Bangalore District Court
Mahender G Bhati vs M/S Sree Gokulam Chits And Finance Co Pvt ... on 12 March, 2026
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Cri Appeal No.834/2024
KABC010126792024
IN THE COURT OF LV ADDL. CITY CIVIL AND SESSIONS
JUDGE, BENGALURU (CCH-56)
DATED: THIS THE 12TH DAY OF MARCH 2026
PRESENT
SRI. MOHAN PRABHU, M.A., LL.M.
LV ADDL. CITY CIVIL AND SESSIONS JUDGE, BENGALURU.
CRIMINAL APPEAL NO.834/ 2024
Appellant/ MAHENDRA G. BHATI
accused S/O GANAPATHI LAL BHATI
AGED ABOUT 29 YEARS,
RESIDING AT No.31/34,
LAKSHMI TEXTILES,
17TH CROSS, RAMAIAH COMPLEX,
B.G. ROAD, HULIMAVU,
BENGALURU - 560 076.
[R/by .D.E. SOMASHEKARA, Adv.]
Vs
Respondent/ M/S SREE GOKULAM CHITS AND FINANCE
Complainant CO. PVT. LIMITED,
No.66, ARCOT ROAD,
KODAMBAKKAM, CHENNAI
BRANCH OFFICE,
BILEKAHALLI, BENGALURU
REP. BY ITS GPA HOLDER
[R/by Sri C.S.S., Adv.]
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Cri Appeal No.834/2024
JUDGMENT
This appeal is filed U/s.374(3) of Cr.P.C. by the accused against the judgment of conviction dated:
18.04.2024 passed in C.C.No.14690/2022 by learned XIV Addl. Judge, Court of Small Causes & ACMM, Bengaluru (SCCH-10), for the offence under S.138 of Negotiable Instruments Act [for short 'N.I. Act'] (2) The parties are referred to their rank before the trial court.
(3) The case of the complainant is briefly stated as follows:
The complainant is a chit and finance private limited and having its corporate office at Chennai and its branch office at Bilekahalli, Bengaluru. The complainant carrying the chit business. The accused had joined chit group bearing No.G2G/0570/MSR/04 carried on by the complainant for sum of Rs. 3 lakhs. After bidding this chit the accused became defaulter. On request of the complainant for repayment of the chit installment the amount due by the accused, the accused issued cheque bearing No.347511 for the chit amount in favour of the 3 Cri Appeal No.834/2024 complainant, cheque dated 08.10.2022 drawn on State Bank of India, Hulimavu branch, Bengaluru for Rs.1,20,735/-. Based on assurance given by the accused, the complainant presented the said cheque for collection through its banker, CSB Bank Ltd. Dharmaram, Bengaluru, but the said cheque issued by the accused came to be dishonoured with bank memo dated 11.10.2022 as 'funds insufficient', which returned to the complainant on 12.10.2022. Thereafter the complainant issued demand notice dated 31.10.2022 to the accused by RPAD demanding to pay the cheque amount. The legal notice returned on 09.11.2022. The accused neither paid the cheque amount nor replied to the legal notice. The accused committed the offence punishable u/S.138 of NI Act.. Hence, the complaint.
(4) After filing the complaint, the learned Magistrate taken cognizance of the offence punishable u/S.138 of NI Act. The sworn statement of the complainant was recorded. The learned Magistrate after perusal of the sworn statement of the complainant, complaint averments and documents passed an order 4 Cri Appeal No.834/2024 dated 22.12.2022 directing the office to register case against the accused in Register - III for the offence punishable u/S.138 of NI Act and issued summons to the accused. Accordingly, the case in C.C.No.14690/2022 came to be registered against the accused. The accused entered appearance by engaging his counsel and released on bail. The accusation read over and explained to the accused for which the accused pedaled not guilty and claimed for trial. The learned Magistrate examined accused u/S.313 of CrPC. The accused denied incriminating evidence. The sworn statement of the complainant considered as his evidence in view of the judgment of Hon'ble Supreme Court in INDIAN BANK ASSOCAITIONS case. Since the learned counsel for the accused moved application u/S.145(2) of NI Act praying to permit the accused to cross examine PW1 application came to be allowed and case posted for cross examination of PW1. PW1 was fully cross examined by the learned counsel for the accused. As defence evidence, the accused has not led any defence evidence. The learned Magistrate after hearing both sides, pronounced the judgment on 18.04.2024 and acting 5 Cri Appeal No.834/2024 u/S.255 (1) of CrPC the accused convicted for the offences punishable u/S.138 of NI Act and sentenced to pay fine of Rs.1,25,000/-, in default, shall undergo simple imprisonment for six months. The amount of Rs.1,20,000/- ordered to be paid to the complainant as compensation and the remaining amount of Rs.5,000/- shall be defrayed to the State as expenses.
