The Supreme Court of India in Sanjabij Tari v. Kishore S. Borcar & Anr. addressed crucial issues under the Negotiable Instruments Act, 1881 (“NI Act”), particularly Sections 138, 118, and 139. The judgment delivered by Justices Manmohan and N.V. Anjaria clarified the scope of presumptions relating to dishonoured cheques, the financial capacity of the complainant, and the revisional jurisdiction of the High Courts. The Court also issued far-reaching guidelines to tackle the massive backlog of cheque-bouncing cases across India.
This case is significant because it reaffirms the legislative intent to uphold the credibility of cheques as a reliable mode of payment, while also balancing procedural fairness to the accused. Moreover, it demonstrates the Supreme Court’s proactive approach in prescribing systemic reforms to ensure speedy justice.
Factual Background
- The appellant, Sanjabij Tari (complainant), claimed to have advanced a friendly loan of ₹6,00,000 to the respondent, Kishore S. Borcar (accused), a close friend.
- In discharge of this liability, the accused issued a cheque which was dishonoured due to insufficiency of funds.
- After serving a statutory notice under Section 138 NI Act and receiving no payment, the appellant filed a criminal complaint.
Trial Court Proceedings
- The Trial Court (30 April 2007) convicted the accused under Section 138 NI Act.
- It held that since the accused admitted his signature on the cheque, presumptions under Sections 118 and 139 arose, and he failed to rebut them.
- The accused’s plea that the cheque was a “blank security cheque” was rejected as unbelievable.
- The Court directed payment in instalments.
Sessions Court Appeal
- The Sessions Court (17 September 2008) upheld the conviction, reiterating that the complainant’s financial means were sufficient.
- The court noted that while the complainant’s salary was modest, he had borrowed funds from his father and financial institutions, making the loan plausible.
High Court Revision
- Bombay High Court at Goa (16 April 2009), exercising revisional jurisdiction, acquitted the accused.
- The High Court accepted the accused’s defence regarding the complainant’s financial incapacity and blank cheque issuance.
- The appellant’s application under Section 482 CrPC to recall this ex parte order was dismissed.
Appeal to the Supreme Court
- The appellant challenged the High Court’s order, arguing that it was passed ex parte and contrary to established presumptions under the NI Act.
- The matter reached the Supreme Court, which comprehensively re-examined the scope of presumptions, financial capacity, and revisional powers.
Issues Before the Court
- Whether the High Court erred in setting aside concurrent findings of the Trial Court and Sessions Court in revisional jurisdiction.
- Whether the complainant’s financial capacity to advance a loan of ₹6,00,000 was sufficiently established.
- What is the scope and effect of presumptions under Sections 118 and 139 of the NI Act?
- Whether a blank cheque issued for obtaining a bank loan can constitute a probable defence.
- Whether violations of Section 269SS of the Income Tax Act (cash loans above ₹20,000) affect the enforceability of debt under Section 138 NI Act.
- What guidelines should be introduced to address the pendency of cheque-bouncing cases nationwide?
Arguments
Appellant (Complainant)
- The High Court erred in interfering with concurrent factual findings of two lower courts.
- Financial incapacity was not proved; the appellant arranged money from his father (a cloth merchant) and loans.
- The accused had earlier sought leniency and expressed willingness to pay, which itself established liability.
- The High Court wrongly refused to recall its ex parte order under Section 482 CrPC.
- Requested restoration of the Trial and Sessions Court’s conviction.
Respondent (Accused)
- The complainant earned only ₹2,300 per month, insufficient to advance ₹6,00,000.
- The alleged loan was undocumented, casting doubt on its validity.
- Relied on Rangappa v. Mohan (2010) and APS Forex Services v. Shakti International (2020), arguing that once financial capacity is challenged, the burden shifts back to the complainant.
- Claimed the cheque was issued blank to enable the complainant to obtain a bank loan, not in discharge of debt.
Reasoning of the Supreme Court
1. Scope and Intent of Chapter XVII NI Act
- Chapter XVII (Sections 138–148) was introduced in 1988 to enhance the acceptability of cheques and ensure financial discipline.
- Criminal liability for cheque dishonour was intended to prevent misuse and promote trust in commercial transactions.
2. Presumptions under Sections 118 & 139
Once the execution of a cheque is admitted, presumptions arise:
Section 118: A cheque is drawn for consideration.
Section 139: holder received a cheque in discharge of a legally enforceable debt.
These are rebuttable presumptions, but the initial onus lies on the accused.
The accused failed to provide independent evidence (such as bank or IT officials) to prove the complainant’s incapacity.
3. Effect of Section 269SS IT Act
- Breach of Section 269SS (cash loans above ₹20,000) attracts a penalty under Section 271D, but does not render the transaction illegal or unenforceable.
