Delhi District Court
Karan Sehgal vs Sonpal Chopra on 6 March, 2025
IN THE COURT OF SH. ANKIT SOLANKI : JMFC NI
DIGITAL COURT NUMBER 01, WEST DISTRICT, TIS
HAZARI COURTS COMPLEX
KARAN SEHGAL
Vs.
SONPAL CHOPRA
CC NI ACT No. 1742/2021
U/S 138 Negotiable Instruments Act, 1881
1. CC NI Act number : 1742/2021
2. Name of the complainant : Karan Sehgal
3. Name of the accused : Sonpal Chopra
4. Offence complained of or proved : U/S 138 of Negotiable Instruments
Act, 1881
5. Plea of the accused : Pleaded not guilty and claimed trial
6. Final Judgment/order : Acquitted
7. Date of judgment/order : 06.03.2025
Date of Institution: 11.06.2021
Date of Reserving Judgment/Order: 20.02.2025
Date of Pronouncement of Judgment/Order : 06.03.2025
JUDGMENT
1. Vide this Judgment, this court shall dispose of the present
complaint filed by Karan Sehgal (hereinafter referred to as ‘the
complainant’) against Sonpal Chopra (hereinafter referred to as
‘the accused’) U/S 138 of Negotiable Instruments Act, 1881 r/w
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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Section 142 Negotiable Instruments Act, 1881 (hereinafterreferred to as ‘NI Act‘).
Brief facts:
2. It is the case of the complainant, that the complainant is
known to the accused since long and both of them are having
friendly relations with each other. On 10.06.2016 accused has
approached to the complainant for financial support of Rs.10
Lakhs for a period of one year from the date of last payment
made by complainant and complainant has requested to the
accused that he will not make the abovesaid payment in one
time and complainant will make the aforesaid payment to the
accused in installments and complainant had given sum of
Rs.10 Lakhs to the accused by way of cheques on different
dates as mentioned below:-
Sr. No. Date Amount Mode (i) 07.07.2016 Rs.3,00,000/- By Cheque (ii) 10.08.2016 Rs.3,00,000/- By Cheque (iii) 18.10.2016 Rs.2,00,000/- By Cheque (iv) 03.01.2017 Rs.1,00,000/- By Cheque (v) 04.01.2017 Rs.1,00,000/- By Cheque Digitally signed by ANKIT SOLANKI ANKIT Date: SOLANKI 2025.03.06 16:56:33 +0530 CC NI ACT No. 1742/2021 Karan Sehgal Vs. Sonpal Chopra 2 Out of 31
The aforsaid cheques are duly encashed by the accused and after
passing of one year i.e. on 10.01.2018 complainant had
approached to the accused and requested him to repay the
aforesaid loan amount, then accused lingeron the matter on one
pretext or other and finally accused had agreed to pay the
aforesaid loan amount to the complainant and at that time it was
further mutually agreed between the complainant and accused
that accused will pay the penalty amount of Rs.15,000/- per
month to the complainant in case accused fails to make the
payment of the loan amount within time till the realization of
full amount and accused has deposited sum of Rs.65,000/- as
penalty amount in the account of the accused till date on
different dates due to non-payment within time. After that
accused has executed deed of agreement/acknowledge dated
27.05.2020 and receipt-cum-undertaking and accused has
agreed to pay the loan amount to the complainant within one
year and simultaneously accused in discharge of his aforesaid
legal liability has issued five cheques bearing no.964191 dated
17.02.2021, 964192 dated 30.03.2021, 964193 dated
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
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30.03.2021, 964194 dated 30.03.2021 and 964195 dated30.03.2021, all sum of Rs.2,00,000/- each, all drawn at Union
Bank of India, Branch Fateh Nagar, New Delhi in favour of the
complainant and at the time of issuance of the aforesaid cheques
accused has assured to the complainant that the aforesaid
cheques shall definitely be encashed on their presentation with
the bank. On 10.02.2021, accused had approached to the
complainant and requested to present only two cheques on
17.02.2021 and on assurance and confirmation of the accused,
the complainant had presented two cheques bearing no.964191
or Rs.2,00,000/- and cheque bearing no.964195 of Rs.2,00,000/-
with his banker namely HDFC Bank Ltd., BF-1, Tagore Garden,
New Delhi-110027 for their encashment, but both aforesaid
cheques were returned back to the complainant vide both
cheques returning memo dated 19.02.2021 with the remarks
“Funds Insufficient” respectively. On 20.02.2021, after the
receipt of the cheques returning memos, complainant has
contacted to the accused and apprised him about the fate of the
above referred cheques issued by the accused and accused has
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
