The Supreme Court has clarified that complaints arising from dishonoured cheques cannot be thrown out at the threshold when the foundational requirements of Section 138 of the Negotiable Instruments Act, 1881, are satisfied. The Court stressed that questions about whether a cheque was issued towards a legally enforceable debt must be tested during trial, not prematurely decided.
The ruling underscores that once the statutory presumption under Section 139 comes into play, it remains intact until rebutted through evidence. Short-circuiting the process at the pre-trial stage, the Court observed, would effectively neutralise the presumption before the complainant even gets a chance to present their case.
According to the Court, concluding at the outset that the cheque was not issued for a legally enforceable liability—without allowing the complainant to lead evidence—would undermine the statutory framework. Such an approach would prematurely erase the presumption that the cheque was issued in discharge of a debt or liability.
The dispute before the Court stemmed from a matrimonial settlement. The complainant alleged that her husband had agreed to pay ₹50 crore, and a third party stepped in as guarantor by issuing a cheque for the same amount in her favour. When the cheque was presented, it was returned with the remark “payment stopped by drawer,” prompting proceedings under Section 138.
A Magistrate took cognisance and issued process. However, the Sessions Court later set aside the order, holding that the cheque was not backed by a legally enforceable debt. This view was affirmed by the High Court, leading to an appeal before the Supreme Court.
Allowing the appeal, the Court held that once the complainant establishes the basic ingredients of Section 138, the burden shifts to the drawer to rebut the statutory presumption during trial. In the absence of any material to displace that presumption, dismissing the complaint at the threshold was found to be unjustified.
The Court restored the cheque dishonour proceedings and revived the case before the Magistrate, making it clear that the merits of the defence must be tested only through a full-fledged trial.
