Dismissed¶¶67

Chandrashekar .v v. M/S Canfin Homes Limited

Karnataka HC1 Aug 2025CRL.RP/1314/2023

Case brief

AI extract

What is this about?

Section 138 NI Act; security cheque; blank/undated signed cheque filled in by holder; implied authority of signatory; service of demand notice at loan-agreement address; unsigned postal acknowledgment; admission of receipt by co-resident mother; presumption under Section 139 NI Act unrebutted; part payment plea unsupported by documents; civil transaction and mortgage no bar to Section 138 prosecution; RBI Circular dated 18.03.2013 on electronic presentation; concurrent finding of conviction; revision under Sections 397/401 CrPC dismissed; Canfin Homes Limited; housing loan default; fine and compensation quantum; Bengaluru; Anant Ramanath Hegde J.

What did the court decide?

No relief to the petitioner; revision petition dismissed. The amount in deposit, if any, to be released in favour of the respondent and adjusted towards the arrears.

Chandrashekar .v Vs M/S Canfin Homes Limited — Cheque Dishonour | Karnataka HC (2025)

What the court decided

AI extract

Outcome

No relief to the petitioner; revision petition dismissed. The amount in deposit, if any, to be released in favour of the respondent and adjusted towards the arrears.

¶¶67

Issue for consideration

Whether a proceeding under Section 138 NI Act is maintainable where the underlying transaction is a pure civil transaction and the loan is secured by mortgage of the property. +5 more

¶¶39

Court's answer

The civil nature of the transaction, or the fact that the property is mortgaged or the loan is secured otherwise, is not a ground to contend that a proceeding under Section 138 NI Act is not maintainable.

¶¶56

Ratio / Principle

Notice sent to the address furnished by the petitioner in the loan agreement is sufficient service; absence of the petitioner's signature on the postal acknowledgment does not mean the notice was not served, and the petitioner's mother Lakshmamma, residing with him at the same address, admitted in cross-examination that she received the notice.

¶¶51

Key takeaways

Law enables the holder of a cheque to fill in the requisite part of the cheque; a person who signs a blank/undated cheque impliedly authorises the holder to fill in its contents, and no lapse is attributable to the financier where the loan amount was transferred to the builder at the borrower's instance.ratio¶¶57
The presumption under Section 139 NI Act is not rebutted where the accused, despite pleading part payment of the loan, produces no document to substantiate the contention relating to payment.ratio¶¶60
The RBI Circular dated 18.03.2013 does not come to the aid of the petitioner; where the borrower is required to pay the liability under the loan agreement and does not do so, the bank cannot be restrained from presenting the cheque for collection, and the Circular cannot be interpreted as contended by the petitioner's counsel.

Detailed headnote1 paragraphs

High Court of Karnataka (Anant Ramanath Hegde J.) dismissed a criminal revision under Sections 397/401 CrPC against concurrent convictions under Section 138 NI Act arising out of a housing-loan security cheque (loan agreement dated 10.08.2015; cheque dated 07.10.2015 for Rs.42,72,305/- as contended by the accused; fine of Rs.45,00,000/- imposed, of which Rs.44,90,000/- to the complainant as compensation). Held: (i) notice sent to the address furnished in the loan agreement is duly served even if the postal acknowledgment does not bear the accused's signature, particularly where the mother, residing with the accused, admitted receipt in cross-examination; (ii) the civil nature of the transaction and the existence of a mortgage or other security do not bar a Section 138 prosecution; (iii) a signatory of a duly signed blank/undated cheque impliedly authorises the holder to fill in its contents, and no lapse attaches to the financier where the loan was transferred to the developer at the borrower's instance; (iv) the presumption under Section 139 NI Act is not rebutted absent documentary proof of part payment; (v) the RBI Circular dated 18.03.2013 does not restrain the bank/financier from presenting the cheque for collection. Revision dismissed; amount in deposit, if any, to be released to the respondent and adjusted towards arrears.

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NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1^ST DAY OF AUGUST, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE CRIMINAL REVISION PETITION NO. 1314 OF 2023

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BETWEEN:

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CHANDRASHEKAR .V, S/O LATE VENKATESH V AGED ABOUT 36 YEARS, RESIDING AT NO. 1200 44TH CROSS, 1 STAGE, K.S. LAYOUT, BENGALURU-560040.

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…PETITIONER

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(BY SRI. VARSHITH REDDY B.,ADVOCATE)

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AND:

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Digitally signed by C HONNUR SAB

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Location: HIGH COURT OF KARNATAKA

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M/S CANFIN HOMES LIMITED, HAVING ITS CORPORATE OFFICE, AT NO. 29/1, 2^ND FLOOR, M.N KRISHNA RAO ROAD, BASAVANAGUDI, BENGALURU-560004, REPRESENTED BY ITS CHIEF MANAGER, MR.ARUN KUMAR.

