Karnataka High Court Upholds Section 138 NI Act Conviction; Says Unrebutted Statutory Presumption Supports Cheque Dishonour Liability

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 12.09.2026

Karnataka High Court Upholds Section 138 NI Act Conviction; Says Unrebutted Statutory Presumption Supports Cheque Dishonour Liability

In an important ruling concerning cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881, the Karnataka High Court has upheld the conviction of an accused after finding that the cheque admittedly belonged to him, his signature was undisputed, and he failed to rebut the statutory presumption available to the complainant under Section 139 of the NI Act.

The High Court, however, partly allowed the revision by setting aside the additional ₹25,000 fine imposed towards defraying the expenses of the State, while leaving the conviction and the remainder of the sentence intact.

Background of the Case

• The dispute arose from a complaint filed by M/s MABA Corporate Services Private Limited, a finance company, against G.B. Chandre Gowda under Section 138 of the Negotiable Instruments Act.
• The trial court convicted the accused and sentenced him to pay a total fine of ₹90 lakh. In default of payment, he was directed to undergo six months’ simple imprisonment. Out of the fine amount, ₹89.75 lakh was directed to be paid to the complainant as compensation, while ₹25,000 was ordered to go to the State.
• The accused challenged the conviction before the First Appellate Court in Criminal Appeal No. 2149 of 2018. After re-appreciating the evidence, the appellate court dismissed his appeal and confirmed the trial court’s decision. He thereafter approached the Karnataka High Court in revision.

Accused Contended There Was No Legally Recoverable Debt

• Before the High Court, the accused principally argued that the cheque in question did not represent any legally recoverable debt and therefore his conviction under Section 138 suffered from legal infirmity and factual error.
• He additionally challenged the imposition of ₹25,000 towards the expenses of the State and sought interference with the sentence to that extent. The complainant, on the other hand, supported the concurrent findings of the courts below.

Signature on Cheque Was Not Disputed

• After examining the record, the Karnataka High Court found that the cheque marked as Ex.P2 belonged to the accused, had been dishonoured, and, importantly, the accused did not dispute his signature on the cheque.
• According to the complainant, the cheque had been issued towards repayment arising out of loan transactions. The complainant had also produced substantial documentary material to support its claim.
• This evidence included on-demand promissory notes marked Ex.P14 to Ex.P18, ledger account Ex.P19, statements of account Ex.P20 to Ex.P26 and acknowledgment letters Ex.P27 and Ex.P28. The High Court held that this material was sufficient for the trial magistrate to raise the statutory presumption under Section 139 of the NI Act in favour of the complainant.

Section 139 Presumption Is Rebuttable, But Accused Must Rebut It

• The Court acknowledged that the presumption available under Section 139 is rebuttable. The crucial question, therefore, was whether the accused had produced sufficient material to rebut it.
• The High Court found that he had not.
• The accused neither entered the witness box nor produced documentary evidence to rebut the statutory presumption. Further, the cross-examination of the complainant’s witness, PW-1, did not bring out sufficient material capable of rebutting the presumption operating in favour of the complainant.
• This aspect became central to the High Court’s decision to sustain the conviction.

High Court Refuses to Interfere With Concurrent Conviction

• Justice V. Srishananda held that the trial magistrate was justified in convicting the accused and directing payment of compensation. The First Appellate Court had also properly re-appreciated the material and affirmed the conviction.
• The High Court emphasised the limited scope of revisional jurisdiction and held that there was no ground warranting annulment of the concurrent orders of conviction.
• The decision therefore reinforces that revisional jurisdiction is not intended to provide another unrestricted opportunity to reassess factual findings when the trial and appellate courts have concurrently evaluated the evidence and the conclusions do not disclose a sufficient legal ground for interference.

₹25,000 Fine Payable to State Set Aside

• Although the conviction was upheld, the High Court found merit in one limited aspect of the accused’s challenge.
• The trial court had directed that ₹25,000 out of the total fine should be paid towards defraying the expenses of the State. The High Court held that this part of the sentence required interference because the dispute was essentially private between the parties and no State machinery was involved.
• Accordingly, the ₹25,000 component payable to the State was set aside.

Conviction and ₹89.75 Lakh Compensation Remain Intact

• The Karnataka High Court consequently allowed the revision petition only in part.
• The conviction of G.B. Chandre Gowda for the offence punishable under Section 138 of the Negotiable Instruments Act was maintained. Only the ₹25,000 fine earmarked for State expenses was removed, while the rest of the sentence remained unaltered.
• The Court further directed that the amount already deposited could be withdrawn by the complainant upon due identification.

Legal Significance

The judgment highlights an important practical aspect of Section 138 litigation. Once foundational facts are established and the statutory presumption under Section 139 becomes operative, merely asserting that no legally enforceable debt existed may not be sufficient. The accused must bring material capable of rebutting that presumption.

In the present case, the admitted signature on the dishonoured cheque, coupled with promissory notes, ledger records, statements of account and acknowledgment letters, supported the complainant’s case. In the absence of contrary evidence from the accused, the High Court found no justification for disturbing the concurrent conviction.

At the same time, the ruling demonstrates that a revisional court may still interfere with a specific and severable component of the sentence even where the underlying conviction is otherwise found to be legally sustainable.

Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

Source: Karnataka High Court

Disclaimer

Handy Download:

Write to us at office@aadrikaalaw.com

Tel: +91-11-4999 2707

www.aadrikaalaw.com