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requested to the complainant to present all aforesaid fivecheques after one month and further assured that at that time
aforesaid cheques shall definitely be encashed. On 30.03.2021
again believing the assurance and confirmation of the accused,
the complainant had presented aforesaid five cheques for their
encashment with his banker namely HDFC Bank Ltd., BF-1,
Tagore Garden, New Delhi-110027, but the aforesaid five
cheques were returned back to the complainant with the remarks
“Funds Insufficient” respectively vide cheques returning memo
dated 05.04.2021 pertains to the cheque bearing no.964191
dated 17.02.2021, cheque returning memo dated 31.03.2021
pertains to cheque bearing no.964192 dated 30.03.2021, cheque
returning memo dated 05.04.2021 pertains to cheque bearing
no.964193 dated 30.03.2021, cheque returning memo dated
05.04.2021 pertains to cheque bearing no.964194 dated
30.03.2021 and cheque returning memo dated 05.04.2021
pertains to cheque bearing no.964195 dated 17.02.2021.
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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The complainant after receipt of said dishonoured cheques, senta legal notice dated 19.04.2021 to the accused through speed
post, but despite receiving of the notice the accused did not
bother to pay back his outstanding dues to the complainant. The
accused had failed to pay the cheque amount to the complainant
within stipulated time of 15 days, hence this complaint U/S
138/142 NI Act.
Proceedings before the Court:
3. The complaint was received by assignment in this Court.
After perusing the complaint and hearing the arguments of the
complainant on the point of summoning of the accused, prima
facie it appeared that the offence U/S 138 NI Act, has been
committed. Hence, cognizance of the offence U/S 138 NI Act
was taken against the accused on 11.10.2021 and summons
were issued to the accused.
4. Notice U/S 251 Cr.P.C. was framed against the accused on
19.01.2022 to which the accused pleaded not guilty and claimed
Digitally
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ANKIT
ANKIT SOLANKI
SOLANKI Date:
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trial. The accused further admitted that the cheques belong tohim and have been dishonoured. Thereafter, considering the
defence stated at the time of framing of notice by the accused,
this court decided to allow cross examination of the
complainant as per 145(2) NI Act, and the case was tried as a
summons case. During complainant evidence, complainant has
examined himself as sole witness as CW-1. After due cross
examination of CW-1 by the Ld. Counsel for the accused, CE
was closed in the present case on 12.01.2023. Statement of the
accused U/S 313 CrPC was recorded on 25.03.2023 wherein the
accused has opted to lead defence evidence, as such, the case
was fixed for defence evidence. In defence evidence, the
accused examined himself as DW1 and thereafter, DE stands
closed and the case was listed for final arguments. On
17.01.2025, final arguments were heard on behalf of the
complainant and accused and the case was reserved for
judgment.
Evidence:
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
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5. To prove his case, complainant has examined himself as CW1
and has led his evidence by way of evidence affidavit.
6. The Accused has examined himself as DW1 in this case to
disprove the complainant’s case.
Arguments of both parties:
7. Ld. counsel for the complainant while reiterating the
contents of the complaint has argued that all the requirements
of Section 138, NI Act have been fulfilled by the complainant
in the present case. He argued that the cheques in question
were issued by the accused towards his legally enforceable
liability. He further argued that when the cheques were
presented before the bank for encashment, the same were
dishonored on presentation for reason ‘Funds Insufficient’.
Thereafter the legal notice dated 22.09.2021 was sent to the
accused to make the payment within the 15 days stipulated
period, but no payment was made by the accused. Thus, all the
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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ingredients of section 138 NI Act, have been duly satisfied andthus presumption U/S 139 NI Act, has been validly raised
against the accused. Ld. Counsel submits that the accused has
failed to raise any probable defence to disprove the case of
complainant and to rebut the presumption U/S 139 NI Act.
Appreciation of evidence:
8. I have heard counsels on behalf of both the sides, perused the
record as well as relevant provisions of law.