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…RESPONDENT

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(BY SRI. NARAYANA SWAMY D.,ADVOCATE)

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THIS CRL.RP IS FILED U/S.397 R/W 401 CR.P.C PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT DATED 21.06.2023 PASSED IN CRL.A.NO.245/2021 ON THE FILE OF THE LXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE (CCH-64) AT BENGALURU AND ALSO JUDGMENT AND ORDER OF CONVICTION AND SENTENCE DATED 24.02.2021 IN C.C.NO.6863/2016 ON THE FILE OF THE XXIV ADDITIONAL SMALL CAUSES JUDGE AND ACMM (SCCH-26) AT BENGALURU CITY AND CONSEQUENTLY ACQUIT THE ACCUSED.

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NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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THIS PETITION, COMING ON FOR ADMISSION THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

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ORAL ORDER

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This petition is filed assailing the concurrent finding in a proceeding initiated pursuant to dishonour of cheque said to have been issued by the present petitioner. The Trial Court sentenced the petitioner to pay a sum of Rs.45,00,000/- as fine amount. Rs.44,90,000/- is ordered to be paid to the complainant as compensation and remaining Rs.10,000/- is ordered to be defrayed towards the expenses of the State.

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Aggrieved by the sentence, the petitioner filed an appeal before the Appellate Court. The appeal is also dismissed confirming the finding of the Trial Court. Hence, the petitioner is before this Court.

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Learned counsel appearing for the petitioner would raise the following contentions:

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(a) The cheque is not issued by the petitioner. The petitioner has not received the loan amount of

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3 - NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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Rs.43,00,000/- said to have been advanced by the complainant pursuant to the loan agreement dated 10.08.2015.

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(b) Notice said to have been issued under Section 138 of Negotiable Instruments Act, 1881 (for short 'NI Act') is not served on the petitioner.

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(d) As on the date the cheque i.e., 07.10.2015 Rs.42,72,305/- was not the amount due.

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(e) The complainant has initiated two more cases alleging dishonour of cheque against the petitioner in respect of the same transaction.

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(f) The builder to whose account the loan amount is transferred has not completed the construction work and had abandoned the work. The property is mortgaged as a security for the loan. The complainant ought to have initiated a civil proceeding to recover the alleged debt.

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4 - NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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(g) The property said to have been sold to the petitioner is again sold to many persons, thereby the petitioner is not owning the property.

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(h) There is no criminal intention on the part of the petitioner and the proceeding under Section 138 of the NI Act is not maintainable as the transaction is a pure civil transaction.

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(i) The fact that the cheque in question was in the custody of the complainant as on the date mentioned in the cheque, is admitted and some other cheques are also said to be in the custody of the complainant and all the contents of the cheque have been filled by the complainant though signature is that of the petitioner.

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Learned counsel appearing for the respondent would submit that notice is sent to the address of the petitioner mentioned in the loan agreement. The loan amount is transferred to the account of the developer as per the instructions of the petitioner. Petitioner has not disputed the fact that the loan is transferred to the account of the

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5 - NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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developer. The petitioner has issued the cheque as security for the loan with an expressly authorized to present the same as and when the amount is due. Since the petitioner defaulted in repaying the installment amount, the respondent is entitled to recall the entire loan amount to initiate proceeding to recover the dues. If at all there is any dispute relating to the project undertaken by the developer, the financier is not responsible for the default on the part of the developer and though the transaction is a civil transaction, dishonour of cheque is also an offence under the provisions of Section 138 of NI Act and the holder of the cheque is entitled to initiate both civil and criminal proceedings.

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This Court has considered the contentions raised at the bar and perused the records.

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On perusal of the records, it is noticed that it is not in dispute that the complainant has sanctioned loan to the accused. The loan amount is transferred to the account of the developer, this fact is also not in dispute. The

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6 - NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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petitioner has not raised the contention that he had not authorized the financier to transfer the loan amount to the account of the developer.

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It emerges from the records that the petitioner has issued duly signed undated cheques as a security for the repayment of loan which is advanced for the purpose of construction of the flat. The signature on the cheque is not in dispute, the dishonour of cheque is not in dispute. What is disputed is service of notice.

¶51

The records would reveal that the notice is sent to the address of the petitioner which is furnished in the loan agreement. Merely because the petitioner’s signature is not found in the acknowledgment issued by the postal department it does not mean that the notice is not served on the petitioner. It appears that the notice is served to one of the persons who is residing in the petitioner’s house.

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As far as the contention that the transaction

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being a civil transaction, the proceeding could not have been initiated under Section 138 of NI Act is concerned, law does

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HC-KAR

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provide a remedy under Section 138 of the NI Act to initiate a proceeding under the said Act in case dishonour of cheque. Merely because the property is mortgaged or the loan is secured otherwise, is not a ground for the accused to raise a contention that proceeding under Section 138 of the NI Act is not maintainable.

