Cheque-bounce jail term cut to six months, Rs 42 lakh compensation stays: Delhi HC in Dr I.A. Khan revision
Justice Sanjeev Narula found no perversity in the concurrent findings that three Rs 10 lakh cheques were issued under a 2016 settlement, rejected the Section 87 alteration plea on the third cheque, and reduced the sentence in view of Rs 21 lakh already deposited.
The Delhi High Court has refused to disturb the conviction of Dr I.A. Khan under Section 138 of the Negotiable Instruments Act over three cheques of Rs 10 lakh each that bounced in 2016, but has cut his sentence from ten months' simple imprisonment to six. Justice Sanjeev Narula, deciding a revision petition pending since 2020, held that the courts below were entitled to find that the cheques were issued under a monetary settlement arising from a Ghaziabad property collaboration, not as security, and that a bank endorsement of an alteration in the amount on one cheque did not by itself make it void under Section 87. The compensation of Rs 42 lakh, Rs 12 lakh over the cheque amounts, was left untouched, and Rs 12.6 lakh lying with the High Court Registry was ordered released to the complainant.
A collaboration deal, a handwritten settlement and three cheques
The dispute goes back to a collaboration agreement of 13 September 2013 for property No. 162, Vikram Enclave Extension, Village Pasonda, Ghaziabad, a 200 square yard plot owned by the petitioner. The complainant was to build four floors; the petitioner would keep the ground and upper ground floors, the complainant the first and second floors with the roof rights. Clause 6 also provided for the complainant to pay the petitioner Rs 25 lakh, of which Rs 5 lakh had been received as earnest money.
Differences arose over the construction. According to the complainant, they were resolved by a settlement on 1 February 2016, recorded in a handwritten document marked Ex. CW-1/Q: he would give up the second floor and its roof rights, and the petitioner would pay him Rs 30 lakh by three cheques. The petitioner issued three State Bank of India cheques of Rs 10 lakh each, Nos. 315386 and 315387 dated 1 March 2016 and No. 315388 dated 3 March 2016, all deposited through ICICI Bank. Two came back for insufficiency of funds; No. 315387 was returned with an objection about an alteration in the amount. A demand notice went out on 27 June 2016, and when nothing was paid the complainant filed a complaint under Section 138.
The trial court convicted Dr Khan on 10 July 2019 and on 19 July 2019 sentenced him to ten months' simple imprisonment, Rs 42 lakh compensation and two months' further imprisonment in default. The Additional Sessions Judge, Shahdara, Karkardooma Courts, dismissed his Criminal Appeal No. 27/2019 on 30 January 2020. In the revision, CRL.REV.P. 122/2020, Mr Anand Prakash and Ms Varsha Arya appeared with the petitioner in person; Mr Shoaib Haider, APP, for the State; and Ms Rakhi Dubey and Mr Sandeep Dubey for the complainant. The matter was reserved on 30 September 2026.
Security cheques, an erased affidavit and a disputed signature
The petitioner's principal case was that the cheques were security for the complainant's performance under the collaboration agreement and were to be returned when the construction was complete. The complainant, he said, never finished the work, particularly on the ground floor, never obtained the required sanction and never paid the contractual Rs 25 lakh, which ought to have been set off against the alleged Rs 30 lakh liability. He disputed the settlement document, pointing out that DW-1 Imran Ali had denied his signature on it, and relied on an affidavit of 26 April 2016 attributed to the complainant, which supposedly acknowledged that the cheques were security. He also attacked the rejection of his applications to lead further evidence.
On cheque No. 315387 he took a separate point. ICICI Bank had returned it marked ‘Alteration in amount’ without presenting it to SBI, the drawee bank. A material alteration, he argued, rendered the cheque void under Section 87 of the NI Act, and a Reserve Bank circular of 22 June 2010 barred cheques with prohibited alterations from the Cheque Truncation System, so the ingredients of Section 138 were never satisfied for that instrument.
The complainant stood on the concurrent findings. The cheques were issued under the 1 February 2016 settlement; CW-2 Shamim Ahmed had witnessed both the settlement and the handing over of the cheques; the petitioner admitted his signatures; and the affidavit produced at the appellate stage was an afterthought never relied on at trial.