9. Before appreciating the facts of the case in detail for the
purpose of decision, let relevant position of law be discussed
first. Section 138, NI provides as under:
“Section 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 provisions of this Act, be punished withDigitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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imprisonment for a term which may be extended to two years,
or with fine which may extend to twice the amount of the
cheque, or with both:”
Provided that nothing contained in this section shall apply
unless:
(A) The cheque has been presented to the bank within a period
of six months from the date on which it is drawn or within the
period of its validity, whichever is earlier;
(B) The payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said
amount of money by giving a notice in writing, to the drawer of
the cheque, within thirty days of the receipt of information by
him from the bank regarding the return of the cheque as unpaid;
and
(C) The drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to the
holder in due course of the cheque, within fifteen days of the
receipt of the said notice.
Explanation — for the purposes of this section, “debt or other
liability” means a legally enforceable debt or other liability.
10. It is well settled position of law that to constitute an offence
under Section 138, NI Act, the following ingredients are
required to be fulfilled:
I. drawing of the cheque by a person on an account maintained
by him with a banker,II. The cheque was issued for payment to another person for
discharge in whole/part any debt or liability;
Digitally
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ANKIT
ANKIT SOLANKI
SOLANKI Date:
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III. Cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the
period of its validity whichever is earlier. RBI in its notification
DBOD.AML BC.No.47/14.01.001/2011-12 has reduced the
aforesaid period from 6 months to 3 months.
IV. Returning of the cheque unpaid by the drawee bank for want
of sufficient funds to the credit of the drawer or any
arrangement with the banker to pay the sum covered by the
cheque;
V. Giving notice in writing to the drawer of the cheque within
30 days of the receipt of information by the payee from the bank
regarding the return of the cheque as unpaid demanding
payment of the cheque amount;
VI. Failure of the drawer to make payment to the payee or the
holder in due course of the cheque, of the amount covered by
the cheque within 15 days of the receipt of the notice.
The offence under Section 138, NI Act is made out against the
drawer of the cheque, only when all the aforementioned
ingredients are fulfilled.
11. In the present case at hand, the complainant has filed on
record the original cheques. In notice under Section 251 CrPC,
the accused has admitted to issuing the cheques in question to
the complainant and admitted the signatures on the cheques.
Therefore, ingredient number I stands fulfilled in the
present case.
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
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12. As per the RBI guidelines, it is essential for the cheque in
question be to presented within a period of three months from
the date on which they are drawn and the same be returned as
unpaid by the drawee bank for want of sufficient funds to the
credit of the drawer or any arrangement with the banker to pay
the sum covered by the cheque. In the case at hand, the cheques
in question were returned due to the reason “FUNDS
INSUFFICIENT.” By implication thereof, the cheques were
presented within three months and the same were returned for
Funds Insufficient. Therefore, Ingredient number III & IV
stand fulfilled in the present case.
13. The legal notice dated 19.04.2021 was sent within 30 days
of return of the bank memo indicating cheques in question being
unpaid. The fact that the legal demand notice has made a clear
and unambiguous demand for payment of the cheques in
question is not disputed. The accused has admitted to the receipt
of legal demand notice in notice u/s 251 CrPC, the ingredient
number V stands discharged by virtue of giving of legal demand
notice within 30 days from the bank return memo.
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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14. Moving on, it is not disputed that the accused has not made
the payment of the cheque amount within 15 days of the receipt
of legal demand notice. Therefore, ingredient number VI also
stands fulfilled in the present case.
15. Let us now move on to ingredient number II,
15.1. The NI Act raises two presumptions in favour of the
holder of the cheque, i.e., complainant; firstly, with regard to the
issuance of cheque for consideration, as contained in Section
118(a) and secondly, with regard to the fact that the holder of
cheque received the same for discharge, in whole or in part, of
any debt or other liability, as contained in Section 139 of the
Act.
15.2. Analysing all the concerned provisions of law and various
pronouncements in this regard, the Hon’ble Apex Court in the
case of Basalingappa v. Mudibasappa [AIR 2019 SC 1983]
held that:
I. Once the execution of cheque is admitted, Section 139 of the
Act mandates that a presumption be drawn that the cheque in
question was for the discharge of any debt or other liability.
