S.138 Negotiable Instruments Act | Supreme Court Round-Up 2025 : Judgments On Cheque Dishonour Cases
Company Independent and Non-Executive Directors Aren't Automatically Liable Upon Filing Of ComplaintIn KS Mehta Vs. Morgan Securities and Credits Pvt. Ltd., 2025 LiveLaw (SC) 286, a bench of Justices BV Nagarathna and SC Sharma clarified that non-executive and independent directors of a company cannot be held vicariously liable for the company's obligations under the Negotiable Instruments...
Company Independent and Non-Executive Directors Aren't Automatically Liable Upon Filing Of Complaint
In KS Mehta Vs. Morgan Securities and Credits Pvt. Ltd., 2025 LiveLaw (SC) 286, a bench of Justices BV Nagarathna and SC Sharma clarified that non-executive and independent directors of a company cannot be held vicariously liable for the company's obligations under the Negotiable Instruments Act, 1881 (NI Act), unless their direct involvement in the company's financial transactions is established.
The Court held that merely holding the position of non-executive and independent director of the company would not make them liable for the company's default unless their active involvement is proved. It added that only directors responsible for the company's day-to-day affairs and business operations can be made liable for the company's default.
IBC Moratorium Acts As A Shield For Ex-Directors If A Cause Of Action Arises After Moratorium
In a notable ruling of Vishnoo Mittal v. M/s Shakti Trading Company, 2025 LiveLaw (SC) 314, a bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah held that if the cause of action for the offence of cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) has arisen after the declaration of moratorium with respect to the company as per the Insolvency & Bankruptcy Code, 2016 (IBC), then the proceedings under S.138 NI Act cannot be continued against the ex-director of the company.
The Court reasoned that upon imposition of the moratorium, the board of directors' powers are suspended, and management of the corporate debtor is taken over by the Insolvency Resolution Professional (IRP). As a result, directors cannot be held liable for actions they are no longer authorized to take.
Cause of Action For Filing Cheque Dishonor Complaint Arises After Lapse Of 15 Days Of Demand Notice For Repaying The Debt Amount
In the same ruling of Vishnoo Mittal (supra), the Court explained that the cause of action for S.138 NI Act arises not on the dishonour of the cheque but when the amount remains unpaid after the expiry of fifteen days after the demand notice.
Cheque Dishonor Complaint Must Be Filed Before Magistrate Having Jurisdiction Where Payee Maintains Bank Account, Not Where Cheque Is Presented For Collection
A bench of Justices Sanjay Kumar and SC Sharma in Prakash Chimanlal Sheth Versus Jagruti Keyur Rajpopat reiterated that the territorial jurisdiction for a complaint for the offence of cheque dishonour under Section 138 of the Negotiable Instruments Act is with the Court having jurisdiction over the place where the payee maintains his bank account through which the cheque was delivered for collection.
The jurisdiction is not where the cheque was physically presented for encashment through the account, but at the place where the account is maintained.
The Appellant had deposited these cheques at Kotak Mahindra Bank's Opera House Branch in Mumbai. However, the Appellant's bank account was maintained at the Bendurwell Branch in Mangalore. When the cheques got dishonoured, he filed a complaint there under the Negotiable Instruments Act. However, the Magistrate in Mangalore dismissed the complaint on the ground that jurisdiction lay where the cheques were physically presented, i.e., Mumbai, a view later upheld by the High Court. However, the Supreme Court later set aside the High Court's decision directing the Mangalore Court to proceed with the complaint.
Magistrates Must Not Issue Summons To Accused Without Verifying Complaint's Credentials
A bench of Justices Abhay S Oka and Ujjal Bhuyan in Rekha Sharad Ushir v. Saptashrungi Mahila Nagari Sahkari Patsansta Ltd., 2025 LiveLaw (SC) 355 recently quashed a complaint filed for the offence of cheque dishonour under Section 138 of the Negotiable Instruments Act (NI Act) after noting that the complainant suppressed material facts and abused the judicial process by withholding loan documents. It said that the law cannot be set into motion by issuing a process on a complaint without satisfying that there were sufficient grounds to proceed against the accused. The Court underscored the Magistrate's duty to apply its mind before setting criminal law into motion.
