2026:HHC:26710-DB IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No. 516 of 2012 Reserved on: 20.06.2026 Date of Decision: 06.07.2026 Chhaju Ram Verma ...Appellant Versus Sandeep Kumar Walia ...Respondent Coram Hon’ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 No. For the Appellant : Mr Rahul Gathania, Advocate. For the Respondent : Mr Dinesh Bhanot, Advocate. Rakesh Kainthla, Judge The present appeal is directed against the judgment dated 29.09.2012, passed by the learned Judicial Magistrate, First Class, Nahan, District Sirmour, H.P (learned Trial Court) vide which the respondent (accused before the learned Trial Court) was acquitted of the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). (The parties 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes. 2 2026:HHC:26710-DB 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 appeal are that the complainant filed a complaint before the Learned Trial Court against the accused for the commission of an offence punishable under Section 138 of the NI Act. It was asserted that the accused is a close friend of the complainant's son. He developed a good family relationship with the complainant. The accused borrowed ₹ 2,50,000/- from the complainant in 2007 for running his business. The complainant paid ₹2,50,000/- to the accused, and the accused issued a cheque of ₹2,50,000/- drawn on 19.06.2008 at Punjab National Bank, Nahan, H.P. The complainant presented the cheque to the bank, but it was dishonoured with the endorsement ‘funds insufficient’. The complainant served the notice upon the accused, asking him to repay the amount within 15 days of the receipt of the notice. The notice was duly served upon the accused, but the accused failed to repay the money. Hence, the complaint was filed against the accused for taking action as per the law. 3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of accusation 3 2026:HHC:26710-DB 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. 4. The complainant examined Ranjana Thakur (CW-1), Parkash Chand (CW-2) and himself (CW-3). 5. The accused, in his statement recorded under Section 313 of the Code of Criminal Procedure (Cr.P.C), admitted that he had an acquaintance with the complainant's son. He asserted that he had no bank account in Punjab National Bank at the time of presentation of the cheque, and that he had closed the account in the year 2005. The complainant deposed falsely that he had dealt with the accused. Complainant's son had paid ₹50,000/- to the accused, which were returned. However, there was a delay in returning the money, and the complainant's son demanded ₹1,000/- per month as the penal amount. He was not entitled to this amount. He (the accused) had issued one blank cheque and one blank affidavit in favour of the complainant's son on 16.05.2005. The complainant misused the cheque issued to his son. He examined himself (DW-1). 6. The learned Trial Court held that the accused had not disputed his signatures on the cheque, and a presumption would 4 2026:HHC:26710-DB arise under Section 118(a) and 139 of the NI Act that the cheque was issued for consideration to discharge the debt/liability. The defence taken by the accused that he had borrowed ₹50,000/- from the complainant's son was highly probable. The accused is not required to prove his defence beyond a reasonable doubt, and it is sufficient that he creates a doubt in the complainant's case. The complainant had also not mentioned the date and month of lending money to the complainant. He had given contradictory suggestions to various witnesses, which made the prosecution's case highly suspect. He claimed that he had withdrawn the money from the bank, but failed to produce his statement of account to corroborate this version. Therefore, the learned Trial Court acquitted the accused. 7. Being aggrieved by the judgment passed by the learned Trial Court, the complainant has filed the present appeal asserting that the learned trial Court erred in ignoring the presumption attached to the cheque. It was wrongly held that the accused had succeeded in establishing his defence on the balance of probability. The accused had failed to prove the return of the money as claimed by him, and the Learned Trial Court erred in accepting the defence of the accused. Hence, it was prayed that the present appeal be 5 2026:HHC:26710-DB allowed and the judgment passed by the learned trial Court be set aside. 8. I have heard Mr Rahul Gathania, learned counsel for the appellant/complainant and Mr Dinesh Bhanot, learned counsel for the respondents/accused. 9 Mr Rahul Gathania, learned counsel for the appellant/complainant, submitted that the accused had failed to prove his defence on the balance of probability. His testimony that he had handed over the blank security cheque to the complainant's son was highly improbable because he had not made any complaint to the bank or the police regarding the misuse of the cheque. Learned Trial Court ignored the presumption attached to the cheque. Therefore, he prayed that the present appeal be allowed and the judgment passed by the learned Trial Court be set aside. 