Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Kar) 25289

THE HIGH COURT OF KARNATAKA
V Srishananda, J
Apara Enterprise Solution Private Ltd – Appellant
Versus
Inflow Technologies Pvt Ltd – Respondent
CRIMINAL REVISION PETITION No.583 OF 2021

Advocates:
For the Appellants/Petitioners: Jairaj G
For the Respondents: R.Kiran

Upon admission of signature on a dishonoured cheque, statutory presumption of a legally enforceable debt arises. While criminal liability persists even if a cheque is issued as security, an appellate court cannot suo motu enhance a sentence in an appeal solely filed by the accused.

Headnote:(A) Negotiable Instruments Act, 1881 - Section 138 - Criminal Procedure Code, 1973 - Sections 397 and 401 - Dishonour of cheque - Legally enforceable debt - Presumption under Section 139 - Once the execution of the cheque is admitted, the presumption arises that the cheque was drawn for consideration and in discharge of a legally enforceable debt - (Para 51) The initial onus to rebut this presumption lies on the accused, and the failure to provide evidence regarding the financial incapacity of the drawee or to prove that the cheques were issued solely as security validates the conviction. (Paras 40, 51)

(B) Appellate Jurisdiction - Modification of sentence - An appellate court lacks the power to suo motu enhance the sentence in a criminal appeal filed by the accused where the quantum of sentence was not challenged by the complainant. (Para 56)

Facts of the case:
The petitioners were convicted for the offence under Section 138 of the Act after cheques issued by them were dishonoured for insufficient funds. The petitioners contended that the cheques were issued as security, that there was an escrow agreement involving a third party which negated their liability, and that proceedings against the third party were already pending. The trial court and the first appellate court rejected these contentions, though the appellate court enhanced the default sentence.

Findings of Court:
The court found that the accused failed to rebut the statutory presumption under Section 139 of the Act. The existence of parallel civil proceedings or agreements with third parties does not absolve the drawer of liability under the Negotiable Instruments Act. However, the appellate court's decision to enhance the sentence without a challenge by the complainant was found to be legally infirm.

Issues: Whether the dishonoured cheques represented a legally enforceable debt and whether the appellate court had the authority to enhance the sentence in an appeal preferred by the accused.

Ratio Decidendi: The statutory presumption under Section 139 operates against the drawer once the signature and issuance are admitted; absent compelling rebutting evidence, the conviction must stand. Procedurally, an appellate court cannot enhance a sentence in an appeal brought by the accused, absent a cross-appeal or challenge from the prosecution/complainant.

Result: Revision petition allowed in part; conviction upheld, but the enhanced default sentence set aside.

Table of Content
1. establishment of factual nexus regarding dishonoured cheques for debt recovery. (Para 1 , 2)
2. procedure for conviction under section 138 of ni act and appellate review. (Para 3 , 4 , 5 , 6 , 7 , 8)
3. arguments on lack of privity and impact of third-party responsibility. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21)
4. rebuttal arguments based on admissions and contractual agreements. (Para 22 , 23 , 24 , 25)
5. application of section 139 presumptions and validity of security cheques. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55)
6. appellate court power limitations regarding enhancing sentences absent complainant appeal. (Para 56 , 57 , 58 , 59)

CAV ORDER

Accused who suffered an order of conviction for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 confirmed in C.C.No.26048/2013 confirmed in Criminal Appeal No.25120/2015 is the revision petitioner.

2. Facts which are utmost necessary for disposal of the present revision petition are as follows:

2.1 Respondent/complainant lodged a complaint under Section 200 of the Code of Criminal Procedure with XIV Additional Chief Metropolitan Magistrate, Mayo Hall Unit, Bengaluru, alleging commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 contending that, complainant is a company incorporated under the provisions of the Indian Companies Act, 1956 carrying on the business of Information and Technology products and services. It also had its business in distribution of software and hardware.

2.2 It is further found from complaint averments that second accused being the Managing Director and third accused being the Director of the accused No.1/Company, viz., Apara Enterprise Solutions Private Limited had the business transaction with the complainant.

2.3 Accused No.2 issued a cheque towards the repayment of the amount outstanding to the complainant. There was a business transaction of purchase orders and invoices to the tune of Rs.4,84,27,931/-. When the same was demanded repeatedly, payment was postponed. Ultimately second accused being the Managing Director of the first accused Company issued an acknowledgment of debt on

16.03.2011 and agreed to pay the amount with 15% interest calculated upto 31.01.2011 which works out to Rs.72,95,708/-.

2.4 Towards the repayment, fifteen cheques were issued. Out of those cheques, cheque No.853204 dated 20.04.2012 was to the tune of Rs.72,95,710/- and cheque No. 853205 dated 20.05.2012 was a sum of Rs.76,595/- drawn on State Bank of India, Bengaluru.

2.5 Both the cheques on presentation got dishonored with an endorsement ‘funds insufficient’. A legal notice was issued to the accused calling upon the amount covered under the cheques to be repaid.

2.6 Notice was not claimed by the accused and therefore, complainant sought for action against the accused.

3. Learned Trial Magistrate after completing necessary formalities, summoned the accused. Accused Nos.2 and 3 appeared before the Court and plea was recorded. The accused pleaded not guilty. Therefore, trial was held.

4. In order to prove the case of the complainant, authorized signatory of the complainant by name Sri Prem Kumar was examined as PW-1 and placed on record as many as 70 documentary evidence which are exhibited and marked as Exhibits P-1 to P-70.

5. As against the material evidence placed on record by the complainant, Sri Manpreet Singh Sidhu, second accused got examined himself as DW-1. He placed on record eight documentary evidence which were exhibited and marked as Exhibits D-1 to D-8.

6. Thereafter, learned Trial Magistrate on cumulative consideration of the oral and documentary evidence placed on the record by both the sides, convicted the accused and sentenced as under:

“Acting under Section 255(2) of Cr.PC accused are hereby convicted and accused Nos.2 & 3 are being the Managing

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2026 Supreme(Online)(Kar) 25289

THE HIGH COURT OF KARNATAKAV Srishananda, JApara Enterprise Solution Private Ltd – AppellantVersusInflow Technologies Pvt Ltd – RespondentCRIMINAL REVISION PETITION No.583 OF 2021

Upon admission of signature on a dishonoured cheque, statutory presumption of a legally enforceable debt arises. While criminal liability persists even if a cheque is issued as security, an appellate court cannot suo motu enhance a sentence in an appeal solely filed by the accused.

Cases Referred (3)

THE HIGH COURT OF KARNATAKA
V Srishananda, J
Apara Enterprise Solution Private Ltd – Appellant
Versus
Inflow Technologies Pvt Ltd – Respondent
CRIMINAL REVISION PETITION No.583 OF 2021