Ms. B.Jayasree

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

IN THE COURT OF THE XI JUDICIAL MAGISTRATE OF FIRST CLASS::

MANORANJAN COMPLEX, GANDHI BHAVAN, HYDERABAD

Present: Smt. B.Jayasree, XI Judicial Magistrate of First Class, Hyderabad.

Dated this the 14 th day of May, 2026

CALENDAR CASE NI No.596 of 2022

Between:

Mr. Harshavardhan Reddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad – 500 016 Telangana.

...Complainant

A N D

Mr. J Bala Murali Krishna, S/o.J. Acheshwer Rao, Aged 32 years, Occ: Business, House No.C3-500, Huda Colony, Chandanagar, Hyderabad – 500 050 … Accused

U/Sec.200 Cr.P.C for the Offence : Section of law U/sec.138 of Negotiable Instruments Act.

Plea of the Accused :Pleaded not guilty.

Found guilty Finding of the Court :

1

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Sentence or Order In the result, accused is sentenced to undergo simple imprisonment for a :period of Six months and also sentenced to pay fine of Rs. 7,00,1000 /- (Rupees Seven lakhs one thousands only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. HarshavardhanReddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad–500016 Telangana. Under Section 357(3) of Cr.P,.C, and the remaining amount of Rs.1,000 /-(One thousand) shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

2

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

In the result Accused is found guilty and is convicted under Section 255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI Act.

************

This case came before me for final hearing in the presence of Sri. Vamshi Banoth, learned Counsel for the Complainant and Sri Gokarapu Srinu learned Counsel for the Accused, upon hearing both sides, perusing the record and the matter having stood over till this day for consideration, this court delivered the following:

J U D G M E N T

1.The Complainant has filed this complaint under sections 138, 142 of

Negotiable Instruments Act, 1881 (herein after referred as NI Act) and Section 190 of

Code of Criminal Procedure, 1973 (herein after referred as Cr.P.C.) against the

Accused.

2.The brief facts of the Complaint are as follows: - the complainant and accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amounts in the share market business and promised of huge returns. The complainant, as an initial investment, paid a total 3

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 of Rs.5,40,000/- to the accused on various dates between the months of April to

October, 2018 through online transfer from his bank account with YES BANK, bearing A/C. No.000699000006993.

It is further submitted that the accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by January, 2019. After investing the said money in the share market business, in support of his assurance the accused issued a post dated cheque bearing No. 000007, dt.01-01-2019 drawn on Laxmi Vilas Bank, Rajeswari nagar, Banglore branch in favor of the complainant for a total of Rs.5,96,000/- being the principal amount plus the return on investment.

It is further submitted that in the month of January, 2018 the complainant was ready to deposit the said cheque dated 01-01-2019 in order to realize the loan amount, the accused had requested the complainant to grant further time to repay the investment amount. The complainant agreed to grant further time for repayment purely out of good faith and with an understanding that the accused will pay the said amount.

Contrary to the belief of the complainant, the accused failed to repay the investment amount, despite several requests from the complainant from time to time. After constant follow up, the accused had finally agreed to repay the amount on 28-02- 2019, and requested complainant to deposit the cheque on 28-02-2019 to realize the amount and assured that is sufficient balance in his account for clearing the said 4

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 cheque. The complainant had deposited the cheque bearing no.000007,dt. 01-01- 2019 drawn on Laxmi Vilas Bank, Rajarajeswari Nagar branch, Banglore for an amount of Rs. 5,96,000/- in his bank account, i.e., YES Bank LIMITED, Somajiguda

Branch, Hyderabad. Complainant received a letter dt. 28-02-2019 from the complainant’s banker along with a cheque return memo and the original cheque, stated that the said cheque was returned citing the reason “Funds Insufficient”.

It is further submitted that in view of the dishonour of the cheque, the complainant had issued a legal notice dt. 12-03-2019 under section 138(b) of NI Act, 1881 through his counsel calling upon the accused to arrange for the payment of the cheque of Rs. 5,96,000/- with in 15 days from the date of the receipt of the said statutory notice. The said legal notice returned to complainant with an endorsement of “Addressee left” but the accused was not paid any amount and not given any reply. Hence, the complaint has been filed seeking prosecution of the Accused for the offence punishable under Section 138 of the NI Act.

3.This Complaint was originally filed before the Hon’ble XIV Additional Chief

Metropolitan Magistrate, Hyderabad and was registered as C.C. No. 6732 of 2019.

However, this case was transferred to this court vide Proceedings of Hon’ble

Metropolitan Sessions Judge, Hyderabad vide Dis No. 4177/2021 Dt. 14/12/2021 5

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 and was renumbered vide docket order dated: 10-05-2022 as CC NI No. 596 of 2022.

4. Upon appearance of Accused, copy of complaint and documents filed along with complaint were furnished.

5.The Accused was examined under Section 251 of the Cr.P.C., wherein the substance of the accusation under Section 138 of the NI Act was explained to him.

The Accused denied the allegations and stated that he does not owe any legally enforceable debt or liability to the Complainant. The Accused pleaded not guilty and claimed to be tried. Accordingly, trial was commenced.

6.During the course of trial, the Complainant, examined himself as PW1: Sri.

Hasha vardhan Reddy and marked Exhibits P1 to P7.

In order to prove his case, the Complainant examined himself as PW1 and reiterated the averments in the complaint. PW1 marked Exhibits P1 to P7

Exhibit P1, is the original cheque bearing no. 000007 dt. 01-01-2019 for an amount of Rs. 5,96,000/- drawn in favour of Pedda reddy Harsh vardhan reddy issued by the

Accused. The execution of cheque is not specifically denied, and no defence is set 6

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 up that the cheque was either lost, misused, or stolen. However accused admitted that present cheque given for security purpose to the complainant.

Exhibits P2 is the original cheque return memo dt. 01-03-2019 issued by the bank, show that the above cheque was dishonored with the reason “Funds Insufficient.”

Exhibit P3 is the office copy of the legal notice 12-03-2019 issued by the

Complainant to the Accused through registered post, demanding payment of the cheque amounts within 15 days.

Exhibit P4 is the original postal receipt dt. 12-03-2019.

Exhibit P5 is original postal envelope returned with endorsement “addressee left”.

Exhibit P6 is the bank account statement of the complainant for the period from 01- 09-2018 to 31-03-2019.

Exhibit P7 is the telephonic conversation between complainant and the accused filed in a pen drive along with certificate under section 65-B Indian Evidence Act, 1872.

7.After closure of the Complainant's evidence, the Accused was examined under Section 313 of the Cr.P.C., by explaining him the incriminating material appearing against him in the evidence of the PW1. In response, the Accused denied all the allegations. He specifically not denied having received any money from the 7

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Complainant. The Accused opted to lead defence evidence in support of his version.

However, since no defence evidence was reported, the defence evidence was closed vide docket order dated 21-03-2025, and the matter was posted for arguments.

8. Written arguments filed behalf of the complainant:

The complainant and the accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amount in the share market business operated by the accused. Therefore, the complainant, as an initial investment, paid a total of Rs. 5,40,000/- to the accused on various dates between the months of April to June, 2018 through online transfer from his bank account with

YES Bank. It is further submitted that the accused accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs.

5,96,000/- to the complainant by January, 2019 and in support of his assurance the accused issued a post dated cheque bearing no. 000007 dt.01-01-2019 drawn on a

Laxmi vilas bank in favor of the complainant for a total principal amount plus return of the investment. It is further submitted that the present cheque dt.01-01-2019 deposited in 28-02-2019 according to the instructions of the accused, complainant received the cheque return memo dt. 28-02-2019 from the banker with endorsement

Funds Insufficient. Later, complainant issued a legal notice dated 12-03-2019 to 8

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 accused to arrange payment of cheque of Rs. 5,96,000/- within 15 days from the date of the receipt of said statutory notice. However said legal notice returned with endorsement “Addressee left” and therefore failed to pay said amount.

It is further submitted that the complainant further submitted that during the pendency of the trial the complainant filed Audio recordings of conversation between him, the accused and mediator namely Bottu Satyanarayana along with true transcript. It is further submitted that by way of suggestions the accused has admitted the transaction between the complainant and accused by suggesting that “It is not true to suggest that as there were many transactions between complainant and accused and the Ex.P1 was obtained by me for security purpose” Hence, there is clear admission that the above cheque was voluntarily given to the complainant by accused in view of the transactions between the complainant and accused. The signature on Ex.P1 cheque belongs to accused and the same is handed over to the complainant.

It is further submitted that the accused failed to deny in the later part of cross examination dt 20-02-2025 with respect to Ex.P7, that the voice in the audio recording does not belongs to him eventuality admitting that he is one who admitted to pay amounts amounting to Rs.10 to 13 lakhs.

It is further submitted that the complainant relies on the precedent held by the

Hon’ble Supreme Court in Bir Singh Vs. Mukesh Kumar (2019) 4 SCC197, para 38.

9

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount or other particulars. This in itself would not invalidate the cheque. The onus still be on accused to prove that the cheque was not in discharge of debt or liability by adducing evidence.

9. Written arguments filed behalf of the accused:

It is submitted that the Hon’ble Supreme Court of India in various verdicts has held that the existence of a legally enforceable debt or liability is a condition sine qua not for attraction the penal provisions of section 138 NI Act. It is further submitted that the PW1 admitted that the present cheque was issued as security. PW1 admitted during cross examination that the cheque was issued in May, 2018 nearly 8 months

before its stated date of 01-01-2019 and submitted that if the cheque had been given

specifically to discharge a debt crystallized in January 2019, it would have been issued around that time, and not eight months in advance. The pre-issuance of the cheque by such a long period entirely consistent with it being a security cheque held in advance. The details of cheque filled by the complainant except signature.

It is further submitted that PW1 admitted that he did not mentioned in the complaint that he had another case against the accused with regard to another cheque. The existence of multiple cheque cases between the very same parties arising out of the same or related transactions strongly suggests that multiple cheques were held as 10

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 security for ongoing financial dealings rather than each cheque being independently referable to a distinct, legally enforceable debt.

It is further submitted that the PW1 admitted during further cross examination on 20- 02-2024 that his total bank transfers to the accused as reflected in Ex.P6/bank statement amounted to Rs. 5,47,000/- only. However, the cheque Ex.P1 is for Rs.

5,50,000/- as confirmed by PW1 during cross examination. PW1 admitted in depositions that some amounts were received by the PW1 back from the accused i.e., Rs. 45,000/- dt. 14-09-2018 , Rs. 12,000/- dt. 17-09-2018 and Rs. 1,000/- dt. 29- 09-2018, total Rs.58,000/-. Despite of receiving the payment, PW1 not subtracted these received amounts from the cheque amount. The cheque has been presented for an amount that is demonstrably inflated beyond any amount that could conceivably be owed. This vitiates the cheque transaction and the prosecution cannot succeed on an inflated amount.

It is further submitted that PW1 admitted that no fixed percentage was agreed upon by me and the accused, it was all oral. The amount mentioned of Rs. 5,96,000/- mentioned in the cheque includes an unspecified “ return on investment” which is not a crystallized legal obligation. It is further submitted that the Audio Recording/Ex.P7 actually strengthen the defence contention. The accused does not has dishonest intention to defraud, he was genuinely unable to pay due to financial difficulties and accused acknowledged the obligation and expressed willingness to repay negating mens rea. The amount involved in the conversation is described as 10 to 13 lakhs by 11

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Satyanarayana far exceeding the amount of the cheque suggesting the cheque related to only a portion of multiple transactions and cannot independently sustain an offence under section 138 of NI Act.

It is further submitted that Hon’ble Supreme Court in Basalingappa Vs.

Mudibasappa, (2019) 5 SCC 418 held that when an accused raises a probable defence, which creates a doubt about the existence of a legally enforceable debt or liability and the complainant fails to rebut such defence, the presumption under section 139 stands rebutted and the accused is entitled to an acquittal. It is further submitted that the cheque was issued as security in May 2018, eight months before the cheque date, amount on the cheque was filled by the complainant himself, the cheque is presented for and amount that exceeds the total amount transferred via bank, no fixed rate of return was ever agreed and the return component is unenforceable and PW1 credibility undermined by major self contradictions in his own depositions

10. Heard and perused the material on record.

11. Points for Consideration:

12

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Upon perusal of the record, the following points arise for consideration by this

Court:

1. Whether the Accused issued Ex. P1 cheque in favour of the Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory notice under

Section 138 of NI Act was duly served on the Accused?

3. Whether the Accused has been able to rebut the presumption under Section 139 of NI Act?

4. Whether the Complainant has established the guilt of the Accused beyond reasonable doubt?

12. Point No.1 and 2:-

1. Whether the Accused issued Ex. P1 cheque in favour of the

Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory

notice under Section 138 of NI Act was duly served on the Accused?

13. Since above points have same set of facts and circumstances to avoid reiteration both points are dealt together. Before appreciating the evidence, it is 13

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 pertinent to refer to the essential ingredients of Section 138 of the NI Act and the presumptions under the NI Act, which are as follows:

1. In Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683, the

Hon’ble Supreme Court has culled out the essential ingredients in order

to constitute an offence u/s 138 of NI Act as highlighted below:

A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account; The cheque should have been issued for discharge, in whole or in part, of any legally enforceable debt or other liability; That cheque has been presented to the bank within a period of six months from the date on which it is drawn with in the period of its validity whichever is earlier; The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information by him of the dishonor of cheque from the bank; The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of the said notice.

2. In addition to the above, the conditions stipulated under Section142

N.I Act have to be fulfilled. It becomes imperative to mention that

Section139 of the N.I Act provides a statutory presumption in favor of the Drawee that the Cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of N.I Act which states that every 14

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 negotiable instrument is presumed to have been drawn and accepted for consideration. That said, what follows is that trial under section 138

N.I Act is structured on the premise of the reverse onus of proof theory since the offence is a document-based technical one. The journey of evidence begins not from the home of the Complainants to but from the point of the Accused. The presumptions carved out in favor of the

Complainant are those of law and not those of facts.

3. Before moving forward, it is pertinent to discuss the relevant provisions of law which deal with legally enforceable debt or liability under the NI Act which are Section118(a) and 139 of the NI Act.

Section118(a) of the NI Act deals with the presumption of consideration and Section138 of NI Act deals with presumption of legally enforceable debt or liability and reads as follows: "118.Presumptions as to negotiable instruments-Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted,endorsed,negotiatedortransferred for consideration; 139.Presumption in favor of holder- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section138 for the discharge, in whole or in part, of any debt or other liability."

4. Further, it is a settled position that when an Accused has to rebut the presumption under Section 139 N.I Act, the standard of proof for doing 15

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 so is that of "preponderance of probabilities". It has been held by the

Hon'ble Supreme Court in Rangappa v. Sri.Mohan, (2010) 11 SCC 441

that the presumption contemplated under Section139 of the N.I Act includes the presumption of the existence of a legally enforceable debt.

To rebut the statutory presumption under Section 139 N.I Act, the standard of proof is that of the preponderance of probabilities, by which the Accused is required to raise a probable defence. To rebut the presumption, it is open to the Accused to rely on evidence led by him/her, or the Accused can also rely on the materials submitted by the

Complainant or the circumstances upon which the parties rely to raise a probable defense.

