Sanjabij Tari vs Kishore S. Borcar - 2025 Supreme(SC) 1738

Headnote:

(A) Negotiable Instruments Act, 1881 – Section 138 read with Sections 118 and 139 – Income Tax Act, 1961 – Sections 269SS and 271D – Dishonour of cheque – Any breach of Section 269SS of IT Act, 1961 is subject to penalty only under Section 271D of IT Act, 1961 – Neither Section 269SS nor 271D of IT Act, 1961 state that any transaction in breach thereof will be illegal, invalid or statutorily void – Any violation of Section 269SS would not render transaction unenforceable under Section 138 of NI Act or rebut presumptions under Sections 118 and 139 of NI Act because such a person, assuming him/her to be payee/holder in due course, is liable to be visited by a penalty only as prescribed – View that any transaction above Rs.20,000/- is illegal and void and does not fall within definition of ‘legally enforceable debt’ cannot be countenanced – Drawer and bank must honour cheque, otherwise, trust in cheques would be irreparably damaged. (Paras 20 and 21)

(B) Negotiable Instruments Act, 1881 – Section 138 – Criminal Procedure Code, 1973 – Section 255 [Bharatiya Nagarik Suraksha Sanhita, 2023 – Section 278] – Dishonour of cheque – Appeal against acquittal – Respondent No.1- Accused has filed no documents and/or examined any independent witness or led any evidence with regard to financial incapacity of Appellant Complainant to advance loans in question – When evidence of Appellant-Complainant is read in its entirety, it cannot be said that Appellant-Complainant had no wherewithal to advance any loan to Respondent No.1-Accused – Fact that accused has failed to reply to statutory notice under Section 138 of NI Act leads to inference that there is merit in Appellant-Complainant’s version – When statutory notice is not replied, it has to be presumed that cheque was issued towards discharge of liability – Defence of financial incapacity of Appellant-Complainant advanced by Respondent No.1-Accused is an afterthought. (Paras 22, 23, 29, 30 and 31)

(C) Negotiable Instruments Act, 1881 – Sections 138, 142 and 147 – Criminal Procedure Code, 1973 – Section 320 – Dishonour of cheque – Appeal against acquittal – Offence under Section 138 of NI Act is quasi-criminal in character and is compoundable – Punishment under NI Act is not a means of seeking retribution but is more a means to ensure payment of money and to promote credibility of cheques as a trustworthy substitute for cash payment – In all cases filed under Section 138 of NI Act, service of summons shall not be confined through prescribed usual modes but shall also be issued dasti i.e. summons shall be served upon accused by complainant in addition – This direction is necessary as a large number of Section 138 cases under NI Act are filed in Metropolitan Cities by financial institutions, by virtue of Section 142(2) of NI Act, against accused who may not be necessarily residing within territorial jurisdiction of Court where complaint has been filed – Complainant shall, at the time of filing complaint, provide requisite particulars including e-mail address, mobile number and/or WhatsApp number/messaging application details of accused, duly supported by affidavit verifying that said particulars pertain to accused/respondent – Trial Courts shall record cogent and sufficient reasons before converting summary trial to summons trial – Impugned order passed by High Court set aside and judgment as well as orders of Trial Court and Sessions Court restored. (Paras 35, 36 and 40)

(D) Criminal Procedure Code, 1973 – Sections 379 and 401 – Revisional jurisdiction – In exercise of revisional jurisdiction, High Court does not, in absence of perversity, upset concurrent factual findings – It is not for Revisional Court to re-analyse and re-interpret evidence on record – Revisional Court will not interfere, even if a wrong order is passed by a Court having jurisdiction, in absence of a jurisdictional error – In absence of perversity, it was not open to High Court in present case, in revisional jurisdiction, to upset concurrent findings of Trial Court and Sessions Court. (Paras 27 and 28)

Facts of the case:

Present Appeal has been filed challenging ex-parte judgment and order dated 16th April 2009 passed by High Court of Bombay at Goa acquitting Respondent No.1-Accused under Section 138 of Negotiable Instruments Act, 1881 and reversing concurrent judgments of Trial Court and Sessions Court.

