Guidelines under Section 138 of the Negotiable Instruments Act, 1881
The judgment arises from the case titled “Sanjabij Tari v. Kishore S. Borcar & Anr.” heard by the Supreme Court of India, comprising Justices Manmohan and N.V. Anjaria. The case number is Criminal Appeal No. 1755 of 2010, decided on 25th September 2025. The appellant, Sanjabij Tari, challenged the ex-parte judgment of the Bombay High Court at Goa, which acquitted the respondent Kishore S. Borcar under Section 138 of the Negotiable Instruments Act, 1881. The High Court’s decision reversed the concurrent findings of the Trial Court and the Sessions Court, which had convicted Kishore S. Borcar for issuing a dishonored cheque of Rs. 6,00,000/- in favor of Sanjabij Tari.
The appellant argued that the High Court erred in exercising its revisional jurisdiction by overturning the conviction based on clear findings of fact by the lower courts. Sanjabij Tari claimed he had sufficient means to provide a friendly loan to Kishore S. Borcar, leveraging funds from his father and a financial institution. Kishore S. Borcar had earlier expressed willingness to repay the cheque amount during sentencing arguments. The appellant’s application to recall the High Court’s judgment was dismissed, leading to this appeal.
The respondent argued that Sanjabij Tari lacked the financial capacity to advance such a loan and contended that the cheque was given as a blank security for obtaining a loan from the bank, a defense the High Court found credible.
Observation:
The core issue revolves around the presumption of a legally enforceable debt under Sections 118 and 139 of the Negotiable Instruments Act once the execution of a cheque is admitted. The case examines whether the presumption can be rebutted and if the High Court’s decision to acquit Kishore S. Borcar was justified.
Decision:
The Supreme Court set aside the High Court’s judgment and restored the concurrent judgments of the Trial Court and Sessions Court, convicting Kishore S. Borcar. The Court directed the respondent to pay Rs. 7,50,000/- in 15 monthly installments of Rs. 50,000/- each. The Court also issued guidelines to streamline the process of handling cheque dishonor cases under Section 138 of the Negotiable Instruments Act to address the massive backlog and ensure efficient resolution.
Ratio Decidendi:
1. Presumption of Debt: The Court emphasized that once the execution of a cheque is admitted, presumptions under Sections 118 and 139 arise, suggesting the cheque was issued for consideration and discharges a legally enforceable debt. These presumptions are rebuttable, but the burden initially lies on the accused to prove otherwise.
2. Financial Capacity: The Court held that questioning the financial capacity of the complainant requires the accused to demonstrate evidence to rebut the presumption. In this case, the respondent failed to present evidence disproving the appellant’s financial capability.
3. Revisional Jurisdiction: The Supreme Court criticized the High Court for exercising revisional jurisdiction without finding any perversity in the concurrent factual findings of the lower courts. Revisional courts should not interfere with factual findings unless there is a jurisdictional error or perversity.
4. Guidelines for Cheque Cases: The Court issued guidelines to streamline the process for dealing with cheque dishonor cases, including electronic service of summons, online payment facilities, and procedural formats to expedite settlements. The Court modified guidelines for compounding offenses under Section 138, encouraging early settlement to reduce litigation burden.
5. Statutory Notice and Defense: Failure to respond to statutory notices can lead to inferences favoring the complainant’s version. The defense of financial incapacity or issuance of a blank signed cheque without evidence is deemed an afterthought.
In conclusion, the Supreme Court reinforced the statutory presumptions favoring the complainant in cheque dishonor cases, ensuring the reliability of cheques as a mode of payment and providing guidelines for efficient handling of such cases by the judiciary.
Petitioner Arguments:
1. Revisional Error by High Court: The appellant’s counsel, Mr. Amarjit Singh Bedi, argued that the High Court erred in revising the conviction of the respondent under Section 138 of the Negotiable Instruments Act (NI Act), despite the trial and sessions courts’ factual findings that the dishonored cheque was issued for a legally enforceable debt.
2. Financial Capacity: The appellant contended there was no evidence proving that he lacked the financial means to lend Rs. 6,00,000 to the respondent. He asserted that he arranged the money through personal and familial sources.
3. Leniency Request by Respondent: During sentencing, the respondent requested leniency and expressed willingness to pay the cheque amount, suggesting acknowledgment of debt.
4. Ex-Parte Judgment: The appellant criticized the High Court for dismissing his application to recall the ex-parte judgment due to an absence of his advocate, arguing that the court should have used its inherent powers to set aside the judgment.
5. Restoration of Lower Courts’ Judgments: The appellant requested the Supreme Court to restore the judgments of the lower courts, agreeing to accept the payment in installments as previously directed.
Respondents Arguments:
1. Financial Means of Appellant: Mr. Ankit Yadav, counsel for the respondent, argued that the appellant’s salary was insufficient to support a loan of Rs. 6,00,000, suggesting the appellant’s financial incapacity.
2. Presumption and Defense: The respondent relied on the presumption under Section 139 of the NI Act, arguing that the appellant failed to prove his financial capacity, especially since the loan was in cash.
3. Blank Cheque Defense: The respondent claimed the cheque was a blank one given to the appellant to facilitate a bank loan, thereby challenging the presumption of a legally enforceable debt.
Judges’ View:
1. Presumption under NI Act: The court reiterated that once the execution of a cheque is admitted, presumptions under Sections 118 and 139 of the NI Act arise, placing the initial burden of proof on the accused to rebut these presumptions.
2. Revisional Jurisdiction: The court emphasized that the High Court, in revisional jurisdiction, should not upset concurrent factual findings unless there is perversity or jurisdictional error.
3. Financial Capacity: The court found that the respondent failed to provide evidence challenging the appellant’s financial capacity, and the appellant’s evidence suggested he had the means to lend the money.
