Himachal Pradesh High Court upheld acquittal under Section 138 of the NI Act, ruling that complainant failed to prove financial capacity to advance the alleged loan, undermining the claim of legally recoverable debt.
Acquittal Under NI Act Upheld for Lack of Complainant’s Financial Capacity
The Himachal Pradesh High Court affirmed the acquittal of an accused in a Section 138 NI Act case, emphasizing that the complainant must establish both the existence of a debt and their own financial ability to extend the alleged loan. The prosecution failed to produce credible evidence demonstrating the complainant’s financial capacity at the relevant time.
The court examined bank statements, income records, and other financial documents and found them insufficient to prove that the complainant could have disbursed the claimed amount. Without such proof, the tribunal held that no legally enforceable debt could be inferred, which is a foundational requirement under Section 138.
"A claim of loan must be backed by demonstrable financial capacity; otherwise, the presumption under Section 139 cannot sustain the prosecution."
This judgment strengthens the defence’s ability to challenge the credibility of the complainant’s claim. Practitioners should anticipate greater scrutiny of complainants’ financial records in NI Act cases. It sets a precedent for courts to look beyond the mere issuance of cheques and verify the antecedent transaction’s plausibility.
Citations
- Negotiable Instruments Act, 1881, Section 138
