Karnataka High Court
M/S Srimatha Mahilasahakari Bank … vs Sri Bs Manjunath on 25 April, 2026
Author: M.G.S. Kamal
Bench: M.G.S. Kamal
-1-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF APRIL, 2026
BEFORE
THE HON'BLE MR. JUSTICE M.G.S. KAMAL
CRIMINAL APPEAL NO. 1111 OF 2021 (A)
BETWEEN:
M/S SRIMATHA MAHILASAHAKARI
BANK NIYAMITHA
NO. 403/803, VIII MAIN ROAD,
X CROSS, SHASHTRYNAGAR,
BSK II STAGE,
BENGALURU - 560 070,
REP BY ITS MANAGER,
SHARADA M K.
...APPELLANT
(BY SRI. ANOOP HARANAHALLI.,ADVOCATE)
AND:
SRI B S MANJUNATH
Digitally signed PROPRIETOR,
by SUMA B N M/S. NRS TRAVELS,
Location: HIGH R/AT NO. 332, II STAGE,
COURT OF 4TH BLOCK, 8TH MAIN,
KARNATAKA
BASAWESWARNAGAR,
BENGLAURU - 560 079.
...RESPONDENT
(BY SRI. VISHWANATH R HEGDE.,ADVOCATE)
THIS CRL.A. IS FILED U/S.378(4) CR.P.C PRAYING TO SET
ASIDE THE JUDGMENT DATED 26.03.2021 PASSED BY THE
XXVITH ACMM, BENGALURU CITY IN C.C.NO.22063/2016-
ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE
P/U/S 138 OF N.I. ACT.
-2-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
THIS APPEAL, COMING ON FOR FINAL HEARING, THIS
DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE M.G.S. KAMAL
ORAL JUDGMENT
This appeal is by the complainant under Section 378 of
Criminal Procedure Code, 1973, being aggrieved by the
judgment and order dated 26.03.2021, passed in
C.C.No.22063/2016 on the file of XXVI Additional Chief
Metropolitan Magistrate, Bangalore City, (hereinafter referred
to as ‘the Trial Court’) by which the accused-respondent has
been acquitted of the offences punishable under Section 138 of
Negotiable Instruments Act, 1881 (hereinafter referred to as
‘the N.I. Act‘).
2. The facts of the case are ;
2.1 That complainant-appellant namely, M/s. Srimatha
Mahila Sahakari Bank Niyamitha, is a Co-Operative Bank
registered under the Karnataka Co-operative Societies Act.
Accused-respondent is its member. That one Smt. Shobha had
applied for sanction of overdraft facility in a sum of
Rs.35,00,000/- from the appellant-Society for the purpose of
-3-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
business improvement i.e., for purchases of four buses vide
application dated 07.10.2011.
2.2 That the said loan was sanctioned and a sum of the
Rs.35,00,000/- was disbursed on 07.10.2011. Accused-
respondent has stood as a guarantor to the said loan facility.
Necessary loan documents were executed.
2.3 That the borrower-Smt. Shobha defaulted in
repayment of the loan amount, despite several requests and
demands and issuance of notice. Appellant-Society therefore
initiated the proceedings before the Joint Registrar of Co-
operative Societies, Bangalore for recovery of loan dues vide
dispute No.UBF/691/2015-16.
2.4 That the accused-respondent herein was arrayed as
respondent No.2 in the said dispute. Accused-respondent who
appeared in the said proceedings admitted the claim of the
appellant-Society and had undertaken to repay the loan, in
furtherance thereof, he had issued a Cheque bearing
No.084462 dated 30.07.2016 drawn on M/s. Tumkur Grain
Merchants Co-operative Bank Ltd., Basaveshwaranagar Branch,
Bengaluru for sum of Rs.48,08,770/-, towards discharge of
-4-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
liability, which was the total outstanding payable by the
borrower-Smt. Shobha as of the said date.
2.5 That on presentation of the said cheque for
encashment, the same returned with an endorsement dated
04.08.2016 as ”funds insufficient”.
2.6 That the appellant-Society issued statutory notice on
06.08.2016 through Registered Post Acknowledgment Due
which was duly served on the Accused-respondent. Despite
receipt of the said notice, he has neither replied nor paid the
cheque amount.
2.7 Consequently, complaint under Section 200 came to
be filed. Cognizance was taken. Sworn statement was recorded.
Summons were issued. Accused-respondent who appeared was
enlarged on bail. Since he pleaded not guilty, matter was set
down for trial.
3. One Smt. Premakala, the Branch Manager of the
appellant-Society was examined on behalf of the complainant-
Society and exhibited 26 documents marked as Ex.P1 to
Ex.P26. The statement of accused-respondent was recorded
-5-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
under Section 313 Cr.P.C, wherein he has denied the
incriminating evidence brought against him. Accused-
respondent did not lead any evidence. During the cross-
examination of PW1, one document was confronted on behalf of
the accused-respondent, which is marked as Ex.D1.
4. The Trial Court framed the following points for its
consideration:
” 1) Whether the Complainant society proves that, the accused
to discharge of legally recoverable debt or other liability issued
the alleged cheque bearing No.084462 dated 30.07.2016 drawn
on M/s. Tumkur Grain Merchants Co-operative Bank Ltd.
Basaveshwaranagar Branch, Bangalore for Rs.48,08,770/-?’
2) Whether the Complainant society proves that, on
presentation of said cheque, same was returned unpaid as
“Funds insufficient” and despite of giving legal notice, he failed
to pay the cheque amount, thereby he committed an offence
punishable under Section 138 of NI Act?
3) What order? ”
5. On appreciation of evidence, trial Court answered point
Nos.1 and 2 in the negative, consequently passed the
impugned judgment and order acquitting the accused-
respondent. Being aggrieved, the present appeal.
6. Learned counsel for the appellant-Society reiterating
the grounds urged in the memorandum of appeal submits;
-6-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
(a) that the impugned judgment and order passed by the
trial Court acquitting the accused-respondent is contrary to the
settled principles of law. When the issuance of cheque is not
disputed by the accused-respondent, the statutory presumption
contemplated under Section 118 of the N.I. Act, ought to have
been drawn by the trial Court instead of casting the burden on
the appellant-Society to prove its case.