No Pre-Cognizance Summons To Accused In Cheque Dishonour Cases
A bench of Justices Manmohan and NV Anjaria in Sanjabij Tari v. Kishore S. Borcar & Anr., 2025 LiveLaw (SC) 952 clarified that an accused need not be heard at the pre-cognizance stage of complaints filed for dishonour of cheque as per Section 138 of the Negotiable Instruments Act. The Court agreed with the Karnataka High Court's judgment in Ashok Vs. Fayaz Aahmad, that there is no requirement to issue summons to the accused at the pre-cognizance stage under Section 223 of the Bharatiya Nagarik Suraksha Sanhita for NI Act complaints.
The Court reasoned that Section 138 cases constitute a significant portion of criminal dockets, particularly in metropolitan courts, and therefore require systemic reforms to avoid delays.Hence, the Court also issued a set of guidelines for speedy trial of cheuq dishonour cases.
Cheque Dishonor Complaint Can Be Filed For Cash Debt Above Rs. 20,000/-
A bench of Justices Manmohan and NV Anjaria in Sanjabij Tari (supra), set aside the judgment of the Kerala High Court in which held that a debt created by a cash transaction above Rupees Twenty Thousand in violation of the Income Tax (IT) Act, 1961 cannot be considered as a "legally enforceable debt" under Section 138 of the Negotiable Instruments Act.
The Court explained that a violation of Section 269SS of the Income Tax Act, 1961, which restricts cash transactions above ₹20,000, does not render such transactions illegal, void or unenforceable. The Bench observed that breach of Section 269SS merely attracts the statutory penalty prescribed under Section 271D and cannot by itself invalidate a debt for the purpose of proceedings under Section 138 of the Negotiable Instruments Act, 1881.
In the same case, the Court also ruled that accused persons convicted under Section 138 of the Negotiable Instruments Act, 1881 (cheque dishonour cases) are entitled to the benefit of the Probation of Offenders Act, 1958, and issued guidelines for the speedy trial of cheque dishonour cases.
Also from the judgment - Supreme Court Modifies Guidelines On Compounding Of Dishonour Cheque Cases
Complaint Not Maintainable When Amount Mentioned In Demand Notice Differs From Amount Mentioned In Cheque
The Supreme Court has reiterated that for a complaint under Section 138 of the Negotiable Instruments Act, 1881, to be maintainable, the statutory notice of demand must precisely mention the cheque amount. If the amount mentioned in the demand notice varies from the cheque amount, then the complaint is not maintainable.
The bench comprising Chief Justice of India BR Gavai and Justice NV Anjaria in the case of Kaveri Plastics v Mahdoom Bawa Bahruden Noorul, 2025 LiveLaw (SC) 927 clarified that a notice mentioning an amount different from the cheque amount, or failing to mention the cheque amount altogether, would be legally invalid.
Case Details: Gian Chand Garg v. Harpal Singh & Anr.
Citation: 2025 LiveLaw (SC) 865
The Supreme Court has held once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction under Section 138 of the Negotiable Instruments Act cannot be sustained.
The Court set aside an order of the High Court which dismissed an application filed by the accused seeking alteration of his conviction based on the settlement arrived at with the complainant after the dismissal of his revision petition.
Allowing the appeal, the Supreme Court said, “Once the complainant has signed the compromise deed accepting the amount in full and final settlement of the default sum the proceedings under Section 138 of the NI Act cannot hold water, therefore, the concurrent conviction rendered by the Courts below has to be set-aside.”
NI Act | '30-Day Time Limit For Filing Cheque Dishonour Complaint Mandatory' : Supreme Court Quashes Belated Complaint
Cause Title: H. S. Oberoi Buildtech Pvt. Ltd & Ors. v. M/S Msn Woodtech
Citation: 2025 LiveLaw (SC) 889
The Supreme Court clarified that the 30 days' timeline prescribed under Section 142(b) of the Negotiable Instruments Act, 1881 (“NI Act”) for filing a complaint is mandatory, unless there is a formal application seeking condonation of delay and a judicial order allowing it.
