Introduction

In the recent judgment of Sanjabij Tari v. Kishore S. Borcar delivered on September 25, 2025, the Hon’ble Supreme Court of India not only addressed the specific dispute between the parties but also issued comprehensive guidelines to tackle the massive backlog of cheque bounce cases across the country. The Hon’ble Supreme Court, while restoring the conviction of the respondent under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), has reinforced the presumptions available under Sections 118 and 139 of the NI Act and established a framework for expeditious disposal of such cases.

Facts of the Case

The case involved a dishonored cheque of Rs. 6,00,000/- issued by the respondent (Kishore S. Borcar) to the appellant (Sanjabij Tari). The appellant claimed that the cheque was issued in discharge of a legally enforceable debt, which the respondent had borrowed from him as a friendly loan. Upon dishonor of the cheque, the appellant sent a legal notice to the respondent, who failed to respond .

Both the Ld. Trial Court and the Ld. Sessions Court convicted the respondent under Section 138 of the NI Act, finding that he had failed to rebut the statutory presumptions under Sections 118 and 139 of the NI Act. However, the Hon’ble High Court of Bombay at Goa, in exercise of its revisional jurisdiction, acquitted the respondent through an ex-parte judgment dated April 16, 2009, accepting his defense that he had given a blank signed cheque to the appellant to enable him to obtain a loan from a bank .

Issues Before the Court

The Hon’ble Supreme Court had to determine:

1. Whether the High Court was justified in upsetting the concurrent findings of the Ld. Trial Court and the Ld. Sessions Court in exercise of its revisional jurisdiction.
2. Whether the respondent had successfully rebutted the statutory presumptions under Sections 118 and 139 of the NI Act.
3. Whether the appellant had the financial capacity to advance a loan of Rs. 6,00,000/- to the respondent.

Arguments Raised

Arguments on Behalf of Appellant-Complainant

The appellant argued that:

1. The Hon’ble High Court erred in upsetting the conviction under Section 138 of the NI Act based on categorical findings of facts rendered by both the Courts below.
2. There was no evidence to establish that he did not have the financial means to advance a friendly loan.
3. The appellant had arranged money from his father, who was a cloth merchant having two shops, and had also used part of a loan he himself had borrowed from a financial institution.
4. The respondent, during arguments on sentencing before the Ld. Trial Court, had prayed for leniency on the ground that he was ready to pay the cheque amount within a reasonable time.
5. The Hon’ble High Court should have exercised its inherent powers to set aside the impugned judgment, which was an ex-parte order

Arguments on Behalf of Respondent No.1-Accused

The respondent contended that:

1. The appellant was being paid a salary of only Rs. 2,300/- per month, which was not sufficient to advance a loan of Rs. 6,00,000/-.
2. The appellant was a highly indebted person who did not have any source of income other than his meagre salary.
3. The accused can rely on material and/or evidence filed by the complainant to raise a probable defense creating doubts about the existence of a legally enforceable debt¹.
4. When the accused questions the financial capacity of the complainant, the onus shifts back to the complainant to prove his financial capacity².
5. The defense that a blank cheque had been given to enable the appellant to obtain a loan from a bank was more than a probable defense to rebut the presumption under the NI Act.

Analysis by the Hon’ble Apex Court

1. Scope and Intent of Chapter XVII of NI Act

The Hon’ble Apex Court began its analysis by outlining the scope and intent of Chapter XVII (Sections 138 to 148) of the NI Act, which was inserted by Act 66 of 1988 with effect from April 1, 1989. The Hon’ble Supreme Court emphasized that the legislative intent was “to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds“.

The Hon’ble Supreme Court observed that the provisions in Chapter XVII were introduced to enhance the reliability of cheques and to criminalize issuance of cheques without sufficient funds while providing safeguards against harassment of honest drawers. The general thrust is to restore credibility of cheques as a substitute for cash.

2. Presumptions Under Sections 118 and 139 of the NI Act

The Hon’ble Supreme Court reiterated that once the execution of a cheque is admitted, the presumptions under Sections 118 and 139 of the NI Act automatically arise. These presumptions are:

1. The cheque was drawn for consideration (Section 118);
2. The holder of the cheque received it in discharge of a legally enforceable debt or liability (Section 139).

The Hon’ble Apex Court clarified that although the presumption under Section 139 of the NI Act is rebuttable, 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 cheque³.

3. Departure from Statutory Presumptions under Sections 118 and 139 NI Act is Contrary to Legislative Intent

The Hon’ble Supreme Court observed with concern that certain courts have failed to give due effect to the statutory presumptions under Sections 118 and 139 of the NI Act, thereby diluting the intent of Parliament.

