Negotiable Instruments Act, 1881 – Chapter XVII (Sections
138 to 148):
Held: The provisions contained in Chapter XVII provide that where any cheque drawn by a person for the discharge of any liability is returned by the bank unpaid for the reason of the insufficiency of the amount of money standing to the credit of the account on which the cheque was drawn or for the reason that it exceeds the arrangements made by the drawer of the cheque with the banker for that account, the drawer of such cheque shall be deemed to have committed an offence – In that case, the drawer, without prejudice to the other provisions of the said Act, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. [Para 13]
Negotiable Instruments Act, 1881 – Chapter XVII (Sections
138 to 148) – Intent of:
Held: The intent behind introducing Chapter XVII is to restore the credibility of cheques as a trustworthy substitute for cash payment and to promote a culture of using cheques – Further, by criminalizing the act of issuing cheques without sufficient funds or for other specified reasons, the law promotes financial discipline, discourages irresponsible practices and allows for a more efficient and timely resolution of disputes compared to the previous pure civil remedy which was found to involve the payee in a long-drawn out process of litigation. [Para 14]
Negotiable Instruments Act, 1881 – ss.118 and 139 – District Courts and High Courts are not giving effect to presumptions: Held: This Court takes judicial notice of the fact that some District Courts and some High Courts are not giving effect to the presumptions incorporated in Sections 118 and 139 of NI Act and are treating the proceedings under the NI Act as another civil recovery proceedings and are directing the complainant to prove the antecedent debt or liability – This Court is of the view that such an approach is not only prolonging the trial but is also contrary to the mandate of Parliament, namely, that the drawer and the bank must honour the cheque, otherwise, trust in cheques would be irreparably damaged. [Para 21]
Negotiable Instruments Act, 1881 – s.138 – Keeping in view the massive backlog of cheque bouncing cases, the following directions are issued:
Held: i) In all cases filed u/s.138 of the NI Act, service of summons shall not be confined through prescribed usual modes but shall also be issued dasti i.e. summons shall be served upon the accused by the complainant in addition – The Trial Courts shall further resort to service of summons by electronic means in terms of the applicable Notifications/Rules, if any, framed under subSections 1 and 2 of s.64 and under Clause (i) of Section 530 and other provisions of the BNSS, 2023 like Delhi BNSS (Service of Summons and Warrants) Rules, 2025; (ii) The complainant shall file an affidavit of service before the Court – In the event such affidavit is found to be false, the Court shall be at liberty to take appropriate action against the complainant in accordance with law;
(iii) In order to facilitate expeditious settlement of cases u/s.138 of the NI Act, the Principal District and Sessions Judge of each District Court shall create and operationalise dedicated online payment facilities through secure QR codes or UPI links – The complainant shall also be informed of such payment and upon confirmation of receipt, appropriate orders regarding release of such money and compounding/closure of proceedings u/s.147 of the NI Act and/or s.255 of Cr.PC/278 BNSS, 2023 may be passed by the Court in accordance with law; (iv) Each and every complaint u/s.138 of the NI Act shall contain a synopsis in the format which shall be filed immediately after the index (at the top of the file) i.e. prior to the formal complaint; (v) This Court directs that there shall be no requirement to issue summons to the accused in terms of s.223 of BNSS i.e., at the pre-cognizance stage; (vi) Since the object of s.143 of the NI Act is quick disposal of the complaints u/s.138 by following the procedure prescribed for summary trial under the Code – The Trial Courts shall record cogent and sufficient reasons before converting a summary trial to summons trial – The Trial Court shall be at liberty (at the initial post cognizance stage) to ask questions, it deems appropriate, u/s.251 Cr.PC/s.274 BNSS, 2023; (vii) The Court shall record the responses to the questions in the ordersheet in the presence of the accused and his/her counsel and thereafter determine whether the case is fit to be tried summarily under Chapter XXI of the Cr.PC/Chapter XXII of the BNSS, 2023; (viii) Wherever, the Trial Court deems it appropriate, it shall use its power to order payment of interim deposit as early as possible u/s.143A of the NI Act; (ix) Since physical courtrooms create a conducive environment for direct and informal interactions encouraging early resolution, the High Courts shall ensure that after service of summons, the matters are placed before the physical Courts – Exemptions from personal appearances should be granted only when facts so warrant – It is clarified that prior to the service of summons the matters may be listed before the digital Courts; (x) Wherever cases u/s.138 of the NI Act are permitted to be heard and disposed of by evening courts, the High Courts should ensure that pecuniary limit of the cheque amount is realistic; (xi) Each District and Sessions Judge in Delhi, Mumbai and Calcutta shall maintain a dedicated dashboard reflecting the pendency and progress of cases u/s.138 of the NI Act – The dashboard shall include, inter alia, details regarding total pendency, monthly disposal rates, percentage of cases settled/compounded, average number of adjournments per case and the stage-wise breakup of pending matters – The District and Sessions Judges in aforesaid jurisdictions shall conduct monthly reviews of the functioning of Magistrates handling NI Act matters; (xii) The Chief Justices of Delhi, Bombay and Calcutta are requested to form Committee on the Administrative side to monitor pendency and to ensure expeditious disposal of s.138 of the NI Act cases. [Para 36]
Negotiable Instruments Act, 1881 – Guidelines for compounding offences under the NI Act nearly fifteen years back in Damodar S. Prabhu are modified:
Held: (a) If the accused pays the cheque amount before recording of his evidence (namely defence evidence), then the Trial Court may allow compounding of the offence without imposing any cost or penalty on the accused; (b) If the accused makes the payment of the cheque amount post the recording of his evidence but prior to the pronouncement of judgment by the Trial Court, the Magistrate may allow compounding of the offence on payment of additional 5% of the cheque amount with the Legal Services Authority or such other Authority as the Court deems fit; (c) Similarly, if the payment of cheque amount is made before the Sessions Court or a High Court in Revision or Appeal, such Court may compound the offence on the condition that the accused pays 7.5% of the cheque amount by way of costs; (d) Finally, if the cheque amount is tendered before this Court, the figure would increase to 10% of the cheque amount. [Para 38]
Negotiable Instruments Act, 1881 – s.138 – Respondent no.1accused was u/s.138 of N.I. Act – The High Court acquitted the respondent no.1-accused u/s.138 of the NI Act and reversing the concurrent judgments of the Trial Court and the Sessions Court – Correctness:
Held: In the present case, the cheque in question has admittedly been signed by the respondent no.1-accused – This Court is of the view that once the execution of the cheque is admitted, the presumption u/s.118 of the NI Act that the cheque in question was drawn for consideration and the presumption u/s.139 of the NI Act that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability arises against the accused – It is pertinent to mention that in the present case, the respondent no.1-accused has filed no documents and/or examined any independent witness or led any evidence with regard to the financial incapacity of the appellant-complainant to advance the loans in question – Furthermore, the fact that the accused has failed to reply to the statutory notice u/s.138 of the NI Act leads to an inference that there is merit in the appellantcomplainant’s version – The High Court’s finding that the respondent no.1-accused’s defence that a signed blank cheque was issued by him so as to enable his friend/appellant-complainant to obtain a loan from a bank was sufficient to rebut the presumptions u/ss.118 and 139 of the NI Act is unbelievable and absurd – Thus, the impugned order passed by the High Court dated 16.04.2009 is set aside and the judgment as well as the orders of Trial Court and Sessions Court are restored with a direction to the respondent no.1-accused to pay Rs.7,50,000/-. [Paras 15, 22, 29, 32]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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