Case at a Glance
A borrower convicted under Section 138 of the Negotiable Instruments Act by the Magistrate and Sessions Court was acquitted by the High Court in revision on the ground that the complainant, earning about Rs. 20,000–25,000 a month, had not shown capacity to lend Rs. 4,50,000. The Supreme Court held that the accused had admitted his signature, failed to rebut the Section 139 presumption, and never questioned financial capacity in reply to the statutory notice; the High Court, exercising revisional jurisdiction, could not upset concurrent findings without perversity. The conviction was restored.
In December 2010 the complainant gave the accused a hand loan of Rs. 4,50,000 at 16% interest, repayable within a year. A cheque dated 20 March 2013 issued by the accused was dishonoured for insufficient funds; a legal notice followed on 28 March 2013 and a Section 138 complaint was filed on 6 May 2013. Only on 16 September 2014, after the complaint, did the accused send a notice claiming that blank cheques given as security for a separate Rs. 40,000 loan had been misused.
The Magistrate convicted the accused on 1 September 2015 and imposed a fine of Rs. 9,00,000 with default imprisonment; the Sessions Court upheld the conviction on 19 September 2016 but reduced the fine to Rs. 6,50,000. On 6 October 2023 the High Court, in revision, set aside the conviction, holding that the complainant had not proved his financial capacity to lend Rs. 4,50,000.
The Key Question Before the Court
Can a High Court in revision set aside concurrent Section 138 convictions on the ground of the complainant’s financial capacity, when the accused admitted his signature and did not raise that plea in reply to the statutory notice?
Presumptions, Financial Capacity and Limits of Revision
Writing for the Bench, Justice B.V. Nagarathna explained that Chapter XVII of the NI Act was enacted to lend credibility to cheques, citing Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd., (2001) 01 SC CK 0098 and Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 02 SC CK 0169 Following Kumar Exports v. Sharma Carpets, (2008) 12 SC CK 0074, presumptions under Sections 118 and 139 are rebuttable, but once execution is admitted “the onus shifts upon the accused to prove that the said cheque was not issued for discharge of any liability”. A bare denial is not enough. The blank-cheque defence had no documentary support for the alleged Rs. 40,000 loan, and the 2014 notice, sent after the complaint, was an afterthought.
On financial capacity, the Court relied on the complainant’s chit-fund investments and evidence of PW-2 and PW-3, and noted that the accused had not replied to the statutory notice raising any plea on capacity, so the complainant had no duty to prove it in advance. On the scope of revision, citing State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 02 SC CK 0014, State of Maharashtra v. Jagmohan Singh Kuldip Singh Anand, (2004) 08 SC CK 0124 and Sanjabij Tari v. Kishore S. Borcar, (2025) 09 SC CK 0342, it held that “the revisional power cannot be equated with the power of an appellate court” and that concurrent findings cannot be disturbed absent perversity — and “the High Court has failed to highlight any reason or material” to justify interference.
What the Court Actually Held
- Once the accused admits his signature on the cheque, the Section 139 presumption arises and the burden shifts to him; a bare denial or an after-the-fact notice does not rebut it.
- Where the accused did not question the complainant’s financial capacity in reply to the statutory notice, the complainant need not prove capacity in advance; here capacity was in any case shown through chit-fund investments and witnesses.
- A High Court exercising revisional jurisdiction does not act as an appellate court and cannot upset concurrent findings of conviction without perversity or jurisdictional error.
- The High Court’s order dated 6 October 2023 was set aside and the judgments of the trial court and Sessions Court were restored.
Why This Judgment Matters
- ‘Financial capacity’ is one of the most frequently raised defences in cheque bounce cases, and this judgment limits its use when not raised at the earliest stage.
- It reinforces the restricted scope of criminal revision against concurrent findings.
- It is a reportable ruling widely cited by High Courts and trial courts in Section 138 matters.
What Should Advocates Take Away From the Judgment?
For Lenders and Complainants
- Keep records of the source of funds, such as chit-fund or bank withdrawals, to answer a capacity challenge.
- Issue the statutory notice promptly and preserve the return memo and postal proof.
For Counsel
- For the accused: raise financial capacity and the ‘security cheque’ defence in the reply to the statutory notice, with documents.
- For complainants: rely on the admitted signature and Section 139 presumption, and on Kumar Exports on the standard of rebuttal.
- In revision against concurrent findings, perversity must be specifically demonstrated.
Key Takeaways
- Admitted signature triggers the Section 139 presumption.
- A belated ‘blank cheque misused’ notice was treated as an afterthought.
- Financial capacity need not be proved upfront if not disputed in reply to the demand notice.
- Revision is not an appeal; concurrent convictions were restored.
Frequently Asked Questions
Does a cheque bounce complainant have to prove he had money to lend?
Not in advance, according to this judgment, where the accused did not question financial capacity in reply to the statutory notice. In this case capacity was in any event shown through chit-fund investments and witness evidence.
Is a claim that a blank security cheque was misused enough?
Not by itself. The Court rejected it here because there was no documentary support for the alleged separate loan and the notice raising it was sent only after the complaint was filed.
Can a High Court overturn a cheque bounce conviction in revision?
Only on perversity or jurisdictional error. Revision is not an appeal, and concurrent findings cannot be re-appreciated as if on appeal.
Conclusion
Kuntegowda v. Thurubaiah restores a cheque bounce conviction more than a decade after the cheque was dishonoured, and clarifies that the financial-capacity defence must be raised early and supported, not invented in revision.
Practical takeaway: Accused persons should answer the statutory notice with their full defence; complainants should keep proof of the source of the loan. The judgment does not expressly say whether the fine stands at Rs. 9,00,000 or Rs. 6,50,000.
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