Case Analysis Surinder Kumar Mahajan vs Sardar Baljit Singh & Anr 2026 DHC 1500

Synopsis

This judgment, delivered by a Single Judge of the Delhi High Court, disposes of a criminal appeal filed by the accused against his conviction and sentence under Section 138 of the Negotiable Instruments Act, 1881. The case arose from a failed property transaction where the accused had received over ₹5 lakhs from the complainant. When the deal fell through, the accused issued a cheque which was dishonored due to his account being closed. The trial court convicted him and sentenced him to two years' rigorous imprisonment. The High Court upheld the conviction, finding the complainant's unchallenged testimony and the accused's own admissions sufficient to prove the offence. However, the court modified the sentence, holding that since the offence occurred in 2000 before the 2002 amendment increased the maximum punishment, the accused could only be sentenced to a maximum of one year's imprisonment as per the unamended provision. The sentence was reduced accordingly.

1. Heading for the Judgment

In the High Court of Delhi at New Delhi

(Criminal Appeal under Section 374 read with 482 Cr.P.C.)

SURINDER KUMAR MAHAJAN ....Appellant/Accused
versus
SARDAR BALJIT SINGH & ANR. ....Respondents/Complainant

Coram: Hon'ble Ms. Justice Chandrasekharan Sudha

Date of Decision: 18th FEBRUARY, 2026

2. Legal Framework

This judgment operates within the following legal framework:

• The Negotiable Instruments Act, 1881 (NI Act):
  Section 138: Deals with the dishonor of cheque for insufficiency of funds or if the amount exceeds the arrangement. It defines the offence and its ingredients.
  Section 139: Raises a presumption in favor of the holder that the cheque was received for the discharge, in whole or in part, of a debt or liability.
  Explanation to Section 138: Clarifies that "debt or other liability" means a legally enforceable debt or other liability.

• The Code of Criminal Procedure, 1973 (Cr.P.C.):
  Section 374: Provides for appeals from convictions.
  Section 482: Saves the inherent powers of the High Court.
  Section 251: Procedure for summary trials where the accused pleads not guilty.
  Section 313: Examination of the accused to explain incriminating circumstances.

• The Indian Penal Code, 1860 (IPC):
  Section 65: Limits the period of imprisonment in default of fine, stating it shall not exceed one-fourth of the maximum term of imprisonment fixed for the offence.

• The General Clauses Act, 1897:
  Section 27: Raises a presumption of due service when a notice is sent by registered post to the correct address.

• Principles of Criminal Jurisprudence:
  Presumption under Section 139 NI Act: A rebuttable presumption in favor of the complainant. The burden shifts to the accused to prove otherwise.
  Effect of Unchallenged Testimony: Testimony not cross-examined can be accepted as true.
  Prospective Application of Penal Statutes: An accused cannot be punished with a higher sentence than what was prescribed at the time of the commission of the offence.

Related Precedents Cited and Relied Upon:

• Bani Singh & Ors. v. State of U.P., (1996) 4 SCC 720:  (Supreme Court) - Held that an appellate court is not precluded from deciding an appeal on merits even in the absence of the respondent, as an appeal cannot be kept pending indefinitely.

• Maya Devi v. Lalta Prasad (2015) 5 SCC 588:  (Supreme Court) - Cited by the appellant for the proposition that penalty is not a legally enforceable debt under Section 138. The court distinguished this, as the accused admitted the underlying debt.

• NEPC Micon Ltd. and Ors. v. Magma Leasing Ltd., (1999) 4 SCC 253:  (Supreme Court) - Held that dishonor of a cheque for the reason that the account has been closed also comes within the ambit of Section 138 NI Act.

• Laxmi Dychem v. State of Gujarat and Ors., (2012) 13 SCC 375:  (Supreme Court) - Reiterated the principle that a closed account is covered under Section 138.

