TaxTMI 
TaxTMI 
2026 (8) TMI 231
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....sed') and thereby set aside the order of conviction dated 19.09.2016 passed by the Court of LXV Additional City Civil & Sessions Judge, Bangalore in Criminal Appeal No. 1224 of 2015. The said Criminal Appeal was preferred by the accused being aggrieved by the judgment dated 01.09.2015 of the Court of the XL Additional Chief Metropolitan Magistrate, Bangalore in Complaint Case No. 12108 of 2013 wherein the Magistrate had convicted him under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") and thereby sentenced him to pay a fine of Rs. 9,00,000/- (Rupees Nine Lakh) and in default of payment of the fine, to undergo simple imprisonment for six months. 3. Briefly stated, the admitted facts of the case leading to the present Appeal are that the complainant and accused, being acquainted with each other, entered into an agreement in December 2010 whereby a hand loan of Rs. 4,50,000/- (Rupees Four Lakh and Fifty Thousand) was extended by the complainant to the accused for the purpose of purchase of a house site. It was further agreed by the parties that the said loan would be paid by the accused within a period of one year with interest at the rat....
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....e complainant had complied with all the requirements of Sections 138 to 142 of the NI Act and therefore presumptions under Sections 118 and 139 of the NI Act were raised in favour of the complainant and the said presumptions were not rebutted by the defence of the accused and hence making him liable to be punished under the rigours of Section 138 of the NI Act. 3.5 Aggrieved by the order dated 01.09.2015 of the trial court, the accused preferred Criminal Appeal No. 1224 of 2015 before the Court of LXV Additional City Civil and Sessions Judge, Bangalore which was dismissed vide judgment dated 19.09.2016 by affirming the findings of the trial court. However, the order of sentence was modified to the extent of fine imposed, which was reduced from Rs. 9,00,000/- (Rupees Nine Lakh) to Rs. 6,50,000/-(Rupees Six Lakh and Fifty Thousand). 3.6 Aggrieved by the judgment dated 19.09.2016 of the Appellate Court, the accused preferred a Criminal Revision Petition No.1502 of 2016 before the Karnataka High Court with a prayer to set aside the judgment dated 19.09.2016 passed in Criminal Appeal No. 1224 of 2015 and judgment dated 01.09.2015 passed in the Criminal Complaint No. 12108 of 2013 ....
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....he complainant's monthly income to infer absence of financial capacity to advance a sum of Rs. 4,50,000/- (Rupees Four Lakh and Fifty Thousand). It was argued that such an approach is contrary to the settled position of law as no initial burden lies upon the complainant once the presumption under Sections 118 and 139 of the NI Act is satisfied. It was further contended that the accused neither produced any additional evidence nor demonstrated any cogent material to rebut the presumption under Section 139 of the NI Act. In fact, it was contended that the accused only produced legal notice sent post-facto and some oral evidence, but no reliable evidence was produced by the accused to rebut the presumption under Section 139 of the NI Act. Lastly, it was argued that the High Court had committed an error by allowing the revision petition preferred by the accused and therefore should be set aside in the interest of justice. 4.2 Per contra, learned counsel for the accused, while opposing the appeal preferred by the complainant, submitted that on 10.10.2010, the accused took a hand loan of Rs. 40,000/- (Rupees Forty Thousand) from one S.B. Ramachandraiah (the Prosecution Witness No. 2 i....
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....m and therefore the High Court was correct in setting aside the concurrent judgments of conviction passed by the lower courts. 5. Before delving into the contentions of the parties and appreciation of facts, we wish to underline the aims and objectives of Chapter XVII (Sections 138 to 148) of NI Act which was inserted by Act 66 of 1988 w.e.f. 01.04.1989. The scope and intent of bringing the said Chapter in the statute is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. It is to enhance the acceptability of cheque in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficient arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers. This chapter has been introduced to prevent dishonesty on the part of the drawer of negotiable instruments to draw a cheque without sufficient funds in the account maintained by him in the bank and induce the payee or holder-in-due-course to act upon it. In other words, these provisions have been introduced to give greater credibility to our trade, business, commerce and industry....
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....on 138 of the NI Act, which is a penal provision, provides that wherever any cheque drawn by a person for discharge of any liability is returned by the bank unpaid for the reason of insufficiency of the amount of money standing to the credit of the account on which the cheque was drawn or for the reason that it exceeds the arrangements made by the drawer of the cheque with the banker for that account, the drawer of such cheque shall be deemed to have committed an offence. In that case, the drawer, without prejudice to the other provisions of the said Act, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. 5.3 At this juncture, it is pertinent to highlight the key ingredients as highlighted by this Court in the case of Kusum Ingots & Alloys Ltd. vs. Pennar Peterson Securities Ltd., (2000) 2 SCC 745. "10. On a reading of the provisions of Section 138 of the NI Act it is clear that the ingredients which are to be satisfied for making out a case under the provision are: (i) a person must have drawn a cheque on an account maintained by him in a bank for paymen....
