Negotiable Instruments Act, 1881 - Supreme Court Half Yearly Digest Jan - Jun, 2026

Negotiable Instruments Act, 1881 - Section 138 - When a company or NGO authorises a specific individual to sign and issue cheques on its behalf, along with the responsibility of making payments under an agreement, such person is treated as the 'drawer' of the cheque and attracts criminal liability under S. 138 NI Act, upon dishonour. The Treasurer of an NGO, who was appointed as the authorised signatory to execute an MoU, sign cheques, and make payments to the respondent, was the 'face' of the organisation and solely responsible for the consequences of the dishonoured cheque. The Court clarified that the liability arises when the conditions under Section 141 NI Act are satisfied, even for authorised signatories. Mere designation as an authorised signatory does not automatically absolve personal liability if the person is the one who actually signed the cheque and was entrusted with the payment obligation. Reliance on Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh (2024) was held to be misplaced in the facts of this case. The conviction was upheld; however, considering the appellant was only the Treasurer, the sentence was modified. The appellant was directed to pay a fine of ₹1.5 crore to the respondent (TSSPDCL) within two months, with default rigorous imprisonment of one year. K. Ranganayakulu v. State of Telangana, 2026 LiveLaw (SC) 605 : 2026 INSC 555

Negotiable Instruments Act, 1881 - Parsharvanath Weld Wires v. State of Chhattisgarh, 2026 LiveLaw (SC) 585

Negotiable Instruments Act, 1881 – Sections 138 and 141 – Offences by Companies/Societies – Vicarious Liability of Office Bearers – Scope of Quashing under Section 482 of Cr.P.C. – Mere designation as an office bearer of a society/company is insufficient to attract vicarious liability under Section 141 of the NI Act in the absence of specific averments disclosing an active role in the conduct of its business affairs - a hyper-technical approach should not be adopted while construing a complaint. If the complaint, read as a whole alongside the documentary material on record, discloses a sufficient factual foundation and prima facie participation of the office bearers in the underlying financial transactions (such as being signatories to the MoU, cheques, or promissory notes), the criminal proceedings cannot be quashed at the threshold - in the absence of any specific factual foundation connecting an office bearer to the transaction beyond a general assertion of their official status, prosecution against such person cannot be sustained – Held that the High Court erred in quashing the proceedings against respondents 1, 2, and 4 (Vice-President, Treasurer, and Manager) whose active involvement was prima facie established through their signatures on the financial documents/cheques related to the transaction - the quashing of proceedings against respondent No. 3 (Executive Member) was justified as no specific role or signing of documents was attributed to him beyond a general assertion of his designation - Appeal partly allowed. [Relied on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another (2005) 8 SCC 89; National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another (2010) 3 SCC 330; Ashok Shewakramani and Others v. State of Andhra Pradesh and Another (2023) 8 SCC 473; S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan (2023) 10 SCC 685; Paras 28 - 42] Mansi Finance v. M. Lalitha, 2026 LiveLaw (SC) 559

Negotiable Instruments Act, 1881; Section 138 & Section 141 — Insolvency and Bankruptcy Code, 2016; Part III (Sections 96, 101, 124, 128) — Code of Criminal Procedure, 1973 (Section 357) / Bharatiya Nagarik Suraksha Sanhita, 2023 (Section 395) — Interplay between Individual Moratorium and Cheque Bounce Proceedings - Core Principles Enunciated by Supreme Court - i. Predominantly Criminal Character of Section 138 - Although arising out of an inherently civil dispute or transaction, the "deeming fiction" under Section 138 of the NI Act attaches strict criminal liability as a measure of public policy and deterrence to maintain commercial integrity. It cannot be treated on par with a mere civil recovery mechanism; ii. Tiered/Bifurcated Approach to Section 138 - Proceedings under Section 138 must be bifurcated into two tiers - Tier-I (Criminal Aspect) which is mandatory and results in personal criminal liability (imprisonment or fine); and Tier-II (Compensatory Aspect) which is a discretionary exercise of power under Section 357 CrPC / Section 395 BNSS aimed at victim reparation; iii. Inapplicability of Moratorium on Criminal Aspect (Tier-I) - The interim moratorium under Section 96 and statutory moratorium under Section 101 of the IBC (Part III) do not stay the criminal aspect of Section 138 proceedings - Liability to pay a fine is an "excluded debt" under Section 79(15)(a) of the IBC, and the moratorium cannot be used to evade personal criminal accountability; iv. Applicability of Moratorium on Compensatory Aspect (Tier-II) - The moratorium provisions under Part III of the IBC apply strictly to the compensatory aspect of Section 138 - If a criminal court adjudicates that compensation is payable, the recovery and enforcement of such compensation against the debtor or his property must be temporarily halted during the moratorium period to prevent the depletion of the asset pool and allow breathing space; v. Vicarious Liability of Directors Undergoing Personal Insolvency - Where a corporate entity cannot be proceeded against due to a legal snag, the personal criminal liability of its Directors under Section 141 survives - if such a Director is undergoing personal insolvency or bankruptcy under Part III of the IBC, the expression "any debt" under Sections 96 and 101 is broad enough to include the statutory compensatory liability shifted onto him - while the criminal trial against the Director continues, the recovery of any ordered compensation from him or his properties remains stayed under Sections 96, 101, 124, and 128 of the IBC - Finding a deep-seated systemic conflict between the literal procedural mechanisms and the overarching social objective of penal deterrence under the NI Act, the Division Bench referred the matter to the Hon'ble Chief Justice of India for constitution of a three-judge Bench to conclusively determine the precise penal orientation of Section 138 and the exact extent of moratorium protections applicable over it. [Relied on P. Mohanraj v. Shah Bros. Ispat (P) Ltd., (2021) 6 SCC 258; Rakesh Bhanot v. Gurdas Agro Private Limited, (2025) 6 SCC 781; Ajay Kumar Radheshyam Goenka v. Tourism Finance Corporation of India Ltd., (2023) 10 SCC 545; Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth, (2025) 4 SCC 629; Paras 141-185, 186 - 211] Dineshchand Surana v. UCO Bank, 2026 LiveLaw (SC) 555 : 2026 INSC 579

