Bangalore District Court
Shaan Finance Limited vs Mahadevaiah on 27 March, 2025
KABC0C0000602022
IN THE COURT OF XIV ADDL.CHIEF JUDICIAL
MAGISTRATE, MAYOHALL UNIT, BENGALURU
Dated this the 27th day of March, 2025
Present : SANTHOSH S.KUNDER, B.A.,LLM,
XIV Addl.C.J.M., Bengaluru
JUDGMENT UNDER SECTION 355 of Cr.P.C
C.C.No.50004/2022
Complainant Mr.Shaan Finance Limited,
Registered office at 611,
Barton Centre,,
No.84, M.R Road,
Bengaluru-560001.
Represented by its,
PA Holder Nishanth Babu.K.K
S/o K.H.Kapani Gowda,
Aged about 34 years.
(By Sri.Sathish.B, Advocate)
V/s
Accused Mahadevaiah,
S/o Veeranna,
Aged about 50 years,
R/at Ippadi (post),
Huthridurga Hobli,
Kunigal Taluk,
Tumkur District.
(By Sri.S.T Prasad,
Indrakumari.R &
M.Narayana Swamy, Advocates)
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Offence U/s 138 of Negotiable Instruments Act.
Plea of the Pleaded not guilty
accused
Final Order Accused is held guilty & convicted
This complaint is filed under Section 200 of Cr.P.C
for the offence punishable under Section 138 of the
Negotiable Instruments Act.
2. Complaint averments in brief:
Complainant is a limited company, incorporated
under the Companies Act, 1956. Complainant is engaged
in the business of advancing vehicle loan for needy
customers. Accused has availed vehicle loan, vide
agreement No.10119 dated 29.11.2019, to purchase APE
Auto DX BS-IV vehicle. He has executed agreement and
thereby agreed to repay the loan in equated monthly
installments. But, he has failed to repay the installments
and became defaulter. After repeated persuasion, he has
issued a cheque bearing No.022115 dated 26.07.2021 for
₹90,500/-, drawn on Federal Bank Ltd., Kunigal Branch,
Tumkur, assuring that he would maintain sufficient
balance in his account to honour the cheque. Complainant
has presented the cheque for encashment on 26.08.2021
through its banker, viz., South Indian Bank, Brigade Road
branch, Bengaluru. But, it was returned with an
endorsement 'funds insufficient', vide bank memo dated
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27.08.2021. This has been informed to the accused
telephonically and personally. But, he did not make the
payment. Left with no other alternative, on 08.09.2021, the
complainant issued a registered demand notice to the
accused calling upon him to pay the cheque amount. In
spite of service of notice on 21.09.2021, he has failed to
pay the cheque amount. Hence, this complaint is filed.
3. This court took cognizance of the offence
punishable under Section 138 of N.I.Act. GPA holder of the
complainant by name, Nishanth Babu.K.K., was examined
on oath. As there were prima facie materials, criminal case
was registered and accused was summoned.
4. Pursuant to the summons, accused has
appeared before the court and got enlarged on bail. After
compliance of Sec.207 of Cr.P.C, this court recorded his
plea. He has pleaded not guilty and claimed to be tried.
5. Sworn statement of affidavit of GPA holder of the
complainant treated as evidence post-cognizance stage.
The complainant has got marked as many as ten
documents, which are marked at Ex.P-1 to 10.
6. Accused was examined under Section 313 of
Cr.P.C. recorded. He denied the incriminating evidence. He
has not led defense evidence. Ex.D1 and 2 were marked for
defence in the cross examination of PW-1.
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7. Heard argument on both side.
8. Points for consideration:
1.Whether the complainant has proved
that the accused has issued cheque
bearing No.022115 dated 26.07.2021
for ₹90,500/-, drawn on Federal Bank,
Kunigal Branch, Tumkur in favour of
the complainant towards discharge of
legally recoverable debt/liability and
the said cheque was dishonored for the
reason 'funds insufficient' and in spite
of service of statutory notice dated
08.09.2021, he has failed pay the
amount covered under the cheque and
thereby committed the offence
punishable under Section 138 of
N.I.Act?
2. What order?
9. The above points are answered as under:-
Point No.1 : In the Affirmative.
Point No.2 : As per final order; for the following:
REASONS
10. Point No.1: - The complainant is contending that
under loan agreement bearing No.10119 dated 29.11.2019,
the accused had availed vehicle loan from the complainant
for purchasing Ape auto and that he has failed to pay the
EMIs and became defaulter. Ultimately, he has drawn the
cheque in question for ₹90,500/- towards discharge of part
of loan liability which was dishonored for the reason 'funds
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insufficient' and that in spite of due service of statutory
demand notice, he has failed to pay the dishonored cheque
amount.