II. 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.
III. To rebut the presumption, it is open for the accused to rely
on evidence led by him or accused can also rely on the materials
submitted by the complainant in order to raise a probable
defence. Inference of preponderance of probabilities can beDigitally
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ANKIT
ANKIT SOLANKI
SOLANKI Date:
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drawn not only from the materials brought on record by
reference to the circumstances upon which they rely.
IV. That it is not necessary for the accused to come in the
witness box in support of his defence. Section 139 imposes an
evidentiary burden and not a persuasive burden.
It is therefore implied that the law regarding the presumption for
the offence under Section 138, NI Act, the presumptions under
Section 118(a) and Section 139 have to be compulsorily raised
as soon as the execution of cheque by the accused is admitted or
proved by the complainant and thereafter the burden is shifted
upon the accused to prove otherwise.
15.3. These presumptions shall end only when the contrary is
proved by the accused, that is, the cheque was not issued for
consideration and in discharge of any debt or liability etc. The
Hon’ble Apex Court in Kumar Exports v. Sharma Carpets
[(2009) 2 SCC 513], has laid down the benchmark for the
burden of proof that the accused has to raise a doubt as to the
presumption under Section 139, NI Act.
“The accused in a trial under Section 138 of the Act has two
options. He can either show that consideration and debt did not
exist or that under the particular circumstances of the case the
non-existence of consideration and debt is so probable that a
prudent man ought to suppose that no consideration and debt
existed. To rebut the statutory presumptions, an accused is not
expected to prove his defence beyond reasonable doubt as is
expected of the complainant in a criminal trial. The accused
may adduce direct evidence to prove that the note in question
was not supported by consideration and that there was no debt
or liability to be discharged by him. However, the court need
not insist in every case that the accused should disprove the
non-existence of consideration and debt by leading direct
evidence because the existence of negative evidence is neither
possible nor contemplated. At the same time, it is clear that
bare denial of the passing of the consideration and existence of
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
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debt, apparently would not serve the purpose of the accused.
Something which is probable has to be brought on record for
getting the burden of proof shifted to the complainant. To
disprove the presumptions, the accused should bring on record
such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not
exist or their non-existence was so probable that a prudent man
would under the circumstances of the case, act upon the plea
that they did not exist. Apart from adducing direct evidence to
prove that the note in question was not supported by
consideration or that he had not incurred any debt or liability,
the accused may also rely upon circumstantial evidence and if
the circumstances so relied upon are compelling, the burden
may likewise shift again on to the complainant. The accused
may also rely upon presumptions of fact, for instance, those
mentioned in Section 114 of the Evidence Act to rebut the
presumptions arising under Sections 118 and 139 of the Act.
The accused has also an option to prove the non-existence of
consideration and debt or liability either by letting in evidence
or in some clear and exceptional cases, from the case set out by
the complainant, that is, the averments in the complaint, the
case set out in the statutory notice and evidence adduced by the
complainant during the trial. Once such rebuttal evidence is
adduced and accepted by the court, having regard to all the
circumstances of the case and the preponderance of
probabilities, the evidential burden shifts back to the
complainant and, thereafter, the presumptions under Sections
118 and 139 of the Act will not again come to the complainant’s
rescue.”
15.4. To put in a nutshell, the intent behind the NI Act is to
prevent financial frauds and affect the socio-economic well-
being of the country. If the burden is placed on the complainant
to prove the existence of liability against the accused, that
would be too harsh as most of these transactions are in the
nature of “friendly loan” and the accused would, in a normal
circumstance, always deny the liability. Therefore, the
legislation is drafted in a way so as to discharge the complainant
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
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from proving the liability and a presumption is raised by virtue
of Section 139 read with Section 118(a) of the Act that the
cheque if issued by the accused, then the same is deemed to be
in discharge of some legally enforceable debt in favour of the
complainant. The presumption is rebuttable and the accused
“may” either prove that no legally enforceable debt existed or
punch holes in the story of the complainant and give rise to a
probable defence to rebut the presumption. As per the law
discussed above, the burden of proof on the accused to raise a
probable defence is that of “preponderance of probabilities”,
and not “beyond reasonable doubt.” Once a probable defence is
raised, then the onus is shifted to the complainant to establish
that a legally enforceable liability existed in his favour and the
burden of proof on complainant in this case is that of “beyond
reasonable doubt.”