Findings of Court:

If Accused is willing to pay in accordance with the guidelines, Court may suggest to parties to go for compounding. If for any reason, financial institutions/complainant asks for payment other than cheque amount or settlement of entire loan or other outstanding dues, then Magistrate may suggest to Accused to plead guilty and exercise power under Section 255(2) and/or 255(3) of Cr.P.C. or 278 of BNSS, 2023 and/or give benefit under Probation of Offenders Act, 1958 to Accused.

Result : Appeal allowed. Elaborate directions issued.

Judgement Key Points

Summary of the Judgment

This Supreme Court judgment, delivered by Justices Manmohan and N.V. Anjaria on 25-09-2025 in Sanjabij Tari v. Kishore S. Borcar & Anr. (Criminal Appeal No. 1755 of 2010), allows an appeal against the High Court of Bombay at Goa's ex-parte acquittal order dated 16-04-2009 under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). It restores the concurrent convictions by the Trial Court and Sessions Court, emphasizing the presumptions under Sections 118 and 139 of the NI Act, the quasi-criminal and compoundable nature of the offense, and issuing comprehensive guidelines to expedite Section 138 cases amid massive pendency. (!) (!) (!) (!)

Key Legal Principles

Violation of Section 269SS of Income Tax Act Does Not Invalidate Transactions Under NI Act
A breach of Section 269SS (prohibiting cash loans above Rs. 20,000 without specified modes) attracts only a penalty under Section 271D of the Income Tax Act. Such transactions are not illegal, invalid, or void, and do not rebut presumptions under Sections 118 and 139 of the NI Act or render the debt unenforceable under Section 138. Cheques must be honored to maintain trust in the instrument. (!) (!) (!)
Presumptions Under Sections 118 and 139
Once cheque execution is admitted, it is presumed to be for consideration (Section 118) and discharged a legally enforceable debt (Section 139). These rebuttable presumptions shift the onus to the accused to prove otherwise via evidence, documents, or cross-examination. Failure to reply to statutory notice infers the cheque was for a debt. Defenses like financial incapacity of the complainant must be substantiated; mere reliance on complainant's evidence is insufficient without independent proof. (!) (!) (!) (!) (!) (!) (!)
Revisional Jurisdiction Limits
High Courts, in revisional powers, cannot re-appreciate evidence or upset concurrent factual findings absent perversity or jurisdictional error, even if lower courts erred. (!) (!) (!) (!)
Nature of Section 138 Offense and Sentencing
The offense is quasi-criminal, aimed at ensuring payment and cheque credibility, not retribution. It is compoundable under Section 147 NI Act. Courts may suggest compounding, guilty pleas with lenient sentencing under Cr.P.C. Sections 255(2)/(3) [now BNSS Section 278], or Probation of Offenders Act benefits. (!) (!) (!) (!)

Facts and Findings

Complainant advanced Rs. 6 lakhs as a friendly loan to accused (a friend); accused issued a cheque that bounced.
Accused admitted signing the cheque but claimed it was blank/security for a bank loan and questioned complainant's financial capacity (low salary). No reply to notice; no independent evidence led by accused.
Lower courts convicted, finding presumptions unrebutted and complainant's testimony credible (funds from father and own loan). High Court acquitted in revision on financial capacity and "blank cheque" defense.
Supreme Court reversed, holding accused failed to rebut presumptions; defense was afterthought and unbelievable; no perversity in lower findings. Directed accused to pay Rs. 7.5 lakhs in 15 EMIs. (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!)

Guidelines for Section 138 NI Act Cases (Mandatory from 01-11-2025)

To address pendency (e.g., 6.5 lakh cases in Delhi), the Court issued binding directions: (!) (!) (!) (!)