“Once the statute prescribes a mandatory time limit for filing a complaint, there cannot be any deviation from the same except when an application accompanying the complaint is filed seeking condonation disclosing reasons for the delay and even then it is obligatory on the part of the Court to take note of such filing beyond limitation and to consider the reasons disclosed independently and to come to a judicious conclusion that in the facts and circumstances of that case condonation is justified. The same not having been done, the order cannot be sustained.”, the court observed.
A bench of Justices Ahsanuddin Amanullah and K Vinod Chandran quashed a cheque bounce complaint as it was filed beyond the statutory 30-day limitation period i.e., on thirty fifth day.
Case Title – Rajeev Khandelwal v. State of Maharashtra & Anr.
Citation: 2025 LiveLaw (SC) 1103
The Supreme Court set aside the cost imposed by the Bombay High Court on a man convicted under Section 138 of the Negotiable Instruments Act, 1881, after noting that the complainant had no objection to the settlement and that the appellant was unable to pay the amount.
A bench of Justice M.M. Sundresh and Justice Satish Chandra Sharma held that the guidelines in Damodar S. Prabhu v. Sayed Babalal H judgment, which provide for imposition of costs in NI Act depending on at which stage the case was compounded, could not be treated as binding.
“The law laid down in the aforementioned judgment cannot be regarded as a binding precedent, as every case must be considered on its own facts”, the Court observed.
For Account Payee Cheque's Dishonour, Complaint Must Be Filed At Place Of Payee's Home Branch : Supreme Court Explains S.142(2)(a) NI Act
Case Details: Jai Balaji Industries Ltd. and Ors. v. M/S Heg Ltd.
Citation: 2025 LiveLaw (SC) 1149
The Supreme Court (November 28) held that complaints arising from the dishonour of account payee cheques must be instituted only before the court that has jurisdiction over the branch of the bank where the payee maintains their account.
The Court clarified that even if the cheque is deposited at a branch different from the payee's home branch, for the purposes of jurisdiction under the Negotiable Instruments Act, the complaint must still be filed before the court governing the home branch of the payee's bank account.
Interpreting Section 142(2)(a) of the Negotiable Instruments Act, 1881, the bench of Justice JB Pardiwala and Justice R Mahadevan observed :
“it is as clear as a noon day that the jurisdiction to try a complaint filed under Section 138 in respect of a cheque delivered for collection through an account, i.e., an account payee cheque, is vested in the court within whose local jurisdiction the branch of the bank in which the payee maintains the account, i.e., the payee's home branch, is situated.”
Precedent in Yogesh Upadhyay declared per incurium
The judgment authored by Justice Pardiwala in Jai Balaji Industries Ltd(supra) declared the ruling in Yogesh Upadhyay v. Atlanta Ltd., 2023 LiveLaw (SC) 125, to be per incuriam. The Court observed that Yogesh Upadhyaywrongly held that the Courts situated at any of the branches of the payee bank, where the cheque is presented, will get jurisdiction. Only the home branch where the account of the payee is maintained will get jurisdiction. The judgment held that Yogesh Upadhyay ignored the Explanation to Section 142(2)(a), which deems a cheque delivered at any branch of the payee's bank to have been delivered at the payee's home branch, where their account is actually maintained.
Case Details: M/S SHRI SENDHURAGRO AND OIL INDUSTRIES PRANAB PRAKASH v. KOTAK MAHINDRA BANK LTD.|1503 T.P.(Crl.) No. 608/2024 and others
Citation : 2025 LiveLaw (SC) 292
The Supreme Court today(March 6) held that a case under the Negotiable Instrument Act, 1881 (NI Act) cannot be transferred from one place to another for the lack of jurisdiction under Section 406(Power of Supreme Court to transfer cases and appeals) of the Code of Criminal Procedure.
A batch of transfer petitions were filed before the Supreme Court seeking transfer to a Court having territorial jurisdiction to try the said complaints under the NI Act. A bench of Justices J.B. Pardiwala and R. Mahadevan addressed the transfer petitions on three issues, namely:
1. Whether a complaint filed under Section 138 of the NI Act can be transferred from one Court to another in the exercise of powers under Section 406 of the CrPC on the ground of lack of territorial jurisdiction of the Court in which the complaint is filed.
2. Assuming that the Court lacks territorial jurisdiction to try the same, is it permissible for this Court in the exercise of powers under Section 406 CrPC to transfer the said complaint to the Court having terroritial jurisdiction.
