M/s ADS Dhalli, Shimla vs Rajinder Chauhan & Anr.

Chirag Bhanu Singh, Judge

The present appeal impugns the judgment dated 28.12.2016 passed by the learned Sessions Judge, Shimla (H.P.), acquitting the respondent/accused of having committed an offence under Section 138 of the Negotiable Instruments Act (NI Act), while setting aside the judgment of conviction dated 02.06.2014 and order of sentence dated 03.06.2014 passed by the learned Additional Chief Judicial Magistrate, Court No. 2, Shimla, in Case No. 2762-3 of 2014/12.

The learned Trial Court had convicted the respondent/accused and sentenced them to undergo simple imprisonment for six months, and had also burdened him with compensation amounting to Rs. 15,20,000/- to be paid to the complainant.

In appeal the learned First Appellate Court, however, went on to hold that since no apples had been purchased from M/s. ADS, Dhalli (that is, the petitioner), there was no legally enforceable debt and hence there was no transaction relating to the sale and purchase of apples by the respondent/accused with the complainant firm, M/s. ADS, Dhalli. The learned First Appellate Court quashed the findings recorded by the learned Trial Court. The findings of the learned Trial Court having been reserved resulting in the acquittal of the respondent/accused stands challenged in the present appeal.

It would be apposite to reproduce the genesis leading to the filing of the complaint under Section 138 of the N.I. Act.

The petitioner herein, who was the complainant, had preferred a complaint alleging that he had ventured into the purchase and sale of apples in the name and style of M/s. ADS, Dhalli.

The accused/respondent No. 1 herein was the proprietor of the firm, M/s. Rajinder Orchard & Co. who is the respondent No. 2 before this Court.

The respondent No. 1, acting on behalf of and for respondent No. 2, purchased the apples from the complainant in the year 2011 and used to make payments in respect of the same from time to time, and even used to issue cheques in favour of the complainant as part payments to be adjusted towards the amount due and payable to the complainant.

Based on the aforesaid business transactions, the respondent had issued cheques amounting to Rs. 5,00,000/-each on 01.03.2012, 03.03.2012 and 05.03.2012, payable at State Bank of India, Sanjauli Branch, Shimla.

The complainant/appellant presented the aforesaid cheques for encashment, however, they were returned dishonoured, with the remarks "funds insufficient".

A legal notice came to be issued as per the statutory provisions of the Act, which came to be duly served on the respondent/accused. Nonetheless, the respondent/accused failed to repay the demanded amount, resulting in the filling of the complaint under Section 138 of the N.I. Act.

I have heard the learned counsel for the parties and gone through the record carefully.

Mr. Neeraj Gupta, learned Senior Counsel for the petitioner, has contended that the findings recorded by the learned First Appellate Court that there was no legally enforceable debt are not sustainable in law in view of the overwhelming evidence brought on record by the complainant/appellant. The ledgers placed on record vide Ext. CW-1/A-1 to Ext. CW-1/A-3 and the folios (Ext. CW-1/C-1 to Ext. CW-1/C-57) clearly show not only the sale and purchase of apples but also the financial transactions recorded therein. It is no coincidence that the ledger entries and the folios match completely. No doubt, the bills exhibit (D-1 to D-15) are in the name of M/s. V.K. Traders, but they also correspond to the ledger entries and the folios placed on record by the complainant/appellant.

The execution of the cheques having not been denied, the findings recorded by the learned First Appellate Court would not sustain. The learned Trial Court, thus, was right having convicted the accused. He has relied upon the judgment of this Court titled as M/s. Himalayan Plastics Ltd. vs. Anoop Kumar (Criminal Appeal No. 28 of 2014, decided on 07.09.2026).

Per contra, Mr. B.S. Chauhan, learned Senior Counsel for the respondent/accused, has strenuously urged that the ledgers and folios had been manufactured later on. He had never purchased any apple from M/s. ADS, Dhalli. The complainant himself has admitted that he had no licence to purchase and sell apple boxes. The cheques of the accused were with M/s. V.K. Traders as security cheques and the same have been misused by the complainant. The complainant has not even examined M/s. V.K. Traders to prove the same. He has thus supported the findings returned by the learned First Appellate Court that there was no legally enforceable debt and, as such, the respondent had been rightly acquitted.