5. It has been held by the Hon’ble Supreme Court in Basalingappa v.

Mudibasappa (2019) 5 SCC 418 that to rebut the presumption, the

Accused can also rely on the materials submitted by the Complainant to raise a probable defense. The Accused by cross- examining the

Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The inference of preponderance of Probabilities can be drawn not only from the material brought on record but also by reference to the circumstances. The

Accused by cross-examining the Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The Accused can prove the non-existence of a consideration by raising a probable defense and if the Accused is proven to have discharged the onus of proof showing that the existence of consideration was doubtful or improbable, the onus would shift on the

Complainant who will be obligated to prove it as a matter of fact and upon his failure to prove would disentitle him for the grant of relief under

Section 138 of the N.I Act.

16

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

6. The Hon’ble Supreme Court in Kumar Exports Private Limited v.

Sharma Carpets (2009) 2 SCC 513, held that to disprove the presumption under Section 139 of the Act, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

Thus, as laid down in the catena of decisions it is an established law that the onus lies upon the Accused to rebut the presumption and to establish that cheque in question was not given in respect of any debtor liability, with the standard of proof being the preponderance of probability. Therefore, it becomes critical to examine whether the explanation of the Accused coupled with the evidence on record is sufficient to dislodge the presumption envisaged by Sections 118 & 139 of N.I Act

These presumptions are statutory in nature and are rebuttable. However, the burden of rebutting these presumptions lies on the Accused. The Accused must raise a probable defence, either by bringing on record credible evidence or by eliciting material inconsistencies in the Complainant’s case during cross-examination, to displace the presumption under Section 139 of NI Act.

14. During cross-examination, PW1 deposed that he is working as Senior

Investigation officer, HSBC Bank and previously, at the time of filing of this complaint he was working as Production Manager and he was not doing business at that time.

17

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

No fixed percentage was agreed upon by PW1 and accused, it was all oral. Further deposed that “I advanced money to the accused several times before this transaction. The accused used to return the money sometimes and sometimes he would not. I advanced the total amount of Rs. 4,67,000/- to the accused multiple times” and further deposed that accused also transferred some amounts to me and further adds that the said amount transferred by the accused are not related to this transaction.

PW1 further deposed that accused issued a post dated cheque to me. It was in May, 2018 and admitted that hand writing on Ex.P1, except the signature is his handwriting. Further deposed that the conversation in Ex.P7 took place on the road on the Boduppal road.

On being confronted with Ex.P6/ bank statement the witness is asked the following questions

Q) As per your bank statement you have transferred the following amounts on the following dates:-

On 20-09-2018 Rs. 48,500/-, 19-09-2018 Rs.1,000/-, 09-10-2018 Rs. 20,000/-, 08-10-2018 Rs. 2,00,000/-, 09-10-2018 Rs.2,00,000/-, 09-10-2018 Rs.68,000/- and 21-09-2018 Rs. 9,600/- total Rs. 5,47,100/- Is it true?

A) Yes, it is true. Witness adds that there are some other amount that he gave by way of cash.

18

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Q) You have filed the present case for Rs. 5,50,000/- which is the amount in

Ex.P1/cheque. Is it true?

A) Yes, it is true.

Q) As per Ex.P6/ bank statement of the accused transferred to you the following amounts on the following dates:

14-09-2018 Rs. 45,000/-, 17-09-2018 Rs. 12,000/- , 29-09-2018 Rs. 1,000/- total Rs. 58,000/- Is it true?

A) Yes, it is true.

PW1 deposed that I have not subtracted the above received amounts from the cheque amount. Witness adds that the said amounts do not pertains to this case and hence it was not subtracted.

It is further pertinent to mention the relevant judgments on the point of presumption of legally enforceable debt or liability. Reliance is placed by this court upon the judgments of Hon'ble Supreme Court of India in Rangappa v

Srimohan, (2010) 11 SCC 441, Kumar Exports v Sharma Carpets, (2009) 2

SCC 513, and BirSingh v Mukesh Kumar, (2019) 4 SCC 197, where in it has held that the presumption u/s 139 NI Act is a presumption of law and not presumption of fact. It has further been held that it is not necessary that the cheque must have been filled by the accused himself and the accused may 19

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 be liable even when the cheque has been filled by the complainant. The essential requirement is that the liability must exist on the date of the presentation of the cheque in question. It has been further held that once the signatures on the cheque are admitted then the court is bound to raise presumption u/s 118 r/w .139 NI Act regarding existence of legally enforceable debt or liability.

15. The defence taken by the accused is there is no legally enforceable debt for total cheque amount between complainant and accused and documents filed by the complainant in support of the alleged transaction does not come within purview of the legally enforceable debt as per section 138 of NI Act. The major defence of accused is that the cheque issued as blank signed security cheque by the accused to the complainant which was clearly admitted by the PW1 in his depositions and

PW1 himself admitted in depositions that accused issued a post dated cheque to me. It was in May, 2018”. On being confronted The handwriting on the Ex.P1/ cheque, PW1 admitted that except the signature, is his hand writing. PW1 admitted that accused transferred some amounts to him. PW1 further deposed that said transactions made by the accused are not related to this transaction. However PW1 not given any explanation for the transactions made by the accused to him.

20

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

16. On being confronted with the bank statement of the complainant /Ex.P6, PW1 questioned that he transferred total amount of Rs. 5,47,000/- to accused bank account, he answered as it is true. Again questioned that the accused also transferred total Rs.58,000/- to the account of complainant. PW1 admitted as it is true. However said transactions made by the accused prior to the loan amount transferred by the complainant to the accused. PW1 again questioned about the present complaint filed against accused for Rs. 5,50,000/- which is Ex.P1/cheque amount, PW1 admitted as it is true. However the PW1/cheque amount of Rs.

5,96,000/-. According to the complaint, it is submitted by the complainant that accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by

January, 2019.

17. Another defence taken by the accused is that he has not received legal notice sent by the complainant. However, legal notice sent by the complainant to accused returned with endorsement Addressee left. .

In Alavi Haji Vs Palapettty Mohammed, (2007) 6 SCC 555 Hon’ble Supreme

Court held that while rendering the decision in D.Vinod Shivappa Vs Nanda

Belliappa case, the court held that “It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is 21

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice send by post, can withing 15 days of receipt of summons from the court in respect of the complaint U/sec.138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons and therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint U/sec.138 of the Act, cannot obviously contend that there was no proper service of notice as required U/sec.138, by ignoring statutory presumption to the contrary U/sec.27 of the G.C Act and Section 114 of the Evidence Act. In our view any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran’s case (Supra) if the “giving of notice” in the context of clause (b) of the proviso was the same as the “receipt of notice” a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of section 138 of the Act.

This establishes the financial transaction and strengthens the presumption of liability.

The accused has failed to rebut the presumption by adducing cogent evidence. Mere denial or suggestions in cross examination are not sufficient to rebut the statutory presumption. Hence, the accused has failed to rebut the presumption even on preponderance of probabilities. Given the admitted fact that the subject cheque bear signature of Accused, and in view of this admission, the statutory presumption under 22

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Section 139 of the NI Act comes into play. Points No. 1 and 2 are answered in affirmative.

18. Point No. 3:

Whether the Accused has successfully rebutted the statutory presumptions

under Sections 118 and 139 of the NI Act?

Another defence taken by the accused that there is no legally enforceable debt up to the extent of Ex.P1/cheque amount. The complainant admitted that he transferred

Rs. 5,47,000/- to the account of accused and also admitted that he filled the blank signed cheque given for security purpose by the accused and presented before bank for the amount of Rs.5,96,000/- . However according to complaint and the legal notice the said Rs. 5,96,000/- is the assured amount being the principal amount plus the return on investment. The defence of accused that the cheque was issued as a blank signed cheque does not itself rebut the presumption. It is well settled that even a blank cheque voluntarily signed and handed over can be filled by the holder. the accused failed to produce any evidence to show that the cheque was misused and there is no liability existed or that the amount claimed is wholly incorrect. On contrary, the complainant version that the cheque amount includes principal and the interest returns appears probable and consistent. However, the accused did not take 23

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 steps such as, issuing stop payment instructions or initiating action against alleged misuse or producing any documentary proof of repayment.

Under Section 139 of the NI Act, it is a settled principle of law that once the execution of a cheque is admitted or proved, a presumption arises in favour of the

Complainant that the cheque was issued towards discharge of a legally enforceable debt or liability. This presumption, however, is rebuttable. The Accused can rebut the same either by bringing positive evidence or by raising a credible and probable defence on the basis of the material brought on record, including through cross- examination of the Complainant’s witnesses. The standard of proof required for the

Accused is not proof beyond reasonable doubt, but proof on the preponderance of probabilities. Once such rebuttal is made, the burden shifts back to the Complainant to establish his case.

The Hon’ble Supreme Court in Rangappa v. Sri Mohan (2010) 11 SCC 441 held that “once the presumption under Section 139 is triggered, the burden is on the Accused to rebut the same by adducing evidence that is sufficient to create doubt about the existence of a legally enforceable debt or liability.” The accused has failed to rebut the presumption even on prepoderance of probabilities. Mere plea that there is no legally enforceable debt up to the extent of Ex.P1/Cheque amount with out producing any cogent evidence, when there is volunatary issuance of cheque and there is no 24

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 evidence of coercion or mistake. Hence, the presumption under Section 139 of NI

Act remains unrebutted.

Hon’ble Supreme Court in Bir Singh vs . Mukesh Kumar, (2019) 4 Scc 197

held that ‘‘If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.

It is not the case of the respondent-accused that he either signed the cheque or parted with it under any threat or coercion. Nor is it the case of the respondent-accused that the unfilled signed cheque had been stolen. The existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under

Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion. The second question is also answered in the negative.

Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.’’

Hence the contentions of the accused is not acceptable.

25

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Accordingly, Point No. 3 is answered in the negative, and it is held that the

Accused has failed to rebut the presumption under Sections 118 and 139 of

the NI Act.

19. Point No. 4:

Whether the Complainant has established the guilt of the Accused

beyond reasonable doubt?

The Complainant has successfully proved the foundational facts such as issuance of subject cheque, it's dishonour, statutory notice, and non-payment within 15 days.

Once the Complainant establishes these, the burden shifts to the Accused, who has failed to rebut the presumption under Section 139 of the NI Act by cogent evidence.

The oral and documentary evidence of PW1 is consistent, credible, and legally sufficient to establish that the cheque in question was issued in discharge of a legally enforceable debt. While the defence of Accused is unworthy of credit, and the presumption under Section 139 of NI Act remains unrebutted. There are no material contradictions or inconsistencies in the testimony of PW1 that would discredit his version.

26

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

20.This Court is satisfied that all the essential ingredients under Section 138 of the NI Act are duly established.In view of the findings recorded above, this Court finds that the Complainant successfully discharged the burden of proving the guilt of

Accused beyond all reasonable doubt.

In present case the complainant filed the complaint against the accused for

Rs.5,96,000/- towards principle and interest returns which was transferred by him to the accused. By issuing the cheque, the accused has undertaken liability to repay the amount. However accused issued blank signed cheque which was admitted by the PW1. The complainant has established the foundational facts required under section 138 of NI Act. The accused has not produced any cogent evidence to rebut the presumption. Mere denial or contention that the liability pertains to EX.P1/ cheque amount is not legally enforceable debt. The mere fact that the complainant presented cheque for Rs. 5,96,000/- where as complainant admittedly transferred amount of Rs.5,47,000/- and accused admitted receiving the Rs.5,47,000/- does not absolve the accused of liability, when he has undertaken repayment by issuing the cheque and the signature on the cheque is not disputed. Once the issuance is admitted, the presumption under Section 139 of NI Act operates in favour of the complainant. Accordingly Point No.4 is answered in affirmative.

27

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

21. In the result Accused is found guilty and is convicted under Section

255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI

Act.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD.

Hearing on Quantum of Sentence:

22. The Accused submitted that he is suffering with kidney problem and other health issues and requested the Court to take a lenient view in the matter. However, mere statement itself cannot be a ground to absolve the Accused from criminal liability under Section 138 of the NI Act. The Complainant has successfully established, through both oral and documentary evidence, that the Accused issued the dishonoured cheque in discharge of a legally enforceable debt or liability. The statutory presumptions under Sections 118 and 139 of the NI Act remain unrebutted.

In the absence of any cogent defence or mitigating circumstances directly related to the offence, this Court finds no justification to take a lenient view merely on the ground of the Accused statement as he is did not any offence.

28

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

23. In the result, accused is sentenced to undergo simple imprisonment for a period of six months and also sentenced to pay fine of Rs.7,01,000/- (Rupees Seven

Lakhs One Thousand only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. P Harshavardhan

Reddy, S/o. P.Ravindranadh, Age 32 years, Occ: Business, R/o.7-1-68/3/1/A,

Dharamkaran Road, Opp Former CM Roasaiah House, Ameerpet, Hyderabad – 500 016, Telangana. Under section 357(3) of Cr.P,.C, and the remaining amount of

Rs. 1000/- shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

29

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Appendix of Evidence

Witness Examined

For Complainant:

PW-1 : Mr. P Harshavardhan Reddy

For Accused:

Nil-

Documents Marked

For Complainant:

1) EX.P1: is the original cheque bearing no.000007, dt.01-01-2019 for an amount of Rs.5,96,000/-

2) Ex.P2: is the original cheque return memo dt.01-03-2019

3) Ex.P3: is the original copy of the legal notice dt.12-03-2019

4) Ex.P4: is the original postal receipt dt.12-03-2019

5) Ex.P5: is the original postal envelope returned with endorsement

6) Ex.P6: is the bank account statement of the complainant for the period from 01-09-2018 to 31-03-2019 (12 pages)

7) Ex.P7: is the telephonic conversation between complainant and the accused filed in a pen-drive along with certificate under Section 65 – B Indian Evidence Act, 1872.

For Accused:

Nil

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

30

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

IN THE COURT OF THE XI JUDICIAL MAGISTRATE OF FIRST CLASS::

MANORANJAN COMPLEX, GANDHI BHAVAN, HYDERABAD

Present: Smt. B.Jayasree, XI Judicial Magistrate of First Class, Hyderabad.

Dated this the 14 th day of May, 2026

CALENDAR CASE NI No.596 of 2022

Between:

Mr. Harshavardhan Reddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad – 500 016 Telangana.

...Complainant

A N D

Mr. J Bala Murali Krishna, S/o.J. Acheshwer Rao, Aged 32 years, Occ: Business, House No.C3-500, Huda Colony, Chandanagar, Hyderabad – 500 050 … Accused

U/Sec.200 Cr.P.C for the Offence : Section of law U/sec.138 of Negotiable Instruments Act.

Plea of the Accused :Pleaded not guilty.

Found guilty Finding of the Court :

1

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Sentence or Order In the result, accused is sentenced to undergo simple imprisonment for a :period of Six months and also sentenced to pay fine of Rs. 7,00,1000 /- (Rupees Seven lakhs one thousands only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. HarshavardhanReddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad–500016 Telangana. Under Section 357(3) of Cr.P,.C, and the remaining amount of Rs.1,000 /-(One thousand) shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

2

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

In the result Accused is found guilty and is convicted under Section 255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI Act.

