Full Judgment Text
REPORTABLE
2026 INSC 327
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2026
(@ SLP (CRL.) NO.7829 OF 2023)
RENUKA APPELLANT
VERSUS
THE STATE OF MAHARASHTRA RESPONDENTS
AND ANOTHER
J U D G M E N T
ATUL S. CHANDURKAR, J.
Leave granted.
1.
2. On a complaint filed under Section 138 of the
1
Negotiable Instruments Act, 1881 , learned Metropolitan
Magistrate on being satisfied that there was prima-facie
material to proceed against the second respondent issued
th
process on 17 June 2022. The second respondent
invoked the revisional jurisdiction of the Sessions Court
Signature Not Verified
Digitally signed by
Gulshan Kumar Arora
Date: 2026.04.07
16:41:59 IST
Reason:
1 For short, the N.I. Act
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 1 of 16
for challenging the said order. The Sessions Court was of
the view that on the date of issuance of the cheque in
question, there was no legally enforceable debt to be
th
satisfied by the drawer. By the order dated 30 December
2022, it set aside the order passed by the learned
Metropolitan Magistrate issuing process. The complainant
approached the High Court of Bombay by filing a writ
petition under Article 227 of the Constitution of India
and challenged the order passed by the Sessions Court.
The learned Single Judge, however, dismissed the writ
petition observing that no error of jurisdiction was found
in the impugned order. Being aggrieved, the complainant
has challenged the aforesaid orders in this Criminal
Appeal.
3. Shorn of necessary details, the facts relevant for
considering the challenge as raised are that it is the case
of the appellant that she had some disputes with her
husband, Mr. Ashwin Natwarlal Sheth in the matter of
alleged illegal and fraudulent transfer of shares
pertaining to Sheth Developers and Realtors (India)
Limited and Sheth Developers Private Limited. She had
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 2 of 16
filed various complaints after which her husband
commenced negotiations for amicable settlement of the
th
disputes. On 12 January 2022, a final draft settlement
agreement was finalised and drawn up between the
parties. One of the terms of the settlement was that the
appellant’s husband would gift to the appellant the fifth,
sixth and seventh floor premises of Natwar Bungalow
along with interest in a plot located in a Co-operative
Housing Society. He also agreed to pay the appellant a
sum of ₹ 50 crores on executing a Declaration-cum-
Indemnity document so as to withdraw the complaints
filed by her against her husband. With a view to
safeguard the interest of the appellant, the second
respondent, who was a close friend of the appellant’s
husband, agreed to act as a mediator and to keep the
amount of ₹ 50 crores in an escrow account till the actual
payment was made by the appellant’s husband.
th
Accordingly, on 12 January 2022, the second
respondent issued Cheque No.080261 for an amount of
₹ 50 crores in favour of the appellant. The appellant
claims to have signed the document titled as Declaration-
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 3 of 16
th
cum-Indemnity on 13 January 2022. It is the further
case of the appellant that the sale of shares of the
concerned entity was completed contrary to the
settlement agreement and the appellant’s husband
received the sale consideration. The appellant accordingly
deposited the cheque that had been issued by the second
th
respondent for encashment. However, on 06 April 2022,
the said cheque was dishonoured and returned with the
remark ‘payment stopped by drawer’. The appellant, on
th
20 April 2022, issued a notice under Section 138 of the
N.I. Act to the second respondent. The said notice was
th
replied by the second respondent on 04 May 2022,
denying any liability to make such payment. The
appellant gave her further reply to the second respondent
and again called upon him to make the necessary
payment. Since no further steps were taken by the
th
second respondent, the appellant on 16 June 2022 filed
a complaint against the second respondent under Section
138 of the N.I. Act.
