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High Courts Cannot Quash Cheque Bounce Cases by Conducting a Pre-Trial Enquiry Under Section 482 CrPC: Supreme Court
Introduction
The Supreme Court of India delivered a significant judgment on December 19, 2024, reaffirming the jurisdictional boundaries of High Courts when dealing with petitions seeking to quash Section 482 CrPC cheque bounce cases under the Negotiable Instruments Act, 1881. In M/s Sri Om Sales v. Abhay Kumar @ Abhay Patel[1], the Court clarified that High Courts cannot conduct roving enquiries into disputed facts regarding whether a cheque was issued for discharge of debt or liability at the pre-trial stage while exercising inherent powers under Section 482 of the Code of Criminal Procedure, 1973. This ruling reinforces the statutory presumption under Section 139 of the Negotiable Instruments Act and protects complainants from premature dismissal of legitimate cheque bounce cases.
The Legal Framework: Understanding Section 138 and Section 139
Section 138 of the Negotiable Instruments Act, 1881
Section 138 of the Negotiable Instruments Act creates a criminal offence when a cheque drawn by a person on an account maintained with a banker for payment of money to another person is returned unpaid by the bank. The provision states that where any cheque is returned unpaid either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank, such person shall be deemed to have committed an offence. The drawer can be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both [2].
The provision was introduced through an amendment in 1988 and came into force in 1989 to encourage the use of cheques and enhance the credibility of such instruments in commercial transactions. Prior to this amendment, dishonour of cheques constituted only a civil liability, and the transformation into criminal liability was designed to create a deterrent effect against casual issuance of cheques without adequate funds.
Section 139: The Statutory Presumption
Section 139 of the Negotiable Instruments Act creates a rebuttable presumption in favour of the holder of the cheque. It provides that unless the contrary is proved, it shall be presumed that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability [3]. This presumption is crucial as it shifts the burden of proof onto the accused to demonstrate that the cheque was not issued for a legally enforceable debt or liability. The presumption operates from the moment the complainant establishes that the cheque was issued by the accused and was dishonoured upon presentation.
The statutory presumption under Section 139 includes not merely that consideration existed, but also that a legally enforceable debt or liability was present at the time of issuance of the cheque. The Supreme Court in Rangappa v. Sri Mohan [4] clarified that this presumption is mandatory and can only be rebutted by the accused by raising a probable defence during trial through evidence. The standard of proof required for rebuttal is preponderance of probabilities, not proof beyond reasonable doubt.
Section 482 CrPC: Inherent Powers of the High Court
Section 482 of the Code of Criminal Procedure, 1973, preserves the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under the Code, or to prevent abuse of the process of any court, or otherwise to secure the ends of justice. This provision does not confer new powers on the High Court but recognizes and preserves the powers that are inherent in every superior court of record. The purpose is threefold: to give effect to orders passed under the Code, to prevent abuse of the process of any court, and to secure the ends of justice.
The inherent powers under Section 482 are extraordinary powers and must be exercised sparingly and with great caution. The High Court can quash criminal proceedings only in exceptional circumstances where continuation of proceedings would amount to abuse of the process of court or where quashing is necessary to secure the ends of justice. However, these powers cannot be used to appreciate evidence or resolve disputed questions of fact which are matters to be decided during trial.
Facts of the Sri Om Sales Case
The complainant, M/s Sri Om Sales, alleged that the first respondent, Abhay Kumar @ Abhay Patel, had taken delivery of goods and in discharge of the resulting liability, issued a cheque dated March 4, 2013, for a sum of twenty lakh rupees. When the cheque was presented for encashment, it was dishonoured twice due to insufficient funds in the account. Following the second dishonour, a statutory demand notice was issued to the respondent as required under Section 138 of the Negotiable Instruments Act.