************

This case came before me for final hearing in the presence of Sri. Vamshi Banoth, learned Counsel for the Complainant and Sri Gokarapu Srinu learned Counsel for the Accused, upon hearing both sides, perusing the record and the matter having stood over till this day for consideration, this court delivered the following:

J U D G M E N T

1.The Complainant has filed this complaint under sections 138, 142 of

Negotiable Instruments Act, 1881 (herein after referred as NI Act) and Section 190 of

Code of Criminal Procedure, 1973 (herein after referred as Cr.P.C.) against the

Accused.

2.The brief facts of the Complaint are as follows: - the complainant and accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amounts in the share market business and promised of huge returns. The complainant, as an initial investment, paid a total 3

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 of Rs.5,40,000/- to the accused on various dates between the months of April to

October, 2018 through online transfer from his bank account with YES BANK, bearing A/C. No.000699000006993.

It is further submitted that the accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by January, 2019. After investing the said money in the share market business, in support of his assurance the accused issued a post dated cheque bearing No. 000007, dt.01-01-2019 drawn on Laxmi Vilas Bank, Rajeswari nagar, Banglore branch in favor of the complainant for a total of Rs.5,96,000/- being the principal amount plus the return on investment.

It is further submitted that in the month of January, 2018 the complainant was ready to deposit the said cheque dated 01-01-2019 in order to realize the loan amount, the accused had requested the complainant to grant further time to repay the investment amount. The complainant agreed to grant further time for repayment purely out of good faith and with an understanding that the accused will pay the said amount.

Contrary to the belief of the complainant, the accused failed to repay the investment amount, despite several requests from the complainant from time to time. After constant follow up, the accused had finally agreed to repay the amount on 28-02- 2019, and requested complainant to deposit the cheque on 28-02-2019 to realize the amount and assured that is sufficient balance in his account for clearing the said 4

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 cheque. The complainant had deposited the cheque bearing no.000007,dt. 01-01- 2019 drawn on Laxmi Vilas Bank, Rajarajeswari Nagar branch, Banglore for an amount of Rs. 5,96,000/- in his bank account, i.e., YES Bank LIMITED, Somajiguda

Branch, Hyderabad. Complainant received a letter dt. 28-02-2019 from the complainant’s banker along with a cheque return memo and the original cheque, stated that the said cheque was returned citing the reason “Funds Insufficient”.

It is further submitted that in view of the dishonour of the cheque, the complainant had issued a legal notice dt. 12-03-2019 under section 138(b) of NI Act, 1881 through his counsel calling upon the accused to arrange for the payment of the cheque of Rs. 5,96,000/- with in 15 days from the date of the receipt of the said statutory notice. The said legal notice returned to complainant with an endorsement of “Addressee left” but the accused was not paid any amount and not given any reply. Hence, the complaint has been filed seeking prosecution of the Accused for the offence punishable under Section 138 of the NI Act.

3.This Complaint was originally filed before the Hon’ble XIV Additional Chief

Metropolitan Magistrate, Hyderabad and was registered as C.C. No. 6732 of 2019.

However, this case was transferred to this court vide Proceedings of Hon’ble

Metropolitan Sessions Judge, Hyderabad vide Dis No. 4177/2021 Dt. 14/12/2021 5

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 and was renumbered vide docket order dated: 10-05-2022 as CC NI No. 596 of 2022.

4. Upon appearance of Accused, copy of complaint and documents filed along with complaint were furnished.

5.The Accused was examined under Section 251 of the Cr.P.C., wherein the substance of the accusation under Section 138 of the NI Act was explained to him.

The Accused denied the allegations and stated that he does not owe any legally enforceable debt or liability to the Complainant. The Accused pleaded not guilty and claimed to be tried. Accordingly, trial was commenced.

6.During the course of trial, the Complainant, examined himself as PW1: Sri.

Hasha vardhan Reddy and marked Exhibits P1 to P7.

In order to prove his case, the Complainant examined himself as PW1 and reiterated the averments in the complaint. PW1 marked Exhibits P1 to P7

Exhibit P1, is the original cheque bearing no. 000007 dt. 01-01-2019 for an amount of Rs. 5,96,000/- drawn in favour of Pedda reddy Harsh vardhan reddy issued by the

Accused. The execution of cheque is not specifically denied, and no defence is set 6

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 up that the cheque was either lost, misused, or stolen. However accused admitted that present cheque given for security purpose to the complainant.

Exhibits P2 is the original cheque return memo dt. 01-03-2019 issued by the bank, show that the above cheque was dishonored with the reason “Funds Insufficient.”

Exhibit P3 is the office copy of the legal notice 12-03-2019 issued by the

Complainant to the Accused through registered post, demanding payment of the cheque amounts within 15 days.

Exhibit P4 is the original postal receipt dt. 12-03-2019.

Exhibit P5 is original postal envelope returned with endorsement “addressee left”.

Exhibit P6 is the bank account statement of the complainant for the period from 01- 09-2018 to 31-03-2019.

Exhibit P7 is the telephonic conversation between complainant and the accused filed in a pen drive along with certificate under section 65-B Indian Evidence Act, 1872.

7.After closure of the Complainant's evidence, the Accused was examined under Section 313 of the Cr.P.C., by explaining him the incriminating material appearing against him in the evidence of the PW1. In response, the Accused denied all the allegations. He specifically not denied having received any money from the 7

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Complainant. The Accused opted to lead defence evidence in support of his version.

However, since no defence evidence was reported, the defence evidence was closed vide docket order dated 21-03-2025, and the matter was posted for arguments.

8. Written arguments filed behalf of the complainant:

The complainant and the accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amount in the share market business operated by the accused. Therefore, the complainant, as an initial investment, paid a total of Rs. 5,40,000/- to the accused on various dates between the months of April to June, 2018 through online transfer from his bank account with

YES Bank. It is further submitted that the accused accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs.

5,96,000/- to the complainant by January, 2019 and in support of his assurance the accused issued a post dated cheque bearing no. 000007 dt.01-01-2019 drawn on a

Laxmi vilas bank in favor of the complainant for a total principal amount plus return of the investment. It is further submitted that the present cheque dt.01-01-2019 deposited in 28-02-2019 according to the instructions of the accused, complainant received the cheque return memo dt. 28-02-2019 from the banker with endorsement

Funds Insufficient. Later, complainant issued a legal notice dated 12-03-2019 to 8

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 accused to arrange payment of cheque of Rs. 5,96,000/- within 15 days from the date of the receipt of said statutory notice. However said legal notice returned with endorsement “Addressee left” and therefore failed to pay said amount.

It is further submitted that the complainant further submitted that during the pendency of the trial the complainant filed Audio recordings of conversation between him, the accused and mediator namely Bottu Satyanarayana along with true transcript. It is further submitted that by way of suggestions the accused has admitted the transaction between the complainant and accused by suggesting that “It is not true to suggest that as there were many transactions between complainant and accused and the Ex.P1 was obtained by me for security purpose” Hence, there is clear admission that the above cheque was voluntarily given to the complainant by accused in view of the transactions between the complainant and accused. The signature on Ex.P1 cheque belongs to accused and the same is handed over to the complainant.

It is further submitted that the accused failed to deny in the later part of cross examination dt 20-02-2025 with respect to Ex.P7, that the voice in the audio recording does not belongs to him eventuality admitting that he is one who admitted to pay amounts amounting to Rs.10 to 13 lakhs.

It is further submitted that the complainant relies on the precedent held by the

Hon’ble Supreme Court in Bir Singh Vs. Mukesh Kumar (2019) 4 SCC197, para 38.

9

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount or other particulars. This in itself would not invalidate the cheque. The onus still be on accused to prove that the cheque was not in discharge of debt or liability by adducing evidence.

9. Written arguments filed behalf of the accused:

It is submitted that the Hon’ble Supreme Court of India in various verdicts has held that the existence of a legally enforceable debt or liability is a condition sine qua not for attraction the penal provisions of section 138 NI Act. It is further submitted that the PW1 admitted that the present cheque was issued as security. PW1 admitted during cross examination that the cheque was issued in May, 2018 nearly 8 months

before its stated date of 01-01-2019 and submitted that if the cheque had been given

specifically to discharge a debt crystallized in January 2019, it would have been issued around that time, and not eight months in advance. The pre-issuance of the cheque by such a long period entirely consistent with it being a security cheque held in advance. The details of cheque filled by the complainant except signature.

It is further submitted that PW1 admitted that he did not mentioned in the complaint that he had another case against the accused with regard to another cheque. The existence of multiple cheque cases between the very same parties arising out of the same or related transactions strongly suggests that multiple cheques were held as 10

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 security for ongoing financial dealings rather than each cheque being independently referable to a distinct, legally enforceable debt.

It is further submitted that the PW1 admitted during further cross examination on 20- 02-2024 that his total bank transfers to the accused as reflected in Ex.P6/bank statement amounted to Rs. 5,47,000/- only. However, the cheque Ex.P1 is for Rs.

5,50,000/- as confirmed by PW1 during cross examination. PW1 admitted in depositions that some amounts were received by the PW1 back from the accused i.e., Rs. 45,000/- dt. 14-09-2018 , Rs. 12,000/- dt. 17-09-2018 and Rs. 1,000/- dt. 29- 09-2018, total Rs.58,000/-. Despite of receiving the payment, PW1 not subtracted these received amounts from the cheque amount. The cheque has been presented for an amount that is demonstrably inflated beyond any amount that could conceivably be owed. This vitiates the cheque transaction and the prosecution cannot succeed on an inflated amount.

It is further submitted that PW1 admitted that no fixed percentage was agreed upon by me and the accused, it was all oral. The amount mentioned of Rs. 5,96,000/- mentioned in the cheque includes an unspecified “ return on investment” which is not a crystallized legal obligation. It is further submitted that the Audio Recording/Ex.P7 actually strengthen the defence contention. The accused does not has dishonest intention to defraud, he was genuinely unable to pay due to financial difficulties and accused acknowledged the obligation and expressed willingness to repay negating mens rea. The amount involved in the conversation is described as 10 to 13 lakhs by 11

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Satyanarayana far exceeding the amount of the cheque suggesting the cheque related to only a portion of multiple transactions and cannot independently sustain an offence under section 138 of NI Act.

It is further submitted that Hon’ble Supreme Court in Basalingappa Vs.

Mudibasappa, (2019) 5 SCC 418 held that when an accused raises a probable defence, which creates a doubt about the existence of a legally enforceable debt or liability and the complainant fails to rebut such defence, the presumption under section 139 stands rebutted and the accused is entitled to an acquittal. It is further submitted that the cheque was issued as security in May 2018, eight months before the cheque date, amount on the cheque was filled by the complainant himself, the cheque is presented for and amount that exceeds the total amount transferred via bank, no fixed rate of return was ever agreed and the return component is unenforceable and PW1 credibility undermined by major self contradictions in his own depositions

10. Heard and perused the material on record.

11. Points for Consideration:

12

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Upon perusal of the record, the following points arise for consideration by this

Court:

1. Whether the Accused issued Ex. P1 cheque in favour of the Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory notice under

Section 138 of NI Act was duly served on the Accused?

3. Whether the Accused has been able to rebut the presumption under Section 139 of NI Act?

4. Whether the Complainant has established the guilt of the Accused beyond reasonable doubt?

12. Point No.1 and 2:-

1. Whether the Accused issued Ex. P1 cheque in favour of the

Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory

notice under Section 138 of NI Act was duly served on the Accused?

13. Since above points have same set of facts and circumstances to avoid reiteration both points are dealt together. Before appreciating the evidence, it is 13

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 pertinent to refer to the essential ingredients of Section 138 of the NI Act and the presumptions under the NI Act, which are as follows:

1. In Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683, the

Hon’ble Supreme Court has culled out the essential ingredients in order

to constitute an offence u/s 138 of NI Act as highlighted below:

A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account; The cheque should have been issued for discharge, in whole or in part, of any legally enforceable debt or other liability; That cheque has been presented to the bank within a period of six months from the date on which it is drawn with in the period of its validity whichever is earlier; The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information by him of the dishonor of cheque from the bank; The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of the said notice.

2. In addition to the above, the conditions stipulated under Section142

N.I Act have to be fulfilled. It becomes imperative to mention that

Section139 of the N.I Act provides a statutory presumption in favor of the Drawee that the Cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of N.I Act which states that every 14

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 negotiable instrument is presumed to have been drawn and accepted for consideration. That said, what follows is that trial under section 138

N.I Act is structured on the premise of the reverse onus of proof theory since the offence is a document-based technical one. The journey of evidence begins not from the home of the Complainants to but from the point of the Accused. The presumptions carved out in favor of the

Complainant are those of law and not those of facts.

3. Before moving forward, it is pertinent to discuss the relevant provisions of law which deal with legally enforceable debt or liability under the NI Act which are Section118(a) and 139 of the NI Act.

Section118(a) of the NI Act deals with the presumption of consideration and Section138 of NI Act deals with presumption of legally enforceable debt or liability and reads as follows: "118.Presumptions as to negotiable instruments-Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted,endorsed,negotiatedortransferred for consideration; 139.Presumption in favor of holder- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section138 for the discharge, in whole or in part, of any debt or other liability."

4. Further, it is a settled position that when an Accused has to rebut the presumption under Section 139 N.I Act, the standard of proof for doing 15

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 so is that of "preponderance of probabilities". It has been held by the

Hon'ble Supreme Court in Rangappa v. Sri.Mohan, (2010) 11 SCC 441

that the presumption contemplated under Section139 of the N.I Act includes the presumption of the existence of a legally enforceable debt.

To rebut the statutory presumption under Section 139 N.I Act, the standard of proof is that of the preponderance of probabilities, by which the Accused is required to raise a probable defence. To rebut the presumption, it is open to the Accused to rely on evidence led by him/her, or the Accused can also rely on the materials submitted by the

Complainant or the circumstances upon which the parties rely to raise a probable defense.

5. It has been held by the Hon’ble Supreme Court in Basalingappa v.

Mudibasappa (2019) 5 SCC 418 that to rebut the presumption, the

Accused can also rely on the materials submitted by the Complainant to raise a probable defense. The Accused by cross- examining the

Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The inference of preponderance of Probabilities can be drawn not only from the material brought on record but also by reference to the circumstances. The

Accused by cross-examining the Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The Accused can prove the non-existence of a consideration by raising a probable defense and if the Accused is proven to have discharged the onus of proof showing that the existence of consideration was doubtful or improbable, the onus would shift on the

Complainant who will be obligated to prove it as a matter of fact and upon his failure to prove would disentitle him for the grant of relief under

Section 138 of the N.I Act.

16

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

6. The Hon’ble Supreme Court in Kumar Exports Private Limited v.

Sharma Carpets (2009) 2 SCC 513, held that to disprove the presumption under Section 139 of the Act, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

Thus, as laid down in the catena of decisions it is an established law that the onus lies upon the Accused to rebut the presumption and to establish that cheque in question was not given in respect of any debtor liability, with the standard of proof being the preponderance of probability. Therefore, it becomes critical to examine whether the explanation of the Accused coupled with the evidence on record is sufficient to dislodge the presumption envisaged by Sections 118 & 139 of N.I Act

These presumptions are statutory in nature and are rebuttable. However, the burden of rebutting these presumptions lies on the Accused. The Accused must raise a probable defence, either by bringing on record credible evidence or by eliciting material inconsistencies in the Complainant’s case during cross-examination, to displace the presumption under Section 139 of NI Act.