(5) Aggrieved by the judgment of conviction, the accused has preferred this appeal, on the following among other grounds.
The learned Magistrate has erred in law in accepting and acting upon the evidence of PW 1 being inadmissible. The evidence of PW 1 is not corroborated by the documents. The complainant is the registered chit fund company and it is represented by General Power of Attorney holder. PW 1 admitted that he was not present on the bid transaction. He has no personal knowledge about the transaction. The complainant is not conducting chit business as per law. It violates S.32 and 33 of Chit Funds Act and failed to comply these sections, which creates doubt about the case of the complainant. The complainant has not produced documents such as chit 6 Cri Appeal No.834/2024 agreement, books of account , balance sheet. Hence, provision u/S.114 of Evidence Act can be made applicable to the case. No notice was issued. The legal notice not duly served on the accused. The chit was terminated on 10.09.2018, but the cheque dated 08.10.2022. The respondent initiated case against the accused after lapse of 4 years. The complainant has failed to proceed as per S.32 of Chit Funds Act. The complainant also not taken any action against the surety. The findings given by the learned Magistrate are perverse, and the same has been upon conjuncture and surmises. PW 1 admitted that Rs.63,000/- is the principal chit amount and statement of accounts there is no chit agreement with regard to interest. Hence, the benefit of doubt shall be given to the accused. Hence, on these grounds, the appellant prayed to allow this appeal and to set aside the judgment and order of conviction and sentence passed by the learned Magistrate in C.C.No.14690/2022 and acquit the accused.
(6) The trial court records received.
(7) The respondent entered appearance by engaging its counsel.
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Cri Appeal No.834/2024 (8) I have heard the arguments on both sides and perused the entire records.
(9) The following points would arise for my consideration:-
Point No.1:- Whether the impugned judgment of conviction and order of sentence passed thereon is illegal, perverse and calls for interference?
Point No.2:- Whether there is sufficient grounds made out by the appellant to set aside the judgment dated 18.04.2024 passed in C.C.No.14690/2022 as prayed for?
Point No.3:- What order?
(10) My findings to the above points are as below:-
Point No.1:- In the negative
Point No.2:- In the negative
Point No32:- As per the final order,
for the following
REASONS
(11) POINT NO.1 & 2:- These points are taken up together for discussion in order to avoid repetition of discussion in evidence and for the sake of convenience.
(12) Prior to proceed further it is important to note 8 Cri Appeal No.834/2024 some of the undisputed facts in this case. The accused has not at all disputed regarding Ex.P4 cheque. Ex.P4 is of the bank account of the accused. Ex.P4(a) is the signature of the accused. It is not the contention of the accused is that as on the date of presentation of Ex.P4 cheque he had sufficient amount in his bank account, so as to honour the cheque.
(13) Now coming to the defence of the accused is concerned, in the cross examination of PW1, the accused has taken contention that the complainant has misused the security cheques. The accused further taken contention that as the case filed after four years from the date of termination of chit, the complaint itself is barred by period of limitation. The accused further contended that Ex.P6 legal notice dated 31.10.2022 not duly served upon the accused. The accused further contended that the complainant has failed to follow the proper procedure as contemplated u/Ss.32 and 33 of Chit Funds Act.
Hence, complaint is not maintainable. The learned counsel for the accused while addressing the arguments, argued regarding these contentions taken by the accused. On the other hand, the learned counsel for the 9 Cri Appeal No.834/2024 complainant submitted that the accused for repayment of chit amount issued Ex.P4 cheque for Rs.1,20,735/-. He submitted that when the complainant presented Ex.P4 cheque for encashment same came to be dishonored with an endorsement 'funds insufficient' in the bank account of the accused. He argued that the legal notice as perEx.P6 sent to the accused to the correct address. Hence, there is presumption u/S/27 of General Clauses Act that notice is duly served. He argued that the complainant has produced documents Ex.P9 ledger statement, which would go to show that last payment was made by the accused on 10.01.2020. Ex.P4 cheque issued on 08.10.2022. Hence, it cannot be held that the debt is time barred. He argued that presumption u/S/139 and 118 of NI Act is available to the complainant.
