The Section 138 NI Act, Jinx: Critique of ‘Celestium’ Judgement Allowing Complainants to file Appeal Under Section 372 CrPC by Hon’ble Apex Court.
In the case of Critical Analysis of
M/s Celestium Financial v. A. Gnanasekaran (2025 INSC 804)
Aurthor Adv. Bijal Gogri (Principal Associate at GNP LEGAL)
DISHONOURED
PAY
THE SUPREME COURT HELD THAT THE COMPLAINANT UNDER SEC- TION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 (NI ACT) QUALIFIES AS A VICTIM AND HAS A RIGHT TO FILE AN APPEAL WITHOUT SEEKING SPECIAL LEAVE
Introduction
The decision of the Supreme Court of India in M/s Celestium Financial v. A. Gnanasekaran (2025 INSC 804) constitutes a significant and authoritative pronouncement on the contours of Appellate rights in criminal proceedings, particularly those arising out of private complaints under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The judgment addresses a long-standing doctrinal ambiguity concerning the interface between Section 372 and Section 378(4) of the Code of Criminal Procedure, 1973 (CrPC), in the context of appeals against acquittal.
At the core of the controversy lays the question whether a complainant in a cheque dishonour prosecution who has undeniably suffered pecuniary loss as a result of the alleged offence can be treated as a “victim” within the meaning of Section 2(wa) CrPC. If answered in the affirmative, such a complainant would be entitled to invoke the provision of Section 372 CrPC and prefer an appeal against an acquittal as of right, without the necessity of first obtaining special leave under Section 378(4) CrPC. Resolving this issue, the Supreme Court adopted a purposive and victim-centric interpretation of the statutory framework, set aside the refusal of leave by the Madras High Court, and clarified that complainants in Section 138 prosecutions who suffer economic loss qualify as “victims” for the purpose of Section 372 CrPC.
This judgment assumes considerable importance not merely for cheque dishonour litigation, but also for the broader evolution of victim jurisprudence in India, particularly in complaint-based prosecutions.
Facts of the Case
The appellant, M/s Celestium Financial, is a registered partnership firm engaged in the business of moneylending. In the course of its commercial activities, the appellant advanced various loans to Respondent No. 1, who was engaged in managing a catering business, as well as to certain other persons acting on his behalf. In discharge of the alleged financial liabilities arising from these transactions, several cheques were issued in favour of the appellant.
Upon presentation, the cheques were dishonoured, leading the appellant to initiate criminal proceedings under Section 138 of the NI Act. The matter proceeded to trial before the jurisdictional Judicial Magistrate. By judgment dated 7 November 2023, the trial court
acquitted Respondent Nos. 1 to 3, holding that the appellant had failed to establish the existence of a legally enforceable debt or liability and that the accused had successfully rebutted the statutory presumption under Section 139 of the NI Act.
Aggrieved by the acquittal, the appellant approached the Madras High Court by filing applications seeking special leave to appeal under Section 378(4) CrPC. By a common order dated 12 June 2024, the High Court dismissed the applications, thereby declining to grant leave to appeal.
The Appellant thereafter approached the Supreme Court. While granting leave, the Supreme Court framed and examined the larger legal question as to whether the appellant, being a complainant who had suffered pecuniary loss, could be treated as a “victim” under Section 2(wa) CrPC and consequently avail the appellate remedy under the Section 372 CrPC without being subjected to the requirement of obtaining special leave under Section 378(4).
Legal Issues
The Supreme Court addressed two interrelated issues of law:
1. Primary Issue: Whether a complainant in a private prosecution under Section 138 of the NI Act, who has suffered pecuniary loss as a consequence of the alleged offence, qualifies as a “victim” within the meaning of Section 2(wa) CrPC and is thereby entitled to file an appeal against an acquittal under the provision of Section 372 CrPC without seeking special leave under Section 378(4) CrPC.
2. Consequential Issue: If such a complainant is held to be a “victim”, whether the appellate remedy under Section 372 CrPC overrides or dispenses with the procedural requirement of special leave contemplated under Section 378(4) CrPC, and how both provisions are to be harmoniously construed.
Submissions of the Parties
A. Submissions on Behalf of the Appellants
The Appellant contended that it occupied a dual status that of a complainant and that of a person who had suffered direct financial loss due to the dishonour of cheques. Emphasising the statutory definition of “victim” under Section 2(wa) CrPC, the appellant argued that the expression “loss or injury” is of wide amplitude and squarely encompasses pecuniary or economic loss. Consequently, the appellant asserted that it clearly fell within the definition of a “victim”.
It was further contended that the Section 372 CrPC, introduced by the Criminal Procedure Code (Amendment) Act, 2008 with effect from 31 December 2009, confers a substantive and independent right of appeal upon victims against orders of acquittal. Requiring a victim- complainant to nevertheless seek special leave under Section 378(4) CrPC would, according to the appellant, dilute the legislative intent underlying the amendment and render the victim’s right of appeal illusory.
