Sri K v. Prasad v I-Spatial Communications (P) Ltd.

Karnataka HC21 Feb 2025CRL.A/61/2013

Case brief

AI extract

What is this about?

S.138 NI Act acquittal upheld; S.139 presumption rebutted on preponderance of probability; accused may rely on complainant's materials without adducing evidence; statutory notice Ex.P4 and complaint silent on underlying transaction; franchise agreement not produced; PW1 admitted lending only Rs.67,00,000/- and not Rs.2,50,00,000/-; PW1 admission of Sheshadripuram Police Station complaint supported defence of cheque Ex.P1 and letter Ex.P10 forcibly taken; complainant's appeal under S.378(4) Cr.P.C. dismissed; CRL.A No. 61 of 2013; Karnataka High Court; NC: 2025:KHC:7895.

What did the court decide?

None; the criminal appeal filed by the complainant under S.378(4) Cr.P.C. against the judgment of acquittal was dismissed and the acquittal stands. ¶¶108

Sri K v Prasad Vs I-Spatial Communications (P) Ltd. — Cheque Dishonour | Karnataka HC (2025)

What the court decided

AI extract

Outcome

None; the criminal appeal filed by the complainant under S.378(4) Cr.P.C. against the judgment of acquittal was dismissed and the acquittal stands.

¶¶108

Issue for consideration

Whether the learned Magistrate erred in acquitting the respondent-accused for the offence under Section 138 of the N.I.Act.

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Court's answer

The point framed is answered in the negative: the learned Magistrate did not err in acquitting the respondent-accused under Section 138 N.I.Act, and there are no grounds made out for setting aside the judgment of acquittal.

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Ratio / Principle

Since the respondent-accused admitted his signature on the cheque (Ex.P1), a presumption under Section 139 N.I.Act had to be drawn that the cheque was issued for discharge of debt/liability; the presumption is rebuttable.

¶¶49

Key takeaways

The standard of proof for rebutting the Section 139 presumption is preponderance of probability.ratio¶¶49
Applying the Apex Court decisions relied upon, the respondent-accused could rely on the materials submitted by the complainant (statutory notice, complaint and evidence of PW1) to prove his defence and need not adduce independent evidence.ratio¶¶88
What the transaction between the complainant and the accused was has not been stated either in the statutory notice (Ex.P4) or in the complaint.ratio

Detailed headnote1 paragraphs

HIGH COURT OF KARNATAKA AT BENGALURU (SHIVASHANKAR AMARANNAVAR, J.), CRL.A No. 61 of 2013, decided 21.02.2025 (NC: 2025:KHC:7895) — Complainant's appeal under S.378(4) Cr.P.C. against acquittal under S.138 N.I.Act (judgment dated 17.10.2012, XVIII ACMM & XX ASCJ, Bengaluru, in C.C.No.36019/2006) DISMISSED. Signature of accused No.2 on cheque Ex.P1 (No.845392, dated 18.04.2006, Indian Bank, for Rs.2,50,00,000/-) being admitted, a rebuttable presumption under S.139 N.I.Act arose, rebuttable on preponderance of probability; however, the Court held the presumption stood rebutted: neither the statutory notice (Ex.P4) nor the complaint disclosed what the transaction between the parties was; the franchise agreement mentioned in PW1's affidavit was neither disclosed nor produced; PW1 admitted having lent only Rs.67,00,000/- (through cheque) and not Rs.2,50,00,000/-; and PW1's admission of having filed a complaint against the accused at Sheshadripuram Police Station probabalised the defence that cheque Ex.P1 and letter Ex.P10 were forcibly taken at the police station. Liability to pay the cheque amount not being established, the accused, who led no defence evidence and gave no reply to the notice, could rely on the complainant's own materials; acquittal upheld as a reasoned judgment. Relied on Rajesh Jain v. Ajay Singh (AIR 2023 SC 5018), Triyambak S. Hegde v. Sripad ((2022) 1 SCC 742), Rangappa v. Mohan (AIR 2010 SC 1898) and Kalamani Tex v. P. Balasubramanian ((2021) 5 SCC 283).

