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by sayum
18 April 2026 1:36 PM
Defence Built on Imaginary and Unproven Story — Burden Under Section 138 Cannot Be Shifted By Mere Denial — Karnataka High Court reversed the acquittal granted by the XV Additional Chief Metropolitan Magistrate, Bangalore, and convicted the accused under Section 138 of the Negotiable Instruments Act. Justice H.P. Sandesh observed, “The Trial Court committed an error in coming to the conclusion that the case of the accused is probable than the case of the complainant. The accused has to rebut the same and mere taking of defence that cheque was given in favour of Somayaji Furniture cannot be a ground to acquit the accused when no cogent evidence is placed.”
The appellant had advanced a loan of Rs. 4 lakh to the accused, repayable with interest at 24% per annum. To discharge the liability, the accused issued a cheque of Rs. 5 lakh, which was dishonoured for insufficient funds. The appellant filed a complaint under Section 138 of the NI Act.
The accused, however, denied the loan transaction and took the defence that the cheque was issued to a third party, Somayaji Furniture, as security for purchase of furniture worth only Rs. 4,000, which was allegedly misused.
The Trial Court accepted this defence and acquitted the accused, relying on a disputed document Ex.D5, which the High Court later described as a “self-styled entry” without supporting evidence.
The High Court noted that the accused changed his stand significantly between his first reply and second reply notice. In the first reply marked as Ex.P8, the accused contended that the cheque was “a bogus instrument”, denying both issuance and acquaintance with the complainant. However, in the second reply marked as Ex.P13, the accused shifted his defence stating that the cheque was issued as security to Somayaji Furniture for purchasing furniture in the year 2002, i.e., seven years prior to the dishonour.
Justice Sandesh remarked, “When contra defence was taken in Ex.P8 and Ex.P13, the Trial Court ought not to have accepted the case of the accused in the absence of cogent evidence with regard to probablising the case that cheque was given only in favour of Somayaji Furniture.”
The Court questioned the credibility of the accused’s defence stating, “If really the cheque was given to Latha Saneel or Somayaji Furniture, the accused ought to have examined the said Latha Saneel, but not done the same.”
Further, the Court rejected the contention that the complainant's inability to recall the accused’s family details or phone number weakened the case. The Court held, “The same cannot be a ground to disbelieve the case of the complainant when the cheque was in the custody of the complainant.”
Justice Sandesh reaffirmed that once the issuance of cheque and its dishonour is admitted, a presumption under Section 139 of the NI Act arises. The Court held, “The burden shifts on the accused to prove the same. The accused has failed to rebut the statutory presumption through acceptable evidence.”
Importantly, the Court recorded that, “No cogent material was placed before the Court to show the existence of Somayaji Furniture or payment for any alleged transaction. There is no explanation for not producing receipts, delivery challans, or even issuing instructions to the bank to stop payment if the cheque was allegedly misused.”
The Court allowed the appeal, set aside the acquittal, and convicted the accused. Justice Sandesh directed, “The accused is directed to pay the amount of Rs.5,00,000/- within two months, in default, he shall undergo simple imprisonment for six months. ”
The Court further ordered that “Out of Rs.5,00,000/-, a sum of Rs.4,90,000/- shall be paid to the complainant, and Rs.10,000/- is to be vested with the State.”
The judgment strongly reinforces the principle that inconsistent defences and mere denial without substantive evidence cannot displace the statutory presumption under Section 138 read with Section 139 of the NI Act.
Date of Decision: 28th March 2025