10. Mr Dinesh Bhanot, learned counsel for the respondent/accused, submitted that the complainant's witnesses contradicted each other. The learned counsel for the complainant had also given contradictory suggestions to the accused in his cross-examination, which made the complainant’s case highly suspect. The learned Trial Court had taken a reasonable view while acquitting the accused, and this Court should not interfere with the 6 2026:HHC:26710-DB reasonable view of the learned Trial Court while deciding an appeal against acquittal. Hence, he prayed that the present appeal be dismissed. 11. I have given a considerable thought to the submission made at the bar and have gone through the records carefully. 12. The present appeal has been filed against a judgment of acquittal. It was laid down by the Hon’ble Supreme Court in Surendra Singh v. State of Uttarakhand, 2025 SCC OnLine SC 176: (2025) 5 SCC 433 that the Court can interfere with a judgment of acquittal if it is patently perverse, is based on misreading/omission to consider the material evidence and reached at a conclusion which no reasonable person could have reached. It was observed at page 440: “12. It could thus be seen that it is a settled legal position that the interference with the finding of acquittal recorded by the learned trial judge would be warranted by the High Court only if the judgment of acquittal suffers from patent perversity; that the same is based on a misreading/omission to consider material evidence on record; and that no two reasonable views are possible and only the view consistent with the guilt of the accused is possible from the evidence available on record.” 13. This position was reiterated in P. Somaraju v. State of A.P., 2025 SCC OnLine SC 2291, wherein it was observed: “12. To summarise, an Appellate Court undoubtedly has full power to review and reappreciate evidence in an appeal 7 2026:HHC:26710-DB against acquittal under Sections 378 and 386 of the Criminal Procedure Code, 1973. However, due to the reinforced or ‘double’ presumption of innocence after acquittal, interference must be limited. If two reasonable views are possible on the basis of the record, the acquittal should not be disturbed. Judicial intervention is only warranted where the Trial Court's view is perverse, based on misreading or ignoring material evidence, or results in a manifest miscarriage of justice. Moreover, the Appellate Court must address the reasons given by the Trial Court for acquittal before reversing it and assigning its own. A catena of the recent judgments of this Court has more firmly entrenched this position, including, inter alia, Mallappa v. State of Karnataka 2024 INSC 104, Ballu @ Balram @ Balmukund v. The State of Madhya Pradesh 2024 INSC 258, Babu Sahebagouda Rudragoudar v. State of Karnataka 2024 INSC 320, and Constable 907 Surendra Singh v. State of Uttarakhand 2025 INSC 114.” 14. A similar view was taken in Tulasareddi v. State of Karnataka, 2026 SCC OnLine SC 89, wherein it was observed: “29. From the aforesaid decisions rendered by this Court, it can be said that if two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should not disturb the findings of acquittal recorded by the Trial Court. Further, if the view taken is a possible view, the Appellate Court cannot overturn the order of acquittal on the ground that another view was also possible. The following principles have to be kept in mind by the Appellate Court while dealing with the appeals against an order of acquittal: (a) whether the judgment of acquittal suffers from patent perversity; (b) whether the judgment is based on misreading/omission to consider the material evidence on record; (c) an order of acquittal is to be interfered with only when there are “compelling and substantial reasons” 8 2026:HHC:26710-DB for doing so. If the order is “clearly unreasonable”, it is a compelling reason for interference.’ (d) the appellate court, while deciding an appeal against acquittal, after reappreciating the evidence, is required to consider whether the view taken by the trial court is a possible view which could have been taken on the basis of the evidence on record; (e) if the view taken is a possible view, the appellate court cannot overturn the order of acquittal on the ground that another view was also possible; and (f) the appellate court can interfere with the order of acquittal only if it comes to a finding that the only conclusion which can be recorded on the basis of the evidence on record was that the guilt of the accused was proved beyond a reasonable doubt and no other conclusion was possible.” 