The respondent replied to the notice denying the issuance of the cheque and refusing to make payment. Consequently, a complaint under Section 138 was filed before the learned Magistrate. Upon examining the complaint and accompanying materials, the Magistrate took cognizance of the offence and issued summons to the accused vide order dated September 27, 2013. The complaint clearly spelled out all necessary ingredients for an offence under Section 138, including the issuance of the cheque for liability regarding goods supplied, dishonour of the cheque, service of legal notice, and failure to pay within the stipulated period.
High Court’s Quashing Order and the Jurisdictional Error
Aggrieved by the summoning order, the respondent approached the Patna High Court under Section 482 of the Code of Criminal Procedure seeking quashing of the proceedings. The High Court, by its order dated June 20, 2019, allowed the petition and quashed the complaint proceedings on the ground that the cheque was not issued for the discharge of any debt or other liability. The High Court essentially conducted an enquiry into the nature of the transaction and concluded that no legally enforceable debt existed.
This approach by the High Court formed the basis of the appeal before the Supreme Court. The appellant contended that the High Court exceeded its jurisdiction by holding an enquiry into the nature of the transaction at the threshold stage. It was submitted that under Section 139 of the Negotiable Instruments Act, a presumption arises that the holder of a cheque received it for the discharge of a debt or liability, and while this presumption is rebuttable, it can only be rebutted during trial through evidence, not at the pre-trial stage in Section 482 CrPC cheque bounce cases.
Supreme Court’s Analysis and Legal Principles
Scope of Enquiry Under Section 482 CrPC
The Supreme Court Division Bench comprising Justice Manoj Misra and Justice Ujjal Bhuyan reiterated well-settled principles regarding the scope of enquiry while considering a prayer to quash criminal complaint and consequential proceedings at the threshold. The Court observed that at this stage, the court is required to examine whether the allegations made in the complaint along with materials in support thereof make out a prima facie case to proceed against the accused or not.
The Court emphasized that if upon reading the complaint allegations and perusing the materials filed in support thereof, a prima facie case is made out to proceed against the accused, the complaint cannot be quashed, particularly by appreciating the evidence or materials on record because the stage for such appreciation is at the trial. The Court clarified that no doubt in exceptional circumstances, the court may take notice of attending circumstances to conclude that continuance of the proceedings would amount to an abuse of the process of the court, or where quashing of the proceedings is necessary to secure the ends of justice.
Application of Section 139 Presumption
The Supreme Court observed that in the present case, the High Court in its jurisdiction under Section 482 proceeded to test whether the cheque was issued for the discharge, in whole or in part, of any debt or other liability. The Court held that such an exercise was unwarranted because under Section 139 of the Negotiable Instruments Act, there is a presumption that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.
The Court emphasized that this presumption can be rebutted by evidence led in trial and therefore the issue of whether the cheque was issued for discharge of debt or liability can appropriately be decided either at the trial, or later, upon conclusion of trial, by the appellate or revisional court. The Court made it clear that conducting a roving enquiry at the pre-trial stage regarding whether the cheque was issued for discharge of debt or liability is not merited in exercise of power under Section 482 of the Code of Criminal Procedure.
Judicial Precedents Reinforcing the Judgment
Maruti Udyog Ltd. v. Narender and Others (1999)
The Supreme Court in the Sri Om Sales case relied upon its earlier decision in Maruti Udyog Ltd. v. Narender and Others[5], where it was held that in view of the express provision of Section 139 of the Negotiable Instruments Act, a presumption must be drawn that the holder of the cheque received the cheque for the discharge of any debt or other liability unless the contrary is proved. The Court in that case had observed that the High Court was not justified in entertaining and accepting the plea of the accused at the initial stage of the proceedings and quashing the complaints filed by the appellant.
Rangappa v. Sri Mohan (2010)
Another significant precedent cited was Rangappa v. Sri Mohan[4], wherein the Supreme Court observed that the presumption under Section 139 includes the existence of a legally enforceable debt, which the accused must rebut at trial. The Court in that case clarified the nature and scope of the presumption under Section 139, holding that once the execution of a cheque is admitted or proved, the presumption mandated by Section 139 automatically comes into play. The accused then has the burden of raising a probable defence to rebut this presumption.
