In a significant procedural correction under cheque dishonour law, the Supreme Court stepped in to examine whether a High Court can prematurely terminate criminal proceedings under Section 138 of the Negotiable Instruments Act by conducting a detailed factual enquiry at the threshold, despite a statutory presumption in favour of the complainant.
The challenge arose after the Patna High Court quashed an entire cheque bounce complaint by concluding, at the pre-trial stage, that the cheque was not issued towards a legally enforceable debt, raising serious concerns about judicial overreach under Section 482 of the Code of Criminal Procedure.
The controversy began when a supplier alleged that goods were delivered to the accused against which a cheque of Rs. 20 lakh was issued. The cheque was dishonoured twice for insufficient funds, following which a statutory demand notice was served and a complaint was filed under Section 138 of the NI Act.
The Magistrate took cognisance and summoned the accused. However, the accused approached the High Court, which quashed the proceedings on the ground that the cheque was not issued for discharge of debt, prompting the complainant to move the Supreme Court.
Taking a firm view, the Apex Court held that the High Court had clearly exceeded its jurisdiction by embarking on a “roving enquiry” into disputed facts at a pre-trial stage. Emphasising the mandatory presumption under Section 139 of the NI Act, the Court observed that “there is a presumption that the holder of a cheque received the cheque… for the discharge, in whole or in part, of any debt or other liability,” and that such presumption can be rebutted only during trial, not at the stage of quashing.
Citing a consistent line of precedents, the Bench warned that “scuttling the criminal process at a nascent stage can be grave and irreparable”, and concluded that the High Court’s approach was legally untenable. Consequently, the Top Court set aside the impugned order, restored the complaint, and directed that the matter proceed in accordance with law, clarifying that it had expressed no opinion on the merits of the defence.
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