3. Basic Relevant Facts of the Case

1. Property Transaction (2000): The complainant agreed to purchase a property from the accused. An earnest money of ₹51,000/- was paid on 12.01.2000, followed by ₹4,50,000/- on 14.01.2000, totaling ₹5,01,000/-.

2. Failure of Transaction: The accused failed to transfer possession. The complainant later discovered that the accused had already sold the property to someone else.

3. Issuance of Cheque: To repay the amount, the accused issued a cheque (No. 19142 dated 27.07.2000) drawn on Bharat Overseas Bank.

4. Dishonor of Cheque: The cheque was dishonored on 14.08.2000 with the memo "account closed." The bank records showed the account was closed on 25.07.2000, two days before the cheque was issued.

5. Legal Notice: A demand notice was sent by registered post on 26.08.2000. The complainant's testimony stated it was refused by the accused.

6. Trial Court Proceedings: The complainant was examined as PW1. Crucially, the accused never cross-examined him. PW2, a bank official, proved the account closure. The accused, in his Section 313 statement, admitted receiving the money, executing the agreement, and issuing the cheque (though claimed it was under pressure).

7. Conviction and Sentence (18.07.2003): The trial court convicted the accused under Section 138 NI Act and sentenced him to 2 years rigorous imprisonment and a fine of ₹10,00,000/-, with a default sentence of one year.

4. Issues in the Judgment

The court framed the following core issue and also addressed the specific grounds raised by the appellant:

1. Main Issue: Whether the conviction entered and sentence passed against the appellant by the trial court are sustainable in law.

2. Sub-Issues Raised by Appellant:
   Whether the cheque was for a "legally enforceable debt" or for a "penalty" which is not covered under Section 138.
   Whether the demand notice was validly served, given an alleged incorrect address.
   Whether an offence under Section 138 is made out when the account was closed before the cheque was issued.
   Whether the sentence of 2 years imprisonment was legal, given that the offence was committed in 2000, before the amendment enhancing the punishment to 2 years came into force in 2003.

5. Ratio Decidendi (The Reasoning of the Court)

The court's reasoning was systematic and addressed each of the appellant's arguments.

• Unchallenged Testimony Proves the Case: The court placed significant weight on the fact that the complainant (PW1) was never cross-examined, despite opportunities. His testimony regarding the payment, the agreement, the issuance of the cheque, and the service of notice remained unchallenged and was therefore accepted as true.

• Accused's Admission Under Section 313: In his statement, the accused admitted to receiving the money, executing the agreement, and issuing the cheque. This admission, coupled with the unchallenged testimony, firmly established the foundational facts.

• Rebuttal of Presumption Under Section 139: The presumption that the cheque was issued for a legally enforceable debt was not rebutted. The accused's vague claim of "pressure" was unsubstantiated and insufficient to displace the presumption.

• Rejection of "Penalty" Argument: The court rejected the argument that the amount was a penalty, not a debt. The accused himself admitted to receiving ₹5,01,000/- from the complainant. He did not claim to have repaid it. Therefore, it was an enforceable debt owed to the complainant, irrespective of any penalty clause in the agreement.

• Rejection of "Incorrect Address" Argument: The complainant's unchallenged testimony stated that the notice was sent and refused by the accused. There was no evidence to show the address was incorrect. Therefore, service was deemed valid under Section 27 of the General Clauses Act.

• Rejection of "Closed Account" Argument: Relying on NEPC Micon Ltd. and Laxmi Dychem, the court held that dishonor of a cheque due to a closed account squarely falls within the ambit of Section 138 NI Act. It is a legally recognized ground for dishonor.

• Sentence Modification (Prospective Application): The court agreed with the appellant on this point. The offence was committed in 2000. The amendment to Section 138, which increased the maximum punishment from 1 year to 2 years, came into effect on 06.02.2003. Applying the principle that penal statutes operate prospectively, the accused could only be sentenced under the unamended provision. The sentence of 2 years was therefore set aside. The court also noted that the default sentence of one year for non-payment of fine exceeded the limit prescribed by Section 65 IPC (which is one-fourth of the maximum term).

