Karnataka HC Sets Aside Developer’s ₹1.21-Crore Cheque Conviction After Housing Society Re-Presents Full Amount Without Recording ₹20 Lakh Part-Payment

The Society and the developer entered into an MOU under which the developer was to procure land for the Society.

After the developer failed to do so, the MOU was cancelled and the developer agreed to repay ₹1,21,10,000, for which he issued a cheque.

After the cheque’s first dishonour, he paid ₹20,00,000 in two instalments.

The Society then presented the cheque again for its full face value; it was dishonoured, and the Society brought a complaint under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

The trial court convicted the accused and imposed a fine of ₹1,35,00,000; the appellate court upheld the conviction but reduced the amount to ₹1,05,00,000, taking account of the ₹20,00,000 already paid.

The accused challenged the conviction and sentence, while the Society challenged the appellate court’s reduction.

Section 138 of the NI Act requires, among other things, that the cheque be issued towards a legally enforceable debt or liability and that the statutory conditions for dishonour and notice be met.

Sections 118 and 139 provide rebuttable presumptions concerning consideration and the existence of a legally enforceable debt.

Under Sections 15 and 56, when part-payment is made after a cheque is drawn but before it is encashed, the part-payment must be endorsed on the instrument; the cheque may then be presented for the balance, and an unendorsed cheque presented for its original amount does not represent the enforceable debt then due.

Revisional jurisdiction is supervisory, not a second appeal, and interference is justified where, for example, a material matter was not considered or the decision is perverse or untenable.

The accused’s ₹20,00,000 payment after the first presentation and before the second was admitted.

Although the complaint described the payments as interest, the complainant did not establish that characterization by evidence; its witness stated there was no agreement for interest, and no supporting document was produced.

The Court therefore treated the payments as part-payment of the cheque debt.

Because the Society presented the cheque for the full ₹1,21,10,000 without endorsing the payments or presenting it for the remaining balance, the cheque did not represent the legally enforceable amount due at the time of the second presentation.

The courts below had not considered this material issue, warranting revisional interference.

It set aside the conviction and the appellate sentence, cancelled the accused’s bail bond, and directed that amounts deposited by the accused and withdrawn by the Society be refunded under Section 148(3) of the NI Act within 60 days of receipt of the certified judgment.

The Society remained at liberty to pursue recovery of any balance by appropriate legal proceedings.