The Karnataka High Court, Dharwad Bench, on 23 August 2025, set aside the acquittal granted by the trial court and convicted Benaka Sponge Iron Pvt. Ltd. and its Director, Ajay Kumar Bhuwalka, in a cheque bounce case under Section 138 of the Negotiable Instruments Act, 1881. The Court ordered them to pay a cumulative fine of ₹2 crore, failing which the Director will undergo six months’ simple imprisonment.
Background of the Case
The complainant, Sri Kamal Kumar Jain, proprietor of M.K. Minerals, Hosapete, supplied iron ore and allied products to the accused company between 2008 and 2009. While part payments were made initially, a substantial outstanding of ₹1,56,87,624 remained unpaid.
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In July 2011, the Director issued two cheques of ₹50 lakh each drawn on IDBI Bank, Bangalore, towards part payment. However, on being presented, both cheques were dishonoured on 15 February 2012 with the remark “insufficient funds.” Despite a legal notice served on 3 March 2012, no payment was made, prompting the complainant to initiate criminal proceedings.
In November 2017, the Additional Civil Judge and JMFC, Hosapete, acquitted the accused, holding that the complainant failed to prove a legally recoverable debt. The court also noted alleged defects in service of legal notice and questioned the admissibility of cheque evidence.
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Justice C.M. Poonacha, after examining the ledger accounts, invoices, and the presumption under Section 139 of the N.I. Act, ruled that the liability of the accused was clearly established. There is an initial presumption which favours the complainant. example of a reverse onus clause… the accused can rebut only by preponderance of probabilities.
The Court also rejected the accused’s contention regarding jurisdiction, citing that the cheques were presented through Axis Bank, Hosapete Branch, thereby giving the Hosapete court jurisdiction.
“The accused Nos.1 and 2 are convicted… and sentenced to pay a cumulative fine of ₹2 crore within four months. In default, accused No.2 shall undergo simple imprisonment of six months,” the Court directed.
Out of the fine, ₹1.98 crore will go to the complainant, while ₹2 lakh will be deposited with the State.
Case Title: Sri. Kamal Kumar Jain vs. Benaka Sponge Iron Pvt. Ltd. & Anr.
Case No.: Criminal Appeal No. 100030 of 2018
