The Supreme Court held that the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881, favors the complainant once the cheque’s authenticity and signature are admitted. The accused must rebut this presumption with credible evidence, not mere denials. The High Court erred in requiring the complainant to prove financial capacity upfront. The Court reinstated the Trial Court’s conviction but modified the sentence to a reduced fine, emphasizing the statutory presumption of liability for the cheque signatory. The judgment reaffirms the legal enforceability of cheques as discharge of debt under Section 138.
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Facts of The Case:
The appellant, Ashok Singh, advanced a loan of ₹22 lakhs to respondent no. 2, Ravindra Pratap Singh, who issued a cheque for the same amount drawn on Bank of Baroda. Upon presentation, the cheque was dishonoured with the remark “payment stopped by drawer.” The appellant issued a legal notice, but the respondent failed to repay or respond. Consequently, a complaint was filed under Section 138 of the Negotiable Instruments Act, 1881. The Trial Court convicted the respondent, sentencing him to one year’s imprisonment and a fine of 35 lakhs, with 30 lakhs as compensation. The Appellate Court upheld this decision. However, the High Court acquitted the respondent, citing the complainant’s failure to prove the loan’s source and the cheque’s issuance towards a legally enforceable debt. The Supreme Court overturned the High Court’s judgment, ruling that the statutory presumption under Sections 118 and 139 of the Act favored the complainant once the cheque’s authenticity was established. The respondent’s defence—claiming the cheque was lost—was deemed unsubstantiated due to delayed police intimation and lack of evidence. The Court reinstated the conviction but modified the sentence to a reduced fine of 32 lakhs, payable within four months, failing which the original sentence would apply. The judgment reinforced the legal principles governing cheque dishonour cases.
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Procedural History:
The case originated with the filing of a complaint by Ashok Singh under Section 138 of the Negotiable Instruments Act, 1881, before the Trial Court (Additional Court, Lucknow), alleging dishonour of a cheque issued by Ravindra Pratap Singh. The Trial Court convicted the accused on 12.04.2019, sentencing him to one year’s imprisonment and a fine of ₹35 lakhs. The Appellate Court (Additional Sessions Judge, Lucknow) upheld this decision on 23.10.2020. The accused then filed a Criminal Revision Petition before the Allahabad High Court (Lucknow Bench), which acquitted him on 21.02.2024, citing inconsistencies in the complainant’s evidence. Aggrieved, Ashok Singh appealed to the Supreme Court, which, on 02.04.2025, set aside the High Court’s order, reinstated the conviction, and modified the sentence to a reduced fine of ₹32 lakhs, payable within four months. The Supreme Court emphasized the statutory presumption under Sections 118 and 139 of the Act and held that the accused failed to rebut it with credible evidence. The procedural journey thus spanned three judicial tiers, culminating in the apex court’s restoration of the Trial Court’s findings with a modified penalty.
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Court Observation:
The Supreme Court made several key observations while deciding the case. It emphasized that once the authenticity of the cheque and the accused’s signature are admitted, a statutory presumption arises under Sections 118 and 139 of the Negotiable Instruments Act in favor of the complainant regarding the existence of a legally enforceable debt. The Court held that the burden then shifts to the accused to rebut this presumption with credible evidence, which the respondent failed to do in this case.
The Court noted that the High Court erred in requiring the complainant to prove his financial capacity to lend the money at the initial stage, as this was not necessary under the law. It observed that the accused’s defense—claiming the cheque was lost—lacked credibility because the police intimation was made belatedly in 2011, despite the cheque being presented in 2010. The Court also rejected the argument that the complaint was not maintainable due to the non-joinder of the partnership firm, holding that since the accused was the signatory and in charge of the firm, he was personally liable.
Additionally, the Court reiterated that the purpose of Section 138 is to uphold the credibility of commercial transactions and discourage dishonesty in cheque dealings. It found no merit in the accused’s contentions and restored the Trial Court’s conviction, though it modified the sentence to a reduced fine, considering mitigating factors. The judgment reinforced the strict interpretation of the Negotiable Instruments Act to ensure deterrence against cheque dishonour.
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Final Decision & Judgement:
The Supreme Court allowed the appeal, setting aside the High Court’s acquittal order and restoring the Trial Court’s conviction of the accused under Section 138 of the Negotiable Instruments Act, 1881. The Court held that the statutory presumption under Sections 118 and 139 of the Act operated in favor of the complainant, as the accused had admitted his signature on the dishonoured cheque. Since the accused failed to rebut this presumption with credible evidence, his defense—that the cheque was lost—was deemed unsubstantiated.
However, considering mitigating factors such as the accused’s age (58 years) and his family circumstances, the Court modified the sentence. Instead of imprisonment, it imposed a reduced fine of 32 lakhs, payable to the appellant within four months. Failure to pay the fine would result in the restoration of the original sentence—one year’s simple imprisonment and the full fine of 35 lakhs. The Court emphasized the importance of maintaining the sanctity of negotiable instruments and deterring dishonesty in financial transactions. The judgment reaffirmed the strict liability principle under Section 138 while balancing it with judicial discretion in sentencing.
**Parties were left to bear their own costs, and all pending applications were disposed of accordingly.**
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Case Details:
Case Title: Ashok Singh vs. State of Uttar Pradesh & Anr. Citation: 2025 INSC 427 (Supreme Court of India) Criminal Appeal No.: Criminal Appeal No. 4171 of 2024 Date of Judgment: April 02, 2025 Judges/Justice Name: Justice Sudhanshu Dhulia And Justice Ahsanuddin Amanullah
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