Rajeshbhai Muljibhai Patel v. State of Gujarat (2020)
The Supreme Court also referred to Rajeshbhai Muljibhai Patel v. State of Gujarat[6], wherein it was held that the High Court should not quash a complaint by entering into disputed questions of fact regarding the discharge of liability. This precedent reinforced the principle that disputed factual questions, particularly those relating to the existence or nature of the debt, should not be resolved at the threshold stage through exercise of powers under Section 482 of the Code of Criminal Procedure.
The Regulatory Framework Governing Cheque Bounce Cases
Procedure for Filing Complaints
Section 142 of the Negotiable Instruments Act governs the procedure for filing complaints in cheque dishonour cases. The provision mandates that no court shall take cognizance of any offence punishable under Section 138 except upon a complaint in writing made by the payee or holder in due course of the cheque. Such complaint must be made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138[7].
The cause of action arises when the drawer of the cheque fails to make payment within fifteen days of receiving the notice of dishonour. The complaint can only be filed before a Judicial Magistrate of the First Class or a Metropolitan Magistrate, and no court inferior to these can try any offence punishable under Section 138. The Negotiable Instruments (Amendment) Act, 2015, clarified the territorial jurisdiction, providing that the offence shall be inquired into and tried only by a court within whose local jurisdiction the branch of the bank where the payee or holder maintains the account is situated.
Summary Trial and Time-Bound Disposal
Proceedings under Section 138 are conducted through summary trial as provided under Sections 262 to 265 of the Code of Criminal Procedure. The objective is to ensure speedy disposal of cheque bounce cases, which form a significant portion of pending cases in magistrate courts across India. The Supreme Court has consistently emphasized the need for time-bound disposal of these cases to maintain the credibility of negotiable instruments in commercial transactions.
Significance and Impact of the Judgment
The judgment in M/s Sri Om Sales v. Abhay Kumar has far-reaching implications for cheque bounce litigation in India. By holding that High Courts cannot conduct roving enquiries into disputed facts at the pre-trial stage, the Supreme Court has protected the statutory presumption under Section 139 from premature erosion. This ensures that complainants who have been issued dishonoured cheques are not denied their day in court through premature quashing of complaints.
The judgment reinforces the principle that the stage for appreciation of evidence and resolution of disputed questions of fact is the trial court, not the High Court exercising its inherent powers under Section 482 CrPC. This preserves the integrity of the trial process and prevents accused persons from circumventing trial by seeking premature quashing. The ruling also clarifies that the statutory presumption under Section 139 is substantive and can only be rebutted through evidence led during trial, ensuring that cases under Section 482 CrPC involving cheque bounce are properly examined at the trial stage.
Furthermore, the judgment contributes to the broader objective of maintaining credibility of cheques as negotiable instruments. By ensuring that genuine complaints are not dismissed prematurely, the ruling strengthens the deterrent effect of Section 138 against casual issuance of cheques without adequate funds or intention to honour them. This is particularly important in India’s commercial landscape where cheques continue to be widely used for business transactions despite the growth of digital payment methods.
Limitations on High Court’s Power to Quash
While the judgment reaffirms the limited scope of enquiry under Section 482 CrPC in cheque bounce cases, it is important to note that High Courts retain the power to quash proceedings in exceptional circumstances. The Supreme Court acknowledged that in cases where continuation of proceedings would amount to abuse of the process of court, or where quashing is necessary to secure the ends of justice, the High Court may intervene.
However, such exceptional circumstances do not include situations where there are disputed questions of fact regarding the existence or nature of the debt. The mere assertion by the accused that no debt existed or that the cheque was issued for a different purpose cannot be a ground for quashing at the threshold stage when a statutory presumption operates in favour of the complainant. The accused must be required to lead evidence during trial to rebut the presumption.
