Section 138 NI Act | Statutory Presumption Upholds Cheque Bounce Conviction Despite Typographical Errors: Madras HC

The Madras High Court has reaffirmed that a conviction under Section 138 of the Negotiable Instruments Act cannot be overturned merely due to typographical discrepancies in the complaint when the signature on the cheque is undisputed and the defence fails to rebut the statutory presumption. This judgment underscores the importance of substance over form in cheque dishonour cases.

Background & Facts

The Dispute

The appellant, G. Dorairaj, and the respondent, J. Janabai, were colleagues at Kilpauk Medical College and Hospital, Chennai. The respondent approached the appellant for a personal loan to meet urgent financial needs. The appellant, believing the respondent owned a property in Perumbakkam, extended a hand loan. In discharge of this liability, the respondent executed a promissory note and issued a cheque for repayment.

Key Facts

• The respondent executed a promissory note (Ex.P1) on 21.11.2014 for Rs. 3,20,200, acknowledging receipt of the amount and agreeing to pay interest at 2% per month.
• The promissory note was signed by the respondent and attested by her son, V. Yuvaraj.
• A cheque (Ex.P2) dated 16.01.2016, bearing No. 505630, drawn on Oriental Bank of Commerce, Kilpauk Branch, for Rs. 3,30,000 was issued by the respondent.
• The cheque was deposited by the appellant on 28.03.2016 at Indian Bank, Chetpet Branch, and returned on 29.03.2016 with the reason "Funds Insufficient".
• A statutory notice (Ex.P4) dated 30.03.2016 was sent to the respondent, which remained unanswered.
• The complaint under Section 138 NI Act was filed on 18.06.2016.
• The appellant initially misstated the date of the promissory note as 10.11.2014 and the amount as Rs. 3,30,000 in the complaint, but corrected this via an additional affidavit filed on 20.06.2017, served on the respondent on 19.03.2018.
• The respondent did not object to the affidavit or the recall petition under Section 311 Cr.P.C. filed to correct the error.
• The respondent never examined any witness or marked any document during trial.
• The respondent claimed two contradictory defences: (1) she was not in Chennai on 16.01.2016 due to employment in Vellore, and (2) the appellant had stolen her cheque book in 2009 during a mortgage transaction and misused the cheque.
• The mortgage deed (Document No. 1014 of 2009) was available during trial but not produced until the appeal stage.

Procedural History

• 16.01.2016: Cheque (Ex.P2) issued by respondent.
• 28.03.2016: Cheque deposited and returned unpaid.
• 30.03.2016: Statutory notice issued.
• 18.06.2016: Complaint filed under Section 138 NI Act before Fast Track Court-I, Egmore, Chennai (C.C. No. 5846 of 2016).
• 11.12.2018: Trial Court convicted respondent under Section 138 NI Act, sentenced to six months simple imprisonment and Rs. 3,30,000 compensation.
• 20.06.2017: Appellant filed additional affidavit correcting date and amount in promissory note.
• 19.03.2018: Chief examination of PW1 resumed after correction.
• 26.10.2021: Lower Appellate Court (XX Additional Sessions Judge) allowed appeal, acquitted respondent, holding that typographical error and lack of documentary corroboration created reasonable doubt.
• 07.03.2020: Lower Appellate Court allowed respondent’s Section 391 Cr.P.C. petition to summon attendance register and mortgage deed.
• 14.09.2020: Madras High Court set aside the 07.03.2020 order in Crl.R.C. No. 673 of 2020, holding that the documents were available during trial and alibi plea was raised only in cross-examination without corroboration.
• 28.03.2023: Criminal Appeal filed under Section 378 Cr.P.C. before Madras High Court.

The Parties' Positions

For the Appellant

• Argued that the cheque signature was not denied and the promissory note was duly executed.
• Contended that the typographical error in the complaint was minor, corrected by affidavit, and never objected to by the respondent.
• Emphasized that the respondent failed to discharge the burden under Sections 118 and 139 of the NI Act.
• Relied on A.V. Murthy v. B.S. Nagabasavanna, J. Magdalene Rejula v. K. Ramesh, Uttam Ram v. Devinder Singh Hudan, Bhupesh Rathod v. Dayashankar Prasad Chaurasia, and Bansal Milk Chilling Centre v. Rana Milk Food Private Ltd.

For the Respondent

• Claimed the cheque was issued in 2009 for a prior loan of Rs. 3,00,000, which was repaid, and the cheque was stolen and misused.
• Argued that the promissory note (Ex.P1) was invalid because it was written on a notebook page and contained discrepancies.
• Asserted that the appellant had not come with clean hands due to suppression of facts and delay.
• Relied on K. Prakashan v. P.K. Surenderan to argue that appellate courts should not interfere with acquittals unless the finding is perverse.

Relief Sought

The appellant sought: (1) setting aside the order of acquittal dated 26.10.2021; (2) restoration of the conviction and sentence dated 11.12.2018; (3) direction to the trial court to enforce the sentence of six months simple imprisonment and compensation of Rs. 3,30,000; and (4) liberty to compound the offence if the respondent pays the amount.

The Legal Issue

The central question was whether Section 138 of the Negotiable Instruments Act can be invoked when the signature on the cheque is undisputed, the promissory note establishes a legally enforceable debt, and a typographical error in the complaint is corrected before trial, provided the defence fails to rebut the statutory presumption.

