Khushi Finance Coporation Gulbarga vs Ganesh

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IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH

DATED THIS THE 4TH DAY OF NOVEMBER, 2025

BEFORE THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

CRIMINAL APPEAL NO.200098 OF 2024 (378(Cr.PC)/419(BNSS)) BETWEEN:

KHUSHI FINANCE CORPORATION, GULBARGA, AT 3-246, MILAN CHOWK, GAZIPUR, GULBARGA, REGISTERED PARTNERSHIP FIRM, REPRESENTED THROUGH ONE OF THE PARTNERS, DR. SUDHA R. HALKAI AGE: 48 YEARS, OCC: PARTNER IN KHUSHI FINANCE CORPORATION AT 3-246, MILAN CHOWK, GAZIPUR, KALABURAGI-585101. ...APPELLANT (BY SRI. RAJESH G. DODDAMANI, ADVOCATE)

AND:

GANESH S/O T. A. PATIL, AGE: MAJOR, OCC: BUSINESS, Digitally signed by RENUKA R/O H.NO.1-29/3;6, GEETA BUILDING, Location: HIGH BEHIND DISTRICT COURT, COURT OF NEAR ST. JOSEPH CONVENT, KARNATAKA GULBARGA-585102. ...RESPONDENT (BY SRI. N. B. DIWANJI, ADVOCATE)

THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(4) OF CR.P.C., PRAYING TO ALLOW THIS APPEAL AND THEREBY SET ASIDE THE JUDGMENT AND ORDER OF ACQUITTAL DATED 10.11.2022 PASSED IN CRIMINAL CASE NO.2340/2014 BY THE III- ADDL. CIVIL JUDGE AND JMFC, KALABURAGI AND CONVICT THE RESPONDENT/ACCUSED AND AWARD DOUBLE THE CHEQUE AMOUNT TO APPELLANT BY WAY OF COMPENSATION. -2- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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THIS APPEAL COMING ON FOR FURTHER HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM)

The captioned appeal is by the complainant assailing

the judgment and order of acquittal passed by the learned

Magistrate acquitting the accused for the offence

punishable under Section 138 of the Negotiable

Instruments Act, 1881.

2. Facts leading to the case as under:

The complainant is a partnership firm engaged in the

business of money lending. The accused, who is an

architect by profession, is stated to have approached the

complainant-firm seeking a loan. Pursuant thereto, the

complainant advanced a sum of Rs.6,00,000/- to the

accused on 09.06.2010, allegedly carrying interest at the

rate of 36% per annum, in addition to 12% and O.D.

charges. It is the specific case of the complainant that -3- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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towards discharge of the said liability, the accused issued

a cheque for Rs.20,00,000/-, which, upon presentation,

was dishonoured. Consequently, after issuing a statutory

notice under Section 138(b) of the Negotiable Instruments

Act, 1881 ("N.I. Act") and upon non-payment within the

stipulated period, the complainant instituted a private

complaint under Section 200 of the Code of Criminal

Procedure, 1973 ("Cr.P.C.") for the offence punishable

under Section 138 of the N.I. Act.

3. Upon service of summons, the accused entered

appearance and contested the proceedings. The principal

defence raised was that the complaint itself was

unsustainable as it was based on a post-dated cheque for

Rs.20,00,000/-, whereas the statutory notice under

Section 138(b) of the N.I. Act demanded only

Rs.3,46,000/-. According to the accused, this discrepancy

between the cheque amount and the amount demanded in

the notice went to the root of the matter, rendering the

prosecution invalid.

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4. The learned Magistrate, on evaluation of the

evidence on record, found that there existed a material

inconsistency between the amount mentioned in the

cheque and the amount demanded in the statutory notice.

The Court held that the complainant failed to prove the

existence of a legally enforceable debt corresponding to

the cheque amount. Consequently, invoking powers under

Section 255(1) of the Cr.P.C., the learned Magistrate

acquitted the accused of the offence punishable under

Section 138 of the N.I. Act.

