SRI SURESH B vs MR KRISHNAMURTHY P - 2022 Supreme(Online)(Kar) 61133

Headnote:

NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 138 - CHEQUE BOUNCE CASES - APPRECIATION OF EVIDENCE

Fact of the Case:

The complainant lent Rs. 2,50,000/- to the accused as a hand loan for business development. The accused issued a cheque for the same amount, which was dishonored due to payment being stopped by the drawer. The complainant served a legal notice, but the accused failed to repay the amount. The complainant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881.

Finding of the Court:

Both the trial court and the appellate court convicted the accused for the offence under Section 138 of the Negotiable Instruments Act, 1881, and sentenced him to pay a fine of Rs. 2,60,000/- and undergo simple imprisonment for 4 months in default of payment.

Issues: Whether the impugned order passed by both Courts are correct, legal and in conformity with the settled principles regarding appreciation of evidence in cross-examination under Section 138 of Negotiable Instruments Act, 1881 which are popularly called as cheque bounce cases?

Ratio Decidendi: The presumption under Section 139 of the Negotiable Instruments Act, 1881, that the cheque was issued for discharge of legally recoverable debt or liability, was not rebutted by the accused. The accused failed to provide a cogent and specific evidence to support his defense that the cheque was stolen. The complainant proved the issuance of the cheque and the legally recoverable debt, while the accused's defense was vague and general denial.

Final Decision: The revision petition was dismissed, upholding the conviction and sentence passed by the lower courts.

Legal Category Hierarchy

1. Accused issued cheque for hand loan repayment; cheque dishonored with payment stopped endorsement; complaint under Section 138 NI Act; conviction and sentence confirmed on revision. (Para 4 , 5 , 6 )

2. Revision petitioner contended no legally enforceable debt, no cross-examination, no valid service of notice, and stolen cheque defence; respondent contended courts correctly appreciated evidence and conviction is proper. (Para 7 , 8 )

3. Revision petition dismissed; no order as to costs. (Para 16 )

4. Whether the rebuttable presumption under Section 139 NI Act applies when a cheque is issued for repayment of a loan, and how does the burden of proof shift?

Under Section 139 of the NI Act, there is a rebuttable presumption that the cheque was issued for discharge of a legally recoverable debt or liability. Once the complainant establishes issuance and reasons, the initial burden shifts to the accused to rebut the presumption through cross-examination or defence evidence. (Para 12 , 15 )

5. Whether service of legal notice is presumed when posted to the correct address through registered post under Section 27 of the General Clauses Act?

Under Section 27 of the General Clauses Act, 1897, once a notice is posted to a correct address through registered post, there is a presumption of due service. The burden is on the accused to rebut this presumption by proving contrary. (Para 13 )

6. Whether the defence that a cheque was stolen can succeed when no legal action was taken and no reason for stopping payment was given?

A defence that the cheque was stolen cannot be accepted when the accused took no legal action such as lodging a complaint or filing a case. Additionally, the accused instructed the bank to stop payment without disclosing any reason, showing knowledge of the issuance and insufficiency of funds. (Para 11 , 13 )

7. Whether vague and general denial by the accused is sufficient to rebut the presumption of a legally recoverable debt in cheque bounce cases?

A vague and general denial by the accused is insufficient to rebut the presumption of a legally recoverable debt. The accused must either cross-examine the complainant's witness to challenge the source of income or lead specific defence evidence to show the presumption does not apply. (Para 12 , 13 , 15 )

This Criminal Revision Petition is filed challenging the

Judgment and order of conviction and sentence dated

20-01-2017 passed by the XVIII Additional Chief Metropolitan

Magistrate, Bengaluru, in C.C No.28890/2015 which was

confirmed by the LXI Additional City Civil and Sessions Judge,

Bengaluru City(CCH-62) in Criminal Appeal No.209/2017 dated

09-01-2020 for the offence punishable under Section 138 of

Negotiable Instruments Act, 1881(hereinafter shortly referred

to as 'N.I.Act').

At the stage of admission itself the matter is heard

and disposed off by consent of both counsels.