What a revision court can and cannot do
Justice Narula began with the limits of revisional jurisdiction, drawing on Kuntegowda v. Thurubaiah, 2026 SCC OnLine SC 1485. A revision court does not reappreciate evidence merely because another view is possible; it interferes where findings are perverse, grossly erroneous, glaringly unreasonable or untenable in law, rest on irrelevant material or none, or ignore relevant material. Equally settled was the operation of Sections 118(a) and 139: once execution of a cheque is admitted, the court must presume it was drawn for consideration towards a legally enforceable debt, and the accused must rebut that on a preponderance of probabilities, which a bare denial cannot do. The judgment cites Rangappa v. Sri Mohan, (2010) 11 SCC 441, and Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197. Since Dr Khan admitted signing and delivering all three cheques, the question was whether his defence raised a probable case.
Why the settlement document held
The judge found that it did not. Ex. CW-1/Q records a monetary settlement of Rs 30 lakh, refers to the cheques issued towards it and contemplates their return if the petitioner paid in cash within a stipulated period. Those terms supported the complainant's case that the cheques represented an agreed money obligation, not instruments to be encashed only once every floor was finished. CW-2 Shamim Ahmed, an attesting witness, deposed that the settlement was recorded in his presence and the three cheques handed over; his admission that he had not inspected the whole building went to his knowledge of the construction, not to what he saw of the settlement.
The challenge to the document's execution fared no better. DW-1 Imran Ali denied his signature and said he knew of no settlement. But the petitioner, who denied signing Ex. CW-1/Q in his Section 313 statement, said in cross-examination that he did not remember whether it bore his signature, and that the complainant had never obtained his signature on any paper by coercion. The courts below had weighed all of this against CW-2, and their acceptance of the complainant's account was not perverse merely because the petitioner disputed the document.
The set-off argument failed for a different reason. The appellate court had noted that the plea of adjusting the unpaid Rs 25 lakh was never raised when notice was framed, in the Section 145(2) application, or in cross-examination. The settlement itself arose from the construction disputes and required the complainant to give up the second floor and roof rights for Rs 30 lakh; allegations of incomplete construction did not show that it was never reached or had been adjusted. Justice Narula accepted that Clause 5 of the collaboration agreement, on which the trial court had leaned, neither quantifies construction expenses nor establishes a Rs 30 lakh liability. But the liability came from the later settlement, and the evidence of CW-1, CW-2 and the admitted signatures gave an independent basis for the finding.
The affidavit that arrived too late
Dr Khan had applied under Section 391 CrPC before the appellate court to bring on record an affidavit of 26 April 2016 said to have been executed by the complainant, acknowledging that the cheques were security. He said he could not produce it at trial because he had shifted residence and his father had died. The appellate court refused: he had never put the affidavit to the complainant's witnesses or mentioned it in his Section 145(2) application or Section 313 statement, and paragraph 5 of the document was completely erased. Section 391, Justice Narula held, gives the appellate court a power to take additional evidence where necessary, not an unfettered right in the accused to introduce evidence never relied on at trial. The refusal disclosed no material irregularity, and an affidavit never admitted and proved could not establish the defence. The trial court's refusal, on 29 June 2019, of a Section 311 application moved at final arguments to summon witnesses on the state of construction was likewise upheld: the timing was unexplained, the possession defence had not been raised at trial, and the construction was covered by CW-2's evidence and photographs.
Cheque No. 315387: ten lakh in words, and figures to match
The Section 87 point received the closest attention. The provision makes a material alteration void against a party who did not consent to it, unless it carries out the common intention of the original parties. In Veera Exports v. T. Kalavathy, (2002) 1 SCC 97, the Supreme Court held that whether an alteration was made by the drawer or with his consent is a question of fact to be proved where disputed. Bir Singh adds that filling in the particulars of a voluntarily signed and delivered cheque is not an alteration, so long as no existing entry such as the amount, date or payee is changed.