5. This Court has heard the learned counsel

appearing for the appellant-complainant as well as the

learned counsel representing the respondent-accused. The

entire material on record has been carefully perused.

6. On independent examination, it is seen that the

cheque dated 16.12.2013, forming the basis of the

complaint, is marked as Ex.P1, while the statutory notice

issued under Section 138(b) of the N.I. Act is marked as

Ex.P4. A bare comparison of Ex.P1 and Ex.P4 makes it -5- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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evident that while the cheque amount is Rs.20,00,000/-,

the complainant has, in the statutory notice, demanded

payment of only Rs.3,46,000/-.

7. The issue as to whether such a discrepancy

between the cheque amount and the amount demanded in

the notice vitiates the proceedings under Section 138 of

the N.I. Act, is no longer res integra. The Hon'ble Supreme

Court, in Kaveri Plastics v. Mahdoom Bawa

Bahrudeen Noorul [2025 SCC OnLine SC 2019], has

categorically dealt with this aspect. Paragraphs 7 to 9 of

the said decision, being directly relevant to the present

controversy, are extracted herein below for ready

reference:

"7. When the Proviso (b) to Section 138 stipulates the service of notice as one of the conditions for constituting the offence, and when the words 'said amount' is incorporated in the language of the provision, it is the amount which is specifically referable to the amount recoverable under the cheque in question. Reading Section 138 of the Act in a composite manner, the word 'said -6- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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amount' occurring in the proviso (b) is connectible with and operates in conjunction with language in the parent part of the Section 'where any cheque drawn by a person ...... of any amount of money'.

7.1. The words 'said amount' and the phrase 'any amount of money' have the same purport signifying the cheque amount. They operate hand- in-hand for the purpose of applicability of the Section. The nexus or linkage between the two is enacted by the Legislature with a purpose of making the two to be the same and inseparable components, the former describing the offence and the latter denoting the condition to be fulfilled for constituting the offence.

8. From the afore-stated reiterative pronouncements and the principles propounded by the courts, the position of law that emerges is that the notice demanding the payment of the amount covered by the dishonoured cheque is one of the main ingredients of the offence Under Section 138 of the NI Act. In the event of the main ingredient not being satisfied on account of discrepancy in the amount of cheque and one mentioned in the notice, all proceedings Under Section 138 of the NI Act would fall flat as bad in law. The notice to be issued under Proviso (b) to Section 138 of the Act, must -7- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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mention the same amount for which the cheque was issued. It is mandatory that the demand in the statutory notice has to be the very amount of the cheque. After mentioning the exact cheque amount, the sender of the service may claim in the notice amounts such as legal charges, notice charges, interest and such other additional amounts, provided the cheque amount is specified to be demanded for payment.

8.1. A failure in above regard, namely when the cheque amount is not mentioned in the Proviso

(b) notice or the amount different than the actual cheque amount is mentioned, in the notice, such notice would stand invalid in eye of law. The notice in terms of Proviso (b) being a provision in penal statute and a condition for the offence, it has to be precise while mentioning of the amount of the cheque which is dishonoured. Even if the cheque details are mentioned in the notice but corresponding amount of cheque is not correctly mentioned, it would not bring in law the validity for such notice. Here the principle of reading of notice as a whole is inapplicable and irrelevant. Any elasticity cannot be adopted in the interpretation. It has to be given technical interpretation. -8-

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8.2. The condition of notice under Proviso (b) is required to be complied with meticulously. Even typographical error can be no defence. The error even if typographical, would be fatal to the legality of notice, given the need for strict mandatory compliance. And in the facts of the present case, the explanation that mentioning of wrong amount in the cheque was in the nature of typographical or inadvertent error could hardly be accepted, for, the so called mistake occurred and recurred in both the notices dated 08.06.2012 and 14.09.2012.

