The Karnataka High Court (Bengaluru Bench) has held that once the issuance of a cheque and the signature on it are admitted by the accused, the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881, are activated. The burden of proof then shifts to the accused to rebut the presumption that the cheque was issued for the discharge of a legally enforceable debt or liability. This rebuttal must be based on a probable defence, not mere denial.
The Court clarified that in a proceeding under Section 138 of the N.I. Act, the complainant is not required to prove their financial capacity in the first instance. The onus to prove financial capacity shifts to the complainant only if the accused raises a credible and probable defence questioning it. Collateral issues like the complainant holding a BPL card or non-disclosure of the loan in tax returns do not automatically disprove the transaction, especially when it is substantiated by documentary evidence like bank statements.
A High Court, while exercising its revisional jurisdiction under Sections 397 and 401 of the CrPC, cannot interfere with concurrent findings of fact recorded by lower courts unless there is a patent defect, an error of jurisdiction or law, or clear perversity in the findings. It cannot re-appreciate evidence and substitute its own findings for that of the trial and appellate courts, added the Court.
A Single Judge Bench of Justice M. Nagaprasanna found that the complainant’s bank statements clearly evidenced the transfer of funds. Specifically, the accused himself had deposited Rs. 1.40 crores into the complainant’s account to settle the earlier cases, and the subsequent loan of Rs. 68 Lakh was advanced from this amount. The Bench also observed that the issue of the BPL card was a matter for the concerned government department to investigate and did not negate the proven financial transaction.
On the argument of the petitioner that the loan was not disclosed in the complainant’s income tax returns, the Bench observed that this issue is for the Income Tax Department to address and does not fall within the jurisdiction of a court deciding a Section 138 complaint. It was held that non-disclosure to the tax authorities does not, by itself, disprove the existence of a legally enforceable debt.
As far as the claim of the accused that he had not borrowed the money, and the cheques were stolen and misused, the Bench noted a significant contradiction. While the accused claimed in his reply notice that the cheques were stolen, no such suggestion was made during the cross-examination of the complainant. Further, a letter from the accused related to the earlier dishonoured cheques admitted the transaction and requested time for repayment.
Thus, the Bench found the accused’s explanation that he paid Rs. 1.40 Crores without any liability merely to avoid legal cases during an election and not credible. Since the signature on the cheques was admitted, the statutory presumption under Section 139 of the N.I. Act was invoked, and the accused failed to present a probable defence to rebut it.
Briefly, the case involves a series of financial transactions between the petitioner, M.P. Kumaraswamy (accused), a former Member of Legislative Assembly, and the respondent, H.R. Huvappa Gowda (complainant), who were acquaintances. The dispute originated from a loan of Rs. 1.66 Crores which the accused allegedly borrowed from the complainant on various dates. Initially, the accused issued three cheques which were dishonoured, leading the complainant to file three criminal cases. During the 2018 Karnataka State Assembly elections, the accused allegedly settled these cases by depositing Rs. 1.40 Crores into the complainant’s bank account, after which the complainant withdrew the cases. This left an outstanding balance of Rs. 26.70 Lakh from the original transaction.
Subsequently, the accused requested another loan of Rs. 68 Lakh from the complainant, and the complainant transferred this amount to the accused through seven cheques between March 8, 2018, and March 16, 2018. It was alleged that the accused agreed to repay the new loan of Rs. 68 Lakh and the previous balance of Rs. 26.70 Lakh along with interest at 2% per month. For this repayment, the accused issued eight cheques, which were dishonoured upon presentation due to ‘insufficient fund’. This led the complainant to initiate fresh proceedings under Section 138 of the Negotiable Instruments Act, 1881. The Trial Court convicted the accused, and the Sessions Court upheld the conviction in appeal.
Appearances:
Advocate Vydhyanatha S. S., for the Petitioner
Advocate Manjunath Prasad H.N., for the Respondent
