Bangalore District Court
H Narasimha Murthy vs M/S Ajjaiah Chit Funds Pvt Ltd Rep By … on 2 August, 2025
1 Crl.Apl.No.1809/2023 JUDGMENT
KABC010336952023
IN THE COURT OF LXIX ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE (CCH 70)
Present:
Smt. Shirin Javeed Ansari, B.A.,LL.B (Hon`s) LL.M.,
LXIX Additional City Civil and
Sessions Judge, Bengaluru.
Dated this the 2nd day of August, 2025
Crl.A.No.1809/2023
Appellant: Sri H.Narasimha Murthy
S/o Hanumantharayappa
Aged about 51 years,
Lecturer in Sharada PU College
Byaarayanapura
Mysore Road
Bengaluru-560 026
(Sri Guruprasad.H.N., Advocate for
Appellant)
-V/s-
Respondent: M/s. Ajjaiah Chit Funds (Pvt) Ltd.,
No.68/20, 5th Cross,
Hanumanthnagar
Bengaluru-560 019
represented by its
Managing Director
Smt.Jayashree
(Smt.Sujata, Advocate for respondent)
2 Crl.Apl.No.1809/2023 JUDGMENT
JUDGMENT
This appeal is filed under Section 374(3) of the Code
of Criminal Procedure, 1973 (Cr.P.C.), challenging the
judgment and order of conviction dated 07.12.2023
passed by the Hon’ble XVI Additional Chief Metropolitan
Magistrate, Bengaluru, in C.C. No. 14087/2022. The trial
court convicted the Appellant for an offence punishable
under Section 138 of the Negotiable Instruments Act,
1881 (hereinafter referred to as “the NI Act“), sentencing
him to pay a fine of Rs.60,000/-, in default of which he
was to undergo simple imprisonment for three months.
Out of the fine, Rs.58,000/- was directed to be paid to the
Respondent as compensation under Section 357 of
Cr.P.C., and Rs.2,000/- was to be adjusted towards state
expenses.
2. Being aggrieved by the said judgment and
conviction, the accused has preferred the present appeal
under Section 374(3) of the Cr.P.C. seeking to set aside
the same.
3 Crl.Apl.No.1809/2023 JUDGMENT
3. The accused in CC No.14087/2022 before the
trial court has preferred the instant appeal against the
complainant. The appellant and respondent are hereby
assigned with their original ranks before the trial court
i.e., the appellant as accused and respondent as
complainant in CC No.14087/2022 in the instant
discussion for the purpose of brevity and convenience to
avoid the confusion and perplexity.
4. The epitomized facts of the case in CC No.
14087/2022 before the trial court are that the
complainant is a registered company dealing in chit fund
transaction. The appellant/accused is the guarantor to
one Mr.Harish.G. who is the subscriber to the chit fund
value of Rs.1,00,000/- on a monthly installment of
Rs.5000/- for a period of 20 months. Mr.Harish.G. is the
successful bidder of 3rd auction for bid amount of
Rs.20,000/- and received chit amount of Rs.80,000/-.
Subsequently, said Mr.Harish.G. failed to pay the arrears
of installments of chit. Therefore, upon demand by the
complainant, the appellant who was guarantor had issued
4 Crl.Apl.No.1809/2023 JUDGMENT
the cheque in question for Rs.50,000/- and the same was
dishonoured for want of sufficient funds in the account of
appellant. Thereafter, left with no option the Complainant
has got issued legal notice on 21.03.2022 through RPAD
and the same has been duly served on 23.03.2022. In-
spite of service of legal notice the appellant/accused failed
to pay the cheque amount. Hence, the complaint under
Section 138 of the NI Act was filed.
5. The trial court recorded the plea of the
accused. The complainant examined complainant
Smt.Jayashree as PW-1 and got marked Exhibits P1 to P7.
Upon consideration of the material on record, the trial
court convicted and accordingly sentenced the appellant
as aforementioned.
