Karnataka HC Leaves Company Directors’ Cheque-Bounce Case Alive, Says Effect Of Unproduced Debt Documents Must Be Considered At Trial

The petitioners sought to quash proceedings in C.C. No. 8551/2022, pending before the JMFC, Devanahalli, for an alleged offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

They contended that the complainant had referred in its sworn statement to documents supporting the alleged debt but had not produced them, and that the Magistrate had taken cognizance without addressing that omission.

They also disputed service of the statutory notice; the cheque’s connection to the petitioners was not disputed.

Section 138 of the NI Act governs the alleged offence, and Section 139 provides a presumption in favour of the holder of the cheque, subject to rebuttal.

The Court considered the Supreme Court’s decision in Rekha Sharad Ushir v. Saptashrungi Mahila Nagari Sahkari Patsanstha Ltd., 2025 SCC OnLine SC 641, which reiterates that a litigant who suppresses material facts relevant to the controversy may be denied relief; in that case, the accused’s reply to the statutory notice and prior demand for documents had been suppressed.

The petition invoked the High Court’s inherent jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

The Court distinguished Rekha Sharad Ushir because the suppression identified there was not established on the facts before it.

Whether the statutory notice had been duly served was a disputed question of fact to be determined at trial.

Since the cheque’s connection to the petitioners was undisputed, and the consequences of the complainant’s failure to produce the documents referred to as Exhibit P.4 could be assessed during trial, neither contention justified quashing the proceedings at that stage.