Date of the Judgment: April 02, 2025
Judges: Sudhanshu Dhulia, J., Ahsanuddin Amanullah, J.
Can a High Court overturn concurrent findings of lower courts in a cheque dishonor case? The Supreme Court addressed this question in Ashok Singh v. State of Uttar Pradesh & Anr., concerning the validity of a conviction under Section 138 of the Negotiable Instruments Act, 1881. The court examined whether the High Court correctly set aside the conviction of the accused, who was found guilty by both the Trial Court and the Appellate Court for issuing a cheque that was dishonored. The bench comprised Justices Sudhanshu Dhulia and Ahsanuddin Amanullah, who delivered the judgment.
Case Background
The case originated from a complaint filed by Ashok Singh (the appellant) alleging that Ravindra Pratap Singh (respondent no. 2) had failed to repay a loan of Rs. 22,00,000. The appellant claimed that on the assurance of repayment, he had advanced a loan of Rs. 22,00,000/- to the respondent no.2. To repay the loan, the accused issued Cheque No.726716 dated 17.03.2010. However, when the appellant presented the cheque for encashment, it was dishonored on 07.05.2010 with the endorsement ‘payment stopped by drawer’. The appellant then sent a legal notice on 18.05.2010, but received no response, leading to the filing of a complaint case.
Timeline
| Date | Event |
|---|---|
| N/A | Appellant advanced a loan of Rs. 22,00,000 to Respondent No. 2. |
| 17.03.2010 | Accused issued Cheque No. 726716 for Rs. 22,00,000. |
| 07.05.2010 | Cheque dishonored with the endorsement ‘payment stopped by drawer’. |
| 18.05.2010 | Appellant sent a Legal Notice to the accused. |
| 12.04.2019 | Trial Court found the accused guilty under Section 138 of the Negotiable Instruments Act, 1881. |
| 23.10.2020 | Appellate Court dismissed the appeal and confirmed the Trial Court’s order. |
| 21.02.2024 | High Court allowed the criminal revision petition, setting aside the conviction. |
| 02.04.2025 | Supreme Court allowed the appeal, setting aside the High Court’s order. |
Course of Proceedings
The Trial Court found the accused guilty under Section 138 of the Negotiable Instruments Act, sentencing him to one year of simple imprisonment and a fine of Rs. 35,00,000. The Appellate Court upheld this decision. However, the High Court reversed these findings, leading to the current appeal before the Supreme Court.
Legal Framework
The primary legal provision in question is Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonor of a cheque. The section states:
138. Dishonour of cheque for insufficiency, etc., of funds in the account .—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both…
The explanation to this section clarifies that “debt or other liability” means a legally enforceable debt or other liability.
Arguments
Appellant’s Arguments:
- ✓ The High Court erred in re-appreciating evidence and overturning concurrent findings of fact.
- ✓ The accused admitted to informing the police about the lost cheque much after it was presented, suggesting the document was backdated.
- ✓ The cheque was issued in discharge of a loan, invoking the presumption under Section 118 read with Section 139 of the Act.
Respondent’s Arguments:
- ✓ The complainant failed to prove the withdrawal of Rs. 22,00,000 or the existence of any business relations.
- ✓ The complainant failed to prove his capacity to advance such a large loan without providing evidence like ledger, Income-Tax Returns, or a money-lending license.
- ✓ The signed cheque was lost while traveling, and a Missing Report was filed on 12.03.2010.
- ✓ The complaint is not maintainable since the drawer of the cheque, M/s Sun Enterprises, was not arrayed as a party.
Issues Framed by the Supreme Court
- Whether the High Court was justified in overturning the concurrent findings of the Trial Court and the Appellate Court?
- Whether the complainant has only to establish that the cheque was genuine, presented within time and upon it being dishonoured, due notice was sent within 30 days of such dishonour, to which re-payment must be received within 15 days, failing which a complaint can be preferred by the complainant within one month as contemplated under Section 142 (1)(b) of the Act?
- Whether the foremost defence available to the accused is to deny the very liability to pay the amount for which the cheque was issued on the ground that it was not a ‘legally enforceable debt’ under the Act?
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the High Court was justified in overturning the concurrent findings of the Trial Court and the Appellate Court? | No | The High Court erred in re-appreciating evidence and overturning the concurrent findings of guilt. |
| Whether the complainant has only to establish that the cheque was genuine, presented within time and upon it being dishonoured, due notice was sent within 30 days of such dishonour, to which re-payment must be received within 15 days, failing which a complaint can be preferred by the complainant within one month as contemplated under Section 142 (1)(b) of the Act? | Yes | The complainant fulfilled all necessary conditions under Section 142(1)(b) of the Act. |
| Whether the foremost defence available to the accused is to deny the very liability to pay the amount for which the cheque was issued on the ground that it was not a ‘legally enforceable debt’ under the Act? | No | The accused failed to provide a sustainable defense to justify the dishonor of the cheque. |
Authorities
The Court considered the following authorities:
- ✓ Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: Relied upon by both appellant and respondent.
- ✓ Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: Relied upon by both appellant and respondent.
- ✓ Kishan Rao v. Shankargouda, (2018) 8 SCC 165: Relied upon by the appellant.
- ✓ Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: Relied upon by the appellant.
- ✓ Dattatraya v. Sharanappa, 2024 SCC OnLine SC 1899: Relied upon by the respondent.
- ✓ John K John v. Tom Varghese, (2007) 12 SCC 714: Relied upon by the respondent.
- ✓ Krishna Janardhan Bhat v. Dattatraya G Hegde, (2008) 4 SCC 54: Relied upon by the respondent.
