M/S Sovereign Developers and Infrastructure Ltd. Vs M/S… — Cheque Dishonour | Karnataka HC (2026)

M/S Sovereign Developers and Infrastructure Ltd. Vs M/S… — Cheque Dishonour | Karnataka HC (2026)

What the court decided

AI extract

Outcome

Dismissed

Issue for consideration

Whether dishonour of the cheque effected by blocking of the account (contended to be at the instance of the respondent rather than the drawer) falls within Section 138 of the N.I. Act and whether it furnishes a ground to escape liability. +3 more

Court's answer

Dishonour of a cheque by blocking of the account also attracts Section 138 of the N.I. Act; dishonour by blocking is not a ground to escape from the consequences of the dishonoured cheque.

Ratio / Principle

Pending proceedings before the NCLT, and the circumstance that the cheque amount is included in the overall liability payable to the respondent, are not grounds to interfere where the liability, issuance of the cheque and its dishonour are not disputed.

Key takeaways

In view of the admission that there was a liability, that the cheque was issued and that it was not honoured, no error of legality or correctness is found in the trial Court's or the appellate Court's decisions and there is no ground to admit the revision; accordingly the revision petition is dismissed.ratio¶63

Detailed headnote1 paragraphs

Criminal revision petition (Cr.P.C. Ss.397 r/w 401) by a company and its Managing Director against concurrent convictions under S.138 NI Act dismissed by the High Court of Karnataka (H.P. Sandesh, J., 02.06.2026). A cheque of Rs.5,00,000/- issued towards part payment of ESI contribution arrears of Rs.44,96,012/- was dishonoured with endorsement 'account blocked'. The Court holds that dishonour by blocking of the account also attracts S.138 NI Act; that pending NCLT proceedings and the inclusion of the cheque amount in the undisputed liability are no ground to interfere; and that, liability, issuance and dishonour being admitted, neither the trial Court's conviction (09.09.2015, C.C.No.12753/2014, XXVII ACMM) nor the appellate Court's confirming judgment (01.09.2016, Crl.A.No.1266/2015, LIX Addl. City Civil & S.J.) suffers any defect of legality or correctness. Revision dismissed; conviction upheld.

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 2^ND DAY OF JUNE, 2026

BEFORE

THE HON'BLE MR. JUSTICE H.P.SANDESH CRIMINAL REVISION PETITION NO. 1426 OF 2016

BETWEEN:

M/S SOVEREIGN DEVELOPERS AND INFRASTRUCTURE LTD NO 16,S D COMPLEX. JALADARSHINI LAYOUT -NEAR B E L ROAD, BANGALORE – 560054

SRI DEEPAK KUMAR AGED 40 YEARS, SON OF SATHYA BRATH SINGH MANAGING DIRECTOR: SOVEREIGN DEVELOPERS & INFRASTRUCTURE LTD Digitally signed by DEVIKA M NO 16 & 17, SECOND FLOOR, Location: HIGH S D COMPLEX, JALADARSHINI LAYOUT COURT OF NEAR B E L ROAD, BANGALORE - 560054 KARNATAKA

…PETITIONERS

(BY SRI. M R MANJUNATH, ADVOCATE)

AND:

M/S E.S.I. CORPORATION SUB REGIONAL OFFICE BANGALORE NORTH (PEENYA) HARINI TOWERS, THIRD CROSS,

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THIRD MAIN, OFF RING ROAD, (NEAR F T I ) SECOND STAGE, INDUSTRIAL SUBURB YESHWANTHAPUR, BANGALORE – 560 022.

REPRESENTED BY SRI N RANGANATHA SOCIAL SECURITY OFFICER, E S I CORPORATION BANGALORE – 560 023.

…RESPONDENT

(BY SMT. V RANJINI, ADVOCATE FOR SRI. B PRAMOD, ADVOCATE)

THIS CRL.RP IS FILED U/S.397 R/W 401 CR.P.C BY THE ADVOCATE FOR THE PETITIONER PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO SET ASIDE THE JUDGEMENT DATED 01.09.2016 PASSED IN CRL.A.NO.1266/2015 ON THE FILE OF THE LIX ADDL. CITY CIVIL ADN S.J., BANGALORE AND SET ASIDE THE JUDGMENT/ORDER OF CONVICTION DATED 09.09.2015 PASSED IN C.C.NO.12753/2014 ON THE FILE OF THE XXVII ACMM, BANGALORE BY ALLOWING THE ABOVE REVISION PETITION BY ACQUITTING THE PETITIONER.

THIS PETITION, COMING ON FOR FINAL HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE H.P.SANDESH

ORAL ORDER

This revision petition is filed against the concurrent

finding of the trial Court as well as the appellate Court.