11. In order to substantiate the case, the
complainant has examined its GPA holder - Nishanth
Babu.K.K as PW-1 who filed affidavit reiterating the
complaint averments. As many as ten documents marked
through him. Ex.P-1 is subject cheque; Ex.P.2 is bank
endorsement; Ex.P-3 is copy of demand notice dated
08.09.2021; Ex.P.4 is postal receipt; Ex.P-5 is postal
acknowledgment card; Ex.P6 is notarized copy of general
power of attorney; Ex.P7 is hypothecation agreement dated
29.11.2019; Ex.P8 is original of Ex.P-6; Ex.P9 is tax invoice
and Ex.P10 is loan account statement.
12. PW-1 was subjected to lengthy cross-
examination by the learned defence counsel. In cross-
examination dated 06.04.2024, it was suggested that the
accused has repaid the entire loan outstanding to the
complainant. He has denied the said suggestion. When it
was questioned if, documents are produced to show the
date of loan; number of EMIs paid; and what is
outstanding payable?, P.W-1 has stated that he would
produce the documents. It is elicited that in the event of
failure to repay three successive EMIs, as per company's
norms, the vehicle will be seized. When it was suggested
that the accused still possesses the vehicle that was
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purchased by him by availing loan, PW-1 has replied that
whenever the complainant's people went for seizure of the
vehicle, the accused, his son and villagers picked up
quarrel. PW-1 has stated that in this regard complaint was
lodged and police issued NCR. PW-1 has denied the
suggestion that the accused himself lodged complaint in
Kunigal police station against the goondas sent by the
complainant and that the police summoned all the
miscreants and got executed bond. PW-1 has stated that
the accused failed to paid EMI since 2020.
13. During cross-examination dated 12.06.2021, it
was suggested that the complainant company is closed.
PW-1 has denied the suggestion. It is elicited that under
Ex.P6, PW-1 has been generally authorized to file cases on
behalf of the complainant. PW-1 has stated that the
complainant possesses documents showing loan
sanctioned, EMIs paid and outstanding payable by the
accused. PW-1 has denied the suggestion that since the
accused has paid entire loan, vehicle has not been seized
by the complainant.
14. On 06.08.2024, the complainant has produced
hypothecation agreement, original GPA, tax invoice and
loan statement. Those documents are marked as Ex.P7 to
10 respectively. Thereafter, the advocate for the accused
further cross-examined PW-1 and elicited that Ex.P7 was
executed in the year 2019. PW-1 has conceded that stamp
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duty on the said document paid on 25.09.2018. PW-1 has
also conceded that as per Article 2.1(iii), 30 days after
delivery of the vehicle, it shall be registered in the name of
the complainant. PW-1 has stated that branch manager by
name, Janakiram has signed Ex.P7 on behalf of the
complainant. When it was suggested that Ex.P7 is not a
registered document, PW-1 has stated that it is registered
before Sub-Registrar, Gandhinagar. He has conceded that
document number, etc. is not appearing on Ex.P7.
15. P.W-1 has admitted that he has not produced
board resolution dated 14.12.2015 which is referred to in
Ex.P8. PW-1 has stated that in the board meeting that was
held on 14.12.2015, Company's Managing Director Umesh
Sanan had participated and he has signed the resolution.
PW-1 has stated that he has no difficulty to produce board
resolution book dated 14.12.2015. PW-1 has denied the
suggestion that the alleged signature of accused appearing
on Ex.P7 and the one appearing in his vakalath are
different. PW-1 has also denied the suggestion that the
signatures of the accused on Ex.P-7 have been forged.
PW-1 has stated that the son of the accused by name-
Mahesh has signed Ex.P7 as guarantor. He has stated that
said Mahesh came to APE show room in Magadi in the year
2019 and affixed his signatures on Ex.P7. P.W-1 has
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denied the suggestion that said Mahesh is in Comma since
29.05.2019.
16. PW-1 was further cross-examined on
21.09.2024. It was suggested that hypothecation
agreement has been recently created for the purpose of this
case. PW-1 has denied the same. When it was suggested
that down payment of ₹1,00,000/- paid by the accused is
not shown in Ex.P9, PW-1 has stated the said document
does not belong to the complainant. He has further stated
that accused has not made down payment of ₹1,00,000/-
to the complainant. It is elicited that the value of the
vehicle that was purchased by the accused was
₹2,37,000/- and the loan advanced to him was
₹1,50,000/-. PW-1 has denied the suggestion that the
complainant has not issued receipts to the accused
although he has paid all the loan installments. PW-1 has
stated that notice has not been issued to the guarantor
Mahesh upon default by the borrower-accused. PW-1 has
stated that he does not remember if security deposit was
taken from the accused. It is elicited that the column
meant for mentioning the same in Schedule-I of the
agreement is kept blank.
17. PW-1 was further cross-examined on
24.10.2024. It is elicited that the complainant had no
difficulty to mention the engine number, chassis number
and registration number of the vehicle in Ex.P7. He has
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conceded that the details of hypothecated vehicle has not
been pleaded in complaint, notice and in evidence affidavit.
