The Madhya Pradesh High Court has clarified that while the presumption under Section 139 of the Negotiable Instruments Act favours the complainant, the accused may rebut it through documentary evidence if the complainant’s financial capacity is credibly questioned during the notice or trial stage. The judgment reinforces procedural fairness in cheque dishonour cases and sets a clear boundary on when courts may permit additional evidence.
Background & Facts
The Dispute
The revision petitioner, Sher Singh, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 before the JMFC, Badnawar, District Dhar on 26.08.2019, alleging dishonour of a cheque dated 08.07.2019 for Rs. 3,25,000 issued by the respondent, Tejalal. The cheque, presented for collection on 18.07.2019, was returned on 19.07.2019 with the remark "insufficient funds". A legal notice dated 22.07.2019 (Exhibit P/3) was served through counsel, to which the accused replied on 05.08.2019 denying receipt of any amount and disputing issuance of the cheque in favour of the complainant.
Key Facts
- The complainant alleged in the complaint and notice that the cheque was issued in consideration of money lent through the sale of his vehicle, but provided no details such as vehicle type, registration number, or sale agreement.
- During trial, the complainant submitted an affidavit under Section 145 of the NI Act, omitting the vehicle sale narrative entirely.
- In cross-examination, the accused questioned the complainant’s financial capacity in paragraphs 7, 8, and 9 of the transcript.
- The accused filed an application under Section 391 of the CrPC, 1973 seeking to produce revenue records (Khasra Nos. 224 and 225, Khate Nos. 333 and 334) showing the complainant’s ownership of agricultural land in village Bhosala, to challenge his claimed financial capacity.
- The trial court rejected the application for summoning bank statements and convicted the accused under Section 138 NI Act on 30.09.2022, sentencing him to three months RI and Rs. 7,000 compensation.
Procedural History
- 26.08.2019: Complaint filed under Section 138 NI Act before JMFC, Badnawar (SCNIA No. 64/2019)
- 19.07.2019: Cheque returned by bank with "insufficient funds" remark
- 22.07.2019: Legal notice served on accused (Exhibit P/3)
- 05.08.2019: Accused’s reply denying receipt of funds and cheque issuance
- 22.06.2022: Trial court convicted accused and imposed sentence
- 2022: Both parties filed appeals - complainant (Criminal Appeal No. 32/2022) seeking enhanced compensation; accused (Criminal Appeal No. 26/2022) seeking acquittal
- 25.02.2025: Appellate court allowed accused’s application under Section 391 CrPC, set aside conviction, and remanded matter to record defence evidence
- 07.04.2026: Criminal Revision No. 1193/2025 filed before Madhya Pradesh High Court challenging remand order
Relief Sought
The revision petitioner sought quashing of the appellate court’s order dated 25.02.2025, restoration of the conviction and sentence, and rejection of the accused’s application under Section 391 CrPC. He argued that the appellate court erred in permitting documentary evidence not raised in the appeal and violated principles of natural justice.
The Legal Issue
The central question was whether an accused in a Section 138 NI Act case may, under Section 391 CrPC, be permitted to adduce documentary evidence to rebut the complainant’s financial capacity when such capacity was challenged during trial and the complainant altered his version of events, and whether the court’s refusal to allow such evidence would violate the rebuttable nature of the presumption under Section 139.
Arguments Presented
For the Petitioner
The complainant argued that the appellate court exceeded its jurisdiction by permitting new evidence under Section 391 CrPC, which was not part of the grounds of appeal. He relied on Ajitsingh Chehuji Rathod v. State of Gujarat (2024 INSC 63), contending that courts cannot assist the accused in collecting defence evidence. He further argued that the accused had ample opportunity to challenge financial capacity during trial but failed to do so until appeal, and that the revenue records (2024-25) were irrelevant to the 2019 transaction.
For the Respondent
The accused contended that the complainant’s financial capacity was squarely challenged in the reply to the notice and during cross-examination. He argued that the complainant’s shifting narrative - from vehicle sale in the notice and complaint to silence in the affidavit - created a legitimate doubt requiring documentary rebuttal. He cited Sanjabij Tari v. Kishore S. Borcar (2025 INSC 1158), asserting that once financial capacity is questioned, the burden shifts to the complainant to substantiate it, and the accused must be given a fair opportunity to rebut with documents.
The Court's Analysis
The High Court examined the interplay between the rebuttable presumption under Section 139 of the NI Act and the procedural flexibility under Section 391 CrPC. It noted that while the presumption operates in favour of the complainant, it is not conclusive and may be rebutted by the accused through credible evidence.
"The presumptions under the NI Act albeit rebuttable operate in favour of the complainant. Hence, it is for the accused to rebut such presumptions by leading appropriate defence evidence and the Court cannot be expected to assist the accused to collect evidence on his behalf."
However, the Court distinguished this principle from the present case, observing that the accused did not seek the court’s assistance to procure evidence ex parte. Instead, he sought to adduce documents already in his possession - revenue records - to challenge the complainant’s credibility, which had been directly questioned during trial.
The Court emphasized that the complainant’s failure to consistently disclose the source of funds - first citing vehicle sale in notice and complaint, then omitting it in affidavit - created a material inconsistency. The accused’s application under Section 391 CrPC was not a new ground but a necessary rebuttal to an issue already raised. The appellate court’s decision to remand was therefore not an overreach but a corrective measure to ensure a fair trial.
The Court further held that the timing of the revenue records (2024-25) did not render them irrelevant, as ownership of land could indicate sustained financial capacity, especially in rural contexts where cash transactions and asset-based lending are common.
The Verdict
The criminal revision was dismissed. The High Court upheld the appellate court’s order dated 25.02.2025, affirming that the matter be remanded to the trial court to record defence evidence, including the revenue documents relating to Khasra Nos. 224 and 225. The conviction and sentence of the accused remain set aside pending fresh proceedings. The complainant’s appeal for enhanced compensation was also dismissed.
What This Means For Similar Cases
Financial Capacity Must Be Challenged Early to Trigger Rebuttal Rights
- Practitioners must ensure that any challenge to the complainant’s financial capacity is explicitly raised in the reply to the Section 138 notice and reiterated during trial.
- Failure to raise the issue early may bar later attempts to introduce documentary rebuttal under Section 391 CrPC.
Documentary Evidence Is Admissible to Rebut Presumptions Under NI Act
- Revenue records, property documents, or bank statements may be admitted under Section 391 CrPC if they directly address a credibility issue raised during trial.
- Courts cannot refuse such evidence merely because it was not part of the original appeal grounds if it goes to the root of the presumption.
Inconsistencies in Complainant’s Narrative Open Door to Defence Evidence
- If a complainant alters his version of events between notice, complaint, and affidavit, the accused is entitled to cross-examine and introduce documents to expose the inconsistency.
- This judgment reinforces that procedural fairness under Section 391 CrPC supersedes rigid adherence to appellate grounds when justice demands.