(b) That the trial Court has misread the documents to
arrive at a wrong conclusion of PW1 not having authority to
represent the appellant-Society, despite production of
documents namely, Exs.P1, P25 and P26 evidencing PW1
having been duly authorized to represent and prosecute the
case.
(c) The trial Court has unnecessarily gone into the loan
documents which were produced by the appellant-Society in
justification of their claim and has come to erroneous
conclusion of said loan documents not justifying the claim made
by the appellant-Society.
(d) That the trial Court has also erroneously found that
there was no prior notice issued by the appellant-Society to the
-7-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
accused before presenting the cheque for encashment which is
neither the requirement of law nor of the facts of the present
case.
(e) When the cheque in question has been admittedly
issued by the accused-respondent, the trial Court ought not to
have held that appellant-Society has not produced relevant
documents to show issuance of the cheque, merely, because in
the order sheet of the dispute No.UBF/691/2015-16 produced
at Ex.P16, there is no mention of the cheque. The trial court
ought not to have held that no cheque was issued at all
contrary to the very defence setup by the accused-respondent.
(f) That the trial court has further erred in holding that
the accused-respondent could not have been burdened to pay
the entire amount in one go and the cheque ought to have
been issued in installments, which is unfounded and contrary to
the material evidence.
7. In support of the submissions, he relies upon the
judgment of the Hon’ble Apex Court in the case United Bank
of India Vs. Naresh Kumar and others reported in
-8-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
(1996) 6 SCC 660, on the point of authorization to represent
a company and the defect which is curable in nature.
8. He further relies upon judgment of the High Court of
Gauhati in the case of M/s. Amprolisa Construction and
Marketing Pvt. Ltd., Vs. Gupta Hardware Pvt. Ltd., and
another in Crl.Pet.No.1263/2022 decided on 03.12.2025 to
contend that absence of board resolution or authorization for
filing a complaint under Section 138 of the N.I. Act is a curable
defect and not a ground to quash the proceedings.
9. He also relies upon the judgment of the ICDS Ltd. Vs.
Beena Shabeer and another reported in (2002) 6 SCC 426,
on the point of maintainability of complaint against the
guarantor under Section 138 of the N.I. Act.
Thus, he submits that the trial Court has erred in
acquitting the accused-respondent. Hence, seeks for allowing
of the appeal.
10. Learned counsel appearing for the accused-
respondent submits;
-9-
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
(a) that the defect in the nature of lack of authorization
to file and prosecute a complaint under Section 138 of the N.I.
Act is not curable as it has a severe penal consequences and
the same cannot be construed lightly.
(b) That PW1 in the cross examination recorded on
08.03.2017 has admitted regarding she not having been duly
authorized at the time of filing of the complaint. Further, in the
cross-examination recorded on 08.03.2017, 19.05.2018 and
08.06.2018 she has admitted that there was no authorization in
her favour to present the complaint and that no board
resolution was passed authorized in her name, appointing her
to represent the appellant-Society.
(c) That she has also admitted Ex.P1 to be a back dated
document clearly establishing that a appellant-Society has
resorted to fabricating the document, which the trial Court has
rightly taken note of.
(d) He relies upon the judgment of the Co-ordinate Bench
of this Court, in the case of Dr. Uma Gangadhar Vs. Classic
Coffee and Spices Pvt. Ltd., Chickmagalur reported in
(2001)6 Kant LJ 193, referring to paragraph Nos.8 and 9 of
– 10 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
the said judgment, he submits that a valid sanction and
authorization is essential to launch a prosecution without which
the entire proceeding stands vitiated.
(e) That the trial Court apart from the issue of
authorization has also adverted to merits of the case. That the
loan documents furnished by the appellant-society had inherent
defects in the nature of differences in the signature of the
borrower and some of the loan documents did not contain the
name of accused-respondent to be the guarantor. Some of the
documents where the name of accused-respondent was shown
as a guarantor were incomplete.
(f) That in the order sheet maintained by the Additional
Registrar of Cooperative Society, there is no mention of the
cheque number or the amount to which the cheques having
been issued. Even in the authorization at Ex.P1 or in the
resolution, there is no details of the cheques issued by the
accused- respondent.
(g) All that the accused required is to make out a
probable defence and he need not even enter the witness box,
which the accused-respondent herein has done successfully in
– 11 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
the instant case and the trial Court is justified in acquitting him
warranting no interference at the hands of this Court.
Hence seeks for dismissal of the appeal.
11. Heard and perused the records.
12. Points that arise for consideration are;
(i) Whether the accused-respondent had issued the
Cheque bearing No.084462 dated 30.07.2016 towards
discharge of legally recoverable debt?
(ii) Whether the judgment and order passed by the trial
Court acquitting the accused-respondent is justified?
(iii) What Order?
13. The facts of the case narrated above do not require
reiteration.
14. The trial Court in the impugned judgments while
acquitting the accused-respondent has held;
(a) that PW1 was not duly authorized by the CEO of the
appellant-Society. That though subsequent board resolution
extracts were produced, there was no specific resolution in
favour of the Manager of the appellant-Society to file the case
on hand. As such, it is held PW1-Manager at the appellant-
– 12 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
Society was not authorized as she did not have valid
authorization.
(b) That though the PW1 has admitted in the cross
examination regarding accused-respondent having given the
cheque after filing of the dispute before the ARCS, she has not
produced document to show that the accused-respondent had
given the alleged cheque towards discharge of the liability as a
guarantor.
(c) That the appellant-Society ought to have issued a
notice to the accused-respondent before presenting the cheque,
calling upon him to maintain the sufficient balance to honor the
cheque. That in the absence of issuance of such cheque,
appellant-Society could not have expected the accused-
respondent to maintain the cheque amount.
(d) That the appellant-society had not followed the proper
procedure while granting the loan. That it had not verified the
vehicle details and its earlier hypothecation. It has not followed
the terms and conditions while sanctioning the loan. It has not
produced the records to show the date of sanction of the loan.
– 13 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
(e) Thus, there are irregularities in sanctioning the loans
and disbursement of the amount. As such, the appellant-
Society cannot fix the criminal liability on the accused-
respondent for a huge cheque amount of Rs.48,08,770/-. That
the cheques were taken blank for the security purpose, it
cannot be utilized for discharge of the liability.