4. Mr. Mukul Rohatgi, learned Senior Advocate for the
appellant submitted that the Sessions Court erred in
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 4 of 16
setting aside the order passed by the learned
Metropolitan Magistrate issuing process on the premise
that the dishonoured cheque had been issued for a debt
that was not legally enforceable. According to him, on a
plain reading of the complaint filed by the appellant
under Section 138 of the N.I. Act coupled with the
undisputed position as regards the issuance of the
cheque by the second respondent, its valid presentation,
its subsequent dishonour, issuance of the statutory
notice and failure on the part of the second respondent to
comply with the statutory notice were the only relevant
considerations at the stage of issuance of process in the
complaint. In other words, it was urged that the
presumption under Section 139 of the N.I. Act that
operated in favour of the payee could be dislodged by the
drawer of the cheque only during the course of trial and
not at the pre-trial stage. When the basic ingredients for
making out an offence under Section 138 of the N.I. Act
had been made out and process had been issued by the
learned Metropolitan Magistrate, scuttling the
proceedings at this stage was unjustified. To substantiate
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 5 of 16
this contention, reliance was placed on the decision in
Sunil Todi and others Vs. State of Gujarat and
2
another by urging that the Sessions Court had misread
the said judgment. It was, thus, submitted that the
Sessions Court was not justified in coming to the
conclusion that the cheque in question had not been
issued for discharge of any legal liability. Such a finding
could be rendered only at the trial and not on the basis of
the statements made during the course of proceedings
challenging the issuance of process. He, therefore,
submitted that the impugned orders be set aside and the
complaint be restored for its adjudication on merits.
5. On the other hand, Dr. A. M. Singhvi, learned
Senior Advocate for the second respondent supported the
impugned orders and opposed the contentions raised on
behalf of the appellant. He submitted that both the
Courts were justified in coming to the conclusion that the
cheque in question had not been shown to have been
issued towards the discharge of any legally enforceable
th
debt. The document dated 12 January 2022, which was
2 2021 INSC 823
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 6 of 16
in the form of a settlement agreement, was admittedly not
signed by the second respondent. There was no
concluded agreement as such and, therefore, the second
respondent could not be bound by the statements made
in that agreement. The liability under the cheque issued
by the second respondent would arise only after the
agreement between the parties was complete. The Courts
were justified in relying upon the decision in Sunil Todi
(supra) wherein it was held that where the payment of
debt was dependent on the happening of an event which
never occurred, there would be no legally recoverable
liability to be satisfied. In view of this position on record,
no useful purpose would be served by continuing the
proceedings under Section 138 of the N.I. Act as it would
amount to an abuse of the process of law. It was, thus,
submitted that the complaint having been rightly
dismissed by the learned Sessions Judge, which order
was upheld by the High Court, no interference therein
was called for. He, therefore, urged that the appeal ought
to be dismissed.
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 7 of 16
6. We have heard the learned Senior Advocates
appearing for the parties at length and we have also
perused the relevant documentary material on record.
Having given due consideration to the rival submissions,
we are of the view that the Sessions Court as well as the
High Court were not justified in coming to the conclusion
that the complaint as filed by the appellant under Section
138 of the N.I. Act was liable to be dismissed at the pre-
trial stage on the ground that the cheque issued by the
second respondent was not towards any legally
enforceable debt.
7. Perusal of the complaint filed by the appellant
under Section 138 of the N.I. Act indicates reference to an
amicable settlement of various disputes between the
appellant and her husband, pursuant to which the
appellant’s husband executed a registered irrevocable
th
Power of Attorney dated 10 December 2022 in favour of
the appellant. It was agreed under the settlement
agreement that the appellant’s husband would transfer
by way of gift three properties and also pay an amount of
₹
50 crores on the execution of a Declaration-cum-
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 8 of 16
Indemnity document. In reciprocation, complaints made
by the appellant as regards fraudulent transfer of her
shares in two companies were to be withdrawn. To ensure
execution of the Declaration-cum-Indemnity document,
the second respondent acted as a guarantor and issued
the cheque in question drawn in favour of the appellant.