Dr Khan admittedly signed and delivered all three cheques. In cross-examination it was suggested to the complainant that he had filled in the amount on Ex. CW-1/A and written the digits 100; he denied both. The petitioner never established that an amount already entered had later been changed without his consent, and never explained in his own evidence when or how the alleged alteration was made. His defence throughout was that the cheques were security and had been misused. Denied suggestions, without more, could not make the cheque void.
The judge distinguished the Supreme Court's decision of 17 July 2026 in Rajasab v. Hulagappa, Criminal Appeal No. 3239 of 2026, where words and a digit had been inserted on the face of the cheque to turn Rs 10,000 into Rs 1,10,000, and the court held that a patent material alteration needs no further proof. Here the cheque, reproduced in the judgment, reads “Ten Lakh only” in words and Rs 100,0000 in figures. The two entries correspond. The digits 100 in the numerical entry, with no evidence that an existing amount was changed, were not an alteration of the kind found in Rajasab, and the bank's endorsement did not by itself prove an unauthorised material alteration.
The further contention that the cheque never reached SBI also failed. The RBI circular of 22 June 2010 does direct collecting banks not to accept cheques with prohibited alterations for presentment under CTS, so such a cheque may be returned without going to the drawee bank. But the ICICI Bank communication of 31 May 2016, Ex. CW-1/D, says only that the cheque was returned for rectification on account of an alteration in the amount; it does not say whether it was forwarded to SBI. The petitioner never raised non-presentation before either court below or in the original revision petition; it surfaced only in later written submissions. A question of law can be raised late, but the assertion that this cheque was withheld from clearing needed a factual foundation, and the record did not supply one.
The judge also noted the petitioner's conduct after the statutory notice. The demand notice of 27 June 2016 expressly referred to the return of cheque No. 315387 for alteration, and the trial court presumed service at his correct addresses. He neither replied alleging an unauthorised alteration nor paid, and when the Section 251 CrPC notice was put to him his explanation was that the cheques were security. Citing Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375, Justice Narula said the silence was neither an admission of alteration nor a substitute for proof of the ingredients of Section 138, but it was relevant to the credibility of a defence advanced now, once the underlying liability and voluntary delivery of the cheque stood established. There was no ground to disturb the conviction.
Rs 42 lakh stays, ten months becomes six
The compensation of Rs 42 lakh comprises the Rs 30 lakh cheque amount and a further Rs 12 lakh. In R. Vijayan v. Baby, (2012) 1 SCC 260, the Supreme Court said compensation in cheque-dishonour cases should be practical and realistic, ordinarily covering the cheque amount and reasonable interest for the period of deprivation, with simple interest at 9 per cent a year indicated as a reasonable measure. The cheques were dishonoured in 2016 and the amount was still unpaid when sentence was passed in July 2019; the liability remains unsatisfied despite deposits made under judicial orders. The figure, the judge held, was neither excessive nor unreasonable.
The substantive sentence was another matter. The trial court had refused leniency chiefly because cheque-dishonour cases were on the rise and deterrence was needed. Those considerations are relevant, Justice Narula said, but the sentence must also reflect the individual case: a property-development arrangement that ended in a monetary settlement, family circumstances placed before the trial court, and an aggregate of Rs 21 lakh deposited during the appeal and the revision. The deposits do not discharge the liability but bear on sentence. Six months' simple imprisonment, the court held, would adequately serve the ends of justice. The default sentence of two months stays.
Order
The revision petition was partly allowed to the limited extent of reducing the substantive sentence from ten months to six months of simple imprisonment. The conviction under Section 138, the direction to pay Rs 42 lakh as compensation and the two-month default sentence were affirmed. Dr Khan had deposited Rs 8,40,000 before the trial court on the appellate court's directions and Rs 12,60,000 with the High Court Registry under the order of 21 February 2024. CRL.M.A. 10656/2024, the complainant's application for release of the Rs 12,60,000, was allowed; the Registry is to release that sum with accrued interest, if any, after verification, and whatever the complainant receives is to be adjusted against the compensation. For the Rs 8,40,000 lying with the trial court, the complainant is at liberty to apply to that court, with the same adjustment. The balance remains recoverable in accordance with law. A copy of the order goes to the trial court, and all pending applications stand disposed of.