1 Neutral Citation No. ( 2025:HHC:31739 ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr.M.P.(M) No. 1280 of 2025 Reserved on: 28.08.2025 Decided on: 16.09.2025 Nitu Singh ...…..Applicant/appellant Versus Babli Devi and another ….. Non-applicants/Respondents Coram The Hon’ble Mr. Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No For the Applicant/Appellant: Ms. Anjali Soni Verma, Advocate. For the Non-applicants/ : Ms. Sunaina, Deputy Advocate Respondents General, for the non- applicant/respondent No.2- State. Rakesh Kainthla, Judge The applicant/appellant (complainant before the learned Trial Court) has filed the present application for seeking special leave to appeal against the judgment dated 1.4.2025 passed by learned Additional Sessions Judge-III, Kangra at Dharamshala, Distt. Kangra, H.P. (learned Appellate Court) vide which the appeal filed by the respondent (accused before the 1 Whether the reporters of the local papers may be allowed to see the Judgment?Yes. 2 Neutral Citation No. ( 2025:HHC:31739 ) learned Trial Court) was allowed and the judgment of conviction dated 31.7.2024 and order of sentence dated 27.08.2024 passed by learned Judicial Magistrate, First Class, Court No.1, Dharamshala, District Kangra (learned Trial Court) were set aside. (Parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.) 2. Briefly stated, the facts giving rise to the present application are that the complainant filed a complaint before the learned Trial Court for taking action against the accused under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). It was asserted that the accused and complainant knew each other. The accused owned ₹3,05,000/- which she had taken for constructing her residential house. The complainant demanded the money, and the accused issued three cheques drawn at Punjab National Bank, Dharamshala to discharge her liability. The complainant presented the cheques for realisation, but they were dishonoured with an endorsement 'insufficient funds'. The complainant served a notice upon the accused demanding the repayment of money, which was duly served upon the accused, but the accused failed to repay the amount. 3 Neutral Citation No. ( 2025:HHC:31739 ) Hence, the complaint was filed before the learned Trial Court for taking action as per law. 3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation was put to her for the commission of an offence punishable under Section 138 of the NI Act, to which she pleaded not guilty and claimed to be tried. 4. The complainant examined Kartar Singh (CW1), herself (CW2) and Suresh Kumar (CW3) to prove her complaint. 5. The accused, in her statement recorded under Section 313 Cr. P.C., denied the complainant’s case in its entirety. She examined herself (DW1). 6. Learned Trial Court held that the accused admitted issuance of cheques in her statement on oath and a presumption arose under Section 118(a) and 139 of NI Act that the cheques were issued for consideration in discharge of the debt or other liability. The burden is upon the accused to rebut the presumption, but she failed to do so. The cheques were dishonoured with an endorsement 'insufficient funds'. The amount was not paid despite receipt of a valid notice of demand. Therefore, the learned Trial Court convicted the accused of the 4 Neutral Citation No. ( 2025:HHC:31739 ) commission of an offence punishable under Section 138 of the NI Act and sentenced her to undergo simple imprisonment for one month and pay compensation of ₹3,50,000/-. 7. Being aggrieved by the judgment and order passed by the learned Trial Court, the accused filed an appeal, which was decided by the learned Additional Sessions Judge-III, Kangra at Dharamshala, District Kangra, H.P. (learned Appellate Court). The learned Appellate Court held that the complainant asserted in her complaint that the accused had borrowed ₹3,05,000/- from her for constructing a house in July 2012. It was suggested to the accused that she had constructed a house in the year 2010, and she admitted it to be correct. Therefore, the version of the complainant that the amount was advanced to construct a house in the year 2012 become doubtful. The complainant stated in her cross-examination that she was running a boutique for 06 years and earning ₹30,000/- to ₹40,000/- per month. The statement was made in the year 2024. The complainant failed to prove her income in the year 2012, and the essential condition that the cheque was issued in discharge of liability was made doubtful. Learned Trial Court had erred in convicting and sentencing the accused, hence, the 5 Neutral Citation No. ( 2025:HHC:31739 ) judgment and order passed by the learned Trial Court were set aside. 8. Being aggrieved by the judgment passed by the learned Appellate Court, the complainant has filed the present application asserting that the learned Appellate Court erred in reversing the well-reasoned judgment of the learned Trial Court. The complainant, Neetu Singh, stated in her cross- examination that she had paid ₹1,85,000/-, ₹95,000/- and ₹85,000/-to the accused. The statement of account (Ex.CW3//A) pertained to December 2012, whereas the loan was advanced in July 2012. Hence, the amount could not have been reflected in the accounts statement. The accused did not take the defence that the complainant had no financial capacity to advance the money, and the learned Appellate Court erred in doubting the financial capacity of the complainant. The statement of the accused was not sufficient to rebut the presumption attached to the cheque. Learned Appellate Court ignored the presumptions contained in Section 118(a) and 139 of the NI Act. The statements of the complainant and her witnesses were wrongly disbelieved. Therefore, it was prayed that the present application be allowed and the leave to appeal be granted. 