Dishonour of Cheque - Section 138 is attracted even when the cheque is issued as "security" or remark "account closed."
Himachal Pradesh High Court Upholds Conviction for Cheque Dishonour, reaffirms lower courts’ decisions, reinforcing the presumption of debt in cheque issuance despite claims of security purpose.
In a significant judgment dated September 23, 2025, the Himachal Pradesh High Court, under Justice Mr. Rakesh Kainthla, upheld the conviction of Sunil Kumar, who was found guilty of an offence under Section 138 of the Negotiable Instruments Act, 1881. The High Court confirmed the concurrent findings of both the Trial Court and the Sessions Court, which had earlier convicted and sentenced the accused to three months of simple imprisonment and a fine of Rs. 70,000, with additional compensation of Rs. 68,000 awarded to the complainant, Ajay Kumar.
The case arose from a complaint filed by Ajay Kumar, who alleged that Sunil Kumar had issued a cheque for Rs. 50,000, drawn on Punjab National Bank, to discharge part of a Rs. 1,50,000 debt. However, upon presentation, the cheque was dishonoured with the remark "account closed". Despite a legal notice being issued, which went undelivered but was deemed served, Sunil Kumar failed to repay the amount, leading to his conviction under Section 138 of the NI Act.
The High Court's judgment reiterated that once the issuance and signature on a cheque are admitted, there is a presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued for a legally enforceable debt or liability. This presumption, the court emphasized, is rebuttable. However, the burden to prove the non-existence of a debt or liability lies with the accused, who must present evidence to counter the presumption. Sunil Kumar's defense that the cheque was issued merely as security and was not meant for payment was rejected by the Court, citing that no sufficient evidence was produced to rebut the statutory presumption.
The court also addressed the issue of the cheque being dishonoured with the notation "account closed". It reaffirmed the principle that a cheque returned for this reason is treated as being dishonoured due to "insufficient funds," thereby attracting the penal provisions of Section 138 of the Negotiable Instruments Act.
In the revision petition, Sunil Kumar contended that the lower courts had failed to properly assess the evidence, particularly regarding the source of the complainant's income and the existence of a legally enforceable debt. However, the High Court upheld the lower courts' findings, stating that the burden of proof to rebut the presumption of a legally enforceable debt or liability was on the accused, which he failed to discharge.
The High Court also highlighted that the role of a revisional court is not to act as an appellate body and re-evaluate evidence unless there is a clear error or miscarriage of justice, which was not the case here. Consequently, the High Court dismissed the revision petition, affirming the three-month imprisonment sentence and a fine of Rs. 70,000, with an additional 15 days of simple imprisonment in case of default.
Bottom Line:
Section 138 is attracted even when the cheque is issued as "security" or when dishonoured with the remark "account closed." The presumption under Section 139 includes the existence of legally enforceable debt or liability, and the burden to rebut such presumption lies on the accused.
Statutory provision(s): Negotiable Instruments Act, 1881 - Sections 138, 139; Criminal Procedure Code, 1973 — Section 397.
Sunil Kumar v. Ajay Kumar, (Himachal Pradesh) : Law Finder Doc Id # 2782468