The appellant accordingly signed the Declaration-cum
th
Indemnity document on 13 January 2022. On getting
knowledge of the sale of certain shares contrary to the
settlement agreement, the appellant presented the
cheque issued by the second respondent for being
honoured. It has been further stated that said cheque
was dishonoured with the remark ‘payment stopped by
drawer’. A reference is thereafter made to the issuance of
a statutory notice under Section 138 of the N.I. Act dated
th
20 April 2022, its service on the second respondent and
th
his reply dated 04 May 2022 denying any liability.
Accordingly, the said complaint came to be filed by the
appellant. The appellant’s statement was duly verified by
the learned Metropolitan Magistrate and on being prima
facie satisfied that the ingredients of Section 138 of the
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 9 of 16
N.I. Act were present, process came to be issued to the
second respondent.
8. It is to be borne in mind that at the stage of
issuance of process by the learned Metropolitan
Magistrate, what is prima facie required to be seen is the
issuance of cheque by the drawer in favour of the
complainant, its dishonour on presentation by the payee,
issuance of statutory notice under Section 138 of the N.I.
Act and filing of the complaint within the prescribed
statutory period. If the drawer does not dispute issuance
of such a cheque nor does he deny his signature on the
dishonoured cheque, the statutory presumption as
contemplated under Section 139 of the N.I. Act comes
into play. As a result, the burden would shift on the
drawer of the cheque to prove that the cheque was not
issued for any legally enforceable debt or liability. This
exercise has to be undertaken during the trial either by
relying upon the material brought on record by the
complainant or by the drawer leading evidence in
rebuttal. At the stage of issuance of process, the statutory
presumption under Section 139 of the N.I. Act cannot be
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 10 of 16
dislodged in a summary manner merely by contending
that the cheque issued was not for any legally enforceable
debt or liability.
9. We may in this regard refer to two decisions of this
Court that have reiterated the view that once the basic
ingredients of Section 138 of the N.I. Act are duly
satisfied by the complainant, the rebuttal of statutory
presumption by the drawer can only be made during the
course of trial.
3
In Rangappa Vs. Sri Mohan , it has been explicitly
reiterated that the presumption mandated by Section 139
of the N.I. Act includes the presumption as regards
existence of a legally enforceable debt or liability. It has
been held that Section 139 is an example of a reverse
onus clause that has been included in furtherance of the
legislative object of improving the credibility of negotiable
instruments. The presumption is rebuttable and the
accused can raise a defence wherein the existence of a
legally enforceable debt or liability can be contested.
3 2010 INSC 289
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 11 of 16
4
In Rajesh Jain Vs. Ajay Singh , it has been held
as under:
“ 34. The NI Act provides for two presumptions: Section 118 and
Section 139. Section 118 of the Act inter alia directs that it shall
be presumed, until the contrary is proved, that every negotiable
instrument was made or drawn for consideration. Section 139 of
the Act stipulates that 'unless the contrary is proved, it shall be
presumed, that the holder of the cheque received the cheque, for
the discharge of, whole or part of any debt or liability'. It will be
seen that the 'presumed fact' directly relates to one of the crucial
ingredients necessary to sustain a conviction under Section 138.
35. Section 139 of the NI Act, which takes the form of a ‘shall
presume’ clause is illustrative of a presumption of law. Because
Section 139 requires that the Court ‘shall presume’ the fact
stated therein, it is obligatory on the Court to raise this
presumption in every case where the factual basis for the raising
of the presumption had been established. But this does not
preclude the person against whom the presumption is drawn
from rebutting it and proving the contrary as is clear from the
use of the phrase ‘unless the contrary is proved’ .
36. The Court will necessarily presume that the cheque had
been issued towards discharge of a legally enforceable
debt/liability in two circumstances. Firstly , when the drawer of
the cheque admits issuance/execution of the cheque and
secondly , in the event where the complainant proves that cheque
was issued/executed in his favour by the drawer. The
circumstances set out above form the fact(s) which bring about
the activation of the presumptive clause. [Bharat Barrel Vs.
