Well Argued · Mangrol · Section 138

Wrong Name, No Case: Mangrol Court Acquits Accused in Rs 17 Lakh Cheque-Bounce Case Defended by Shukla Legal Services LLP

Well Argued · Claw Editorial

A ₹17 lakh cheque was returned unpaid, yet the cheque-bounce case against the person who wrote it failed. The cheque was payable to a dairy business, and the man who filed the complaint never proved that he owned it. Defending the accused, Shukla Legal Services LLP showed that only the payee can bring a complaint under Section 138. The Civil Judge and Judicial Magistrate First Class at Mangrol agreed and acquitted the accused.

01The milk supply and the cheque

The complainant ran a milk dairy in a village in Mangrol taluka, trading under a business name, and sold milk in bulk. The accused ran a dairy business in Ahmedabad that bought milk in bulk for distribution.

According to the complaint, the two signed a written agreement on 2 December 2019, notarised at Mangrol, for the supply of milk. The complainant supplied milk until 14 April 2020. When the lockdown began, the accused could not pay on the agreed terms, and the two ended the arrangement by consent.

The complainant’s case was that, on settling accounts, ₹47 lakh was due. Towards it, he said, the accused gave two HDFC Bank cheques: one for ₹30 lakh and one for ₹17 lakh. Both were payable to the complainant’s dairy business. This case concerned the ₹17 lakh cheque, dated 26 December 2020.

The cheque was deposited on 6 February 2021 and returned on 8 February marked “funds insufficient”. A legal notice was sent by registered post on 11 February 2021. The envelope was refused on 13 February and came back unopened. The complaint was filed on 4 March 2021.

02Timeline

03The trial

The accused appeared on summons and pleaded not guilty. The complainant gave his evidence by sworn affidavit and produced eight documents:

• the original cheque and the bank’s return memo;
• the deposit slip;
• the legal notice, the refused registered-post envelope and the postal receipt;
• the milk-supply agreement of 2 December 2019, and an agreement of 26 August 2020 on the amount due.

The accused did not give oral evidence. He relied on documents: tanker dispatch slips and weighbridge slips from the milk business, exhibited before the court. Both sides then argued, and the defence filed written arguments.

04The defence case

The defence denied that any legally enforceable debt was due, and contended that the cheque had been misused. In its written arguments, it pointed to what was missing from the complainant’s case:

• no account or document proving the alleged transaction;
• no documentary evidence of the milk business itself;
• and, most importantly, no proof of the complainant’s authority to file the complaint on behalf of the dairy named on the cheque.

The last point decided the case. The court did not need to reach the question of whether the debt was real.

05Who can file a Section 138 complaint

The court set out the seven ingredients of an offence under Section 138. The first six concern the cheque, the debt, presentation, dishonour, notice and non-payment. The seventh is easy to overlook: the complaint must be made in writing by the payee or the holder in due course of the cheque.

That requirement comes from Section 142(a) of the Act, which says that no court shall take cognizance of an offence under Section 138 “except upon complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque.”

Here, the complaint was filed by an individual describing himself as the proprietor of the dairy. The original cheque, however, named the dairy business as payee. So the question was simple: had he proved that he was its proprietor?

In cross-examination he said: “The name of my milk dairy was [the business name]. I ran my dairy business in a shop. This shop was owned by me. I have written documents of it. If I need to produce them, I can.” (Translated from the Gujarati.) But no such document was ever produced, and nothing on record explained on what authority he had filed for the firm.

06The Supreme Court’s ruling in Milind Shripad Chandurkar

The court relied on the Supreme Court’s decision in Milind Shripad Chandurkar v. Kalim M. Khan, AIR 2011 SC 1588, which arose on almost identical facts. There, cheques for diesel supplied by a petrol pump were payable to the firm that ran it, and the person who filed the complaint could not prove he owned the firm.

The Supreme Court explained the law in steps:

• Section 7 of the Act defines the payee as the person named in the instrument to whom the money is to be paid. Section 8 defines the holder, and Section 9 the holder in due course.
• Following Shankar Finance and Investments v. State of Andhra Pradesh, (2008) 8 SCC 536, where the payee is a proprietary concern, the complaint can be filed by the proprietor describing himself as its sole proprietor, by the concern itself represented by its proprietor, or by a power-of-attorney holder acting for the proprietor.
• Relying on Janki Vashdeo Bhojwani v. IndusInd Bank, (2005) 2 SCC 217, and National Small Industries Corporation v. State (NCT of Delhi), (2009) 1 SCC 407, it held that a complaint is maintainable only by someone who is the payee or the holder in due course.

On the facts, the Supreme Court held that the complainant “miserably failed to prove any nexus or connection by adducing any evidence, whatsoever, worth the name” with the payee firm:

“Mere statement in the affidavit in this regard, is not sufficient to meet the requirement of law.”

It added that a business of that size must have left a trail of bank transactions and tax filings, so there was “no dearth of material” the complainant could have produced to show he was the sole proprietor. He produced none, even though the issue had been raised from the start. The Supreme Court upheld the acquittal.

07How the court applied it

The Mangrol court found the same gap in this case. The ownership of the milk business was questioned in the complainant’s cross-examination, yet at no stage did he place even the slightest evidence on record that he was the proprietor of the dairy named on the cheque. The documents he did produce did not record him as its proprietor either.

So, even assuming the cheque had been given for a legally enforceable debt, the payee and holder of the cheque was the dairy business, and nothing connected the complainant to it. No order could therefore be passed in his favour. The court answered the main issue in the negative.

08The order

The judgment was pronounced in open court on 29 October 2026 by Shri Karna Ajit Marvaha, Civil Judge and Judicial Magistrate First Class, Mangrol.

09Lessons for practitioners

10What happens next

The complainant can appeal against the acquittal. The bond ordered under Section 437A exists for exactly that situation, to secure the accused’s appearance if an appeal is filed. Any civil claim for the money is a separate matter, and this judgment did not decide it.

11FAQ