Guideline	Details
Summons Service (!)	Usual modes + dasti by complainant + electronic (email/WhatsApp per BNSS Sections 64, 530). Complainant to provide accused details via affidavit; file service affidavit.
Online Payment (!)	Districts to enable QR/UPI for immediate payment/settlement at summons stage.
Complaint Format (!) - (!)	Mandatory synopsis post-index with party/cheque/dishonour/notice/cause details.
Pre-Cognizance (!)	No summons under BNSS Section 223 needed before cognizance.
Summary Trial (!) - (!)	Record reasons for conversion to summons trial. Post-cognizance, ask key questions (cheque ownership, signature, liability, defense type, compounding intent) under Cr.P.C. Section 251 / BNSS Section 274.
Interim Compensation (!)	Order under Section 143A NI Act early.
Hearings (!)	Prefer physical courts post-summons for settlement; digital pre-summons.
Evening Courts (!)	High Courts to raise realistic pecuniary limits (e.g., Delhi's Rs. 25,000 too low).
Monitoring (!) (!)	Dashboards in Delhi/Mumbai/Calcutta; monthly reviews; HCs to form committees for mediation/Lok Adalats.

Updated Compounding Guidelines (revising Damodar S. Prabhu): (!) - (!)
- Pre-defense evidence: No cost.
- Post-defense evidence, pre-judgment: 5% cost.
- Appellate/Revisional stage: 7.5% cost.
- Supreme Court: 10% cost.
Courts to encourage; suggest guilty plea/probation if complainant demands more. (!) - (!)

This judgment reinforces NI Act's intent for swift enforcement, prioritizes presumptions, and mandates procedural reforms for efficiency. (!) (!) (!) (!) (!) (!)

1. Cheque issued for discharge of legally enforceable debt dishonoured — Conviction under Section 138, NI Act — High Court reversed Trial and Sessions Court findings. (Para 1 , 2 , 3 , 7 )

2. Whether High Court erred in reversing conviction where cheque was issued for legally enforceable debt — Whether complainant had financial capacity to advance such loan. (Para 2 , 3 , 7 , 8 , 9 , 10 )

3. Appeal allowed — High Court ex-parte order set aside — Trial and Sessions Court convictions restored — Accused directed to pay in fifteen equated monthly instalments. (Para 36 , 38 , 39 , 40 )

4. Who bears the initial onus of proving that a cheque was not issued in discharge of a legally enforceable debt, and what happens when the accused raises a defence questioning the complainant's financial capacity?

The presumption under Section 139 of the NI Act is rebuttable and the initial onus of proving that the cheque is not in discharge of any debt or liability is on the accused. When the accused raises a probable defence questioning the complainant's financial capacity, the onus shifts back to the complainant to prove financial capacity, particularly in cash loan cases. (Para 9 , 15 , 17 , 18 )

5. Can a defence that a blank cheque was issued to enable the payee to obtain a bank loan rebut the presumption of a legally enforceable debt under Sections 118 and 139 of the NI Act?

No. A defence that a blank cheque was issued to enable the payee to obtain a bank loan is more than a probable defence to rebut the presumption under Sections 118 and 139 of the NI Act, particularly when the parties were known to each other. Such a defence is unbelievable and cannot sustain the accused. (Para 10 , 32 )

6. Does a breach of Section 269SS of the Income Tax Act, 1961 render a transaction unenforceable under Section 138 of the NI Act?

No. Breach of Section 269SS of the IT Act, 1961 is subject to penalty only under Section 271D. Neither provision states that any transaction in breach thereof will be illegal, invalid, or statutorily void. Therefore, a violation of Section 269SS does not render the transaction unenforceable under Section 138 of the NI Act. (Para 19 , 20 )

7. Can the High Court in exercise of revisional jurisdiction upset concurrent factual findings of the Trial Court and Sessions Court in the absence of perversity?