The reappraisal of the evidence on record shows that the complainant appeared as his only witness. As per him, his firm was dealing in the sale and purchase of apples. The accused used to purchase apples from them in the name and style of Rajinder Orchards & Company (ROC), whose proprietor was respondent No. 1. In the year 2011, he had sold apples to the accused from time to time. Proper ledgers and folios had been maintained and entries were duly made therein. He had placed on record the ledger entries, the folios and the register entries, being Ext. CW-1/B-1 to Ext. CW-1/B-80. Further, as per him, in order to liquidate the payments due, the accused had issued cheques (Ext. CW-1/E to Ext. CW-1/G), which were, however, unfortunately dishonoured.

No doubt, in the cross-examination, the complainant/petitioner, while appearing as CW-1, had deposed that M/s. ADS, Dhalli did not have a licence to purchase and sell apples. He had, however, hastened to add that they had registered their firm with the Registrar. He had also deposed that they had an agreement with M/s. V.K. Traders and the sales bills had been prepared in the name of ROC. He has admitted that the bills (Ext. CW-1/C-1 to Ext. CW-1/C-52) were in the name of M/s. V.K. Traders and he had signed (Ext. CW-1/D-1 to Ext. CW-1/D-3) as a partner. He has denied that the firm of the accused had not purchased any apples from the complainant.

The accused, while appearing as his own witness in defense as DW-1, on the other hand, has on the contrary averred that through purchased apples from M/s. V.K. Traders in the year 2011. As per him, M/s. VK Traders is owned by one Vinay Kumar. He had purchased apples from M/s. V.K Traders and issued bills, Exhibit CW-1/C-1 to Exhibit CW-1/C-52, which have been issued by M/s. V.K Traders. The stamp of M/s. ADS, Dhalli, partners on the bills is false and fictitious. The original bills in this behalf were Exhibit D-1 to Exhibit D-15.

The cheques in question, Exhibit CW-1/E to Exhibit CW-1/G, had been paid as security cheques to M/s. V.K Traders as sale consideration for Exhibit CW-1/C-1 to Exhibit CW-1/C-52. He had paid the sale consideration to M/s. V.K. Traders. He had not issued any cheque to M/s. ADS, Dhalli and neither had he purchased any apples from M/s. ADS, Dhalli The complainant has misused the cheques, he does not have to pay anything to the complainant, and a false complaint has been filed against him.

In his cross-examination, he has admitted that he had opened the bank account in the name of ROC, and the cheques, Exhibit CW-1/E to Exhibit CW-1/G, had been issued in respect of the said account. Apart from this, he has no other account. He has denied that Anil Kaprate and Deepak Chauhan had some agreement with Vinay Kumar, the proprietor of M/s. V.K. Traders. He has feigned ignorance that agreement Mark ‘X’ had been entered into between Anil Kaprate, Deepak Chauhan and Vinay Kumar. He has denied that, as per the agreement, Anil Kaprate and Deepak Chauhan had been operating from Shop No. 36 owned by Vinay Kumar and under his license.

He has admitted that the insignia of ADS has been affixed on the bills, Exhibit D-1 to Exhibit D-15. However, he has admitted that he has transferred money through RTGS and NEFT to the complainant from time to time in the year 2011.

Admittedly, no evidence has been led by the accused to prove his business and financial transactions with M/s. V.K. Traders, apart from his own statement.

Viewed in the aforesaid context, the documentary evidence gains significance. The ledgers, Exhibit CW-1/D-1 to Exhibit CW-1/D-3, are of ROC. It bears the stamp of M/s ADS. The folios on record, Exhibit CW-1/C-1 to CW-1/C-52, also incorporate the word ‘ROC’ and bear the stamp of M/s. ADS, Dhalli.

The entries of the register (bahi-khata), Exhibit CW-1/B-1 to Exhibit CW-1/B-80, strangely correspond to the bills, Exhibit CW-1/C-1 to Exhibit CW-1/C-52. The respondent/accused has himself admitted in his cross-examination that these bills bear the insignia of M/s ADS, Dhalli.

The bills, Exhibit D-1 to Exhibit D-15, also have the names of Anil Kaprate and Deepak Chauhan and the insignia Marka of M/s. ADS, Dhalli on the left.

Further, the perusal of the agreement, Mark ‘X’, shows that Vinay Kumar, the proprietor of BK Traders, had entered into an agreement with the partners of ADS, namely Anil Kaprate and Deepak Chauhan, whereby Vinay Kumar had, inter alia, allowed the partners of ADS to use his platform for the sale of apples and other fruit under his license for one year, with effect from 1st of July 2011 to 30th of June 2012.

