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Cash Loans Above ₹20,000 Violate Income Tax Law, Not Enforceable Under NI Act: Kerala HC

Case Law Details

TaxGuru Citation
2025 taxguru.in 6322
Case Name
P.C. Hari Vs Shine Varghese (Kerala High Court)
Date of Judgement/Order
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P.C. Hari Vs Shine Varghese (Kerala High Court)

Digital India push reflected in Court’s approach to Cash Deals- Cash Loans Above ₹20,000 Violate Income Tax Law, Not Enforceable Under NI Act: Kerala High Court

The revision petitioner (accused) was convicted u/s 138 of the Negotiable Instruments Act for issuing a cheque of ₹9,00,000, which was dishonoured due to insufficient funds. The alleged loan was paid in cash by the complainant. Both the trial court & the appellate court upheld the conviction & sentence.

Also read: Cash Loans Above ₹20,000 Enforceable Despite Section 269SS Violation: SC

The Criminal Revision Petition challenged the legality & enforceability of the debt due to violation of Section 269SS of the Income Tax Act, 1961, which prohibits cash transactions above ₹20,000.

The important points arose for consideration by  Courts are:

1.Whether the presumption u/s 139 of the NI Act cover the “legally enforceable debt”?

Court discusses Sections 138 & 139 of the NI Act. It clarifies that the presumption includes legally enforceable debt, as explained in Rangappa v. Sri Mohan [2010 KHC 4325which overruled the earlier view in Krishna Janardhan Bhat v. Dattatraya G. Hegde [2008 (4) SCC 54], The explanation to Section 138 specifically mentions “legally enforceable debt,” & Section 139 operates to presume such enforceability unless rebutted.

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Author Info

CA Vijayakumar Shetty
Qualification: CA in Practice
Company: Shetty & Co, Chartered Accountants, Mangalore
Location: Mangalore, Karnataka
Articles Published: 7,266

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