6 Neutral Citation No. ( 2025:HHC:31739 ) 9. Ms. Anjali Soni Verma, learned counsel for the applicant/ complainant, submitted that the learned Appellate Court erred in acquitting the accused. The accused admitted the issuance of the cheque, and there is a presumption of consideration and liability attached to the cheque. The burden is upon the accused to rebut the presumption. The accused failed to lead any satisfactory evidence to rebut this presumption. Learned Appellate Court relied upon the statement of account, which pertained to a period after the advancement of the loan. Therefore, she prayed that the present application be allowed and the leave to appeal be granted. 10. I have given considerable thought to the submissions made at the bar and have gone through the records carefully. 11. The complainant asserted that the accused had taken ₹3,05,000/- for constructing a residential house in the year 2012. She stated in her cross-examination that she had advanced ₹25,000/-, ₹95,000/- and ₹85,000/- to the accused in the year 2012. She had advanced money for constructing a house, which was demanded by the accused. The accused had promised to repay the amount after her retirement. The accused 7 Neutral Citation No. ( 2025:HHC:31739 ) Babli Devi (DW1) admitted in her cross-examination that she had constructed a house in the year 2010. This is the only evidence regarding the date of construction of the house. She was not further cross-examined regarding this fact. Therefore, the learned Appellate Court had rightly held that the statement of the accused that she had constructed the house in the year 2010 made it doubtful that the complainant had advanced ₹3,05,000/- to the accused in the year 2012 for constructing the house. 12. The complainant stated on 11.03.2024that she had been running a boutique for six years, which shows that the complainant has been running a boutique since 2018. She examined Suresh Kumar (CW3), who proved her statement of account (Ex. CW3/A). Statement of account shows the total debit of ₹59,000/- and credit of ₹60,519/- between 01.12.2012 and 15.12.2018. The account statement does not show that the complainant ever had ₹3,00,000/- in her account between 1.12.2012 and 15.12.2018. Learned counsel for the complainant was justified in submitting that the statement of account does not pertain to July 2012, when the cheque was issued; however, it showed the complainant’s financial capacity from 01.12.2012 to 15.12.2018. If her account never had ₹3,00,000/- and the total 8 Neutral Citation No. ( 2025:HHC:31739 ) credit in the account was ₹60,519/- in the six years, the learned Appellate Court was justified in doubting her capacity to advance ₹3,05,000/- in the year 2012 as well. It was laid down by the Hon’ble Supreme Court in Salem Municipality v. P. Kumar, (2019) 13 SCC 307: (2018) 5 SCC (Civ) 708: 2018 SCC OnLine SC 2735 that there is a presumption of the continuity of things under Section 114 of the Indian Evidence Act, which applies forward and backwards. It was observed at page 320: “36. It is no doubt true that under Section 114 of the Evidence Act, 1872, there is a presumption of continuance of a state of affairs once shown to have prevailed. It is open to the court under Section 114 to presume the continuity of any fact once shown to have prevailed. Such a presumption of continuity can be drawn not only forward but also backwards. The Court can presume that such a state of affairs might have existed in past also unless discontinuity is proved…” 13. It was laid down by the Hon’ble Supreme Court in Tedhi Singh Versus Narayan Dass Mahant (2022) 6 SCC 735 that the accused has a right to demonstrate that the complainant did not have the financial capacity to advance the loan stated to have been advanced by him. It was observed: - “9. The Trial Court and the First Appellate Court have noted that in the case under Section 138 of the N.I. In the Act, the complainant need not show in the first instance that he had the capacity. The proceedings under Section 138 of the N.I. Act is not a civil suit. At the time, when the complainant gives his evidence, unless a case is set up in 9 Neutral Citation No. ( 2025:HHC:31739 ) the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the complainant to initially lead evidence to show that he had the financial capacity. To that extent, the Courts in our view were right in holding on those lines. However, the accused has the right to demonstrate that the complainant in a particular case did not have the capacity and therefore, the case of the accused is acceptable, which he can do by producing independent materials, namely, by examining his witnesses and producing documents. It is also open to him to establish the very same aspect by pointing to the materials produced by the complainant himself. He can further, more importantly, further achieve this result through the cross-examination of the witnesses of the complainant. Ultimately, it becomes the duty of the Courts to consider carefully and appreciate the totality of the evidence and then come to a conclusion whether, in the given case, the accused has shown that the case of the complainant is in peril for the reason that the accused has established a probable defence.”