When it was questioned when exactly did the accused
purchase the vehicle by borrowing loan, PW-1 has stated
that loan agreement was executed on 29.11.2019 and the
accused purchased the vehicle on 29.05.2019. When it was
questioned if loan was sanctioned four months before
purchasing the vehicle, PW-1 has stated that it is not
correct. Printout of google map confronted to PW-1 and
asked that the said document shows that the complainant
company is temporarily closed. PW-1 has admitted the
same. Said document is marked as Ex.D1. However, PW-1
has stated that at the time of filing of this complaint, the
complainant company was functioning. When it was
questioned when did the complainant company close?
PW-1 has stated that the company is not closed; only
license has been transferred and the address has been
changed. Document showing details of Directors of
complainant was confronted to PW-1 to suggest that the
present Managing Director of the complainant is Beerendra
Kumar. PW-1 has admitted the same. This document is
marked as Ex.D2. PW-1 has stated that the presently the
office of the complainant is situated in # 611, 6 th Floor,
Barton Center, M.G Road, Bengaluru. When it was
suggested that the complainant company is presently
functioning in Jayanagar. PW-1 has admitted the same. He
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has denied the suggestion that he has no authority to
prosecute the complaint on behalf of the complainant. It is
elicited that EMI amount was ₹6,800/-. When it was
questioned on what basis the complainant is claiming that
the accused is liable to pay outstanding of ₹90,500/-,
PW-1 has replied that the said amount is arrived on the
basis of outstanding installment. He has denied the
suggestion that the accused has already paid ₹2,41,000/-
to the complainant and that he has remitted excess money.
PW-1 has denied the same. He has admitted that Ex.P2
does not bear the seal of the bank. However, he has denied
the suggestion that Ex.P2 is a created document. When it
was asked as to the basis for arriving a figure of ₹90,500/-,
PW-1 has stated that the accused has defaulted in paying
EMIs and it is towards payment of EMIs, he has issued the
cheque.
18. Advocate for the complainant has argued that
the accused has borrowed vehicle loan from the
complainant which he has admitted. He has failed to
substantiate his contention he has repaid entire loan. It
was argued that the accused has not led defence evidence.
On the other hand, the complainant has produced
sufficient evidence to prove that the accused has
committed the offence under Section 138 of NI Act.
Therefore, he has prayed for convicting the accused.
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19. Per contra, learned counsel for the accused at
the out set submitted that Ex.P2-bank memo does not bear
the seal of the bank and it is a created document. In this
regard, by pointing out Section 146 of NI Act, he has
argued that, to presume the fact of dishonor of cheque, the
complainant is required to produce slip or memo having
official mark of the bank on it denoting that the cheque has
been dishonored. On production of such document, then
only, the presumption of dishonor of cheque operates. He
has submitted that the complainant has not examined the
bank official to prove dishonor of cheque. Therefore, he has
submitted that the complainant has failed to prove that
Ex.P1 has been dishonored and as such, prosecution
under Section of 138 of NI Act does not lie. In this regard,
learned counsel for the accused has cited in the judgment
of Hon'ble High Court of Bombay rendered in Vandana V/s
Abhilasha; (2018) ACD 950.
20. It was further argued that Ex.P-7 does not
contain the engine and chassis number of the vehicle and
the same has been admitted by P.W-1 in cross
examination. Therefore, it is an incomplete document and
thus, it cannot be relied. He has submitted that Ex.P-7 is
also a created document, on which, the guarantor-
Mahesh, the son of the accused, purported to have been
signed on 29.11.2019, was met with road traffic accident
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on 29.05.2019 and since then, he is in comma. Thus,
forgery is also attributed to the official(s) of complainant.
21. It was further argued that GPA at Ex.P-6/Ex.P-
8 was executed in the year 2015. It was admitted by P.W-1
that subsequently, new Directors were inducted to the
complainant company who have not authorised him to
prosecute the complaint and as as such, he has no
authority to proceed with the prosecution. It was further
argued that complainant company is closed. On this count
also, the prosecution cannot be continued.
22. Upon going through the oral and documentary
evidence placed on record, it is evident that the accused
does not dispute borrowing of vehicle loan from the
complainant. By admitting borrowing of loan, suggestions
were given to PW-1 in his cross-examination. Relevant
portions of deposition of PW-1 is extracted as under:-
"XXXX ಆರೋಪಿ ಎಲ್ಲಾ ಸಾಲದ ಬಾಕಿಯನ್ನು ಈಗಾಗಲೇ ನಿಮ್ಮ
ಫೈನಾನ್ಸ್ ಖಾತೆಗೆ ಸಂದಾಯ ಮಾಡಿದ್ದಾರೆ ಯಾವುದೇ ಬಾಕಿ ಇಲ್ಲ
ಎಂದರೆ ಸಾಕ್ಷಿ ಸರಿಯಲ್ಲ ಎನ್ನುತ್ತಾರೆ.XXXX"
"XXXX ಆರೋಪಿಯು ಸಾಲದ ಬಾಬ್ತು ಸಂಪೂರ್ಣ ಹಣವನ್ನು
ನಮಗೆ ಸಂದಾಯ ಮಾಡಿದ್ದರೂ ಆತನನ್ನು ಸತಾಯಿಸುವ
ಉದ್ದೇಶದಿಂದ ಸುಳ್ಳು ದೂರನ್ನು ಸಲ್ಲಿಸಿದ್ದೇನೆಂದರೆ ಸರಿಯಲ್ಲ."