(f) That since the appellant-Society has not issued notice
before presenting the cheque for encashment of entire loan and
there is no agreement between accused-respondent and the
appellant-Society to fill the blank cheques, the accused-
respondent cannot be burdened for payment of huge amount of
Rs.48,08,770/-.
(g) That the above circumstances would prove the
defence putforth by the accused-respondent that he did not
issue the cheque towards discharge of the debt to be probable
and convincing.
Based on the above reasoning, trial Court has proceeded
to acquit the accused-respondent.
– 14 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
15. Before adverting to the submissions and the
reasoning assigned by the trial Court as noted above, it is
relevant to encapsulate few judgments of the Hon’ble Apex
Court on the settled position of law regarding the statutory
presumptions available to the appellant-Society. In the case of
Sanjabji Tari Vs. Kishore S. Borcar and another reported in
(2025) SCC Online 2069, the Hon’ble Apex Court at
paragraph Nos.11 to 18, 29, 30 has held as under:
”11. Having heard learned counsel for the parties, this court is of the
view that it is essential to first outline the scope and intent of Chapter
XVII (sections 138 to 148) of the Negotiable Instruments Act, which
has been inserted by Act, 66 of 1988 with effect from April 1, 1989.
12. The Statement of Objects and Reasons of Act, 66 of 1988 states,
“.. . to enhance the acceptability of cheques in settlement of liabilities
by making the drawer liable for penalties in case of bouncing of
cheques due to insufficiency of funds in the accounts or for the reason
that it exceeds the arrangements made by the drawer, with adequate
safeguards to prevent harassment of honest drawers.”
13. The provisions contained in Chapter XVII provide that where any
cheque drawn by a person for the discharge of any liability is returned
by the bank unpaid for the reason of the insufficiency of the amount of
money standing to the credit of the account on which the cheque was
drawn or for the reason that it exceeds the arrangements made by the
drawer of the cheque with the banker for that account, the drawer of
such cheque shall be deemed to have committed an offence. In that
case, the drawer, without prejudice to the other provisions of the said
Act, shall be punishable with imprisonment for a term which may
extend to two years, or with fine which may extend to twice the
amount of the cheque, or with both.
14. Consequently, this court is of the view that the intent behind
introducing Chapter XVII is to restore the credibility of cheques as a
trustworthy substitute for cash payment and to promote a culture of
using cheques. Further, by criminalizing the act of issuing cheques
without sufficient funds or for other specified reasons, the law
promotes financial discipline, discourages irresponsible practices and
allows for a more efficient and timely resolution of disputes compared
– 15 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
to the previous pure civil remedy which was found to involve the payee
in a long-drawn out process of litigation.
Once execution of cheque is admitted, presumptions under sections
118 and 139 of the Negotiable Instruments Act, arise
15. In the present case, the cheque in question has admittedly been
signed by respondent No. 1-accused. This court is of the view that
once the execution of the cheque is admitted, the presumption under
section 118 of the Negotiable Instruments Act, that the cheque in
question was drawn for consideration and the presumption under
section 139 of the Negotiable Instruments Act, that the holder of the
cheque received the said cheque in discharge of a legally enforceable
debt or liability arise against the accused. It is pertinent to mention
that observations to the contrary by a two-judge Bench in Krishna
Janardhan Bhat v. Dattatraya G. Hegde [(2008) 141 Comp Cas 665
(SC); (2008) 4 SCC 54; (2008) 2 SCC (Cri) 166; 2008 SCC OnLine SC
106.] have been set aside by a three-judge Bench in Rangappa v. Sri
Mohan [(2010) 11 SCC 441; (2010) 4 SCC (Civ) 477; (2011) 1 SCC
(Cri) 184; 2010 SCC OnLine SC 583.] .
16. This court is further of the view that by creating this presumption,
the law reinforces the reliability of cheques as a mode of payment in
commercial transactions.
17. Needless to mention that the presumption contemplated under
section 139 of the Negotiable Instruments Act, is a rebuttable
presumption. However, the initial onus of proving that the cheque is
not in discharge of any debt or other liability is on the accused/drawer
of the cheque (see : Bir Singh v. Mukesh Kumar [(2019) 5 Comp Cas-
OL 560 (SC); (2019) 4 SCC 197; (2019) 2 SCC (Cri) 40; (2019) 2 SCC
(Civ) 309; 2019 SCC OnLine SC 138.] .
18. The judgment of this court in APS Forex Services P. Ltd. v. Shakti
International Fashion Linkers [(2020) 12 SCC 724; (2020) 4 SCC (Cri)
505; 2020 SCC OnLine SC 193.] relied upon by learned counsel for
respondent No. 1-accused only says that the presumption under
section 139 of the Negotiable Instruments Act is rebuttable and when
the same is rebutted, the onus would shift back to the complainant to
prove his financial capacity, more particularly, when it is a case of
giving loan by cash. This judgment nowhere states, as was sought to
be contended by learned counsel for respondent No. 1-accused, that in
cases of dishonour of cheques, in lieu of cash loans, the presumption
under section 139 of the Negotiable Instruments Act does not arise.
Approach of some courts below to not give effect to the presumptions
under sections 118 and 139 of the Negotiable Instruments Act, is
contrary to mandate of Parliament
29. Furthermore, the fact that the accused has failed to reply to the
statutory notice under section 138 of the Negotiable Instruments Act,
leads to an inference that there is merit in the appellant-complainant’s
version. This court in Tedhi Singh v. Narayan Dass Mahant [(2022) 6
– 16 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
SCC 735; (2022) 2 SCC (Cri) 726; (2022) 3 SCC (Civ) 442; 2022 SCC
OnLine SC 302.] has held that the accused has the initial burden to set
up the defence in his reply to the demand notice that the complainant
did not have the financial capacity to advance the loan. The relevant
portion of the said judgment is reproduced hereinbelow [ See page 740
of (2022) 6 SCC.] :
“10. The proceedings under section 138 of the Negotiable
Instruments Act, is not a civil suit. At the time, when the
complainant gives his evidence, unless a case is set up in the
reply notice to the statutory notice sent, that the complainant
did not have the wherewithal, it cannot be expected of the
complainant to initially lead evidence to show that he had the
financial capacity. To that extent, the courts in our view were
right in holding on those lines. However, the accused has the
right to demonstrate that the complainant in a particular case
did not have the capacity and therefore, the case of the
accused is acceptable which he can do by producing
independent materials, namely, by examining his witnesses
and producing documents. It is also open to him to establish
the very same aspect by pointing to the materials produced by
the complainant himself. He can further, more importantly,
achieve this result through the cross-examination of the
witnesses of the complainant. Ultimately, it becomes the duty
of the courts to consider carefully and appreciate the totality of
the evidence and then come to a conclusion whether in the
given case, the accused has shown that the case of the
complainant is in peril for the reason that the accused has
established a probable defence.”