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As far as the further contention that the contents of the cheque are mentioned by the complainant is concerned, law does enable the holder of the cheque to fill the requisite part of the cheque. The person who has issued the cheque under his signature impliedly authorizes the holder of the cheque to fill the contents. Since the transaction is established and since the transfer of the amount to the account of the builder is at the instructions of the borrower, this Court does not find any lapse on the part of the financier in filling the blank cheque duly signed by the complainant to present the same to recover the dues under the loan agreement.

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HC-KAR

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Learned counsel for the petitioner though would submit that he has paid part of the loan amount, document is not produced to substantiate the contention relating to payment. Thus, the presumption under Section 139 of the NI Act is not rebutted by leading acceptable evidence.

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The Trial Court and Appellate Court have considered these aspects and have held that the complainant has established his case.

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It is also admitted in the cross-examination that Lakshmamma who is the mother has received the notice and she is residing along with the accused in the same address where the accused is residing. So there cannot be an objection relating to service of notice.

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Learned counsel for the petitioner would also refer Circular dated 18.03.2013 issued by Reserve Bank of India to contend that the Banks are not supposed to collect the cheques and present the same when the transaction can be carried out electronically. This Circular does not come to the aid of the petitioner as the petitioner is required to

¶64

9 - NC: 2025:KHC:29920 CRL.RP No. 1314 of 2023

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HC-KAR

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transfer the amount towards the liability under the loan agreement and in case the petitioner does not agree to transfer, the Bank cannot be restrained from presenting the cheque for collection. Circular cannot be interpreted in the way suggested by the learned counsel for the petitioner.

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After considering the materials placed on record and the reasons assigned by the Trial Court and Appellate Court, this Court does not find any reason to interfere with the impugned orders in exercise of jurisdiction under Section 397 of the Code of Criminal Procedure.

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Accordingly, the Revision Petition is dismissed .

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The amount in deposit if any, shall be released in

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favour of the respondent and the same shall be adjusted to the arrears.

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Sd/(ANANT RAMANATH HEGDE) JUDGE

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GVP List No.: 2 Sl No.: 35

Issues for consideration

6 issues framed by the court

AI extract

1.
Whether a proceeding under Section 138 NI Act is maintainable where the underlying transaction is a pure civil transaction and the loan is secured by mortgage of the property.¶¶39
The court held
The civil nature of the transaction, or the fact that the property is mortgaged or the loan is secured otherwise, is not a ground to contend that a proceeding under Section 138 NI Act is not maintainable.ratio¶¶56
2.
Whether the statutory notice under Section 138 NI Act was duly served on the petitioner.¶¶31
The court held
Notice sent to the address furnished by the petitioner in the loan agreement is sufficient service; absence of the petitioner's signature on the postal acknowledgment does not mean the notice was not served, and the petitioner's mother Lakshmamma, residing with him at the same address, admitted in cross-examination that she received the notice.ratio¶¶51
3.
Whether the complainant/holder could lawfully fill in the contents of the cheque which was in its custody, the signature alone being that of the petitioner.¶¶40
The court held
Law enables the holder of a cheque to fill in the requisite part of the cheque; a person who signs a blank/undated cheque impliedly authorises the holder to fill in its contents, and no lapse is attributable to the financier where the loan amount was transferred to the builder at the borrower's instance.ratio¶¶57
4.
Whether part repayment by the petitioner ought to have been deducted from the alleged debt, bearing on the presumed liability under Section 139 NI Act.¶¶32
The court held
The presumption under Section 139 NI Act is not rebutted where the accused, despite pleading part payment of the loan, produces no document to substantiate the contention relating to payment.ratio¶¶60
5.
Whether the revisional court should interfere, under Sections 397/401 CrPC, with the concurrent findings of conviction recorded by the Trial Court and the Appellate Court.medium confidence¶¶17
The court held
Considering the materials on record and the reasons assigned by the Trial Court and the Appellate Court, no ground for interference is made out in exercise of revisional jurisdiction under Section 397 CrPC; the concurrent findings stand and the revision petition is dismissed.ratio¶¶67
6.
Whether the Reserve Bank of India Circular dated 18.03.2013 precludes the financier/bank from presenting the cheque for collection where the transaction could be carried out electronically.¶¶63
The court held
The RBI Circular dated 18.03.2013 does not come to the aid of the petitioner; where the borrower is required to pay the liability under the loan agreement and does not do so, the bank cannot be restrained from presenting the cheque for collection, and the Circular cannot be interpreted as contended by the petitioner's counsel.ratio¶¶66

Chandrashekar .v v. M/S Canfin Homes Limited

Case brief

What is this about?

What did the court decide?

Chandrashekar .v v. M/S Canfin Homes Limited

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

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