14. During cross-examination, PW1 deposed that he is working as Senior

Investigation officer, HSBC Bank and previously, at the time of filing of this complaint he was working as Production Manager and he was not doing business at that time.

17

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

No fixed percentage was agreed upon by PW1 and accused, it was all oral. Further deposed that “I advanced money to the accused several times before this transaction. The accused used to return the money sometimes and sometimes he would not. I advanced the total amount of Rs. 4,67,000/- to the accused multiple times” and further deposed that accused also transferred some amounts to me and further adds that the said amount transferred by the accused are not related to this transaction.

PW1 further deposed that accused issued a post dated cheque to me. It was in May, 2018 and admitted that hand writing on Ex.P1, except the signature is his handwriting. Further deposed that the conversation in Ex.P7 took place on the road on the Boduppal road.

On being confronted with Ex.P6/ bank statement the witness is asked the following questions

Q) As per your bank statement you have transferred the following amounts on the following dates:-

On 20-09-2018 Rs. 48,500/-, 19-09-2018 Rs.1,000/-, 09-10-2018 Rs. 20,000/-, 08-10-2018 Rs. 2,00,000/-, 09-10-2018 Rs.2,00,000/-, 09-10-2018 Rs.68,000/- and 21-09-2018 Rs. 9,600/- total Rs. 5,47,100/- Is it true?

A) Yes, it is true. Witness adds that there are some other amount that he gave by way of cash.

18

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Q) You have filed the present case for Rs. 5,50,000/- which is the amount in

Ex.P1/cheque. Is it true?

A) Yes, it is true.

Q) As per Ex.P6/ bank statement of the accused transferred to you the following amounts on the following dates:

14-09-2018 Rs. 45,000/-, 17-09-2018 Rs. 12,000/- , 29-09-2018 Rs. 1,000/- total Rs. 58,000/- Is it true?

A) Yes, it is true.

PW1 deposed that I have not subtracted the above received amounts from the cheque amount. Witness adds that the said amounts do not pertains to this case and hence it was not subtracted.

It is further pertinent to mention the relevant judgments on the point of presumption of legally enforceable debt or liability. Reliance is placed by this court upon the judgments of Hon'ble Supreme Court of India in Rangappa v

Srimohan, (2010) 11 SCC 441, Kumar Exports v Sharma Carpets, (2009) 2

SCC 513, and BirSingh v Mukesh Kumar, (2019) 4 SCC 197, where in it has held that the presumption u/s 139 NI Act is a presumption of law and not presumption of fact. It has further been held that it is not necessary that the cheque must have been filled by the accused himself and the accused may 19

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 be liable even when the cheque has been filled by the complainant. The essential requirement is that the liability must exist on the date of the presentation of the cheque in question. It has been further held that once the signatures on the cheque are admitted then the court is bound to raise presumption u/s 118 r/w .139 NI Act regarding existence of legally enforceable debt or liability.

15. The defence taken by the accused is there is no legally enforceable debt for total cheque amount between complainant and accused and documents filed by the complainant in support of the alleged transaction does not come within purview of the legally enforceable debt as per section 138 of NI Act. The major defence of accused is that the cheque issued as blank signed security cheque by the accused to the complainant which was clearly admitted by the PW1 in his depositions and

PW1 himself admitted in depositions that accused issued a post dated cheque to me. It was in May, 2018”. On being confronted The handwriting on the Ex.P1/ cheque, PW1 admitted that except the signature, is his hand writing. PW1 admitted that accused transferred some amounts to him. PW1 further deposed that said transactions made by the accused are not related to this transaction. However PW1 not given any explanation for the transactions made by the accused to him.

20

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

16. On being confronted with the bank statement of the complainant /Ex.P6, PW1 questioned that he transferred total amount of Rs. 5,47,000/- to accused bank account, he answered as it is true. Again questioned that the accused also transferred total Rs.58,000/- to the account of complainant. PW1 admitted as it is true. However said transactions made by the accused prior to the loan amount transferred by the complainant to the accused. PW1 again questioned about the present complaint filed against accused for Rs. 5,50,000/- which is Ex.P1/cheque amount, PW1 admitted as it is true. However the PW1/cheque amount of Rs.

5,96,000/-. According to the complaint, it is submitted by the complainant that accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by

January, 2019.

17. Another defence taken by the accused is that he has not received legal notice sent by the complainant. However, legal notice sent by the complainant to accused returned with endorsement Addressee left. .

In Alavi Haji Vs Palapettty Mohammed, (2007) 6 SCC 555 Hon’ble Supreme

Court held that while rendering the decision in D.Vinod Shivappa Vs Nanda

Belliappa case, the court held that “It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is 21

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice send by post, can withing 15 days of receipt of summons from the court in respect of the complaint U/sec.138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons and therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint U/sec.138 of the Act, cannot obviously contend that there was no proper service of notice as required U/sec.138, by ignoring statutory presumption to the contrary U/sec.27 of the G.C Act and Section 114 of the Evidence Act. In our view any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran’s case (Supra) if the “giving of notice” in the context of clause (b) of the proviso was the same as the “receipt of notice” a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of section 138 of the Act.

This establishes the financial transaction and strengthens the presumption of liability.

The accused has failed to rebut the presumption by adducing cogent evidence. Mere denial or suggestions in cross examination are not sufficient to rebut the statutory presumption. Hence, the accused has failed to rebut the presumption even on preponderance of probabilities. Given the admitted fact that the subject cheque bear signature of Accused, and in view of this admission, the statutory presumption under 22

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Section 139 of the NI Act comes into play. Points No. 1 and 2 are answered in affirmative.

18. Point No. 3:

Whether the Accused has successfully rebutted the statutory presumptions

under Sections 118 and 139 of the NI Act?

Another defence taken by the accused that there is no legally enforceable debt up to the extent of Ex.P1/cheque amount. The complainant admitted that he transferred

Rs. 5,47,000/- to the account of accused and also admitted that he filled the blank signed cheque given for security purpose by the accused and presented before bank for the amount of Rs.5,96,000/- . However according to complaint and the legal notice the said Rs. 5,96,000/- is the assured amount being the principal amount plus the return on investment. The defence of accused that the cheque was issued as a blank signed cheque does not itself rebut the presumption. It is well settled that even a blank cheque voluntarily signed and handed over can be filled by the holder. the accused failed to produce any evidence to show that the cheque was misused and there is no liability existed or that the amount claimed is wholly incorrect. On contrary, the complainant version that the cheque amount includes principal and the interest returns appears probable and consistent. However, the accused did not take 23

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 steps such as, issuing stop payment instructions or initiating action against alleged misuse or producing any documentary proof of repayment.

Under Section 139 of the NI Act, it is a settled principle of law that once the execution of a cheque is admitted or proved, a presumption arises in favour of the

Complainant that the cheque was issued towards discharge of a legally enforceable debt or liability. This presumption, however, is rebuttable. The Accused can rebut the same either by bringing positive evidence or by raising a credible and probable defence on the basis of the material brought on record, including through cross- examination of the Complainant’s witnesses. The standard of proof required for the

Accused is not proof beyond reasonable doubt, but proof on the preponderance of probabilities. Once such rebuttal is made, the burden shifts back to the Complainant to establish his case.

The Hon’ble Supreme Court in Rangappa v. Sri Mohan (2010) 11 SCC 441 held that “once the presumption under Section 139 is triggered, the burden is on the Accused to rebut the same by adducing evidence that is sufficient to create doubt about the existence of a legally enforceable debt or liability.” The accused has failed to rebut the presumption even on prepoderance of probabilities. Mere plea that there is no legally enforceable debt up to the extent of Ex.P1/Cheque amount with out producing any cogent evidence, when there is volunatary issuance of cheque and there is no 24

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 evidence of coercion or mistake. Hence, the presumption under Section 139 of NI

Act remains unrebutted.

Hon’ble Supreme Court in Bir Singh vs . Mukesh Kumar, (2019) 4 Scc 197

held that ‘‘If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.

It is not the case of the respondent-accused that he either signed the cheque or parted with it under any threat or coercion. Nor is it the case of the respondent-accused that the unfilled signed cheque had been stolen. The existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under

Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion. The second question is also answered in the negative.

Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.’’

Hence the contentions of the accused is not acceptable.

25

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Accordingly, Point No. 3 is answered in the negative, and it is held that the

Accused has failed to rebut the presumption under Sections 118 and 139 of

the NI Act.

19. Point No. 4:

Whether the Complainant has established the guilt of the Accused

beyond reasonable doubt?

The Complainant has successfully proved the foundational facts such as issuance of subject cheque, it's dishonour, statutory notice, and non-payment within 15 days.

Once the Complainant establishes these, the burden shifts to the Accused, who has failed to rebut the presumption under Section 139 of the NI Act by cogent evidence.

The oral and documentary evidence of PW1 is consistent, credible, and legally sufficient to establish that the cheque in question was issued in discharge of a legally enforceable debt. While the defence of Accused is unworthy of credit, and the presumption under Section 139 of NI Act remains unrebutted. There are no material contradictions or inconsistencies in the testimony of PW1 that would discredit his version.

26

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

20.This Court is satisfied that all the essential ingredients under Section 138 of the NI Act are duly established.In view of the findings recorded above, this Court finds that the Complainant successfully discharged the burden of proving the guilt of

Accused beyond all reasonable doubt.

In present case the complainant filed the complaint against the accused for

Rs.5,96,000/- towards principle and interest returns which was transferred by him to the accused. By issuing the cheque, the accused has undertaken liability to repay the amount. However accused issued blank signed cheque which was admitted by the PW1. The complainant has established the foundational facts required under section 138 of NI Act. The accused has not produced any cogent evidence to rebut the presumption. Mere denial or contention that the liability pertains to EX.P1/ cheque amount is not legally enforceable debt. The mere fact that the complainant presented cheque for Rs. 5,96,000/- where as complainant admittedly transferred amount of Rs.5,47,000/- and accused admitted receiving the Rs.5,47,000/- does not absolve the accused of liability, when he has undertaken repayment by issuing the cheque and the signature on the cheque is not disputed. Once the issuance is admitted, the presumption under Section 139 of NI Act operates in favour of the complainant. Accordingly Point No.4 is answered in affirmative.

27

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

21. In the result Accused is found guilty and is convicted under Section

255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI

Act.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD.

Hearing on Quantum of Sentence:

22. The Accused submitted that he is suffering with kidney problem and other health issues and requested the Court to take a lenient view in the matter. However, mere statement itself cannot be a ground to absolve the Accused from criminal liability under Section 138 of the NI Act. The Complainant has successfully established, through both oral and documentary evidence, that the Accused issued the dishonoured cheque in discharge of a legally enforceable debt or liability. The statutory presumptions under Sections 118 and 139 of the NI Act remain unrebutted.

In the absence of any cogent defence or mitigating circumstances directly related to the offence, this Court finds no justification to take a lenient view merely on the ground of the Accused statement as he is did not any offence.

28

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

23. In the result, accused is sentenced to undergo simple imprisonment for a period of six months and also sentenced to pay fine of Rs.7,01,000/- (Rupees Seven

Lakhs One Thousand only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. P Harshavardhan

Reddy, S/o. P.Ravindranadh, Age 32 years, Occ: Business, R/o.7-1-68/3/1/A,

Dharamkaran Road, Opp Former CM Roasaiah House, Ameerpet, Hyderabad – 500 016, Telangana. Under section 357(3) of Cr.P,.C, and the remaining amount of

Rs. 1000/- shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

29

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Appendix of Evidence

Witness Examined

For Complainant:

PW-1 : Mr. P Harshavardhan Reddy

For Accused:

Nil-

Documents Marked

For Complainant:

1) EX.P1: is the original cheque bearing no.000007, dt.01-01-2019 for an amount of Rs.5,96,000/-

2) Ex.P2: is the original cheque return memo dt.01-03-2019

3) Ex.P3: is the original copy of the legal notice dt.12-03-2019

4) Ex.P4: is the original postal receipt dt.12-03-2019

5) Ex.P5: is the original postal envelope returned with endorsement

6) Ex.P6: is the bank account statement of the complainant for the period from 01-09-2018 to 31-03-2019 (12 pages)

7) Ex.P7: is the telephonic conversation between complainant and the accused filed in a pen-drive along with certificate under Section 65 – B Indian Evidence Act, 1872.

For Accused:

Nil

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

30

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

IN THE COURT OF THE XI JUDICIAL MAGISTRATE OF FIRST CLASS::

MANORANJAN COMPLEX, GANDHI BHAVAN, HYDERABAD

Present: Smt. B.Jayasree, XI Judicial Magistrate of First Class, Hyderabad.

Dated this the 14 th day of May, 2026

CALENDAR CASE NI No.596 of 2022

Between:

Mr. Harshavardhan Reddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad – 500 016 Telangana.

...Complainant

A N D

Mr. J Bala Murali Krishna, S/o.J. Acheshwer Rao, Aged 32 years, Occ: Business, House No.C3-500, Huda Colony, Chandanagar, Hyderabad – 500 050 … Accused

U/Sec.200 Cr.P.C for the Offence : Section of law U/sec.138 of Negotiable Instruments Act.

Plea of the Accused :Pleaded not guilty.

Found guilty Finding of the Court :

1

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Sentence or Order In the result, accused is sentenced to undergo simple imprisonment for a :period of Six months and also sentenced to pay fine of Rs. 7,00,1000 /- (Rupees Seven lakhs one thousands only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. HarshavardhanReddy, S/o. P Ravindranath, Aged 32 years, Occ: Business, R/o. #7-1-68/3/1/A, Dharamkaran Road, Opp Former CM Rosaiah House, Ameerpet, Hyderabad–500016 Telangana. Under Section 357(3) of Cr.P,.C, and the remaining amount of Rs.1,000 /-(One thousand) shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

2

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

In the result Accused is found guilty and is convicted under Section 255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI Act.

************

This case came before me for final hearing in the presence of Sri. Vamshi Banoth, learned Counsel for the Complainant and Sri Gokarapu Srinu learned Counsel for the Accused, upon hearing both sides, perusing the record and the matter having stood over till this day for consideration, this court delivered the following:

J U D G M E N T

1.The Complainant has filed this complaint under sections 138, 142 of

Negotiable Instruments Act, 1881 (herein after referred as NI Act) and Section 190 of

Code of Criminal Procedure, 1973 (herein after referred as Cr.P.C.) against the

Accused.

2.The brief facts of the Complaint are as follows: - the complainant and accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amounts in the share market business and promised of huge returns. The complainant, as an initial investment, paid a total 3

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 of Rs.5,40,000/- to the accused on various dates between the months of April to

October, 2018 through online transfer from his bank account with YES BANK, bearing A/C. No.000699000006993.

It is further submitted that the accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by January, 2019. After investing the said money in the share market business, in support of his assurance the accused issued a post dated cheque bearing No. 000007, dt.01-01-2019 drawn on Laxmi Vilas Bank, Rajeswari nagar, Banglore branch in favor of the complainant for a total of Rs.5,96,000/- being the principal amount plus the return on investment.