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....oney to the payee or the holder in due course within fifteen days of the receipt of the notice. vii. Filing of the complaint within a month from the date of expiry of the grace period of fifteen days before a Metropolitan Magistrate or a Judicial Magistrate not below first class. 5.5 At this juncture we find it appropriate to deal with certain presumptions that flow from the NI Act with respect to cheques drawn in favour of the payee or the holder in due course. Section 118 of the NI Act provides for certain special rules of evidence. The said provision is extracted as hereunder: "118. Presumptions as to negotiable instruments.-Until the contrary is proved, the following presumptions shall be made:- (a) of consideration:-that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; (b) as to date:-that every negotiable instrument bearing a date was made or drawn on such date; (c) as to time of acceptance:-that every accepted bill of exchange was accepted within a r....
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....e) and (f) which allows for presumption that every transfer of negotiable instrument was made before its maturity, every indorsement appearing upon a negotiable instrument was made in order in which they appear, every negotiable instrument that was lost was duly stamped respectively. Lastly, the statutory presumption under Section 118(g) is that every holder of a negotiable instrument shall be considered as a holder in due course i.e. he is presumed to have paid the consideration for the instrument and in good faith. 5.6 Now, coming to Section 139 of the NI Act, the said section raises the presumption that unless the contrary is proved, it shall be presumed that the holder of the cheque had received the cheque for the discharge, in whole or in part, of any debt or other liability. The said section is extracted as hereunder: "139. Presumption in favour of holder.-It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section138 for the discharge, in whole or in part, of any debt or other liability." The presumption as envisaged under Section 139 is a statutory and mandatory presumption and not ....
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.... 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over." 5.7 A conjoint and harmonious reading of the aforesaid provisions clearly indicate towards the statutory presumption that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of the negotiable instrument is either approved or admitted. As soon as the complainant discharges the burden to prove that the instrument was executed by the drawer, the rules of presumption under Sections 118 and 139 of the NI Act help him and shift the burden of rebutting the said presumptions upon the said drawer. Since these pres....
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....eriod of limitation and the other requirements such as the presentment of cheque within six months from the date on which it was drawn, demand of the said amount through legal notice within thirty days and non-repayment of the cheque amount within a period of fifteen days thereafter are fulfilled, the court has to set in motion the wheel of criminal machinery as envisaged under Section 138 of the NI Act. 6.2 As apparent from the bare perusal of the record, the complainant herein received the cheque bearing No. 524714 dated 20.03.2013 drawn by the accused for a sum of Rs. 4,50,000/-(Rupees Four Lakh and Fifty Thousand). The said cheque was presented before the State Bank of India, Magadi Road Branch, Bengaluru on 20.03.2013 i.e. within the period of six months as envisaged under Section 138(a). Thereafter, the said Bank issued a return memo with respect to the cheque bearing No. 524714 stating that the said cheque was dishonoured owing to insufficiency of funds in the accused's bank account. In consequence of the return memo received by the complainant, a legal notice was issued to the accused on 28.03.2013 demanding the cheque amount of Rs. 4,50,000/-(Rupees Four Lakh and Fifty ....
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....re is no documentary evidence to support the contention of the accused that he had borrowed Rs. 40,000/-(Rupees Forty Thousand) from S.B. Ramachandraiah. There is no receipt or endorsement to evince the fact that the said loan was ever repaid by the accused. Furthermore, even if this Court accepts the argument of the accused that a blank cheque was given by the accused which was later misplaced by S.B. Ramachandriah, we fail to see any step that was undertaken by the accused to recover the said cheques from him. No legal action has been undertaken by him to show that there was any attempt made by the accused for recovering the cheques and documents issued by him which were allegedly misappropriated by the complainant herein. The accused has relied upon the legal notice dated 16.09.2014 that was addressed to the complainant and to S.B. Ramachandraiah wherein for the first time, a demand was made by the accused for the return of the said cheque and document. However, we cannot help but take note of the fact that the said legal notice was issued only on 16.09.2014 whereas the Complaint Case No. 12108 of 2013 was filed on 06.05.2013. Furthermore, by the time the said legal notice was i....