15. While dealing with the appeal against the acquittal in a complaint filed for the commission of an offence punishable under Section 138 of the NI Act, the Hon’ble Supreme Court held in Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 that the normal rules with same rigour cannot be applied to the cases under Negotiable Instruments Act because there is a presumption that the holder had received the cheque for consideration to discharge the debt/liability. The Appellate Court is entitled to look into the evidence to determine whether the accused has discharged the burden or not. It was observed: - “12…. The principles aforesaid are not of much debate. In other words, ordinarily, the appellate court will not be upsetting the judgment of acquittal, if the view taken by the trial court is one of the possible views of the matter and 9 2026:HHC:26710-DB unless the appellate court arrives at a clear finding that the judgment of the trial court is perverse i.e. not supported by evidence on record or contrary to what is regarded as normal or reasonable; or is wholly unsustainable in law. Such general restrictions are essential to remind the appellate court that an accused is presumed to be innocent unless proven guilty beyond a reasonable doubt, and a judgment of acquittal further strengthens such presumption in favour of the accused. However, such restrictions need to be visualised in the context of the particular matter before the appellate court and the nature of the inquiry therein. The same rule with the same rigour cannot be applied in a matter relating to the offence under Section 138 of the NI Act, particularly where a presumption is drawn that the holder has received the cheque for the discharge, wholly or in part, of any debt or liability. Of course, the accused is entitled to bring on record the relevant material to rebut such presumption and to show that preponderance of probabilities are in favour of his defence but while examining if the accused has brought about a probable defence so as to rebut the presumption, the appellate court is certainly entitled to examine the evidence on record in order to find if preponderance indeed leans in favour of the accused. 13. For determination of the point as to whether the High Court was justified in reversing the judgment and orders of the trial court and convicting the appellant for the offence under Section 138 of the NI Act, the basic questions to be addressed are twofold: as to whether the complainant Respondent 2 had established the ingredients of Sections 118 and 139 of the NI Act, so as to justify drawing of the presumption envisaged therein; and if so, as to whether the appellant-accused had been able to displace such presumption and to establish a probable defence whereby, the onus would again shift to the complainant?” 16. The present appeal has to be decided as per the parameters laid down by the Hon’ble Supreme Court. 10 2026:HHC:26710-DB 17. The ingredients of the offence punishable under Section 138 of the NI Act were explained by the Hon’ble Supreme Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul, 2025 SCC OnLine SC 2019 as under: - “5.1.1. In K.R. Indira v. Dr. G. Adinarayana (2003) 8 SCC 300, this Court enlisted the components, aspects and the acts, the concatenation of which would make the offence under Section 138 of the Act complete, to be these (i) drawing of the cheque by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/in part of any debt or liability, (ii) presentation of the cheque by the payee or the holder in due course to the bank, (iii) returning the cheque unpaid by the drawee bank for want of sufficient funds to the credit of the drawer or any arrangement with the banker to pay the sum covered by the cheque, (iv) giving notice in writing to the drawer of the cheque within 15 days of the receipt of information by the payee from the bank regarding the return of the cheque as unpaid, demanding payment of the cheque amount, and (v) failure of the drawer to make payment to the payee or the holder in due course of the cheque, of the amount covered by the cheque, within 15 days of the receipt of the notice.” 18. The accused admitted in his cross-examination that the cheque (Ext. C-1) bears his signature. It was laid down by the Hon'ble Supreme Court in APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) 12 SCC 724, that when the issuance of a cheque and signature on the cheque are not disputed, a presumption would arise that the cheque was issued in discharge of the legal liability. It was observed: - 11 2026:HHC:26710-DB “9. Coming back to the facts in the present case and because the accused has admitted the issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable, there is a presumption under Section 139 of the NI Act that there exists a legally enforceable debt or liability. Of course, such a presumption is rebuttable. However, to rebut the presumption, the accused was required to lead evidence that the full amount due and payable to the complainant had been paid. In the present case, no such evidence has been led by the accused. The story put forward by the accused that the cheques were given by way of security is not believable in the absence of further evidence to rebut the presumption, and more particularly, the cheque in question was issued for the second time after the earlier cheques were dishonoured. Therefore, both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists a legally enforceable debt or liability as per Section 139 of the NI Act. It appears that both the learned trial court as well as the High Court have committed an error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of the NI Act. As observed above, Section 139 of the Act is an example of a reverse onus clause and therefore, once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter, it is for the accused to rebut such presumption by leading evidence.” 