It is further submitted that in the month of January, 2018 the complainant was ready to deposit the said cheque dated 01-01-2019 in order to realize the loan amount, the accused had requested the complainant to grant further time to repay the investment amount. The complainant agreed to grant further time for repayment purely out of good faith and with an understanding that the accused will pay the said amount.

Contrary to the belief of the complainant, the accused failed to repay the investment amount, despite several requests from the complainant from time to time. After constant follow up, the accused had finally agreed to repay the amount on 28-02- 2019, and requested complainant to deposit the cheque on 28-02-2019 to realize the amount and assured that is sufficient balance in his account for clearing the said 4

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 cheque. The complainant had deposited the cheque bearing no.000007,dt. 01-01- 2019 drawn on Laxmi Vilas Bank, Rajarajeswari Nagar branch, Banglore for an amount of Rs. 5,96,000/- in his bank account, i.e., YES Bank LIMITED, Somajiguda

Branch, Hyderabad. Complainant received a letter dt. 28-02-2019 from the complainant’s banker along with a cheque return memo and the original cheque, stated that the said cheque was returned citing the reason “Funds Insufficient”.

It is further submitted that in view of the dishonour of the cheque, the complainant had issued a legal notice dt. 12-03-2019 under section 138(b) of NI Act, 1881 through his counsel calling upon the accused to arrange for the payment of the cheque of Rs. 5,96,000/- with in 15 days from the date of the receipt of the said statutory notice. The said legal notice returned to complainant with an endorsement of “Addressee left” but the accused was not paid any amount and not given any reply. Hence, the complaint has been filed seeking prosecution of the Accused for the offence punishable under Section 138 of the NI Act.

3.This Complaint was originally filed before the Hon’ble XIV Additional Chief

Metropolitan Magistrate, Hyderabad and was registered as C.C. No. 6732 of 2019.

However, this case was transferred to this court vide Proceedings of Hon’ble

Metropolitan Sessions Judge, Hyderabad vide Dis No. 4177/2021 Dt. 14/12/2021 5

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 and was renumbered vide docket order dated: 10-05-2022 as CC NI No. 596 of 2022.

4. Upon appearance of Accused, copy of complaint and documents filed along with complaint were furnished.

5.The Accused was examined under Section 251 of the Cr.P.C., wherein the substance of the accusation under Section 138 of the NI Act was explained to him.

The Accused denied the allegations and stated that he does not owe any legally enforceable debt or liability to the Complainant. The Accused pleaded not guilty and claimed to be tried. Accordingly, trial was commenced.

6.During the course of trial, the Complainant, examined himself as PW1: Sri.

Hasha vardhan Reddy and marked Exhibits P1 to P7.

In order to prove his case, the Complainant examined himself as PW1 and reiterated the averments in the complaint. PW1 marked Exhibits P1 to P7

Exhibit P1, is the original cheque bearing no. 000007 dt. 01-01-2019 for an amount of Rs. 5,96,000/- drawn in favour of Pedda reddy Harsh vardhan reddy issued by the

Accused. The execution of cheque is not specifically denied, and no defence is set 6

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 up that the cheque was either lost, misused, or stolen. However accused admitted that present cheque given for security purpose to the complainant.

Exhibits P2 is the original cheque return memo dt. 01-03-2019 issued by the bank, show that the above cheque was dishonored with the reason “Funds Insufficient.”

Exhibit P3 is the office copy of the legal notice 12-03-2019 issued by the

Complainant to the Accused through registered post, demanding payment of the cheque amounts within 15 days.

Exhibit P4 is the original postal receipt dt. 12-03-2019.

Exhibit P5 is original postal envelope returned with endorsement “addressee left”.

Exhibit P6 is the bank account statement of the complainant for the period from 01- 09-2018 to 31-03-2019.

Exhibit P7 is the telephonic conversation between complainant and the accused filed in a pen drive along with certificate under section 65-B Indian Evidence Act, 1872.

7.After closure of the Complainant's evidence, the Accused was examined under Section 313 of the Cr.P.C., by explaining him the incriminating material appearing against him in the evidence of the PW1. In response, the Accused denied all the allegations. He specifically not denied having received any money from the 7

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Complainant. The Accused opted to lead defence evidence in support of his version.

However, since no defence evidence was reported, the defence evidence was closed vide docket order dated 21-03-2025, and the matter was posted for arguments.

8. Written arguments filed behalf of the complainant:

The complainant and the accused known to each other and upon such acquaintance the accused had requested the complainant to invest certain amount in the share market business operated by the accused. Therefore, the complainant, as an initial investment, paid a total of Rs. 5,40,000/- to the accused on various dates between the months of April to June, 2018 through online transfer from his bank account with

YES Bank. It is further submitted that the accused accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs.

5,96,000/- to the complainant by January, 2019 and in support of his assurance the accused issued a post dated cheque bearing no. 000007 dt.01-01-2019 drawn on a

Laxmi vilas bank in favor of the complainant for a total principal amount plus return of the investment. It is further submitted that the present cheque dt.01-01-2019 deposited in 28-02-2019 according to the instructions of the accused, complainant received the cheque return memo dt. 28-02-2019 from the banker with endorsement

Funds Insufficient. Later, complainant issued a legal notice dated 12-03-2019 to 8

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 accused to arrange payment of cheque of Rs. 5,96,000/- within 15 days from the date of the receipt of said statutory notice. However said legal notice returned with endorsement “Addressee left” and therefore failed to pay said amount.

It is further submitted that the complainant further submitted that during the pendency of the trial the complainant filed Audio recordings of conversation between him, the accused and mediator namely Bottu Satyanarayana along with true transcript. It is further submitted that by way of suggestions the accused has admitted the transaction between the complainant and accused by suggesting that “It is not true to suggest that as there were many transactions between complainant and accused and the Ex.P1 was obtained by me for security purpose” Hence, there is clear admission that the above cheque was voluntarily given to the complainant by accused in view of the transactions between the complainant and accused. The signature on Ex.P1 cheque belongs to accused and the same is handed over to the complainant.

It is further submitted that the accused failed to deny in the later part of cross examination dt 20-02-2025 with respect to Ex.P7, that the voice in the audio recording does not belongs to him eventuality admitting that he is one who admitted to pay amounts amounting to Rs.10 to 13 lakhs.

It is further submitted that the complainant relies on the precedent held by the

Hon’ble Supreme Court in Bir Singh Vs. Mukesh Kumar (2019) 4 SCC197, para 38.

9

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount or other particulars. This in itself would not invalidate the cheque. The onus still be on accused to prove that the cheque was not in discharge of debt or liability by adducing evidence.

9. Written arguments filed behalf of the accused:

It is submitted that the Hon’ble Supreme Court of India in various verdicts has held that the existence of a legally enforceable debt or liability is a condition sine qua not for attraction the penal provisions of section 138 NI Act. It is further submitted that the PW1 admitted that the present cheque was issued as security. PW1 admitted during cross examination that the cheque was issued in May, 2018 nearly 8 months

before its stated date of 01-01-2019 and submitted that if the cheque had been given

specifically to discharge a debt crystallized in January 2019, it would have been issued around that time, and not eight months in advance. The pre-issuance of the cheque by such a long period entirely consistent with it being a security cheque held in advance. The details of cheque filled by the complainant except signature.

It is further submitted that PW1 admitted that he did not mentioned in the complaint that he had another case against the accused with regard to another cheque. The existence of multiple cheque cases between the very same parties arising out of the same or related transactions strongly suggests that multiple cheques were held as 10

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 security for ongoing financial dealings rather than each cheque being independently referable to a distinct, legally enforceable debt.

It is further submitted that the PW1 admitted during further cross examination on 20- 02-2024 that his total bank transfers to the accused as reflected in Ex.P6/bank statement amounted to Rs. 5,47,000/- only. However, the cheque Ex.P1 is for Rs.

5,50,000/- as confirmed by PW1 during cross examination. PW1 admitted in depositions that some amounts were received by the PW1 back from the accused i.e., Rs. 45,000/- dt. 14-09-2018 , Rs. 12,000/- dt. 17-09-2018 and Rs. 1,000/- dt. 29- 09-2018, total Rs.58,000/-. Despite of receiving the payment, PW1 not subtracted these received amounts from the cheque amount. The cheque has been presented for an amount that is demonstrably inflated beyond any amount that could conceivably be owed. This vitiates the cheque transaction and the prosecution cannot succeed on an inflated amount.

It is further submitted that PW1 admitted that no fixed percentage was agreed upon by me and the accused, it was all oral. The amount mentioned of Rs. 5,96,000/- mentioned in the cheque includes an unspecified “ return on investment” which is not a crystallized legal obligation. It is further submitted that the Audio Recording/Ex.P7 actually strengthen the defence contention. The accused does not has dishonest intention to defraud, he was genuinely unable to pay due to financial difficulties and accused acknowledged the obligation and expressed willingness to repay negating mens rea. The amount involved in the conversation is described as 10 to 13 lakhs by 11

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Satyanarayana far exceeding the amount of the cheque suggesting the cheque related to only a portion of multiple transactions and cannot independently sustain an offence under section 138 of NI Act.

It is further submitted that Hon’ble Supreme Court in Basalingappa Vs.

Mudibasappa, (2019) 5 SCC 418 held that when an accused raises a probable defence, which creates a doubt about the existence of a legally enforceable debt or liability and the complainant fails to rebut such defence, the presumption under section 139 stands rebutted and the accused is entitled to an acquittal. It is further submitted that the cheque was issued as security in May 2018, eight months before the cheque date, amount on the cheque was filled by the complainant himself, the cheque is presented for and amount that exceeds the total amount transferred via bank, no fixed rate of return was ever agreed and the return component is unenforceable and PW1 credibility undermined by major self contradictions in his own depositions

10. Heard and perused the material on record.

11. Points for Consideration:

12

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Upon perusal of the record, the following points arise for consideration by this

Court:

1. Whether the Accused issued Ex. P1 cheque in favour of the Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory notice under

Section 138 of NI Act was duly served on the Accused?

3. Whether the Accused has been able to rebut the presumption under Section 139 of NI Act?

4. Whether the Complainant has established the guilt of the Accused beyond reasonable doubt?

12. Point No.1 and 2:-

1. Whether the Accused issued Ex. P1 cheque in favour of the

Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonored and whether statutory

notice under Section 138 of NI Act was duly served on the Accused?

13. Since above points have same set of facts and circumstances to avoid reiteration both points are dealt together. Before appreciating the evidence, it is 13

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 pertinent to refer to the essential ingredients of Section 138 of the NI Act and the presumptions under the NI Act, which are as follows:

1. In Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683, the

Hon’ble Supreme Court has culled out the essential ingredients in order

to constitute an offence u/s 138 of NI Act as highlighted below:

A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account; The cheque should have been issued for discharge, in whole or in part, of any legally enforceable debt or other liability; That cheque has been presented to the bank within a period of six months from the date on which it is drawn with in the period of its validity whichever is earlier; The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information by him of the dishonor of cheque from the bank; The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of the said notice.

2. In addition to the above, the conditions stipulated under Section142

N.I Act have to be fulfilled. It becomes imperative to mention that

Section139 of the N.I Act provides a statutory presumption in favor of the Drawee that the Cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of N.I Act which states that every 14

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 negotiable instrument is presumed to have been drawn and accepted for consideration. That said, what follows is that trial under section 138

N.I Act is structured on the premise of the reverse onus of proof theory since the offence is a document-based technical one. The journey of evidence begins not from the home of the Complainants to but from the point of the Accused. The presumptions carved out in favor of the

Complainant are those of law and not those of facts.

3. Before moving forward, it is pertinent to discuss the relevant provisions of law which deal with legally enforceable debt or liability under the NI Act which are Section118(a) and 139 of the NI Act.

Section118(a) of the NI Act deals with the presumption of consideration and Section138 of NI Act deals with presumption of legally enforceable debt or liability and reads as follows: "118.Presumptions as to negotiable instruments-Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted,endorsed,negotiatedortransferred for consideration; 139.Presumption in favor of holder- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section138 for the discharge, in whole or in part, of any debt or other liability."

4. Further, it is a settled position that when an Accused has to rebut the presumption under Section 139 N.I Act, the standard of proof for doing 15

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 so is that of "preponderance of probabilities". It has been held by the

Hon'ble Supreme Court in Rangappa v. Sri.Mohan, (2010) 11 SCC 441

that the presumption contemplated under Section139 of the N.I Act includes the presumption of the existence of a legally enforceable debt.

To rebut the statutory presumption under Section 139 N.I Act, the standard of proof is that of the preponderance of probabilities, by which the Accused is required to raise a probable defence. To rebut the presumption, it is open to the Accused to rely on evidence led by him/her, or the Accused can also rely on the materials submitted by the

Complainant or the circumstances upon which the parties rely to raise a probable defense.

5. It has been held by the Hon’ble Supreme Court in Basalingappa v.

Mudibasappa (2019) 5 SCC 418 that to rebut the presumption, the

Accused can also rely on the materials submitted by the Complainant to raise a probable defense. The Accused by cross- examining the

Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The inference of preponderance of Probabilities can be drawn not only from the material brought on record but also by reference to the circumstances. The

Accused by cross-examining the Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The Accused can prove the non-existence of a consideration by raising a probable defense and if the Accused is proven to have discharged the onus of proof showing that the existence of consideration was doubtful or improbable, the onus would shift on the

Complainant who will be obligated to prove it as a matter of fact and upon his failure to prove would disentitle him for the grant of relief under

Section 138 of the N.I Act.

16

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

6. The Hon’ble Supreme Court in Kumar Exports Private Limited v.

Sharma Carpets (2009) 2 SCC 513, held that to disprove the presumption under Section 139 of the Act, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

Thus, as laid down in the catena of decisions it is an established law that the onus lies upon the Accused to rebut the presumption and to establish that cheque in question was not given in respect of any debtor liability, with the standard of proof being the preponderance of probability. Therefore, it becomes critical to examine whether the explanation of the Accused coupled with the evidence on record is sufficient to dislodge the presumption envisaged by Sections 118 & 139 of N.I Act

These presumptions are statutory in nature and are rebuttable. However, the burden of rebutting these presumptions lies on the Accused. The Accused must raise a probable defence, either by bringing on record credible evidence or by eliciting material inconsistencies in the Complainant’s case during cross-examination, to displace the presumption under Section 139 of NI Act.

14. During cross-examination, PW1 deposed that he is working as Senior

Investigation officer, HSBC Bank and previously, at the time of filing of this complaint he was working as Production Manager and he was not doing business at that time.

17

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

No fixed percentage was agreed upon by PW1 and accused, it was all oral. Further deposed that “I advanced money to the accused several times before this transaction. The accused used to return the money sometimes and sometimes he would not. I advanced the total amount of Rs. 4,67,000/- to the accused multiple times” and further deposed that accused also transferred some amounts to me and further adds that the said amount transferred by the accused are not related to this transaction.

PW1 further deposed that accused issued a post dated cheque to me. It was in May, 2018 and admitted that hand writing on Ex.P1, except the signature is his handwriting. Further deposed that the conversation in Ex.P7 took place on the road on the Boduppal road.