30. This court in M.M.T.C. Ltd. v. Medchl Chemicals and Pharma P. Ltd.
[(2002) 108 Comp Cas 48 (SC); (2002) 1 SCC 234; 2002 SCC (Cri)
121; 2001 SCC OnLine SC 1364.] has specifically held that when a
statutory notice is not replied, it has to be presumed that the cheque
was issued towards the discharge of liability.
16. In the case of Ashok Singh Vs. State of Uttar
Pradesh reported in 2025 Live Law (SC) 383, at paragraph
Nos. 15 to 17 has held as under:
”15. There can be no dispute that in matters relating to alleged
offences under Section 138 of the Act, the complainant has only to
establish that the cheque was genuine, presented within time and
upon it being dishonoured, due notice was sent within 30 days of such
dishonour, to which re-payment must be received within 15 days,
failing which a complaint can be preferred by the complainant within
one month as contemplated under Section 142 (1)(b) of the Act.
– 17 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
16. On the other hand, the foremost defence available to the accused
is to deny the very liability to pay the amount for which the cheque
was issued on the ground that it was not a ‘legally enforceable debt’
under the Act.
17. In the present case, there is no denial apropos the signature on
the cheque by the respondent no.2 and, as noted hereinbefore, the
stand taken is that the said cheque was lost. This is the reason given
by the respondent no.2 to have advised the bank to stop payment due
to which the cheque in question was not honoured/encashed. However,
the relevant dates beg to tell a different tale. The cheque in question
dated 17.03.2010 was presented within time but returned un-encashed
on 07.05.2010 with the endorsement ‘payment stopped by drawer’. A
Legal Notice was also sent by the appellant on 18.05.2010 through
Registered Post, i.e., within the stipulated thirty days period,
intimating about the dishonour of the cheque. As no reply was
proffered by respondent no.2, thus, an inference, albeit rebuttable,
could arise that he had no sustainable/valid defence to justify why the
cheque in question was dishonoured. Be that as it may, the respondent
no.2 avers that no reply was sent as he had not received any Legal
Notice. ”
17. In the case of Rajesh Jain Vs. Ajay Singh reported
in (2023) 10 SCC 148, at paragraph Nos.28, 29 and 32 to 37
has held as under:
” Burden of proof and presumptions : Conceptual underpinnings
28. There are two senses in which the phrase “burden of proof” is used
in the Evidence Act, 1872 (“the Evidence Act” hereinafter). One is the
burden of proof arising as a matter of pleading and the other is the one
which deals with the question as to who has first to prove a particular
fact. The former is called the “legal burden” and it never shifts, the
latter is called the “evidential burden” and it shifts from one side to the
other. [See Kundan Lal Rallaram v. Custodian (Evacuee Property)
[Kundan Lal Rallaram v. Custodian (Evacuee Property), 1961 SCC
OnLine SC 10 : AIR 1961 SC 1316] .]
29. The legal burden is the burden of proof which remains constant
throughout a trial. It is the burden of establishing the facts and
contentions which will support a party’s case. If, at the conclusion of
the trial a party has failed to establish these to the appropriate
standards, he would lose to stand. The incidence of the burden is
usually clear from the pleadings and usually, it is incumbent on the
plaintiff or complainant to prove what he pleaded or contends. On the
other hand, the evidential burden may shift from one party to another
as the trial progresses according to the balance of evidence given at
any particular stage; the burden rests upon the party who would fail if
no evidence at all, or no further evidence, as the case may be is
– 18 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
adduced by either side (see Halsbury’s Laws of England, 4th Edn. para
13). While the former, the legal burden arising on the pleadings is
mentioned in Section 101 of the Evidence Act, the latter, the evidential
burden, is referred to in Section 102 thereof. [G. Vasu v. Syed Yaseen
Sifuddin Quadri [G. Vasu v. Syed Yaseen Sifuddin Quadri, 1986 SCC
OnLine AP 147 : AIR 1987 AP 139] affirmed in Bharat Barrel & Drum
Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co. v.
Amin Chand Payrelal, (1999) 3 SCC 35] .]
32. The Evidence Act provides for presumptions, which fit within one of
three forms:”may presume” (rebuttable presumptions of fact), “shall
presume” (rebuttable presumption of law) and conclusive
presumptions (irrebuttable presumption of law). The distinction
between “may presume” and “shall presume” clauses is that, as
regards the former, the Court has an option to raise the presumption
or not, but in the latter case, the Court must necessarily raise the
presumption. If in a case the Court has an option to raise the
presumption and raises the presumption, the distinction between the
two categories of presumptions ceases and the fact is presumed,
unless and until it is disproved. [G. Vasu v. Syed Yaseen Sifuddin
Quadri [G. Vasu v. Syed Yaseen Sifuddin Quadri, 1986 SCC OnLine AP
147 : AIR 1987 AP 139] ]
Section 139, NI Act-Effect of presumption and shifting of onus of proof
33. The NI Act provides for two presumptions : Section 118 and
Section 139. Section 118 of the Act inter alia directs that it shall be
presumed, until the contrary is proved, that every negotiable
instrument was made or drawn for consideration. Section 139 of the
Act stipulates that “unless the contrary is proved, it shall be presumed,
that the holder of the cheque received the cheque, for the discharge
of, whole or part of any debt or liability”. It will be seen that the
“presumed fact” directly relates to one of the crucial ingredients
necessary to sustain a conviction under Section 138. [ The rules
discussed hereinbelow are common to both the presumptions under
Section 139 and Section 118 and are hence, not repeated–reference
to one can be taken as reference to another]
34. Section 139 of the NI Act, which takes the form of a “shall
presume” clause is illustrative of a presumption of law. Because
Section 139 requires that the Court “shall presume” the fact stated
therein, it is obligatory on the Court to raise this presumption in every
case where the factual basis for the raising of the presumption had
been established. But this does not preclude the person against whom
the presumption is drawn from rebutting it and proving the contrary as
is clear from the use of the phrase “unless the contrary is proved”.