19. A similar view was taken in N. Vijay Kumar v. Vishwanath Rao N., 2025 SCC OnLine SC 873, wherein it was held as under: “6. Section 118 (a) assumes that every negotiable instrument is made or drawn for consideration, while Section 139 creates a presumption that the holder of a cheque has received the cheque in discharge of a debt or liability. Presumptions 12 2026:HHC:26710-DB under both are rebuttable, meaning they can be rebutted by the accused by raising a probable defence.” 20. This position was reiterated in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed: “ONCE EXECUTION OF A CHEQUE IS ADMITTED, PRESUMPTIONS UNDER SECTIONS 118 AND 139 OF THE NI ACT ARISE 15. In the present case, the cheque in question has admittedly been signed by the Respondent No. 1-Accused. This Court is of the view that once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability arises against the accused. It is pertinent to mention that observations to the contrary by a two-Judge Bench in Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54, have been set aside by a three-Judge Bench in Rangappa (supra). 16. This Court is further of the view that by creating this presumption, the law reinforces the reliability of cheques as a mode of payment in commercial transactions. 17. Needless to mention that the presumption contemplated under Section 139 of the NI Act is rebuttable. However, the initial onus of proving that the cheque is not in discharge of any debt or other liability is on the accused/drawer of the cheque [See: Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197]. 21. Therefore, the Court has to start with the presumption that the cheque was issued for consideration to discharge the debt/liability. 22. The complainant stated that the accused was a friend of his son. The accused borrowed ₹2,50,000/- for his business and 13 2026:HHC:26710-DB issued a cheque to repay the amount. He stated in his cross- examination that he had retired on 31.10.2005 as an Assistant Account Officer from the Electricity Board. His son was running a family business, and he used to assist him. Some of the money was deposited in the bank, and some of it was invested in the business. The cheque was already filled before it was handed over to him, and the accused had not put the signatures on the cheque in his presence. He had paid the money to the accused in two instalments of ₹1,00,000/- and ₹ 1,50,000/-. Some of the money was withdrawn from the bank, and some was lying at home. Some money was taken from the service dues of the complainant's wife, and some money was taken from the business of the complainant's son. He could not say whether the amount was reflected in the income tax return or not. He denied that his son was working as a financier, and that two affidavits were still lying with his son. 23. Accused Sandeep Kumar (DW-1) stated that he had borrowed ₹50,000/- from the complainant's son and handed over a blank cheque to him. He had returned the money to the complainant's son. But the cheque and stamp papers were not returned. He never visited the house of the complainant. He stated in his cross-examination that Dadahu was a small town where everybody knew each other. He was not aware that the complainant 14 2026:HHC:26710-DB had retired in the year 2007 and was residing with his family members. He did not have any record of a transaction with the complainant's son. He had not issued the cheque to any person, and a false complaint was made against him. He denied that he had taken the money for purchasing the raw material and that he had issued the cheque to repay the amount. 24. Learned Trial Court held that the complainant had not stated in his complaint that the money was paid in two instalments of ₹1,00,000/- and ₹1,50,000/-. The complainant’s statement in his cross-examination that he had retired in the year 2005 was contrary to the suggestion made to the accused that he had retired in the year 2007. The complainant had not specified the dates when the amount was advanced. The complainant's son and wife did not step into the witness box to corroborate his version that he had taken the money from them. 25. Learned Trial Court ignored the fact that once a presumption is raised that the cheque was issued for consideration to discharge the debt/liability, the complainant is not required to prove the existence of consideration or the debt/liability, and the burden is upon the accused to rebut the presumption. It was laid down by the Hon’ble Supreme Court in Uttam Ram v. Devinder Singh 15 2026:HHC:26710-DB Hudan, (2019) 10 SCC 287: 2019 SCC OnLine SC 1361, that a presumption under Section 139 of the NI Act would obviate the requirement to prove the existence of consideration. It was observed: “20. The trial court and the High Court proceeded as if the appellant was to prove a debt before the civil court, wherein the plaintiff is required to prove his claim on the basis of evidence to be laid in support of his claim for the recovery of the amount due, and the dishonour of a cheque carries a statutory presumption of consideration. The holder of the cheque in due course is required to prove that the cheque was issued by the accused and that when the same was presented, it was not honoured. Since there is a statutory presumption of consideration, the burden is on the accused to rebut the presumption that the cheque was issued not for any debt or other liability.” 