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1 - NC: 2025:KHC:7895 CRL.A No. 61 of 2013

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 21^ST DAY OF FEBRUARY, 2025

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BEFORE

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THE HON'BLE MR JUSTICE SHIVASHANKAR AMARANNAVAR

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CRIMINAL APPEAL NO. 61 OF 2013

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BETWEEN:

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SRI. K.V. PRASAD S/O SRI. K.R. VENKATESHALU AGED ABOUT 47 YEARS R/A NO.128, RAILWAY PARALLEL ROAD I BLCOK, K.P. WEST BANGALORE-560 020

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…APPELLANT

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(BY SRI. R.B. SADASIVAPPA, ADVOCATE)

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AND:

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Digitally signed by LAKSHMINARAYANA MURTHY RAJASHRI Location: HIGH COURT OF KARNATAKA

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I-SPATIAL COMMUNICATIONS (P) LTD REP. BY ITS MANAGING DIRECTOR SRI MANJUNATH B. JAGIRDAR NO.159/5, 10^TH MAIN, RMV EXTN SADASHIVANAGAR BANGALORE-560 080

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SRI. MANJUNATH B. JAGIRDAR MANAGING DIRECTOR I-SPATIAL COMMUNICATIONS (P) LTD., R/A NO.11/15, “GIRNAR”, 3^RD CROSS BEHIND INDIAN BANK NANDIDURG ROAD JAYAMAHAL EXTENSION BANGALORE-560 046

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…RESPONDENTS

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(BY SRI. S. KALYAN BASAVARAJ, ADVOCATE FOR R1 & R2)

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NC: 2025:KHC:7895 CRL.A No. 61 of 2013

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THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C BY PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT DATED 17.10.2012 PASSED BY THE XVIII ACMM & XX ASCJ, BANGALORE IN C.C.NO.36019/2006 - ACQUITTING THE RESPONDENT/ ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I.ACT.

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THIS APPEAL, COMING ON FOR DICTATING JUDGMENT, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE SHIVASHANKAR AMARANNAVAR

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ORAL JUDGMENT

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This appeal is filed by the appellant – complainant challenging the judgment of acquittal dated 17.10.2012 passed in C.C.No.36019/2006 by the XVIII Additional Chief Metropolitan Magistrate and XX Additional Small Causes Court Judge, Bengaluru, whereunder, the respondent - accused had been acquitted of the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short hereinafter referred to as “N.I.Act”) .

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Case of the appellant – complainant in brief is as under;

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Respondent No.1 – accused No.1 is a private Limited Company and respondent No.2 – accused No.2 is the Managing Director of respondent No.1 – accused No.1 –

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Company. For the valuable consideration, which the accused had received from the complainant which was due and liable to pay to him towards repayment of that amount, accused No.2 had issued the cheque bearing No.845392 dated 18.04.2006 drawn on Indian Bank, K.M.C.O, Bengaluru Cantonment Branch for a sum of Rs.2,50,00,000/- in favour of the complainant. The complainant presented the said cheque for encashment. The said cheque came to be dishonoured for the reason “payee stopped payment” . The complainant got issued the legal notice dated 17.05.2006 to the respondent – accused. The said notice had been served on the respondent – accused. The respondent – accused had not paid the said cheque amount. Therefore, the appellant – complainant filed a private complaint against the respondent – accused for the offence under Section 138 of the N.I.Act. The learned Magistrate took cognizance and registered C.C.No.36019/2006 against the respondent – accused for the offence under Section 138 of the N.I.Act. The plea of the accused has been recorded. The appellant

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– complainant, in order to prove his case has examined himself as PW1 and got marked Exs.P1 to P13. The statement of the accused had been recorded under Section 313 of Cr.P.C. The respondent – accused has not lead any defence evidence. The learned Magistrate after hearing the arguments on both sides has formulated the points for consideration and passed the judgment of acquittal. The said judgment of acquittal has been challenged by the appellant - complainant in this appeal.