35. The Court will necessarily presume that the cheque had been
issued towards discharge of a legally enforceable debt/liability in two
circumstances. Firstly, when the drawer of the cheque admits
issuance/execution of the cheque and secondly, in the event where the
complainant proves that cheque was issued/executed in his favour by
the drawer. The circumstances set out above form the fact(s) which
bring about the activation of the presumptive clause. [Bharat Barrel &
– 19 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel & Drum Mfg. Co.
v. Amin Chand Payrelal, (1999) 3 SCC 35] ]
36. Recently, this Court has gone to the extent of holding that
presumption takes effect even in a situation where the accused
contends that a blank cheque leaf was voluntarily signed and handed
over by him to the complainant. [Bir Singh v. Mukesh Kumar [Bir
Singh v. Mukesh Kumar, (2019) 4 SCC 197 : (2019) 2 SCC (Civ) 309 :
(2019) 2 SCC (Cri) 40] ]. Therefore, mere admission of the drawer’s
signature, without admitting the execution of the entire contents in the
cheque, is now sufficient to trigger the presumption.
37. As soon as the complainant discharges the burden to prove that
the instrument, say a cheque, was issued by the accused for discharge
of debt, the presumptive device under Section 139 of the Act helps
shifting the burden on the accused. The effect of the presumption, in
that sense, is to transfer the evidential burden on the accused of
proving that the cheque was not received by the Bank towards the
discharge of any liability. Until this evidential burden is discharged by
the accused, the presumed fact will have to be taken to be true,
without expecting the complainant to do anything further.
18. In the case of Hithan B. Dalal Vs. Brathindranath
Banerjee reported in (2001) 6 SCC 16, wherein at paragraph
Nos.21 to 24 has held as under:
” 21. The appellant’s submission that the cheques were not drawn for
the “discharge in whole or in part of any debt or other liability” is
answered by the third presumption available to the Bank under Section
139 of the Negotiable Instruments Act. This section provides that:
“139. It shall be presumed, unless the contrary is proved, that the
holder of a cheque received the cheque, of the nature referred to
in Section 138 for the discharge, in whole or in part, of any debt or
other liability.”
The effect of these presumptions is to place the evidential burden on
the appellant of proving that the cheque was not received by the Bank
towards the discharge of any liability.
22. Because both Sections 138 and 139 require that the court “shall
presume” the liability of the drawer of the cheques for the amounts for
which the cheques are drawn, as noted in State of Madras v. A.
Vaidyanatha Iyer [AIR 1958 SC 61 : 1958 Cri LJ 232] it is obligatory
on the court to raise this presumption in every case where the factual
basis for the raising of the presumption had been established. “It
introduces an exception to the general rule as to the burden of proof in
– 20 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
criminal cases and shifts the onus on to the accused.” (Ibid. at p. 65,
para 14.) Such a presumption is a presumption of law, as distinguished
from a presumption of fact which describes provisions by which the
court “may presume” a certain state of affairs. Presumptions are rules
of evidence and do not conflict with the presumption of innocence,
because by the latter, all that is meant is that the prosecution is
obliged to prove the case against the accused beyond reasonable
doubt. The obligation on the prosecution may be discharged with the
help of presumptions of law or fact unless the accused adduces
evidence showing the reasonable possibility of the non-existence of the
presumed fact.
23. In other words, provided the facts required to form the basis of a
presumption of law exist, no discretion is left with the court but to
draw the statutory conclusion, but this does not preclude the person
against whom the presumption is drawn from rebutting it and proving
the contrary. A fact is said to be proved when,
“after considering the matters before it, the court either believes it to
exist, or considers its existence so probable that a prudent man ought,
under the circumstances of the particular case, to act upon the
supposition that it exists” [ Section 3, Evidence Act] .
Therefore, the rebuttal does not have to be conclusively established
but such evidence must be adduced before the court in support of the
defence that the court must either believe the defence to exist or
consider its existence to be reasonably probable, the standard of
reasonability being that of the “prudent man”.
24. Judicial statements have differed as to the quantum of rebutting
evidence required. In Kundan Lal Rallaram v. Custodian, Evacuee
Property [AIR 1961 SC 1316] this Court held that the presumption of
law under Section 118 of the Negotiable Instruments Act could be
rebutted, in certain circumstances, by a presumption of fact raised
under Section 114 of the Evidence Act. The decision must be limited to
the facts of that case. The more authoritative view has been laid down
in the subsequent decision of the Constitution Bench in Dhanvantrai
Balwantrai Desai v. State of Maharashtra [AIR 1964 SC 575 : (1964) 1
Cri LJ 437] where this Court reiterated the principle enunciated in
State of Madras v. Vaidyanatha Iyer [AIR 1958 SC 61 : 1958 Cri LJ
232] and clarified that the distinction between the two kinds of
presumption lay not only in the mandate to the court, but also in the
nature of evidence required to rebut the two. In the case of a
discretionary presumption the presumption if drawn may be rebutted
by an explanation which “might reasonably be true and which is
consistent with the innocence” of the accused. On the other hand in
the case of a mandatory presumption
“the burden resting on the accused person in such a case would not be
as light as it is where a presumption is raised under Section 114 of the
Evidence Act and cannot be held to be discharged merely by reason of
the fact that the explanation offered by the accused is reasonable and
probable. It must further be shown that the explanation is a true one.
The words ‘unless the contrary is proved’ which occur in this provision
– 21 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
make it clear that the presumption has to be rebutted by ‘proof’ and
not by a bare explanation which is merely plausible. A fact is said to be
proved when its existence is directly established or when upon the
material before it the court finds its existence to be so probable that a
reasonable man would act on the supposition that it exists. Unless,
therefore, the explanation is supported by proof, the presumption
created by the provision cannot be said to be rebutted”. (AIR p. 580,
para 12)”
19. Thus as seen above, settled principle of law
repeatedly reiterated by the Hon’ble Apex Court is that once
signature and issuance of a cheque is admitted, the statutory
presumption has to be necessarily drawn in favour of the
complainant. Though the accused is entitled for rebuttal of the
same, the rebuttal has to be specific, cogent, acceptable and
true. It cannot be a mere denial or in the nature of general
suggestions.