The revision petitioner was the accused before the

trial Court and the respondent was the complainant before the

trial court. They will be referred to as per their ranks before

the trial Court for convenience.

The brief case of the complainant before the trial

Court are that the accused and the complainant are close

friends for several years. It is the contention of the

complainant

that

08-07-2015,

the

accused/revision

petitioner approached the complainant/respondent for financial

assistance for development of his business. He demanded a

hand loan of Rs.2,50,000/-. Considering his request, the

complainant advanced a hand loan of Rs.2,50,000/- on

10-07-2015. The accused/revision petitioner assured that he

would repay the amount. But he did not repay the amount.

When demanded by the complainant, the accused issued a

cheque in favour of the complainant for Rs.2,50,000/- dated

14-10-2015 drawn on Bank of India, Sanjaynagar Branch,

Bengaluru.

The

complainant

presented

the

cheque

for

encashment through Karnataka Bank but the said cheque was

returned with an endorsement "payment stopped by the

drawer" on 15-10-2015. In this regard, the complainant got

issued legal notice on 13-11-2015. Though the notice was duly

served, the accused did not repay the amount. Therefore, the

complainant

filed

complaint

before

the

Metropolitan

Magistrate for the offence punishable under Section 138 of the

N.I Act.

Before the trial Court, the complainant got himself

examined as PW.1 and produced five documents as Exs.P-1 to

P-5. The accused entered the defence and got examined

himself as DW.1 and produced one document marked as

Ex.D-1(a). After hearing the arguments, the trial Court

convicted the accused/revision petitioner for the offence

punishable under Section 138 of the N.I Act and sentenced him

to pay fine of Rs.2,60,000/- and in default to undergo simple

imprisonment for a period of 4 months and out of that fine

amount a sum of Rs.2,50,000/- was ordered to be paid as

compensation to complainant. Aggrieved by the said Judgment

of conviction and order of sentence, the revision petitioner filed

Criminal Appeal before the Sessions Judge in Criminal appeal

No.209/2017 which also came to be dismissed after hearing

both the sides. Aggrieved by the same, the revision petitioner

has filed this revision petition.

Learned

counsel

for

the

revision

petitioner

Sri Umesh B.N., argued that the order of conviction passed by

the trial Court and the order of confirmation by the appellate

Court are arbitrary, illegal and erroneous. It is further argued

that there was no legally enforceable debt or liability and the

accused has rebutted the presumption if any in favour of

complainant by showing preponderance of probabilities by

bringing on record that the complainant has no capacity to

extend the loan. Though the trial Court has recorded that the

complainant has failed to produce the documents regarding

borrowing of loan, but still convicted the accused which is

erroneous. It is further contended that no legal notice was

served on the accused. The learned counsel contended that

both the Courts have failed to appreciate the evidence brought

out by the accused and there is no legally recoverable debt.

Hence the learned counsel for the revision petitioner prays to

set aside the impugned Judgment and order of convictio

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2022 Supreme(Online)(Kar) 61133

Legal Category Hierarchy

Table of Contents

4. Whether the rebuttable presumption under Section 139 NI Act applies when a cheque is issued for repayment of a loan, and how does the burden of proof shift?

5. Whether service of legal notice is presumed when posted to the correct address through registered post under Section 27 of the General Clauses Act?

6. Whether the defence that a cheque was stolen can succeed when no legal action was taken and no reason for stopping payment was given?

7. Whether vague and general denial by the accused is sufficient to rebut the presumption of a legally recoverable debt in cheque bounce cases?

2022 Supreme(Online)(Kar) 61133

Legal Category Hierarchy

Table of Contents

4. Whether the rebuttable presumption under Section 139 NI Act applies when a cheque is issued for repayment of a loan, and how does the burden of proof shift?

5. Whether service of legal notice is presumed when posted to the correct address through registered post under Section 27 of the General Clauses Act?

6. Whether the defence that a cheque was stolen can succeed when no legal action was taken and no reason for stopping payment was given?

7. Whether vague and general denial by the accused is sufficient to rebut the presumption of a legally recoverable debt in cheque bounce cases?

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