26 This position was reiterated in Ashok Singh v. State of U.P., 2025 SCC OnLine SC 706, wherein it was observed: “22. The High Court while allowing the criminal revision has primarily proceeded on the presumption that it was obligatory on the part of the complainant to establish his case on the basis of evidence by giving the details of the bank account as well as the date and time of the withdrawal of the said amount which was given to the accused and also the date and time of the payment made to the accused, including the date and time of receiving of the cheque, which has not been done in the present case. Pausing here, such presumption on the complainant, by the High Court, appears to be erroneous. The onus is not on the complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is alleged to have been issued in his favour. Only if an objection is raised that the complainant was not in a financial position to pay the amount so claimed by him to have been given as a 16 2026:HHC:26710-DB loan to the accused, only then would the complainant have to bring before the Court cogent material to indicate that he had the financial capacity and had actually advanced the amount in question by way of a loan. In the case at hand, the appellant had categorically stated in his deposition and reiterated in the cross-examination that he had withdrawn the amount from the bank in Faizabad (Typed Copy of his deposition in the paperbook wrongly mentions this as ‘Firozabad’). The Court ought not to have summarily rejected such a stand, more so when respondent no. 2 did not make any serious attempt to dispel/negate such a stand/statement of the appellant. Thus, on the one hand, the statement made before the Court, both in examination-in- chief and cross-examination, by the appellant with regard to withdrawing the money from the bank for giving it to the accused has been disbelieved, whereas the argument on behalf of the accused that he had not received any payment of any loan amount has been accepted. In our decision in S. S. Production v. Tr. Pavithran Prasanth, 2024 INSC 1059, we opined: ‘8. From the order impugned, it is clear that though the contention of the petitioners was that the said amounts were given for producing a film and were not by way of return of any loan taken, which may have been a probable defence for the petitioners in the case, but rightly, the High Court has taken the view that evidence had to be adduced on this point which has not been done by the petitioners. Pausing here, the Court would only comment that the reasoning of the High Court, as well as the First Appellate Court and Trial Court, on this issue is sound. Just by taking a counter-stand to raise a probable defence would not shift the onus on the complainant in such a case, for the plea of defence has to be buttressed by evidence, either oral or documentary, which in the present case has not been done. Moreover, even if it is presumed that the complainant had not proved the source of the money given to the petitioners by way of loan by producing statement of accounts and/or Income Tax Returns, the same ipso facto, would not negate such claim for the reason that the cheques having being issued and signed by the petitioners has not been denied, and no evidence has been led to show that the respondent lacked capacity to provide the 17 2026:HHC:26710-DB amount(s) in question. In this regard, we may make profitable reference to the decision in Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735: ‘10. The trial court and the first appellate court have noted that in the case under Section 138 of the NI Act, the complainant need not show in the first instance that he had the capacity. The proceedings under Section 138 of the NI Act are not a civil suit. At the time, when the complainant gives his evidence, unless a case is set up in 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, 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)’ (underlining in original; emphasis supplied by us in bold). 27. A similar view was taken in Sanjay Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed: “21. This Court also takes judicial notice of the fact that some District Courts and some High Courts are not giving effect to the presumptions incorporated in Sections 118 and 139 of the NI Act and are treating the proceedings under the 18 2026:HHC:26710-DB NI Act as another civil recovery proceedings and are directing the complainant to prove the antecedent debt or liability. This Court is of the view that such an approach is not only prolonging the trial but is also contrary to the mandate of Parliament, namely, that the drawer and the bank must honour the cheque; otherwise, trust in cheques would be irreparably damaged.” 