The Supreme Court of India has overturned a Bombay High Court judgment that had acquitted an individual in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). A bench comprising Justices Manmohan and N.V. Anjaria held that once the execution of a cheque is admitted, the statutory presumptions of consideration and legally enforceable debt arise, and the High Court, in its revisional jurisdiction, cannot upset concurrent factual findings of lower courts in the absence of perversity. The Court also issued a comprehensive set of guidelines to expedite the trial of cheque bouncing cases nationwide.
Case Background
The appeal was filed by Sanjabij Tari (Appellant-Complainant) against a judgment dated 16th April 2009 by the High Court of Bombay at Goa. The High Court had acquitted Kishore S. Borcar (Respondent No.1-Accused) in an ex-parte order, reversing the conviction orders passed by both the Trial Court and the Sessions Court.
The case originated from a complaint that a cheque for Rs. 6,00,000 issued by the accused in discharge of a friendly loan was dishonoured. The Trial Court, in its judgment on 30th April 2007, found the accused guilty, holding that he had failed to rebut the presumptions under Sections 118 and 139 of the NI Act. The Sessions Court upheld this conviction on 17th September 2008. However, the High Court acquitted the accused, prompting the complainant to approach the Supreme Court.
Arguments of the Parties
Appellant-Complainant’s Submissions: Mr. Amarjit Singh Bedi, counsel for the appellant, argued that the High Court erred in its revisional jurisdiction by overturning the consistent factual findings of the two lower courts. He contended that there was no evidence to prove the complainant lacked the financial capacity to advance the Rs. 6,00,000 loan. He emphasised that the complainant, in his sworn statement, explained he had arranged the funds from his father, a cloth merchant, and even from a personal loan he had taken. Further, the accused had shown readiness to pay the cheque amount during sentencing arguments, indicating an admission of liability.
Respondent No.1-Accused’s Submissions: Per contra, Mr. Ankit Yadav, counsel for the accused, argued that the complainant’s monthly salary of only Rs. 2,300 was insufficient to lend such a large sum. He submitted that under the precedent set in Rangappa vs. Sri Mohan, the accused can raise a probable defence to create doubt about the existence of a legally enforceable debt. Citing APS Forex Services Private Limited vs. Shakti International Fashion Linkers and Ors., he argued that when the complainant’s financial capacity is questioned, the onus shifts back to the complainant to prove it. The defence maintained that a blank cheque was given to the complainant merely to help him obtain a bank loan.
Supreme Court’s Analysis and Reasoning
The Supreme Court began by reiterating the legislative intent behind Chapter XVII of the NI Act, which is “to enhance the acceptability of cheques in settlement of liabilities.”
Presumptions Under NI Act are Not Optional: The bench firmly established that once the signature on a cheque is admitted, the presumptions under Section 118 (that it was for consideration) and Section 139 (that it was for a legally enforceable debt) automatically arise. The Court noted that any contrary observations in Krishna Janardhan Bhat vs. Dattatraya G. Hegde were overruled by a larger bench in Rangappa.
The judgment stated, “The initial onus of proving that the cheque is not in discharge of any debt or other liability is on the accused/drawer of the cheque.”
Judicial Approach to NI Act Cases: The Court took judicial notice of a worrying trend where some lower courts and High Courts fail to give effect to these statutory presumptions, treating Section 138 proceedings as simple civil recovery suits. The Court observed, “This Court is of the view that such an approach is not only prolonging the trial but is also contrary to the mandate of Parliament.”
Violation of Income Tax Act Does Not Invalidate Debt: The Supreme Court explicitly set aside a recent Kerala High Court ruling in P.C. Hari vs. Shine Varghese & Anr., which held that a cash transaction over Rs. 20,000, violating Section 269SS of the Income Tax Act, 1961, is not a ‘legally enforceable debt’. The Supreme Court clarified that a breach of Section 269SS only attracts a penalty under Section 271D of the IT Act and does not render the transaction “illegal, invalid or statutorily void.” Therefore, such a transaction remains enforceable under Section 138 of the NI Act.
Scope of Revisional Jurisdiction: The Court reiterated the settled principle that a revisional court cannot re-analyse evidence and interfere with concurrent factual findings unless there is clear perversity. “It is a well-established principle of law that the Revisional Court will not interfere, even if a wrong order is passed by a Court having jurisdiction, in the absence of a jurisdictional error,” the judgment noted, citing Southern Sales & Services and Others vs. Sauermilch Design and Handels GMBH.
Accused’s Conduct and Defence: The bench found the accused’s defence—that he gave a blank signed cheque to his friend to enable him to secure a bank loan—to be “unbelievable and absurd.” The Court also drew an adverse inference from the accused’s failure to reply to the statutory demand notice, which, as per the ruling in Tedhi Singh vs. Narayan Dass Mahant, suggests merit in the complainant’s case.
New Guidelines for Expeditious Disposal
Acknowledging the “staggeringly high” pendency of cheque bouncing cases, the Court issued a series of binding directions, including:
- Dual Service of Summons: Summons must be served not only through regular modes but also dasti (by the complainant) and through electronic means.
- Online Payment Facilities: District Courts must create dedicated online payment links (QR codes/UPI) for the accused to pay the cheque amount at the initial stage.
- Mandatory Synopsis: Every complaint must be filed with a standardized synopsis of key details at the top.
- No Pre-Cognizance Summons: Magistrates are not required to issue summons to the accused before taking cognizance of the complaint.
- Structured Questioning: At the initial stage, the Trial Court shall ask the accused specific questions about the cheque, signature, and liability to determine if a summary trial is appropriate.
- Use of Physical Courts: After service of summons, matters should be placed before physical courts to encourage settlement.
Modified Guidelines for Compounding
The Court also “revisited and tweaked” the 15-year-old guidelines for compounding NI Act offences laid down in Damodar S. Prabhu. The modified costs are:
- No Cost: If the cheque amount is paid before the recording of the accused’s defence evidence.
- 5% Cost: If paid after defence evidence but before the Trial Court’s judgment.
- 7.5% Cost: If paid before the Sessions Court or High Court in appeal/revision.
- 10% Cost: If paid before the Supreme Court.
Final Decision
The Supreme Court allowed the appeal, setting aside the High Court’s acquittal order and restoring the conviction and sentence passed by the Trial Court and Sessions Court. The Respondent No.1-Accused was directed to pay Rs. 7,50,000 in 15 equated monthly instalments of Rs. 50,000 each. The High Courts and District Courts have been directed to implement the new guidelines by 1st November, 2025.
