Supreme Court: Altered Cheque Cannot Lead to Section 138 NI Act Conviction

• The Supreme Court set aside a conviction under Section 138 of the Negotiable Instruments Act due to a visibly altered cheque.
• The cheque, originally for ₹10,000, was found to have been materially altered to appear as ₹1.10 lakh.
• The Court ruled that visible alteration on a cheque invalidates the instrument and makes a conviction unsustainable without needing additional evidence.
• This decision reversed judgments from the trial court, appellate court, and the Karnataka High Court.
• The Supreme Court ordered the reimbursement of compensation paid by the appellant, Rajasab, within four weeks.

A conviction under Section 138 of the Negotiable Instruments Act for cheque dishonour cannot be sustained if the cheque has been manifestly tampered with, as such alteration renders the instrument invalid.

The Supreme Court of India recently delivered a significant judgment, overturning a conviction under Section 138 of the Negotiable Instruments Act (NI Act) due to a visibly altered cheque. In the case of Rajasab Vs Hulagappa, a bench comprising Justices Sanjay Kumar and Sanjeev Sachdeva determined that a cheque, which clearly showed signs of being changed from an original value of ₹10,000 to ₹1.10 lakh, could not form the basis for a conviction. This ruling underscores the invalidity of instruments that have undergone material alteration.

The apex court found that the cheque in question had been manifestly tampered with, specifically noting the insertion of the words "One Lak" before "Ten Thousand only" and the numerical digit "1" before "10,000/-" in the amount box. Such an alteration, the Court held, rendered the entire instrument invalid, thereby making the appellant's conviction unsustainable. This decision effectively set aside the judgments of the trial court, the appellate court, and the Karnataka High Court, all of which had previously upheld the conviction.

Central to the Supreme Court's decision is the principle that a conviction under Section 138 of the Negotiable Instruments Act, pertaining to cheque dishonour, cannot be upheld if the cheque itself bears clear evidence of material alteration. The Court clarified that when the alteration is patently obvious on the face of the instrument, lower courts are not required to demand additional evidence to prove the tampering. The visible nature of the alteration is sufficient to invalidate the cheque.

The bench emphasized that a cheque that has been materially altered loses its legal standing, making any subsequent dishonour an invalid ground for prosecution under the NI Act. This ruling provides crucial guidance on the evidentiary standards for material alteration in cheque dishonour cases, asserting that the physical state of the cheque can, in itself, be conclusive proof of tampering, negating the need for further corroboration.

The appellant, Rajasab, had faced a protracted legal battle stemming from the disputed cheque. The journey began with the trial court, which, on August 11, 2014, accepted the complainant's assertion that the cheque was originally issued for ₹1.10 lakh and subsequently convicted Rajasab. This conviction was later affirmed by the District and Sessions Judge, Koppal, who dismissed the appellant's appeal on March 25, 2019.

Further appeals led to the Karnataka High Court's Dharwad Bench, which, in a judgment dated April 25, 2025, upheld the conviction under Section 138 of the Negotiable Instruments Act. While maintaining the conviction, the High Court did reduce the imposed fine from ₹1,15,000 to ₹1,10,000, directing this amount to be paid as compensation to the complainant. Rajasab subsequently deposited the specified sum. However, the Supreme Court, upon its own examination, concluded that the lower courts had erred in rejecting the contention of material alteration, finding the tampering manifest on the cheque's face.

Beyond setting aside the conviction, the Supreme Court issued specific directives regarding the financial implications for the parties involved. The Court mandated that the amount previously received by the respondent, pursuant to the earlier court orders, must be reimbursed to the appellant, Rajasab, within a strict timeframe of four weeks from the judgment date of July 17, 2026.

Furthermore, the Supreme Court clarified that if any portion of the amount initially deposited by the appellant remains held by the concerned court, Rajasab is at liberty to petition for its release. This release would also include any accrued interest on the deposited funds, ensuring that the appellant is fully compensated following the overturning of the conviction.

Source: Original reporting via legal news source.