The factual matrix of the case of the

complainant while invoking the jurisdiction of the trial

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Court for the offence under Section 138 of Negotiable Instruments Act,1881 (hereinafter referred to as ‘N.I.’ Act for short), is that the complainant is the Employees’ State Insurance Corporation (hereinafter referred as ‘E.S.I’ short). The complaint is filed through Social Security Officer who is competent to file the complaint. It is allegation of the complainant that accused No.1 is a private limited company and accused No.2 is the Director of the accused No.1 Company. The Company of the accused is coming under the provisions of E.S.I Act and accused were under obligation to pay employee's contribution and the employer's contribution to the E.S.I. There was arrears of contribution from the accused to the tune of Rs.44,96,012/- from 01.04.2007 to 30.09.2011 (Rupees Forty four lakhs ninety six thousand and twelve only). To pay part of the said contribution, the accused issued subject matter of cheque dated 27.10.2013 for an amount of Rs.5,00,000/- and the same was presented on 08.11.2013 to the bank. On 09.11.2013, the cheque was

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dishonoured with an endorsement ‘account blocked’. Thereafter, legal notice was issued on 26.11.2013 which was served on accused on 29.11.2013. In spite of the demand, the accused fails to pay the cheque amount and hence, the complaint was filed. The trial Court has taken the cognizance and issued the process and secured the accused. In spite of service of summons also, the accused did not choose to pay the amount and hence complainant was examined before the trial Court and got marked 19 documents as Exs.P.1 to P.19 including the subject matter of cheque at Ex.P2, bank endorsement as Ex.P3, legal notice as Ex.P4 and so also postal acknowledgement as Ex.P5.

The trial Court considering the material on record comes to the conclusion that though document at Ex.D1 is marked i.e. a copy of order sheet in Criminal RP No.201/2015, the defence have not led any evidence. Further, it also comes to the conclusion that even blocking of the account also comes within the purview of Section

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138 of N.I. Act and hence, convicted and sentenced the accused for the said offence. Being aggrieved by the said order, the accused preferred an appeal in Crl.Appeal No.1266/2015.

The appellate Court also held vide order dated 01.09.2016 that the trial Court has rightly convicted the accused for the offence under Section 138 of N.I. Act and confirmed the judgment of the trial Court and comes to the conclusion that it does not require any interference. Further, it is contended that the subject matter of the cheque at Ex.P2 was issued towards the legal liability. Being aggrieved by the concurrent finding of both Courts, the present revision petition is filed before this Court.

The main contention of the revision petitioner before this Court is that the cheque was not dishonoured at the instance of him and the same was at the instance of the respondent by blocking the same. The said aspect was not taken note of by the trial Court as well as the

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appellate Court. The trial Court has fully ignored that the cheque as per Ex.P2 is fully typewritten and not filled by the revision petitioner, as the same was fully blank signed cheque as per Ex.P2, claiming that for security purpose in future events, the same was issued.

The counsel submits that the trial Court also committed an error in imposing the penalty of Rs.6,00,000/as against the cheque amount of Rs.5,00,000/- which is exorbitant. He also submits that

the proceedings against the revision petitioner is pending before the NCLT and admits that till date, the company is not yet taken over. However, he submits that the amount of liability which is payable in favour of the respondent also includes the cheque amount. Under the circumstances, there cannot be any conviction and sentence to the revision petitioner.

Per contra, learned counsel appearing for the respondent would suggest that the liability is towards the

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legal liability and admittedly the amount was not paid and the same has taken note of by the trial Court as well as the appellate court.

He further contends that with regard to blocking of the cheque, it also attracts Section 138 of N.I. Act and the same is considered by the trial Court as well as the appellate Court. He also submits that while considering the issue between the parties on the very same ground cannot be agitated in the revision petition contending that the Cheque is dishonoured not at the instance of the revision petitioner and hence, no ground is made out.

Having heard the counsel appearing for the revision petitioner and also the counsel appearing for the respondent, it is not in dispute that the issuance of cheque at Ex.P2 and the same is admitted. The said cheque is also issued towards the discharge of the part of the legal liability that is payable towards the ESI amount which is also not in dispute. After the dishonour of cheque on

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09.11.2013, legal notice was issued and the same was served on accused. But the accused did not comply with the demand and hence cognizance was taken against the accused. Even though counsel submits that matter is seized before the NCLT, it is not a ground to escape from the clutches of this Court with regard to the dishonour of cheque is concerned i.e., by blocking of the account and the same also attracts Section 138 of N.I.Act. This aspect was considered by the trial Court as well as the appellate Court. When the liability is not disputed, issuance of Cheque, dishonour of Cheque are also not disputed and even when the matter is pending before the NCLT so also the submission of the counsel that the amount of liability is also included in the cheque amount are not a ground to interfere.

To exercise the revision jurisdiction of this

Court and when the scope of revision is very limited, then the Court has to consider whether the order passed by the

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trial Court as well as the appellate Court suffers from its legality and correctness.

Having considered the material on record and in view of the admission that there was a liability and cheque was issued so also the same was not honoured, I do not find any error on the part of trial Court and appellate Court on the ground of legality and correctness. Hence, I do not find any ground to admit the revision and to the finding of the trial Court on the ground of legality and correctness

and thus, the revision petition stands dismissed .

Sd/(H.P.SANDESH) JUDGE

SSD List No.: 1 Sl No.: 67