Failure To Report Loss Of Cheque To Bank Undermines "Cheque Misplaced" Defence Under NI Act: Himachal Pradesh High Court
The High Court held that where an accused claims to have misplaced a signed cheque but fails to report the alleged loss to the bank or take steps to stop payment, such a defence cannot be relied upon to rebut the statutory presumption under the Negotiable Instruments Act.
Justice Rakesh Kainthla, Himachal Pradesh High Court
The Himachal Pradesh High Court clarified that a bare assertion of loss of a cheque, unsupported by any contemporaneous action such as informing the bank, is insufficient to dislodge the presumption that the cheque was issued in discharge of a legally enforceable liability.
The Court was hearing a criminal revision petition challenging concurrent judgments passed by the Trial Court and the Appellate Court convicting the accused for the offence punishable under Section 138 of the Negotiable Instruments Act arising out of dishonour of a cheque.
A Bench of Justice Rakesh Kainthla, while stating that “any prudent person would have immediately informed the bank to stop the payment of the lost cheque,” held that “the failure to report the matter to the Bank would make it difficult to rely upon the statement of the accused that he had lost the cheque”.
Advocate I.S. Chandel appeared for the petitioner-accused, while Advocate Vivek Singh Attri represented the respondent-complainant.
Background
The complainant had alleged that the accused issued a cheque for ₹2,50,000/- towards the discharge of his liability. Upon presentation, the cheque was dishonoured with the endorsement “funds insufficient”. A statutory notice of demand was issued, which was served upon the accused, but payment was not made within the prescribed period.
The Trial Court convicted the accused under Section 138 of the Negotiable Instruments Act and sentenced him to undergo simple imprisonment for one year, while also directing payment of a compensation amounting to ₹5,00,000/-. The Appellate Court upheld the conviction and sentence, leading to the filing of the present revision.
Before the High Court, the accused contended that the cheque had been misplaced and misused, that the complainant failed to establish the underlying liability, and that the compensation imposed was excessive.
Court’s Observation
The Himachal Pradesh High Court noted that the accused had admitted his signature on the cheque in his statement recorded under Section 313 of the CrPC as well as in his testimony on oath. The Court held that such admission was sufficient to raise the statutory presumptions under Sections 118(a) and 139 of the Negotiable Instruments Act.
The Court rejected the defence that the cheque was misplaced, observing that no steps were taken by the accused to report the alleged loss to the bank or to issue stop-payment instructions. The absence of any contemporaneous action, the Court held, rendered the defence improbable and insufficient to rebut the presumption.
The Bench further highlighted that "the accused did not lead any other evidence to establish that he had misplaced his cheque", therefore affirming that, "the learned Courts below had rightly held that the accused had failed to rebut the presumption attached to the cheque".
On the question of sentence and compensation, the Court reiterated that proceedings under Section 138 of the Negotiable Instruments Act are both punitive and compensatory in nature. Referring to the Apex Court’s ruling in Kalamani Tex v. P. Balasubramanian (2021), the Court reaffirmed that “courts should uniformly levy a fine up to twice the cheque amount along with simple interest at the rate of 9% per annum”.
Considering the lapse of time between issuance of the cheque and final adjudication, the loss suffered by the complainant due to non-payment, and the costs incurred in pursuing litigation, the Court held that the compensation awarded, being equivalent to twice the cheque amount, was neither excessive nor disproportionate.
Conclusion
Finding no perversity or illegality in the concurrent findings of the courts below, the Himachal Pradesh High Court dismissed the criminal revision petition and upheld the conviction, sentence, and fine imposed upon the accused under Section 138 of the Negotiable Instruments Act.
Cause Title: Sohan Lal v. Jagdish Kumar Sharma (Neutral Citation: 2025:HHC:44717)
Appearances
Petitioner: I.S. Chandel, Advocate
Respondent: Vivek Singh Attri, Advocate