15.5. The accused can rebut the presumption as raised under the
NI Act by (a) putting forth his defence at the time of framing of
notice u/s 251 CrPC; (b) cross-examining the complainant; (c)
when statement of accused is recorded u/s 313 CrPC; (d) or by
leading defence evidence, thereby demolishing the case of the
complainant. It is amply clear that the accused does not need to
discharge his or her liability beyond the shadow of reasonable
doubt. He just needs to create holes in the case set out by the
Complainant.
16. At the stage of final arguments, Ld. Counsel for the
complainant has argued that the signatures on the cheques in
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
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question have been admitted by the accused and the legal
demand notice of the cheques in question have been served. All
the ingredients of Section 138 NI Act have been fulfilled and
the accused be convicted.
17. On the other hand, Ld. Counsel for the accused has argued
that the complainant has not been able to prove his case on the
basis of preponderance of probabilities and that the accused be
acquitted of all the charges.
18. In the humble opinion of this court, there are certain
discrepancies in the version put forward by the complainant:
(i) Firstly, the complainant in his evidence had stated that he
does not remember the total income tax filed by him during the
relevant year 2015-16 and 2016-17.
(ii) Secondly, the complainant had admitted that there is no
written document to prove that the complainant had provided
financial aid to the accused in the year 2016-17 as mentioned in
his complaint. It is unreasonable for a prudent person to
advance a huge loan of Rs.10 Lakhs to another without there
being any written document of the same. The complainant also
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
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did not take any collateral from the accused at the time ofadvancement of the alleged loan. This further raises a doubt that
whether any loan was ever advanced by the complainant to the
accused. He has further admitted that there was no written
document with respect to the penalty clause of Rs.15,000/- per
month payable by the accused for non-payment of the loan. The
complainant knows the accused through Mr. Sanjeev but he had
not called Mr. Sanjeev as a witness, who is alleged to be a
witness to the loan transaction.
(iii) Further, the accused had admitted that he has never sent any
written notice to the accused asking for the loan to be repaid by
the accused. A prudent person is expected to communicate a
material proposition to another in writing, specially when the
same relates to a huge loan of Rs.10 Lakhs but no written
communication was established by the complainant towards the
accused.
(iv) Most importantly the complainant in his evidence had
stated that the loan amount of Rs.10 Lakhs “had been repaid
partly by the accused”. But the legal demand notice of the
cheque in question states that the accused is to pay Rs.10 Lakhs
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
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to the complainant. The fact that some payment had already
been done by the accused has not been mentioned in the legal
demand notice. The complainant had admitted that he had
received some payment from the accused in the year 2016-17.
However, the legal demand notice in the present case was sent
in the year 2021, which means the legal demand notice was sent
after some payment had already been received by the
complainant, however, the same has not been adjusted in the
legal demand notice.
In the case of Dashrathbhai Trikambhai Patel vs Hitesh
Mahendrabhai Patel on 11 October, 2022, Hon’ble Supreme
Court of India has dealt with a similar aspect. It is pertinent to
discuss the judgment in detail.
33. Brief facts of the case are as under:
On 10 April 2014, the appellant issued a statutory notice under
Section 138 of the Act to the first respondent-accused. It was
alleged that the first respondent borrowed a sum of rupees
twenty lakhs from the appellant on 16 January 2012 and to
discharge the liability, issued a cheque dated 17 March 2014
bearing cheque No. 877828 for the said sum. It was further
alleged that the cheque when presented on 2 April 2014 was
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dishonoured due to insufficient funds. The appellant issued the
notice calling the first respondent to pay the legally enforceable
debt of Rs. 20,00,000:
“Therefore, my client hereby calls upon you to make
payment of Rs.20,00,000/- towards the legally
enforceable debt due and payable by you within a
period of 15 days from the date of receipt of this
particular notice, […]”
On 25 April 2014, the first respondent addressed a response
to the statutory notice where he alleged the following:
(i) The first respondent and the appellant are related
to each other. The appellant’s son married the first
respondent’s sister;
(ii) The appellant lent the first respondent a loan of
rupees forty lakhs. There was an oral agreement
between the parties that the first respondent would
pay rupees one lakh every three months by cheque
and rupees eighty thousand in cash to the appellant.
Two cheques were given to the appellant for security.
