Failure to Prove Loan and Notice Service Fatal to Section 138 NI Act Case: Madhya Pradesh High Court

The Madhya Pradesh High Court recently refused to interfere with an order of acquittal in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, holding that the complainant failed to establish the foundational facts of a legally enforceable debt as well as proper service of statutory notice.

Dismissing a criminal appeal filed by the complainant, court reiterated the settled principle that where two views are possible, the one favouring the accused must prevail.

The appeal was preferred by one Suresh, assailing the October 11, 2012 judgment of the Additional Sessions Judge, Betul, which had set aside the conviction recorded by the Judicial Magistrate First Class in 2012. The trial court had convicted the accused Sanjay and sentenced him to six months’ rigorous imprisonment along with a fine of ₹80,000 in a cheque bounce case arising out of an alleged friendly loan.

Justice Rajendra Kumar Vani, while affirming the acquittal, noted that the complainant’s version regarding advancement of a loan of ₹80,000 suffered from material inconsistencies and lacked corroboration. Court observed that although the complainant claimed to have advanced the amount in cash, neither the date of the transaction nor the source of funds was consistently disclosed in the complaint or in examination-in-chief.

Court recorded that during cross-examination, the complainant stated that the money was given on September 2, 2006 at his shop, but this fact did not find mention either in the complaint or in his affidavit evidence. Court questioned why the transaction was not reduced into writing, particularly when the cheque was allegedly issued nearly twelve days later. It found that such omissions raised serious doubts regarding the genuineness of the transaction.

Further, the high court took note of contradictory statements regarding the complainant’s financial capacity. While initially stating that he lent the money from his business earnings, the complainant later admitted that he had borrowed the amount from two to four persons to advance it to the accused. Court noted that the complainant neither disclosed the names of those persons nor clarified whether the lenders were two or four in number, observing that “the statement of this witness does not inspire confidence of the court”.

On the issue of statutory notice, the high court agreed with the appellate court that service of notice was not proved. It was noted that the notice was sent to an address at Amla, whereas the complainant admitted during cross-examination that the accused was a resident of Multai. Court found that the notice was therefore not sent to the correct address of the accused.

Court further observed that the complainant admitted the notice did not bear his signatures and was issued by his advocate, yet the advocate was not examined to prove dispatch of the notice. Although the complainant claimed that the notice was also sent through a courier service, no receipt or document was produced in support of this assertion. Even the application made to the post office seeking confirmation of service did not bear the complainant’s signature.

Referring to Supreme Court precedents, the high court reiterated that “however strong a suspicion may be, it cannot take place of a proof beyond reasonable doubt” and that appellate courts must exercise restraint while interfering with acquittal orders. Relying on settled principles governing appeals against acquittal, court held that unless the findings are perverse or illegal, interference is unwarranted.

Finding no perversity in the appellate court’s assessment of evidence, the high court concluded that the acquittal did not call for interference and dismissed the appeal as devoid of merit. The appellant was represented by Advocate Vaibhav Dharpure on behalf of Advocate Jaideep Sirpurkar, while none appeared for the respondent.

Case Title: Suresh v. Sanjay

Date of Judgment: January 30, 2026

Bench: Justice Rajendra Kumar Vani