"XXXX ಆರೋಪಿಯು ಸಾಲದ ಎಲ್ಲಾ ಕಂತುಗಳನ್ನು ಪಾವತಿ
ಮಾಡಿದ್ದರೂ, ಆತನಿಂದ ಸಾಲದ ಹಣ ಬಾರಿ ಇದೆ ಎಂದು ಹೇಳಿ
ದಾಖಲೆಗಳನ್ನು ಹಾಜರುಪಡಿಸದೇ ಸುಳ್ಳು ಹೇಳುತ್ತಿದ್ದೇನೆ ಎಂದರೆ
ಸರಿಯಲ್ಲ."
"XXXX ನಮ್ಮ ದಾಖಲಾತಿ (ನಿ.ಪಿ-7 ರ ಅನುಸೂಚಿ-2) ಪ್ರಕಾರವೇ
ಆರೋಪಿಯು ಒಟ್ಟು ರೂ.2,41,000/-ಗಳನ್ನು ದೂರುದಾರ
13 CC.No.50004/2022
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ಸಂಸ್ಥೆಗೆ ಈಗಾಗಲೇ ಕಟ್ಟಿದ್ದಾರೆಂದರೆ ಸರಿಯಲ್ಲ. ಸಾಲದ ಹಣಕ್ಕಿಂತ
ಹೆಚ್ಚಾಗಿ ಆರೋಪಿಯಿಂದ ರೂ.2,41,000/-ಗಳನ್ನು
ಪಡೆದುಕೊಂಡಿರುವುದರಿಂದ ಹೆಚ್ಚಿನ ಹಣದ ಮೇಲೆ ನಾವೇ
ಆರೋಪಿಗೆ ನಿ.ಪಿ-7 ರ Article-2.2 ರ ಹಿಂತಿರುಗಿಸಲು ಕಂಡಿಕೆ
(ii)ರಲ್ಲಿ ಜವಾಬ್ದಾರರಾಗಿದ್ದರೂ ಹೇಳಿದಂತೆ ಆರೋಪಿಯ ಬಡ್ಡಿ
ಸಮೇತ ವಿರುದ್ಧಸುಳ್ಳು ಹಣವನ್ನು ದೂರನ್ನು ಸಲ್ಲಿಸಿದ್ದೆೇವೆ
ಎಂದರೆ ಸರಿಯಲ್ಲ.XXXX"
"XXXX ಆರೋಪಿಯು ಪ್ರತಿಯನ್ನು ಈಗಾಗಲೇ ನಾನು
ನ್ಯಾಯಾಲಯಕ್ಕೆ ರೂ.2,41,000/-ಗಳನ್ನು ಕಟ್ಟಿದ್ದಾರೆಂದು
ನಿ.ಪಿ-7 ರ ಅನುಸೂಚಿ-1 ರಲ್ಲಿ ಹೇಳಲಾಗಿದ್ದು, ಆರೋಪಿಯಿಂದ
ಇನ್ನೂಸಾಲದ ಹಣ ಬಾಕಿ ಇದೆ ಎಂದು ಸುಳ್ಳು ಹೇಳುತ್ತಿದ್ದೇನೆ
ಎಂದರೆ ಸರಿಯಲ್ಲ.XXXX"
23. Thus, from the very suggestions given to PW-1
on multiple occasions by the learned defence counsel, it is
very clear that the accused admits that he has availed
vehicle loan from the complainant. Apart from the
admission by the accused, in order to prove the borrowing
of loan by the accused, the complainant has produced
loan-cum-hypothecation agreement at Ex.P7 dated
29.11.2019 where, it is evident from schedule-I at page
No.4 that the complainant has lent loan of ₹1,50,000/- to
the accused on 29.11.2019 and the same is repayable in
installments. As per schedule-II of the agreement at page
No.4, the loan is repayable in 36 months and total sum
repayable is ₹2,37,800/- (₹6,700 X 35 months + ₹3,300/-
in 36th month). Accused has disputed his signature on
hypothecation agreement. However, it is to be noted that
he admits borrowing of vehicle loan. But, his defence is
that he has repaid the entire loan. When he admits
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borrowing of vehicle loan from the complainant, he cannot
dispute the loan agreement at all.