20. The aforesaid enunciation of law by the Hon’ble Apex
Court also emphasizes that the accused is required to place his
defence at the earliest, i.e., in response to the notice that is
issued.
21. In the instant case, there is no dispute of accused-
respondent being a guarantor to the loans borrowed by the
original borrower. There is also no dispute of the fact that the
accused-respondent has indeed issued the cheque. There is
also no dispute of the fact that the appellant-Society had
– 22 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
initiated proceedings under Section 70 of the Co-operative
Societies Act against the principal borrower as respondent No.1
and accused-respondent herein as respondent No.2, in a case
No.ARD.UBF No.691/2015-16, in which the amount of recovery
sought for is Rs.42,20,201/-. The Principal borrower as well as
the accused-respondent appeared and represented through
their respective counsel, the daily order sheet maintained in the
said proceeding, more particularly, of 04.03.2016 read as
under:
“¥ÀæPÀgÀt PÀgɸÀ¯Á¬ÄvÀÄ. ªÁ¢ ºÁUÀÆ ¥ÀgÀ ªÀQîgÀÄ ºÁdj. ¥ÀæwªÁ¢-2
ºÁUÀÆ ¥ÀgÀ ªÀQîgÀÄ ºÁdj. G½zÀªÀgÀÄ UÉÊgÀÄ. Dgï-2gÀªÀgÀÄ PÁ¯ÁªÀPÁ±À
¤rzÀÝ°è, ¥ÀÆtð ¸Á® ¥ÁªÀw¸ÀĪÀÅzÁV w½¹zÀÝgÀ ªÉÄÃgÉUÉ, Dgï.gÀªÀgÀ
DPÉëÃ¥ÀuÉUÁV ºÁUÀÆ ªÁ¢AiÀÄ ¸ÁPÀëöåPÁÌV ¥ÀæPÀgÀtªÀ£ÀÄß ¢£ÁAPÀ:
16.03.2016gÀ ªÀÄzsÁºÀß 3.00 UÀAmÉUÉ ªÀÄÄAzÀÆqÀ¯Á¬ÄvÀ”.
22. There is no dispute with regard to the aforesaid Order
passed by the Additional Registrar of Cooperative Society.
23. Clearly, the accused-respondent who participated in
the dispute under Section 70 of the Karnataka Cooperative
Societies Act, before the Additional Registrar of Cooperative
Society was conscious of the submissions made and
undertaking given by him for repayment of the outstanding
loan amount.
– 23 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
24. The notice issued as required under Section 138 of
N.I. Act, has admittedly been received by the accused-
respondent and he has not issued any reply to the same.
25. These admitted facts supported by the documents
compel the Court to draw the mandatory presumption available
under the law, regarding accused-respondent having issued the
cheque towards the discharge of legally recoverable debt.
26. The lengthy line of cross-examination adopted by the
accused-respondent indicate that the dispute raised by him is
predominantly with regard to the lack of authorization by the
appellant-Society in favour of PW1.
27. Learned counsel for the accused-respondent referred
to the portions of deposition of PW1 recorded on 08.03.2017,
19.05.2018 and 08.06.2018, the said portions are extracted
hereunder for immediate perusal.
Cross-examination recorded on 08.03.2017:
” It is true that resolution has not been passed in the board
meeting authorizing me to file complaint and conduct the case.
It is not true to suggest that I have not been given proper
authorization to conduct this case.”
– 24 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
Cross-examination recorded on 19.05.2018:
” ಸ EZÁÑ ೇ ೆಯ ೊ ೆ ೆ ಅ ಾರ ಪತ ವನು ಾಜರುಪ ೇ ೆ. ಸದ ಅ ಾರ ಪತ ವ
ದೂರು ಾಖ”ಸುವ ಸಂದಭ%ದ”& ಇ(ದ)ೆ ಅದನು ದೂ ನ ೊತ ೆ ಾಜರುಪ ಸು*+ ೆ ಎಂದ)ೆ -ಾ.
ಆ ಸಮಯ ೆ1 ಅ ಾರ ಪತ ಇರ”ಲ& ಎಂದು ನು ಯು ಾ+)ೆ. ನಂತರ ಸ ಇ3ಾ4 ೇ ೆಯ ಸಮಯದ”&
ಅ ಾರ ಪತ ವನು ಪ5ೆದು ೊಂಡು ಾ78ಾಲಯ ೆ1 ಾಜರುಪ ೇ ೆ ಎಂದ)ೆ ಸ . ಸದ
ಅ ಾರ ಪತ ವನು (.05.09.2016 ಎಂದು 9ಂ(ನ ( ಾಂಕವನು ನಮೂ( ಪ5ೆದು ೊಂ ೇ ೆ
ಎಂದ)ೆ ಸ .”Cross-examination recorded on 08.06.2018:
”.. ೇಸು ಾಖಲು ;ಾಡು<ಾಗ >ೋ?% )ೆಸಲೂ7ಶA ಅಥ<ಾ >ೋ?% )ೆಸಲೂ7ಶA ಎ ಾCDEನು
ಾಜರುಪ ಲ& ಎಂದ)ೆ ಸ . -ಾ.ಯು ಮುಂದುವ)ೆದು ನಂತರ ಆತ)ೈ-ೆಶA ಾಜರುಪ ೇ<ೆ,
>ೋ?% )ೆಸಲೂ7ಶA ಾಜರುಪ ಲ& ಎಂದು ನು ಯು ಾ+)ೆ. ಆ (ನ >ೋ?% )ೆಸಲೂ7ಶA ನಮH
ಬ ಇ(ದ)ೆ ಅದನು J8ಾ%ದು ೊ ೆ “KE ಆL 5ಾಕೂ7MಂNO ನು ನಮೂ(ಸಲು ೊಂದ)ೆ
ಇರ”ಲ& ಎಂದ)ೆ ನಮH ಬ ಾಖPೆ ಇತು+, ಆದ)ೆ ಾಖPೆಗಳ ಪREಯ”& ನಮೂ( ಲ& ಎಂದು
ನು ಯು ಾ+)ೆ.”
