Vijay Gopala Lohar v.

Pandurang Ramchandra Ghorpade & Anr, 2019:

In the case, the complainant/respondent alleged that the appellant had taken a loan from
the respondent and later to repay the loan amount deposited cheques in the bank which
were returned with an endorsement “funds insufficient”. Subsequently, the respondent
filed complaint under Section 138 of the Negotiable Instrument Act, 1881. The Trial
Court though acquitted the appellant, the High Court was of the opinion that there was no
satisfactory evidence led by the appellant that the cheque in question were issued for the
discharge of a legally enforceable debt.

One of the seminal issue that was raised in the case was that notice referred to the loan
amount and not the cheque amount. The appellant contended that according to clause(b)
of the proviso to Section 138 of the NI Act, the demand by the notice should be only the
cheque amount and not the loan amount.

The Two-Judge Bench of the Supreme Court took the view that there was no dispute
regarding the proposition that the notice issued under Section 138 of the NI Act has to be
only for the cheque amount and not for any other amount more than the cheque amount.

Accordingly, the Supreme Court refused to interfere with the High Court’s judgment and
dismissed the appeal.

Shah Brothers Ispat Pvt. Ltd v. P. Mohanraj & Ors, 2018:

In this case, NCLAT by reversing the order of NCLT, Chennai Bench, held that
moratorium will not extend to proceedings under section 138 of Negotiable Instruments
Act, 1881. The observation of NCLAT is that, the proceedings under section 138 of the
Negotiable Instruments Act, 1881 are criminal in nature and therefore, moratorium
cannot be made applicable to such proceedings. The offence under section 138 is not a
natural crime like hurt or murder. It is an offence created by legal fiction in the statute. It

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is a civil liability transformed into a criminal liability, under restricted conditions by way
of an amendment to the NI Act, 1881.

Therefore, proceedings under section 138 of the NI Act, 1881 are special in nature in
the sense that, these are primarily civil in nature, transformed into criminal with the intent
to provide the complainant the amount of cheque i.e., nothing but recovery of money by
way of compensation.

Kishan Lal vs Shankargauda, 2018:

The accused had issued a cheque of Rs. 2,00,000/- to the complainant which when the
latter presented to the bank was returned dishonored as “insufficient funds”. The
complainant gave a notice to the accused u/s 138 of the Negotiable Instruments Act to
which the accused replied that the cheque in possession of the complainant was stolen by
him. The complainant accordingly filed the case and led oral as well as documentary
evidence but the accused did not lead any evidence and the Trial Court convicted the
accused on the basis of the presumption u/s 139 of the N.I. Act.

Supreme Court has held that a mere denial of the existence of debt by the accused is not
sufficient to acquit the accused and that under Section 139 of the Negotiable Instruments
Act, there is a presumption that the accused had issued the cheque for the discharge of
some debt or liability and if the accused leads on evidence for his defense rebutting this
presumption, then he can be convicted.

Latest News:
› Section 138: Perversity of Acquittal in cheque bounce cases, reminder by Supreme court
on April 10, 2019:-

Supreme Court has held that finding of trial court cannot be termed as perverse if the
same is not against the weight of evidence on record and that the High court without
discarding the evidence led cannot held the view about financial capacity as perverse.

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Supreme Court was dealing with a situation where the High court had reversed the
acquittal order passed by the trail court in a cheque bounce case. The High Court found
the finding of trial court perverse.

It then referred to its earlier judgment on the expression ‘perverse’ where it was held that
although High Court can reappraise the evidence and conclusions drawn by the trial court
but judgment of acquittal can be interfered with only if judgment is against the weight of
evidence.

Then the Supreme Court commented “High Court without discarding the evidence,
which was led by defence could not have held that finding of trial court regarding
financial capacity of the complainant is perverse. We are, thus, satisfied that accused has
raised a probable defence and the findings of the trial court that complainant failed to
prove his financial capacity are based on evidence led by the defence. The observations
of the High Court that findings of the trial court are perverse are unsustainable”.

› July 4th, 2019:

In a judgment that will change the way prosecution is launched in cheque bounce cases,
the High Court has made it clear that the account holder has to be in complete control of
an account from which the cheque is issued. A complaint under the Negotiable
Instruments Act would not be maintainable if the account has been blocked.

Justice Manoj Bajaj asserted the cheque must be from an alive and operative account
“maintained” by the holder, who was capable of governing financial transactions
including clearance of cheques.

The ruling came in a case where a bank account stood blocked when cheques were
presented. Justice Manoj Bajaj asserted the court had no hesitation in holding that the
account holder was not maintaining the account on the date when the cheques were
presented by the complainant to the drawee bank.

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Justice Bajaj was hearing petitions filed by Rajesh Meena for quashing criminal
complaints under Sections 138, 141 and 142 of the Negotiable Instruments Act.
Directions were also sought for quashing summoning orders passed by Faridabad Judicial
Magistrate First Class.

Justice Bajaj was told that the trial court summoned the accused after examining the pre-
summoning evidence and the fact that the cheques were dishonoured with the remarks
“account blocked”

The petitioner’s counsel contended that the blocking of the account could not be
attributed to the account holder as it was a result of an order passed by National Company
Law Tribunal. “By virtue of the order, the authority and control of the account holder
over the account ceased to exist”. The counsel added the cheques given were post-dated.
The company’s account stood blocked when the cheques were presented.

Justice Bajaj asserted a careful analysis of Section 138 revealed that the first and
foremost requirement was that the cheque issued by the account holder was from an
account maintained by him.