6. Being aggrieved by the impugned judgment
passed by the trial court, the appellant being accused
before the trial court has preferred the instant appeal
against the respondent who was the complainant before
the trial court on the following:
5 Crl.Apl.No.1809/2023 JUDGMENT
GROUNDS OF APPLEAL
a) The trial court committed a grave error in
law in taking cognizance, rendering the
conviction legally unsustainable.
b) The impugned judgment is contrary to law
and the probabilities of the case,
warranting its reversal.
c) The trial court was misled by the
Respondent, leading to an erroneous
conclusion that the Appellant committed
an offence under Section 138 of the NI Act.
d) The Appellant was not given sufficient
opportunity to establish his defence, and
the judgment is one-sided.
e) The Appellant was bedridden for four
months due to ill health, and the deaths of
his father and brother caused depression,
preventing him from instructing his
counsel or participating in the trial.
f) The statutory notice under Section 138
was not served on the Appellant, and the
cheque was misused by the Respondent
for wrongful gain.
6 Crl.Apl.No.1809/2023 JUDGMENT
g) The cheque was issued as security for
Harish G., the successful bidder in the
chit fund, and the Respondent wrongly
pursued the Appellant instead of Harish G.
h) The trial court ignored discrepancies and
contradictory statements in the
Respondent’s evidence, convicting the
Appellant without proper reasoning.
i) The Respondent failed to prove a legally
enforceable debt, and thus, Section 138
does not apply.
j) The trial court erred in accepting the
evidence of PW-1, which was inadmissible.
k) The cheque bore different ink for the date
and figures, suggesting it was a blank
cheque, casting doubt on its issuance.
l) The transaction violated Section 269SS of
the Income Tax Act, 1961, as no loan
above Rs.20,000/- was made through an
account payee cheque, negating the
applicability of Section 138.
Hence, under the said facts and circumstances, the
appellant/accused pray before this court to call for entire
7 Crl.Apl.No.1809/2023 JUDGMENT
records from the trial court, set aside the impugned
judgment conviction and sentence passed by Trial Court
in CC No.14087/2022 dated 07.12.2023.
7. In spite of providing ample opportunities,
neither the Appellant nor the Respondent submitted
arguments before this court. Perused the materials
available on record.
8. On the basis of the materials available on
record following points arise for my consideration:
1. Whether the trial court erred in taking
cognizance and convicting the
Appellant under Section 138 of the NI
Act, and whether the judgment is
contrary to law and probabilities?
2. Whether the Respondent proved the
existence of a legally enforceable debt
and compliance with the statutory
requirements of Section 138 of the NI
Act?
3. Whether the Appellant was denied a fair
opportunity to present his defence,
rendering the trial vitiated?
8 Crl.Apl.No.1809/2023 JUDGMENT
4. Whether the cheque was misused,
issued as a blank cheque, or wrongly
enforced against the Appellant instead
of the principal debtor, Harish G.?
5. Whether the alleged violation of Section
269SS of the Income Tax Act affects
the applicability of Section 138 of the
NI Act?
6. What order?
9. My findings to the above points are as under:
Point No.1 to 5 : In Negative
Point No.6: As per final order for
the following:
REASONS
10. Point No. 1 : The Appellant contends that the
trial court committed a grave error in taking cognizance,
rendering the conviction bad in law, and that the
judgment is against the law and probabilities of the case.
To evaluate this, it is necessary to examine the procedural
and substantive correctness of the trial court’s actions.
11. Under Section 138 of the NI Act, cognizance is
warranted when a cheque is issued for a legally
9 Crl.Apl.No.1809/2023 JUDGMENT
enforceable debt or liability, is dishonoured due to
insufficient funds or exceeding arrangements, a demand
notice is served within 30 days of dishonour, and the
drawer fails to pay within 15 days of receiving the notice.