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Heard learned counsel for the appellant – complainant and learned counsel for the respondent – accused.

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Learned counsel for the appellant – complainant would contend that the respondent – accused has admitted his signature on the cheque – Ex.P1. As the respondent – accused had admitted his signature on the cheque, a presumption has to be drawn under Section 139 of the N.I.Act that the cheque had been issued for discharge of the debt / liability. The said presumption has

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not been rebutted by the respondent – accused. The respondent - accused had taken up the defence that the cheque had been taken forcibly in the police station. The said defence had not been established. Therefore, the presumption under Section 139 of the N.I.Act had remained unrebutted. The respondent – accused had not sent any reply to the said legal notice. The respondent – accused had not lead any defence evidence. Learned counsel for the appellant on the grounds urged has placed reliance on the following decisions;

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(i) Rajesh Jain Vs. Ajay Singh reported in AIR 2023 SC 5018

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(ii) Triyambak S. Hegde Vs. Sripad reported in (2022) 1 SCC 742

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(iii) Rangappa Vs. Mohan reported in AIR 2010 SC 1898

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(iv) Kalamani Tex and Another Vs P.Balasubramanian reported in (2021)5 SCC 283

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With this, he prayed for allowing the appeal and convicting

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the respondent – accused for the offence under Section 138 of the N.I.Act.

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Learned counsel for the respondent – accused would

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contend that the appellant – complainant has not stated what was the transaction between the appellant and the respondent in his legal notice and in the complaint. In the affidavit filed by PW1, there is a mention regarding Franchise Agreement, but it is not produced. The mode of payment is also not stated by the complainant. What was the liability was also not stated either in his complaint or in the evidence. The admission of PW1 itself would establish that the appellant – complainant had lent Rs.67,00,000/- to the respondent – accused and he had not lent Rs.2,50,00,000/-. The complainant ie., PW1 had admitted in his cross examination that he had filed a complaint against the accused in the Sheshadripuram Police Station. The above said aspect itself would establish the defence of the respondent – accused. By the said aspects, the respondent - accused had rebutted the presumption drawn under Section 139 of the Act. The appellant – complainant had not established the transaction between the appellant and the respondent and

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the liability of the respondent to pay the cheque amount. Considering the said aspect, the learned Magistrate has rightly acquitted the respondent – accused for the offence under Section 138 of the N.I.Act, by a reasoned judgment. With this, he prayed for dismissal of the appeal.

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Having heard the learned counsels, this Court has perused the impugned judgment and the Trial Court records. Considering the grounds urged, the following point arises for consideration;

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“Whether the learned Magistrate has erred in acquitting the respondent – accused for the offence under Section 138 of the N.I.Act?”

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My answer to the above point is in the negative , for the following reasons;

¶47

It is the specific case of the appellant – complainant that, the respondent – accused was due a sum of Rs.2,50,00,000/- and therefore, he had issued Ex.P1 – cheque. The respondent – accused had admitted his signature on Ex.P1 – cheque. As the respondent –

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accused had admitted his signature on the cheque, a presumption under Section 139 of the N.I.Act has to be drawn that the cheque is issued for discharge of debt / liability. The said presumption is a rebuttable presumption. The standard of proof of rebutting the presumption is preponderance of probability.

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The Hon’ble Apex Court in the case of Rajesh Jain

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Vs. Ajay Singh reported in AIR 2023 SC 5018 has observed thus;

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“47. The accused has neither replied to the demand notice nor has led any rebuttal evidence in support of his case. The case set up by him needs to be drawn from the suggestions put during the cross examination and from his reply given in the statement recorded under Section 313 of Cr.P.C.