On being confronted with Ex.P6/ bank statement the witness is asked the following questions

Q) As per your bank statement you have transferred the following amounts on the following dates:-

On 20-09-2018 Rs. 48,500/-, 19-09-2018 Rs.1,000/-, 09-10-2018 Rs. 20,000/-, 08-10-2018 Rs. 2,00,000/-, 09-10-2018 Rs.2,00,000/-, 09-10-2018 Rs.68,000/- and 21-09-2018 Rs. 9,600/- total Rs. 5,47,100/- Is it true?

A) Yes, it is true. Witness adds that there are some other amount that he gave by way of cash.

18

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Q) You have filed the present case for Rs. 5,50,000/- which is the amount in

Ex.P1/cheque. Is it true?

A) Yes, it is true.

Q) As per Ex.P6/ bank statement of the accused transferred to you the following amounts on the following dates:

14-09-2018 Rs. 45,000/-, 17-09-2018 Rs. 12,000/- , 29-09-2018 Rs. 1,000/- total Rs. 58,000/- Is it true?

A) Yes, it is true.

PW1 deposed that I have not subtracted the above received amounts from the cheque amount. Witness adds that the said amounts do not pertains to this case and hence it was not subtracted.

It is further pertinent to mention the relevant judgments on the point of presumption of legally enforceable debt or liability. Reliance is placed by this court upon the judgments of Hon'ble Supreme Court of India in Rangappa v

Srimohan, (2010) 11 SCC 441, Kumar Exports v Sharma Carpets, (2009) 2

SCC 513, and BirSingh v Mukesh Kumar, (2019) 4 SCC 197, where in it has held that the presumption u/s 139 NI Act is a presumption of law and not presumption of fact. It has further been held that it is not necessary that the cheque must have been filled by the accused himself and the accused may 19

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 be liable even when the cheque has been filled by the complainant. The essential requirement is that the liability must exist on the date of the presentation of the cheque in question. It has been further held that once the signatures on the cheque are admitted then the court is bound to raise presumption u/s 118 r/w .139 NI Act regarding existence of legally enforceable debt or liability.

15. The defence taken by the accused is there is no legally enforceable debt for total cheque amount between complainant and accused and documents filed by the complainant in support of the alleged transaction does not come within purview of the legally enforceable debt as per section 138 of NI Act. The major defence of accused is that the cheque issued as blank signed security cheque by the accused to the complainant which was clearly admitted by the PW1 in his depositions and

PW1 himself admitted in depositions that accused issued a post dated cheque to me. It was in May, 2018”. On being confronted The handwriting on the Ex.P1/ cheque, PW1 admitted that except the signature, is his hand writing. PW1 admitted that accused transferred some amounts to him. PW1 further deposed that said transactions made by the accused are not related to this transaction. However PW1 not given any explanation for the transactions made by the accused to him.

20

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

16. On being confronted with the bank statement of the complainant /Ex.P6, PW1 questioned that he transferred total amount of Rs. 5,47,000/- to accused bank account, he answered as it is true. Again questioned that the accused also transferred total Rs.58,000/- to the account of complainant. PW1 admitted as it is true. However said transactions made by the accused prior to the loan amount transferred by the complainant to the accused. PW1 again questioned about the present complaint filed against accused for Rs. 5,50,000/- which is Ex.P1/cheque amount, PW1 admitted as it is true. However the PW1/cheque amount of Rs.

5,96,000/-. According to the complaint, it is submitted by the complainant that accused had accepted the said amount from time to time and assured the complainant that he will pay a total amount of Rs. 5,96,000/- to the complainant by

January, 2019.

17. Another defence taken by the accused is that he has not received legal notice sent by the complainant. However, legal notice sent by the complainant to accused returned with endorsement Addressee left. .

In Alavi Haji Vs Palapettty Mohammed, (2007) 6 SCC 555 Hon’ble Supreme

Court held that while rendering the decision in D.Vinod Shivappa Vs Nanda

Belliappa case, the court held that “It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is 21

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice send by post, can withing 15 days of receipt of summons from the court in respect of the complaint U/sec.138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons and therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint U/sec.138 of the Act, cannot obviously contend that there was no proper service of notice as required U/sec.138, by ignoring statutory presumption to the contrary U/sec.27 of the G.C Act and Section 114 of the Evidence Act. In our view any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran’s case (Supra) if the “giving of notice” in the context of clause (b) of the proviso was the same as the “receipt of notice” a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of section 138 of the Act.

This establishes the financial transaction and strengthens the presumption of liability.

The accused has failed to rebut the presumption by adducing cogent evidence. Mere denial or suggestions in cross examination are not sufficient to rebut the statutory presumption. Hence, the accused has failed to rebut the presumption even on preponderance of probabilities. Given the admitted fact that the subject cheque bear signature of Accused, and in view of this admission, the statutory presumption under 22

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Section 139 of the NI Act comes into play. Points No. 1 and 2 are answered in affirmative.

18. Point No. 3:

Whether the Accused has successfully rebutted the statutory presumptions

under Sections 118 and 139 of the NI Act?

Another defence taken by the accused that there is no legally enforceable debt up to the extent of Ex.P1/cheque amount. The complainant admitted that he transferred

Rs. 5,47,000/- to the account of accused and also admitted that he filled the blank signed cheque given for security purpose by the accused and presented before bank for the amount of Rs.5,96,000/- . However according to complaint and the legal notice the said Rs. 5,96,000/- is the assured amount being the principal amount plus the return on investment. The defence of accused that the cheque was issued as a blank signed cheque does not itself rebut the presumption. It is well settled that even a blank cheque voluntarily signed and handed over can be filled by the holder. the accused failed to produce any evidence to show that the cheque was misused and there is no liability existed or that the amount claimed is wholly incorrect. On contrary, the complainant version that the cheque amount includes principal and the interest returns appears probable and consistent. However, the accused did not take 23

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 steps such as, issuing stop payment instructions or initiating action against alleged misuse or producing any documentary proof of repayment.

Under Section 139 of the NI Act, it is a settled principle of law that once the execution of a cheque is admitted or proved, a presumption arises in favour of the

Complainant that the cheque was issued towards discharge of a legally enforceable debt or liability. This presumption, however, is rebuttable. The Accused can rebut the same either by bringing positive evidence or by raising a credible and probable defence on the basis of the material brought on record, including through cross- examination of the Complainant’s witnesses. The standard of proof required for the

Accused is not proof beyond reasonable doubt, but proof on the preponderance of probabilities. Once such rebuttal is made, the burden shifts back to the Complainant to establish his case.

The Hon’ble Supreme Court in Rangappa v. Sri Mohan (2010) 11 SCC 441 held that “once the presumption under Section 139 is triggered, the burden is on the Accused to rebut the same by adducing evidence that is sufficient to create doubt about the existence of a legally enforceable debt or liability.” The accused has failed to rebut the presumption even on prepoderance of probabilities. Mere plea that there is no legally enforceable debt up to the extent of Ex.P1/Cheque amount with out producing any cogent evidence, when there is volunatary issuance of cheque and there is no 24

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019 evidence of coercion or mistake. Hence, the presumption under Section 139 of NI

Act remains unrebutted.

Hon’ble Supreme Court in Bir Singh vs . Mukesh Kumar, (2019) 4 Scc 197

held that ‘‘If a signed blank cheque is voluntarily presented to a payee towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.

It is not the case of the respondent-accused that he either signed the cheque or parted with it under any threat or coercion. Nor is it the case of the respondent-accused that the unfilled signed cheque had been stolen. The existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under

Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion. The second question is also answered in the negative.

Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.’’

Hence the contentions of the accused is not acceptable.

25

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Accordingly, Point No. 3 is answered in the negative, and it is held that the

Accused has failed to rebut the presumption under Sections 118 and 139 of

the NI Act.

19. Point No. 4:

Whether the Complainant has established the guilt of the Accused

beyond reasonable doubt?

The Complainant has successfully proved the foundational facts such as issuance of subject cheque, it's dishonour, statutory notice, and non-payment within 15 days.

Once the Complainant establishes these, the burden shifts to the Accused, who has failed to rebut the presumption under Section 139 of the NI Act by cogent evidence.

The oral and documentary evidence of PW1 is consistent, credible, and legally sufficient to establish that the cheque in question was issued in discharge of a legally enforceable debt. While the defence of Accused is unworthy of credit, and the presumption under Section 139 of NI Act remains unrebutted. There are no material contradictions or inconsistencies in the testimony of PW1 that would discredit his version.

26

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

20.This Court is satisfied that all the essential ingredients under Section 138 of the NI Act are duly established.In view of the findings recorded above, this Court finds that the Complainant successfully discharged the burden of proving the guilt of

Accused beyond all reasonable doubt.

In present case the complainant filed the complaint against the accused for

Rs.5,96,000/- towards principle and interest returns which was transferred by him to the accused. By issuing the cheque, the accused has undertaken liability to repay the amount. However accused issued blank signed cheque which was admitted by the PW1. The complainant has established the foundational facts required under section 138 of NI Act. The accused has not produced any cogent evidence to rebut the presumption. Mere denial or contention that the liability pertains to EX.P1/ cheque amount is not legally enforceable debt. The mere fact that the complainant presented cheque for Rs. 5,96,000/- where as complainant admittedly transferred amount of Rs.5,47,000/- and accused admitted receiving the Rs.5,47,000/- does not absolve the accused of liability, when he has undertaken repayment by issuing the cheque and the signature on the cheque is not disputed. Once the issuance is admitted, the presumption under Section 139 of NI Act operates in favour of the complainant. Accordingly Point No.4 is answered in affirmative.

27

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

21. In the result Accused is found guilty and is convicted under Section

255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI

Act.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD.

Hearing on Quantum of Sentence:

22. The Accused submitted that he is suffering with kidney problem and other health issues and requested the Court to take a lenient view in the matter. However, mere statement itself cannot be a ground to absolve the Accused from criminal liability under Section 138 of the NI Act. The Complainant has successfully established, through both oral and documentary evidence, that the Accused issued the dishonoured cheque in discharge of a legally enforceable debt or liability. The statutory presumptions under Sections 118 and 139 of the NI Act remain unrebutted.

In the absence of any cogent defence or mitigating circumstances directly related to the offence, this Court finds no justification to take a lenient view merely on the ground of the Accused statement as he is did not any offence.

28

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

23. In the result, accused is sentenced to undergo simple imprisonment for a period of six months and also sentenced to pay fine of Rs.7,01,000/- (Rupees Seven

Lakhs One Thousand only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

Out of said fine amount a sum of Rs. 7,00,000 /- (Rupees Seven Lakhs only) shall be payable as compensation to the complainant i.e., Mr. P Harshavardhan

Reddy, S/o. P.Ravindranadh, Age 32 years, Occ: Business, R/o.7-1-68/3/1/A,

Dharamkaran Road, Opp Former CM Roasaiah House, Ameerpet, Hyderabad – 500 016, Telangana. Under section 357(3) of Cr.P,.C, and the remaining amount of

Rs. 1000/- shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

29

CC NI No. 596 of 2022

Old CC NI No.6732 of 2019

Appendix of Evidence

Witness Examined

For Complainant:

PW-1 : Mr. P Harshavardhan Reddy

For Accused:

Nil-

Documents Marked

For Complainant:

1) EX.P1: is the original cheque bearing no.000007, dt.01-01-2019 for an amount of Rs.5,96,000/-

2) Ex.P2: is the original cheque return memo dt.01-03-2019

3) Ex.P3: is the original copy of the legal notice dt.12-03-2019

4) Ex.P4: is the original postal receipt dt.12-03-2019

5) Ex.P5: is the original postal envelope returned with endorsement

6) Ex.P6: is the bank account statement of the complainant for the period from 01-09-2018 to 31-03-2019 (12 pages)

7) Ex.P7: is the telephonic conversation between complainant and the accused filed in a pen-drive along with certificate under Section 65 – B Indian Evidence Act, 1872.

For Accused:

Nil

Typed by me, corrected and pronounced by me in the open Court, on this the 14th day of May, 2026.

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

30

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

IN THE COURT OF THE XI JUDICIAL MAGISTRATE OF FIRST CLASS::

MANORANJAN COMPLEX, GANDHI BHAVAN, HYDERABAD

Present: Smt. B.Jayasreee, XI Judicial Magistrate of First Class, Hyderabad.

Monday, Dated this the 04th day of May, 2026

CALENDAR CASE NI No. 4510 of 2022

Between:

Sri. Srihari Sunkara, S/o. (late) Sri. S.A. Appa Rao, Aged 52 years, Occ: Business, R/o. Plot No.45, Srinagar Colony, Hyderabad.

...Complainant

A N D

Sri. Changanti Purushottam Rao, S/o. Srinivasa Rao, Aged 50 years, NSIC Technical Service Center, 80’ Feet Road, Bhavnagar Road, Crossing, Aji Industrial Area, Rajkot, Gujarat – 360 003. R/o. Flat No.203, Block – C, Landmark Residency, Madinaguda, Hyderabad – 500049.

… Accused

U/Sec.200 Cr.P.C for the Offence : Section of law U/sec.138 of Negotiable Instruments Act.

Plea of the Accused :Pleaded not guilty.

Finding of the Court : Found guilty

In the result, accused is sentenced to Sentence or Order undergo simple imprisonment for a period of Six months and also sentenced to pay fine of Rs. 60,01,000/- (Rupees Sixty Lakhs One Thousand only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

1

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

Out of said fine amount a sum of Rs. 60,00,000/- (Rupees Sixty Lakhs only) shall be payable as compensation to the complainant i.e., Sri. Srihari Sunkara, S/o. (late) Sri. S.A Appa Rao, Aged 52 years, Occ: Business, R/o. Plot No.45, Srinagar Colony, Hyderabad. Under section 357(3) of Cr.P,.C, and the remaining amount of Rs. 1,000/- (Rupees One Thousand shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

In the result Accused is found guilty and is convicted under Section 255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI Act.

************

Offence Under Section 138 of Negotiable Instrument Act

This case is coming up before me for a final hearing in the

presence of M/s. K Satya Sai Baba, Learned Counsel for the Complainant

and M/s. B. Pradeep Kumar, Learned Counsel for the Accused and

having heard and having stood over for consideration, this Court

delivered the following:

JUDGMENT

1.The Complainant has filed this complaint under sections 138, 142 of Negotiable

Instruments Act, 1881 (herein after referred as NI Act) and Section 200 of Code of

Criminal Procedure, 1973 (herein after referred as Cr.P.C.) against the Accused.

2

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

2.The brief facts of the Complaint are as follows: - The complainant submits that he knows the accused since 2011. The complainant doing the business by running industry namely M/s. Sunkap Automation Ltd., During the course of business transactions with NSIC (National Small Industries Corporation), Hyderabad, where accused worked as Branch Manager. The accused approached the complainant in the first week of January, 2018 and requested him to provide a hand loan of Rs. 60 lakhs and agreed to repay the same within one year. The complainant agreed to provide the same and paid an amount of Rs. 57,50,000/- in installments on different dates through account transfer i.e., from his account Indian Bank, Srinagar colony branch, to the accused bank account ICICI Bank. The transactions are Rs. 25,00,000/- on 25-01-2018,

Rs. 4,00,000/- on 09-03-2018, Rs. 7,50,000/- on 21-03-2018, Rs. 11,00,000/- on 17-04- 2018, Rs. 7,50,000/- on 21-05-2018 and Rs. 2,50,000/- on 22-05-2018, total Rs.

