1. Appeal challenging High Court order acquitting accused under Section 138 NI Act after setting aside trial and appellate court convictions. (Para 2 , 3 )
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2026 Supreme(SC) 864
SUPREME COURT OF INDIA
B.V. NAGARATHNA, UJJAL BHUYAN, JJ.
Kuntegowda - Appellant
Versus
Thurubaiah – Respondent
Criminal Appeal No. 3654 of 2026 (Arising out of Special Leave Petition (Criminal) No. 2247 of 2024)
Decided On : 04-08-2026
Advocates appeared:
For the Petitioner(s): Ms. Aparna Bhat, Sr. Adv. Ms. Rajkumari Banju, AOR Ms. Karishma Maria, Adv. Mr. Saransh Khandelwal, Adv.
For the Respondent(s): Mr. Anand Sanjay M Nuli, Sr. Adv. Mr. Abhishek Kanyalur, Adv. Mr. Dharam Singh, Adv. Mr. Suraj Kaushik, Adv. Ms. Akhila Wali, Adv. Ms. Divya Sinha, Adv. Mr. Ashritsai Torgal, Adv. Ms. Tanya Chhillar, Adv. M/S. Nuli & Nuli, AOR
For the Petitioner(s): Ms. Aparna Bhat, Sr. Adv. Ms. Rajkumari Banju, AOR Ms. Karishma Maria, Adv. Mr. Saransh Khandelwal, Adv.
For the Respondent(s): Mr. Anand Sanjay M Nuli, Sr. Adv. Mr. Abhishek Kanyalur, Adv. Mr. Dharam Singh, Adv. Mr. Suraj Kaushik, Adv. Ms. Akhila Wali, Adv. Ms. Divya Sinha, Adv. Mr. Ashritsai Torgal, Adv. Ms. Tanya Chhillar, Adv. M/S. Nuli & Nuli, AOR
IMPORTANT POINTS
(1) Dishonour of cheque – Presumption as envisaged under Section 139 of NI Act is a statutory and mandatory presumption and not a discretionary one.
(2) Revisional jurisdiction – Scope of revisional jurisdiction is limited.
Headnote:
(A) Negotiable Instruments Act, 1881 – Section 138 read with Sections 118 and 139 – Indian Evidence Act, 1872 – Section 114 [Section 119 of Bharatiya Sakshya Adhiniyam, 2023] – Dishonour of cheque – Acquittal by High Court – Cheque issued towards repayment of hand loan – There is statutory presumption that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once execution of negotiable instrument is either approved or admitted – Presumption as envisaged under Section 139 is a statutory and mandatory presumption and not a discretionary one – Since these presumptions are rebuttable presumptions, accused has burden of disproving the same by leading evidence – In present case, accused has admitted his signature on cheque as a drawer and complainant becomes holder in due course – There is no receipt or endorsement to evince the fact that loan was ever repaid by accused – Legal notice sent by accused has no evidentiary value to support case of accused as same was sent by accused after commencement of complaint case against him – Failure of accused to respond to statutory notice issued under Section 138 of NI Act gives rise to inference that complainant's version carries merit. (Paras 5.6, 5.7, 6, 6.3 and 6.7)
(B) Negotiable Instruments Act, 1881 – Section 138 read with Sections 118 and 139 – Dishonour of cheque – Acquittal by High Court – High Court has failed to highlight any reason or material satisfaction to the effect that there was any such glaring contradiction or perversity apparent on face of record so as to justify exercise of powers under revisional jurisdiction and thereby erred in interfering with judgment and orders of courts below – High Court erred in reversing well-reasoned and concurrent findings of conviction and sentence of lower courts while exercising its extremely limited revisional jurisdiction – Impugned order passed by High Court set aside and judgments as well as orders of trial court and Sessions Court restored. (Paras 6.10, 7.5 and 8)
(C) Criminal Procedure Code, 1973 – Section 397 [Section 438 of Bharatiya Nagarik Suraksha Sannhita, 2023] – Revisional jurisdiction – Discretion in exercise of revisional jurisdiction should be exercised within four corners of this section whenever there has been miscarriage of justice – However, while exercising power under this section, Court does not act as an appellate Court – Court, in revision, considers material only to satisfy itself about correctness, legality and propriety of findings, sentence and order recorded by lower court, and should refrain from substituting its conclusion on an elaborate consideration of evidence – Findings of lower courts should not be reversed merely on the ground that alternative view is possible on facts of the case. (Paras 7 and 7.3)
Facts of the case:
High Court, by impugned order dated 06.10.2023 and while exercising its revisional jurisdiction, allowed criminal revision petition preferred by accused and set aside conviction and sentence recorded by trial court, and acquitted him under Section 138 of NI Act by observing that complainant had failed to disclose from which of his relatives he had taken money to extend the hand loan to the accused.
