Karnataka HC Upholds Conviction Over ₹12 Lakh Loan, Says Signed Cheque Can Revive Time-Barred Debt

The complainant alleged that the accused borrowed ₹12,00,000 on 15 June 2014, agreeing to repay with interest, and later issued a cheque dated 27 April 2018 for the debt.

The cheque was returned with the endorsement “account closed”; the accused did not pay after service of the statutory notice.

The trial court convicted the accused under Section 138 of the Negotiable Instruments Act, 1881, and imposed a fine of ₹12,50,000, including compensation to the complainant; the appellate court affirmed the conviction.

In revision, the accused sought remand, relying on the COVID-19 pandemic and family bereavements as reasons for not cross-examining the complainant.

He also disputed the loan and the complainant’s financial capacity, and argued that the cheque related to a time-barred debt.

Sections 397 and 401 of the Code of Criminal Procedure, 1973 confer supervisory revisional jurisdiction; that jurisdiction is not equivalent to a second appeal, and interference with concurrent findings is ordinarily warranted only where the decision is perverse, grossly erroneous, unreasonable, unsupported by material, or otherwise reflects arbitrary exercise of discretion.

Under Sections 118 and 139 of the Negotiable Instruments Act, presumptions arise in favour of consideration and a legally enforceable debt once the relevant foundational facts are established, but those presumptions are rebuttable.

Section 25(3) of the Indian Contract Act, 1872 recognizes a written and signed promise to pay a time-barred debt as a contract.

The Court relied on Kuntegowda v. Thurubaiah for the limits of revisional review and cited Sri Ganesh v. Sri K.R. Puttaswamy in support of its conclusion that issuance of a cheque for a time-barred debt may constitute a fresh promise under Section 25(3).

The Court found that the cheque was drawn on the accused’s account and that the notice and payment requirements had been met; the statutory presumptions therefore operated in the complainant’s favour.

The accused had not replied to the notice, cross-examined the complainant, or led defence evidence, and the courts below had recorded that opportunities to cross-examine had been granted, including before the pandemic.

Although the original loan appeared time-barred by the date of the cheque, the Court treated the cheque as a written promise to pay and, applying Section 25(3) of the Contract Act, held that the debt was enforceable for the cheque amount.

It concluded that the lower courts had considered relevant material and that no basis for revisional interference was established.

It dismissed the criminal revision petition, leaving the conviction and sentence undisturbed.