2025:HHC:28900 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. MP (M) No. 1966 of 2025 Reserved on:13.08.2025 Date of Decision: 27.08.2025 M/s Shree Enterprises ...Applicant Versus M/s Shivam Enterprises ...Non-applicant Coram Hon’ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1. No. For the applicant/ appellant : Mr. G.R.Palsra, For the non-applicant/ respondent : Nemo Rakesh Kainthla, Judge The applicant/appellant has filed the present application for the grant of special leave to appeal against the judgment dated 09.7.2025, passed by learned Judicial Magistrate First Class, Manali, District Kullu, H.P. (learned Trial Court) vide which the complaint filed by the applicant/ appellant (the complainant before the learned Trial Court) was dismissed. (Parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.) 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes. 2 2025:HHC:28900 2. Briefly stated, the facts giving rise to the present application are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). It was asserted that the complainant is running his business under the name and style of Shree Enterprises. The accused purchased various items from the complainant worth ₹2,00,000/- on credit basis. He issued a cheque to discharge his liability for ₹2,00,000/- drawn at State Bank of India, Katrain Branch. The complainant presented the cheque to the bank, but it was dishonoured with an endorsement ‘funds insufficient’. The complainant served a notice upon the accused calling him to make the payment. Notice was duly served upon the accused, but the accused failed to repay the amount. Hence, the complaint was filed to take action as per the law. 3. The learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, notice of accusation was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried. 3 2025:HHC:28900 4 The complainant examined himself (CW-1) to prove his case. 5. The accused, in his statement recorded under Section 313 of Cr.P.C., denied the complainant’s case in its entirety. He examined Vivek Karofa (DW-1) to prove his defence. 6. Learned Trial Court held that the accused purchased different items from the complainant worth ₹2,00,000/-. He claimed that the cheque was issued a security to the complainant and he had made the payment of the whole amount. His witness Vivek Karofa (DW1) proved the statements of account showing that different amounts were transferred from Shivam Enterprises to Shree Enterprises between 23.09.2020 and 15.06.2021. This supported the defence of the accused that he had paid the amount to the complainant. The essential requirement that the cheque was issued in discharge of the legal liability was not satisfied. Hence, the accused was acquitted of the commission of an offence punishable under Section 138 of the NI Act, and the complaint was dismissed. 7. Being aggrieved by the judgment passed by the learned Trial Court, the accused filed the present appeal and the 4 2025:HHC:28900 present application seeking special leave to appeal. It was asserted that the testimony of Vijay Karofa (DW-1) is not helpful to the accused. The transactions shown in the statements of account were made before the issuance of the cheque. The accused himself admitted that he had purchased various items from the complainant. This shows that the transaction is not in dispute. The learned Trial Court failed to properly appreciate the material on record. Therefore, it was prayed that the present application be allowed and leave to appeal be granted to the applicant 8. Mr. G.R. Palsra, learned counsel for the applicant/appellant submitted that the learned Trial Court erred in dismissing the complaint. The accused admitted that he had purchased various articles worth ₹2,00,000/- from the complainant. He also admitted his signatures on the cheque; therefore, a presumption would arise that the cheque was issued to the complainant for consideration to discharge his liability. The accused claimed that he had paid the amount to the claimant; however, his witness proved that the money was paid before the issuance of the cheque. Therefore, the payments will not absolve the accused from discharging his liability towards 5 2025:HHC:28900 the complainant. Hence, he prayed that the present application be allowed and leave to appeal be granted to the applicant. 9. I have given considerable thought to his submissions and have gone through the records carefully. 10. The complainant came with a specific case that he is the proprietor of Shree Enterprises, the accused is the proprietor of M/s. Shivam Enterprises, who had purchased various items from the complainant, and issued a cheque to discharge his liability. Thus, as per the complainant, the articles were purchased on credit, the cheque was issued towards the price of the articles supplied to the complainant, and any payment made before issuance of the cheque would be towards the repayment of the articles purchased by the accused on credit basis. Hence, such a payment cannot be ignored because it was made before the issuance of the cheque, and the learned Trial Court had rightly considered the payments made by the accused. 11. It was submitted that the amount proved by Vivek Karofa, Manager, Himachal Pradesh Gramin Bank, was not ₹2,00,000/-. Indeed, the total amount proved to have been paid from the account of the accused to the account of the 6 2025:HHC:28900 complainant is ₹96,491.84, which is much less than ₹2,00,000/-; however, the payment was towards the articles supplied on credit basis. The complainant denied the receipt of various payments in his cross-examination for want of knowledge. He also stated that the accused had not made any payment to him. Thus, the accused has not acknowledged the payment made by the accused. 12. It was laid down by Hon’ble Supreme Court in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, (2023) 1 SCC 578: 2022 SCC OnLine SC 1376 that the cheque can be presented for the amount due and if some payment had been made before the presentation of the cheque, the complainant is bound to endorse the same and present the cheque for the remaining amount. It was observed: - “16. Based on the above analysis of precedent, the following principles emerge: 16.1. 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. 16.2. However, the cardinal rule when a cheque is issued for security is that between the date on 7 2025:HHC:28900 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. 16.3. 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. 