28. Therefore, the complainant's version cannot be doubted because he had not produced the statement of account or examined his wife or son. 29. The complainant asserted that he had retired in the year 2005, and it was suggested to the accused that the complainant had retired in the year 2007. Learned Trial Court held that it was a major contradiction, which made the complainant’s case highly suspect. This finding cannot be sustained. A suggestion was given to a witness by the learned counsel and it cannot override the complainant’s testimony on oath. 30. It was submitted that the complainant had not mentioned the amount in his income tax return, which would make his version highly doubtful. This submission cannot be accepted. It was laid down by this Court in Surinder Singh vs. State of H.P. 2018(1) D.C.R. 45 that the failure to mention the loan in the income tax return will not entitle the accused to acquittal. It was observed: - 10. It would further be noticed that the learned trial Magistrate has acquitted the accused on the ground that the 19 2026:HHC:26710-DB loan has not been shown in the Income Tax Return furnished by the complainant, and while recording such finding, has placed reliance upon the judgment of the Hon'ble Delhi High Court in Vipul Kumar Gupta vs. Vipin Gupta 2012 (V) AD (CRI) 189. However, after having perused the said judgment, it would be noticed that the amount in the said case was ₹ 9 lacs, and it is in that background that the Court observed as under: - "9. I find myself in agreement with the reasoning given by the learned ACMM that before a person is convicted for having committed an offence under Section 138 of the Act, it must be proved beyond a reasonable doubt that the cheque in question, which has been made as a basis for prosecuting the respondent/accused, must have been issued by him in the discharge of his liability or a legally recoverable debt. In the facts and circumstances of this case, there is every reason to doubt the version given by the appellant that the cheque was issued in the discharge of a liability or a legally recoverable debt. The reasons for this are a number of factors that have been enumerated by the learned ACMM. Some of them are that non-mentioning by the appellant in his Income Tax Return or the Books of Accounts, the factum of the loan having been given by him because by no measure, an amount of ₹ 9,00,000/- can be said to be a small amount which a person would not reflect in his Books of Accounts or the Income Tax Return, in case the same has been lent to a person. The appellant, neither in the complaint nor in his evidence, has mentioned the date, time or year when the loan was sought or given. The appellant has presented a cheque, which obviously is written with two different inks, as the signature appears in one ink, while the remaining portion, which has been filled in the cheque, is in a different ink. All these factors prove the defence of the respondent to be plausible to the effect that he had issued these cheques by way of security to the appellant for getting a loan from the Prime Minister Rojgar Yojana. The respondent/accused has only to create doubt in the version of the appellant, while the appellant has to prove the guilt of the accused beyond a reasonable doubt, in which, in my opinion, he has failed miserably. There is no cogent reason which has been shown 20 2026:HHC:26710-DB by the appellant which will persuade this Court to grant leave to appeal against the impugned order, as there is no infirmity in the impugned order." 31. Therefore, the complainant's case cannot be doubted because the amount was not mentioned in the income tax return. 32. The complainant asserted that he had withdrawn some money from the bank, and some money was lying with him. It was submitted that the payment of the money in cash violates Section 269SS of the Income Tax Act, and the complaint was not maintainable. This submission cannot be accepted. It was laid down by this Court in Surinder Singh vs. State of H.P. 2018(1) D.C.R. 45 that contravention of Section 269 SS of the Income Tax Act will give rise to a penalty, but will not invalidate the transaction. It was observed: 5. The relevant portion of Section 269 SS of the IT Act reads thus: - "(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit' or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) The amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is (twenty) thousand rupees or more. Provided......" 6. Provided......" 6. Section 271D provides for a penalty for failure to comply with the aforesaid provisions, which reads thus: 21 2026:HHC:26710-DB "271D. Penalty for failure to comply with the provisions of Section 269-SS - (1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269-SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty impossible under sub-section (1) shall be imposed by the Joint Commissioner." 