The agreement further postulated that the first party, that is, Vinay Kumar of M/s. V.K. Traders, on whose license M/s. ADS, Dhalli was doing business of apples and fruit, will not interfere at any cost and will not undertake any apple business on this license for a full one year. The said original agreement had been put to the accused while appearing as his own witness, and he had feigned ignorance about any such agreement.

Having been confronted with the said original agreement, it was incumbent upon the accused to have at least examined the proprietor of M/s. V.K. Traders to rebut the presumption, which he has apparently failed to do. More particularly the accused while appearing as DW-1 has himself that he had purchased apples from M/s. V.K. Traders and issued bills Exhibit CW-1/C-1 to Exhibit CW-1/C-52, which had been issued by M/s. V.K. Traders. This was the most important fact to have been rebutted.

This further gains significance because the accused himself had admitted in his cross-examination that in the year 2011, he had transferred money to the complainant through RTGS and NEFT from time to time in the year 2011.

The evidence discussed above clearly goes to show that though the complainant did not have any license to sell and purchase the apples, he had entered into an agreement with M/s. V.K. Traders and had procured his platform for use for a period of one year with effect from 01.07.2011 to 30.06.2012. During the said period, the proprietor of M/s. V.K. Traders had agreed not to use his license and not to do any business on his license for the said period.

The bills, Exhibit D-1 to Exhibit D-15, also clearly show that the bills of M/s. V.K. Traders had the trademark of M/s. ADS, Dhalli on the left and the names of Anil Kaprate and Deepak Chauhan on the right.

Furthermore, the bills, Exhibit D-1 to Exhibit D-15, correspond to the bills, Exhibit CW-1/C-1 to CW-1/C-52.

This factum regarding the business transactions having been proved, the onus had to shift to the accused to rebut the same. It has been categorically proved that the complainant, who was running the M/s. ADS Dhalli proprietorship/partnership, had been using the license of M/s. V.K. Traders during the year 2011 and had been transacting business on the license of M/s. V.K. Traders.

It, thus, could not be said that there was no legally enforceable debt in lieu of which the cheques in question had been issued.

The evidence on record led by the complainant, thus, was sufficient to hold that the accused and the complainant had business/financial dealings, and the complainant had sold apples to the accused. There is overwhelming documentary evidence on record, as has been discussed in detail above.

Being a quasi-criminal proceeding, the complainant thus only had to prove that they had financial dealings and there was a legally enforceable debt for which the cheques had been issued. To that extent, the complainant had led sufficient evidence. Except for the bald statement of the accused, there is nothing to remotely suggest that the accused had only been dealing with M/s. V.K. Traders and not M/s. ADS, Dhalli. The documentary evidence seemingly reflects to the contrary.

Seen otherwise, by virtue of Clause (a) of Section 118 of the Negotiable Instruments Act, the Court is obligated to presume that the negotiable instrument was made for consideration until the contrary is proved. The initial burden, thus, would lie on the accused to prove non-existence of consideration, which would lead the Court to believe the non-existence of consideration either by direct evidence or by preponderance of probabilities, showing that the existence of consideration was either improbable, doubtful, or illusory, as has been also held in Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm & Ors. [(2008) 7 SCC 655].

This position was reiterated in N. Vijay Kumar v. Vishwanath Rao N., 2025 SCC OnLine SC 873, wherein it was held as under:

A similar view was taken in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed:

Thus, the Court has to start with the presumption that the cheque was issued in discharge of a liability for consideration, and the burden lies upon the accused to rebut this presumption.

In the present case, however, the accused has failed to lead any convincing and cogent evidence to rebut this presumption, particularly in view of the overwhelming evidence led by the complainant. Since the accused has neither disputed his signatures on the cheques nor denied their execution, and his stand is that the cheques in question had been handed over to M/s. V.K. Traders as security, he ought to have examined the proprietor of M/s. V.K. Traders to substantiate his defence. The accused has failed to rebut the business dealings between him and M/s. ADS, Dhalli too.

The preponderance of probabilities is that the cheques had been issued by the accused towards payment for the apples purchased from the complainant.

The findings recorded by the learned First Appellate Court to the contrary, holding that there was no legally enforceable debt, thus cannot be sustained. The finding so arrived by the learned First Appellate Court in thus set aside and quashed. Consequently, the findings recorded by the learned Trial Court are upheld.

The criminal appeal is disposed off in the aforesaid terms. The learned Trial Court shall take steps to ensure that the accused undergone the sentence so imposed by the learned Trial Court. The records of the learned Courts below be sent back forthwith.

Pending application(s), if any, also stand disposed off accordingly.