The Punjab & Haryana High Court has clarified that multiple complaints under Section 138 of the Negotiable Instruments Act may be filed for dishonoured cheques arising from a single loan transaction, provided each cheque constitutes a distinct cause of action. The Court further held that a spouse who issues a cheque to discharge the other spouse’s debt assumes legal liability under the Act, rejecting the defence of mere security or lack of personal indebtedness.
Background & Facts
The Dispute
The dispute arose from a loan of ₹2 crore 7 lakh extended by Sanjeev Chugh, the complainant, to Sunaina Chauhan in April-May 2015 for investment purposes. The loan was advanced through bank transfers (₹2 crore) and cash (₹7 lakh). To secure repayment, Sunaina Chauhan issued five cheques in her sole name, and she and her husband Rakesh Chauhan jointly issued two cheques. All seven cheques were subsequently dishonoured.
Key Facts
- Loan extended: April-May 2015
- Cheques issued by Sunaina Chauhan alone: 5 cheques totaling ₹2.5 crore
- Cheques issued jointly by Sunaina Chauhan and Rakesh Chauhan: 2 cheques totaling ₹1 crore
- Dishonour dates: Two joint cheques dishonoured on 17.04.2018; five individual cheques dishonoured on 08.05.2018
- Legal notices issued: 04.05.2018 (for joint cheques); 15.05.2018 (for individual cheques)
- Complaints filed: NACT/21963/2018 (Sunaina alone); NACT/21962/2018 (both spouses)
- Revisionist Rakesh Chauhan admitted during cross-examination that he signed the cheques and delivered them to the complainant for repayment of the loan and interest
- Revisionists claimed the entire debt was repaid in cash by end of 2015, but produced no documentary or witness evidence to substantiate this
Procedural History
- 09.06.2023: Learned JMIC, Gurgaon convicted both revisionists under Section 138 NI Act; sentenced to one year rigorous imprisonment and fine equivalent to cheque amount
- 13.06.2023: Sentence orders passed by JMIC, Gurgaon
- 03.01.2024: Additional Sessions Judge, Gurugram dismissed appeals but modified compensation to include bank interest from date of cheque issuance
- 14.02.2025: Punjab & Haryana High Court remanded the matter to Additional Sessions Judge, holding that trial was conducted in absence of accused
- 22.04.2025: Additional Sessions Judge upheld conviction and enhanced sentences: 1 year 6 months rigorous imprisonment and increased compensation
- 15.05.2025: Punjab & Haryana High Court suspended sentences and compensation payments pending revision
- 03.12.2025: Supreme Court set aside the suspension of compensation, directed deposit of ₹2 crore with High Court within two weeks, and ordered security for balance
- 27.03.2026: Present judgment pronounced by Justice Subhas Mehla
The Parties' Positions
Revisionists (Sunaina & Rakesh Chauhan):
- Claimed debt was fully repaid in cash by end of 2015
- Argued complaints were filed with mala fide intent after three-year delay
- Contended that two complaints for same debt violated non bis in idem
- Asserted Rakesh Chauhan had no personal liability as he did not borrow the money
- Claimed cheques were issued as security, not for discharge of debt
Respondent (Sanjeev Chugh):
- Denied repayment in cash, citing absence of evidence
- Argued cheques were issued for discharge of debt, not as security
- Maintained separate complaints were justified due to distinct drawers and amounts
- Asserted Rakesh Chauhan assumed liability by voluntarily issuing cheques
- Cited judicial precedents on presumption under Section 139 NI Act
Relief Sought
Revisionists:
- Set aside conviction and sentence
- Declare complaints non-maintainable
- Acquit Rakesh Chauhan for lack of legally enforceable debt
Complainant (CRR-1563-2025):
- Enhance imprisonment to two years
- Award additional compensation of ₹2 crores
The Legal Issue
The central questions were: (1) Whether two separate complaints under Section 138 of the Negotiable Instruments Act, arising from a single loan transaction but involving different sets of cheques with different drawers, are legally maintainable; (2) Whether a spouse who issues a cheque to discharge the debt of his or her spouse incurs independent liability under Section 138; and (3) Whether the enhancement of imprisonment from one year to one year and six months was excessive and punitive rather than compensatory.
Arguments Presented
For the Appellant/Petitioner
Learned Senior Counsel for the revisionists contended that the filing of two complaints violated the principle of non bis in idem, as both arose from the same transaction and debt. They relied on Meters and Instruments Pvt. Ltd. v. Kanchan Mehta to argue that Section 138 proceedings are quasi-civil and meant to enforce civil liability, not to punish. They asserted that Rakesh Chauhan could not be held liable as he was not the borrower; the debt was solely Sunaina Chauhan’s. They further claimed the cheques were issued as security, and mere issuance of a cheque does not create liability if no legally enforceable debt exists against the drawer. They submitted that the enhancement of sentence was punitive, based on non-appearance, not on merits, and thus illegal.