It was agreed that the appellant would return both the
cheques when the sum lent was paid in full;
(iii) The appellant’s son-initiated divorce proceedings
against the respondent’s sister. However, the dowry
that was given at the time of marriage is still in the
possession of the appellant; and
(iv) The cheques that were issued for security have
been misused by the appellant.
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
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4. On 12 May 2014, the appellant filed a criminal complaint
against the first respondent for the offence under Section 138 of
the Act. On 19 May 2014, the first respondent issued another
reply to the legal notice. By the said reply, the earlier reply to
the legal notice was sought to be amended by replacing the
acknowledgment of having received a loan of rupees forty lakhs
to rupees twenty lakhs.
5. By a judgment dated 30 August 2016, the Trial Court
acquitted the first respondent of the offence under Section 138
on the ground that the first respondent paid the appellant a sum
of rupees 4,09,3015 between 8 April 2012 and 30 December
2013 partly discharging his liability in respect of the debt of
rupees twenty lakhs. The split up of the payments is set out
below:
Date Amount
18.04.2012 Rs. 49,315/-
05.10.2012 Rs. 1,20,000/-
15.01.2013 Rs. 60,000/-
10.07.2013 Rs. 1,20,000/-
30.12.2013 Rs. 60,000/-
Total Rs. 4,09,315/-
The Trial Court observed that the appellant has failed to prove
that he was owed a legally enforceable debt of rupees twenty
lakhs:
“Therefore, the plaintiff’s complaint proved that the accused has
paid Rs, 4,09,315 out of the amount due as per fact. So that on
the day the plaintiff deposited in the bank to recover a legal
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
16:59:22
+0530
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
21 Out of 31
amount of Rs, 20,00,000/- The court believes that the
prosecution has failed to prove that fact.”
Relevant paras of the judgment reads as:
“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 8 [a term which may be extended to
two years’], or with fine which may extend to twice
the amount of the cheque, or with both:
Provided that nothing contained in this section shall
apply unless–
(a) the cheque has been presented to the bank within
a period of six months from the date on which it is
drawn or within the period of its validity, whichever
is earlier;
(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for the
payment of the said amount of money by giving a
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
16:59:26
+0530
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
22 Out of 31
notice; in writing, to the drawer of the cheque,
[within thirty days] of the receipt of information by
him from the bank regarding the return of the cheque
as unpaid; and
(c) the drawer of such cheque fails to make the
payment of the said amount of money to the payee or,
as the case may be, to the holder in due course of the
cheque, within fifteen days of the receipt of the said
notice.
Explanation.–For the purposes of this section, “debt of other
liability” means a legally enforceable debt or other liability.
(emphasis supplied)
10. Section 138 of the Act provides that a drawer of a cheque is
deemed to have committed the offence if the following
ingredients are fulfilled:
(i) A cheque drawn for the payment of any amount of
money to another person;
(ii) The cheque is drawn for the discharge of the
‘whole or part’ of any debt or other liability. ‘Debt or
other liability’ means legally enforceable debt or
other liability; and
(iii) The cheque is returned by the bank unpaid
because of insufficient funds.
However, unless the stipulations in the proviso are fulfilled the
offence is not deemed to be committed. The conditions in the
proviso are as follows:
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
16:59:30
+0530CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
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(i) The cheque must be presented in the bank within
six months from the date on which it was drawn or
within the period of its validity;
(ii) The holder of the cheque must make a demand for
the payment of the ‘said amount of money’ by giving
a notice in writing to the drawer of the cheque within
thirty days from the receipt of the notice from the
bank that the cheque was returned dishonoured; and
(iii) The holder of the cheque fails to make the
payment of the ‘said amount of money’ within fifteen
days from the receipt of the notice.
It must be noted that when a part-payment is made after the
issuance of a post-dated cheque, the legally enforceable debt at
the time of encashment is less than the sum represented in the
cheque. A part-payment or a full payment may have been made
between the date when the debt has accrued to the date when the
cheque is sought to be encashed. Thus, it is crucial that we refer
to the law laid down by this Court on the issuance of post-dated
cheques and cheques issued for the purpose of security. In Indus
Airways Private Limited v. Magnum Aviation Private Limited,
the issue before a two-Judge Bench of this Court was whether
dishonour of post-dated cheques which were issued by the
purchasers towards ‘advance payment’ would be covered by
Section 138 of the Act if the purchase order was cancelled
subsequently. It was held that Section 138 would only be
applicable where there is a legally enforceable debt subsisting
on the date when the cheque is drawn. In Sampelly
Satyanarayana Rao v. Indian Renewable Energy Development
Agency Limited, the respondent advanced a loan for setting up
a power project and post-dated cheques were given for security.