Amin Chand] [(1999) 3 SCC 35]
xxxxxxxxxxxxxxxxxxx
38. As soon as the complainant discharges the burden to
4 2023 INSC 888
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 12 of 16
prove that the instrument, say a cheque, was issued by the
accused for discharge of debt, the presumptive device under
Section 139 of the Act helps shifting the burden on the accused.
The effect of the presumption, in that sense, is to transfer the
evidential burden on the accused of proving that the cheque was
not received by the Bank towards the discharge of any liability.
Until this evidential burden is discharged by the accused, the
presumed fact will have to be taken to be true, without expecting
the complainant to do anything further.”
10. A perusal of the revisional order passed by the
learned Judge of the Sessions Court indicates that he has
given much importance to the fact that the agreement
th
dated 12 January 2022 was not signed by the second
respondent and, hence, the issuance of the cheque in
question was not for any enforceable debt. He also
appears to have given importance to the dispute between
the appellant and her husband by stating that it was a
matrimonial dispute and civil litigation between the said
parties was pending in various Courts. In our view, the
learned Judge misdirected himself when he proceeded to
th
give more weightage to the document dated 12 January
2022 and in the process, ignored the fact that the basic
ingredients for attracting the provisions of Section 138 of
the N.I. Act had been duly satisfied by the appellant, at
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 13 of 16
least for issuance of process. The drawing of the cheque
by the second respondent, its presentation and
subsequent dishonour at the instructions of the second
respondent is not in dispute. The second respondent does
not also dispute that he had issued the said cheque and
that it was duly signed by him. The issuance of statutory
notice as well as filing of the complaint within the
prescribed period are also not in dispute. In such a
situation, when the basic ingredients of Section 138
stand duly satisfied and the statutory presumption under
Section 139 gets triggered, coming to a conclusion that
the cheque was not issued for a legally enforceable debt
at the pre-trial stage itself without granting an
opportunity to the complainant to substantiate her case
by leading evidence would amount to ignoring the
statutory presumption that the cheque had been issued
for a legally enforceable debt or liability. As a
consequence, the presumption under Section 139 of the
N.I. Act gets washed away even prior to commencement of
the trial. We are of the view that in the facts of the
present case, the dismissal of the complaint as a
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 14 of 16
consequence of setting aside the order issuing process is
totally unjustified in the absence of any material being
brought on record by the second respondent to rebut the
statutory presumption and prove his contention that the
cheque was issued not towards any enforceable debt or
liability.
Since we are inclined to restore the complaint for
being tried on merits, it is not necessary to deal with the
decision in Sunil Todi and others (supra) in detail. Suffice
it to observe that even in the said decision, it has been
held that disputed questions as regards existence of
outstanding liability are questions of fact that have to be
determined at the trial on the basis of evidence.
11. For all these reasons, we are of the view that the
learned Judge of the Sessions Court committed an error
th
in setting aside the order dated 17 June 2022 passed by
the learned Metropolitan Magistrate issuing process
under Section 138 of the N.I. Act. The High Court also
fell into error in upholding the order passed by the
learned Sessions Judge. Accordingly, both the aforesaid
orders are set aside. The complaint filed by the appellant
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 15 of 16
being CC1831/SC/2022 stands restored for its
adjudication on merits.
We clarify that the complaint shall be decided on
its own merits and in accordance with law after giving
due opportunity to all parties concerned. Any
observations made in this judgment shall not be
construed as an expression of opinion on the merits of
the said case.
12. The Criminal Appeal is allowed in aforesaid terms.
…….……………………..J.
[J.K. MAHESHWARI]
…..………………………..J.
[ATUL S. CHANDURKAR]
NEW DELHI,
th
APRIL 7 , 2026.
