Supreme Court’s Landmark Judgment Reinforces Presumption under Section 138 NI Act and Issues Comprehensive Guidelines to Reduce Cheque Bounce Case Backlog

October 9, 2025 admin

Case Title: Sanjabij Tari v. Kishore S. Borcar & Anr.

I. Introduction

The Supreme Court of India in Sanjabij Tari v. Kishore S. Borcar & Anr. has delivered a landmark ruling on the scope and interpretation of Sections 138, 118, and 139 of the Negotiable Instruments Act, 1881 (“NI Act”). The judgment not only reinstates the importance of statutory presumptions in cheque dishonour cases but also issues comprehensive nationwide guidelines aimed at ensuring the speedy disposal of cheque bounce matters that constitute nearly half of the pendency in Indian trial courts.

II. Background of the Case

The appellant, Sanjabij Tari, filed a complaint under Section 138 of the NI Act against the respondent, Kishore S. Borcar, for dishonour of a cheque amounting to ₹6,00,000/-. The trial court convicted the respondent, and the Sessions Court upheld the conviction. However, the Bombay High Court (Goa Bench) set aside both concurrent findings and acquitted the accused in an ex parte revisional order dated 16th April 2009.

Aggrieved, the complainant approached the Supreme Court, challenging the High Court’s interference and the legality of the acquittal order.

III. Legal Issues

Whether the High Court, in its revisional jurisdiction, could upset concurrent factual findings without establishing perversity.
Whether presumption under Sections 118 and 139 of the NI Act stands rebutted merely on the accused alleging financial incapacity of the complainant.
Whether loans advanced in cash above ₹20,000 violate Section 269SS of the Income Tax Act, thereby becoming unenforceable under Section 138 of the NI Act.
What measures should be adopted to address the alarming pendency of cheque bounce cases nationwide.

IV. Observations and Reasoning of the Supreme Court

1. Presumption under Sections 118 and 139 NI Act

The Court reaffirmed that once the execution of a cheque is admitted, a statutory presumption arises that the cheque was issued for a legally enforceable debt or liability. This presumption is rebuttable, but the initial burden lies on the accused to prove otherwise. Reliance was placed on Rangappa v. Sri Mohan (2010) 11 SCC 441 and Bir Singh v. Mukesh Kumar (2019) 4 SCC 197.

2. Cash Transactions and Section 269SS of the Income Tax Act

The Court categorically held that a violation of Section 269SS of the Income Tax Act, 1961 only attracts a penalty under Section 271D and does not render the transaction illegal or unenforceable under Section 138 NI Act. Consequently, the Kerala High Court’s contrary view in P.C. Hari v. Shine Varghese (2025 SCC OnLine Ker 5535) was set aside.

3. Revisional Jurisdiction and Perversity Test

The Supreme Court reiterated that the High Court, while exercising revisional jurisdiction, cannot reappreciate evidence or interfere with concurrent findings of fact unless the findings are perverse or without jurisdiction, as laid down in Bir Singh and Southern Sales & Services v. Sauermilch Design (2008) 14 SCC 457.

4. Failure to Reply to Statutory Notice

The Court held that non-reply to a demand notice under Section 138 raises a strong inference in favour of the complainant. Reference was made to Tedhi Singh v. Narayan Dass Mahant (2022) 6 SCC 735 and MMTC Ltd. v. Medchl Chemicals & Pharma (P) Ltd. (2002) 1 SCC 234.

5. Defence of Blank Cheque Held Unbelievable

The accused’s plea that a blank cheque was issued to help the complainant secure a bank loan was termed “unbelievable and absurd.” The Court observed that such a contention defies logic since no one issues a cheque on an account with insufficient funds for that purpose.

V. Policy Concerns and Judicial Directions

Recognizing that Section 138 cases constitute nearly 50% of trial court pendency in major cities (e.g., Delhi—49.45%), the Court issued sweeping directions to streamline proceedings under the NI Act.

Key Guidelines Issued:

Service of Summons:
- Summons shall also be served dasti (personally by the complainant) and through electronic means like email or WhatsApp.
Online Payment Mechanism:
- District Courts to establish secure UPI/QR-based payment systems for early settlement.
Standardised Synopsis Format:
- Every complaint under Section 138 NI Act must include a prescribed summary sheet detailing cheque particulars, dishonour memo, statutory notice, and cause of action.
Summary Trial Emphasis:
- Courts must record reasons before converting a summary trial into a summons trial under Section 143 NI Act.
Updated Compounding Guidelines (Modified from Damodar S. Prabhu v. Sayed Babalal H.):
- No cost if payment made before defence evidence.
- 5% cost if made before judgment.
- 7.5% cost in appeal/revision.
- 10% cost if made before the Supreme Court.
Probation and Compounding:
- Accused under Section 138 NI Act may also be granted benefit under the Probation of Offenders Act, 1958, promoting restorative justice.
Administrative Oversight:
- Chief Justices of Delhi, Bombay, and Calcutta High Courts to form monitoring committees ensuring monthly reviews of NI Act cases and promoting mediation and Lok Adalats.

VI. Final Decision

The Supreme Court set aside the High Court’s acquittal and restored the conviction by the Trial and Sessions Courts.
Respondent No.1 was directed to pay ₹7,50,000 in 15 equal monthly instalments of ₹50,000 each.

The Court mandated that all High Courts and District Courts implement the newly issued guidelines by 1st November 2025.

VII. Conclusion

The judgment in Sanjabij Tari v. Kishore S. Borcar stands as a definitive reaffirmation of the sanctity of cheques as a credible financial instrument. It not only fortifies the statutory presumptions under the NI Act but also modernizes procedural mechanisms through technology-driven service, online payments, and structured documentation.

This ruling is a progressive step towards balancing the rights of both drawers and payees, reducing judicial backlog, and reinforcing public confidence in the banking and legal system.