Karnataka HC Sets Aside Rejection Of Couple’s Discharge Plea In Cheating Case, Citing Pending NI Act Cases Over Same Investment

The petitioners challenged the Sessions Court’s dismissal of their revision petition, which had affirmed the Magistrate’s rejection of their discharge application in C.C. No. 26716/2018.

The complaint alleged cheating in connection with money invested by the second respondent; the petitioners maintained that the transaction was monetary or commercial and that they had repaid some amounts online.

Proceedings under Section 138 of the Negotiable Instruments Act, 1881, concerning the amount were also pending in two separate cases.

The Court had directed the complainant’s counsel to ascertain whether the alleged cash transaction of ₹80 lakh was reflected in the complainant’s income-tax returns; no such returns were produced.

The petition was brought under Section 482 of the Code of Criminal Procedure, as stated in the petition heading, and referred to Section 528 of the Bharatiya Nagarik Suraksha Sanhita.

The Court also considered the pending proceedings under Section 138 of the Negotiable Instruments Act, 1881.

It applied the case-specific principle that a monetary or investment transaction should not be given the colour of a criminal case where the materials indicate an investment, and that further prosecution for cheating may be untenable in the circumstances.

The order cites no judicial precedents or further statutory test.

The Court noted that the materials indicated the complainant had invested money with the petitioners and that proceedings concerning the amount were already pending under Section 138 of the Negotiable Instruments Act.

It also took account of the failure to produce the income-tax returns said to reflect the alleged ₹80 lakh cash transaction, despite the Court’s direction.

On those circumstances, it considered the cheating prosecution untenable and set aside the orders refusing discharge.

It expressly clarified that its observations were not to affect the merits of the pending Section 138 cases, which must be decided independently and with all parties’ contentions left open.