57,50,000/-.

It is submitted that the accused executed demand promissory note for the said amount of Rs. 57,50,000/- in favor of the complainant dt. 22-05-2018 and agreed to repay the said amount within one year. After one year when the complainant demanded the accused for the payment, accused executed another promissory note on Rs. 100/- non judicial stamp paper on 20-06-2019 agreeing to repay the said amount with interest and issued a cheque dt. 24-06-2019 for Rs. 57,50,000/- vide cheque bearing no. 005652 drawn on ICICI Bank. The accused while issuing the said cheque, requested the complainant not to present the said cheque for a period of two months. later complainant presented the cheque before the bank and same got dishonored and the same informed to the accused over phone, but the accused requested some more time and postponed the payment from time to time on one or the other reason. The accused again issued another cheque for Rs. 57,50,000/- vide cheque bearing no. 519388 dt.

17-03-2021 drawn on Punjab National Bank, Musheerabad Branch, Hyderabad in favor of complainant towards the discharge of the liability in part under the promissory note dt.

22-05-2018.

It further submitted that when the said cheque presented before the bank, same was returned unpaid by the accused banker vide memo dt. 18-03-2021 with an endorsement 3

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 "Funds Insufficient". That on receipt of the information about the dishonor of the cheque the complainant got issued statutory notice under Section 138 of NI Act to the accused though Registered Post to all available addresses vide notice dt 26-03-2021. The notice to present work place of the accused was served on 01-04-2021, the notice to his residential place was returned unserved with an endorsement "addressee left" dt. 29- 03-2021, the notice to his permanent residential address was returned unserved with an endorsement "refused" dt. 03-04-2021 and the notice to Hyderabad office was returned unserved with an endorsement "left" dt. 30-03-2021. Inspite of the notice the accused neither paid the amount nor replied the notice. Hence , the complaint has been filed seeking prosecution of the accused for the offence punishable under Section 138 of the

NI Act.

3.This Complaint was originally filed before the Hon’ble XIV Adidtional Chief

Metropolitan Magistrate, Hyderabad and was registered as C.C. No. 7554of 2021.

However, this case was transferred to this court vide Proceedings of Hon’ble

Metropolitan Sessions Judge, Hyderabad vide Dis No. 4177/2021 Dt. 14/12/2021 and was renumbered vide docket order dated: 10-02-2022 as CC NI No. 4510 of 2022.

4. Upon appearance of Accused, copy of complaint and documents filed along with complaint were furnished.

5.The Accused was examined under Section 251 of the Cr.P.C., wherein the substance of the accusation under Section 138 of the NI Act was explained to him.

The Accused denied the allegations and stated that he does not owe any legally enforceable debt or liability to the Complainant. The Accused pleaded not guilty and claimed to be tried. Accordingly, trial was commenced.

4

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

6.During the course of trial, the Complainant, examined himself as PW1: Sri.

Srihari and marked Exhibits P1 to P12.

In order to prove his case, the Complainant examined himself as PW1 and reiterated the averments in the complaint. PW1 marked Exhibits P1 to P12.

Exhibit P1, is the original cheque bearing no. 519388 dt. 17-03-2021 for an amount of

Rs. 57,50,000/- drawn on Punjab National Bank, Hyderabad, and issued by the

Accused Mr. Chaganti Purusottam Rao. The execution of this cheque is not specifically denied, in order to give his defence accused got marked Ex.D1 to Ex.D3 while in cross examination of PW1. However the transactions mentioned in the Ex.D1 to Ex.D3 are

before issuing the cheque by the accused in favor of the complainant.

Exhibits P2is the original cheque return memo dt. 18-03-2021 issued by the bank, show that the above cheque was dishonoured with the reason “Funds Insufficient.”

Exhibit P3 is the office copy of the legal notice 26-03-2021 issued by the Complainant to the Accused firm through registered post, demanding payment of the cheque amounts within 15 days.

Exhibit P4 is the original postal receipt dt.27-03-2021.

Exhibit P5 is original postal acknowledgment card dt. 01-04-2021 marked subject to objection. bearing the signature and seal of N.S.I.C.

Exhibit P6 is the Online Postal tracking report dt. 01-04-2021

Exhibit P7 is the unserved Postal Cover dt. 29-03-2021 returned with endorsement "Addressee left"

Exhibit P8 is the Unserved Postal Cover dt. 30-03-2021. returned with endorsement " left" .

Exhibit P9 is the Unserved Postal Cover dt. 03-04-2021. returned with endorsement "Refused".

Exhibit P10 is Promissory Note dated 22-05-2018.

Exhibit P11 is Promissory Note dated 20-06-2019.

5

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

Exhibit P12 is Bank statement from 01-01-2017 to 31-05-2018.

7.After closure of the Complainant's evidence, the Accused was examined under

Section 313 of the Cr.P.C., by explaining him the incriminating material appearing against him in the evidence of the PW1. In response, the Accused denied all the allegations. He admitted the receiving the amount of Rs. 57,50,000/- from the complainant but stated that he transferred said amount to one Bhasker who was having business relation with complainant regards land deal. The Accused opted to lead defence evidence in support of his version. However, since no defence evidence was reported, the defence evidence was closed vide docket order dated 13-03-2025, and the matter was posted for arguments.

8. Written Arguments filed on behalf of the complainant:

Complainant submitted that complainant doing business by running an industry namely

M/s Sunkap Automation Ltd., during the course of business the complainant doing the business transactions with NSIC (National Small Industries Corporation), Hyderabad, where accused worked as a Branch Manager. Accused approached the complainant in the first week of January, 2018 and requested him to provide a hand loan of Rs. 60 lakhs and agreed to repay the same within one year. Complainant agreed to provide the same and paid an amount of Rs. 57,50,000/- in installments on different dates through the account transfer from his account to the accused bank account. The transactions includes Rs. 25,00,000/- on 25-01-2018, Rs. 4,00,000/- on 09-03-2018, Rs.7,50,000/- on 21-03-2018, Rs. 11,00,000/- on 17-04-2018, Rs. 7,50,000/- on 21-05-2018 and Rs.

2,50,000/- on 22-05-2018 , total amount is 57,50,000/-. After receipt of said amount the accused executed demand promissory note for the said amount of Rs. 57,50,000/- in favor of the complainant dt 22-05-2018 and agreed to repay the said amount within one year, but not paid after one year. On demand by the complainant, accused executed another promissory note dt 20-06-2019 in favor of complainant and issued a cheque dt.

24-06-2019 for Rs. 57,50,000/- vide cheque no.005652 drawn on ICICI Bank, but 6

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 accused requested some more time and postponed the payment from time to time.

Later accused issued another cheque for Rs. 57,50,000/- vide cheque bearing no.

519388 dt.17-03-2021 drawn on Punjab National Bank. The complainant presented said cheque for encashment through banker Indian Bank, Srinagar Colony, Hyderabad and same was returned unpaid by the accused banker vide memo dt. 18-03-2021 with endorsement "funds insufficient". Then he got issued legal notice to the accused which was served on 01-04-2021 to accused work place address, returned with endorsement

Addressee left dt. 29-03-2021 to accused residential address and returned with endorsement refused dt 03-04-2021 to permanent address of the accused and notice to his office in Hyderabad was returned with the endorsement Left dt. 30-03-2021.

Accused neither paid the amount and nor replied the notice, Hence the present complaint was filed.

To establish the legally enforceable debt the complainant relying on Ex.P12 under which complainant transferred an amount of Rs. 57,50,000/- from his account to the account of accused and said fact was not disputed by the accused. The defence of accused that said amount of Rs. 57,50,000/- was related to land transaction, but not personal transaction, and the said amounts were transferred to the account of one

Bhaskar who is accused in CCNI 4514/2022 and CCNI 4521/ 2022 on the file of 1st

Judicial Magistrate of First Class, Hyderabad which were filed by the complainant.

PW1 stated in his chief examination that the first transaction with accused is in January 2018 is for Rs. 25 Lakhs given to the accused is for land deal. The amount Rs.

57,50,000/- transferred to the accused by complainant for his personal use.

It is further submitted that the signature on the cheque was not disputed except suggestion and there is no explanation is offered as toowe the disputed cheque went into the hands of the complainant.

Complainant relied on the citations are

1. Rangappa Vs. Sri Mohan, (2011) 11 SCC, 441

2. Krishna Rao Vs. Shankar gouda, 2018 (3) SCC (Cri) 544

3. T.P. Murugan Vs. Bojan, 2018 (3) SCC (cri) 584 7

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

4. Rohitbhai Jivanlal patel Vs. State of Gujarat & another, 2019 (2) ALD (Cri) 385 (SC)

5. Bir Singh Vs. Mukesh Kumar, (2019) 4 SCC 197

6. 2020 (1) ALD (Crl.) 1 (SC)

7. 2019(2) SCC (Cri) 40

8. 2018 (3) SCC (Cri) 584

9. 2020 (1)ALD (Cri) 1 (SC)

9. Written Arguments filed on behalf of the accused:

It is submitted by the accused that the complainant is the director of M/s Sunkap

Automation Ltd and the accused is the manager of NSIC, Balanagar branch, which provided loan to the above company and they are acquainted. And further said company needs land for their business purpose. So the accused introduced one

Bhaskar for the land deal for the company. The accused acted only as the introducer of the said Bhaskar. He was no way connected with the land deal. But the complainant paid amount for the land deal, into the account of the accused, which he promptly sent to the account of the Bhaskar and his wife and did not use a single penny for his personal use. When the said land deal failed with Bhaskar, the complainant falsely implicated the accused in the hand loan transaction and high highhandedly obtained a cheque and promissory note. Even then the accused did not want any litigation and settled with the complainant and paid Rs. 20,00,000/- to the account of the company of the complainant on 27-01-2020, as full and final settlement but the complainant falsely filed the present case. Ex.D1 to Ex.D3 marked on behalf of accused while in cross examination of PW1 by confronting the documents to PW1.

Ex.D1 is the bank account statement of the accused for the period 01-04-2018 to 31-03- 2019

Ex.D2 is the bank account statement of the accused for the period 01-01-2020 to 31- 01-2020 8

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

Ex.D3 is the bank account statement of the accused for the period 01-04-2017 to 31- 03-2018

Accused relied on citation that Rangappa Vs. Sri Mohan (2010) 11 SCC 441 and

Rajesh Jain Vs. Ajay Singh (2023) 10 SCC 148

10.Heard both sides. Perused the material on record.

11.Points for Consideration:

Upon perusal of the record, the following points arise for consideration by this

Court:

1. Whether the Accused issued Ex. P1 cheque in favour of the Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonoured and whether statutory notice under

Section 138 of NI Act was duly served on the Accused?

3. Whether the Accused has been able to rebut the presumption under Section 139 of NI Act?

4. Whether the Complainant has established the guilt of the Accused beyond reasonable doubt?

12. Point No.1 and 2:-

1. Whether the Accused issued Ex. P1 cheque in favour of the Complainant towards discharge of legally enforceable debt or liability?

2. Whether the said cheque was dishonoured and whether statutory notice under

Section 138 of NI Act was duly served on the Accused?

9

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

13. Since above points have same set of facts and circumstances to avoid reiteration both points are dealt together. Before appreciating the evidence, it is pertinent to refer to the essential ingredients of Section 138 of the NI Act and the presumptions under the NI

Act, which are as follows:

1. In Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683, the

Hon’ble Supreme Court has culled out the essential ingredients in order to

constitute an offence u/s 138 of NI Act as highlighted below:

A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account; The cheque should have been issued for discharge, in whole or in part, of any legally enforceable debt or other liability; That cheque has been presented to the bank within a period of six months from the date on which it is drawn with in the period of its validity whichever is earlier; The cheque was returned unpaid by the bank due to either insufficiency of funds in the account to honour the cheque or that it exceeds the amount arranged to be paid from that account on an agreement made with that bank; A demand of the said amount has been made by the payee or holder in due course of the cheque by a notice in writing given to the drawer within thirty days of the receipt of information by him of the dishonour of cheque from the bank; The drawer fails to make payment of the said amount of money within fifteen days from the date of receipt of the said notice.

2. In addition to the above, the conditions stipulated under Section142 N.I

Act have to be fulfilled. It becomes imperative to mention that Section139 of the N.I Act provides a statutory presumption in favor of the Drawee that the Cheque was issued to him in discharge of a debt or other liability of a legally enforceable nature. Also, the said provision must be read along with Section 118 of N.IAct which states that every negotiable instrument is presumed to have been drawn and accepted for consideration. That said, what follows is that trial under section 138 N.I Act is structured on the premise of the reverse onus of proof theory since the offence is a document-based technical one. The journey of evidence begins not from the home of the Complainants to but from the point of the Accused. The presumptions carved out in favour of the Complainant are those of law and not those of facts.

3. Before moving forward, it is pertinent to discuss the relevant provisions of law which deal with legally enforceable debt or liability under the NI Act which are Section118(a) and 139 of the NI Act. Section118(a) of the NI Act 10

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 deals with the presumption of consideration and Section 138 of NI Act deals with presumption of legally enforceable debt or liability and reads as follows: "118.Presumptions as to negotiable instruments-Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, wasaccepted, endorsed,negotiatedortransferred for consideration; 139.Presumption in favor of holder- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section138 for the discharge, in whole or in part, of any debt or other liability."

4. Further, it is a settled position that when an Accused has to rebut the presumption under Section 139 N.I Act, the standard of proof for doing so is that of "preponderance of probabilities". It has been held by the Hon'ble

Supreme Court in Rangappa v. Sri.Mohan, (2010) 11 SCC 441 that the presumption contemplated under Section139 of the N.I Act includes the presumption of the existence of a legally enforceable debt. To rebut the statutory presumption under Section 139 N.I Act, the standard of proof is that of the preponderance of probabilities, by which the Accused is required to raise a probable defence. To rebut the presumption, it is open to the Accused to rely on evidence led by him/her, or the Accused can also rely on the materials submitted by the Complainant or the circumstances upon which the parties rely to raise a probable defense.

5. It has been held by the Hon’ble Supreme Court in Basalingappa v.

Mudibasappa (2019) 5 SCC 418 that to rebut the presumption, the

Accused can also rely on the materials submitted by the Complainant to raise a probable defense. The Accused by cross- examining the

Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The inference of preponderance of Probabilities can be drawn not only from the material brought on record but also by reference to the circumstances. The Accused by cross- examining the Complainant can rebut the presumption of issuance of cheque in discharging of any debt or other liability. The Accused can prove the non-existence of a consideration by raising a probable defense and if the Accused is proven to have discharged the onus of proof showing that the existence of consideration was doubtful or improbable, the onus would shift on the Complainant who will be obligated to prove it as a matter of 11

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 fact and upon his failure to prove would disentitle him for the grant of relief under Section 138 of the N.I Act.

