Following Supreme Court’s Ruling In Celestium Financial, Court Recognises Independent Appellate Right Of Payee In Section 138 NI Act Cases
LawDaily.org | Criminal Law | Negotiable Instruments Act
The Gujarat High Court has held that a complainant in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881 is to be treated as a “victim” and is entitled to avail the statutory remedy of appeal available to victims against an order of acquittal. The Court accordingly directed transfer of a pending criminal appeal filed by the complainant to the competent Sessions Court, where it would be considered as an appeal under the victim appeal provision.
The order was passed by Justice Hemant M. Prachchhak in Criminal Appeal No. 874 of 2012 titled Laxmi Insecticides Pvt. Ltd. through Manager Dineshbhai v. Saurashtra Agro Chemicals & Ors., decided on 23 July 2026. The appeal had been filed by the original complainant challenging the judgment and order dated 02 April 2012 passed by the Metropolitan Magistrate, Negotiable Instruments Act Court No. 30, Ahmedabad, whereby the accused persons were acquitted of the offence punishable under Section 138 of the Negotiable Instruments Act.
The Gujarat High Court was not required to examine the merits of the cheque dishonour dispute at this stage. The principal question before the Court was regarding the appropriate appellate remedy available to a complainant who has suffered due to dishonour of a cheque and wishes to challenge an order of acquittal passed in favour of the accused.
The Court considered the recent legal position emerging from the judgment of the Supreme Court in Celestium Financial v. A. Gnanasekaran, wherein the Supreme Court examined the status of a complainant under Section 138 of the Negotiable Instruments Act and held that such complainant is a victim of the offence and has a right to prefer an appeal against acquittal under the victim appeal mechanism.
Background Of The Case
The proceedings before the Gujarat High Court arose from a complaint filed under Section 138 of the Negotiable Instruments Act. Section 138 deals with criminal liability arising from dishonour of cheques issued towards legally enforceable debts or liabilities. A cheque holder or payee who receives a dishonoured cheque is permitted to initiate criminal proceedings against the drawer of the cheque, subject to compliance with statutory requirements including issuance of notice and failure of payment within the prescribed period.
In the present matter, Laxmi Insecticides Pvt. Ltd., through its authorised representative, had initiated proceedings against the accused persons alleging commission of cheque dishonour offence. However, after trial, the concerned Magistrate Court acquitted the accused persons by judgment dated 02 April 2012. Aggrieved by the acquittal, the complainant approached the Gujarat High Court by filing an appeal invoking the provisions relating to appeals against acquittal under criminal procedure law.
During the hearing of the appeal, attention of the Court was drawn towards the subsequent legal developments concerning the rights of complainants in cheque dishonour matters, particularly the Supreme Court’s judgment in Celestium Financial.
Supreme Court Clarified Status Of Section 138 Complainant
The Gujarat High Court extensively relied upon the principles laid down by the Supreme Court in Celestium Financial. The Supreme Court had considered whether a complainant who initiates proceedings under Section 138 of the Negotiable Instruments Act can be regarded as a “victim” for the purpose of exercising the right of appeal against acquittal. The Supreme Court answered the issue in favour of the complainant and held that the person who suffers due to dishonour of cheque is the person directly affected by the alleged offence.
The Court observed that in cases under Section 138 of the Negotiable Instruments Act, the complainant is not merely a person who sets criminal law into motion but is also the person who has suffered the consequences of the alleged wrongful act. The Supreme Court held that a complainant in a cheque dishonour case is indeed a victim because the dishonour of the cheque causes direct financial injury to the payee or holder of the cheque.
The Court further observed that merely because proceedings under Section 138 begin through a private complaint filed under Section 200 of the Code of Criminal Procedure, the complainant does not lose the character of a victim. The complainant continues to remain the person affected by the offence.