No. In exercise of revisional jurisdiction, the High Court does not, in the absence of perversity, upset concurrent factual findings rendered by both Courts below. The revisional court will not re-analyse and re-interpret evidence on record and will not interfere even if a wrong order is passed, in the absence of a jurisdictional error. (Para 27 , 28 )

8. What inference arises when the accused fails to reply to the statutory notice under Section 138 of the NI Act?

When a statutory notice under Section 138 of the NI Act is not replied to, it has to be presumed that the cheque was issued towards the discharge of liability. The failure to reply leads to an inference that there is merit in the complainant's version, and the accused has the initial burden to set up the defence in his reply. (Para 29 , 30 )

JUDGMENT :

MANMOHAN, J.

1. The present Appeal has been filed challenging the ex-parte judgment and order dated 16th April 2009 passed by the High Court of Bombay at Goa acquitting the Respondent No.1-Accused under Section 138 of the Negotiable Instruments Act, 1881 (for short ‘NI Act’) and reversing the concurrent judgments of the Trial Court and the Sessions Court.

ARGUMENTS ON BEHALF OF APPELLANT-COMPLAINANT

2. Mr. Amarjit Singh Bedi, learned counsel for the Appellant-Complainant submitted that the High Court in exercise of its revisional jurisdiction erred in upsetting the conviction of the Respondent No.1-Accused under Section 138 of the NI Act based on categorical findings of facts rendered by both the Courts below that the dishonoured cheque had been issued in favour of the Appellant Complainant in discharge of a legally enforceable debt.

3. He contended that there was no evidence on record to establish that the Appellant-Complainant did not have the financial means to advance a friendly loan of Rs.6,00,000/- (Rupees Six Lakhs) to the Respondent No.1-Accused . He emphasised that the Appellant-Complainant in his statement under oath had stated that in order to oblige his friend/Respondent No.1-Accused , the Appellant Complainant had arranged money from his father, who was a cloth merchant having two shops and even went to the extent of parting with a portion of the loan amount which he himself had borrowed from a financial institution.

4. He pointed out that the Respondent No.1-Accused during the course of arguments on sentencing before the Trial Court had prayed for leniency on the ground that he was ready to pay the cheque amount to the Appellant-Complainant within a reasonable time.

5. He further stated that though the Appellant-Complainant filed an application under Section 482 of the Code of Criminal Procedure (‘Cr.P.C.’) for recall of the impugned judgment by substantiating sufficient cause for the absence of his advocate on 16th April 2009, yet the learned Single Judge had been pleased to dismiss the said application holding that the Court had become functus officio and it had no jurisdiction under criminal law to recall the impugned order. He submitted that the High Court erred in not exercising its inherent powers to set aside the impugned judgment which, for all legal purposes, was an ex-parte order.

6. He lastly stated that if this Court were to set aside the impugned judgment of the High Court and restore the concurrent judgments of the Trial Court and Sessions Court, the Appellant-Complainant would accept the payment of outstanding amount in instalments as directed by the Trial Court.

ARGUMENTS ON BEHALF OF RESPONDENT NO.1-ACCUSED

7. Per contra, Mr. Ankit Yadav, learned counsel for the Respondent No.1- Accused stated that the Appellant-Complainant was being paid a salary of only Rs.2,300/- (Rupees Two Thousand and Three Hundred) per month at the relevant point of time, which was not even adequate to take care of his family, leave alone sufficient to advance a loan of Rs.6,00,000/- (Rupees Six Lakhs). He contended that the Appellant-Complainant was a highly indebted person who did not have any source of income other than his meagre salary and therefore, he did not have the wherewithal to advance such a huge loan and that too without issuance of any kind of receipt.

8. He submitted that the accused can always rely on material and/or evidence filed by the complainant in order to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability. In support of his submission, he relied upon the judgment of this Court in Rangappa vs. Sri Mohan, (2010) 11 SCC 441.

9. He further submitted that whenever the accused questions the financial capacity of the complainant in support of his probable defence, despite the presumption of a legally enforceable debt under Section 139 of the NI Act, the onus shifts back to the complainant to prove his financial capacity, more particularly, when it is

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2025 Supreme(SC) 1738