IN THE 238 M/S H.S Pioneer Sandeep Jain and CORAM : HON'BLE Present: - Ms. Mr. Ms. for VINOD S. BHARDWAJ, The criminal complaint of Negotiable Instruments M/S H.S. Pioneer 23.08.2016 alongwith proceedings arising FACTS 2. Briefly been regularly from the respondents. commercial transactions, to time, which, on 3. It is by the respondents regarding payments THE HIGH COURT OF PUNJAB AT CHANDIGARH CRM Date Pioneer and another VERSUS and another HON'BLE MR. JUSTICE VINOD Ms. Prabhleen Kaur, Advocate for Mr. J.S. Lalli, Advocate for the petitioner Ms. Tanveen Kaur, Legal Aid Counsel the respondents. ***** BHARDWAJ, J. (Oral) The instant petition has been filed complaint no. 5855 dated 20.05.2015 Instruments Act, 1881 titled as “Sandeep Pioneer & Another” pending before alongwith the summoning order arising therefrom. Briefly the facts of the petitioner are purchasing different quantities respondents. In discharge of its liability, transactions, the petitioner had been on all earlier occasions, were duly is the case of the petitioner that certain respondents were defective, leading to a payments and reconciliation of accounts. PUNJAB AND HARYANA CHANDIGARH CRM-M-28499-2016 (O&M) Date of Decision: 13.02.2026 ...Petitioners ...Respondents VINOD S. BHARDWAJ petitioners. Counsel filed for seeking quashing of registered under section 138 “Sandeep Jain & Another v/s before JMIC, Ludhiana for dated 21.05.2015 and the are that the petitioner–firm had of dyed acrylic/nylon yarn liability, arising out of such been issuing cheques from time duly honoured and encashed. certain consignments supplied a dispute between the parties accounts. Thereafter, on account of SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -2- stated financial disputes and constraints, four cheques bearing No. 296412 dated 17.04.2015 for Rs.25,000/-, No. 296413 dated 17.04.2015 for Rs.25,000/-, No. 296414 dated 17.04.2015 for Rs.25,000/-, and No. 648430 dated 17.04.2015 for a sum of Rs.1,00,000/-, all drawn on Indian Overseas Bank, Sundernagar Branch, Ludhiana, were issued by the petitioner and the same was presented by the respondents for encashment. The said cheques, however, were dishonoured vide return memos dated 18.04.2015 with the remarks “Exceeds Arrangement”. 4. Consequent upon such dishonour, the respondents issued a legal notice dated 22.04.2015 under Section 138 of the Negotiable Instruments Act, 1881, calling upon the petitioner to make payment of the cheque amounts. Upon receipt of the said notice, the petitioner furnished a reply dated 06.05.2015, wherein it was intimated that two bank drafts, namely Draft No. 953968693 dated 04.05.2015 for Rs.90,000/- and Draft No. 953968704 dated 06.05.2015 for Rs.85,000/-, both drawn on Indian Overseas Bank, Sundernagar, Ludhiana, had been prepared towards discharge of the outstanding liability. It was further stated that the said drafts could be collected from the office of the petitioner’s counsel and photocopies thereof were enclosed with the reply. 5. As per the case of the petitioner, the aforesaid drafts were duly collected by the respondents’ counsel and were encashed. Reliance has been placed on bank status reports evidencing encashment of the drafts. It is further the case of the petitioner that, in addition thereto, a sum of Rs.60,000/- was additionally paid through four receipts issued by the respondents, and another cheque bearing No. 296443 dated 20.08.2016 for SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -3- Rs.30,000/- was also issued with an undertaking that it would be honoured upon presentation after the stipulated date. The petitioner asserts that, in this manner, the entire liability of approximately Rs.2,65,000/-, as reflected in the invoice and legal notice, stood fully discharged. 6. Notwithstanding the above, the respondents instituted a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging non-payment of the cheque amounts despite service of statutory notice, without disclosing the receipt and encashment of the bank drafts and other payments. 7. Upon presentation of the complaint, the learned Judicial Magistrate First Class, Ludhiana, vide order dated 21.05.2015, issued summoning orders against the petitioner. The grievance of the petitioner is that despite having allegedly received the entire amount claimed, the respondents have neither withdrawn the complaint nor acknowledged full satisfaction of the liability against the instruments. ARGUMENTS ON BEHALF OF THE PETITIONERS 8. It is vehemently contended on behalf of the petitioner that the institution of the complaint under Section 138 of the Negotiable Instruments Act, 1881 constitutes a patent abuse of the process of law. Learned counsel submits that the foundational requirement for maintaining a complaint under Section 138 is the failure of the drawer to make payment of the cheque amount within the statutory period of fifteen days from the date of receipt of notice issued under clause (b) of the proviso to Section 138. The penal liability is thus contingent upon a continued default even after receipt of statutory demand. SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -4- 9. In the present case, immediately upon receipt of the legal notice, the petitioner, without demur and in order to avoid unnecessary litigation, caused demand drafts to be prepared for amounts equivalent to the sums covered by the dishonoured cheques. The said drafts were intimated to the respondents through a written reply within the prescribed statutory period and were made available for collection. It is further the specific case of the petitioner that the said drafts were in fact collected and encashed by the respondents. 