In P.C. Hari v. Shine Varghese & Anr.⁴, the Hon’ble Kerala High Court had held that a debt arising from a cash transaction exceeding Rs. 20,000/-, in violation of Section 269SS of the Income Tax Act, 1961 (“IT Act”), cannot be treated as a “legally enforceable debt” unless satisfactorily explained, implying that the presumption under Section 139 of the NI Act would not apply in such cases.

Disagreeing with that view, the Hon’ble Supreme Court clarified that a breach of Section 269SS of the IT Act attracts only a penalty under Section 271D of the IT Act and does not render the underlying transaction illegal, void, or unenforceable. Consequently, such contravention does not affect the operation of Sections 118 and 139 of the NI Act because such a person, assuming him/her to be the
payee/holder in due course, is liable to be visited by a penalty only as prescribed. The contrary reasoning in P.C. Hari was, therefore, set aside.

The Hon’ble Apex Court further noted that some District and High Courts are treating prosecutions under Section 138 NI Act as akin to civil recovery proceedings by requiring complainants to independently prove the existence of a debt or liability. This approach, the Court held, not only delays trials but also undermines the legislative mandate aimed at ensuring credibility and sanctity of cheques in commercial transactions.

4. No Evidence Produced to Prove Complainant’s Financial Incapacity

The accused failed to produce any evidence or witnesses to prove the complainant’s financial incapacity. As clarified in Rajaram S/o Sriramulu Naidu (Since Deceased) Through LRs. vs. Maruthachalam (Since Deceased) Through LRs.⁵, such presumptions under Sections 118 and 139 NI Act can only be rebutted through credible evidence, like testimony from the complainant’s bank or tax officials—which was not done here.

5. When the Evidence of PW-1 is read in its entirety, it cannot be said that the appellant-complainant had no wherewithal to advance loan

When the complainant’s testimony (PW-1) is read as a whole, it clearly shows that he possessed the means to advance the loan. He stated that he lent money to the accused, a friend, partly from funds he had received and partly by borrowing from his father.

Both the Ld. Trial Court and the Ld. Sessions Court found this evidence credible and held that the accused had failed to rebut the statutory presumptions under Sections 118 and 139 of the NI Act. The Courts concluded that the complainant had proved the existence of a legally enforceable debt and that the accused’s claim of the complainant’s financial incapacity was baseless.

6. High Court’s Exercise of Revisional Jurisdiction

The Hon’ble Supreme Court held that in exercise of revisional jurisdiction, the Hon’ble High Court should not, in the absence of perversity, upset concurrent factual findings. It is not for the Revisional Court to re-analyze and re-interpret the evidence on record, even if a wrong order is passed by a Court
having jurisdiction, in the absence of a jurisdictional error⁶.

7. Failure to Reply to Notice

The accused’s failure to respond to the statutory notice under Section 138 of the NI Act supports the inference that the complainant’s version is credible. As held in Tedhi Singh v. Narayan Dass Mahant⁷, if the accused intends to dispute the complainant’s financial capacity, such a defence must be raised in the reply to the demand notice.

Similarly, in MMTC Ltd. and Anr. v. Medchl Chemicals & Pharma (P) Ltd. and Anr.⁸, it was held that non-reply to a statutory notice implies that the cheque was issued towards a subsisting liability. Since the accused neither replied to the notice nor initiated any proceedings disputing encashment, his defence of the complainant’s financial incapacity is clearly an afterthought. Bottom of Form

8. Respondent’s Defense

The Hon’ble Supreme Court found the respondent’s defense that a signed blank cheque was issued to enable the appellant to obtain a loan from a bank to be “unbelievable and absurd” . The Hon’ble Supreme Court agreed with the Sessions Court’s finding that “it is funny to say that for obtaining loan from the bank, one can show a cheque which is issued on an account in which there are not sufficient funds” .

9. Guidelines Issued by the Court

Recognizing the staggering pendency of cheque-bounce cases under Section 138 of the Negotiable Instruments Act, 1881, the Hon’ble Supreme Court took judicial notice of the mounting burden on trial courts. Reiterating the nature of the offence, the Hon’ble Supreme Court referred to P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd.⁹, wherein proceedings under Section 138 were described as “a civil sheep in a criminal wolf’s clothing”, emphasizing that such cases are primarily intended to protect the interests of the payee rather than to punish the drawer.