For the Respondent/State
Learned Senior Counsel for the complainant countered that each dishonoured cheque constitutes a distinct offence under Section 138, even if arising from one transaction, as held in Sumit Bansal v. M/s MGI Developers and Promoters. He argued that Rakesh Chauhan’s signature on the cheques, coupled with his admission during cross-examination that the cheques were given for repayment of the loan, established a legally enforceable debt against him. He relied on M/s Womb Laboratories Pvt. Ltd. v. Vijay Ahuja, Sube Singh v. Poonam Chand Ratti, and Atma Ram v. Jagat Ram to show that the presumption under Section 139 applies regardless of the drawer’s relationship to the borrower. He emphasized that the plea of security cheques was unsupported by evidence and rejected by the trial court. He further argued that the enhancement of sentence was justified due to the decade-long evasion of liability and the severe financial and mental hardship suffered by the complainant.
The Court's Analysis
The Court undertook a detailed analysis of the statutory framework under Section 138 and Section 139 of the Negotiable Instruments Act, and the jurisprudence developed by the Supreme Court and coordinate benches. It held that the filing of two separate complaints was legally permissible because each set of cheques had distinct drawers, different dishonour dates, and separate statutory notices. The Court cited Sumit Bansal v. M/s MGI Developers and Promoters to affirm that each dishonoured cheque, when presented, dishonoured, and followed by notice, gives rise to a distinct cause of action.
"The cause of action, though emanating from a common financial transaction, is cheque-specific under Section 138 of the Negotiable Instruments Act, and each dishonoured cheque constitutes a separate offence."
Regarding Rakesh Chauhan’s liability, the Court rejected the argument that marital relationship alone could not create liability. It held that his voluntary act of signing and delivering cheques to discharge his wife’s debt constituted an assumption of liability. The Court emphasized that Section 139 creates a statutory presumption in favour of the holder, and the burden to rebut it lies on the accused. Mere denial or assertion of security is insufficient without credible evidence.
"It is not a case where liability is being imputed upon Rakesh Chauhan merely by virtue of his marital relationship... rather, it is a case where he consciously and voluntarily assumed that liability by issuing the cheques in question."
The Court further noted that Rakesh Chauhan’s own admission during cross-examination - that he issued the cheques for repayment of the loan and interest - rendered his defence untenable. Permitting such evasion would undermine the legislative intent behind Section 138, which is to ensure credibility in commercial transactions.
On the issue of sentence enhancement, the Court acknowledged the complainant’s prolonged hardship but held that the primary object of Section 138 is compensatory, not punitive. While the enhancement of compensation was upheld as justified, the Court found no merit in increasing the term of imprisonment beyond one year. The Court distinguished between financial redressal and incarceration, noting that the latter should not be used as a tool for retribution.
The Court also addressed the issue of concurrent sentences, relying on V.K. Bansal v. State of Haryana, and directed that Sunaina Chauhan’s sentences in both complaints run concurrently, as both arose from the same transaction.
The Verdict
The revisionists’ convictions were upheld. Sunaina Chauhan and Rakesh Chauhan were sentenced to rigorous imprisonment for one year in each case, with sentences to run concurrently for Sunaina Chauhan. Compensation was fixed at ₹1 crore 75 lakh for the joint cheques and ₹4 crore for the individual cheques, as awarded by the Additional Sessions Judge. The complainant’s petition for further enhancement of sentence or compensation was dismissed. The revisionists were directed to surrender before the Trial Court within two weeks. The compensation already deposited with the High Court was ordered released to the complainant. The unpaid balance, if any, shall be recoverable under Section 461 of BNSS.
What This Means For Similar Cases
Separate Cheques, Separate Complaints Are Valid
- Practitioners may file multiple complaints under Section 138 for dishonoured cheques arising from a single loan, provided each cheque has distinct drawer(s), dishonour date, and statutory notice
- Courts must examine whether each cheque constitutes an independent cause of action, not merely whether the underlying debt is the same
- This prevents accused from exploiting procedural consolidation to evade liability on multiple cheques
Spousal Liability Is Not Automatic But Can Be Established
- A spouse who signs a cheque to discharge the other spouse’s debt assumes legal liability under Section 138
- Mere marital relationship is insufficient; liability arises from voluntary act of issuance
- Cross-examination admissions and documentary evidence are critical to rebut the presumption under Section 139
- Defence of "security cheque" requires credible evidence; bald assertions will not suffice
Sentences Must Be Compensatory, Not Punitive
- Courts must prioritize compensation over imprisonment in Section 138 cases
- Enhancement of imprisonment based on non-appearance or delay is impermissible
- Sentences should reflect the nature of the default and the need for deterrence, not retribution
- Where multiple convictions arise from one transaction, concurrent sentences must be ordered to avoid disproportionate punishment