10. It is submitted that once the entire cheque amount stood tendered and realised within the statutory period contemplated under Section 138, the essential ingredient of “failure to make payment” ceased to exist. The penal consequences contemplated under Section 138 are not intended to be used as a tool of harassment even after the liability has been satisfied. The provision is compensatory in nature and not to perpetuate criminal proceedings after satisfaction of the underlying debt. 11. It is contended that in such circumstances, the filing of the complaint, despite receipt and encashment of the demand drafts, is wholly unwarranted and amounting to misuse of the criminal process for purposes other than those sanctioned by law. The continuation of proceedings under Section 138, in the face of admitted discharge of the cheque amounts, would defeat the legislative intent and convert a remedial statutory mechanism into an instrument of oppression. 12. It is further submitted that the conduct of the respondents, subsequent to the issuance of the statutory notice and the petitioner’s reply thereto, unequivocally demonstrates mala fides and calculated misuse of the SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -5- criminal process. 13. The complaint was filed on the assertion that, despite service of notice, payment had not been made within the stipulated period. On the basis of such incomplete and misleading disclosure, the learned Judicial Magistrate First Class, Ludhiana, was persuaded to issue summoning orders against the petitioner. 14. It is further contended that only after the summoning orders had been issued, did the respondents present the collected drafts for encashment of the amounts thereunder. Counsel submits that such a course of action, reveals a deliberate male fide on the part of the respondents to first ensure initiation of criminal proceedings and thereafter appropriate the amounts tendered, thereby seeking to retain both the civil satisfaction of the debt and the leverage of criminal prosecution. 15. Counsel contends that a complainant invoking penal provisions is under a duty of utmost candour and must disclose all material facts bearing upon the existence or extinguishment of liability. The suppression of receipt and encashment of the demand drafts, coupled with the assertion of non-payment, amounts to a material misrepresentation before the Court. 16. Counsel submits that the petitioner’s conduct, viewed in its entirety, unequivocally demonstrates an absence of any dishonest intention. From the inception of the transaction, the petitioner had every intention to honour his financial commitments. The alleged liability, as quantified in the legal notice at Rs.2,60,650/-, was not disputed with a view to evade payment; rather, prompt steps were taken to liquidate the same. The petitioner issued demand drafts covering the amounts equivalent to the SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -6- dishonoured cheques within the statutory period prescribed under Section 138. In addition thereto, further payments were made in cash, duly receipted by the respondents. 17. It is submitted that the cumulative effect of the demand drafts and the additional payments made by the petitioner substantially satisfied the liability alleged in the legal notice. Furthermore, in order to ensure complete discharge of any remaining amount and to obviate any controversy, the petitioner issued an additional cheque dated 20.08.2016 for Rs.30,000/-, thereby evidencing his continued intention to honour the balance, if any, and to bring the matter to an amicable closure. 18. Counsel submits that it is well settled that while Section 138 creates a statutory offence predicated upon dishonour of a cheque, the underlying object of the provision is to ensure credibility in commercial transactions and to secure payment of lawful dues. The provision is not intended to criminalise a bona fide commercial dispute or to punish a drawer who, despite temporary financial constraints, makes sincere and demonstrable efforts to discharge the liability. The petitioner’s actions namely issuance of demand drafts within the statutory period, additional payments made towards the outstanding sum and issuance of a further cheque to complete the liability, collectively negate any inference of mens rea or wilful default. In the absence of dishonest intention at the inception or deliberate refusal to make payment after notice, the essential substratum of the offence under Section 138 stands eroded. 19. Counsel also places reliance on the settled principles laid down by the Hon’ble Supreme Court in State of Haryana v. Ch. Bhajan Lal, 1991 SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -7- (1) RCR (Criminal) 383 and contends that the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure, 1973 may be invoked to prevent abuse of the process of any Court and to secure the ends of justice. One of the recognised categories pertains to cases where the allegations made in the complaint or the First Information Report, even if taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out a case against the accused. 20. Learned counsel further submits that the continuation of the present proceedings, despite discharge of the alleged liability, would occasion grave and manifest injustice to the petitioner. It is, therefore, prayed that this Court, in exercise of its inherent powers under Section 482 of the Code of Criminal Procedure, 1973, be pleased to quash the complaint and the consequential summoning order, so as to prevent abuse of the process of Court and to secure the ends of justice. ARGUMENTS ON BEHALF OF THE RESPONDENTS 21. Per contra, learned counsel appearing on behalf of the respondents vehemently opposes the petition and prays for dismissal of the same. 22. At the outset, it is submitted that the complaint under Section 138 of the Negotiable Instruments Act, 1881 has been instituted strictly in accordance with the statutory scheme and after fulfillment of all mandatory requirements contemplated under the Act. The cheques in question, admittedly issued by the petitioner towards discharge of a legally enforceable debt arising from purchase of goods, were dishonoured upon presentation with the remarks “Exceeds Arrangement”. The dishonour of the SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -8- cheques is not disputed. 