9. When the provision is penal and the offence is technical, there is no escape from holding that the 'said amount' in proviso (b) cannot be the amount other than mentioned in the cheque in question for dishonour of which the notice is received, nor the mentioning of omnibus amount in the notice would fulfill the requirement. It has to be held that in order to make a valid notice under the Proviso (b) to Section 138 of the NI Act, it is mandatory that 'said amount' to be mentioned therein is the very amount of cheque, and none other."

8. The Hon'ble Apex Court, in the judgment cited

supra, has categorically held that the amount specified in -9- NC: 2025:KHC-K:6527 CRL.A No. 200098 of 2024

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the statutory notice issued under proviso (b) to Section

138 of the Negotiable Instruments Act, 1881, must

correspond to and be identical with the amount mentioned

in the dishonoured cheque. The statutory requirement

under Section 138(b) contemplates that the drawer of the

cheque must be called upon to make payment of "the said

amount of money" that is, the precise amount for which

the cheque was issued and dishonoured. Any deviation or

discrepancy between the cheque amount and the amount

demanded in the notice would render the notice invalid, as

such notice would fail to satisfy the mandatory ingredients

prescribed under Section 138(b) of the N.I. Act. The Apex

Court has further emphasized that this defect is not a

mere technical irregularity curable by interpretation but a

substantive flaw that goes to the very root of the

prosecution.

9. In the light of the authoritative pronouncement

by the Hon'ble Supreme Court, this Court is of the

considered view that the cheque in the present case, being

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for a sum of Rs.20,00,000/-, could not have been made

the foundation of a complaint based on a statutory notice

that demanded payment of only Rs.3,46,000/-. The

demand in the notice issued under proviso (b) to Section

138 of the N.I. Act must necessarily reflect the exact

amount covered under the dishonoured cheque, as it

constitutes the basis of the cause of action for launching

prosecution under Section 138 of the N.I. Act. In the

absence of such conformity, the notice fails to meet the

statutory requirement and consequently vitiates the entire

proceedings.

10. In the present case, the complainant's statutory

notice demanding Rs.3,46,000/-, when the cheque amount

was Rs.20,00,000/-, is clearly inconsistent with the

legislative mandate. Such a notice cannot be construed as

a valid notice under Section 138(b) of the N.I. Act. As a

result, the presumption under Sections 118 and 139 of the

N.I. Act regarding existence of a legally enforceable debt

does not arise. The complainant has, therefore, failed to

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establish the foundational facts necessary to attract the

penal consequences under Section 138 of the N.I. Act.

11. Consequently, this Court finds that the learned

Magistrate has rightly appreciated the evidence on record

and has correctly concluded that the complainant failed to

prove the existence of a legally recoverable debt

corresponding to the cheque amount. The finding of

acquittal recorded by the Trial Court is firmly supported by

both law and evidence. This Court does not find any

perversity, illegality, or infirmity in the impugned

judgment warranting interference in appeal.

12. For the foregoing reasons, this Court holds that

the appeal filed by the complainant is devoid of merit and

is accordingly dismissed. The judgment of acquittal

rendered by the learned Magistrate is hereby confirmed.

13. Insofar as the documents produced by the

complainant by way of additional evidence are concerned,

this Court finds that the same have no bearing on the

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controversy involved in the present appeal. In view of the

settled legal position laid down by the Hon'ble Apex Court,

the additional documents sought to be produced do not in

any manner advance the case of the appellant or cure the

statutory defect inherent in the notice issued under

Section 138(b) of the N.I. Act. Accordingly, I.A.No.1/2025,

filed for production of additional documents, stands

rejected.

However, it is directed that the documents filed along

with I.A.No.1/2025 shall be returned to the complainant

after retaining photocopies of the same for record

purposes.

Sd/-

(SACHIN SHANKAR MAGADUM) JUDGE

NB List No.: 2 Sl No.: 28 CT:SI