The Venkataraman Credit Vs Sri Gowtam — Cheque Dishonour | Karnataka HC (2025)

The Venkataraman Credit Vs Sri Gowtam — Cheque Dishonour | Karnataka HC (2025)

What the court decided

AI extract

Outcome

Appeal allowed; acquittal dated 06.09.2019 in C.C.No.1273/2017 set aside; accused directed to pay cheque amount of Rs.10,32,997/- within one month from the date of the order, failing which simple imprisonment for one year; no interest imposed owing to the complainant's procedural lapses.

Issue for consideration

Whether the Trial Court committed an error in acquitting the accused on its conclusion that the issuance of the cheque at Ex.P1 was not proved, and whether the matter requires interference of this Court? +1 more

Court's answer

Since issuance of the cheque is undisputed (accused admits issuance) and its dishonour with endorsement 'insufficient funds' is undisputed, the presumption under Section 139 of the N.I. Act comes to the rescue of the complainant; the accused's only contention is that the cheque was issued towards security and nothing is placed on record to substantiate or rebut the presumption.

Ratio / Principle

The Trial Court's reasoning that a document was required to show that the accused issued Ex.P1 towards a legally recoverable debt is erroneous, because there is no denial from the accused that he issued the cheque; likewise the Trial Court's findings that the accused successfully rebutted the presumption and that the dishonour attracted no penal consequences are errors.

Key takeaways

The accused availed the loan of Rs.26,50,000/-, paid no installments (only interest of Rs.74,900/- reflected in account extracts), made no effort to retrieve the vehicle by paying dues after seizure (November 2016) until the auction on 19.04.2017, and took no action regarding the sale; therefore he cannot find fault with the complainant in conducting the public auction of the hypothecated vehicle.ratio¶¶63
Although the complainant would otherwise be entitled to interest, since it conducted the auction without issuing prior notice, without giving notice of seizure or of disposal, and without valuing the vehicle, the accused cannot be penalised to pay interest.ratio¶¶67

Detailed headnote1 paragraphs

Negotiable Instruments Act, 1881 — Sections 138, 139 — Appeal under Section 378(4) Cr.P.C. by complainant co-operative society against acquittal under Section 138. Issuance of the cheque (Ex.P1) and its dishonour ('insufficient funds') were undisputed and the accused admitted issuance; his only plea that the cheque was given as security was unsupported by any material on record, so the statutory presumption under Section 139 stood unrebutted and the Trial Court erred in insisting on independent documentary proof of a legally recoverable debt when there was no denial of issuance. The accused, having availed a loan of Rs.26,50,000/- and paid no installment (interest alone of Rs.74,900/- reflecting in account extracts), made no effort after seizure to clear dues and cannot fault the lender's public auction of the hypothecated tipper. However, the complainant gave no notice of seizure, no notice before auction/disposal and obtained no valuation; for these lapses the accused was not saddled with interest notwithstanding the complainant's otherwise entitlement. Appeal allowed: acquittal of 06.09.2019 in C.C.No.1273/2017 (JMFC, V Court, Mangaluru) set aside; accused to pay cheque amount of Rs.10,32,997/- within one month, failing which simple imprisonment for one year.