24. As per Clause 2.1 (iii) of Ex.P-7, after the vehicle
is purchased, it should be hypothecated with the
complainant. 'B' Register extract of the vehicle which is
produced by the complainant with memo dated 02.12.2024
shows that the vehicle bearing registration No. (KA-06/AA-
8082; chassis No.MBX0003BFXD843375; engine
No.S9D8983221) has been hypothecated to the
complainant. Details of the vehicles shown in 'B' Register
extract tally with the details as shown in Ex.P-9-Tax
invoice. Ex.P9 also shows that the said vehicle has been
hypothecated to the complainant. Therefore, the contention
that the vehicle purchased by the accused by availing loan,
has not been hypothecated to the complainant, cannot be
accepted.
25. It is true that details of the vehicle is not
forthcoming in Ex.P7. However, it is to be noted that when
the accused does not dispute borrowing of loan from the
complainant and that he has purchased the vehicle by
utilizing the loan amount, notwithstanding that certain
coloumns in Ex.P7 are left blank, it does not affect the
merits of the case. Though, the accused has contended
that he has repaid the entire loan amount, no documents
produced to substantiate the same. On the other hand,
loan statement at Ex.P10 shows that the accused has not
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paid the loan installments regularly and as on 20.07.2021,
outstanding loan payable by him was ₹90,500/-. The
accused is contending that in Ex.P7, there is entry to the
effect that he has paid ₹2,41,000/-. However, no such
entry is forthcoming in Ex.P7 as sought to be contended by
the accused. Thus, Ex.P10 proves the case of the
complainant that the accused is a defaulter. Cheque at
Ex.P1 was drawn on 26.07.2021 for ₹90,500/-. As noted
above, as on 20.07.2021, outstanding payable by the
accused was ₹90,500/-. Thus, the complainant has proved
that as on the date of drawing the cheque, the accused was
liable to pay ₹90,500/- to the complainant. It is evident
from Ex.P2 that the cheque was presented for encashment
in South Indian Bank Ltd., Brigade Road branch and the
same was dishonored on 27.08.2021 for the reason 'funds
insufficient'.
26. It is true that bank endorsement does not bear
official stamp of the bank and seal of the official of the
bank. Section 146 of NI Act reads as under:-
"The Court shall, in respect of every
proceeding under this Chapter, on production
of bank's slip or memo having thereon the
official mark denoting that the cheque has
been dishonoured, presume the fact of
dishonour of such cheque, unless and until
such fact is disproved."
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27. Section 146 of NI Act provides that bank's slip
is prima facie evidence for dishonor of cheque. Section
provides that, in every proceeding under Chapter-XVII of NI
Act (from Ss. 138 to 148), on production of bank's slip or
memo having thereon the official mark denoting that
cheque has been dishonor, the court shall presume the
fact of dishonor of cheque, unless and until such fact is
disproved. Requirement of Section 146 of NI Act is that
there should be official mark of the bank on bank's slip or
memo denoting that cheque has been dishonored and then
only presumption would come into play. In the present
case, the bank has clearly noted that the subject cheque
has been dishonored for the reason 'funds insufficient'.
28. As noted above and rightly pointed out by the
learned counsel for the accused that Ex.P2 does not bear
the official mark of the bank. Now the question before the
court is, whether cheque return memo which is not bearing
official stamp of the bank, would render it as invalid
document. In Guneet Bhasin Vs. State of NCT of Delhi &
others [ (2023) 296 DLT 401] the question for
consideration was, if the cheque return memo not bearing
official stamp of the bank, does it render the cheque return
memo as invalid or illegal? Referring to Section 138 and
146 of N.I.Act and Section 4 of the Bankers Book
(Evidence) Act, 1891, Hon'ble court held that:-
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"9 The cheque return memo is a memo
informing the payee's banker and the
payee about the dishonour of a cheque.
When the cheque is dishonored, the
drawee bank immediately issues a cheque
return memo to the payee's banker
mentioning the reason for non-payment.
The purpose of the cheque return memo is
to give the information of the holder of the
cheque that his cheque on presentation
could not be encashed due to the variety of
reasons as mentioned in the cheque return
memo. As per the Section 146 of the N.I.
Act, the cheque return memo on
presentation presumed the fact of
dishonour of the cheque unless and until
such fact is disapproved. Neither section
138 nor the Section 146 of the NI Act has
prescribed any particular from of cheque
return memo. The Section 138 of the NI Act
does not mandate any particular form of
cheque return memo which is nothing but
a mere information given by the Banker of
the due holder of a cheque that the cheque
has been returned as unpaid. If the cheque
return memo is not bearing any official
stamp of the bank, it does not render the
cheque return memo as invalid or illegal.
