2025:HHC:28473 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. MP(M) No. 2017 of 2025. Reserved on: 08.08.2025. Date of Decision: 22.08.2025. Bharat Sharma ...Applicant/ appellant Versus Beli Ram ...Respondent Coram Hon’ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No For the Petitioner : Ms. Ruchika Khachi and Lalita Devi, Advocates. Rakesh Kainthla, Judge The applicant/ appellant has filed the present application for seeking Special Leave to appeal against the judgment dated 09.08.2024 passed by the learned Judicial Magistrate, First Class, Kandaghat, District Solan, HP (learned Trial Court). (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:28473 2. Briefly stated, the facts giving rise to the present appeal are that the complainant presented a complaint against the accused before the learned Trial Court for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as NI Act). It was asserted that the complainant advanced ₹2,25,000/- to the accused in December 2019. The accused promised to repay the amount on or before 10.02.2020. He issued a cheque of ₹1,25,000/- drawn on Punjab National Bank, Parag Solan, District Solan, to discharge part of his liability. The complainant presented the cheque to his bank, i.e. State Bank of India, for its realisation. The complainant’s bank sent the cheque to the bank of the accused; however, the bank of the accused dishonoured the cheque with the endorsement ‘Funds Insufficient’. The complainant served a notice upon the accused on 18.03.2020 at the correct address. The notice was served upon the accused, but he failed to pay the amount; hence, a 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 him for the commission of an offence 3 2025:HHC:28473 punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried. 4. The complainant examined himself (CW-1) to prove his complaint. 5. The accused, in his statement recorded under Section 313 of CrPC, stated that the complainant had advanced a loan to Jagdish at the instance of the accused, and the accused issued his cheque to secure the loan. He denied the rest of the complainant’s case. He stated that the complainant had misused the cheque issued by him. 6. Learned Trial Court held that the complainant did not mention the date, time and month of lending the amount. He claimed that he had not advanced a loan to any person; however, the copies of the complaint filed in the case titled ‘Bharat Sharma vs. Radha Krishan’ showed that he had advanced ₹2,25,000/- to Radha Krishan. The complainant stated that he was earning ₹ 50,000/- to ₹ 60,000/- per month, and his expenditure was ₹20,000/- per month. Therefore, his financial capacity was doubtful. The complainant had taken the loan from the bank and had defaulted on the repayment of the loan. Hence, 4 2025:HHC:28473 his plea that he had advanced money to the accused was highly suspect. The complainant had not executed any document at the time of advancement of the loan, which is highly suspicious. All these circumstances made the complainant’s version highly doubtful; hence, the learned Trial Court acquitted the accused of the commission of an offence punishable under Section 138 of the NI Act. 7. Being aggrieved by the judgment passed by the learned Trial Court, the complainant has filed the present application seeking leave to appeal. It has been asserted that the learned Trial Court failed to properly appreciate the evidence. The accused admitted the issuance of the cheque, and the burden was upon him to prove that the cheque was not issued in the discharge of the legal liability. The complainant failed to prove this fact. Therefore, it was prayed that the present application be allowed and the leave to appeal be granted. 8. I have heard Ms. Ruchika Khachi and Lalita Devi, learned counsel for the applicant/ appellant. 9. Ms. Ruchika Khachi and Lalita Devi, learned counsel for the applicant/ appellant, submitted that the learned Trial 5 2025:HHC:28473 Court read the evidence of the case titled ‘Bharat Sharma vs. Radha Krishan’ in the present case, which is impermissible. The accused admitted the issuance of the cheque, and the burden was upon him to show that the cheque was not issued in discharge of the legal liability. The accused failed to do so. 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 stated in his cross-examination that he was running a Dhaba at Kandaghat. The accused was alone in his shop at that time. He had advanced loans of ₹8 – 10 Lakhs to 4-5 people. His monthly income was ₹50,000/- to ₹60,000/-, and he incurs the expenditure of ₹20,000/-. He had taken a loan from the bank. 12. The cross-examination of the complainant makes his financial capacity highly doubtful. He claimed that he had advanced ₹8-10 Lakhs to 4-5 people. He stated that his monthly income was ₹50,000/- to ₹60,000/-. He mentioned his expenses as ₹20,000/-. He claimed that he had taken a loan 6 2025:HHC:28473 from the bank. The fact that he had to take the loan from the bank falsifies his statement that he is in a position to advance a loan of ₹8-10 Lakhs to various people. It is difficult to believe that a person would take a loan from the bank on interest and would advance the money to the people without charging any interest. Further, he would have no necessity to take the loan from the bank if he had the financial capacity to advance the loan of ₹8-10 Lakhs. Thus, the learned Trial Court was justified in doubting the financial capacity of the applicant/ appellant. 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. 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 com- plainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the com- plainant did not have the wherewithal, it cannot be ex- pected 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 7 2025:HHC:28473 that the complainant in a particular case did not have the capacity and therefore, the case of the accused is accept- able, which he can do by producing independent materi- als, 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-examina- tion 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 de- fence.” 