23. It is contended that upon receipt of intimation of dishonour, the respondents issued a statutory notice dated 22.04.2015 under proviso (b) to Section 138, calling upon the petitioner to make payment within the stipulated period of fifteen days and the petitioner failed to make valid and complete payment of the cheque amounts within the statutory period. Consequently, the cause of action accrued in favour of the respondents, entitling them to institute the complaint. 24. Learned counsel submits that the mere preparation or alleged tender of demand drafts does not ipso facto amount to “payment” within the meaning of Section 138, unless the amount is actually realised and credited to the account of the payee within the prescribed period. It is contended that the drafts were neither encashed within the statutory period nor were they accepted as unconditional satisfaction of the entire liability at the relevant time when the cause of action arose. 25. It is further argued that the petitioner cannot unilaterally claim discharge of liability by issuing drafts or by making partial payments unless such payments are demonstrably made within the statutory window and unequivocally accepted in full and final settlement. The respondents submit that the encashment of drafts, even if assumed, does not retrospectively nullify the cause of action that had already crystallised upon expiry of the statutory period. 26. Learned counsel further submits that the petitioner’s plea of bona fide intention or absence of mens rea is misconceived. The offence under Section 138 is one of strict statutory liability, and once issuance of SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -9- cheque, its dishonour, and failure to pay within the statutory period are established, the offence stands attracted irrespective of subsequent conduct. The presumption under Sections 118 and 139 of the Negotiable Instruments Act operates in favour of the holder of the cheque and the burden lies heavily upon the accused to rebut the same at trial. 27. The respondents further contend that the petitioner has sought to create a defence predicated upon alleged subsequent payments and adjustments. However, the complaint discloses all foundational ingredients of the offence under Section 138, namely: a. Issuance of cheques towards discharge of legally enforceable debt; b. Presentation of cheques within validity period; c. Dishonour of cheques; d. Issuance of statutory notice within prescribed time; and e. Failure to make payment within fifteen days of receipt of notice. 28. In such circumstances, it is submitted that the summoning order passed by the learned Judicial Magistrate First Class, Ludhiana, is well- reasoned and does not suffer from any jurisdictional error warranting interference. 29. Learned counsel further submits that the inherent powers under Section 482 Cr.P.C. are to be exercised sparingly and with great caution. Unless the complaint, on its face, fails to disclose any offence or is manifestly frivolous, the High Court ought not to stifle a legitimate prosecution at the threshold. The present case does not fall within the exceptional categories warranting quashing. The complaint discloses a prima SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -10- facie case, and the proceedings cannot be characterised as an abuse of the process of law. The petition, therefore, deserves to be dismissed. 30. I have heard the counsel appearing for the parties and have gone through the documents appended with the present petition. CONCLUSION 31. At the outset, it is apposite to refer to Section 138 of the Negotiable Instruments Act, 1881. The same is extracted as under : “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 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 SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -11- 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 debtor other liability. 32. The statutory framework of Section 138 of the Negotiable Instruments Act, 1881 predicates criminal liability upon the failure of the drawer to make payment of the cheque amount within fifteen days of receipt of the statutory notice. The provision, though penal in form, is fundamentally compensatory in object. The legislative intent is to ensure promptitude and credibility in commercial dealings, not to perpetuate criminal prosecution once the underlying liability has been satisfied. 33. Adverting to the facts of the present case, upon dishonour of the cheques in question, a legal notice dated 22.04.2015 was served upon the petitioner in terms of proviso (b) to Section 138 of the Negotiable Instruments Act, 1881. Within the statutory period prescribed therein, and with a view to discharge the alleged liability, the petitioner prepared and tendered Demand Draft No. 953968693 dated 04.05.2015 for a sum of Rs.90,000/- and Demand Draft No. 953968704 dated 06.05.2015 for a sum of Rs.85,000/-. The record further reflects, as per the communication received from the concerned bank that both the aforesaid demand drafts stood realised and paid on 07.07.2015. 