in de ault.

In view of the above, we find no illegality in the order passed by the learned Magistrate and confirmed by the Sessions Court in awarding a sentence in default of payment of compensation. The High Court was in error in setting aside the sentence imposed in default of payment of compensation.

Thus, there is no infirmity in imposing a sentence of imprisonment in case  f default in the payment of compensation.

No other point was urged.

In view of the above, the present revision fails, and the same is dismissed.

Records of the learned Courts below be sent back forthwith, along with a copy of this judgment.