TaxTMI 
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2025 (9) TMI 1634
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.... that the High Court in exercise of its revisional jurisdiction erred in upsetting the conviction of the Respondent No.1-Accused under Section 138 of the NI Act based on categorical findings of facts rendered by both the Courts below that the dishonoured cheque had been issued in favour of the Appellant- Complainant in discharge of a legally enforceable debt. 3. He contended that there was no evidence on record to establish that the Appellant-Complainant did not have the financial means to advance a friendly loan of Rs. 6,00,000/- (Rupees Six Lakhs) to the Respondent No.1-Accused. He emphasised that the Appellant-Complainant in his statement under oath had stated that in order to oblige his friend/Respondent No.1-Accused, the Appellant- Complainant had arranged money from his father, who was a cloth merchant having two shops and even went to the extent of parting with a portion of the loan amount which he himself had borrowed from a financial institution. 4. He pointed out that the Respondent No.1-Accused during the course of arguments on sentencing before the Trial Court had prayed for leniency on the ground that he was ready to pay the cheque amount to the Appellant-Complai....
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.... a cheque. In support of his submission, he relied upon the judgment of this Court in APS Forex Services Private Limited vs. Shakti International Fashion Linkers and Ors., (2020) 12 SCC 724. 10. He emphasised that the defence of the Respondent No.1-Accused that a blank cheque had been given to the Appellant-Complainant to enable him to obtain a loan from the bank was more than a probable defence to rebut the presumption under the NI Act, particularly, in view of the fact that the parties were known to each other. REASONING SCOPE AND INTENT OF CHAPTER XVII OF NI ACT 11. Having heard learned counsel for the parties, this Court is of the view that it is essential to first outline the scope and intent of Chapter XVII (Sections 138 to 148) of NI Act which has been inserted by Act 66 of 1988 w.e.f. 1st April 1989. 12. The Statement of Objects and Reasons of Act 66 of 1988 states, "....to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to preven....
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....9 of the NI Act, is a rebuttable presumption. However, the initial onus of proving that the cheque is not in discharge of any debt or other liability is on the accused/drawer of the cheque [See: Bir Singh vs. Mukesh Kumar, (2019) 4 SCC 197]. 18. The judgment of this Court in APS Forex Services Private Limited (supra) relied upon by learned counsel for the Respondent No.1-Accused only says that presumption under Section 139 of the NI Act is rebuttable and when the same is rebutted, the onus would shift back to the complainant to prove his financial capacity, more particularly, when it is a case of giving loan by cash. This judgment nowhere states, as was sought to be contended by learned counsel for the Respondent No.1-Accused, that in cases of dishonour of cheques, in lieu of cash loans, the presumption under Section 139 of the NI Act does not arise. APPROACH OF SOME COURTS BELOW TO NOT GIVE EFFECT TO THE PRESUMTIONS UNDER SECTIONS 118 AND 139 OF NI ACT IS CONTRARY TO MANDATE OF PARLIAMENT 19. Recently, the Kerala High Court in P.C. Hari vs. Shine Varghese & Anr., 2025 SCC OnLine Ker 5535 has taken the view that a debt created by a cash transaction above Rs. 20,000/- (Rupe....
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....) 16 SCC 125 has held that presumptions under Sections 118 and 139 of the NI Act can be rebutted by the accused examining the Income Tax Officer and bank officials of the complainant/drawee. WHEN THE EVIDENCE OF PW-1 IS READ IN ITS ENTIRETY, IT CANNOT BE SAID THAT THE APPELLANT-COMPLAINANT HAD NO WHEREWITHAL TO ADVANCE LOAN 23. Most certainly, the accused can rely upon the evidence adduced by the complainant to rebut the presumption with regard to the existence of a legally enforceable debt or liability, yet in the present case, when the evidence of Appellant-Complainant (PW-1) is read in its entirety, like it should be, it cannot be said that the Appellant-Complainant had no wherewithal to advance any loan to the Respondent No.1-Accused. 24. In fact, the Appellant-Complainant, in his statement, has stated that as the Respondent No.1-Accused was his friend, he had advanced part of the loan received by him and had also taken loan from his father to advance money to the Respondent No.1-Accused. 25. The Trial Court in its order and judgment dated 30th April 2007 has held that the Respondent No.1-Accused has failed to rebut the presumption under Sections 118 and 139 of the ....
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.... the Revisional Court will not interfere, even if a wrong order is passed by a Court having jurisdiction, in the absence of a jurisdictional error. 28. Consequently, this Court is of the view that in the absence of perversity, it was not open to the High Court in the present case, in revisional jurisdiction, to upset the concurrent findings of the Trial Court and the Sessions Court. FAILURE OF ACCUSED TO REPLY TO NOTICE LEADS TO AN INFERENCE 29. Furthermore, the fact that the accused has failed to reply to the statutory notice under Section 138 of the NI Act leads to an inference that there is merit in the Appellant-Complainant's version. This Court in Tedhi Singh vs. Narayan Dass Mahant, (2022) 6 SCC 735 has held that the accused has the initial burden to set up the defence in his reply to the demand notice that the complainant did not have the financial capacity to advance the loan. The relevant portion of the said judgment is reproduced hereinbelow:- "10. ... The proceedings under Section 138 of the NI Act is not a civil suit. At the time, when the complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the co....