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53. In his 313 statements, he admits of having taken a loan of Rs 20 lakh and having repaid some interest but in the cross examination of the complainant, a suggestion is made that the accused had no financial dealings with the complainant. Whereas in his 313 statement, the accused states that his cheque book and passbook is kept in his sister in law’s house, yet, in the cross examination

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of Gita Sunar, the accused’s sister-in-law, no suggestion is made to that effect. In fact, she has plainly denied that any blank cheque was given to her by her brother-in-law. We find it highly unnatural to presume that the accused would leave his signed cheque leaves and passbook in his sisterin law’s house. Even if he did, there is no reason(s) or motive attributed on part of his sister-in- law, for her to collude along with the complainant.

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The accused has also not explained as to why he has not set up his defense at the earliest point, that is, at the stage of receiving the demand notice, even though he admits having received the demand notice in his 313 statement, yet he makes a suggestion to the complainant in his cross examination that no legal notice had been issued. The theory of ‘blank cheque’ being misused has been suggested, only to be denied by both, the complainant and Gita Sunar-CW-3. No action has been taken by way of registering a police complaint in order to prosecute the alleged illegal conduct of his blank cheque having been misused by CW-3.

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54. Nothing significant has been elicited in the cross-examination of complainant to raise any suspicion in the case set up by the complainant. Other than some minor inconsistencies, the case of the complainant has been consistent throughout as

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can be noticed from a perusal of the complainant, demand notice and affidavit evidence. In fact, the signature on the cheque having not been disputed, and the presumption under Section 118 and 139 having taken effect, the complainant’s case stood satisfied every ingredient necessary for sustaining a conviction under Section 138. The case of the defense was limited only to the issue as to whether the cheque had been issued in discharge of a debt/liability. The accused having miserably failed to discharge his evidential burden, that fact will have to be taken to be proved by force of the presumption, without requiring anything more from the complainant.

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55. As rightly contended by the appellant, there is a fundamental flaw in the way both the Courts below have proceeded to appreciate the evidence on record. Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the

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presumption. If he fails to do so, the Court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking aid of the presumption. The Court would then take an overall view based on the evidence on record and decide accordingly”.

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The Hon’ble Apex Court in the case of Triyambak S.

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Hegde v. Sripad reported in (2022) 1 SCC 742 wherein it has held as under;

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“17. On the position of law, the provisions referred to in Sections 118 and 139 of the NI Act as also the enunciation of law as made by this Court needs no reiteration as there is no ambiguity whatsoever.In, Basalingappav. Mudibasappa relied on by the learned counsel for the respondent, though on facts the ultimate conclusion therein was against raising presumption, the facts and circumstances are entirely different as the transaction between the parties as claimed in the said case is peculiar to the facts of that case where the consideration claimed to have been paid did not find favour with the Court keeping in view the

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various transactions and extent of amount involved. However, the legal position relating to presumption arising under Sections 118 and 139 of the NI Act on signature being admitted has been reiterated. Hence, whether there is rebuttal or not would depend on the facts and circumstances of each case.”

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The Hon’ble Apex Court in the case of Rangappa v.

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Mohan reported in AIR 2010 SC 1898 has held as

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under;

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“14. In light of these extracts, we are in agreement with the respondent - claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat (supra) may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that

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NC: 2025:KHC:7895 CRL.A No. 61 of 2013

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there is an initial presumption which favours the complainant . Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the accused/ defendant cannot be expected to discharge an unduly high standard or proof. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence

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of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

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11. The Hon’ble Apex Court in the case of Kalamani Tex

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v. P. Balasubramanian reported in (2021) 5 SCC 283

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has held as under;

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“13. Adverting to the case in hand, we find on a plain reading of its judgment that the trial court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these “reverse onus” clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystallised by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat in the following words: (SCC pp. 120-21, para 18)

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“18. In the case at hand, even after purportedly drawing the presumption under

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NC: 2025:KHC:7895 CRL.A No. 61 of 2013

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Section 139 of the NI Act, the trial court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the trial court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the appellant-accused.”