- Hence, cash loans above ₹20,000 can still form the basis of a legally enforceable debt.
4. High Court’s Error in Revisional Jurisdiction
- Revisional jurisdiction is limited; High Courts cannot reappreciate evidence absent perversity.
- By overturning concurrent factual findings, the High Court acted beyond its jurisdiction.
5. Failure to Reply to Statutory Notice
- Non-reply to the Section 138 notice strengthens the complainant’s case.
- The accused’s defence of financial incapacity was treated as an afterthought
6. Defence of Blank Cheque
The Court rejected the argument that a blank cheque was issued for bank loan purposes as “unbelievable and absurd,” since no bank would accept a cheque from an account with insufficient funds.
Benefit of Probation of Offenders Act in NI Act Cases
The Court reaffirmed that proceedings under Section 138 NI Act are essentially civil in nature, though carrying criminal consequences. Relying on its prior jurisprudence (P. Mohanraj; Damodar S. Prabhu; Gian Chand Garg), the Court held that accused persons are entitled to seek the benefit of probation under the Probation of Offenders Act, 1958.
This is because punishment under the NI Act is aimed not at retribution but at ensuring repayment and maintaining cheque credibility.
Systemic Concerns and Guidelines
The Court noted the massive backlog of cheque-bouncing cases:
Delhi: 6.5 lakh cases (49.45% of total trial pendency)
Mumbai: 1.17 lakh
Calcutta: 2.65 lakh
To address this, the Court issued practical guidelines:
A. Service of Summons
- Besides regular modes, summons should also be served dasti (by complainant) and electronically (email/WhatsApp).
- Complainant must provide verified contact details of the accused.
B. Online Payment Facilities
- District Courts must operationalise QR code/UPI-based online payment links for direct settlement at the threshold stage.
C. Mandatory Complaint Synopsis
- Each complaint under Section 138 must include a synopsis format (parties, cheque details, dishonour memo, notice particulars, cause of action, relief sought).
D. No Pre-Cognizance Summons
- No need to issue summons under Section 223 BNSS before taking cognizance of NI Act complaints.
E. Summary Trial Emphasis
- Trial courts must prefer summary trials and give cogent reasons before converting to summons trials.
F. Initial Stage Questions
- Courts may directly ask accused key questions (admission of signature, cheque issuance, liability, defence type) under Section 251 CrPC/274 BNSS.
G. Interim Deposit Orders
- Encourage early interim compensation orders under Section 143A NI Act.
H. Physical Court Proceedings
- Post-summons, matters should be heard in physical courts to encourage early resolution.
I. Evening Courts & Pecuniary Limits
- High Courts to set realistic pecuniary limits for cheque cases in evening courts (Delhi’s ₹25,000 limit deemed too low).
J. Dashboards & Monitoring
- Dedicated dashboards for Section 138 cases to track pendency, disposal rates, settlements, and adjournments.
- Committees of Chief Justices to oversee progress and promote ADR/mediation.
Compounding Guidelines Modified
Earlier guidelines in Damodar S. Prabhu v. Sayed Babalal H. (2010) imposed graded costs (10%, 15%, 20%).
The Court revised them downward:
- Before defence evidence → Compounding allowed without cost.
- After defence evidence but before judgment → 5% of the cheque amount as cost.
- In appeal/revision before HC/Sessions → 7.5% cost.
- In the Supreme Court → 10% cost
This shift acknowledges falling interest rates and aims to encourage early settlement.
Final Decision
- The appeal was allowed.
- The High Court’s order was set aside.
- The Trial and Sessions Court convictions were restored.
- The accused was directed to pay ₹7,50,000 in 15 monthly instalments of ₹50,000.
- All High Courts and District Courts were directed to implement the new guidelines by 1 November 2025.
Conclusion
The judgment in Sanjabij Tari v. Kishore S. Borcar is a landmark ruling in NI Act jurisprudence. It clarifies that:
- Presumptions under Sections 118 and 139 are strong safeguards and cannot be lightly ignored.
- Financial incapacity cannot be presumed without evidence.
- Revisional jurisdiction is narrow; High Courts must avoid re-evaluating factual findings.
- Procedural lapses (non-reply to notice, blank cheque defences) weaken the accused’s case.
- Cash loans, even if violating IT Act provisions, remain enforceable debts under Section 138.
Equally important, the Court’s systemic guidelines reflect its recognition that cheque-bouncing cases are overwhelming trial courts and require digital solutions, ADR promotion, and streamlined procedures.
This ruling balances individual justice in the instant case with structural reforms in the justice system, strengthening public confidence in the cheque mechanism as a reliable financial instrument.
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