Cheque Dishonour Complaints Cannot Be Quashed During Pre-Trial Stage, If Essentials Of Sec 138 NI Act Are Met: Supreme Court

(MENAFN- KNN India) New Delhi, Apr 8 (KNN) The Supreme Court of India has ruled that cheque dishonour complaints under Section 138 of the Negotiable Instruments Act, 1881 cannot be quashed at the pre-trial stage solely on the ground that the cheque was not issued for a legally enforceable debt.

A bench comprising J K Maheshwari and Atul S Chandurkar observed that once the basic ingredients of Section 138 are satisfied, the statutory presumption under Section 139 comes into effect and must be tested during trial.

The Court emphasised that determining whether a cheque was issued towards a legally enforceable debt is a matter of evidence and cannot be adjudicated at the preliminary stage without giving the complainant an opportunity to present their case.

It noted that dismissing a complaint prematurely would effectively negate the statutory presumption that the cheque was issued for a valid liability, even before trial begins.

Case Background

The case arose from a matrimonial settlement where the husband allegedly agreed to pay Rs 50 crore, and a third party issued a cheque as guarantor, which was later dishonoured.

The complainant initiated proceedings under the Negotiable Instruments Act, and a Magistrate took cognisance. However, the Sessions Court set aside the order, holding there was no legally enforceable debt, a view later upheld by the Bombay High Court.

Supreme Court's Ruling

Allowing the appeal, the Supreme Court held that once the statutory presumption under Section 139 is triggered, it is for the accused to rebut it during trial.

The Court observed that in the absence of material evidence from the accused to counter the presumption, dismissing the complaint at the threshold is unjustified.

It further clarified that rebuttal of the presumption can only take place during the course of trial, reinforcing that pre-trial quashing of such cases would undermine the legislative intent of the law.

The ruling is expected to strengthen the enforcement framework under the Negotiable Instruments Act by ensuring that cheque dishonour cases proceed to trial when statutory conditions are met.

Impact on MSMEs

The ruling strengthens the enforcement of cheque payments, benefiting MSMEs that rely heavily on cheques for business transactions. By ensuring that cheque dishonour cases proceed to trial once basic conditions are met, it improves payment security and deters defaults.

However, it may also increase litigation exposure for MSMEs, requiring stronger financial discipline and documentation in transactions.

(KNN Bureau)

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