12. Hon’ble Supreme Court in N. Rangachari v.
Bharat Sanchar Nigam Ltd. (2007) 5 SCC 108 elucidated
that a magistrate must be satisfied of these ingredients
before taking cognizance, based on the complaint, sworn
statement, and supporting documents. The trial court,
vide its order dated 11.05.2022, took cognizance after
recording the sworn statement of the Complainant (PW-1)
and marking documents Ex.P1 to P7, which included the
cheque (Ex.P1), bank endorsement of dishonour (Ex.P2),
legal notice (Ex.P3), postal receipt (Ex.P4), postal
acknowledgment (Ex.P5), authorization letter (Ex.P6), and
the complaint (Ex.P7). The trial court found prima facie
evidence of the issuance of a cheque for Rs.50,000/-
dated 08.03.2022, its dishonour on 09.03.2022 for
insufficient funds, issuance of a legal notice on
21.03.2022, its service on 23.03.2022, and the Appellant’s
10 Crl.Apl.No.1809/2023 JUDGMENT
failure to pay within the statutory period. The complaint
was filed on 04.05.2022, within the limitation period
prescribed under Section 138(c) read with Section 142 of
the NI Act. The Appellant has not pointed to any specific
procedural irregularity, such as improper registration of
the complaint or failure to comply with Section 200 of
Cr.P.C. The trial court’s reliance on the Complainant’s
sworn statement and documents was consistent with the
principles laid down in N.Rangachari Case.
13. The contention that the judgment is against
the probabilities of the case is vague and unsupported by
specific references to errors in evidence appreciation. The
trial court’s findings were based on unchallenged
evidence, including the cheque, bank memo, and proof of
notice service, which establish the statutory ingredients.
Thus, this court finds no error in the cognizance process
or the conviction’s legal foundation. Accordingly, Point
No.1 is answered in
14. Point No. 2: The crux of Section 138 of the NI
Act lies in the existence of a legally enforceable debt or
11 Crl.Apl.No.1809/2023 JUDGMENT
liability, the dishonour of a cheque issued to discharge it,
and non-compliance with a statutory demand notice.
Section 139 creates a rebuttable presumption that the
cheque was issued for a legally enforceable debt, placing
the onus on the accused to disprove it. The Hon’ble
Supreme Court in Rangappa v. Sri Mohan (2010) 11 SCC
441 clarified that this presumption shifts the burden to
the accused to establish, through credible evidence or
cross-examination, that no debt existed or the cheque was
issued for a different purpose.
15. The Respondent’s case is that the Appellant, as
a guarantor for Harish G., a subscriber to a chit fund
group (No. HD-04-02) with a chit value of Rs.1,00,000/-,
issued a cheque for Rs.50,000/- to discharge a liability
arising from Harish G.’s failure to pay arrears after
receiving Rs.80,000/- as the successful bidder in a chit
auction on 09.03.2019. The cheque (Ex.P1) was issued on
08.03.2022, presented on the same day, and dishonoured
on 09.03.2022 for insufficient funds (Ex.P2). A legal notice
dated 21.03.2022 (Ex.P3) was served on the Appellant on
12 Crl.Apl.No.1809/2023 JUDGMENT
23.03.2022 (Ex.P5), demanding payment within 15 days.
The Appellant’s failure to comply led to the complaint filed
on 04.05.2022.
16. The trial court found that the Respondent
complied with all statutory requirements i.e., presentation
of the cheque within its validity period (three months from
08.03.2022), issuance of a notice within 30 days of
dishonour (21.03.2022), and filing of the complaint within
one month of the expiry of the 15-day notice period. The
documents Ex.P1 to P7 corroborate the oral evidence of
PW-1, the Complainant’s Managing Director, who testified
about the chit fund transaction, the Appellant’s role as
guarantor, and the sequence of events leading to the
complaint.
17. The Appellant contends that no legally
enforceable debt existed, claiming the cheque was issued
as security. However, he failed to cross-examine PW-1 or
adduce evidence to rebut the presumption under Section
139. The trial court noted that the Appellant did not
dispute the chit fund transaction, his signature on the
13 Crl.Apl.No.1809/2023 JUDGMENT
cheque, the dishonour, or the service of the notice. The
defence of “security” was raised during the plea recording
on 25.11.2022, where the Appellant claimed to have
repaid Rs.20,000/-, but no evidence–such as bank
statements, receipts, or witness testimony–was produced
to substantiate this claim. The Supreme Court in
Rangappa case emphasized that mere assertions are
insufficient to rebut the presumption; the accused must
adduce positive evidence or elicit contradictions through
cross-examination. The Appellant’s failure to do so leaves
the presumption intact.