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12. Considering the above decisions, the respondent –

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accused can rely on the materials submitted by the appellant – complainant in order to prove the defence and he need not adduce the evidence. The respondent – accused in order to establish his defence is placing reliance on the averments of statutory notice, complaint and the evidence of PW1.

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The statutory notice got issued by the appellantcomplainant to the respondent – accused is at Ex.P4. In Ex.P4, what was the transaction between the appellant and the respondent has not been stated. What is stated in Ex.P4 is as under;

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“both of you know that towards the repayment of the consideration which you had received from my client and towards the amount due by you and repayable by you, you had issued a cheque xxxxxxxx.”

¶92

In Paragraph No.2 of the complaint, the appellant – complainant has stated as under;

¶93

“The complainant submits that for the valuable consideration which the accused had received from the complainant and it was due and liable to pay to the complainant and towards the repayment of the amount, the accused had issued the cheque xxxxxxx.”

¶94

What was the transaction between the appellantcomplainant and the respondent – accused has not been

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NC: 2025:KHC:7895 CRL.A No. 61 of 2013

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stated either in the statutory notice – Ex.P4 or in the complaint.

¶98

PW1 in his evidence affidavit has stated as under;

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“Towards repayment of consideration received by them from me in franchise agreement, the accused have issued a cheque bearing No.845392 dated 18.4.2006 drawn on Indian Bank, KMCO, Bengaluru Cantonment Branch for a sum of Rs.2,50,00,000/(Rupees Two Crore Fifty Lakhs) only in favour of me only towards their liability with me. The accused have also given letter dated 21.4.2006 admitting their liability and issuance of Cheque.”

¶100

What was that franchise agreement had not made known in the affidavit of PW1. The franchise agreement has not been produced by the complainant.

¶101

PW1 in his cross examination has stated that in the year 2000-01, he had lent Rs.67,00,000/- to the accused and he had lent the said amount through the cheque and it is lent as the respondent – accused was his friend, for his business purpose. PW1 in the cross examination has also admitted that he had not lent Rs.2,50,00,000/- to the

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respondent - accused and voluntarily said that he had lent Rs.67,00,000/- to the respondent – accused. Considering the above said aspects, what was the liability of the respondent – accused to pay a sum of Rs.2,50,00,000/has not been established.

¶104

It is the defence of the respondent - accused that the cheque – Ex.P1 and the letter – Ex.P10 dated 18.03.2006 were forcibly taken in the police station. PW1 in his cross examination had admitted that he had filed a complaint against the respondent – accused in the Sheshadripuram Police Station. The said admission of PW1 also probabalizes the defence of the respondent - accused that the cheque – Ex.P1 and the letter Ex.P10 might have been forcibly taken in the police station. PW1 has not stated for what purpose he had filed the complaint against the respondent – accused in the Sheshadripuram Police station. Considering all these aspects, the respondent – accused has established his defence. The respondent – accused has rebutted the presumption drawn under

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Section 139 of the N.I.Act. The appellant – complainant has not established the liability of the respondent – accused for payment of the cheque amount of Rs.2,50,00,000/-. Considering all these aspects, the learned Magistrate has rightly acquitted the respondent – accused for the offence under Section 138 of the N.I.Act by a reasoned judgment. There are no grounds made out for setting aside the judgment of acquittal. In the result, the following;

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ORDER

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The appeal is dismissed .

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Sd/(SHIVASHANKAR AMARANNAVAR) JUDGE

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GH List No.: 1 Sl No.: 18

Sri K v. Prasad v I-Spatial Communications (P) Ltd.

Case brief

What is this about?

What did the court decide?

Sri K v. Prasad v I-Spatial Communications (P) Ltd.

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

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Case details

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