Kerala High Court: No 138 NI Act Case for Cash Loans Above ₹20K Without Valid IT Act Explanation

The Kerala High Court held that cheque bounce cases under Section 138 of the NI Act are not maintainable if based on cash loans above ₹20,000 made in violation of the Income Tax Act, unless there’s a clear and valid explanation as per Section 273B of the IT Act.

Justice P.V. Kunhikrishnan said such cash dealings can't be treated as “legally enforceable debts.” 

The presumption under Section 139 NI Act still applies but can be rebutted. The ruling will apply prospectively, except where the issue has already been raised in pending cases. 

(P.C. Hari v. Shine Varghese and Anr)