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....r 2013. I came to know that the said cheque was dishonored. I have demanded the repayment of the amount, but the complainant has stated that he has filed a complaint against the accused and is waiting for its result." Further, the PW-3 in his examination has stated: "I know the complainant. His native is situated near my village and he used to come to my bakery. I have financial transaction with the complainant. He borrowed Rs. 50,000/- from me on 05.12.2010. He promised me to repay it within 2-3 months, but he did not repay within time. On enquiry, he stated that his amount is struck with some person and he has filed a case against him. He says that cheque issued by the said person is bounced and he will pay within 6 months" Upon perusal of the aforesaid statements made by the PW-2 and PW-3, there appears a consonance with the case of the complainant that in order to extend loan of Rs. 4,50,000/- (Rupees Four Lakh and Fifty Thousand) in favour of the accused, the complainant had taken financial assistance from his friends and families. Upon perusal of cross-examination conducted by the counsel of accused upon the testimonies of PW-2 and PW-3, nothing has been elicit....
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....The said testimonies were subjected to intensive cross-examination as well wherein nothing of substance was elicited to shake their veracity and therefore the trial court and the Appellate Court were right in relying upon and basing their conviction on the same. 6.7 Furthermore, the failure of the accused to respond to the statutory notice issued under Section 138 of the NI Act gives rise to an inference that the complainant's version carries merit. The initial burden of raising a defence that the complainant lacked the financial capacity to advance the loan rests upon the accused and ought to have been specifically pleaded in the reply to the demand notice. In the absence of such a plea, the complainant cannot be expected, to adduce evidence establishing his financial capacity to pay the loan to the accused while leading his evidence. The accused may discharge this burden by producing independent witnesses or documentary evidence to demonstrate the complainant's lack of financial means. Alternatively, he may rely upon the materials produced by the complainant himself or establish the same through an effective cross-examination of the complainant and his witnesses. In the fa....
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....edit facilities so as to enable him to extend a hand loan to the accused. 6.10 As already observed, the said testimonies have been put through cross-examination by the opposing counsel and nothing has been elicited so as to shake its credibility. Thereafter, upon return of cheque after its presentment due to insufficiency of funds, a legal notice in compliance with the rigours of Section 138 of NI Act was issued and thereupon a complaint was lodged before the Magistrate which led to the culmination of Complaint Case No. 12108 of 2013. The said chain of events right from the return of cheque, until the filing of the complaint case was done within the contours of law and procedural mandate as ordained in Chapter XVII (Sections 138 to 148) of the NI Act and therefore, we fail to find any merit in the submission of the learned counsel for the accused that the complainant failed to delineate proper sequence of time and chain of events beginning from issuance of hand loan to the filing of complaint. We therefore hold that the High Court erred in reversing well-reasoned and concurrent findings of conviction and sentence of the lower courts while exercising its extremely limited revisio....
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....lf about the correctness, legality and propriety of the findings, sentence and order recorded by the lower court, and should refrain from substituting its conclusion on an elaborate consideration of evidence and the findings of the lower courts should not be reversed merely on the ground that an alternative view is possible on the facts of the case. In this case, such a position did not also emanate from the evidence on record. 7.1 This Court, in the State of Maharashtra vs. Jagmohan Singh Kuldip Singh Anand, (2004) 7 SCC 659 observed that the High Court, in exercise of its revisional jurisdiction, cannot embark upon an in-depth roving re-examination of the oral evidence and medical evidence and come to a conclusion contrary to the consistent one reached by two courts below. In the facts of the present case, in the impugned judgment, the High Court gravely erred in upsetting the concurrent findings of conviction of the trial court and the Appellate Court by substituting its own conclusions and reasoning on the merits of the case and thereby erred in setting aside the well-reasoned and correct judgement and orders of the trial and appellate courts. 7.2 Upon perusal of the impu....
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.... iii. There is a non-consideration of any relevant material or the judicial discretion has been exercised arbitrarily or capriciously. 7.4 This Court in Sanjabij Tari vs. Kishore S. Borcar, 2025 INSC 1158 in similar facts and circumstances wherein the High Court had reversed concurrent findings of conviction under Section 138 of NI Act, while setting aside the impugned order, observed as under: "27. It is well settled that in exercise of revisional jurisdiction, the High Court does not, in the absence of perversity, upset concurrent factual findings. This Court is of the view that it is not for the Revisional Court to re-analyse and re-interpret the evidence on record. As held by this Court in Southern Sales & Services and Ors. v. Sauermilch Design and Handels GMBH, (2008) 14 SCC 457, it is a well-established principle of law that the Revisional Court will not interfere, even if a wrong order is passed by a Court having jurisdiction, in the absence of a jurisdictional error. 28. Consequently, this Court is of the view that in the absence of perversity, it was not open to the High Court in the present case, in revisional jurisdiction, to upset the concurrent fin....