The two cheques were dishonoured and a complaint was
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
16:59:34
CC NI ACT No. 1742/2021 +0530Karan Sehgal Vs. Sonpal Chopra
24 Out of 31
instituted under Section 138. Distinguishing Indus Airways
(supra), it was held that the test for the application of Section
138 is whether there was a legally enforceable debt on the date
mentioned in the cheque. It was held that if the answer is in the
affirmative, then the provisions of Section 138 would be
attracted. In Sripati Singh v. State of Jharkand, this Court
observed that if a cheque is issued as security and if the debt is
not repaid in any other form before the due date or if there is no
understanding or agreement between the parties to defer the
repayment, the cheque would mature for presentation:
“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 fulfillment 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
time frame 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 amount, the cheque 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.
18. When a cheque is issued and is treated as
‘security’ towards repayment of an amount with aDigitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
16:59:38
CC NI ACT No. 1742/2021 +0530
Karan Sehgal Vs. Sonpal Chopra
25 Out of 31
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 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 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 a
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 a civil litigation to
recover the amount, which is not the intention of 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
circumstance stated above if the cheque is presented
and dishonoured, 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 situation, but in any event,
it is not for the drawer of the cheque to dictate terms
with regard to the nature of litigation.” (emphasisDigitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
16:59:42
+0530CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
26 Out of 31
supplied) Based on the above analysis of precedent,
the following principles emerge:
(i) Where the borrower agrees to repay the loan
within a specified timeline and issues a cheque for
security but defaults in repaying the loan within the
timeline, the cheque matures for presentation. When
the cheque is sought to be encashed by the debtor and
is dishonoured, Section 138 of the Act will be
attracted;
(ii) However, the cardinal rule when a cheque is
issued for security is that between the date on which
the cheque is drawn to the date on which the cheque
matures, the loan could be repaid through any other
mode. It is only where the loan is not repaid through
any other mode within the due date that the cheque
would mature for presentation; and
(iii) If the loan has been discharged before the due
date or if there is an ‘altered situation’, then the
cheque shall not be presented for encashment.
This Court in NEPC Micon Ltd. v. Magna Leasing Ltd. held
that the Courts must interpret Section 138 with reference to the
legislative intent to suppress the mischief and advance the
remedy. The objective of the Act in general and Section 138
specifically is to enhance the acceptability of cheques and to
inculcate faith in the efficacy of negotiable instruments for the
transaction of business.7 Section 138 criminalises the dishonour
of cheques. This is in addition to the civil remedy that is
available. Through the criminalisation of the dishonour of
cheques, the legislature intended to prevent dishonesty on the
part of the drawer of a negotiable instrument.8 The
interpretation of Section 138 must not permit dishonesty of the
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
16:59:46
+0530
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
27 Out of 31
6 AIR 1995 SC 1952 7 Sunil Sodhi v. State of Gujarat, Criminal
Appeal No. 1446 of 2021 8 M/s Electronics Trade and
Technology Development Corporation Ltd., 1996(3) Crimes 82
(SC) drawee of the cheque as well. A cheque is issued as
security to provide the drawee of the cheque with a leverage of
using the cheque in case the drawer fails to pay the debt in the
future. Therefore, cheques are issued and received as security
with the contemplation that a part or the full sum that is
addressed in the cheque may be paid before the cheque is
encashed.
The High Court while dismissing the appeal against acquittal
held that the notice issued by the appellant is an omnibus notice
since it does not represent a legally enforceable debt. Relying
on the judgment of this Court in Rahul Builders Vs. Arihant
Fertilizers & Chemicals, it was held that the legal notice was not
issued in accordance with proviso (b) to Section 138 since it did
not represent the ‘correct amount’. The appellant has contended
that the requirement under Section 138 is to send a notice
demanding the ‘cheque amount’. It was contended that the
offence under Section 138 was made out since the appellant in
the statutory notice demanded the payment of rupees twenty
lakhs which was the ‘cheque amount’.