- ✓ G Pankajakshi Amma v. Mathai Mathew (Dead) through LRs., (2004) 12 SCC 83: Relied upon by the respondent.
- ✓ Aneeta Hada v. Godfather Travels and Tours Private Limited, (2012) 5 SCC 661
- ✓ Aparna A Shah v. Sheth Developers Private Limited, (2013) 8 SCC 71
- ✓ Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152
- ✓ S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89
- ✓ Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1
- ✓ Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106
- ✓ Tedhi Singh v Narayan Dass Mahant, (2022) 6 SCC 735
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Treatment by the Court |
|---|---|
| High Court erred in re-appreciating evidence. | Accepted. The Supreme Court agreed that the High Court should not have overturned concurrent findings of fact. |
| Accused admitted to informing the police about the lost cheque much after it was presented. | Accepted. The Supreme Court found this inconsistency strengthened the statutory presumption in favor of the appellant. |
| Cheque was issued in discharge of a loan, invoking presumption under Section 118 read with Section 139 of the Act. | Accepted. The Supreme Court held that the burden of proof shifted to the accused to rebut the presumption. |
| Complainant failed to prove the withdrawal of Rs. 22,00,000. | Rejected. The Supreme Court noted that the complainant stated he withdrew the amount from the bank in Faizabad, and the respondent did not adequately negate this. |
| Complainant failed to prove his capacity to advance such a large loan. | Rejected. The Supreme Court stated that the onus is not on the complainant to prove his financial capacity unless an objection is raised and supported. |
| The signed cheque was lost while traveling, and a Missing Report was filed on 12.03.2010. | Rejected. The Supreme Court found the timing of the police intimation (in 2011) dubious. |
| The complaint is not maintainable since the drawer of the cheque, M/s Sun Enterprises, was not arrayed as a party. | Rejected. The Supreme Court held that since the signatory of the cheque (the accused) is also the person in charge, the complaint is maintainable. |
How each authority was viewed by the Court?
- ✓ Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: Considered.
- ✓ Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: Considered.
- ✓ Kishan Rao v. Shankargouda, (2018) 8 SCC 165: Considered.
- ✓ Uttam Ram v. Devinder Singh Hudan, (2019) 10 SCC 287: Considered.
- ✓ Dattatraya v. Sharanappa, 2024 SCC OnLine SC 1899: Considered.
- ✓ John K John v. Tom Varghese, (2007) 12 SCC 714: Considered.
- ✓ Krishna Janardhan Bhat v. Dattatraya G Hegde, (2008) 4 SCC 54: Considered.
- ✓ G Pankajakshi Amma v. Mathai Mathew (Dead) through LRs., (2004) 12 SCC 83: Considered.
- ✓ Aneeta Hada v. Godfather Travels and Tours Private Limited, (2012) 5 SCC 661: Considered.
- ✓ Aparna A Shah v. Sheth Developers Private Limited, (2013) 8 SCC 71: Considered.
- ✓ Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152: Applied. The court used the dicta in this case to determine that the complaint was maintainable since the signatory of the cheque was arrayed as the accused and was also the person in charge.
- ✓ S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89: Taken note of. The court harmonized its reading with this judgment to conclude that the complaint was maintainable.
- ✓ Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1: Considered.
- ✓ Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106: Profitably referred to. The court used this case to support its view that the High Court’s presumption about the complainant’s obligation to establish his case was erroneous.
- ✓ Tedhi Singh v Narayan Dass Mahant, (2022) 6 SCC 735: Reference made. The court referenced this case to support its reasoning that the complainant need not show in the first instance that he had the capacity.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the following factors:
- ✓ The High Court’s overreach in overturning concurrent findings of the Trial Court and Appellate Court without sufficient justification.
- ✓ The accused’s inconsistent statements regarding the lost cheque, particularly the delay in reporting it to the police.
- ✓ The statutory presumption under Section 139 of the Negotiable Instruments Act, which places the burden on the accused to prove the absence of a legally enforceable debt.
- ✓ The failure of the accused to provide a probable defense or rebut the presumption in favor of the complainant.
| Reason | Percentage |
|---|---|
| High Court’s overreach | 30% |
| Inconsistent statements by the accused | 25% |
| Statutory presumption under Section 139 | 30% |
| Failure to provide a probable defense | 15% |
Fact:Law Ratio
| Category | Percentage |
|---|---|
| Fact | 45% |
| Law | 55% |
Key Takeaways
- ✓ High Courts should be cautious in overturning concurrent findings of lower courts unless there is a clear error in law or fact.
- ✓ The statutory presumption under Section 139 of the Negotiable Instruments Act places a significant burden on the accused to prove the absence of a legally enforceable debt.
- ✓ Inconsistencies in the accused’s statements can significantly undermine their defense in cheque dishonor cases.
Directions
The Supreme Court modified the sentence to payment of a fine restricted to Rs. 32,00,000, to be paid within four months. Failure to pay within this period would result in the restoration of the original sentence of one year simple imprisonment and a fine of Rs. 35,00,000.
Development of Law
The ratio decidendi of the case is that the High Court should not overturn concurrent findings of lower courts unless there is a clear error in law or fact. The statutory presumption under Section 139 of the Negotiable Instruments Act places a significant burden on the accused to prove the absence of a legally enforceable debt. This reaffirms the existing legal position and provides clarity on the application of Section 138 and Section 139 of the Act.
Conclusion
The Supreme Court allowed the appeal, setting aside the High Court’s order and modifying the sentence to a fine of Rs. 32,00,000, emphasizing the importance of upholding concurrent findings of lower courts and the statutory presumption under Section 139 of the Negotiable Instruments Act.