Cheque Dishonour | Onus On Accused To Prove Cheque Issued Towards Repayment Of Loan Was Misused By Complainant: Karnataka High Court

The Karnataka High Court has held that in a cheque bounce case, the onus is on the accused to prove that the cheque was misused after it was issued to another person in lieu of a loan borrowed from them and thus did not amount to a legally enforceable debt.

A single-judge bench of Justice Venkatesh Naik T dismissed the revision petition filed by the accused Muddumadaiah and upheld the conviction handed down under section 138 of the Negotiable Instruments Act.

It said “When the execution of a Negotiable instrument is admitted, passing of consideration is admitted, signature found in Ex-P1 (cheque) is admitted, then the court may draw presumption under section 118 of N.I. Act and the court shall draw presumption under section 139 of N.I. Act in favour of the holder of the Negotiable Instrument.”

It was submitted that the complainant, B Jyothi, had filed the private complaint stating that the accused and complainant are known to each other, thus, the accused borrowed a sum of Rs.90,000, from the complainant and in consideration thereof, the accused issued a cheque for a sum of Rs.90,000/- drawn on State Bank of Mysore, Krishnamurthypuram, Mysuru, in favour of the complainant and the said cheque was presented for encashment on 01.02.2007, but it was returned with 'insufficient funds'.

The primary contention of the accused was that the complainant failed to prove beyond reasonable doubt that the cheque was issued towards legally enforceable debt or liability to attract Section 138 of the Act.

It was argued that the accused had borrowed a sum of Rs.30,000 as a hand loan from the mother of the complainant and issued the Cheque. But the complainant has misused the same and has presented the cheque for a sum of Rs.90,000. Therefore, there was no legally recoverable debt.

The bench noted that in the present case, the accused has not disputed the issuance of the cheque, or service of legal notice on him, but he has taken the contention that he borrowed a sum of Rs.30,000 from the mother of the complainant and in consideration thereof, he issued cheque, but the complainant misused the same.

It then said “To substantiate such contention, the accused did not enter the witness box nor produced any documents before the Court. Therefore, the complainant has complied with the legal requirement of section 138 of N.I. Act.”

Further, it held that in such a circumstance, the burden shifts on the accused to disprove the case of the complainant, which was not done. It also observed that the accused had not discharged the loan borrowed from the complainant and had not placed any material to prove that he discharged the loan of Rs.30,000 borrowed from the mother of the complainant.

"The accused never made any efforts to examine the mother of the complainant and he has not placed any material to show that the cheque was not issued towards legally enforceable debt. On the contrary, the complainant has proved that the cheque was issued by the accused towards the discharge of legally enforceable debt i.e., towards hand loan received by him. In this regard, the accused has not placed any contra evidence to disbelieve the case of the complainant," it held.

The court also observed that if the cheque was issued concerning any other transaction or to the mother of the complainant, it had to be construed that the same was issued towards a legally enforceable debt or liability. There is a presumption that the Negotiable Instrument is supported by consideration. If any Negotiable Instrument is supported by consideration, the court shall draw presumption under the provisions of N.I. Act, it observed.

Accordingly, it held that in the present case, the complainant has proved that at the relevant date, he lent a loan of Rs.90,000 to the accused and as consideration, the accused issued a cheque in favour of the complainant. The accused has not placed any material before the Court to prove that under what circumstances, he issued the cheque in favour of the complainant, it was found.

Dismissing the petition the bench said, “The trial court as well as the first appellate court considering the factual and legal aspects of the matter, rightly convicted the accused.”

Appearance: Advocates M Sharass Chandra and Nagaraju H R for Petitioner.

Citation No: 2023 LiveLaw (Kar) 484

Case Title: Muddumadaiah And B Jyothi

Case No: Criminal Revision Petition No. 366 OF 2019