[S.139 NI Act] Presumption Is In Favour Of Complaint If Accused In Reply Notice Admits Availment Of Loan: Karnataka High Court

The Karnataka High Court has held that there is presumption in favour of the complainant under Section 139 of the Negotiable Instruments Act, when in the reply notice issued by the accused to the complainant the transaction of availment of loan is admitted again calling upon the complainant to prove the transaction does not arise at all.

A single-judge bench of Justice Rajendra Badamikar reversed the order dated 30.08.2018 passed by the trial court acquitting accused T Gururaj who was charged with the offence punishable under Section 138 of the Act.

The complaint filed by Jitendra Kumar NM it was said that the accused are relatives and well-acquainted with each other. The accused had approached the complainant seeking a hand loan of Rs.5 Lakhs in October 2013 for family necessity and to purchase a site promising to repay the same within 4 to 6 months.

The complainant had advanced a loan of Rs 5 Lakhs in cash. But the accused failed to repay the said loan within the time as assured. When the complainant persistently demanded repayment of the loan amount, on 01.11.2014 the accused issued a cheque for Rs.5 Lakhs dated 15.11.2014. When the said cheque was presented to the Bank, it was bounced for Insufficient Funds.

Following this, the complaint had been lodged against the accused for the offence under the Act. The trial court on appreciation of evidence acquitted the accused.

Counsel for the complainant argued that in the reply notice itself, the accused admitted the receipt of Rs 5 lakhs as a hand loan and cheque, as well as signature, and as such the presumption is in favour of the complainant under Section 139 of the N.I. Act. Hence, the learned counsel would contend that the said presumption is not rebutted and the Magistrate on irrelevant considerations has acquitted the accused.

While the counsel for the accused argued that though the said transaction regarding availing of the loan was admitted, the same was already repaid and the blank cheques were obtained at the time of advancement of the loan, which is evident from the admissions given by the complainant and hence, the presumption in favour of the complainant stands rebutted.

Court's Findings

Firstly, the bench noted that the cheque belongs to the accused and it bears his signature are undisputed facts. Since the cheque and signature have been admitted, the initial presumption under Section 139 of the N.I. Act that the cheque was issued towards legally enforceable debt is in favour of the complainant. Apart from that, under Section 118 of the N.I. Act also, the presumption regarding the transaction is being undertaken for consideration and hence, it is for the accused to rebut the said presumption.

Then it said, “No doubt, the complainant was cross-examined at length, wherein his financial status was challenged and the assertion regarding issuance of cheque, obtaining cheque etc., as security was elicited, but these aspects become irrelevant in view of reply notice given on behalf of the accused by his counsel.”

It added, “When in the reply notice itself the accused has admitted about the borrowing of Rs.5.00 Lakhs in the month of October, 2013 and issuance of Blank Cheques, the burden is on the accused to prove that he has already repaid the borrowed loan amount, as now he is asserting that the issuance of cheque was not towards the legally enforceable debt.”

Further, it said, “When the accused in his reply notice admitted the transaction of availment of loan and when he admits that the cheque belongs to him and it bears his signature, now the question of accused disputing the transaction does not arise at all.”

Rejecting the contention of the accused regarding submission of IT Returns and non-disclosure of the statement of account etc by the complainant. The court said, “When in the reply notice itself this fact is admitted by the accused the question of complainant proving this fact once again does not arise at all, and it is for the accused to rebut the presumption, but he has not taken any pain to substantiate his claim regarding repayment.”

Allowing the appeal the court held “The entire approach of the learned Magistrate in this regard is arbitrary and erroneous and as such, the impugned judgment of acquittal calls for interference by this Court.”

Observing that the conduct of the complainant in prosecuting the wife of the accused in respect of the cheque for Rs.10.00 Lakhs is also questionable. Thus it said “Under these circumstances, in my considered opinion, it is just and proper to impose a fine of Rs.6.00 Lakhs to the accused, which would serve the purpose. The impugned judgment of acquittal is perverse and arbitrary and hence, it calls for interference by this Court.”

Convicting the accused for the offence punishable under Section 138 of the Act the court sentenced the accused to pay a fine of Rs.6.00 Lakhs, in default, he shall undergo simple imprisonment for a period of six months. Out of the fine amount of Rs.6.00 Lakhs, Rs.5,50,000, shall be paid to the complainant by way of compensation and Rs.50,000, shall be credited to the State towards expenses incurred by the State.

Appearance: Advocates Kumar S.J and S Rajashekar for Appellants.

Advocate S. Visweswaraiah for Respondent.

Citation No: 2024 LiveLaw (Kar) 243

Case Title: Jithendra Kumar N M AND T Gururaj

Case No: CRIMINAL APPEAL NO.2158/2018

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