Arguments Presented

For the Appellant

The appellant’s counsel argued that the issuance of the cheque (Ex.P2) and the existence of the promissory note (Ex.P1) created a presumption under Sections 118 and 139 of the NI Act that the cheque was issued for consideration. The respondent did not deny her signature or the authenticity of the documents. The typographical error in the complaint - misstating the date as 10.11.2014 instead of 21.11.2014 and the amount as Rs. 3,30,000 instead of Rs. 3,20,200 - was corrected via an affidavit filed in 2017, served on the respondent, and no objection was raised. The correction was permitted under Section 311 Cr.P.C. and upheld by precedent in J. Magdalene Rejula and Bansal Milk Chilling Centre. The respondent’s alibi defence was inconsistent with her cross-examination and Section 313 statement, and the mortgage deed was available during trial but never produced. The lower appellate court erred in treating a rectified technical error as a fatal contradiction.

For the Respondent

The respondent’s counsel contended that the foundational facts of the case were irreparably damaged by the discrepancy between the complaint and the actual promissory note. The appellant’s failure to disclose the prior loan of Rs. 3,00,000 and the alleged theft of the cheque book in 2009 amounted to suppression of material facts. The lower appellate court was justified in drawing adverse inference under Section 114(g) of the Indian Evidence Act. The respondent’s attempt to produce the attendance register and mortgage deed during appeal was legitimate, and the High Court’s earlier order setting aside the Section 391 Cr.P.C. order was flawed. The appellate court’s acquittal, based on two possible views, could not be disturbed under K. Prakashan v. P.K. Surenderan.

The Court's Analysis

The Court observed that the respondent never denied her signature on the cheque (Ex.P2) or the promissory note (Ex.P1). The burden under Sections 118 and 139 of the NI Act therefore shifted to the respondent to establish a probable defence. She failed to examine any witness or produce any document during trial. The defence of alibi - that she was in Vellore on 16.01.2016 - was first suggested during cross-examination and never corroborated by contemporaneous records. The mortgage deed dated 2009, which she claimed proved cheque theft, was available throughout the trial but only sought to be produced during appeal, which the Court rightly rejected as an abuse of process.

"The respondent not denied the issuance of cheque (Ex.P2) and her signature. Hence, Sections 118 and 139 of Negotiable Instruments Act, 1881 comes into play. Admittedly, the respondent neither examined any witness nor marked any document to probablize her defence and to prove that the appellant has not come with clean hands."

The Court held that the typographical error in the complaint was not a substantive defect but a clerical oversight, corrected with notice to the respondent and without prejudice. The precedent in Bansal Milk Chilling Centre explicitly permits correction of such technical flaws in criminal cases under the Code. The lower appellate court’s reliance on this error to create reasonable doubt was legally unsustainable.

The Court further noted that the period of limitation for the debt was not barred: the promissory note was dated 21.11.2014 and the cheque issued on 16.01.2016 - both within the three-year limitation period. The respondent’s claim that the cheque was issued in 2009 was contradicted by the date on the instrument itself and the absence of any complaint or bank notice over seven years.

The lower appellate court’s conclusion that the appellant had not come with clean hands was speculative and unsupported by evidence. The Court emphasized that the burden of proof lies on the accused to rebut the statutory presumption, not on the complainant to prove every detail beyond all possible doubt.

The Verdict

The Criminal Appeal is allowed. The judgment of acquittal dated 26.10.2021 passed by the XX Additional Sessions Judge, Chennai, in Crl.A.No.22 of 2019 is set aside. The conviction and sentence dated 11.12.2018 by the Fast Track Court-I, Egmore, Chennai, in C.C.No.5846 of 2016 are restored and confirmed. The respondent is directed to undergo six months simple imprisonment and pay compensation of Rs. 3,30,000 to the appellant. In default of payment, she shall undergo two months additional simple imprisonment. The trial court is directed to secure the respondent for sentence execution. The respondent may apply to the trial court to compound the offence upon payment of the amount.

What This Means For Similar Cases

Typographical Errors Are Not Fatal if Corrected

• Practitioners may file affidavits or Section 311 Cr.P.C. applications to correct minor clerical errors in complaints or notices under Section 138 NI Act.
• Courts must distinguish between substantive contradictions and technical inaccuracies - the latter are curable if notice is given and no prejudice is shown.
• Failure to object to correction during trial waives the right to challenge it later.

Statutory Presumption Prevails Over Speculative Defences

• When the signature on the cheque is undisputed and a promissory note or acknowledgment exists, the presumption under Sections 118 and 139 NI Act is strong.
• Defence theories based on alleged theft, misuse, or alibi must be substantiated with contemporaneous evidence - mere assertions or belated production of documents are insufficient.
• Courts must not allow accused persons to delay production of evidence until appeal stage to create doubt.

Clean Hands Doctrine Requires Concrete Evidence

• Allegations of unclean hands must be supported by specific, documented facts - not vague suspicions.
• A complainant’s failure to disclose a prior transaction does not automatically invalidate a Section 138 complaint if the current debt is independently established.
• The burden to prove fraud or misrepresentation lies squarely on the accused.