Findings of Court:
High Court committed error in setting aside the order of conviction in exercise of revisional jurisdiction. No sufficient ground has been mentioned by the High Court in its judgment to enable it to exercise its revisional jurisdiction for setting aside the conviction.
Result : Appeal allowed.
Table of Contents
2. Dispute on whether High Court erred in acquitting under Section 138 NI Act — contention that Section 139 presumption was not rebutted; counter-contention that lender lacked capacity and cheque was misused. (Para 4 )
3. Impugned High Court order setting aside conviction under Section 138 NI Act set aside; trial and appellate court judgments and orders restored; appeal allowed. (Para 7 , 8 )
4. Can a High Court re-examine evidence and substitute its own conclusions while exercising revisional jurisdiction under Section 397 CrPC?
No. The High Court in revision cannot act as an appellate court and should not dwell on facts and evidence. It must limit itself to checking correctness, legality, and propriety of the lower court's order and cannot reverse findings merely because an alternative view is possible on the record. (Para 7 , 8 )
5. Does the accused's defense that the cheque was misused by the complainant rebut the presumption under Section 139 NI Act?
No. The presumption under Section 139 that the cheque was issued for discharge of debt or liability is rebuttable but the accused must lead cogent evidence to disprove it. Plausible theories, conjectures, and surmises without supporting evidence are insufficient to shift the burden back to the complainant. (Para 6 )
6. What are the essential ingredients that must be proved to constitute an offence under Section 138 of the Negotiable Instruments Act?
The ingredients are: cheque drawn for discharge of debt or liability, presented to bank within six months, returned unpaid for insufficiency of funds, demand notice given within thirty days of receiving return information, non-payment within fifteen days of notice, and complaint filed within limitation before a Magistrate. (Para 5 , 6 )
7. Does the complainant's monthly income alone determine his financial capacity to extend a hand loan under Section 138 NI Act?
No. The court held that monthly income alone does not determine financial capacity. The complainant's routine investments in business ventures such as chit funds and financial assistance received from relatives established his capacity to advance the loan. (Para 6 )
8. Does a legal notice sent by the accused after the filing of the complaint case have evidentiary value in rebutting the presumption under Section 138 NI Act?
No. The court held that a legal notice sent after the commencement of the complaint case amounts to ex post facto creation of evidence and an afterthought to create an artificial defense. It has no evidentiary value to support the accused's case. (Para 6 )
JUDGMENT :
B.V. NAGARATHNA, J.
Leave granted.
2. The present criminal appeal has been preferred by the complainant/appellant assailing the order dated 06.10.2023 passed by the High Court of Karnataka at Bengaluru in Criminal Revision Petition No.1502 of 2016 wherein the High Court allowed the said criminal revision petition preferred by the respondent (hereinafter referred to as ‘accused’) 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 rate of 16% per annum.
3.1 Thereafter, the accused issued a cheque bearing No.524714 dated 20.03.2013 in favour of the complainant drawn upon ICICI Bank, Malleshwaram Branch, Bengaluru. The said cheque was presented for encashment by the complainant before State Bank of India, Magadi Road Branch, Bengaluru which was returned on 22.03.2013 with remark “funds insufficient”. Aggrieved, the complainant served a legal notice on the accused on 28.03.2013 demanding that the sum of Rs.4,50,000/- (Rupees Four Lakh and Fifty Thousand) alongwith interest be paid within fifteen days from the date of receipt of the said legal notice.
3.2 Aggrieved by the inaction and non-repayment of the hand loan extended, the complainant filed a complaint on 06.05.2013 being Complaint Case No.12108 of 2013 under Section 200 of the Code of Criminal Procedure, 1973 read with Section 138 of the NI Act before the Court of XII Additional Chief Metropolitan Magistrate, Bengaluru.
3.3 When the matter stood thus, the accused sent a legal notice dated 16.09.2014 to the complainant and one S.B. Ramachandraiah (who was later examined by the trial court as Prosecution Witness No.2) imploring the latter to return his blank cheques and blank documents that were allegedly deposited by the accused as a security for a hand loan of Rs.40,000/- (Rupees Forty Thousand) that was extended to him by S.B. Ramachandraiah.
3.4 On 01.09.2015, the accused was convicted by the Court of the XII Additional Chief Metropolitan Magistrate, Bangalore under Section 138 of the NI Act in the Complaint Case and was sentenced to pay a fine of Rs.9,00,000/- (Rupees Nine Lakh), in default whereof he was directed to undergo simple imprisonment for six months. The trial court, while convicting the accused, held that the signature on the cheque admittedly belonged to the accused and that the said cheque was dishonoured due to insufficiency of funds. It was further observed that even though the legal notice dated 28.03.2013 was not received by the accused personally, nevertheless, it was addressed to the accused and there was nothing on record to believe that the accused was not residing at the address shown in the legal notice and therefore on the basis of acknowledgment and correctness of address of the accused, the notice was deemed to have been served upon him. Furthermore, it was held by the trial court that the complainant had complied with all the requi
