Statutory presumption attached to issuance of a cheque, being one made in discharge of a legally enforceable debt or liability, is required to be accorded due weight.
In a recent judgment, Hon’ble Supreme Court held that the statutory presumption attached to the issuance of a cheque, being one made in discharge of a legally enforceable debt or liability, is required to be accorded due weight.
ABCAUS Case Law Citation:
4976 (2026) (01) abcaus.in SC
In the instant case the appellant/complainant had challenged the judgment of the Hon’ble High Court in seeking to quash complaints instituted under Section 138 read with Sections 141 and 142 of the Negotiable Instruments Act, 1881.
The complainant and the respondent firm had entered into an Agreement to Sell property. Under the terms of the Agreement, the respondent firm (vendor) was obliged to execute and register the Sale Deed(s) in favour of the complainant on or before the scheduled date and in the event of failure to do so, the entire amount received was to be refunded to the complainant together with an appreciation amount by way of compensation.
The partner of the firm executed a personal guarantee undertaking to ensure refund of the amount together with the appreciation amount in case the sale deeds were not executed to the complainant within the stipulated period. To secure the said liability, he also undertook to issue personal cheques corresponding to the firm’s cheques, to provide an alternative mechanism for repayment.
Upon the failure of Respondents to execute the Sale Deed(s) the firm issued two cheques representing the principal consideration and the appreciation amount. In addition, in terms of his personal guarantee, the partner issued two personal cheques. These cheques were handed over to the complainant with an understanding that the personal cheques could be presented earlier, while the firm’s cheques would be available for presentation later.
However, on presentation, both the personal cheques were returned dishonoured with the bank’s remark “Exceeds Arrangement”. Subsequently, the complainant presented the firm’s cheques which too were returned unpaid with the remark “Funds Insufficient”.
The complainant thereafter issued a statutory notice to all the accused persons demanding payment within the statutory period, but despite service, no payment was made.
The complainant instituted two complaints under Section 138 of the NI Act in respect of the personal cheque and firm’s cheque. The Trial Court took cognizance and issued summons.
The accused issued further cheques. However, they were also dishonoured. As a result, a total of five complaint cases came to be filed by the complainant against the same set of accused, each complaint relating to distinct cheque instruments and separate dates of presentation and dishonour.
Aggrieved by the institution and continuation of the said criminal complaints and the summoning orders passed thereafter, Respondents preferred petitions before the High Court under Section 482 of the Cr.PC seeking quashing of the complaints and the summoning orders.
The Hon’ble High Court held that the complainant could not simultaneously maintain two separate complaints in respect of the same debt or liability, merely because separate sets of cheques i.e., one issued in the name of the firm and another personally by its proprietor, had been presented and dishonoured. It was, thus, concluded that continuation of both complaints would amount to parallel prosecution for the same cause of action. On that reasoning, the High Court quashed the complaint relating to the firm’s cheques in entirety, and also partially quashed the complaint relating to the personal cheques in respect of one accused who was not a signatory to the cheques nor shown to be involved in the transaction.
Aggrieved, the complainant approached the Hon’ble Supreme Court challenging the quashing of Complaint by the High Court on account of parallel prosecution. The respondent firm/partners also filed Appeals challenging the High Court’s refusal to quash Complaint Case for personal cheques.
The Hon’ble Supreme Court observed that recently a three-Judge Bench had held that the power to quash criminal proceedings must be exercised sparingly, and only where the complaint, even if accepted in full, discloses no offence or continuation would amount to abuse of process of law. Directions had been issued to the High Courts to be kept in mind while exercising the power under Section 482 of the Cr.PC.
The Hon’ble Supreme Court noted that what weighed with the High Court while allowing the quashing of the complainant was that firm’s cheques represented the same liability under the Agreement to Sell and, therefore, two parallel prosecutions could not simultaneously stand.
The Hon’ble Supreme Court opined that whether those cheques were issued as alternative or supplementary instruments, or represented fresh undertakings, was a disputed question of fact requiring evidence at the time of trial and cannot be resolved at the threshold. Questions such as whether the firm’s cheques were issued in substitution of the personal cheques, whether the parties treated them as alternative securities, and whether both were intended to be simultaneously enforceable, were all mixed questions of fact. The inherent jurisdiction of the High Court under Section 482 of the Cr.PC cannot be used to decide such disputed issues.
The Hon’ble Supreme Court opined that High Court exceeded its jurisdiction and was not justified in quashing Complaint related to the firm’s cheque. The complaint on its face disclosed the ingredients of offence under Section 138 of the NI Act and must proceed to trial.
Accordingly, the complaint quashed by Hon’ble High Court was restored for trial before the concerned Trial Court.
Adverting the appeal of the respondents, the Hon’ble Supreme Court observed that while examining the case viz-a-viz the ingredients required for commission of offence under Section 138 of the NI Act, the record clearly indicated that the cheques were dishonoured, statutory notices were served, cheques were returned, and the summons were thereafter issued. On such material, the complaint prima facie stood. Any disputed question of fact qua the offence under Section 138 of the NI Act or any defence that Respondent wanted to raise against the offence alleged must be done during the trial.
The Hon’ble Supreme Court further stated that burden of proving whether there exists any debt or liability is something which must be discharged in trial. A bare perusal of Section 139 of the NI Act would indicate that once a cheque is issued in discharge of liability and dishonoured, a presumption of liability in favour of the complainant arises. The accused person is then required to rebut the presumption by raising facts that either there was no debt or liability when the cheque was drawn, or the cheque was not drawn in discharge of liability, or notice was not served in time.
The Hon’ble Supreme Court opined that the statutory presumption attached to the issuance of a cheque, being one made in discharge of a legally enforceable debt or liability, is required to be accorded due weight. Therefore, in circumstances where the accused approaches the Court seeking quashing of proceedings even before the commencement of trial, the Court must exercise circumspection and refrain from prematurely stifling the prosecution at the threshold, particularly by overlooking the legal presumption that operates in favour of the complainant.
Accordingly, it was held that the High Court was justified in not quashing Complaint against Respondent. The complaints prima facie disclosed the ingredients of offence under Section 138 of the NI Act and must proceed to trial.
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