7. A collective reading of both the aforesaid Sections would go to show that even though contravention of Section 269- SS of the IT Act would be visited with a strict penalty on the person taking the loan or deposit. However, Section 271D does not in any manner suggest or even provide that such a transaction would be null and void. The payer of money in cash, in violation of Section 269 SS of the IT Act, can always have the money recovered. 8. The object of introducing Section 269 of the IT Act has been succinctly set out by the Hon'ble Supreme Court in Asstt. Director of Inspection Investigation vs. A.B. Shanthi (2002) 6 SCC 259, wherein it was observed as under: - "8. The object of introducing Section 269-SS is to ensure that a taxpayer is not allowed to give a false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false entries in his accounts, or by giving a false explanation for the same. During search and seizures, unaccounted money is unearthed, and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends, and it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The main objection of Section 269-SS was to curb this menace." 9. In light of the aforesaid observations, it cannot but be said that Section 269-SS only provides for the mode of accepting payment or repayment in certain cases so as to counteract evasion of tax. However, Section 269-SS does not declare all transactions of loans by cash in excess of ₹20,000/- as invalid, illegal or null and void, as the main object of 22 2026:HHC:26710-DB introducing the provision was to curb and unearth black money. 33. A similar view was taken by the Hon’ble Supreme Court in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed: “19. Recently, the Kerala High Court in P.C. Hari v. Shine Varghese, 2025 SCC OnLine Ker 5535 has taken the view that a debt created by a cash transaction above ₹20,000/- (Rupees Twenty Thousand) in violation of the provisions of Section 269SS of the Income Tax Act, 1961 (for short ‘IT Act, 1961’) is not a ‘legally enforceable debt’ unless there is a valid explanation for the same, meaning thereby that the presumption under Section 139 of the Act will not be attracted in cash transactions above ₹ 20,000/- (Rupees Twenty Thousand). 20. However, this Court is of the view that any breach of Section 269SS of the IT Act, 1961, is subject to a penalty only under Section 271D of the IT Act, 1961. Further, neither Section 269SS nor 271D of the IT Act, 1961 states that any transaction in breach thereof will be illegal, invalid or statutorily void. Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the NI Act or rebut the presumptions under Sections 118 and 139 of the NI Act because such a person, assuming him/her to be the payee/holder in due course, is liable to be visited by a penalty only as prescribed. Consequently, the view that any transaction above Rs. 20,000/- (Rupees Twenty Thousand) is illegal and void and therefore does not fall within the definition of ‘legally enforceable debt’ cannot be countenanced. Accordingly, the conclusion of law in P.C. Hari (supra) is set aside.” 34. This position was reiterated in Shine Varghese Koipurathu v State of Kerala, Crl. A. No. 5385 of 2025 decided on 8th December 2025. 23 2026:HHC:26710-DB 35. Therefore, the complainant's case cannot be discarded because he had paid the money in cash. 36. The accused claimed that he had borrowed ₹50,000/- from the complainant's son and returned the amount. However, he could not produce any record of such a transaction. He did not file his bank transaction to prove that he had returned the money to the complainant's son. This was necessary because he was aware of the fact that his cheque and two affidavits were lying with the complainant's son. Hence, any prudent person would have taken precautions to ensure that the repayment of the money is well documented to avoid any embarrassment in future. The fact that the accused had no such evidence would make his version highly suspect. 37. Learned Trial Court had proceeded as if the presumption did not exist, and the complainant was required to prove the existence of the consideration by leading satisfactory evidence. This approach vitiated the judgment of the learned Trial Court. It was laid down in Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148: 2023 SCC OnLine SC 1275 that when the court failed to consider the presumption under section 139 of the Negotiable Instruments 24 2026:HHC:26710-DB Act, its judgment could be interfered with. It was observed at page 166: 54. As rightly contended by the appellant, there is a fundamental flaw in the way both the courts below have proceeded to appreciate the evidence on record. Once the presumption under Section 139 was given effect to, the courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift to the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the court can straightaway proceed to convict him, subject to the satisfaction of the other ingredients of Section 138. If the court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking the aid of the presumption. The court would then take an overall view based on the evidence on record and decide accordingly. 