B. Submissions on Behalf of the Respondents
The Respondents, conversely, placed reliance on judicial precedents that have construed the appellate rights of complainants in
a restrictive manner. It was contended that Section 378(4) of the Code of Criminal Procedure, 1973, constitutes a specific and self-contained provision governing appeals arising from complaint cases and unequivocally mandates that a complainant must obtain special leave of the High Court before preferring an appeal against an order of acquittal. Permitting a complainant to circumvent this statutory requirement by invoking Section 372 of the Code, it was argued, would effectively nullify the legislative safeguard intended to shield acquitted persons from frivolous and vexatious prosecutions.
The respondents further endorsed the reasoning adopted by the High Court, submitting that the leave requirement under Section 378(4) serves a vital filtering function and ought not to be rendered otiose by an unduly expansive interpretation of Section 372.
Analysis and Reasoning of the Supreme Court
The Supreme Court, speaking through Justice B.V. Nagarathna and Justice Satish Chandar Sharma, undertook a comprehensive textual, contextual, and purposive examination of the relevant provisions of the Code of Criminal Procedure, 1973, the legislative intent underlying the 2009 amendments, and the evolving jurisprudence concerning victims’ rights within the criminal justice system.
At the threshold, the Court reaffirmed the settled principle that statutory interpretation must advance the object and purpose of the enactment, particularly where legislative amendments are introduced to remedy identified lacunae or structural deficiencies in the existing legal framework. The 2009 amendments to the CrPC, most notably the insertion of Section 2(wa) and the Section 372 were acknowledged as a deliberate legislative intervention aimed at fortifying the position and participatory rights of victims in criminal proceedings.
While interpreting Section 2(wa) CrPC, the Court adopted a broad, liberal, and inclusive construction of the term “victim”. It categorically held that the expression “loss or injury” is not restricted to bodily or physical harm but encompasses economic and pecuniary loss as well. On this interpretative footing, the Court concluded that a complainant in a prosecution under Section 138 of the Negotiable Instruments Act, who suffers financial loss due to dishonour of a cheque, squarely falls within the statutory definition of a “victim”.
Turning to the provision of Section 372 CrPC, the Court held that it confers a substantive, independent, and unqualified right of appeal upon victims against orders of acquittal, conviction for a lesser offence, or inadequacy of compensation. The Court expressly rejected the contention that this right is confined only to cases instituted on police reports, observing that neither the text of the provision nor its legislative history supports such a restrictive construction, whether expressly or by necessary implication.
The apparent conflict between Section 372 and Section 378(4) CrPC was resolved by applying the doctrine of harmonious construction. The Court clarified that Section 378(4) regulates appeals by complainants qua complainants in complaint cases, whereas Section 372 operates in a distinct and independent field by conferring appellate rights upon victims qua victims. Where a complainant also satisfies the statutory definition of a victim under Section 2(wa), the appeal would be maintainable under Section 372, and the procedural requirement of obtaining special leave under Section 378(4) would not be attracted. Significantly, the Court underscored the foundational principle that procedural law must remain subservient to substantive rights. An interpretation that obliges a victim to seek special leave notwithstanding the clear and unambiguous language of Section 372 would dilute the efficacy of the victim’s statutory right of appeal and defeat the very purpose for which the amendment was enacted.
At the same time, the Court was careful to emphasise that recognition of a victim’s right to appeal does not erode or dilute the presumption of innocence that continues to operate in favour of an acquitted accused. The well settled parameters governing appellate interference with orders of acquittal remain untouched, and the conferment of a right to appeal does not ipso facto warrant reversal of the trial court’s findings.
In view of the foregoing analysis, the Supreme Court allowed the appeals, set aside the common order of the Madras High Court dated 12th June 2024, and granted liberty to the appellant to file appeals under Section 372 CrPC within a period of four months from the date of the Supreme Court’s judgment dated 8th April 2025. The Court further clarified that if such appeals were filed within the stipulated period, the issue of limitation would not be raised either by the respondents or by the appellate court.
Conclusion
The decision in M/s Celestium Financial v. A. Gnanasekaran (2025 INSC 804) represents a coherent and purposive reconciliation of Sections 2(wa), 372, and 378(4) of the Code of Criminal Procedure, 1973. By unequivocally holding that a complainant in a prosecution under Section 138 of the Negotiable Instruments Act, who has suffered pecuniary loss, falls within the statutory definition of a “victim”, the Supreme Court has conclusively clarified that such a complainant is entitled to maintain an appeal against acquittal under Section 372 CrPC, without being required to obtain special leave under Section 378(4).
The ruling is poised to have far-reaching implications for appellate practice in cheque dishonour cases and, more broadly, in complaint-initiated criminal prosecutions. At a doctrinal level, the judgment reinforces the legislative intent underlying the 2009 amendments to the CrPC and reaffirms the fundamental principle that statutory rights and remedies conferred by Parliament must receive full, effective, and meaningful operation. Importantly, this expansion of victim-centric appellate rights is achieved without diluting the foundational safeguards of criminal jurisprudence, including the presumption of innocence and the well-settled parameters governing appellate interference with acquittals.