Negotiable Instruments – Delay in Presentment – Section 75A of the Negotiable Instruments Act, 1881 – While delay in presentment is excused if caused by circumstances beyond the holder's control (such as a strike), the presentment must be made within a "reasonable time" as soon as the cause of delay ceases to operate - The bank's failure to act on the immediate working days following the strike precluded the protection of Section 75A. [Paras 56] Canara Bank v. Kavita Chowdhary, 2026 LiveLaw (SC) 375 : 2026 INSC 363

Negotiable Instruments Act, 1881 – Section 141 – Vicarious Liability of Directors – Essential Averments – Held, merely being a Director of a company is insufficient to make a person liable under Section 141 - It is an essential requirement to specifically aver in the complaint that, at the time the offence was committed, the accused was in charge of and responsible for the conduct of the business of the company - Signing a Board Resolution regarding major directional issues does not ipso facto evidence involvement in the day-to-day management of the affairs of the company. [Paras 6 - 8] Saroj Pandey v. Govt of NCT of Delhi, 2026 LiveLaw (SC) 349 : 2026 INSC 324

Negotiable Instruments Act, 1881 – Reverse Onus Clause – Held: Section 139 is a reverse onus clause included to improve the credibility of negotiable instruments - It is obligatory for the Court to raise this presumption once the factual basis (issuance/execution of the cheque) is established - Dismissing a complaint before trial on the ground that the debt was not legally enforceable, without allowing the complainant to lead evidence, ignores the statutory mandate - The Supreme Court set aside the orders of the Sessions Court and High Court, restoring the complaint.. It held that since the signatures and issuance were not disputed, the existence of a legally enforceable debt is a matter of trial. [Relied on Rangappa v. Sri Mohan, 2010 INSC 289; Rajesh Jain v. Ajay Singh, 2023 INSC 888; Paras 8-11] Renuka v. State of Maharashtra, 2026 LiveLaw (SC) 338 : 2026 INSC 327

Negotiable Instruments Act, 1881 – Section 138 and 139 – Dishonour of Cheque – Legally Enforceable Debt – Rebuttal of Presumption at Pre-trial Stage – Held: At the stage of issuance of process, the Court is only required to see if the basic ingredients of Section 138 are prima facie satisfied, including the issuance of the cheque, its dishonour, and the service of statutory notice - Once the drawer does not dispute the signature or the issuance of the cheque, the statutory presumption under Section 139 comes into play, shifting the burden to the drawer to prove that the cheque was not issued for a legally enforceable debt - This rebuttal is an exercise to be undertaken during the trial through evidence and cannot be dislodged in a summary manner at the pre-trial stage. Renuka v. State of Maharashtra, 2026 LiveLaw (SC) 338 : 2026 INSC 327

