Case at a Glance
A complainant said he lent ₹2,50,000 in cash on 10 October 2016, partly in ₹2,000 notes — a denomination that did not exist until the demonetisation exercise of November 2016. The borrower, convicted under Section 138 of the Negotiable Instruments Act by two courts, argued this slip destroyed the complainant’s case. The Karnataka High Court disagreed: the mistake about the notes alone could not rebut the statutory presumptions, the borrower’s ‘security cheque’ and ‘stop payment’ defences were unproved and inconsistent, and a revisional court cannot re-appreciate evidence. The revision was dismissed.
According to the complainant, he lent ₹2,50,000 in cash to the accused on 10 October 2016 for family and legal necessities. The accused issued a Canara Bank cheque dated 4 November 2016, which was returned for ‘funds insufficient’. A legal notice dated 8 December 2016 was served, but there was neither a reply nor payment. The Senior Civil Judge and JMFC, Shidlaghatta (C.C. No. 199/2020) convicted the accused on 29 April 2022 and imposed a fine of ₹3,50,000, with one year’s simple imprisonment in default. The appellate court at Chintamani dismissed his appeal on 17 November 2023.
In revision, the accused — described in the order as an agriculturist and advocate — argued that the complainant lacked the financial capacity to lend the money, that the complainant claimed to have paid in ₹500 and ₹2,000 notes, that the cheque had been given as security for a loan from a third person and was misplaced, and alternatively that he had instructed the bank to stop payment. The complainant did not appear before the High Court.
The Key Question Before the Court
Does a complainant’s demonstrably wrong claim that he paid part of the loan in ₹2,000 notes before they were issued, by itself, rebut the presumptions under Sections 118 and 139 of the Negotiable Instruments Act?
A Wrong Detail Is Not a Rebuttal
Justice Geetha K.B. first recalled the limits of revision, noting that “the revisional power cannot be equated with the power of an appellate Court”, and relied on the Supreme Court’s recent decision in Kuntegowda v. Thurubaiah, along with State of Maharashtra v. Jagmohan Singh Kuldip Singh Anand, (2004) 08 SC CK 0124 and State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 02 SC CK 0014, which confine interference to findings that are perverse or suffer from a glaring defect.
On the ₹2,000 notes, the Court accepted that “during October, 2016 there were no notes of Rs.2000 denomination”, but held that this circumstance alone could not displace the presumption. The documents relied on for the security-cheque story (Exs. D.1 to D.3) were “in no way helpful to the accused to prove his defense”, and after that plea failed the accused shifted to a stop-payment defence, which was inconsistent with it. The financial-capacity objection was not raised in the accused’s reply to notice or in his evidence, and “nothing was elicited in his cross-examination to disbelieve the financial capacity of the complainant.” The Court concluded that “the accused failed to rebut the presumptions in favour of the complainant.”
What the Court Actually Held
- An error in the complainant’s evidence about paying in ₹2,000 notes in October 2016 does not, by itself, rebut the presumptions under Sections 118 and 139 of the NI Act.
- The ‘security cheque for another person’s loan’ defence was not proved by the documents produced.
- A stop-payment defence taken after the security-cheque plea failed was inconsistent and did not help the accused; the complainant’s financial capacity was not shaken.
- Concurrent findings that are not perverse cannot be re-appreciated in revision; the revision petition was dismissed and the conviction and fine stand.
Why This Judgment Matters
- Cash-loan cheque cases often turn on small inconsistencies; this ruling shows that one wrong detail will not undo the statutory presumption.
- It reinforces that defences must be raised early — in the reply to the legal notice and in evidence — and must be consistent.
- It applies the Supreme Court’s 2026 guidance in Kuntegowda on the narrow scope of revision in cheque cases.
What Should Advocates Take Away From the Judgment?
For Complainants
- Prove the loan and your means to lend; unexplained inconsistencies can still be attacked, so keep your account accurate.
- Send a statutory notice promptly and preserve proof of service.
- An absent reply to notice strengthens the presumption in your favour.
For Counsel
- Raise the financial-capacity defence in the reply notice and in the accused’s evidence, not for the first time in revision.
- Avoid mutually inconsistent defences such as ‘security cheque’ and ‘stop payment’.
- In revision, show perversity in the findings, not merely another possible view — see Kuntegowda v. Thurubaiah.
Key Takeaways
- The Section 139 presumption is rebutted by a probable defence, not by isolated slips in the complainant’s evidence.
- Documents must actually prove a security-cheque defence.
- Shifting defences undermine credibility.
- Revision is not a second appeal on facts.
Frequently Asked Questions
Why did the ₹2,000 note argument fail?
The Court accepted that ₹2,000 notes did not exist in October 2016, but held that this error alone could not rebut the presumptions under Sections 118 and 139, especially when the accused’s own defences were unproved and inconsistent.
Can a cheque given as security lead to a Section 138 case?
Here the accused claimed the cheque was security for a loan from another person, but the documents he produced did not prove this, so the defence failed on facts.
Can the High Court re-examine evidence in a criminal revision?
Only in limited cases. The Court said revisional power is not the same as appellate power, and concurrent findings are interfered with only if perverse or suffering from a glaring defect.
Conclusion
The complainant’s claim about ₹2,000 notes was plainly wrong, but the Karnataka High Court looked at the whole picture: an unanswered legal notice, unproved defences that changed over time, and no real challenge to the lender’s means. On that record the presumption stood, and the conviction was upheld.
Practical takeaway: In a cheque bounce defence, one factual slip by the complainant is not enough — you must build a consistent, probable defence from the reply notice onwards.
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