55. At the stage when the courts concluded that the signature had been admitted, the court ought to have inquired into either of the two questions (depending on the method in which the accused has chosen to rebut the presumption): Has the accused led any defence evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of the cheque? In the absence of rebuttal evidence being led, the inquiry would entail: Has the accused proved the non-existence of debt/liability by a preponderance of probabilities by referring to the “particular circumstances of the case”? 56. The perversity in the approach of the trial court is noticeable from the way it proceeded to frame a question at trial. According to the trial court, the question to be decided was “whether a legally valid and enforceable debt existed qua the complainant and the cheque in question (Ext. CW I/A) was issued in discharge of said liability/debt”. When the initial 25 2026:HHC:26710-DB framing of the question itself being erroneous, one cannot expect the outcome to be right. The onus, instead of being fixed on the accused, has been fixed on the complainant. A lack of proper understanding of the nature of the presumption in Section 139 and its effect has resulted in an erroneous order being passed. 57. Einstein had famously said: “If I had an hour to solve a problem, I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” Exaggerated as it may sound, he is believed to have suggested that the quality of the solution one generates is directly proportionate to one's ability to identify the problem. A well-defined problem often contains its own solution within it. 58. Drawing from Einstein's quote, if the issue had been properly framed after careful thought and application of judicial mind, and the onus correctly fixed, perhaps, the outcome at trial would have been very different, and this litigation might not have travelled all the way up to this Court.” 38. The complainant asserted that he had presented the cheque at his bank, but it was dishonoured with an endorsement ‘insufficient funds’. The accused claimed that he had closed the account in the year 2005; however, Parkash Chand (CW-2) stated that the accused had an account in the bank. The cheque was received for payment on 21.06.2008 and was dishonoured with an endorsement ‘insufficient funds’. Nothing was suggested to him in the cross-examination that the account of the accused was closed at the time of the presentation of the cheque. He is a public official who has no interest in either the complainant or the accused, and 26 2026:HHC:26710-DB his testimony is to be accepted as correct. His statement is duly corroborated by the Memorandum of dishonour (Ext.C-3), in which the reason for dishonour was mentioned as funds insufficient. It was laid down by the Hon’ble Supreme Court in Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83: (2010) 1 SCC (Civ) 625: (2010) 2 SCC (Cri) 1: 2010 SCC OnLine SC 155 that the memo issued by the Bank is presumed to be correct and the burden is upon the accused to rebut the presumption. It was observed at page 95: 24. Section 146, making a major departure from the principles of the Evidence Act, provides that the bank's slip or memo with the official mark showing that the cheque was dishonoured would, by itself, give rise to the presumption of dishonour of the cheque, unless and until that fact was disproved. Section 147 makes the offences punishable under the Act compoundable. 39. In the present case, no evidence was produced to rebut the presumption, and it is held that the cheque was dishonoured with an endorsement ‘insufficient funds.’ 40. The complainant asserted that he had issued a notice to the accused, which was duly served upon him. The complainant has placed on record the acknowledgement, which bears the signature of someone. The accused admitted in his statement on oath that the acknowledgement was sent to the corrected address. Therefore, a presumption would arise that the notice was duly served upon the 27 2026:HHC:26710-DB accused, and the burden would shift upon the accused to rebut the presumption. The accused failed to produce any evidence to rebut the presumption; hence, it is held that the notice was duly served upon the accused. 41. Therefore, it was duly proved on record that the accused had issued a cheque in favour of the complainant to discharge his debt/liability, which was dishonoured with an endorsement ‘funds insufficient’ and the accused failed to repay the amount within 15 days from the date of the receipt of the notice. Hence, all the ingredients of the commission of an offence punishable under Section 138 of the NI Act were duly satisfied, and the learned Trial Court erred in acquitting the accused. 42. In view of the above, the present appeal is allowed, and judgment passed by the learned Trial Court is ordered to be set aside, and the accused is convicted of the commission of an offence punishable under Section 138 of the NI Act. 43. Let he be produced for hearing him on the quantum of sentence on27.07.2026 (Rakesh Kainthla) Judge 06th July, 2026 (ravinder)