Negotiable Instruments Act, 1881 – Section 138 – Dishonour of Post-dated Cheques – Presumption of Cheating – Dishonour of a post-dated cheque by itself is not sufficient to presume the existence of a dishonest intention at the time of issuance - Post-dated cheques are often issued to discharge existing or future liabilities and do not carry a representation of sufficient funds at the time of issuance - While dishonour may trigger proceedings under Section 138 of the NI Act, it does not ipso facto amount to cheating under Section 420 IPC unless dishonest intention is proved from the start. [Relied on Iridium India Telecom Ltd. v. Motorola Inc. (2011) 1 SCC 74; Vesa Holdings Private Limited and Another v. State of Kerala and others (2015) 8 SCC 293; Paras 12-20] V. Ganesan v. State, 2026 LiveLaw (SC) 269 : 2026 INSC 265 : AIR 2026 SC 1547

Negotiable Instruments Act, 1881 – Section 138 – Code of Criminal Procedure, 1973 – Sections 372 and 378 – Appeal against Acquittal – Right of Complainant as 'Victim' – Conflict of Judgments – Reference to Larger Bench – The Supreme Court observed a conflict between a recent co-ordinate Bench decision in Celestium Financial vs. A. Gnanasekaran (2025 INSC 804) and earlier decisions in Satya Pal Singh vs. State of M.P. and Subhash Chand vs. State (Delhi Administration) regarding whether a complainant in a Section 138 NI Act case must seek special leave to appeal under Section 378(4) CrPC or can appeal directly as a 'victim' under the proviso to Section 372 CrPC. Everest Automobiles v. Rajit Enterprises, 2026 LiveLaw (SC) 155

Negotiable Instruments Act, 1881 – Section 138 – Separate Cause of Action – Held that a separate cause of action arises upon each dishonour of a cheque, provided the statutory sequence of presentation, dishonour, notice, and failure to pay is complete - The fact that multiple cheques arise from a single transaction does not merge them into a single cause of action - Once a cheque is issued in discharge of liability and subsequently dishonoured, a presumption of liability in favour of the complainant arises - The burden of proving the absence of a debt or liability lies with the accused and must be discharged during the trial – Noted that the High Court, while exercising power under Section 482, must avoid conducting a "mini-trial" or usurping the function of the Trial Court when disputed factual questions exist - The Supreme Court set aside the High Court's finding that maintaining two separate complaints for the same underlying debt (one for personal cheques and one for firm cheques) amounted to parallel prosecution - held that since the instruments were distinct, drawn on different accounts, and presented on different dates, the law does not bar separate prosecutions - Questions regarding whether cheques were issued as alternative securities or in substitution of one another are mixed questions of fact that cannot be resolved at the threshold under Section 482 - Noted that statutory weight must be given to the presumption under Section 139 - Quashing proceedings prematurely overlooks this legal presumption which operates in favor of the complainant. [Relied on State of Haryana and Others vs. Bhajan Lal and Others, 1992 Supp (1) SCC 335; Neeharika Infrastructure Private Limited vs. State of Maharashtra and Others, (2021) 19 SCC 401; Kusum Ingots & Alloys Ltd. vs. Pennar Peterson Securities Ltd. and Others, (2000) 2 SCC 745 M.M.T.C. Ltd. and Another vs. Medchl Chemicals and Pharma (P) Ltd. and Another, (2002) 1 SCC 234; Paras 26-45] Sumit Bansal v. MGI Developers and Promoters, 2026 LiveLaw (SC) 34 : 2026 INSC 40

Negotiable Instruments Act, 1881; Section 138 and 142(1)(b) - The Supreme Court set aside an order of the Karnataka High Court that had treated the sequence of condoning delay and taking cognizance as interchangeable or a "curable irregularity" – Noted that under the proviso to Section 142(1)(b) of the NI Act, the power to take cognizance of a complaint filed after the prescribed period is expressly subject to the complainant first satisfying the Court that there was sufficient cause for the delay – Held that an order taking cognizance before the delay is formally condoned is legally unsustainable and satisfaction of the Court regarding sufficient cause for delay must precede the act of taking cognizance of a belated complaint - Supreme Court made following Findings: i. Mandatory Sequence: The satisfaction of the Court regarding "sufficient cause" resulting in the condonation of delay must precede the act of taking cognizance; ii. Irregularity not Curable: Held that High Court's view that taking cognizance before condoning delay is a "curable irregularity" is not in keeping with the statutory mandate of the proviso to Section 142(1)(b); iii. Impact of Misrepresentation: noted that the respondent (complainant) contributed to the procedural error by erroneously stating in her complaint that it was filed within time – Appeal allowed. [Relied on Dashrath Rupsingh Rathod vs. State of Maharashtra and another (2014) 9 SCC 129; Paras 13-15] S. Nagesh v. Shobha S. Aradhya, 2026 LiveLaw (SC) 13 : 2026 INSC 27 : 2026 1 Crimes (SC) 12