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 16 of 16
2026 INSC 327
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2026
(@ SLP (CRL.) NO.7829 OF 2023)
RENUKA APPELLANT
VERSUS
THE STATE OF MAHARASHTRA RESPONDENTS
AND ANOTHER
J U D G M E N T
ATUL S. CHANDURKAR, J.
Leave granted.
1.
2. On a complaint filed under Section 138 of the
1
Negotiable Instruments Act, 1881 , learned Metropolitan
Magistrate on being satisfied that there was prima-facie
material to proceed against the second respondent issued
th
process on 17 June 2022. The second respondent
invoked the revisional jurisdiction of the Sessions Court
Signature Not Verified
Digitally signed by
Gulshan Kumar Arora
Date: 2026.04.07
16:41:59 IST
Reason:
1 For short, the N.I. Act
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 1 of 16
for challenging the said order. The Sessions Court was of
the view that on the date of issuance of the cheque in
question, there was no legally enforceable debt to be
th
satisfied by the drawer. By the order dated 30 December
2022, it set aside the order passed by the learned
Metropolitan Magistrate issuing process. The complainant
approached the High Court of Bombay by filing a writ
petition under Article 227 of the Constitution of India
and challenged the order passed by the Sessions Court.
The learned Single Judge, however, dismissed the writ
petition observing that no error of jurisdiction was found
in the impugned order. Being aggrieved, the complainant
has challenged the aforesaid orders in this Criminal
Appeal.
3. Shorn of necessary details, the facts relevant for
considering the challenge as raised are that it is the case
of the appellant that she had some disputes with her
husband, Mr. Ashwin Natwarlal Sheth in the matter of
alleged illegal and fraudulent transfer of shares
pertaining to Sheth Developers and Realtors (India)
Limited and Sheth Developers Private Limited. She had
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 2 of 16
filed various complaints after which her husband
commenced negotiations for amicable settlement of the
th
disputes. On 12 January 2022, a final draft settlement
agreement was finalised and drawn up between the
parties. One of the terms of the settlement was that the
appellant’s husband would gift to the appellant the fifth,
sixth and seventh floor premises of Natwar Bungalow
along with interest in a plot located in a Co-operative
Housing Society. He also agreed to pay the appellant a
sum of ₹ 50 crores on executing a Declaration-cum-
Indemnity document so as to withdraw the complaints
filed by her against her husband. With a view to
safeguard the interest of the appellant, the second
respondent, who was a close friend of the appellant’s
husband, agreed to act as a mediator and to keep the
amount of ₹ 50 crores in an escrow account till the actual
payment was made by the appellant’s husband.
th
Accordingly, on 12 January 2022, the second
respondent issued Cheque No.080261 for an amount of
₹ 50 crores in favour of the appellant. The appellant
claims to have signed the document titled as Declaration-
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 3 of 16
th
cum-Indemnity on 13 January 2022. It is the further
case of the appellant that the sale of shares of the
concerned entity was completed contrary to the
settlement agreement and the appellant’s husband
received the sale consideration. The appellant accordingly
deposited the cheque that had been issued by the second
th
respondent for encashment. However, on 06 April 2022,
the said cheque was dishonoured and returned with the
remark ‘payment stopped by drawer’. The appellant, on
th
20 April 2022, issued a notice under Section 138 of the
N.I. Act to the second respondent. The said notice was
th
replied by the second respondent on 04 May 2022,
denying any liability to make such payment. The
appellant gave her further reply to the second respondent
and again called upon him to make the necessary
payment. Since no further steps were taken by the
th
second respondent, the appellant on 16 June 2022 filed
a complaint against the second respondent under Section
138 of the N.I. Act.