(14) I have appreciated the rival contentions and perused the entire records. On perusal of the oral evidence of PW 1 in his oral evidence he has reiterated the complaint averments and has deposed that the accused who had joined chit group for Rs.3 lakhs after bidding chit became defaulter in payment. He has 10 Cri Appeal No.834/2024 deposed that on request for repayment of the chit installment amount, due by the accused, the accused issued Ex.P4 cheque for Rs.1,20,735/- dated 08.10.2022 towards discharge of installment amount due in favour of the complainant. PW1 has deposed that when they have presented Ex.P4 cheque for Rs.1,20,735/- for collection through their bank CSB Bank Ltd. Dharmaram, Bengaluru cheque came to be dishonoured with memo dated 11.10.2022 as funds insufficient. Hence, they have issued legal notice dated 31.10.2022 to the accused by RPAD. The documents Ex.P1 to 9 are marked through PW
1. Ex.P1 is the certified copy of certificate of incorporation, Ex.p2 is the certified copy of resolution, Ex.P3 is the certified copy of General Power of Attorney, Ex.P4 is the cheque issued by the accused, Ex.P4(a) is the signature of the accused,Ex.P5 is the bank endorsement for dishonour of cheque. Ex.P6 is the legal notice dated 31.10.2022. Ex.P7 is the postal receipt for having sent the legal notice to the accused. Ex.P8 is the returned RPAD cover, Ex.P8(a) is the legal notice, which was there in Ex.P8 envelope. Ex.P9 is the account statement to show the balance due payable by the 11 Cri Appeal No.834/2024 accused.
(15) It is pertinent to note that the complainant is mentioned the same address which is mentioned in Ex.P6 legal notice, in the cause title of the complaint, the learned Magistrate after registering the case in C.C.No.14690/2022 issued summons to the accused to the same address mentioned in the cause title, which is equivalent to address mentioned in Ex.P6 legal notice. The summons came to be issued to the accused on 21.10.2023 through court process and by way of RPAD. The summons issued to the very same address through RPAD duly served upon the accused. There is postal acknowledgment returned to the court for having summons duly served upon the accused. That on 08.08.2023 the date fixed for appearance of the accused, the accused entered appearance by engaging his counsel Sri. NPS. If at all the address mentioned in Ex.P6 noticed, and Ex.P8 postal cover is wrong there was no chance to serve the summons to the accused. When the summons issued through the court same was duly served upon the accused which indicates that the complainant issued legal notice to the correct address of the accused. Since 12 Cri Appeal No.834/2024 the complainant issued legal notice as per Ex.P6 dated 31.10.2022 to the correct address of the accused, in view of the provision u/S.27 of General Clauses Act notice is deemed to be served on the accused. The accused has not disclosed in the cross examination of PW1 is that, if the address mentioned in Ex.P6 legal notice is wrong then what is the correct address. There is prima facie materials to show that the complainant issued Ex.P6 legal notice to the correct address of the accused. Hence, this court is of the opinion that the notice was duly served upon the accused. Hence, the defence of the accused is that the notice was not duly served is not acceptable.
(16) The second contention raised by the accused is that the complainant has not produced any documents to show the balance payable by the accused towards chit amount. Such contention taken by the accused is not acceptable, because the complainant has produced and got marked document Ex.P9 statement of account. The document Ex.P9 reflecting the balance payable by the accused is shown as Rs.1,20,735/-. Merely because the 13 Cri Appeal No.834/2024 complainant ha snot produced other documents such as chit agreement, it cannot be held that the complainant has failed to prove the balance amount payable by the accused. The document Ex.P9 ledger extract is sufficient to hold that the accused was due sum of Rs.1,20,735/- as on 10.10.2022.
(17) Another contention taken by the accused is that the claim made by the complainant is time barred. The learned counsel for the complainant submitted that as per Ex.P9 ledger extract there is clear mention regarding last payment made by the accused on 10.01.2020. In perused the document Ex.P9. The learned counsel for the complainant rightly submitted that the accused had made last payment to the complainant on 10.01.2020, which itself save the limitation. Even though the accused was participated in the bid and collected the chit amount on 30.08.2017, the accused made last payment on 10.10.2020. PW 1 in his cross examination has deposed that the accused participated in bid and collected the chit amount on 30.08.2017. He has deposed that the accused paid the amount of 14 Cri Appeal No.834/2024 RS.53,000/- on 10.01.2020. The oral evidence of PW 1 is supported by documents Ex.P9. Hence, it can be safely held that Ex.P4 cheque is not for time barred debt.