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3. Whether the expression "that for the ends of justice" means that this Court can transfer any criminal case or appeal to any Court in Section 406 CrPC
Answering in negative, the Court ordered:
"Our final conclusion is, we have made ourselves very clear that the territorial jurisdiction issue cannot be raised for the purpose of Section 406 CrPC. For the purpose of any transfer of case or proceedings under Section 406CrPC, the case must fall under the ambit of the expression 'expedient for the ends of justice',"Jusitce Pardiwala said while pronouncing the judgment.
In Paragraph 49 of the judgment, the Court observed that "an order of transfer of trial is not to be passed as a matter of routine and more particularly on the plea of lack of territorial jurisdiction of the court to try the offence under Section 138 of the N.I. Act."
Also from the judgment - NI Act Allows Filing Of Cheque Dishonour Complaint At Place Of Payee Bank; Accused Can't Seek Transfer Citing Inconvenience: Supreme Court
Case Details: Adhiraj Singh v. Yograj Singh and Ors.
Citation: 2025 LiveLaw (SC) 75
The Supreme Court observed that the cheque issued after the retirement of the director of the company would not trigger his liability under Section 141 of the Negotiable Instrument Act, 1882 (“NI Act”).
“Once the facts are plain and clear that when the cheques were issued by the Company, the appellant (director) had already resigned and was not a director in the Company and was not connected with the company, he cannot be held responsible for the affairs of the Company in view of the provisions as contained in Section 141 of the NI Act.”, the Court said.
The bench comprising Justice JK Maheshwari and Justice Rajesh Bindal was hearing the appeal filed against the Himachal Pradesh High Court's refusal to quash the cheque dishonour case against the Appellant, who had resigned from the company's directorship before the issuance of cheque by the company towards a legally existing debt.
S.141 NI Act | 'Director Who's In Charge Of Company' & 'Director Who's Responsible To Company' Are Different Aspects: Supreme Court
Case Details: Hitesh Verma v. M/S Health Care At Home India Pvt. Ltd., Diary No. – 29293/2019
Citation: 2025 LiveLaw (SC) 176
The Supreme Court observed that there are twin requirements for an offence to fall under Section 141 of the Negotiable Instruments Act, which talks about the dishonour of a cheque committed by a company. Elucidating, the Court said that the accused person should be in charge of and responsible to the company for the conduct of the business.
“There are twin requirements under sub-Section (1) of Section 141 of the 1881 Act. In the complaint, it must be alleged that the person, who is sought to be held liable by virtue of vicarious liability, at the time when the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company. A Director who is in charge of the company and a Director who was responsible to the company for the conduct of the business, are two different aspects. The requirement of law is that both the ingredients of sub-Section (1) of Section 141 of the 1881 Act must be incorporated in the complaint.,” the Court said.
S. 138 NI Act | Complainant Has No Onus To Prove Financial Capacity At The Threshold: Supreme Court
Case Details: Ashok Singh v. State of Uttar Pradesh & Anr.
Citation: 2025 LiveLaw (SC) 383
The Supreme Court reaffirmed that once the drawer admits to signing the cheque, the presumption under Section 139 of the Negotiable Instruments Act, 1881 (“NI Act”) cannot be rebutted merely by questioning the complainant's debt-giving capacity, especially when such a defence was not raised in the reply notice by the accused.
“The onus is not on the complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is alleged to have been issued in his favour. Only if an objection is raised that the complainant was not in a financial position to pay the amount so claimed by him to have been given as a loan to the accused, only then the complainant would have to bring before the Court cogent material to indicate that he had the financial capacity and had actually advanced the amount in question by way of loan.”, the court observed.
The bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah heard the case where the Appellant/complainant challenged the Allahabad High Court's decision which had overturned the trial court's order convicting the Respondent/accused for an offence of cheque dishonour punishable under Section 138 NI Act.
S.141 NI Act | Cheque Dishonour Complaint Need Not State Specific Administrative Role Of Company Directors: Supreme Court
Case Details: HDFC Bank Ltd. v. State of Maharashtra
Citation: 2025 LiveLaw (SC) 624
The Supreme Court held that to make directors of a company liable for the offence of dishonour of cheque, it is not necessary that the complaint should state their specific role within the company.