34. The chronology of events unmistakably demonstrates that the petitioner had tendered payment within fifteen days of receipt of the SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -12- statutory notice though not encashed. However, in the interregnum, the respondents proceeded to institute proceedings under Section 138 of the Act and persisted with the same. It is noteworthy that the respondents waited for more than two months until the petitioner was summoned vide order dated 21.05.2015, and only thereafter presented the demand drafts for encashment. Such conduct lends credence to the petitioner’s contention that the criminal process was invoked not for recovery of dues, since the amounts had already been tendered, but only to exert undue pressure. 35. Even assuming that the respondents, for bona fide reasons, were unable to deposit and encash the demand drafts within the stipulated period, the undeniable position remains that the entire liability stood satisfied by the petitioner. 36. Significantly, the respondents have not disputed the encashment of the drafts. What is sought to be argued is that the cause of action had already accrued. However, the chronology of events demonstrates that the amounts were tendered within the statutory period and the respondents, having accepted and realised the same, cannot be permitted to approbate and reprobate by retaining the benefit of payment while simultaneously prosecuting the drawer. 37. The expression ‘fails to make payment’ as used in proviso (c) to Section 138 of the Negotiable Instruments Act, 1881 thus needs to be properly understood: Failure to make payment has to be understood and applied in the terms as per industry practice. “Payment” is understood to have been made when the tender is accepted as a lawful discharge of liability. The statute does not prescribe any specific mode of payment. SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -13- Making of payment, thus entails a legally valid tender and does not press/pose a cash payment alone. It has to be understood as a valid offer and acceptance of legally enforceable discharge which may be cash, manager’s cheque, demand draft or may even be a mix of all of above and may also include a renewed cheque. The making of payment and credit of payment are two different accounting principles. The delay in presentation of drafts was solely on the part of the respondent-complainant himself and is not a failure to make the payment as a demand draft is issued only after full payment stands deposited and is not dishonoured, if presented within the validity period. 38. The offence under Section 138 is not attracted where the drawer, upon service of notice, makes payment within the prescribed period. Once payment is lawfully tendered and accepted, the foundational ingredient of “failure to make payment” stands negated. The continuance of prosecution thereafter would not advance the object of the statute; rather, it would convert a remedial provision into a weapon of harassment. 39. In the present matter, even accepting the complaint in its entirety, the admitted encashment of the demand drafts and discharge of the alleged liability render the essential ingredients of the offence unsustainable. The dispute, at best, assumes the complexion of an accounting adjustment between commercial parties, which cannot be permitted to be clothed with criminality in the absence of subsisting default. 40. The criminal process is not to be allowed to degenerate into a coercive instrument once the legislative object underlying Section 138 of the Negotiable Instruments Act i.e. securing payment of the cheque amount has SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -14- already been fulfilled. The penal provision is intended to ensure financial discipline and credibility in commercial transactions; it is not designed to perpetuate prosecution after satisfaction of the underlying liability. 41. To compel the petitioner to undergo the rigours of a criminal trial, notwithstanding discharge of the cheque amount, would amount to subjecting him to unwarranted hardship and needless oppression. Such continuation would constitute an abuse of the judicial process. 42. This Court is constrained to observe that litigants invoking penal provisions must do so with a sense of responsibility and candour. Where the statutory objective stands accomplished through payment of the cheque amount, insistence on continuing criminal prosecution defeats the spirit of the act and burdens the criminal justice system with avoidable litigation. The courts must remain vigilant to ensure that criminal law is not employed as a tool of pressure or retribution in matters that have, in substance, been resolved. 43. Accordingly, this Court is satisfied that the present case falls within the well-recognised parameters laid down by the Supreme Court in State of Haryana v. Bhajan Lal (supra)warranting exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973, to secure the ends of justice and to prevent abuse of the process of law. 44. Consequently, the petition is allowed. The complaint instituted under Section 138 of the Negotiable Instruments Act, 1881, along with the summoning order dated 21.05.2015 passed by the learned Judicial Magistrate First Class, Ludhiana, and all consequential proceedings arising therefrom, are hereby quashed. SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document 238 CRM-M-28499-2016 (O&M) -15- 45. Ordered accordingly. 46. Pending misc. application(s), if any, shall stand disposed of. (VINOD S. BHARDWAJ) 13.02.2026 JUDGE Sumit Gusain Whether speaking/reasoned : Yes/No Whether Reportable : Yes/No SUMIT SINGH GUSAIN 2026.03.06 18:01 I attest to the accuracy and integrity of this document