6. New Legal Framework Established

This judgment does not establish any new legal principle. Its primary value lies in its role as a clear and comprehensive application of several well-settled principles under the NI Act and criminal procedure. It serves as an illustrative guide on:

1. The Evidentiary Value of Unchallenged Testimony: It reinforces that in criminal trials, the failure to cross-examine a key witness can be fatal to the defence, as the unchallered testimony can be taken as proved.

2. The Strength of Presumption under Section 139: The judgment demonstrates how the statutory presumption under Section 139, when combined with admissions by the accused under Section 313 Cr.P.C., creates a powerful case for the complainant that is difficult to rebut without concrete evidence.

3. Scope of "Legally Enforceable Debt": It clarifies that the underlying transaction does not need to be the primary subject of the NI Act proceedings. If the accused admits to receiving money and issuing a cheque to repay it, that is sufficient proof of a "legally enforceable debt" for the purposes of Section 138, even if the original transaction was a property deal that failed.

4. Prospective Application of Enhanced Sentences: It firmly reiterates the constitutional principle that a person cannot be punished with a greater penalty than what was prescribed by law at the time the offence was committed.

7. Examination and Analysis by the Court

The court's analysis was thorough and methodical.

• Preliminary Issue of Non-Appearance: The court first addressed the absence of the respondent/complainant. Citing Bani Singh, it correctly held that an appeal cannot be kept pending indefinitely and proceeded to decide the case on merits based on the records.

• Evidence-Based Analysis: The court meticulously reviewed the trial court record. It highlighted the most critical pieces of evidence: the unchallenged testimony of PW1 and the admissions of the accused in his Section 313 statement.

• Sequential Rejection of Arguments: The court took each argument raised by the appellant's counsel and systematically rejected it, providing clear legal reasoning and, where applicable, citing Supreme Court precedents (for the closed account issue).

• Correction of Sentencing Error: The court demonstrated its role as a corrective forum by identifying the clear legal error in the sentence. It correctly applied the principle of prospective operation of penal amendments and modified the sentence to align with the law at the time of the offence.

8. Critical Analysis and Final Outcome

Critical Analysis:

This judgment is a balanced and legally sound decision. It upholds a valid conviction while correcting a clear error in sentencing.

• Strengths: The primary strength is its grounding in the evidence on record. The court correctly identified that the accused's own admissions and the failure to cross-examine the complainant left his defence with no legs to stand on. The legal reasoning on each point is clear and supported by precedent. The modification of the sentence demonstrates judicial fairness and a commitment to the rule of law, ensuring the appellant is not punished under a law that was not in force when he committed the act.

• Correctness: The decision is legally correct. The conviction is sound based on the un-rebutted presumption under Section 139. The reduction of the sentence is mandatory under the principle of legality (nullum crimen, nulla poena sine lege). The rejection of the "penalty" argument is particularly strong, as the accused's admission of receiving money made the existence of a debt undeniable.

• Potential Impact: The judgment serves as a strong reminder to accused persons in NI Act cases that vague defences ("under pressure") are insufficient to rebut the statutory presumption. It also highlights the critical importance of cross-examining the complainant's witnesses. If a key witness goes uncross-examined, their testimony can form the sole basis for conviction.

Final Outcome:

The appeal was partly allowed. The court issued the following orders:

1. Conviction Upheld: The conviction of the appellant for the offence under Section 138 of the Negotiable Instruments Act was confirmed.

2. Sentence Modified: The sentence was modified. The appellant was sentenced to simple imprisonment for a period of one year (instead of two years) and a fine of ₹10,00,000/-. In default of payment of fine, he was to undergo simple imprisonment for a period of three months (instead of one year). The direction to pay ₹7,00,000/- of the fine as compensation to the complainant was upheld.

3. The appeal was allowed only to the extent of the modification of the sentence.