The Karnataka High Court has set aside the conviction of a man under Section 138 of the Negotiable Instruments Act, 1881, holding that he rebutted the statutory presumptions under Sections 118 and 139 through the complainant’s own cross-examination. Justice Geetha K.B. found that the trial court and the appellate court had failed to examine the evidence on the complainant’s financial capacity, and acquitted the accused in the ₹10 lakh cheque dishonour case.
Background
The complainant alleged that the accused, whom he described as a family friend working in a post office, had sought a hand loan of ₹10,00,000 on 10.09.2021. According to the complainant, he paid the amount in cash on 25.09.2021. The accused allegedly issued a cheque dated 20.12.2021 drawn on Cauvery Grameena Bank, Kulkunte Branch. The cheque was returned for “insufficient funds”.
The legal notice dated 06.01.2022 came back “unclaimed” from the accused’s home address and marked “insufficient address” from his office address. The Principal Civil Judge and JMFC, Chintamani, convicted the accused on 05.09.2023. The II Additional District and Sessions Judge, Chikkaballapur, sitting at Chintamani, confirmed the conviction on 09.09.2024. The accused then filed a criminal revision petition before the High Court.
Arguments
Advocate Raghavendra K., appearing for the accused, argued that the complainant was a total stranger to his client. He said the accused had lost his cheque books and passbook, and had lodged a police complaint (Ex.D.2) on 22.06.2020. The accused had also sent a stop-payment letter to his bank (Ex.D.1) on 02.11.2020, long before the alleged loan. Counsel further argued that the complainant earned only ₹40,000 to ₹50,000 a month and had produced no document showing he could lend ₹10 lakh.
Advocate Syed Zaheeruddin Bareed, appearing for the complainant, argued that Exs.D.1 and D.2 were concocted, pointing to the five-month gap between them. He submitted that the bank memo recorded “funds insufficient”, not that the cheque had been blocked. He also argued that the accused had examined neither the bank manager nor any police officer to prove these complaints.
Limited Revisional Jurisdiction
Relying on the Supreme Court’s decision in Kuntegowda v. Thurubaiah, 2026 SCC OnLine SC 1485, the High Court noted that it can interfere in revision only if the findings below are perverse, grossly erroneous, or based on irrelevant material, or if relevant material was ignored.
Court’s Findings on Rebuttal
The Court held that the ingredients of Section 138 relating to presentation, dishonour, notice and non-payment were satisfied, which raised the statutory presumptions in the complainant’s favour. It noted, however, that these presumptions are rebuttable.
Examining the cross-examination, the Court found that the complainant could not say how he came to know the accused. He did not examine “one Anand”, through whom he claimed they met, and produced no record of his alleged phone calls. The Court also pointed to a contradiction: the complainant first said the accused had never come to his house, and later said he had handed over the money at his house.
On the complainant’s answer that he did not know whether the accused was a contract employee, the Court said: “This shows that without knowing the employment structure of the accused, he lent ₹10,00,000/- to the accused is unbelievable one.”
The Court found that the loss of the cheque books was established, since “not even a single suggestion is put to the accused denying lodging of such complaints by the accused to the bank and police station.” It noted that the cheque in question was among the leaves listed in Ex.D.1. It also noted that, under RBI guidelines and the Income Tax Act, 1961, transactions above ₹2,00,000 must go through a bank, whereas the complainant claimed he lent the ₹10 lakh in cash.
On financial capacity, the Court held: “Mere denial of financial capacity is not sufficient but some cogent evidence is to be produced to prove that the complainant is not having financial capacity to lend ₹10,00,000/- which is being established in this case by cross-examining the complainant.”
It added that “Without knowing the financial capacity of borrower nobody would lend money” and found that the complainant led no evidence once the presumptions were rebutted. According to the Court, the courts below “have grossly not verified the evidence elicited in the cross-examination of the complainant regarding his financial capacity and the employment structure of the accused.”
Outcome
The High Court allowed the revision petition, set aside the conviction and sentence, and acquitted the accused. It directed that any amount in deposit be refunded to him on proper identification.
Case Title: Sri Muniraju v. Sri S Devaraj
Case No.: Criminal Revision Petition No. 1600 of 2024
Bench: Justice Geetha K.B.
Date: 17.10.2026