28. Thus referring to the aforesaid three portions of the
deposition, learned counsel for the accused-respondent
vehemently submits that document at Ex.P1 is backdated and
fabricated and cannot be relied upon. He also submitted that
the witness has admitted there being no resolution in her
name.
29. This Court is not persuaded to accept the said
submission, inasmuch as there is no dispute with regard to the
resolution dated 27.01.2015 produced at Ex.P26 as well as the
resolution dated 12.05.2015. In the resolution dated
27.01.2015, after discussion of issue, the following is recorded:
– 25 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
”Resolved that CEO can authorise manager to represent bank
to sign, give evidence, present or take back documents in legal
proceedings. The meeting concluded with vote of thanks.”
30. This Resolution indicates that CEO has been
authorized to further authorize manager to represent the Bank.
31. Ex.P25-Resolution dated 12.05.2015, relevant portion
read as under:
” …. It was decided to file suit against all 16 vehicle loan
borrowers, also against Mr. Manjunath B. S. and Vasanth
Kokila, who have given cheque as guarantors to other loan
borrowers.”
32. All that the witness PW1 has stated is that the
resolution is not been passed in the board meeting authorizing
her to file the complaint. True it is that her name is not
mentioned in the said resolution. Instead, it is resolved that the
CEO to authorize the Manager. The said answer may have to be
read only to that extent and not beyond.
33. Ex.P1 is a letter of authority in the letterhead of the
appellant-Society issued by the CEO. The date of the said
authorization is 05.09.2016. Sworn statement by way of an
affidavit is defined on 26.09.2016. It is in this context, the
deposition regarding earlier date of Ex.P1 as deposed by PW1
– 26 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
has to be viewed. Even if it is assuming that PW1 has stated
about she obtaining authorization as per Ex.P1, subsequent to
the sworn statement with the prior date, in the considered view
of this Court, same would not amount to an admission of
purported fabrication of document as sought to be made out.
34. It is necessary to note that the complainant is a Co-
operative Society incorporated exclusively for the
empowerment of the women dealing with the public money.
Apart from this there are ten other appeals arising out of
similar facts situation and in all these appeals, accused-
respondent is the guarantor. It is not in dispute, loan
disbursed by the appellant-society was for the business
purpose in the nature of purchase of buses and vehicles. On a
specific query of this Court, learned counsel for the appellant-
Society submits that all the borrowers are his family members
and relatives of the accused-respondent and the vehicles which
were purchased from the loan borrowed from the appellant-
Society were attached to the proprietary firm being run by the
accused-respondent.
– 27 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
35. Clearly, public money has been utilised by the
borrowers and the respondent-accused. Being conscious of his
liability to repay, respondent-accused has undertaken to pay
the same as noted in the daily order sheet maintained in the
JRCS dispute. Having issued the cheque in furtherance to said
undertaking, it is not justified for the accused-respondent to
take up a contrary stand on a hyper technical issue of
appellant-Society not being represented by a duly authorized
representative despite production of Exs.P1, P25 and P26 as
noted above.
36. It is relevant at this juncture to refer to the judgment
of the Hon’ble Apex Court in the case of Haryana State Co-
operative Supply and Marketing Federation Ltd., Vs.
Jayam Textiles and Another reported AIR 2014 SCC 1926,
wherein at paragraph Nos.6 and 7 it is held as under:
” 6. Having heard the learned counsel for the parties and after
perusing the material on record, we find that admittedly
authorisation by the Board of Directors of the appellant
Federation was not placed before the courts below. But, we
may notice that a specific averment was made by the appellant
Federation before the learned Judicial Magistrate that the said
general power of attorney had been filed in connected case
being CC No. 1409 of 1995, which has neither been denied nor
disputed by the respondents. In any case, in our opinion, if the
courts below were not satisfied, an opportunity ought to have
been granted to the appellant Federation to place the document
containing authorisation on record and prove the same in
– 28 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
accordance with law. This is so because procedural defects and
irregularities, which are curable, should not be allowed to
defeat substantive rights or to cause injustice. Procedure, a
handmaiden to justice, should never be made a tool to deny
justice or perpetuate injustice, by any oppressive or punitive
use.
7. In view of the fact that in spite of arbitration award against
the respondents, there was non-payment of amount by the
respondents to the appellant Federation, and also in the light of
authorisation contained in Annexure P/7, we are of the opinion
that, in the facts and circumstances of the case, an opportunity
should be given to the appellant Federation to produce and
prove the authorisation before the trial court, more so, when
money involved is public money. We, therefore, set aside the
judgments of the courts below and remit the matters back to
the trial court with a direction to conduct trial afresh taking into
consideration the authorisation placed before us and dispose of
the matter as expeditiously as possible in accordance with law.”
37. Thus the procedural defects and irregularities, if any,
should not be allowed to defeat the substantive rights and to
cause injustice. In the aforesaid case though the Hon’ble Apex
Court has remanded the matter, there is no need in the instant
case inasmuch as the documents were made available,
therefore there is no question of remanding the matter.
38. The trial Court in the considered view of this Court
has misread the facts of the case and has wrongly applied the
principles of law, causing burden on the appellant-Society and
has further erred in going into the appreciation of the contents
of the loan documents, which is unwarranted.
– 29 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
39. The complainant has produced accounts statement
pertaining to loan transactions at Ex.P13 indicating
disbursement of the loan. Loan documents in the nature of
loan agreement at Ex.P14 and Ex.P15, Surety bond at Ex.P18,
hypothecation agreement at Ex.P19, Form-34 (Rule-60)
regarding making an entry for higher purchase subsequent to
registration at Ex.P20 to Ex.P23. These documents have been
signed both the borrower as well as accused-respondent as
guarantor. In the Cross-examination of PW.1, except general
denial nothing is elicited. The accused-respondent has not led
any evidence to discredit the version of complainant-Society.
Accused-respondent has also not denied that the vehicles
purchase of which these loans were advanced were used by the
accused-respondent for his business.
40. Another important aspect of the matter is that in the
Cross-examination of PW.1, following suggestions have been
made:
” It is not true to suggest that at the time of
disbursement of loan, we have taken blank cheques from the
borrower and guarantor…. As the said cheque presented we
have misused it….
…. It is not true to suggest that we have misused the
blank cheques given with regard to this loan..
