Disputed enforceability of settlement cheques must be tested at trial, not quashed pre-trial.

The respondent initiated proceedings under Sections 138 and 142 of the Negotiable Instruments Act, 1881, alleging dishonour of cheques issued pursuant to settlement arrangements resolving disputes connected with M/s Shree Narsingh Education Consulting Pvt. Ltd. and FIR No. 41/2022 registered for offences under Sections 409/420/467/468/471/120-B IPC.

Ritu Jaju, her son Anurav Jaju and the respondent executed a settlement dated 12 June 2024 under which ₹2 crore was payable, including through four post-dated cheques of ₹48,75,000 each.

Neeraj Jaju separately executed an MOU dated 31 July 2024, agreeing to pay ₹2 crore in full and final settlement and issuing six post-dated cheques towards that amount.

The cheques were allegedly dishonoured, statutory notices were issued, and complaints under Section 138 were instituted.

The Trial Courts passed summoning orders dated 28 June 2025 and 30 June 2025 in the respective complaints.

Neeraj Jaju had also instituted a civil suit seeking declaration and cancellation of the MOU.

1. Whether the High Court should quash the summoning orders and consequential proceedings under Section 528 BNSS where the petitioners dispute the existence of a legally enforceable debt underlying cheques issued pursuant to settlement agreements.

2. Whether the petitioners’ contention that the settlement liability was contingent upon the quashing of FIR No. 41/2022, and that the settlements were obtained under coercion or undue pressure, could be conclusively determined at the pre-trial stage.

3. Whether the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act displaced the petitioners’ challenge to the existence of the debt at the stage of issuance of process.

The Court applied Sections 138 and 142 of the Negotiable Instruments Act, 1881, concerning dishonour of cheques and institution of complaints, and Sections 118 and 139, which raise presumptions regarding consideration and the existence of a legally enforceable debt or liability once foundational facts, including issuance and dishonour of the cheque, are prima facie established.

The inherent jurisdiction under Section 528 BNSS, corresponding to Section 482 Cr.P.C., is to be exercised sparingly and with circumspection; at the pre-trial stage, the High Court should not conduct a detailed appreciation of evidence or adjudicate disputed questions of fact.

Relying on Rathish Babu Unnikrishnan v. State (Govt. of NCT of Delhi), (2022) 20 SCC 661, the Court held that a defence based on the cheque being contingent or issued as security ordinarily must be tested at trial, unless it is supported by unimpeachable material that completely disproves the complaint.

Relying also on Renuka v. State of Maharashtra, 2026 INSC 327, the Court reiterated that a settlement-based defence alleging absence of an existing legally enforceable debt cannot ordinarily rebut the Section 139 presumption at the pre-trial stage.

The complaints prima facie disclosed the settlement arrangements, agreed monetary obligations, issuance of cheques, dishonour, statutory notices and failure to pay.

Since the petitioners did not dispute execution of the settlements or issuance and signatures of the cheques, the statutory presumption under Section 139 was attracted.

The petitioners’ arguments that the settlement amount was not based on an adjudicated claim, that liability depended upon quashing of the FIR, and that the settlements were procured through coercion or unequal bargaining power involved interpretation of contractual clauses and disputed factual circumstances requiring evidence.

The pendency of Neeraj Jaju’s civil suit challenging the MOU did not invalidate the cheque proceedings; rather, it demonstrated that the dispute required adjudication and could not be conclusively resolved in inherent-jurisdiction proceedings.

The Court therefore held that the petitioners’ defences could be raised to rebut the statutory presumption during trial, but did not justify quashing at the stage of issuance of process.

The summoning orders did not suffer from perversity, patent illegality or jurisdictional infirmity.

Accordingly, CRL.M.C. Nos. 4889/2026, 5493/2026 and 5523/2026 were dismissed, and all pending applications were disposed of.