Himachal Pradesh High Court upheld acquittal under Section 138 of the Negotiable Instruments Act, ruling that complainant failed to prove financial capacity to advance the alleged loan.
HP HC Upholds Acquittal Under NI Act Due to Lack of Financial Capacity
The Himachal Pradesh High Court upheld the acquittal of an accused in a cheque dishonour case under Section 138 of the Negotiable Instruments (NI) Act, 1881, reaffirming that the complainant must establish both legal and financial capacity to advance the alleged loan at the time of issuing the cheque.
The Court noted that while the dishonour of a cheque raises a presumption under Section 139, it is rebuttable. The prosecution failed to produce bank statements or income evidence showing the complainant had sufficient funds or lending capacity. Relying on Ankesh Kumar Gupta v. State of UP, the Court held that without proof of financial ability, the presumption cannot sustain a conviction.
The burden shifts only after the initial foundation is laid, which includes financial capacity,the Court observed.
This decision serves as a caution to prosecutors in NI Act cases: documentary proof of the complainant’s financial standing is essential. Defence counsels should aggressively challenge uncorroborated claims, especially in high-value disputes where lending capacity is implausible.
Citations
- Negotiable Instruments Act, 1881, Section 138, Section 139
- Ankesh Kumar Gupta v. State of UP