The Hon’ble Apex Court also cited Damodar S. Prabhu vs. Sayed Babalal H.¹⁰, to reaffirm that offences under Section 138 are compoundable, and drew strength from Gian Chand Garg v. Harpal Singh & Anr.¹¹, which held that parties are free to amicably settle cheque-bounce disputes, treating them as civil in nature. Further, the Hon’ble Supreme Court approved the view in Chellammal & Anr. v. State Represented by the Inspector of Police¹² that accused persons in Section 138 cases can also avail the benefit of the Probation of Offenders Act, 1958, while expressly setting aside contrary observations of the Kerala High Court in M.V. Nalinakshan v. M. Rameshan & Anr.¹³.

Accordingly, keeping in view the massive backlog, the quasi-criminal and compoundable nature of the offence, and the need for procedural efficiency, the Hon’ble Supreme Court issued comprehensive guidelines to facilitate expeditious disposal of such cases. These include the following:

1. Service of Summons – Service of summons shall not be confined to prescribed usual modes but shall also be issued dasti (by hand). Trial Courts shall resort to service of summons by electronic means in terms of applicable notifications/rules. The complainant shall provide requisite particulars including e-mail address, mobile number, and/or WhatsApp number of the accused, supported by an affidavit. The complainant shall file an affidavit of service before the Court.
2. Online Payment Facilities – The Principal District and Sessions Judge of each District Court shall create and operationalize dedicated online payment facilities through secure QR codes or UPI links to facilitate expeditious settlement of cases. Summons issued in Section 138 NI Act cases shall clearly state that the accused may pay the cheque amount at the initial stage through these online links. Once payment is confirmed, the complainant will be notified, and the court may pass suitable orders for compounding or closure of proceedings.
3. Standardized Complaint Format – Each complaint under Section 138 of the NI Act shall contain a standardized synopsis with specific details about the parties, cheque, dishonor, statutory notice, cause of action, and relief sought.
4. Pre-Cognizance Stage – There shall be no requirement to issue summons to the accused at the pre-cognizance stage .
5. Summary Trial – Trial Courts shall record cogent and sufficient reasons before converting a summary trial to summons trial. The Trial Court shall be at liberty to ask specific questions under Section 251 Cr.P.C./Section 274 BNSS, 2023 at the initial post-cognizance stage. The Court shall record the responses to the questions in the order-sheet in the presence of the accused and his/her counsel
6. Interim Deposit – Wherever the Trial Court deems it appropriate, it shall use its power to order payment of interim deposit as early as possible under Section 143A of the NI Act .
7. Physical Court Appearance – After service of summons, matters shall be placed before the physical Courts to create a conducive environment for direct and informal interactions encouraging early resolution.
8. Evening Courts – All High Courts directed to revisit and revise pecuniary limits by issuing appropriate practice directions, ensuring that evening courts handle cases involving realistic cheque amounts to make the system more effective and meaningful.
9. Monitoring Mechanism – Each District and Sessions Judge in Delhi, Mumbai, and Calcutta shall maintain a dedicated dashboard reflecting the pendency and progress of cases under Section 138 of the NI Act. The Chief Justices of Delhi, Bombay, and Calcutta are requested to form Committees on the Administrative side to monitor pendency and ensure expeditious disposal of Section 138 cases
10. Modified Guidelines for Compounding – The Hon’ble Supreme Court also modified the guidelines for compounding offenses under the NI Act, originally framed in Damodar S. Prabhu v. Sayed Babalal H., as follows:

• If the accused pays the cheque amount before recording of his evidence, the Trial Court may allow compounding without imposing any cost or penalty.
• If payment is made post recording of evidence but prior to judgment, compounding may be allowed on payment of additional 5% of the cheque amount.
• If payment is made before the Sessions Court or High Court, compounding may be allowed on payment of 7.5% of the cheque amount.
• If payment is made before the Supreme Court, the additional amount would be 10% of the cheque amount.

If the accused is willing to pay as per these guidelines but the complainant demands additional amounts, the Magistrate may suggest to the accused to plead guilty and exercise powers under relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 or give benefit under the Probation of Offenders Act, 1958 to the accused.

The Hon’ble Apex Court allowed the appeal by setting aside the impugned order dated 16th April, 2009 passed by the Hon’ble High Court and restored the judgment as well as the orders of Ld. Trial Court and Ld. Sessions Court.

Conclusion

The present judgment is a significant development in the jurisprudence relating to cheque bouncing cases. By reaffirming the statutory presumptions under the NI Act and issuing comprehensive guidelines for expeditious disposal of such cases, the Hon’ble Supreme Court has taken a proactive step towards addressing the massive backlog of Section 138 cases and restoring the credibility of cheques as a trustworthy substitute for cash payment. The implementation of these guidelines, which are to be effective from November 1, 2025, is expected to significantly reduce the pendency of cheque bouncing cases across the country.

Analysis done by: Mitali Umat