4. Mr. Mukul Rohatgi, learned Senior Advocate for the
appellant submitted that the Sessions Court erred in
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 4 of 16
setting aside the order passed by the learned
Metropolitan Magistrate issuing process on the premise
that the dishonoured cheque had been issued for a debt
that was not legally enforceable. According to him, on a
plain reading of the complaint filed by the appellant
under Section 138 of the N.I. Act coupled with the
undisputed position as regards the issuance of the
cheque by the second respondent, its valid presentation,
its subsequent dishonour, issuance of the statutory
notice and failure on the part of the second respondent to
comply with the statutory notice were the only relevant
considerations at the stage of issuance of process in the
complaint. In other words, it was urged that the
presumption under Section 139 of the N.I. Act that
operated in favour of the payee could be dislodged by the
drawer of the cheque only during the course of trial and
not at the pre-trial stage. When the basic ingredients for
making out an offence under Section 138 of the N.I. Act
had been made out and process had been issued by the
learned Metropolitan Magistrate, scuttling the
proceedings at this stage was unjustified. To substantiate
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 5 of 16
this contention, reliance was placed on the decision in
Sunil Todi and others Vs. State of Gujarat and
2
another by urging that the Sessions Court had misread
the said judgment. It was, thus, submitted that the
Sessions Court was not justified in coming to the
conclusion that the cheque in question had not been
issued for discharge of any legal liability. Such a finding
could be rendered only at the trial and not on the basis of
the statements made during the course of proceedings
challenging the issuance of process. He, therefore,
submitted that the impugned orders be set aside and the
complaint be restored for its adjudication on merits.
5. On the other hand, Dr. A. M. Singhvi, learned
Senior Advocate for the second respondent supported the
impugned orders and opposed the contentions raised on
behalf of the appellant. He submitted that both the
Courts were justified in coming to the conclusion that the
cheque in question had not been shown to have been
issued towards the discharge of any legally enforceable
th
debt. The document dated 12 January 2022, which was
2 2021 INSC 823
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 6 of 16
in the form of a settlement agreement, was admittedly not
signed by the second respondent. There was no
concluded agreement as such and, therefore, the second
respondent could not be bound by the statements made
in that agreement. The liability under the cheque issued
by the second respondent would arise only after the
agreement between the parties was complete. The Courts
were justified in relying upon the decision in Sunil Todi
(supra) wherein it was held that where the payment of
debt was dependent on the happening of an event which
never occurred, there would be no legally recoverable
liability to be satisfied. In view of this position on record,
no useful purpose would be served by continuing the
proceedings under Section 138 of the N.I. Act as it would
amount to an abuse of the process of law. It was, thus,
submitted that the complaint having been rightly
dismissed by the learned Sessions Judge, which order
was upheld by the High Court, no interference therein
was called for. He, therefore, urged that the appeal ought
to be dismissed.
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 7 of 16
6. We have heard the learned Senior Advocates
appearing for the parties at length and we have also
perused the relevant documentary material on record.
Having given due consideration to the rival submissions,
we are of the view that the Sessions Court as well as the
High Court were not justified in coming to the conclusion
that the complaint as filed by the appellant under Section
138 of the N.I. Act was liable to be dismissed at the pre-
trial stage on the ground that the cheque issued by the
second respondent was not towards any legally
enforceable debt.
7. Perusal of the complaint filed by the appellant
under Section 138 of the N.I. Act indicates reference to an
amicable settlement of various disputes between the
appellant and her husband, pursuant to which the
appellant’s husband executed a registered irrevocable
th
Power of Attorney dated 10 December 2022 in favour of
the appellant. It was agreed under the settlement
agreement that the appellant’s husband would transfer
by way of gift three properties and also pay an amount of
₹
50 crores on the execution of a Declaration-cum-
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 8 of 16
Indemnity document. In reciprocation, complaints made
by the appellant as regards fraudulent transfer of her
shares in two companies were to be withdrawn. To ensure
execution of the Declaration-cum-Indemnity document,
the second respondent acted as a guarantor and issued
the cheque in question drawn in favour of the appellant.