Section 138 of the Act stipulates that if the cheque is returned
unpaid by the bank for the lack of funds, then the drawee shall
be deemed to have committed an offence under Section 138 of
the Act. However, the offence under Section 138 of the Act is
attracted only when the conditions in the provisos have been
fulfilled. Proviso (b) to Section 138 states that a notice
demanding the payment of the ‘said amount of money’ shall be
made by the drawee of the cheque.
Digitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
16:59:49
+0530
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
28 Out of 31
It was also observed that the question of whether the notice
demanding an amount higher than the cheque amount is valid
would depend on the language of the notice:
“8. It is a well-settled principle of law that the notice
has to be read as a whole. In the notice, demand has
to be made for the “said amount” i.e. the cheque
amount. If no such demand is made the notice no
doubt would fall short of its legal requirement. Where
in addition to the “said amount” there is also a claim
by way of interest, cost etc. whether the notice is bad
would depend on the language of the notice. If in a
notice while giving the break-up of the claim the
cheque amount, interest, damages etc. are separately
specified, other such claims for interest, cost etc.
would be superfluous and these additional claims
would be severable and will not invalidate the notice.
If, however, in the notice an omnibus demand is
made without specifying what was due under the
dishonoured cheque, the notice might well fail to
meet the legal requirement and may be regarded as
bad.”
Section 138 creates a deeming offence. The provisos prescribe
stipulations to safeguard the drawer of the cheque by providing
them the opportunity of responding to the notice and an
opportunity to repay the cheque amount. The conditions
stipulated in the provisos need to be fulfilled in addition to the
ingredients in the main provision of Section 138. It has already
been concluded above that the offence under Section 138 arises
only when a cheque that represents a part or whole of the legally
enforceable debt at the time of encashment is returned by the
bank unpaid. Since the cheque did not represent the legally
enforceable debt at the time of encashment, the offence under
Section 138 is not made out.
Digitally signed
by ANKIT
SOLANKI
ANKIT Date:
SOLANKI 2025.03.06
16:59:55
+0530
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
29 Out of 31
In view of the discussion above, we summarise our findings
below:
(i) For the commission of an offence under Section
138, the cheque that is dishonoured must represent a
legally enforceable debt on the date of maturity or
presentation;
(ii) If the drawer of the cheque pays a part or whole
of the sum between the period when the cheque is
drawn and when it is encashed upon maturity, then
the legally enforceable debt on the date of maturity
would not be the sum represented on the cheque;
(iii) When a part or whole of the sum represented on
the cheque is paid by the drawer of the cheque, it
must be endorsed on the cheque as prescribed in
Section 56 of the Act. The cheque endorsed with the
payment made may be used to negotiate the balance,
if any. If the cheque that is endorsed is dishonoured
when it is sought to be encashed upon maturity, then
the offence under Section 138 will stand attracted;
(iv) The first respondent has made part-payments
after the debt was incurred and before the cheque was
encashed upon maturity. The sum of rupees twenty
lakhs represented on the cheque was not the ‘legally
enforceable debt’ on the date of maturity. Thus, the
first respondent cannot be deemed to have committed
an offence under Section 138 of the Act when the
cheque was dishonoured for insufficient funds; andDigitally
signed by
ANKIT
ANKIT SOLANKI
SOLANKI Date:
2025.03.06
17:00:00
+0530CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
30 Out of 31
(v) The notice demanding the payment of the ‘said amount of
money’ has been interpreted by judgments of this Court to mean
the cheque amount.
19. Taking the abovementioned judgment into consideration, it
is clear that some payment had been made by the accused to the
complainant with respect to the loan amount but the same has
not been mentioned or reflected in the legal demand notice. The
legal liability of the accused is lesser than the cheque amount.
Therefore, ingredients of Section 138 NI Act have not been
fulfilled. Accordingly, accused Sonpal Chopra is acquitted of all
the charges.
20. Copy of this Judgment be given free of cost to both the
parties.
Announced in open Court Digitally signed
Today on this 06.03.2025 ANKIT
by ANKIT
SOLANKI
SOLANKI Date:
2025.03.06
17:00:12 +0530
(Ankit Solanki)
Judicial Magistrate First Class
(NI ACT) Digital Court No.1
Tis Hazari Courts, West, Delhi
CC NI ACT No. 1742/2021
Karan Sehgal Vs. Sonpal Chopra
31 Out of 31
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