The cheque return memo is not a document
which is not required to be covered under
Section 4 of the Bankers Book (Evidence)
Act, 1891. If there is any infirmity in the
cheque return memo, it does not render
entire trial under Section 138 of NI Act as
nullity."
(underlined for emphasis)
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29. The above said judgment has been quoted for
approval by Hon'ble High Court of Allahabad in
Mohd.Yunus Malik Vs. State of U.P. & Another [Neutral
Citation No. 2023: AHC:140834] where it was held that:-
"13. From perusal of the same, it is
apparently clear that if the cheque
return memo is not bearing any official
stamp of the bank, it does not render
the cheque as invalid or illegal. Further,
if there is any infirmity in the cheque or
letter, it does not render entire trial
under Section 138 of Act, 1881 as
nullity.
14. After going through the provision of
Section 146 of Act, 1881, counter
affidavit filed on behalf of bank and
judgment of Delhi Court in the case of
the firm view that in case cheque return
memo is not having signature and
stamp of the bank, but it is validly
issued by the bank, that would not
render the proceeding of Section 138 of
Act, 1881 as invalid or illegal."
30. Above referred judgments being the recent
judgments, the same required to followed and thus,
judgment rendered in Vandana's case does not hold the
field.
31. It is pertinent to note that Ex.P-2 bears the
serial number of the dishonoured cheque and the reason
for its dishnonor. It is to be noted that the accused has
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nowhere disputed the dishonor of cheque-Ex.P-1 and the
reason for its dishonour. No suggestions given to P.W-1 in
his cross examination to that effect. It is not his case that
he had sufficient balance to honour the cheque as on the
date of its presentation. Except the bald assertion, nothing
is placed on record to show that Ex.P-2 is a created/forged
document. Therefore, the argument that, the bank memo
at Ex.P-2 is an invalid document and it renders the entire
proceedings invalid, cannot be accepted.
32. After the receipt of intimation of dishonor, the
complainant has caused a demand notice dated
08.09.2021 as per Ex.P3 through RPAD calling upon the
accused to pay the cheque amount. The said notice was
posted on 08.09.2021 which can be seen from Ex.P4,
postal receipt. Ex.P5 proves that the said notice was served
on the accused. The accused does not dispute service of
demand notice on him. It is relevant to note that the
accused has not issued reply to the notice. Had really
entire loan installments paid and there is no outstanding,
nothing prevented him from issuing reply to Ex.P3. But,
this has not been done. Further, he has not produced any
document to substantiate that he has repaid the entire
loan installments. Thus, it appears that the defence that
the entire loan amount is repaid is an afterthought and
thus, his defence cannot be believed.
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33. Learned counsel for the complainant has relied
on following judgments:-
Sl.No. Judgments
1. Rangappa V/s Sri.Mohan;
(2010) 11 SCC 441
2. Bir Singh V/s Mukesh Kumar;
(2019) 4 SCC 197
34. Learned counsel for the accused has relied on
following judgments:-
Sl.No. Judgments
1. K.Prakashan V/s P.K Surenderan;
(2008) 1 SCC 258
2. Krishna Janardhan Bhat V/s
Dattatraya G.Hegde;
AIR 2008 SC 1325
3. Sri. Dattatraya V/s Sharanappa;
AIR 2024 SC 4103
4. M.S Narayana Menon Alias Mani
V/s State of Kerala and another;
(2006) 6 SCC 39
35. A drawer of a cheque is deemed to have
committed the offence under Section 138 of the NI Act, if
the following ingredients are fulfilled:
(i) A cheque drawn for the payment of any
amount of money to another person;
(ii) The cheque is drawn for the discharge of
the "whole or part" of any debt or other
liability. "Debt or other liability" means legally
enforceable debt or other liability; and
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(iii) The cheque is returned by the bank unpaid
because of insufficient funds.
For constituting offence under Section 138 of NI Act,
the stipulations in the proviso are to be fulfilled. The
conditions in the proviso are as follows:
(i) The cheque must be presented in the bank
within six months from the date on which it
was drawn or within the period of its validity;
(ii) The holder of the cheque must make a
demand for the payment of the "said amount of
money" by giving a notice in writing to the
drawer of the cheque within thirty days from
the receipt of the notice from the bank that the
cheque was returned dishonoured; and
(iii) The holder of the cheque fails to make the
payment of the "said amount of money" within
fifteen days from the receipt of the notice.
36. A negotiable instrument including a cheque
carries following presumptions in terms of Section 118(a)
and Section 139 of the N.I.Act.
(i) Section 118 of the N.I.Act provides;
Presumptions as to negotiable
instruments; Until the contrary is
proved, the following presumptions
shall be made;
(a) of consideration that every
negotiable instrument was made or
drawn for consideration, and that every
such instrument, when it has been
accepted, indorsed negotiated or
22 CC.No.50004/2022
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transferred was accepted, indorsed,
negotiated or transferred for
consideration:"
(ii) Section 139 of the N.I.Act provides
as follows:
'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".