Practical Implications for Litigants
For Complainants
The judgment provides significant protection to complainants in cheque bounce cases. It ensures that their complaints cannot be dismissed at the threshold stage merely because the accused raises a defence regarding the nature or existence of the debt. Complainants can now proceed to trial with the confidence that the statutory presumption under Section 139 will be given proper weightage and will not be undermined through premature judicial intervention.
However, complainants must ensure that their complaints disclose all essential ingredients of the offence under Section 138, including the issuance of the cheque for discharge of debt or liability, dishonour of the cheque for specified reasons, service of statutory notice, and failure of the drawer to make payment within fifteen days of receiving the notice. The complaint must be supported by proper documentation including the dishonoured cheque, return memo from the bank, and proof of service of notice.
For Accused Persons
The judgment clarifies that accused persons in cheque bounce cases cannot avoid trial by approaching the High Court under Section 482 CrPC at the threshold stage and raising disputed questions of fact regarding the debt. If the accused wishes to contest the existence or nature of the debt, they must do so during trial by leading evidence to rebut the statutory presumption under Section 139.
The accused may still approach the High Court under Section 482 in exceptional circumstances, such as where the complaint on its face does not disclose the essential ingredients of the offence, or where there is a legal bar to the institution or continuation of proceedings. However, mere disputes regarding factual aspects of the transaction will not constitute grounds for quashing at the pre-trial stage.
Conclusion
The Supreme Court’s judgment in M/s Sri Om Sales v. Abhay Kumar @ Abhay Patel serves as an important reminder of the jurisdictional limits of High Courts when dealing with petitions seeking to quash cheque bounce cases under Section 482 CrPC. By holding that High Courts cannot conduct roving enquiries into disputed facts regarding the debt or liability at the pre-trial stage, the Court has reinforced the sanctity of the statutory presumption under Section 139 of the Negotiable Instruments Act.
The ruling ensures that the trial process is not short-circuited and that accused persons are required to rebut the statutory presumption through evidence during trial rather than through threshold petitions under Section 482. This approach balances the need to protect accused persons from frivolous prosecutions with the equally important objective of maintaining the credibility of cheques as negotiable instruments in commercial transactions.
The judgment reaffirms fundamental principles of criminal jurisprudence regarding the scope of enquiry at different stages of criminal proceedings. It clarifies that appreciation of evidence and resolution of disputed questions of fact are functions of the trial court, not the High Court exercising inherent powers. This demarcation of jurisdictional boundaries is essential for the orderly administration of justice and prevents erosion of the trial process through excessive judicial intervention at preliminary stages.
References
[2] Section 138, The Negotiable Instruments Act, 1881. Available at: https://indiankanoon.org/doc/1823824/
[3] Section 139, The Negotiable Instruments Act, 1881. Available at: https://indiankanoon.org/doc/268919/
[4] Rangappa v. Sri Mohan, (2010) 11 SCC 441, Supreme Court of India. Available at: https://indiankanoon.org/doc/150051/
[5] Maruti Udyog Ltd. v. Narender and Others, Criminal Appeal Nos. 706-715 of 1998, Supreme Court of India. Available at: https://indiankanoon.org/doc/74914/
[6] Rajeshbhai Muljibhai Patel v. State of Gujarat (2020), cited in M/s Sri Om Sales judgment.
[7] Section 142, The Negotiable Instruments Act, 1881. Available at: https://devgan.in/nia/chapter_17.php
[8] Section 482, Code of Criminal Procedure, 1973. Available at: https://blog.ipleaders.in/section-482-crpc/
[9] High Court Cannot Conduct Roving Enquiry into Debt Validity at Section 482 Stage in Cheque Dishonour Cases: Supreme Court, Law Trend. Available at: https://lawtrend.in/high-court-cannot-conduct-roving-enquiry-into-debt-validity-at-section-482-stage-in-cheque-dishonour-cases-supreme-court/