The appellant accordingly signed the Declaration-cum
th
Indemnity document on 13 January 2022. On getting
knowledge of the sale of certain shares contrary to the
settlement agreement, the appellant presented the
cheque issued by the second respondent for being
honoured. It has been further stated that said cheque
was dishonoured with the remark ‘payment stopped by
drawer’. A reference is thereafter made to the issuance of
a statutory notice under Section 138 of the N.I. Act dated
th
20 April 2022, its service on the second respondent and
th
his reply dated 04 May 2022 denying any liability.
Accordingly, the said complaint came to be filed by the
appellant. The appellant’s statement was duly verified by
the learned Metropolitan Magistrate and on being prima
facie satisfied that the ingredients of Section 138 of the
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 9 of 16
N.I. Act were present, process came to be issued to the
second respondent.
8. It is to be borne in mind that at the stage of
issuance of process by the learned Metropolitan
Magistrate, what is prima facie required to be seen is the
issuance of cheque by the drawer in favour of the
complainant, its dishonour on presentation by the payee,
issuance of statutory notice under Section 138 of the N.I.
Act and filing of the complaint within the prescribed
statutory period. If the drawer does not dispute issuance
of such a cheque nor does he deny his signature on the
dishonoured cheque, the statutory presumption as
contemplated under Section 139 of the N.I. Act comes
into play. As a result, the burden would shift on the
drawer of the cheque to prove that the cheque was not
issued for any legally enforceable debt or liability. This
exercise has to be undertaken during the trial either by
relying upon the material brought on record by the
complainant or by the drawer leading evidence in
rebuttal. At the stage of issuance of process, the statutory
presumption under Section 139 of the N.I. Act cannot be
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 10 of 16
dislodged in a summary manner merely by contending
that the cheque issued was not for any legally enforceable
debt or liability.
9. We may in this regard refer to two decisions of this
Court that have reiterated the view that once the basic
ingredients of Section 138 of the N.I. Act are duly
satisfied by the complainant, the rebuttal of statutory
presumption by the drawer can only be made during the
course of trial.
3
In Rangappa Vs. Sri Mohan , it has been explicitly
reiterated that the presumption mandated by Section 139
of the N.I. Act includes the presumption as regards
existence of a legally enforceable debt or liability. It has
been held that Section 139 is an example of a reverse
onus clause that has been included in furtherance of the
legislative object of improving the credibility of negotiable
instruments. The presumption is rebuttable and the
accused can raise a defence wherein the existence of a
legally enforceable debt or liability can be contested.
3 2010 INSC 289
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 11 of 16
4
In Rajesh Jain Vs. Ajay Singh , it has been held
as under:
“ 34. The NI Act provides for two presumptions: Section 118 and
Section 139. Section 118 of the Act inter alia directs that it shall
be presumed, until the contrary is proved, that every negotiable
instrument was made or drawn for consideration. Section 139 of
the Act stipulates that 'unless the contrary is proved, it shall be
presumed, that the holder of the cheque received the cheque, for
the discharge of, whole or part of any debt or liability'. It will be
seen that the 'presumed fact' directly relates to one of the crucial
ingredients necessary to sustain a conviction under Section 138.
35. Section 139 of the NI Act, which takes the form of a ‘shall
presume’ clause is illustrative of a presumption of law. Because
Section 139 requires that the Court ‘shall presume’ the fact
stated therein, it is obligatory on the Court to raise this
presumption in every case where the factual basis for the raising
of the presumption had been established. But this does not
preclude the person against whom the presumption is drawn
from rebutting it and proving the contrary as is clear from the
use of the phrase ‘unless the contrary is proved’ .
36. The Court will necessarily presume that the cheque had
been issued towards discharge of a legally enforceable
debt/liability in two circumstances. Firstly , when the drawer of
the cheque admits issuance/execution of the cheque and
secondly , in the event where the complainant proves that cheque
was issued/executed in his favour by the drawer. The
circumstances set out above form the fact(s) which bring about
the activation of the presumptive clause. [Bharat Barrel Vs.