6. The Hon’ble Supreme Court in Kumar Exports Private Limited v.

Sharma Carpets (2009) 2 SCC 513, held that to disprove the presumption under Section 139 of the Act, the Accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Thus, as laid down in the catena of decisions it is an established law that the onus lies upon the

Accused to rebut the presumption and to establish that cheque in question was not given in respect of any debtor liability, with the standard of proof being the preponderance of probability. Therefore, it becomes critical to examine whether the explanation of the Accused coupled with the evidence on record is sufficient to dislodge the presumption envisaged by

Sections 118 & 139 of N.I Act.

These presumptions are statutory in nature and are rebuttable. However, the burden of rebutting these presumptions lies on the Accused. The Accused must raise a probable defence, either by bringing on record credible evidence or by eliciting material inconsistencies in the Complainant’s case during cross-examination, to displace the presumption under Section 139 of NI Act.

14. During cross-examination, PW1 deposed that he is the director in M/s Sunkap

Automation Ltd. He knows the accused since the last 7 to 8 years. The accused is working as branch manager in National Small Industries Corporation (NSIC). The accused is working at Balanagar branch. NSIC used to give the funds to the suppliers and Sunkap Automation company used to give the bank guarantees. There were no amount dues pending between Sunkap Automation company and NSIC as on the date of filing of this complaint.

PW1 further deposed that the first transaction between complainant and the accused in

January, 2018 for Rs. 25,00,000/- given to accused for purpose of using Land deal and said land deal was between Bhaskar (accused in CCNI no. 4514/2022 and 4521/2022) and Sunkap Automation company. The amount of Rs. 57,50,000/- transferred to 12

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 accused for his personal use by the complainant between months of January, 2018 and

May, 2018 and PW1 transferred some amount to the Bhaskar after May, 2018 and not transferred any amount to accused after May, 2018.

PW1 further deposed that the land deal was between accused and Bhaskar and he is not concerned with the said land deal. The land deal was for the purpose of establishing my company in the name and style of M/S. Sunkap Automation Limited and said land deal is incomplete. The first Rs. 25,00,000/- was for the personal use of accused. The witness again states that the Rs. 25,00,000/- was for the land deal whereas the remaining balance of Rs. 57,50,000/- was for the personal use of the accused.

PW1 further deposed that Ex.P10 was executed in May, 2018 and it does not contains any witness signatures. The date of execution of the Ex.P11/ Promissory note is 20-06- 2019 and date of purchase of Ex.P11 is 18-11-2018 and it does not contains signatures of any witnesses.

On being confronted with the bank statement of the accused specifically the transaction

dt. 26-02-2019 which shows that PW1 transferred Rs. 50,000/- to the accused same

admitted by PW1. Ex.D1 is the bank account statement of the accused for the period 01-04-2018 to 31-03-2019.

On being confronted with the bank account statement of the accused specifically dt. 27- 01-2020 which shows that the accused transferred Rs. 20,00,000/- to the account of

M/S. Sunkap Automation Limited and the witness admitted as true. Ex.D2 is the bank account statement of the accused for the period 01-01-2020 to 31-01-2020

Pw1 further deposed that ‘I advanced loan amount to the account of accused, he re transferred them to the bank accounts of Bhasker and his wife by name Tallepalli

Rajewari. Ex.D3 is the bank account statement of the accused for the period 01-04- 2017 to 31-03-2018

15. The defence taken by the accused that accused not received the legal notice issued by the complainant. On perusal the legal notice was returned with endorsement "addressee left", "left" and "refused" on three different address of the accused.

13

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

However is the deemed service of summons. Moreover the Acknowledgment card/Ex.P5 is having seal of the company where the accused is working.

According to Hon'ble Supreme Court in Alavi Haji vs Palapetty Muhammed & Anr 2007 (3) SCC (CRI) 236, (2007) 2 ALD(CRL) 294, held that

14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement refused or not available in the house or house locked or shop closed or addressee not in station, due service has to be presumed. [Vide Jagdish Singh Vs. Natthu Singh ;

State of M.P. Vs. Hiralal & Ors. and V.Raja Kumari Vs. P.Subbarama Naidu & Anr. ] It is, therefore, manifest that in view of the presumption available under Section 27 of the

Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.

16. Major defence taken by the accused is that he paid transaction of Rs. 20,00,000/-

dt. 27-01-2020 to the Complainant company through bank account transfer which is

supported by Ex.D2. According to the facts of the complaint, accused executed promissory note dt.20-06-2019/Ex.P11 on Rs.100/- non judicial stamp paper agreeing to repay the said amount with interest and issued a cheque dated 24-06-2019 for Rs.

57,50,000/- vide cheque no. 005652 and it was dishonored and same was informed to the accused over phone and accused requested some more time and postponed the payment. However complainant not filed complaint pertains to said cheque. On great persuasion by the complainant, the accused again issued another cheque for Rs.

14

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 57,50,000/- vide cheque bearing no. 519388 dt. 17-03-2021 towards discharge of liability in part under the promissory note dt.22-05-2018/ Ex.P10. On perusal, according to Ex.D2, accused transferred Rs. 20,00,000/- dt. 27-01-2020 to the account of M/S

Sunkap Automation Limited and PW1 is the Director of said company which is clearly admitted by the PW1 in his depositions. However the present complaint made by the complainant against accused in individual capacity and amount transferred by the complainant personal account to the accused bank account. Moreover said transaction

dt. 27-01-2020 made by the accused prior to the date of issuance of cheque in present

complaint by the accused.

17. During cross examination of PW1, deposed the fact of transferring the payment of

Rs. 20,00,000/- to the M/S Sunkap Automation Limited from the accused account but not to the account of the complainant. The present complaint filed by the complainant in his personal capacity. The accused has failed to rebut the presumption by adducing cogent evidence. Mere denial or suggestions in cross examination are not sufficient to rebut the statutory presumption. Hence, the accused has failed to rebut the presumption even on preponderance of probabilities. Given the admitted fact that the subject cheque bear signature of Accused, and in view of this admission, the statutory presumption under Section 139 of the NI Act comes into play. Points No. 1 and 2 are answered in affirmative.

18. Point No. 3:

Whether the Accused has successfully rebutted the statutory presumptions

under Sections 118 and 139 of the NI Act?

Under Section 139 of the NI Act, it is a settled principle of law that once the execution of a cheque is admitted or proved, a presumption arises in favour of the Complainant that the cheque was issued towards discharge of a legally enforceable debt or liability. This presumption, however, is rebuttable. The Accused can rebut the same either by bringing positive evidence or by raising a credible and probable defence on the basis of 15

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021 the material brought on record, including through cross-examination of the

Complainant’s witnesses. The standard of proof required for the Accused is not proof beyond reasonable doubt, but proof on the preponderance of probabilities. Once such rebuttal is made, the burden shifts back to the Complainant to establish his case.

In Rohitbhai Jivanial Patel Vs. State of Gujrat and others Manu/SC/0393/2019,

AIR 2019 SC 1876

Hon'ble Supreme Court held that once cheque is issued and signature admitted , strong

presumption arises which must be rebutted by cogent evidence. Accused not denied the existence of cheque and payment received by the complainant. . On contrary, the issuance of cheque indicates admission of liability and liability becomes legally enforceable. Thus, even if the accused made payment to the account of the company of the complainant. once the accused issued cheque in personal capacity, it creates independent enforceable liability. The Hon’ble Supreme Court in Rangappa v. Sri

Mohan (2010) 11 SCC 441 held that “once the presumption under Section 139 is triggered, the burden is on the Accused to rebut the same by adducing evidence that is sufficient to create doubt about the existence of a legally enforceable debt or liability.”

The accused has failed to rebut the presumption even on preponderance of probabilities. Mere plea that "payment made to the account of the company of the complainant” is not sufficient when there is voluntary issuance of cheque and there is no evidence of coercion or mistake. Moreover said transaction made before issuance of cheque in present complaint and mere denial of issuance of not sufficient to rebut the presumption under section 139 of NI Act.significantly, though the disputed the signature of cheque, no steps were taken to send the cheque for FSL examination. Further accused has not examined Bhasker who is connected to the alleged transaction, mere suggestions in cross examination not amount to rebuttal of statutory presumptions.

Hence, the presumption under Section 139 of NI Act remains unrebutted. Accordingly,

Point No. 3 is answered in the negative, and it is held that the Accused has failed to rebut the presumption under Sections 118 and 139 of the NI Act.

16

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

19. The crucial aspect in the present case is that the accused had made part payment prior to issuance of the cheque but after executing the promissory notes/ Ex.P10 and

Ex.P11 to Sunkap Automation Limited but complainant filed present complaint in personal capacity against the accused. Complainant transferred amount to account of accused for hand loan which was reflected in Ex.P12 and where as accused made payment to the company account of the complainant. Moreover said transaction dt. 27- 01-2020 of Rs. 20,00,000/- made by the accused after the date of issuance of cheque

dt. 17-03-2021.

20. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstaces which may lead the court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist, mere denial would not fulfil the requirements of rebuttal as envisaged under section 118 and 139 of the NI Act.

21. It is further pertinent to mention the relevant judgments on the point of

presumption of legally enforceable debt or liability. Reliance is placed by this court upon the judgments of Hon'ble Supreme Court of India in Rangappa v

Srimohan, (2010) 11 SCC 441, Kumar Exports v Sharma Carpets, (2009) 2

SCC 513, and BirSingh v Mukesh Kumar, (2019) 4 SCC 197, where in it has held that the presumption u/s 139 NI Act is a presumption of law and not presumption of fact. It has further been held that it is not necessary that the cheque must have been filled by the accused himself and the accused may be liable even when the cheque has been filled by the complainant. The essential requirement is that the liability must exist on the date of the presentation of the cheque in question. It has been further held that once the signatures on the cheque are admitted then the court is bound to raise presumption u/s 118 r/w .139 NI Act regarding existence of legally enforceable debt or liability.

17

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

22.However, the Accused has neither entered the witness box to depose in support of his version, nor examined any witness to prove his defence. While the Accused marked Ex.D1 to Ex.D3, which allegedly showing the payment made by the accused to company of complainant. However said payment made before issuing the cheque and payment not made to the account of complainant. Hence, the presumption under

Section 139 of NI Act remains unrebutted.The Hon’ble Supreme Court in

Rangappa v. Sri Mohan (2010) 11 SCC 441 held that “once the presumption under

Section 139 is triggered, the burden is on the Accused to rebut the same by adducing evidence that is sufficient to create doubt about the existence of a legally enforceable debt or liability.”

23. Point No. 4:

Whether the Complainant has established the guilt of the Accused beyond

reasonable doubt?

The Complainant has successfully proved the foundational facts such as issuance of subject cheques, their dishonour, statutory notice, and non-payment within 15 days.

Once the Complainant establishes these, the burden shifts to the Accused, who has failed to rebut the presumption under Section 139 of the NI Act by cogent evidence. The oral and documentary evidence of PW1 is consistent, credible, and legally sufficient to establish that the cheques in question were issued in discharge of a legally enforceable debt. While the defence of Accused is unworthy of credit, and the presumption under

Section 139 of NI Act remains unrebutted. There are no material contradictions or inconsistencies in the testimony of PW1 that would discredit his version.

24.This Court is satisfied that all the essential ingredients under Section 138 of the

NI Act are duly established.In view of the findings recorded above, this Court finds that the Complainant successfully discharged the burden of proving the guilt of Accused beyond all reasonable doubt.

18

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

25.In the result Accused is found guilty and is convicted under Section 255(2) of the Cr.P.C. for the offence punishable under Section 138 of the NI Act.

Typed by me, corrected and pronounced by me in the open Court, on this the 04th day of May, 2026.

Sd/-

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD.

Hearing on Quantum of Sentence:

26. The Accused submitted that he already transferred Rs.20,00,000/- to the company account of complainant and pleaded not guilty and requested the Court to take a lenient view in the matter. However, mere submission by itself cannot be a ground to absolve the Accused from criminal liability under Section 138 of the NI Act.

The Complainant has successfully established, through both oral and documentary evidence, that the Accused issued the dishonored cheques in discharge of a legally enforceable debt or liability. The statutory presumptions under Sections 118 and 139 of the NI Act remain unrebutted. In the absence of any cogent defence or mitigating circumstances directly related to the offence, this Court finds no justification to take a lenient view merely on the ground of the Accused’s submission.

27. In the result, accused is sentenced to undergo simple imprisonment for a period of Six months and also sentenced to pay fine of Rs.60,01,000/- (Rupees Sixty

Lakhs One Thousand only) and in default of payment of such amount accused is sentenced to undergo Simple imprisonment for a period of Three months.

19

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

Out of said fine amount a sum of Rs.60,00,000 /- (Rupees Sixty Lakhs only) shall be payable as compensation to the complainant i.e., Sri.Srihari Sunkara, S/o. (late)

Sri. S.A Appa Rao, Aged 52 years, Occ: Business,R/o. Plot No.45, Srinagar

Colony,Hyderabad. Under section 357(3) of Cr.P,.C, and the remaining amount of

Rs.1,000/- (Rupees One Thousand) shall be payable to the State as fine amount.

Accused is informed about the right of filing appeal against the judgment within the limitation period of law. A copy of Judgment shall be given to the accused as per

Sec.363 of Cr.P.C R/w Rule 73 of Criminal Rules of Practice free of cost.

Typed by me, corrected and pronounced by me in the open Court, on this the 04th day of May, 2026.

Sd/-

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

20

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

Appendix of Evidence

Witness Examined

For Complainant:

PW-1 : Mr. Srihari Sunkara

For Accused:

Nil-

Documents Marked

For Complainant:

EX.P1: is the original cheque bearing No.519388, dt.17-03-2021 for an amount of

Rs.57,50,000/-

Ex.P2: is the original cheque return memo dt.18-03-2021

Ex.P3: is the office copy of the legal notice dt.26-03-2021

Ex.P4: is the original postal receipts (4 in number) dt.27-03-2021

Ex.P5: is the original acknowledgment card dt.01-04-2021 (learned defense counsel raised an objection that the acknowledgment card is not mentioned in ‘List of

Documents’ filed along with the complaint at the time of filing, and hence, it should be accompanied by a petition u/s.294 CrPC)

Ex.P6: is the postal tracking report dt.01-04-2021

Ex.P7: is the original unserved postal envelope dt.29-03-2021

Ex.P8: is the original unserved postal envelope dt.30-03-2021

Ex.P9: is the original unserved postal envelope dt.03-04-2021

Ex.P10: is the original promissory note dt.22-05-2018

Ex.P11: is the original promissory note dt.20-06-2019

Ex.P12: is my bank account statement for the period 01-01-2017 to 31-05-2018 (26 pages) (learned defence counsel raised an objection that the acknowledgment card is not mentioned in ‘List of Documents’ filed along with the complaint at the time of filing, and hence, it should be accompanied by a petition u/s.294 CrPC).

21

CC NI No.4510 of 2022

Old CC NI No. 7554 of 2021

For Accused:

Ex.D1 is the bank account statement of the accused for the period 01-04-2018 to 31-03-2019

Ex.D2 is the bank account statement of the accused for the period 01-01-2020 to 31-01-2020

Ex.D3 is the bank account statement of the accused for the period 01-04-2017 to 31-03-2018

Sd/-

XI JUDICIAL MAGISTRATE OF FIRST CLASS,

HYDERABAD

22