Mere Denial of Transaction Will Not Annul the Lawful Discharge of Payment Through Cheque

The High Court of Karnataka in the case of G E Ramesh v. B P Umashankar, [CRIMINAL APPEAL No.1197 OF 2013 (A)] held on February 9, 2024, that the mere denial of a transaction will not annul the evidence of the lawful issuance of a cheque.

A cheque issued by a paddy merchant for 200 quintals of paddy bought from the complainant had been dishonoured, with the bank endorsement saying, “Payment stopped by the borrower.” The merchant was found guilty by the Trial Court under Section 138 of the Negotiable Instrument Act (NI Act) for dishonor of cheque, however, the First Appellate Court held that the accused had probabled his defense through the production of a police complaint regarding the loss of a signed cheque and an endorsement issued by the police on the same day. Aggrieved by the order of the First Appellate Court, the complainant appealed to the High Court.

The High Court disagreed with the findings of the First Appellate Court since the ‘stop payment’ instruction was issued to the bank six days prior to the date the loss of the cheque was reported. The court further dismissed the contention made by the accused that he had not bought paddy from the complainant. Citing prior cases, the court stated that mere denial of the transaction does not discredit the evidence of the complainant proving the issuance of cheque. The decision of the Trial Court was upheld, and the accused was convicted under Section 138 of the NI Act, although with a reduced penalty and sentence.