17. In Sunil Todi v. State of Gujarat [Sunil Todi v. State of Gujarat, (2022) 16 SCC 762: 2021 SCC OnLine SC 1174], a two- Judge Bench of this Court expounded the meaning of the phrase “debt or other liability”. It was observed that the phrase takes within its meaning a “sum of money promised to be paid on a future day by reason of a present obligation”. The Court observed that a post-dated cheque issued after the debt was incurred would be covered within the meaning of “debt”. The Court held that Section 138 would also include cases where the debt is incurred after the cheque is drawn but before it is presented for encashment. In this context, it was observed: (SCC para 30) “30. The object of the NI Act is to enhance the acceptability of cheques and to inculcate faith in the efficiency of negotiable instruments for the transaction of business. The purpose of the provision would become otiose if the provision is interpreted to exclude cases where debt is incurred after the drawing of the cheque but before its encashment. In Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539: (2014) 5 SCC (Civ) 138: (2014) 6 SCC (Cri) 845], advance payments were made but since the purchase agreement was cancelled, there was no occasion of incurring any debt. The true purpose of Section 138 would not be fulfilled if “debt or other liability” is interpreted to include only a debt that exists as on the date of drawing of the cheque. Moreover, Parliament has used the expression “debt or other liability”. The expression “or other liability” must have a meaning of its own, the legislature having used two distinct phrases. The expression “or other liability” 8 2025:HHC:28900 has a content which is broader than “a debt” and cannot be equated with the latter. In the present case, the cheque was issued near the commencement of the power supply. The issuance of the cheque in the context of a commercial transaction must be understood in the context of business dealings. The issuance of the cheque was followed close on its heels by the supply of power. To hold that the cheque was not issued in the context of a liability which was being assumed by the company to pay for the dues towards power supplied would be to produce an outcome at odds with the business dealings. If the company were to fail to provide a satisfactory LC and yet consume power, the cheques were capable of being presented for the purpose of meeting the outstanding dues.” 13. It was further held that when the payments were made after incurring the debt, the presentation of the cheque for the whole amount of the debt is bad. It was observed: - 20. The judgments of this Court on post-dated cheques, when read with the purpose of Section 138, indicate that an offence under the provision arises if the cheque represents a legally enforceable debt on the date of maturity. The offence under Section 138 is tipped by the dishonour of the cheque when it is sought to be encashed. Though a post-dated cheque might be drawn to represent a legally enforceable debt at the time of its drawing, for the offence to be attracted, the cheque must represent a legally enforceable debt at the time of encashment. If there has been a material change in the circumstances such that the sum in the cheque does not represent a legally enforceable debt at the time of maturity or encashment, then the offence under Section 138 is not made out. 24. It was the contention of the first respondent that the cheque was not dated. On the other hand, it was the contention of the appellant that the cheque was dated 17- 9 2025:HHC:28900 3-2014. The courts below did not record a finding on whether the cheque was undated or was dated 17-3-2014. However, it was conclusively held that the cheque was issued by the first respondent for security on the date when the loan was borrowed. It was also categorically recorded by the courts below that a sum of Rs 4,09,315 that was paid by the first respondent was paid to partly fulfil the debt of rupees twenty lakhs. The appellant, in his cross-examination, has stated that a “cheque against a cheque” was given when he loaned the sum of rupees twenty lakhs. Thus, it can be concluded that the cheque was given as security to discharge the loan, either undated or dated as 17-3-2014. Merely because the sum of Rs 4,09,315 was paid between 8-4-2012 and 30-12- 2013, which was after 17-3-2014, it cannot be concluded that the sum was not paid in discharge of the loan of rupees twenty lakhs. The sum of Rs 4,09,315 was paid after the loan was lent to the first respondent. The appellant, in his cross-examination, has not denied the receipt of the payments. He has also stated it was not received as a “gift or reward”. In view of the above discussion, at the time of the encashment of the cheque, the first respondent did not owe a sum of rupees twenty lakhs as represented in the cheque at the time of encashment of the cheque that was issued for security. 34. In view of the discussion above, we summarise our findings below: 34.1. 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. 34.2. 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. 10 2025:HHC:28900 34.3. 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. 34.4. 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. 34.5. The notice demanding the payment of the “said amount of money” has been interpreted by judgments of this Court to mean the cheque amount. The conditions stipulated in the provisos to Section 138 need to be fulfilled in addition to the ingredients in the substantive part of Section 138. Since in this case, the first respondent has not committed an offence under Section 138, the validity of the form of the notice need not be decided.” 14. Therefore, the complainant could not have presented the cheque for ₹2,00,000/- and he was required to endorse the amount paid to him by the accused. The failure to do so would make the cheque bad, and the learned Trial Court was justified in 11 2025:HHC:28900 holding that the accused cannot be held liable based on such a cheque. 15. It was submitted that the accused admitted the issuance of the cheque and his 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 applicant/appellant. The presumption is rebuttable, and the moment evidence is led, the presumption would stand rebutted. 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’.” 16. In the present case, the evidence produced by the accused regarding the payment made by him to the complainant 12 2025:HHC:28900 will rebut the presumption that the cheque was issued towards the liability of ₹2,00,000/-. Therefore, the complainant was required to endorse the amount or explain that the liability was for ₹2,00,000/- despite the payments made by the accused. No explanation was provided, and no evidence was led; hence, the learned Trial Court had rightly held that the accused was not liable. 17. In view of the above, the learned Trial Court had taken a reasonable view while acquitting the accused, and there is no ground justifying the grant of leave to appeal. Hence, the present application fails, and the same is dismissed. Cr. AST No.7323 of 2025 18. 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) Judge 27th , August 2025 (ravinder)