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....re not sufficient funds. The case of the accused is unbelievable". KEEPING IN VIEW THE MASSIVE BACKLOG OF CHEQUE BOUNCING CASES, THE FOLLOWING GUIDELINES ARE ISSUED 33. Before parting with this matter, this Court takes judicial notice of the fact that despite repeated directions by this Court in various judgments including Indian Bank Association and Others vs. Union of India and Others, (2014) 5 SCC 590, Damodar S. Prabhu vs. Sayed Babalal H., (2010) 5 SCC 663 and In Re: Expeditious Trial of cases under Section 138 of NI Act 1881, (2021) 16 SCC 116, pendency of cheque bouncing cases under the NI Act in District Courts in major metropolitan cities of India continues to be staggeringly high. For instance, the pendency of Section 138 cases as on 01st September 2025 in Delhi District Courts is 6,50,283 (Six Lakhs Fifty Thousand Two Hundred Eighty Three), Mumbai District Courts is 1,17,190 (One Lakh Seventeen Thousand One Hundred Ninety) and Calcutta District Courts is 2,65,985 (Two Lakhs Sixty Five Thousand Nine Hundred Eighty Five) [Source: National Judicial Data Grid]. This pendency is putting an unprecedented strain on the judicial system as in some States, cases under Sectio....
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.... MR (Cri) Journal 273 are set aside. 36. Keeping in view the massive backlog of cheque bouncing cases and the fact that service of summons on the accused in a complaint filed under Section 138 of the NI Act continues to be one of the main reasons for the delay in disposal of the complaints as well as the fact that punishment under the NI Act is not a means of seeking retribution but is more a means to ensure payment of money and to promote credibility of cheques as a trustworthy substitute for cash payment, this Court issues the following directions:- A. In all cases filed under Section 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. This direction is necessary as a large number of Section 138 cases under the NI Act are filed in the metropolitan cities by financial institutions, by virtue of Section 142(2) of the NI Act, against accused who may not be necessarily residing within the territorial jurisdiction of the Court where the complaint has been filed. The Trial Courts shall further resort to service of summons by ele....
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....___ (ii) Date: ____________ (iii) Amount: ____________ (iv) Drawn on Bank/Branch: ____________ (v) Account No.: ____________ III. Dishonour (i) Date of Presentation: ____________ (ii) Date of Return/Dishonour Memo: ____________ (iii) Branch where cheque was dishonoured:_________ (iv) Reason for Dishonour: ____________ IV. Statutory Notice (i) Date of Notice: ____________ (ii) Mode of Service: ____________ (iii) Date of Dispatch & Tracking No.: ____________ (iv) Proof of Delivery & date of delivery: ____________ (v) Whether served:____________________ (vi) If Not, reasons thereof:________________ (vii) Reply to the Legal Demand Notice, if any_______________ V. Cause of Action (i) Date of accrual: ____________ (ii) Jurisdiction invoked under Section 142(2): ____________ (iii) Whether any other complaint under section 138 NI Act is pending between the same parties, If Yes, in which court and the date and year of the institution. VI. Relief Sought (i) Summoning of accused and trial ....
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.... the Cr.P.C. / Chapter XXII of the BNSS, 2023. H. Wherever, the Trial Court deems it appropriate, it shall use its power to order payment of interim deposit as early as possible under Section 143A of the NI Act. I. 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. J. Wherever cases under Section 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. For instance, in Delhi, the jurisdiction of the evening courts to hear and decide cases of cheque amount is not exceeding Rs. 25,000/-. In the opinion of this Court, the said limit is too low. The High Courts should forthwith issue practice directions and set up realistic pecuniary benchmarks for evening Courts. K. Each District and Se....
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....d pays 15% of the cheque amount by way of costs. (d) Finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount. xxx xxx xxx 24. We are also conscious of the view that the judicial endorsement of the above quoted Guidelines could be seen as an act of judicial law-making and therefore an intrusion into the legislative domain. It must be kept in mind that Section 147 of the Act does not carry any guidance on how to proceed with the compounding of offences under the Act. We have already explained that the scheme contemplated under Section 320 CrPC cannot be followed in the strict sense. In view of the legislative vacuum, we see no hurdle to the endorsement of some suggestions which have been designed to discourage litigants from unduly delaying the composition of the offence in cases involving Section 138 of the Act. 25. The graded scheme for imposing costs is a means to encourage compounding at an early stage of litigation. In the status quo, valuable time of the court is spent on the trial of these cases and the parties are not liable to pay any court fee since the proceeding....