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2026 Supreme(Online)(Kar) 21081

THE HIGH COURT OF KARNATAKA
V Srishananda, J
Dyani Antony Paul – Appellant
Versus
Anil Hegde – Respondent
Criminal Revision Petition No.782 OF 2023 | Criminal Revision Petition No.858 OF 2023

Advocates:
For the Appellants/Petitioners: Rajashekar.S, Dineshkumar Rao K
For the Respondents: Dinesh Kumar Rao.K, Raghavendra Shenoy M

A cheque issued towards a debt, even if initially time-barred, becomes a legally enforceable debt under Section 138 of the Negotiable Instruments Act if the debtor executes a written agreement acknowledging the liability, thereby creating a fresh contract under Section 25(3) of the Indian Contract Act.

Headnote:(A) Negotiable Instruments Act, 1881 - Section 138 - Dishonour of cheque - Legally enforceable debt - Presumption under Section 139 - Standard of proof for rebuttal - Held, once the signature on the cheque is admitted, the burden shifts to the accused to rebut the presumption by raising a probable defence; mere denial is insufficient. (Para 31, 38, 39)

(B) Indian Contract Act, 1872 - Section 25(3) - Time-barred debt - Fresh promise to pay - A cheque issued in discharge of a debt, even if past the period of limitation, becomes enforceable as a new contract if there is a written promise to pay, thereby satisfying legal enforceability requirements under Section 138 of the Negotiable Instruments Act. (Para 32, 34, 35)

(C) Evidence Act, 1872 - Section 91 - Proof of terms of contract - Once a document like a surrender deed is reduced to writing and the signature is admitted, the contents are deemed to be admitted unless disproved by cogent evidence. (Para 33, 37)

Facts of the case:
The complainant alleged that the accused, after failing to pay lease dues regarding an industrial unit, executed a surrender deed and issued two cheques toward the total outstanding liability. Upon dishonour of these cheques, a complaint was filed, leading to the accused's conviction by the Trial Court. The accused contended that the cheques were issued as blank security for a different loan amount and that the debt was time-barred.

Findings of Court:
The Court held that the surrender deed established the crystallization of the liability. The accused failed to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act, as he did not provide evidence to disprove his signature or the contents of the written agreement, nor did he take steps to verify signatures via a handwriting expert.

Issues: Whether the cheques were issued for a legally enforceable debt, whether the debt was time-barred, and whether the Trial Court's conviction and the First Appellate Court's modification of the default sentence were sustainable.

Ratio Decidendi: A written document (surrender deed) acknowledging a debt, even if that debt was previously time-barred, operates as a new contract under the law, making cheques issued against it enforceable under the Negotiable Instruments Act. The burden lies on the accused to lead cogent evidence to rebut the statutory presumption of a valid debt once the cheque and signature are admitted.

Result: Revision petitions dismissed.

Table of Content
1. establishing the factual basis for ni act section 138 debt. (Para 2 , 3 , 4 , 5)
2. trial court's evaluation of evidence and conviction rationale. (Para 6 , 7 , 8 , 9)
3. appellate court's review, endorsement of conviction, and sentence modification. (Para 10 , 11)
4. arguments challenging debt existence and validity of documents. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21)
5. respondent arguments regarding evidentiary burden and scope of revision. (Para 22 , 23 , 24 , 25)
6. court's analysis on statutory presumption and liability establishment. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48)
7. legal standard for appellate sentencing and default imprisonment. (Para 49 , 50 , 51 , 52 , 53)

CAV JUDGMENT

(PER: HON'BLE MR JUSTICE V SRISHANANDA)

Heard.

These two revision petitions in Crl.RP No.782/2023 is filed by the complainant and Crl.RP No.858/2023 is filed by the accused challenging the Order passed by the learned Judge in the First Appellate Court in Crl.A No.102/2021, whereby, the Order of the Trial Court in C.C.No.6784/2019 convicting the accused for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881, imposing fine of Rs.6,08,57,000/- of which Rs.6,08,50,000/- was ordered to be paid as compensation to the complainant and balance sum of Rs.7,000/- to be appropriated towards defraying expenses of the State, and in default, to undergo simple imprisonment for a period of two years was modified by reducing the default sentence from two years to six months.

2. Facts of the case which are utmost necessary for disposal of the present revision petitions are as under:

2.1 A private complaint came to be filed on the file of the JMFC IV Court, Mangaluru, Dakshina Kannada, alleging commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

2.2 In the complaint it has been contended that the complainant is the owner of the small scale industrial unit situated in premises bearing Door No.6-54 measuring 700 square feet comprised in Sy.No.40/5(P) measuring 12 cents and 7 cents of the property which is further comprised in Sy.No.40/8 of Idya village, Mangaluru taluk, along with the machineries, equipments and industrial plant.

2.3 Complainant had leased the above industrial unit to the accused under a lease agreement. The industrial unit was called ‘Prem Prasad Bottling’.

3. It is further contented by the complainant that there was difficulty to run the said industrial unit on the part of the accused and he failed to pay the dues in respect of lease rentals. Therefore, accused was requested to surrender the unit with all equipments.

4. Accused having realised that he cannot run the industrial unit any longer, surrendered the entire unit by executing a deed of surrender on 18.01.2019 and liability of the accused as on the date of deed of surrender was crystallized in a sum of Rs.5,15,73,798/-. Towards the repayment of said liability, accused passed on two cheques bearing Nos.968221 and 968224 dated 01.02.2019 and 26.02.2019 in a sum of Rs.3,00,00,000/- and Rs.2,15,73,798/- respectively.

5. Those cheques were presented for collection and were dishonored with an endorsement ‘funds insufficient’. Thereafter, complainant got issued a legal notice on 15.03.2019 calling upon the accused to pay the amount covered under the cheques within fifteen days. Notice was duly served on the accused on 16.03.2019. But an untenable reply was caused by the accused on 28.03.2019. Therefore, complainant sought for taking necessary action against the accused.

6. Learned Trial Magistrate, after taking cognizance of the offence, completed necessary formalities and summoned the accused and plea was recorded. Accused pleaded not guilty. Therefore, trial was held.

7. In order to prove the case of the complainant, complainant got examined himself as PW-1 and placed on record 20 documents which are exhibited and mark

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2026 Supreme(Online)(Kar) 21081

THE HIGH COURT OF KARNATAKAV Srishananda, JDyani Antony Paul – AppellantVersusAnil Hegde – RespondentCriminal Revision Petition No.782 OF 2023 | Criminal Revision Petition No.858 OF 2023

Cases Referred (5)

THE HIGH COURT OF KARNATAKA
V Srishananda, J
Dyani Antony Paul – Appellant
Versus
Anil Hegde – Respondent
Criminal Revision Petition No.782 OF 2023 | Criminal Revision Petition No.858 OF 2023