(Emphasis supplied) 14. It was held by the Hon’ble Supreme Court in Basalingappa Versus Mudibasappa (2019) 5 SCC 418, that where the financial capacity to pay ₹6,00,000/- was questioned and there was no satisfactory reply, the accused had raised a probable defence. It was observed: - “30. We are of the view that when evidence was led before the Court to indicate that apart from a loan of Rs. 6 lakhs given to the accused, within 02 years, an amount of Rs. 18 lakhs have been given out by the complainant and his financial capacity being questioned, it was incumbent on the complainant to have explained his financial capacity. The court cannot insist on a person to lead negative evidence. The observation of the High Court that the trial court's finding that the complainant failed to prove his financial capacity for lending money 10 Neutral Citation No. ( 2025:HHC:31739 ) is perverse cannot be supported. We fail to see how the trial court's findings can be termed as perverse by the High Court when it was based on consideration of the evidence, which was led on behalf of the defence.” 15. It was laid down by the Hon’ble Supreme Court in Dattatraya v. Sharanappa, (2024) 8 SCC 573: (2024) 3 SCC (Cri) 776: 2024 SCC OnLine SC 1899 that when the financial capacity of the accused is not established, the accused is entitled to acquittal. It was observed: “29. Applying the aforementioned legal position to the present factual matrix, it is apparent that there existed a contradiction in the complaint made by the appellant as against his cross-examination, relatable to the time of presentation of the cheque by the respondent, as per the statements of the appellant. This is to the effect that while the appellant claimed the cheque to have been issued at the time of advancing of the loan as a security, however, as per his statement during the cross- examination it was revealed that the same was presented when an alleged demand for repayment of alleged loan amount was raised before the respondent, after a period of six months of advancement. Furthermore, there was no financial capacity or acknowledgement in his income tax returns by the appellant to the effect of having advanced a loan to the respondent. Even further, the appellant has not been able to showcase when the said loan was advanced in favour of the respondent, nor has he been able to explain as to how a cheque issued by the respondent, allegedly in favour of Mr Mallikarjun, landed in the hands of the instant holder, that is, the appellant.” (Emphasis supplied) 16. A similar view was taken in John K. Abraham Versus Simon C. Abraham & Another (2014) 2 SCC 236, wherein it was 11 Neutral Citation No. ( 2025:HHC:31739 ) held:- “9. It has to be stated that in order to draw the presumption under Section 118 read along with 139 of the Negotiable Instruments Act, the burden was heavy upon the complainant to have shown that he had required funds for having advanced the money to the accused; that the issuance of the cheque in support of the said payment advanced was true and that the accused was bound to make the payment as had been agreed while issuing the cheque in favour of the complainant.” 17. It was submitted that the accused admitted the issuance of the cheque and her signature on the cheque; therefore, a presumption under Section 139 and 118(a) of the NI Act would arise. This submission will not help the petitioner. It was laid down by the Hon’ble Supreme Court in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275 that the presumption applies in the absence of evidence and disappears after the evidence is produced. It was observed: “38. John Henry Wigmore [John Henry Wigmore and the Rules of Evidence: The Hidden Origins of Modern Law] on Evidence states as follows: “The peculiar effect of the presumption of law is merely to invoke a rule of law compelling the Jury to reach the conclusion in the absence of evidence to the contrary from the opponent but if the opponent does offer evidence to the contrary (sufficient to satisfy the Judge's requirement of some evidence), the presumption ‘disappears as a rule of law and the case is in the Jury's hands free from any rule’.” 12 Neutral Citation No. ( 2025:HHC:31739 ) 18. In the present case, the evidence of the complainant made her financial capacity doubtful, and the statement of the accused made the existence of liability suspect. This was sufficient to rebut the presumption attached to the cheques. 19. Therefore, the learned Appellate Court had taken a reasonable view while acquitting the accused, and there is no sufficient material to grant leave to appeal to the applicant/complainant. 20. In view of the above, the present application fails and it is dismissed. Cr. AST No.3839 of 2025 21. In view of the dismissal of the application for the grant of special leave to appeal, the proposed appeal also stands disposed of. (Rakesh Kainthla) 16 September 2025. Judge (yogesh)