Loan Amount, Falsity Of Defence, Etc: Karnataka High Court Lists Factors To Determine Fine On Cheque Bounce Convict

The Karnataka High Court has laid down guidelines for trial and sessions courts to keep in mind while fixing fine amounts on a convict in cheque dishonour cases, under the Negotiable Instruments Act.

The aspects to be considered by the court are as follows:

1. Quantum of the loan;

2. The defence taken by the accused, more particularly whether he has taken a false defence and failed to prove the same;

3. Whether the accused has dragged on the matter unnecessarily and thereby delayed the disposal of the case at the stage of trial, appeal, revision and before the Supreme Court;

4. Whether the transaction relates to business between the parties or the parties are business class who would have utilised the amount for their business and flourish;

5. In other cases, the returns the loan amount would have brought, if it was kept in a fixed deposit in a nationalised bank etc.

The list, however, is not exhaustive, and there may be other justifiable reasons for fixing the quantum of fine, Justice J M Khazi clarified.

Background

The development comes in a petition filed by AV Poojappa challenging his conviction under Section 138 of the NI Act.

The complainant, Dr SK Vagdevi, had alleged that the accused was known to her and her family for the past several years. In the first week of April 2012, the accused requested the complainant to advance a hand loan of ₹5,50,000 for his urgent personal requirement.

Taking into consideration the request of the accused, the complainant advanced a hand loan of ₹5,50,000 on 10.04.2012, i.e., transferred a sum of ₹5 lakhs to the account of the accused through RTGS and paid the remaining ₹50,000/- in cash.

The accused had promised to repay the same during February 2013, and a cheque dated 25.02.2013 for a sum of ₹5,50,000 was issued. However, when the complainant presented the cheque for realisation, it was returned dishonoured as "Funds insufficient".

The trial court, on examining the evidence, convicted the accused and sentenced him to pay fine of ₹7,20,000 with a default sentence of imprisonment and directed that out of the fine amount, a sum of ₹7,15,000/- be paid to the complainant by way of compensation.

In an appeal filed by the accused, the Appellate court upheld the conviction but reduced the fine amount to ₹5,55,000 and directed a sum of ₹5,50,000/- paid to the complainant by way of compensation.

In revision, the petitioner argued that the Courts below erred in not understanding the statutory importance of Sections 118 and 139 of N.I. Act and by misapplying the same to the evidence on record, convicted the accused.

Amicus curiae appointed by the court to represent the complainant argued that on dishonour of the cheque, when a legal notice was sent to the accused through RPAD, it had been duly served.

It was stated that during the cross-examination of PW-1, he took up a defence that ₹5 lakhs transferred to the account of the accused through RTGS was the loan taken from him and it was returned to him. However, except for the suggestion, the accused did not lead any evidence to prove his defence.

On going through the records, the bench said the fact that the cheque in question is drawn on the account of the accused, maintained with his banker and it bears his signature is not in dispute.

Therefore, the presumption under Section 139 of N.I Act that the cheque was issued towards repayment of any legally recoverable debt or liability, placing the initial burden on the accused to rebut the presumption and establish the circumstances in which the cheque came to be issued or reached the hands of the complainant, it was held.

Noticing that the accused has not sent a reply to the legal notice spelling out his defence at the earliest available opportunity, the court held, “Except making this suggestion, the accused has not led any evidence to prove that he was the lender and complainant was the borrower and the loan taken from him was returned through RTGS. However, the conduct of the accused in not sending any reply taking such defence and also not leading any evidence to prove the same, this Court is very sure that for the sake of defence, the accused has taken such a defence without any substance.”

"The loan was of the year 2012. By the time the Session Courts disposed of the appeal on 07.11.2019, already seven years had elapsed. Considering the same, even the fine of ₹7,20,000/- imposed by the trial Court was on the lower side. Without proper application of mind, unnecessarily the Sessions Court has reduced the fine.," it added.

However, since the complainant did not challenge the order of the Sessions Court reducing the fine amount, the court stated that in the present revision, the same could not be modified, restoring the fine imposed by the trial Court.

Accordingly, it dismissed the petition.

Appearance: Advocate Mahesh Kiran Shetty S for Petitioner.

Amicus Curiae Angad Kamath for Respondent.

Citation No: 2025 LiveLaw (Kar) 202

Case Title: A V Poojappa AND Dr S K Vagadevi

Case No: CRIMINAL REVISION PETITION NO.13 OF 2020

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