Supreme Court Upholds Trial Court's Conviction in Cheque Dishonour Case, Modifies Sentence to Fine.


03 April 2025 Criminal Trial >> Criminal Law   |   Negotiable Instruments Act >> Criminal Law   |   Cheque Bounce >> Debt Recovery  

In a significant judgment of Ashok Singh Vs State of Uttar Pradesh & Anr., the Supreme Court of India overturned a High Court order that had set aside the conviction of an accused in a cheque dishonour case. The apex court, while allowing the appeal filed by the complainant, reinstated the findings of guilt recorded by the Trial Court and the Appellate Court. However, considering the age and personal circumstances of the accused, the Supreme Court modified the sentence to a monetary penalty.

The case originated from a complaint filed by the appellant alleging that he had advanced a loan of Rs. 22,00,000 to the respondent no.2, who subsequently issued a cheque for the same amount. The cheque, however, was dishonoured by the bank with the remark "payment stopped by drawer." Despite a legal notice sent by the complainant, the accused failed to make the payment, leading to the filing of a complaint under Section 138 of the Negotiable Instruments Act, 1881.


 

 

The Trial Court, 1 after considering the evidence, found the accused guilty and sentenced him to one year of simple imprisonment along with a fine of Rs. 35,00,000. The Appellate Court upheld this order. However, the High Court, in its revision petition, allowed the accused's plea, citing inconsistencies in the complainant's version, particularly regarding the details of his bank account and the dates of the transaction.

The Supreme Court, hearing the appeal against the High Court's order, meticulously examined the facts and submissions of both parties. The counsel for the appellant argued that the High Court had erred in re-appreciating the evidence and overturning the concurrent findings of the lower courts. It was emphasized that the accused had admitted his signature on the cheque, triggering the presumption under Sections 118 and 139 of the Negotiable Instruments Act, placing the burden of proof on the accused to raise a probable defence. The appellant's counsel also highlighted the suspicious timing of the accused's intimation to the police about the alleged loss of the cheque, which was much after the cheque presentation date.

Conversely, the counsel for the accused contended that the complainant had failed to prove the existence of a legally enforceable debt and his financial capacity to advance such a substantial loan. Reliance was placed on several Supreme Court judgments to argue that the initial burden lay on the complainant to establish the factual basis for invoking the presumption. It was also argued that the complaint was not maintainable as the drawer of the cheque, a partnership firm, was not arrayed as a party.

However, the Supreme Court, in its analysis, noted that the accused had admitted his signature on the cheque and his defence of the cheque being lost was not substantiated by credible evidence, especially considering the delay in informing the police. The court also addressed the argument regarding the non-joinder of the partnership firm, relying on the principle that the signatory of the cheque, who is also in charge of the firm, can be held liable under Section 138/141 of the Act.

Crucially, the Supreme Court reiterated the principle laid down in previous judgments that the complainant is not obligated to initially prove the source of funds unless the accused specifically raises a credible objection regarding the complainant's financial capacity. In this case, the court found that the accused had failed to effectively rebut the statutory presumption in favour of the complainant.

Consequently, the Supreme Court allowed the appeal, setting aside the High Court's order. While the natural consequence would have been the revival of the original sentence, the court, considering the age of the accused and the plea for a monetary penalty, modified the sentence to a fine of Rs. 32,00,000 to be paid to the appellant within four months. The court clarified that failure to pay the fine within the stipulated time would result in the reinstatement of the original sentence of imprisonment and the full fine amount of Rs. 35,00,000 being payable to the complainant.

This judgment underscores the importance of the statutory presumptions in cheque dishonour cases and clarifies the burden of proof on both the complainant and the accused. It also demonstrates the Supreme Court's willingness to consider mitigating circumstances while upholding the principles of law related to commercial transactions.


Section 138, Negotiable Instruments Act - 1881  

Section 141, Negotiable Instruments Act - 1881  

Negotiable Instruments Act, 1881