Cheque Dishonour Complaint Can't Be Quashed At Pre-Trial Stage Once Section 138 NI Act Ingredients Are Met : Supreme Court

The Supreme Court has observed that when the basic ingredients of Section 138 of the Negotiable Instruments Act, 1881, are fulfilled, a cheque dishonour case cannot be quashed at the pre-trial stage upon concluding that the cheque was not issued for a legally enforceable debt.

The court said that whether the cheque was issued for a legally enforceable debt or not is a matter of trial, and cannot be decided at the pre-trial stage.

“…when the basic ingredients of Section 138 stand duly satisfied and the statutory presumption under Section 139 gets triggered, coming to a conclusion that the cheque was not issued for a legally enforceable debt at the pre-trial stage itself without granting an opportunity to the complainant to substantiate her case by leading evidence would amount to ignoring the statutory presumption that the cheque had been issued for a legally enforceable debt or liability. As a consequence, the presumption under Section 139 of the N.I. Act gets washed away even prior to commencement of the trial.”, the Court observed.

A bench of Justices JK Maheshwari and Atul S Chandurkar heard the case that arose from a matrimonial settlement dispute, where the complainant alleged that her husband had agreed to pay ₹50 crore. A third party, acting as a guarantor, issued a cheque of the same amount in her favour.

When the cheque was presented, it was dishonoured with the remark “payment stopped by drawer.” The complainant then initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881.

A Magistrate took cognisance and issued process against the drawer. However, the Sessions Court set aside this order, holding that the cheque was not issued for a “legally enforceable debt.” The Bombay High Court upheld this view, prompting the complainant to approach the Supreme Court.

Allowing the appeal, the judgment authored by Justice Chandurkar observed that once the statutory presumption under Section 139 comes into operation, the complaint cannot be dismissed at the threshold, especially when the presumption has not been rebutted, which shall be done during the trial.

“once the basic ingredients of Section 138 of the N.I. Act are duly satisfied by the complainant, the rebuttal of statutory presumption by the drawer can only be made during the course of trial.”, the court observed, pointing that “the dismissal of the complaint as a Criminal appeal arising out of consequence of setting aside the order issuing process is totally unjustified in the absence of any material being brought on record by the second respondent to rebut the statutory presumption and prove his contention that the cheque was issued not towards any enforceable debt or liability.”

In terms of the aforesaid, the appeal was allowed.

The Bombay High Court's decision to quash the cheque dishonour proceedings was set aside, and the case was restored to its original file before the magistrate.

Cause Title: RENUKA VERSUS THE STATE OF MAHARASHTRA & ANR.

Click here to download judgment

Appearance:

For Petitioner(s) : Mr. Mukul Rohatgi, Sr. Adv. Mr. Siddharth Bhatnagar, Sr. Adv. Ms. Ranjeeta Rohatgi, AOR Mr. Gaurav Srivastava, Adv. Ms. Shrika Gautam, Adv.

For Respondent(s) : Mr. Omkar Deshpande, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Shrirang B. Varma, Adv. Dr. A.M. Singhvi, Sr. Adv. Mr. Kavin Gulati, Sr. Adv. Mr. C.D. Mehta, Adv. Mr. Mahesh Agarwal, Adv. Mr. Ankur Saigal, Adv. Mr. Bhavik Mehta, Adv. Ms. Kajal Dalal, Adv. Ms. Deepshika Mishra, Adv. Ms. Prakruti, Adv. Mr. E. C. Agrawala, AOR