18. Moreover, the guarantor’s liability under a chit
fund agreement is legally enforceable, as it constitutes a
contractual obligation to cover the principal debtor’s
default. The Respondent’s evidence establishes that the
Appellant executed documents as a guarantor, and the
cheque was issued to discharge this liability. The trial
court’s conclusion that the cheque was issued for a legally
enforceable debt is supported by the evidence and the
statutory presumption, which the Appellant failed to
14 Crl.Apl.No.1809/2023 JUDGMENT
dislodge. This court finds no reason to interfere with this
finding.
19. Point No.3: The Appellant contends that he
was denied a fair opportunity to present his defence due
to ill health, which confined him to bed for four months,
and the subsequent deaths of his father and brother,
which caused depression, preventing him from instructing
his counsel or participating in the trial. This ground raises
the issue of whether the trial court violated principles of
natural justice or Section 313 of Cr.P.C., which mandates
an opportunity for the accused to explain incriminating
circumstances. The trial court record reveals that the
Appellant appeared through counsel on 25.11.2022,
obtained bail, and pleaded not guilty. Copies of
prosecution papers were supplied, and the plea was
recorded under Section 313 of Cr.P.C. However, the
Appellant and his counsel remained absent thereafter,
failing to cross-examine PW-1 or adduce defence evidence.
The trial court, vide orders dated 27.11.2023 and
28.11.2023, closed the cross-examination of PW-1 and
15 Crl.Apl.No.1809/2023 JUDGMENT
dispensed with the Appellant’s statement under Section
313(1) of Cr.P.C., citing his continuous absence despite
sufficient opportunities. The bail bond was cancelled, and
the cash security of Rs.1,000/- was forfeited on
17.10.2023.
20. Section 143 of the NI Act mandates that trials
under Section 138 be conducted expeditiously, preferably
concluding within six months, with day-to-day
proceedings unless adjournment is necessary with
recorded reasons. The Supreme Court in Indian Bank
Association v. Union of India (2014) 5 SCC 590 directed
that chief examination, cross-examination, and re-
examination be conducted on the same day, and the trial
be concluded within three months where possible. The
trial court adhered to these guidelines, noting that the
proceedings were summary in nature under Section 262
to 265 of Cr.P.C.
21. In Basalingappa v. Mudibasappa (2019) 5
SCC 418, the Supreme Court held that while the accused
must be given a reasonable opportunity to defend, courts
16 Crl.Apl.No.1809/2023 JUDGMENT
are not obligated to grant indefinite adjournments,
especially in summary trials where the accused fails to
participate without justifiable cause. The Appellant’s claim
of ill health and depression is raised for the first time in
the appeal, unsupported by medical certificates, affidavits,
or any application for adjournment filed before the trial
court. The absence of contemporaneous evidence, such as
a medical report or a plea for condonation of delay,
undermines the credibility of this defence. Had the
Appellant been genuinely incapacitated, he could have
instructed his counsel to seek adjournment or file an
application under Section 317 of Cr.P.C. for exemption
from personal appearance. No such steps were taken. The
trial court’s decision to proceed after multiple
opportunities aligns with the mandate of expeditious
disposal and does not violate natural justice. The
Appellant’s failure to engage in the trial cannot be
attributed to the court’s actions. This ground is
unsustainable.
17 Crl.Apl.No.1809/2023 JUDGMENT
22. Point No. 4: The Appellant alleges that the
cheque was issued as security for Harish G., the
successful bidder in the chit fund, and was misused by
the Respondent, who should have pursued Harish G.
instead. Additionally, he claims the cheque was blank,
with the date and figures in different ink, casting doubt on
its issuance.
23. Under Section 20 of the NI Act, when a person
signs and delivers a blank or incomplete cheque, the
holder has prima facie authority to complete it, and the
signatory remains liable unless misuse is proved. The
Supreme Court in HDFC Securities Ltd. v. State of
Maharashtra (2017) 1 SCC 640 clarified that a
guarantor’s liability under a cheque is co-extensive with
that of the principal debtor, and the payee is not obligated
to exhaust remedies against the principal debtor before
pursuing the guarantor under Section 138.