(18) The learned counsel for the appellant much argued about the complainant has not followed the provision u/Ss.32, 33 and 34 of Chit Funds Act. No doubt, in this case, the complainant has not produced documents i.e. copy of notice to show that in view of S.32 and 33 of Chit Funds Act, notice was issued to the accused demanding to pay bid amount, but during the course of cross examination of PW 1 he has clearly deposed that they have issued notice soon after the accused failed to pay the chit amount. This court is of the opinion that since this case filed u/S.138 of NI Act the main ingredients to be fulfilled in this case is S.138 and 142 of NI Act. If the provision u/S/138 and 142 of NI Act is followed, it is sufficient to file complaint against the accused. It is not the contention of the appellant / accused is that the complainant has not followed procedure as contemplated u/Ss.138 and 142 of NI Act. 15
Cri Appeal No.834/2024 (19) Ex.P4 cheque is dated 18.10.2022. The complainant presented the same to the bank within its validity. Ex.P5 is the bank endorsement dated 11.10.2022 for having dishonoured the cheque for funds insufficient. According to PW 1 Ex.P5 received by them on 12.10.2022, within 30 days from the date of receipt of bank endorsement as per Ex.P5 the complainant issued legal notice to the accused as per Ex.P6 dated 31.10.2022, the complainant had given 15 days time to the accused to pay the cheque amount. After Ex.P8 RPAD cover returned to the complainant, after 15 days within 30 days the complainant has filed this complaint. Thus, the complainant followed proper procedure as contemplated u/S/138 and 142 of NI Act.
(20) During the course of cross examination of PW 1, no pint is elicited from his mouth to discard his version. No doubt, PW 1 in his cross examination admitted the suggestion that he was not present at the time of bid. Since the complainant is running chit business, it all based on the documentary evidence. The accused has not at all disputed regarding he joined chit group 16 Cri Appeal No.834/2024 No.G2G.0570/MSR/04 carried out by the complainant. The accused not at all disputed regarding the bidding chit amount and receiving the chit amount. Even though the accused has taken contention that he had paid the entire chit amount and there is no due payable by him in order to substantiate this contention taken by the accused, he has not produced any documents. Mere taking such contention without proof is not sufficient to hold that the accused has repaid the chit amount to the complainant. On the other hand, the documents relied on by the complainant, which is marked at Ex.P9 ledger extract would go to show that as on 10.10.2022 the accused due a sum of Rs.1,20,735/- payable to the complainant. It is not necessary to produce the documents regarding interest and with regarding to interest document Ex.P9 ledger extract itself reflects. The learned Magistrate rightly drawn presumption as required u/Ss.139 & 118 of NI Act. It is important to refer some of the judgments.
(21) In the judgment of Hon'ble Supreme Court in the case of K.S. Ranganath Vs Vitthala Shetty reported in 2022 [1] Crimes 454-[SC] wherein head note reads as below:-
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Cri Appeal No.834/2024 "Negotiable Instruments Act, 1881 - Section 138 read with Sections 118 and 139-
Dishonour of cheque-Conviction and sentence
- When a cheque is drawn out and is relied upon by drawee, it will raise a presumption that it is drawn towards a consideration which is a legally recoverable amount - Onus is on accused to raise a probable defence and standard of proof for rebutting presumption is on preponderance of probabilities-Defence sought to be put forth and witnesses examined in instant proceedings are only by way of improvement in respect of same cause of action-Defence sought to be put forth relating to cheque and other documents having been obtained by force, cannot be accepted as a probable defence when respondent successfully discharged initial burden cast on him-Appeal dismissed.(Paras 11, 17 and 19)"
(22) The Hon'ble Supreme Court in Judgment in a case of Rangappa V/s Mohan in para no. 14 observed as follows:-
"In the light of these extracts, we are in agreement with the respondent/ claimant that 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 Krishnajanardhana Bhat case 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 circumstance therein. As noted in the citations, this is ofcourse 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 18 Cri Appeal No.834/2024 be no doubt that there is an initial presumption which favours the complainant."