The Court noted that while Section 141(1) of the Negotiable Instruments Act requires a specific averment that the person was “in charge of, and responsible to the company for the conduct of its business”, there is no necessity to adopt word for word the language of the statute. Rather, material compliance is enough provided the complaint specifies the role of the director.
"What is important to note is that the repetition of the exact words of the Section in the same order, like a mantra or a magic incantation is not the mandate of the law."
S. 138 NI Act | Cheque Dishonour Complaint Maintainable Against Partners Without Arraigning Parnership Firm : Supreme Court
Case Details: Dhanasingh Prabhu v. Chandrasekar & Another
Citation: 2025 LiveLaw (SC) 708
The Supreme Court held that a complaint under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) for the dishonour of a cheque issued in the name of a partnership firm is maintainable against individual partners of a firm, even when the partnership firm is not arrayed as an accused.
The Court reasoned that “when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm.”
Complaint Can Be Amended At Post-Cognizance Stage If No Prejudice Is Caused To Accused : Supreme Court
Case Details: Bansal Milk Chilling Centre v. Rana Milk Food Private Ltd. & Anr.
Citation : 2025 LiveLaw (SC) 743
The Supreme Court ruled that an amendment to a complaint can be made at the post-cognizance stage, provided that no 'prejudice' is caused to the accused and the complainant's cross-examination is awaited.
The bench comprising Justices BV Nagarathna and KV Viswanathan allowed the complainant's request to amend the complaint under Section 138 of the Negotiable Instruments Act, 1881, noting that no cross-examination had been concluded and the correction changing “Desi Ghee (milk products)” to “milk” was a typographical error appearing in both the legal notice and the complaint, which did not prejudice the accused.
S. 138 NI Act | Supreme Court Doubts Kerala HC View That Cheque Dishonour Case Can Be Filed Over Debt For Illegal Consideration
Cause Title: K.K.D. Pandian v. S. Tamilselvi
The Supreme Court prima facie observed held that cheque dishonour proceedings under Section 138 of the Negotiable Instruments Act, 1881, cannot be initiated for liabilities stemming from an illegal or unenforceable debt.
A bench of Justices Aravind Kumar and Joymalya Bagchi heard an appeal arising from a Madras High Court (Madurai Bench) order that had acquitted the respondent-accused in a cheque dishonour case, holding that the cheque was issued towards repayment of an illegal debt.
Challenging this decision, the petitioner-complainant approached the Supreme Court, relying on the Kerala High Court ruling in C.V. Rajan v. Illikkal Ramesan (2015), to argue that even if the debt arose from an illegal promise or purpose, it would still fall within the ambit of Section 138 of the Negotiable Instruments Act, 1881.
Case : BHARAT MITTAL Vs STATE OF RAJASTHAN | SLP(Crl) No. 12327/2025
Citation : 2025 LiveLaw (SC) 1223
In an important legal development, the Supreme Court doubted two of its earlier judgments which held that the director or the authorised signatory of a company convicted under Section 138 of the Negotiable Instruments Act, 1881 cannot be directed to make the deposit before the appellate Court as per Section 148 of the Act for suspension of sentence.
Disagreeing with the precedents, a bench comprising Justice Aravind Kumar and Justice NV Anjaria observed that a blanket exemption cannot be given to the company's convicted director/authorised signatory from making the deposit under Section 148 of the NI Act. Such an exemption should be decided based on the factual circumstances of each case, the bench observed.
However, in view of the fact that the earlier precedents were delivered by benches of equal strength, the present bench, as a matter of judicial discipline, refrained from overruling them and instead chose to refer them to a larger bench for an authoritative reconsideration.
The present bench expressed inability to concur with the views expressed in Bijay Agarwal Versus M/s Medilines(2024) and Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (2024).
In Bijay Agarwal, it was held that an authorised signatory of a company which issued the cheque cannot be regarded as the "drawer" of the cheque, and hence cannot be directed to make the deposit. This conclusion was based on the reasoning that the liability to make the deposit under Section 148 has been imposed upon the "drawer" of the cheque. In Shri Gurudatta Sugars, the Court held that the company's signatory is not liable to pay the interim compensation under Section 143A of the NI Act.