4. Failure to Respond to Notice: The court noted the respondent’s failure to reply to the statutory notice, inferring merit in the appellant’s version of the events.
5. Blank Cheque Defense: The court found the respondent’s defense of issuing a blank cheque for a bank loan implausible and rejected it.
6. Guidelines Issued: To address the backlog of cheque dishonor cases, the court issued comprehensive guidelines, including measures for expeditious trial and compounding of offenses under Section 138 of the NI Act.
Ratio Decidendi:
The Supreme Court of India ruled that the High Court erred in its revisional jurisdiction by overturning the concurrent findings of the trial and sessions courts without evidence of perversity or jurisdictional error. The presumption under Section 139 of the NI Act, regarding the enforceability of a debt, remains unless adequately rebutted by the accused. The absence of a reply to the statutory notice and the implausibility of the respondent’s defense further supported the appellant’s case. The court also issued guidelines to streamline the handling of cheque dishonor cases, emphasizing early resolution and financial discipline in commercial transactions. The appeal was allowed, restoring the lower courts’ judgments with a structured payment plan for the respondent.
Sequence of Events
The case revolves around the dishonor of a cheque under Section 138 of the Negotiable Instruments Act, 1881. Below is a step-by-step sequence of events from the judgment:
1. Filing of Criminal Appeal: Sanjabij Tari, the appellant, filed a criminal appeal against the judgment of the High Court of Bombay at Goa, which acquitted Kishore S. Borcar (Respondent No.1-Accused) under Section 138 of the Negotiable Instruments Act, reversing the concurrent judgments of the Trial Court and the Sessions Court.
2. Arguments by Appellant-Complainant: The appellant argued that the High Court erred in its revisional jurisdiction by upsetting the conviction of the Respondent No.1-Accused, despite clear factual findings by the lower courts that the dishonored cheque was issued for a legally enforceable debt.
3. Financial Capacity Argument: The appellant emphasized that he had the financial means to advance a friendly loan of Rs.6,00,000/- to the respondent, having arranged money from his father and borrowed a portion from a financial institution.
4. Respondent’s Request for Leniency: During sentencing arguments before the Trial Court, the respondent had requested leniency, expressing willingness to pay the cheque amount within a reasonable time.
5. Application for Recall: The appellant filed an application under Section 482 of Cr.P.C. for recall of the High Court’s impugned judgment, citing the absence of his advocate during the proceedings. The application was dismissed as the Court considered itself functus officio.
6. Respondent No.1-Accused’s Arguments: The respondent argued that the appellant, drawing a meager salary, lacked the financial capacity to advance such a large loan. He further contended that the appellant was highly indebted and did not issue any receipt for the loan.
7. Questioning Financial Capacity: The respondent relied on judgments stating that when the accused questions the complainant’s financial capacity, the onus shifts back to the complainant to prove it, especially in cash transactions.
8. Defense of Blank Cheque: The respondent claimed that a blank cheque was issued to the appellant to obtain a bank loan, which was purportedly a probable defense to rebut the presumption under the NI Act.
9. Court’s Analysis of NI Act: The Supreme Court emphasized the purpose of Chapter XVII of the NI Act, which was to enhance the credibility of cheques as substitutes for cash and to restore trust in cheques.
10. Presumptions under NI Act: The Court reiterated that once the execution of a cheque is admitted, presumptions under Sections 118 and 139 arise against the accused, which are rebuttable but place the initial burden on the accused.
11. Criticism of High Court’s Approach: The Supreme Court criticized some courts for not giving effect to statutory presumptions under NI Act, treating proceedings akin to civil recovery rather than quasi-criminal, which prolongs trials.
12. Rebuttal of Financial Incapacity: The Court noted that no evidence was led by the respondent to prove the appellant’s financial incapacity, and upheld the findings of lower courts that the appellant had the means to advance the loan.
13. Revisional Jurisdiction Standards: The Court held that revisional jurisdiction should not upset concurrent factual findings in the absence of perversity or jurisdictional error.
14. Failure to Reply to Notice: The Court inferred that failing to reply to statutory notice adds credibility to the complainant’s version, deeming financial incapacity defense as an afterthought.
15. Defense of Blank Cheque Deemed Unbelievable: The Court found the defense of issuing a blank cheque for obtaining bank loans as absurd and agreed with lower courts’ rejection of such a defense.
16. Issuance of Guidelines: Given the massive backlog of cheque bouncing cases, the Supreme Court issued guidelines to streamline the process, including electronic service of summons, online payment facilities, and realistic pecuniary limits for evening courts.
17. Modified Guidelines for Compounding: The Court modified existing guidelines for compounding offences under the NI Act to encourage early settlement and reduce litigation burden.
18. Conclusion of Appeal: The Supreme Court allowed the appeal, set aside the High Court’s judgment, and restored the orders of the Trial and Sessions Courts. It directed the respondent to pay Rs.7,50,000/- in 15 monthly installments of Rs.50,000/- each.
These steps encapsulate the judicial reasoning and procedural developments leading to the Supreme Court’s final decision in the case, addressing key legal principles related to the Negotiable Instruments Act and its application in cheque dishonor cases.
About Advocate Anoop Verma
Advocate Anoop Verma is a distinguished Advocate at the Punjab and Haryana High Court, Chandigarh, and also appears before the Supreme Court of India. With years of dedicated experience in criminal law, bail matters, quashing petitions, and cases under Section 138 of the Negotiable Instruments Act, he is known for his practical approach and sharp legal strategy.
He has represented clients in numerous complex criminal and financial cases across Chandigarh, Haryana, Punjab, and Delhi, earning a reputation for professionalism, clarity, and result-driven advocacy.
For legal consultation or representation before the High Court or Supreme Court, you may contact:
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