Karnataka HC Upholds Conviction Over ₹3.6 Lakh Loan Between Childhood Friends, Rejects Claim Cheque Secured Lender’s Mother’s Chit

The complainant alleged that he lent the accused ₹3,60,000 on 10 May 2016, repayable within six months, and that the accused issued a cheque for that amount, which was dishonoured for insufficient funds.

After the complainant served a demand notice and received no payment, he filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”)

The accused did not dispute his signature on the cheque but claimed it had been given as security in a chit transaction with the complainant’s mother, and also challenged the complainant’s financial capacity

The trial court convicted the accused and imposed a fine of ₹4,60,000, directing ₹4,50,000 to be paid as compensation; the appellate court affirmed the conviction and sentence

The accused challenged both decisions in revision

Section 138 of the NI Act applies where the statutory requirements concerning a cheque issued towards a legally enforceable debt, its dishonour, demand notice, and failure to pay are satisfied

Sections 118 and 139 require the court to presume, subject to rebuttal, that a cheque was issued for consideration and towards a legally recoverable debt; the accused may rebut those presumptions through cross-examination, defence evidence, or other material raising a probable defence

Under Sections 397 and 401 of the Code of Criminal Procedure, 1973, revisional jurisdiction is supervisory, not a second appeal; interference with concurrent findings is warranted where they are perverse, grossly erroneous, untenable, based on irrelevant or no material, or reached through arbitrary or capricious exercise of discretion

The Court relied on Kuntegowda v. Thurubaiah, State of Maharashtra v. Jagmohan Singh Kuldip Singh Anand, and State of Kerala v. Puttumana Illath Jathavedan Namboodiri for the limits on revisional review

The accused admitted that the cheque bore his signature and was drawn on his bank account; the Court therefore treated the statutory presumptions as arising once the relevant cheque and notice requirements were established

It found the chit-transaction defence insufficient because the accused’s notice to the complainant’s mother was issued only after the criminal case had begun and after the complainant had been partly cross-examined

The challenge to financial capacity also failed: the complainant testified to earning an annual salary of ₹6,50,000 in 2016, and the accused elicited no material in cross-examination or defence evidence establishing incapacity to lend the amount

Finding no basis to disturb the concurrent findings under the restrictive revisional standard, the Court dismissed the petition

The judgment’s statement that the issue was answered “in the affirmative” appears inconsistent with its reasoning and dismissal.