Victim Appeal Right Cannot Be Restricted
The Gujarat High Court also referred to the reasoning adopted by the Supreme Court regarding the nature of victim rights under criminal procedure law. The Supreme Court had explained that a victim of an offence must have an effective and independent right to challenge an adverse decision. The Court compared the position of victims with convicted accused persons. While an accused who suffers conviction has a statutory right to challenge the conviction through appeal, similarly a victim should not be denied the right to challenge acquittal, inadequate compensation, or conviction for a lesser offence where the law permits such challenge.
The Supreme Court observed that Parliament introduced the victim appeal provision with the objective of recognising the independent rights of victims in the criminal justice system. Such right was intended to operate without unnecessary procedural restrictions. The Gujarat High Court noted that the Supreme Court had specifically held that the complainant under Section 138 of the Negotiable Instruments Act and the victim are effectively the same person because it is the person suffering from cheque dishonour who initiates the complaint.
Issue Regarding Appeal Provision Before High Court
Before the Gujarat High Court, it was submitted that in light of the Supreme Court’s ruling, the complainant should approach the Sessions Court instead of maintaining an appeal before the High Court under the earlier appeal mechanism. The Court was also informed that the issue was being considered in another matter before the Supreme Court, namely M/s Everest Automobiles v. M/s Rajit Enterprises, where the Supreme Court had observed that the question involved wider consequences and may require authoritative consideration by a larger Bench.
However, until any contrary legal position emerges, the Gujarat High Court proceeded on the basis of the law declared by the Supreme Court in Celestium Financial. The Court observed that the complainant’s appeal was required to be considered as an appeal by a victim before the immediate superior court in the judicial hierarchy.
Gujarat High Court Directs Transfer Of Appeal
After considering the submissions and legal position, the Gujarat High Court directed the Registry to transfer the pending appeal to the concerned Sessions Court. The Court directed that after transfer, the matter shall be treated as an appeal under the victim appeal provision and numbered accordingly. The Court further directed issuance of notice to the parties and transfer of the entire record of the proceedings, including certified copies of the impugned judgment and other relevant documents, to the Sessions Court.
The Sessions Court was directed to decide the matter in accordance with law. Since the matter had remained pending for a considerable period, the High Court directed the lower appellate court to make efforts for expeditious disposal.
Court Clarifies No Finding On Merits
The Gujarat High Court specifically clarified that it had not examined the correctness of the acquittal order passed by the Magistrate Court. The Court’s consideration was limited only to determining the appropriate appellate forum and the legal right available to the complainant. The Sessions Court, after receiving the transferred appeal, would independently examine the grounds raised by the complainant and decide the matter on merits.
Importance Of The Judgment For Cheque Bounce Litigation
The decision assumes significance because cheque dishonour litigation forms a substantial part of criminal proceedings before Indian courts. Section 138 of the Negotiable Instruments Act was introduced to enhance confidence in commercial transactions and ensure credibility of cheque-based payments. For several years, questions remained regarding the precise appellate remedy available to complainants after acquittal of accused persons.
The Gujarat High Court’s order, following the Supreme Court’s reasoning, clarifies that complainants are not merely informants or private parties but are persons directly affected by the alleged offence. The recognition of complainants as victims strengthens their position within the criminal justice framework and provides them an independent remedy against acquittal.
Legal Position Emerging From The Judgment
The following principles emerge from the Gujarat High Court’s decision:
Conclusion
The Gujarat High Court’s order in Laxmi Insecticides Pvt. Ltd. v. Saurashtra Agro Chemicals & Ors. reinforces the expanding recognition of victims’ rights in criminal proceedings arising from cheque dishonour cases. By following the Supreme Court’s ruling in Celestium Financial, the Court recognised that a complainant under Section 138 of the Negotiable Instruments Act is not merely a person who initiates prosecution but is the person directly affected by the dishonour of the cheque.
The transfer of the appeal to the Sessions Court ensures that the complainant receives consideration of the challenge against acquittal through the appropriate appellate mechanism. The order marks another important development in cheque bounce jurisprudence and strengthens the legal position that victims of statutory offences are entitled to meaningful appellate remedies.