Thus, the combined effect of Section 118(a) and
Section 139 of N.I.Act raises a presumption in favour of the
holder of the cheque that he has received the same for
discharge, in whole or in part of any debt or other liability.
37. Hon'ble Supreme Court in Hiten P.Dalal
V.Bratindranath Banerjee: (2001) 6 SCC 16, it was held
that:
"22. Because both Sections 138 and
139 require that the Court "shall
presume" the liability of the drawer of
the cheques for the amounts for which
the cheques are drawn, as noted in
State of Madras vs.A.Vaidyanatha Iyer
AIR 1958 SC 61, it is obligatory on the
Court to raise this presumption in every
case where the factual basis for the
raising of the presumption had been
established. "It introduces an exception
to the general rule as to the burden of
proof in criminal cases and shifts the
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onus on to the accused" (ibid). Such a
presumption is a presumption of law, as
distinguished from a presumption of fact
which describes provisions by which the
court 'may presume" a certain state of
affairs. Presumptions are rules of
evidence and do not conflict with the
presumption of innocence, because by
the latter all that is meant is that the
prosecution is obliged to prove the case
against the accused beyond reasonable
doubt. The obligation on the prosecution
may be discharged with the help of
presumptions of law or fact unless the
accused adduces evidence showing the
reasonable possibility of the
nonexistence of the presumed fact."
38. In Kalamani Tex and Anr. V/s
Balasubramanian, 2021 SCC Online SC 75, Hon'ble
Supreme Court held that:
"14. 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."
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39. In Krishna Janadhan Bhat V/s Dattatraya
G.Hegde; (2008) 4 SCC 54, Hon'ble Supreme Court held
that:-
"The presumption mandated by Section 139
includes a presumption that there exists a
legally enforceable debt or liability . 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."
40. In Rangappa V/s Sri.Mohan; (2010) 11 SCC
441, Hon'ble Supreme Court held that, ordinarily in
cheque bouncing cases, what the courts have to consider is
whether the ingredients of the offence enumerated in
Section 138 of the Act have been met and if so, whether the
accused was able to rebut the statutory presumption
contemplated by Section 139 of the Act.
41. Hon'ble Apex Court in the case titled as Bir
Singh vs Mukesh Kumar, (2019) 4 SCC 197 where it was
held as follows:
"33. A meaningful reading of the
provisions of the Negotiable Instruments
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 the 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
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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.
34. If a signed blank cheque is
voluntarily presented to a payee,
towards some payment, the payee may
fill up the amount and other particulars.
This in itself would not invalidate the
cheque. The onus would still be on the
accused to prove that the cheque was
not in discharge of a debt or liability by
adducing evidence."
42. It is pertinent to refer to the judgment of the
Hon'ble Apex Court in M/s Kumar Exports Vs. Sharma
Carpets, (2009) 2 SCC 513, wherein it was held:-
"20. The accused in a trial under
Section 138 of the Act has two options.
He can either show that consideration
and debt did not exist or that under the
particular circumstances of the case the
non existence of consideration and debt
is so probable that a prudent man
ought to suppose that no consideration
and debt existed. To rebut the statutory
presumptions an accused is not
expected to prove his defence beyond
reasonable doubt as is expected of the
complainant in a criminal trial. The
accused may adduce direct evidence to
prove that the note in question was not
supported by consideration and that
there was no debt or liability to be
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discharged by him. However, the Court
need not insist in every case that the
accused should disprove the
nonexistence of consideration and debt
by leading direct evidence because the
existence of negative evidence is
neither possible nor contemplated. At
the same time, it is clear that bare
denial of the passing of the
consideration and existence of debt,
apparently would not serve the purpose
of the accused. Something which is
probable has to be brought on record
for getting the burden of proof shifted to
the complainant. To disprove the
presumptions, the accused should bring
on record such facts and
circumstances, upon consideration of
which, the Court may either believe
that the consideration and debt did not
exist or their nonexistence was so
probable that a prudent man would
under the circumstances of the case,
act upon the plea that they did not
exist. Apart from adducing direct
evidence to prove that the note in
question was not supported by
consideration or that he had not
incurred any debt or liability, the
accused may also rely upon
circumstantial evidence and if the
circumstances so relied upon are
compelling, the burden may likewise
shift again on the complainant. The
accused may also rely upon
presumptions of fact, for instance,
those mentioned in Section 114 of the
Evidence Act to rebut the presumptions
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arising under Sections 118 and 139 of
the Act."
43. Further, the above said principles have also been
recently crystallized by Hon'ble Supreme Court in the case
of Basalingappa vs Mudibasappa, (2019) 5 SCC 418,
where it s held that:-
"25. We having noticed the ratio laid
down by this Court in above cases on
Sections 118(a) and 139, we now
summarise the principles enumerated
by this Court in following manner:
(i) Once the execution of cheque is
admitted Section 139 of the Act
mandates a presumption that the
cheque was for the discharge of any
debt or other liability.