– 30 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
… As on the date of cheque accused has been overdue
for Rs.35,00,000/- plus interest. It is not true to suggest that
even though that the liability of the accused is only
Rs.35,00,000/- we have filled the cheque for Rs.48,08,750/-.
Witness says the interest has been added.”
41. The aforesaid suggestions to PW.1 indicate that
admission of accused-respondent herein being the guarantor
for loan transactions. Admission of the outstanding loan
amount and also admission of he having issued the cheque as a
guarantor.
42. The trial Court in the absence of any serious dispute
with regard to the loan transactions and in the light of categoric
admission of disbursal of loan by the complainant-Bank in
favour of the borrower to which the accused-respondent herein
was the guarantor ought not to have gone into question of
mode and manner of repayment of loan amount. Particularly
as on the date when the cheque was issued, proceedings were
already initiated by the complainant-Bank under Section 70 of
the Karnataka Co-operative Societies Act, before the ARCS, in
which accused-respondent herein was arrayed as respondent
No.2. The trial Court in the absence of production of any
cogent evidence by the accused-respondent herein to displace
– 31 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
proof of execution of loan documents at Ex.P13 to Ex.P23 ought
not to have discredited the case of the complainant-Bank.
43. The trial Court erred in holding that there was no
agreement between the appellant-Society and the accused-
respondent for payment of outstanding as he was a guarantor.
As such, the cheque issued was not towards discharge of
liability. Necessary to note the judgment of the Hon’ble Apex
Court in the case of ICDS Pvt Ltd., (Supra), wherein at
paragraph Nos.8 to 11 held as under:
”8. The High Court, as noticed above, did allow the petition
upon a categorical finding that being a cheque from the
guarantor it could not be said to have been issued for the
purpose of discharging any debt or liability and the complaint
under Section 138 of the Negotiable Instruments Act, 1881,
thus cannot be maintained.
9. As noticed hereinbefore, the principal reason for quashing of
the proceeding as also the complaint by the High Court was by
reason of the fact that Section 138 of the Act provides for
issuance of a cheque to another person towards the discharge
in whole or in part of any debt or liability and on the factual
context, the High Court came to a conclusion that issuance of
the cheque cannot be correlated for the purpose of discharging
any debt or liability and as such complaint under Section 138
cannot be maintainable.
10. The language, however, has been rather specific as regards
the intent of the legislature. The commencement of the section
stands with the words “Where any cheque”. The above noted
three words are of extreme significance, in particular, by reason
of the user of the word “any” — the first three words suggest
that in fact for whatever reason if a cheque is drawn on an
account maintained by him with a banker in favour of another
person for the discharge of any debt or other liability, the
highlighted words if read with the first three words at the
– 32 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021
HC-KAR
commencement of Section 138, leave no manner of doubt that
for whatever reason it may be, the liability under this provision
cannot be avoided in the event the same stands returned by the
banker unpaid. The legislature has been careful enough to
record not only discharge in whole or in part of any debt but the
same includes other liability as well. This aspect of the matter
has not been appreciated by the High Court, neither been dealt
with or even referred to in the impugned judgment.
11. The issue as regards the coextensive liability of the
guarantor and the principal debtor, in our view, is totally out of
the purview of Section 138 of the Act, neither the same calls for
any discussion therein. The language of the statute depicts the
intent of the law-makers to the effect that wherever there is a
default on the part of one in favour of another and in the event
a cheque is issued in discharge of any debt or other liability
there cannot be any restriction or embargo in the matter of
application of the provisions of Section 138 of the Act. “Any
cheque” and “other liability” are the two key expressions which
stand as clarifying the legislative intent so as to bring the
factual context within the ambit of the provisions of the statute.
Any contra-interpretation would defeat the intent of the
legislature. The High Court, it seems, got carried away by the
issue of guarantee and guarantor’s liability and thus has
overlooked the true intent and purport of Section 138 of the
Act. The judgments recorded in the order of the High Court do
not have any relevance in the contextual facts and the same
thus do not lend any assistance to the contentions raised by the
respondents.”
44. The trial Court has also found that the issuance of a
cheque as a security could not have been used by the
appellant-Society. This findings of the trial Court also contrary
to law laid down by the Hon’ble Apex Court in the case of
Sripathi Singh Vs. State of Jharkhand and another
reported in (2022) 18 SCC 614, wherein at paragraph Nos.21
held as under:
– 33 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
”21. A cheque issued as security pursuant to a financial
transaction cannot be considered as a worthless piece of paper
under every circumstance. “Security” in its true sense is the
state of being safe and the security given for a loan is
something given as a pledge of payment. It is given, deposited
or pledged to make certain the fulfilment of an obligation to
which the parties to the transaction are bound. If in a
transaction, a loan is advanced and the borrower agrees to
repay the amount in a specified time-frame and issues a cheque
as security to secure such repayment; if the loan amount is not
repaid in any other form before the due date or if there is no
other understanding or agreement between the parties to defer
the payment of amount, the cheque which is issued as security
would mature for presentation and the drawee of the cheque
would be entitled to present the same. On such presentation, if
the same is dishonoured, the consequences contemplated under
Section 138 and the other provisions of the NI Act would flow.”
45. For the aforesaid reasons and analysis and the
documentary and oral evidence produced by the complainant-
Bank, this Court is of the considered view that the complainant-
appellant-Society has proved and established that the cheques
in question were issued by the accused-respondent before
discharge of the loan. The trial Court is not justified in
acquitting the accused-respondent.
Point raised are answered accordingly.
46. Accordingly, following:
– 34 –
NC: 2026:KHC:22967
CRL.A No. 1111 of 2021HC-KAR
ORDER
(i) Appeal is allowed. Judgment and order dated
26.03.2021, passed in C.C.No.22063/2016 on the file
of XXVI Additional Chief Metropolitan Magistrate,
Bangalore City is set-aside.
(ii) Accused-respondent is convicted for the offences
punishable under Section 138 of the N.I. Act.
(iii) Accused-respondent shall pay the fine amount of
Rs.50,00,000/-, in default accused-respondent shall
undergo simple imprisonment for a period of one
year.
(iv) Out of the fine amount, cheque amount shall be
paid to the appellant-Society remaining shall be paid
to the State.
Sd/-
(M.G.S. KAMAL)
JUDGE
RL
List No.: 1 Sl No.: 0
