Court sets aside concurrent convictions under Section 138 of Negotiable Instruments Act after finding trial and appellate courts' appreciation of evidence grossly erroneous and unreliable
In a significant judgment delivered on 17th October 2026, the Karnataka High Court, presided over by Justice Geetha K.B., allowed the revision petition filed by Sri Muniraju, setting aside his conviction under Section 138 of the Negotiable Instruments Act (NI Act). The case arose from a complaint filed by Sri S Devaraj alleging dishonour of a cheque amounting to Rs. 10,00,000/- purportedly issued by the accused in discharge of a loan.
The trial court, and subsequently the appellate court, had found the accused guilty of the offence, relying heavily on the statutory presumptions under Sections 118 and 139 of the NI Act which presume the existence of a legally enforceable debt and that the cheque was issued for discharge of such debt. However, the High Court found these courts failed to properly appreciate the defense evidence and cross-examination that seriously undermined the complainant's case.
Key findings from the High Court's judgment included:
1. Rebuttal of Presumptions: The accused had produced credible evidence that he had lost and blocked the cheque leaves, including the one alleged in the complaint, well before the date of the loan transaction. He lodged a police complaint and informed the bank, which was not seriously disputed by the complainant. This constituted a probable rebuttal of the statutory presumptions.
2. Doubtful Financial Capacity: The complainant claimed to have lent Rs. 10,00,000/- in cash despite having a monthly income of Rs. 40,000 to Rs. 50,000/- and no documentary evidence was produced to establish his capacity to advance such a large sum. The cross-examination revealed inconsistencies and lack of proof regarding his financial means.
3. Questionable Transaction Circumstances: The complainant's version of the loan transaction was marked by material inconsistencies, including the nature of acquaintance with the accused, the place and manner of the loan, and absence of any documentary evidence or third-party witnesses. The accused's employment structure and requirement of employer permission for loans were also not considered adequately by the courts below.
4. Deemed Service of Notice: Although legal notices sent to the accused's addresses were returned unclaimed or marked insufficient address, the court held there was deemed service as the addresses matched the accused's known addresses.
The High Court reiterated the limited scope of revisional jurisdiction, emphasizing that interference is warranted only if the findings are perverse, grossly erroneous, or based on irrelevant or no material. It found the trial and appellate courts' conclusions to be grossly erroneous and a mechanical application of presumptions without proper appreciation of the evidence.
Consequently, the court set aside the conviction and sentence imposed on the accused, acquitting him of the offence under Section 138 of the NI Act. The amount deposited was ordered to be refunded to the accused upon proper identification.
This judgment underscores the importance of a holistic and critical examination of evidence in cheque bounce cases and affirms that statutory presumptions under the NI Act are rebuttable and must be applied judiciously.
Bottom Line:
Negotiable Instruments Act, 1881 Section 138 Revision against concurrent conviction - Accused successfully rebutted presumptions under Sections 118 and 139 by producing material showing prior loss/blocking of cheque leaves, eliciting serious inconsistencies in complainant's version, and disputing complainant's financial capacity to advance Rs.10,00,000/- in cash - Trial Court and Appellate Court wrongly appreciated evidence and mechanically applied presumptions - Conviction set aside and accused acquitted.
Statutory provision(s):
Negotiable Instruments Act, 1881 Sections 118, 138, 139; Criminal Procedure Code, 1973 Sections 200, 313, 397, 401
Sri Muniraju v. Sri S Devaraj, (Karnataka) : Law Finder Doc Id # 3001765