(ii) The presumption under Section 139
is a rebuttable presumption and the
onus is on the accused to raise the
probable defence. The standard of proof
for rebutting the presumption is that of
preponderance of probablities.
(iii) To rebut the presumption, it is open
for the accused to rely on evidence led
by him or accused can also rely on the
materials submitted by the complainant
in order to raise a probable defence.
Inference of preponderance of
probabilities can be drawn not only from
the materials brought on record by the
parties but also by reference to the
circumstances upon which they rely.
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(iv) That it is not necessary for the
accused to come in the witness box in
support of his defence, Section 139
imposed an evidentiary burden and not
a persuasive burden.
(v) It is not necessary for the accused to
come in the witness box to support his
defence."
44. From the ratio laid down in the aforesaid
judgments, it is clear that for the offence under Section
138 of the Act, the presumptions under Section 118 (a)
and Section 139 of N.I.Act have to be compulsory raised as
soon as execution of cheque by the accused is admitted or
proved by the complainant and thereafter, burden shifts
on the accused to prove otherwise. However,
presumptions, both under Sections 118 and 139 of N.I.Act
are rebuttable in nature.
45. In the present case, the accused has not
disputed issuance of cheque to the complainant. He has
also not disputed his signature on the cheque. Admittedly,
the cheque was drawn on his bank account. Therefore,
presumption mandated under Section 139 of the Act
would gets attracted. He has not explained under what
circumstances the cheque came to the hands of the
complainant. Assuming for argument for sake that if the
accused repaid the entire loan amount to the complainant,
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there was no necessity for him to issue the cheque to the
complainant. Indisputably, the cheque was presented for
encashment well within its validity and that it was
returned by the bank unpaid because of insufficient funds.
After the receipt of the intimation of dishonour from the
bank, the complainant has issued a statutory demand
notice within the period stipulated under proviso (b) to
Section 138 and the said notice served on the accused.
Accused has neither issued reply to the notice nor made
payment of amount covered under the dishonored cheque.
Therefore, offence under Section 138 of N.I.Act is deemed
to have been committed. He has failed to probablize his
defence(s). The elicitation made in the cross-examination
of PW-1 that the complainant company is closed after the
filing of this complaint, does not affect the case on hand.
Therefore, this court holds that the complainant has
proved that the accused has committed the offence
punishable under Section 138 of N.I.Act. Accordingly, I
answer Point No.1 in the Affirmative.
46. Point No.2:-Punishment prescribed for the offence
under Section 138 of Negotiable Instruments Act is
imprisonment for a period which may extend to two years
or with fine which may extend to twice the amount of the
cheque or with both. Considering the facts and
circumstances of this case, year of the transaction and the
rate of interest stipulated under Section 80 of NI Act, this
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court is of the considered view that it is just and desirable
to impose fine of ₹1,50,000/- and out of the said amount,
it is just and proper to award a sum of ₹1,45,000/- as
compensation to the complainant as provided U/s 357(1)
(b) of Cr.P.C and the remaining sum of ₹5,000/- shall go to
the State. In view of the findings recorded above, I proceed
to pass the following:
ORDER
Acting under Section 255(2) of Cr.P.C., accused is convicted for the offence punishable under Section 138 of Negotiable Instruments Act. He is sentenced to pay a fine of ₹1,50,000/-. In default to pay fine, he shall undergo simple imprisonment for a period of three months.
Out of the realized fine amount, a sum of ₹1,45,000/- is ordered to be paid to the complainant as compensation and the remaining sum of ₹5,000/- shall be remitted to State.
Bail bonds executed by accused shall stands cancelled.
Accused is entitled for a copy of this judgment free of cost which shall be supplied to him forthwith.
(Dictated to the Stenographer, transcript computerized by her, revised corrected and then pronounced by me in the open Court on this the 27th day of March, 2025) ( SANTHOSH S.KUNDER ) XIV Addl. C.J.M., Bengaluru.
31 CC.No.50004/2022KABC0C0000602022 ANNEXURES Witness examined for the Complainant:
PW.1 Nishanth Babu.K.K Documents marked for the Complainant:
Ex.P.1 Cheque Ex.P.2 Bank endorsement Ex.P.3 Copy of legal notice dated 08.09.2021 Ex.P.4 Postal receipt Ex.P.5 Postal acknowledgment card Ex.P.6 Notarized copy of general power of attorney Ex.P.7 Hypothecation agreement dated 29.11.2019 Ex.P.8 Original GPA Ex.P.9 Tax invoice
Ex.P.10 Loan statement of accused Witness examined for the defense Nil Documents marked for the defense:
Ex.D1 Print out google map
Ex.D2 Print out showing the list of Directors of
complainant
XIV Addl.C.J.M., Bengaluru.