24. The Respondent’s evidence establishes that the
Appellant, as guarantor, issued the cheque to discharge a
liability arising from Harish G.’s default in the chit fund
18 Crl.Apl.No.1809/2023 JUDGMENT
transaction. The cheque (Ex.P1) bears the Appellant’s
signature, which is undisputed. The claim that it was
blank is unsupported by evidence, as the Appellant did
not cross-examine PW-1 to challenge the cheque’s
authenticity or produce expert evidence to prove different
ink usage. The trial court, relying on Section 118(a) of the
NI Act, presumed that the cheque was issued for
consideration, and Section 139 reinforced the
presumption of a legally enforceable debt. The Appellant’s
failure to rebut these presumptions through cross-
examination or defence evidence renders the claim of
misuse untenable. Regarding the pursuit of Harish G., the
Respondent’s choice to enforce the cheque against the
Appellant, as guarantor, is legally permissible. The
guarantor’s liability is independent under the NI Act, and
the Respondent was not required to first pursue Harish G.
The trial court’s finding that the cheque was issued for a
legally enforceable debt is supported by the evidence and
legal presumptions, and this ground fails.
19 Crl.Apl.No.1809/2023 JUDGMENT
25. Point No.5: The Appellant argues that the
transaction violated Section 269SS of the Income Tax Act,
1961, which mandates that loans or advances exceeding
Rs.20,000/- be made through an account payee cheque.
He contends that this violation negates the applicability of
Section 138 of the NI Act.
26. Section 269SS applies to tax compliance and
prohibits cash loans above Rs.20,000/- to prevent tax
evasion. However, it does not affect the enforceability of a
debt or liability under the NI Act. The Supreme Court in
Rangappa case held that the validity of the underlying
transaction is irrelevant to Section 138, which focuses on
the cheque’s issuance, dishonour, and non-payment after
notice. The Respondent’s evidence establishes a chit fund
transaction, not a cash loan, and the Appellant’s role as
guarantor created a legally enforceable liability. The trial
court did not err in ignoring this argument, as Section
269SS does not bar prosecution under Section 138. This
ground is misconceived and lacks merit.
20 Crl.Apl.No.1809/2023 JUDGMENT
27. Point No.6: Having meticulously examined the
grounds of appeal, the trial court record, and the
applicable legal framework, this court finds that the trial
court’s judgment is well-reasoned, supported by evidence,
and consistent with the law.
28. The Respondent established the ingredients of
Section 138 through unchallenged oral and documentary
evidence, and the statutory presumptions under Sections
118, 139, and 146 of the NI Act were correctly applied.
The Appellant failed to rebut these presumptions or
substantiate his defences, including the claims of misuse,
blank cheque, or personal incapacity.
The sentence of a Rs.60,000/- fine, with ₹58,000/- as
compensation to the Respondent, is proportionate to the
cheque amount (₹50,000/-) and aligns with the punitive
and compensatory objectives of Section 138. The default
sentence of three months’ imprisonment is reasonable,
considering the nature of the offence and the need to deter
cheque dishonour.
29. The Appellant’s request to adduce defence
21 Crl.Apl.No.1809/2023 JUDGMENT
evidence or raise additional grounds cannot be
entertained, as sufficient opportunities were provided
during the trial, and no arguments were advanced in the
appeal to justify new grounds.
30. The trial court’s adherence to the Supreme
Court’s directives in Indian Bank Association case for
expeditious disposal, coupled with the Appellant’s failure
to participate, justifies the conviction and sentence. No
miscarriage of justice is evident, and the appeal lacks
merit.
31. Point No.6: In view of the reasons mentioned
above, and findings arrived at on Point No.1 to 5, I
proceed to pass the following:
ORDER
The appeal filed by appellant/accused Sri.
H. Narasimha Murthy u/sec. 374(3) of Cr.P.C is
hereby dismissed.
The judgment and order of conviction
dated 07.12.2023 passed by the Hon’ble XVI
Additional Chief Metropolitan Magistrate,
Bengaluru, in C.C. No. 14087/2022 is hereby
22 Crl.Apl.No.1809/2023 JUDGMENTconfirmed.
Office is hereby directed to returned the
entire TCR along with copy of this Judgment
forthwith.
The Trial Court is directed to take
necessary steps for execution of the sentence in
accordance with law.
(Dictated to Stenographer Grade-I directly on computer, typed by
him, revised and corrected by me and then pronounced in open court on
this the 2nd day of August, 2025)(Shirin Javeed Ansari)
LXIX Addl.C.C. & Sessions Judge,
Bengaluru.