(23) In the decision of Hon'ble Supreme Court reported in 2019(1) DCR 401 between Bir Singh V/s Mukesh Kumar it is held that a meaningful reading of the provisions of the Negotiable Instrument Act including, in particular, sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to he payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of section 138 would be attracted. In my humble view, the principles of these cited decision is aptly applicable to the present case because PW1 in his examination in chief clearly deposed regarding accused issuing Ex.P4 cheque towards discharge of legally enforceable debt. Further, in the judgment of Hon'ble Supreme Court in a case of Sumeti Vij V/s M/s Paramount Tech Fab Industries, wherein it is held that to rebut the 19 Cri Appeal No.834/2024 presumption, facts must be proved by the accused on a preponderance of probability. In the decision of the Hon'ble High Court of Karnataka in M Ramesh Kumar Case wherein in para No.5 observed that section 138 of N.I. Act, on proof of issuance of the cheque, the onus shifts to the accused to rebut the presumption that the cheque was issued not for discharge of any debt or liability in terms of section 138 of N.I. Act. In the decision of Hon'ble High Court of Karnataka in the case of Sitaram Gouda A V/s Isbu Kunhammade it is held that, accused not disputing issuance of cheque- but taking inconsistent stand later- accused not initiating any proceedings as regards misuse, or forgery of cheque and making of wrongful claim- except denial, accused not proving his case beyond reasonable doubt as obligation was on him to do so when he took a special plea.
(24) On perusal of trial court records, the trial court has rightly drawn presumption under S.139 of N.I. Act, by following three ingredients as laid down by the Hon'ble Supreme Court in Rangappa Vs Mohan reported in 2010 SC 1898. Section 139 of N.I. Act empowers the court to 20 Cri Appeal No.834/2024 presume that holder of cheque received it for discharge of any liability enforceable debt or liability. Burden is on the accused to rebut the said presumption.
(25) Section 118 of The Act reads thus:
118. Presumptions as to negotiable instruments. -- Until the contrary is proved, the following presumptions shall be made:--
(a) Consideration --that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration (26) Further, Section 139 of The Act reads thus:
139. Presumption in favour of holder.--It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
(27) Section 118 of The Act pertains to presumption of negotiable instrument which mandates that 'unless the contrary is proved.' Similarly, Section 139 of The Act also mandates that 'unless the contrary is 21 Cri Appeal No.834/2024 proved.' Therefore, it has to be presumed that the holder of the cheque received the cheque of the nature referred to in Section 138 of the Act for the discharge in whole or in part of any debt or liability. Needless to say that the presumption contemplated under Section 139 of the Act is rebuttal presumption. However, the onus of proving that the cheque was not issued towards discharge of any debt or liability is on the accused. But in this case, the accused has failed to rebut the presumptions available to complainant u/S.139 of NI Act. It is relevant to cite the decision of Hon'ble Supreme Court in the case of Sunil Todi and others V/s State of Gujurat and another and in judgment of Hon'ble High Court of Karnataka which are reported in 2021(2) KCCR SN 119 (DB), Judgment reported in 2006 (5) KLJ 323 and reported in 2006(3) KLR
333. When the cheque issued in blank, the holder of the cheque has authorized to fill the amount due.
(28) Further, The Hon'ble Apex Court in (2012) 13 SCC 3123 (Laxmi Dyechem v. State of Gujarat) has held thus:
"It has to be presumed that the cheque was issued in discharge of debt or other liability but the presumption could be rebutted by adducing 22 Cri Appeal No.834/2024 evidence. The burden of proof was however on the person who wanted to rebut the presumption. However, this presumption coupled with the object of Chapter XIV of The Act leads to the conclusion that by countermanding payment of post dated cheque party should not be allowed to get away from the penal provision of Section 138 of The Act. "
(29) The trial court on proper appreciation of the evidence on record has rightly come to the conclusion that the accused has committed offence punishable u/S.138 of NI Act. The accused has failed to rebut presumption available to the complainant u/S.139 & 118 of NI Act. There is no infirmity in the impugned judgment of conviction and sentence passed thereon and warrants no interference at the hands of this court.
(30) Considering on re-appreciation of entire evidence and after perusal of entire records, this court is of the opinion that there is no infirmity in the order passed by the trial court in C.C. No.14690/2022. Hence, I answer point No.1 & 2 in the negative.
(31) POINT NO.3:- In view of my findings on point No.1 and 2, I proceed to pass the following. 23
Cri Appeal No.834/2024 ORDER The appeal filed by the appellant/ accused U/s.374 [3] of Cr.P.C. is hereby dismissed.
The judgment of conviction and sentence passed by the learned XIV Addl. Judge, Court of Small Causes & ACMM, Bengaluru (SCCH-10), in C.C.No.14690/2022 dated 18.04.2024 is hereby confirmed.
The office is directed to send back TCR forthwith to learned XIV Addl. Judge, Court of Small Causes & ACMM, Bengaluru (SCCH-10), along with a copy of this judgment.
[Dictated to the SG-I, transcribed and typed by him, corrected and then pronounced in the open court on this the 12th day of MARCH 2026] (MOHAN PRABHU), LV Addl. City Civil & Sessions Judge, Bengaluru. (CCH-56)