Case Note & Summary
The complainant/appellant and the accused/respondent were acquainted and in December 2010, the complainant extended a hand loan of Rs.4,50,000 to the accused for purchase of a house site, repayable within one year with interest at 16% per annum. The accused issued a cheque dated 20.03.2013 drawn on ICICI Bank, Malleshwaram Branch, Bengaluru, which was dishonoured on 22.03.2013 for insufficient funds. After statutory notice and non-payment, the complainant filed a complaint under Section 200 CrPC read with Section 138 of the Negotiable Instruments Act, 1881. The trial court convicted the accused on 01.09.2015, finding that the signature on the cheque was admitted, the cheque was dishonoured, and the legal notice was deemed served. The trial court raised presumptions under Sections 118 and 139 of the NI Act and held that the accused failed to rebut them. The accused preferred Criminal Appeal No.1224 of 2015, which was dismissed on 19.09.2016 by the appellate court, upholding the conviction but reducing the fine from Rs.9,00,000 to Rs.6,50,000. The accused then filed Criminal Revision Petition No.1502 of 2016 before the Karnataka High Court. The High Court, by order dated 06.10.2023, allowed the revision and acquitted the accused, holding that the complainant failed to disclose the source of the loan funds and his financial capacity to lend Rs.4,50,000 given his monthly income of Rs.20,000-25,000. The High Court observed that it was improbable for the complainant to have advanced such a large amount without charging interest, and the accused successfully rebutted the presumption by exposing the complainant's financial incapacity. Aggrieved, the complainant approached the Supreme Court by way of special leave petition, which was granted. Before the Supreme Court, the complainant argued that the High Court erred by shifting the burden of proof onto the complainant and that no initial burden lies on the complainant once the presumptions are satisfied; the accused failed to produce reliable evidence to rebut the presumption. The accused contended that he had given blank cheques as security for a smaller loan from a relative of the complainant and that the complainant misused them; the complainant's income was insufficient to advance such a loan. The judgment text is incomplete and does not contain the final decision of the Supreme Court.
Issue of Consideration
Whether the High Court, in its revisional jurisdiction, was justified in setting aside the concurrent findings of conviction under Section 138 of the Negotiable Instruments Act, 1881 by holding that the complainant lacked financial capacity to advance the loan, thereby failing to discharge the initial burden of proving the existence of a legally enforceable debt?
Law Points
- Presumption under Section 139 of NI Act
- Rebuttal of presumption
- Financial capacity of complainant
- Standard of proof
- Revisional jurisdiction of High Court
Case Details
Criminal Appeal No. of 2026 (Arising out of Special Leave Petition (Criminal) No.2247 of 2024)
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Nature of Litigation
Criminal appeal against acquittal in a case under Section 138 of the Negotiable Instruments Act, 1881
Remedy Sought
The complainant/appellant sought setting aside of the High Court's order dated 06.10.2023 and restoration of the trial court's judgment of conviction and sentence as modified by the appellate court.
Filing Reason
The High Court, in its revisional jurisdiction, had set aside concurrent findings of guilt under Section 138 NI Act by holding that the complainant lacked financial capacity to advance the loan, thereby acquitting the accused.
Previous Decisions
The trial court convicted the accused and sentenced him to a fine of Rs.9,00,000, which was reduced to Rs.6,50,000 by the appellate court; both courts held that the presumptions under Sections 118 and 139 were not rebutted. The High Court in revision allowed the accused's petition, set aside the conviction and acquitted him.
Issues
Whether the High Court, in exercising revisional jurisdiction, exceeded its scope by re-appreciating evidence and reversing concurrent findings of conviction under Section 138 of the Negotiable Instruments Act.
Whether the High Court's finding that the complainant lacked financial capacity to advance the loan is sufficient to rebut the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act.
What is the extent of the initial burden on the complainant to prove financial capacity in proceedings under Section 138 of the Negotiable Instruments Act.
Submissions/Arguments
Complainant's counsel argued that the High Court's order placed undue emphasis on the complainant's monthly income to infer absence of financial capacity, contrary to settled law that no initial burden lies on the complainant once the presumptions under Sections 118 and 139 are satisfied. The accused failed to produce reliable evidence to rebut the presumption; mere post-facto legal notice and oral evidence are insufficient.
Accused's counsel contended that the accused had given blank cheques as security for a smaller loan of Rs.40,000 from PW-2, a relative of the complainant, and the cheques were misused. The complainant failed to specify the exact date, source, and timeline of the alleged loan, and his admitted monthly income of Rs.20,000-25,000 made it improbable for him to lend Rs.4,50,000.
Judgment Excerpts
the signature on the cheque admittedly belonged to the accused and that the said cheque was dishonoured due to insufficiency of funds.
the complainant had complied with all the requirements of Sections 138 to 142 of the NI Act and therefore presumptions under Sections 118 and 139 of the NI Act were raised in favour of the complainant and the said presumptions were not rebutted by the defence of the accused.
the High Court observed that the complainant failed to satisfy the court that he had the financial capacity to advance such a huge amount which was completely disproportionate to his monthly income.
Procedural History
The complainant filed a complaint under Section 200 CrPC read with Section 138 NI Act on 06.05.2013. The trial court convicted the accused on 01.09.2015. The accused's appeal (Criminal Appeal No.1224 of 2015) was dismissed on 19.09.2016, with modification of fine. The accused filed a criminal revision petition (No.1502 of 2016) before the Karnataka High Court, which allowed it on 06.10.2023, setting aside the conviction. The complainant then filed a special leave petition, which was granted, and the present criminal appeal was heard by the Supreme Court.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 118, 139, 140, 141, 142
- Code of Criminal Procedure, 1973: 200