Amin Chand] [(1999) 3 SCC 35]
xxxxxxxxxxxxxxxxxxx
38. As soon as the complainant discharges the burden to
4 2023 INSC 888
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 12 of 16
prove that the instrument, say a cheque, was issued by the
accused for discharge of debt, the presumptive device under
Section 139 of the Act helps shifting the burden on the accused.
The effect of the presumption, in that sense, is to transfer the
evidential burden on the accused of proving that the cheque was
not received by the Bank towards the discharge of any liability.
Until this evidential burden is discharged by the accused, the
presumed fact will have to be taken to be true, without expecting
the complainant to do anything further.”
10. A perusal of the revisional order passed by the
learned Judge of the Sessions Court indicates that he has
given much importance to the fact that the agreement
th
dated 12 January 2022 was not signed by the second
respondent and, hence, the issuance of the cheque in
question was not for any enforceable debt. He also
appears to have given importance to the dispute between
the appellant and her husband by stating that it was a
matrimonial dispute and civil litigation between the said
parties was pending in various Courts. In our view, the
learned Judge misdirected himself when he proceeded to
th
give more weightage to the document dated 12 January
2022 and in the process, ignored the fact that the basic
ingredients for attracting the provisions of Section 138 of
the N.I. Act had been duly satisfied by the appellant, at
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 13 of 16
least for issuance of process. The drawing of the cheque
by the second respondent, its presentation and
subsequent dishonour at the instructions of the second
respondent is not in dispute. The second respondent does
not also dispute that he had issued the said cheque and
that it was duly signed by him. The issuance of statutory
notice as well as filing of the complaint within the
prescribed period are also not in dispute. In such a
situation, when the basic ingredients of Section 138
stand duly satisfied and the statutory presumption under
Section 139 gets triggered, coming to a conclusion that
the cheque was not issued for a legally enforceable debt
at the pre-trial stage itself without granting an
opportunity to the complainant to substantiate her case
by leading evidence would amount to ignoring the
statutory presumption that the cheque had been issued
for a legally enforceable debt or liability. As a
consequence, the presumption under Section 139 of the
N.I. Act gets washed away even prior to commencement of
the trial. We are of the view that in the facts of the
present case, the dismissal of the complaint as a
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 14 of 16
consequence of setting aside the order issuing process is
totally unjustified in the absence of any material being
brought on record by the second respondent to rebut the
statutory presumption and prove his contention that the
cheque was issued not towards any enforceable debt or
liability.
Since we are inclined to restore the complaint for
being tried on merits, it is not necessary to deal with the
decision in Sunil Todi and others (supra) in detail. Suffice
it to observe that even in the said decision, it has been
held that disputed questions as regards existence of
outstanding liability are questions of fact that have to be
determined at the trial on the basis of evidence.
11. For all these reasons, we are of the view that the
learned Judge of the Sessions Court committed an error
th
in setting aside the order dated 17 June 2022 passed by
the learned Metropolitan Magistrate issuing process
under Section 138 of the N.I. Act. The High Court also
fell into error in upholding the order passed by the
learned Sessions Judge. Accordingly, both the aforesaid
orders are set aside. The complaint filed by the appellant
Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 15 of 16
being CC1831/SC/2022 stands restored for its
adjudication on merits.
We clarify that the complaint shall be decided on
its own merits and in accordance with law after giving
due opportunity to all parties concerned. Any
observations made in this judgment shall not be
construed as an expression of opinion on the merits of
the said case.
12. The Criminal Appeal is allowed in aforesaid terms.
…….……………………..J.
[J.K. MAHESHWARI]
…..………………………..J.
[ATUL S. CHANDURKAR]
NEW DELHI,
th
APRIL 7 , 2026.
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