13. It was held by the Hon’ble Supreme Court in Basalin- gappa Versus Mudibasappa (2019) 5 SCC 418, that where the fi- nancial capacity to pay ₹6,00,000/- was questioned and there was no satisfactory reply, the accused had raised a probable de- fence. It was observed: - “26. Applying the preposition of law as noted above, in the facts of the present case, it is clear that the signature on the cheque, having been admitted, a presumption shall be raised under Section 139 that the cheque was issued in discharge of debt or liability. The question to be looked into is as to whether any probable defence was raised by the accused. In cross-examination of the PW1, when the specific question was put that a cheque was issued in re- lation to a loan of Rs. 25,000/-taken by the accused, the PW1 said that he does not remember. PW1 in his evidence admitted that he retired in 1997, on which date he re- ceived a monetary benefit of Rs. 8 lakhs, which was en- cashed by the complainant. It was also brought in the evi- dence that in the year 2010, the complainant entered into 8 2025:HHC:28473 a sale agreement for which he paid an amount of Rs. 4,50,000/-to Balana Gouda towards sale consideration. Payment of Rs. 4,50,000/-being admitted in the year 2010, and further payment of the loan of Rs. 50,000/- with regard to which complaint No.119 of 2012 was filed by the complainant, a copy of which complaint was also filed as Ex.D2. There was a burden on the complainant to prove his financial capacity. In the years 2010-2011, as per the own case of the complainant, he made a payment of Rs. 18 lakhs. During his cross-examination, when the fi- nancial capacity to pay Rs. 6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the bur- den on the complainant to prove his financial capacity and other facts. 27. There was another evidence on the record, i.e., a copy of the plaint in O.S. No. 148 of 2011 filed by the com- plainant for recovery of a loan of Rs. 7 lakhs given to one Balana Gouda in December 2009. Thus, there was evi- dence on record to indicate that in December 2009, he gave ₹ 7 lakhs in a sale agreement, in 2010, he made a payment of ₹ 4,50,000/-towards sale consideration, and further, he gave a loan of ₹ 50,000/-for which a com- plaint was filed in 2012 and further loan of ₹ 6 lakhs in November 2011. Thus, during the period from 2009 to November 2011, an amount of ₹ 18 lakhs was given by the complainant to different persons including the accused, which put a heavy burden to prove the financial capacity when it was questioned on behalf of the accused, the ac- cused being a retired employee of State Transport Corpo- ration, who retired in 1997 and total retirement benefits, which were encashed were ₹ 8 lakhs only. The High Court observed that, though the complainant is a retired em- ployee, the accused did not even suggest that a pension is the only means for the survival of the complainant. The following observations were made in Paragraph 16 of the judgment of the High Court: 9 2025:HHC:28473 "17. Though the complainant is a retired employee, the accused did not even suggest that a pension is the only means of survival for the complainant. Un- der these circumstances, the Trial Court's finding that the complainant failed to discharge his initial burden of proof of lending capacity is perverse." 28. There is one more aspect of the matter which also needs to be noticed. In the complaint filed by the com- plainant as well as in the examination-in-chief, the com- plainant has not mentioned as to on which date the loan of Rs. 6 lakhs was given to the accused. It was during cross-examination, he gave the date as November 2011. Under Section 118 (b), a presumption shall be made as to the date that every negotiable instrument was made or drawn on such date. Admittedly, the cheque is dated 27.02.2012; there is not even a suggestion by the com- plainant that a post-dated cheque was given to him in November 2011 bearing a date 27.02.2012. Giving of a cheque on 27.02.2012, which was deposited on 01.03.2012, is not compatible with the case of the complainant when we read the complaint submitted by the complainant, es- pecially Para 1 of the complaint, which is extracted below: "1. The accused is a very good friend of the com- plainant. The accused requested the Complainant a hand loan to meet out the urgent and family neces- sary sum of 6,00,000/-(Rupees Six Lakh) and on ac- count of long-standing friendship and knowing the difficulties, which is being faced by the accused the complainant agreed to lend hand loan to meet out the financial difficulties of the accused and accord- ingly the Complainant lends hand loan Rs. 6,00,000/-(Rupees Six Lakh) dated 27.02.2012 in favour of the Complainant, stating that on its pre- sentation it will be honoured. But to the surprise of the Complainant on presentation of the same for collection through his Bank, the Cheque was re- turned by the Bank with an endorsement "Funds In- sufficient" on 01-03-2012." 10 2025:HHC:28473 29. Thus, there is a contradiction in what was initially stated by the complainant in the complaint and his exam- ination-in-chief regarding the date on which the loan was given on one side and what was said in cross-exami- nation on the other side, which has not been satisfactorily explained. The High Court was unduly influenced by the fact that the accused did not reply to the notice denying the execution of the cheque or legal liability. Even before the trial court, the appellant-accused had not denied his signature on the cheque. 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 fi- nancial 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 evi- dence. The observation of the High Court that the trial court's finding that the complainant failed to prove his financial capacity for lending money 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.” 14. 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 11 2025:HHC:28473 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 as to 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. 15. A similar view was taken in John K. Abraham Versus Simon C. Abraham & Another (2014) 2 SCC 236, wherein it was held:- “9. It has to be stated that in order to draw the presump- tion under Section 118 read along with 139 of the Nego- tiable 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 ad- vanced 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. 10. Keeping the said statutory requirements in mind, when we examine the facts as admitted by the respon- dent-complainant, as rightly concluded by the learned trial Judge, the respondent was not even aware of the date 12 2025:HHC:28473 when the substantial amount of Rs.1,50,000/- was ad- vanced by him to the appellant, that he was not sure as to who wrote the cheque, that he was not even aware when exactly and where exactly the transaction took place for which the cheque came to be issued by the appellant. Apart from the said serious lacuna in the evidence of the complainant, he further admitted as PW.1 by stating once in the course of the cross-examination that the cheque was in the handwriting of the accused and the very next moment taking a diametrically opposite stand that it is not in the handwriting of the accused and that it was written by the complainant himself, by further reiterating that the amount in words was written by him.” 16. Therefore, the learned Trial Court had rightly acquitted the accused, and there is no perversity in the judgment passed by the learned Trial Court. Consequently, the present application fails, and the same is dismissed. CRAST No. 1670 of 2025 Since, the application to grant leave to appeal has been dismissed, therefore, the instant appeal is dismissed as not maintainable. (Rakesh Kainthla) Judge 22nd August 2025 (Anurag)