Sanjabij Tari v. Kishore S. Borcar 2025 INSC 1158 - Income Tax Act - S.138 NI Act

Negotiable Instruments Act - Section 138,139 ; Income Tax Act- Section 269SS, 271D ; - Neither Section 269SS nor 271D of the IT Act, 1961 state that any transaction in breach thereof will be illegal, invalid or statutorily void. Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the NI Act or rebut the presumptions under Sections 118 and 139 of the NI Act because such a person, assuming him/her to be the payee/holder in due course, is liable to be visited by a penalty only as prescribed- The view that any transaction above Rs.20,000/- (Rupees Twenty Thousand) is illegal and void and therefore does not fall within the definition of ‘legally enforceable debt’ cannot be countenanced. (Para 20)

Negotiable Instruments Act 1881 - Section 138 - A. In all cases filed under Section 138 of the 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 the accused by the complainant in addition. This direction is necessary as a large number of Section 138 cases under the NI Act are filed in the metropolitan cities by financial institutions, by virtue of Section 142(2) of the NI Act, against accused who may not be necessarily residing within the territorial jurisdiction of the Court where the complaint has been filed. The Trial Courts shall further resort to service of summons by electronic means in terms of the applicable Notifications/Rules, if any, framed under subSections 1 and 2 of Section 64 and under Clause (i) of Section 530 and other provisions of the Bhartiya Nagarik Suraksha Sanhita, 2023 (for short ‘BNSS, 2023’) like Delhi BNSS (Service of Summons and Warrants) Rules, 2025. For this purpose, the complainant shall, at the time of filing the complaint, provide the requisite particulars including e-mail address, mobile number and/or WhatsApp number/messaging application details of the accused, duly supported by an affidavit verifying that the said particulars pertain to the accused/respondent. B. The complainant shall file an affidavit of service before the Court. In the event such affidavit is found to be false, the Court shall be at liberty to take appropriate action against the complainant in accordance with law. C. In order to facilitate expeditious settlement of cases under Section 138 of the NI Act, the Principal District and Sessions Judge of each District Court shall create and operationalise dedicated online payment facilities through secure QR codes or UPI links. The summons shall expressly mention that the Respondent/Accused has the option to make payment of the cheque amount at the initial stage itself, directly through the said online link. The complainant shall also be informed of such payment and upon confirmation of receipt, appropriate orders regarding release of such money and compounding/closure of proceedings under Section 147 of the NI Act and/or Section 255 of Cr.P.C./278 BNSS, 2023 may be passed by the Court in accordance with law. This measure shall promote settlement at the threshold stage and/or ensure speedy disposal of cases. D. Each and every complaint under Section 138 of the NI Act shall contain a synopsis in the following format which shall be filed immediately after the index (at the top of the file) i.e. prior to the formal complaint: (Para 36)

Negotiable Instruments Act - Section 138,139 - Bharatiya Nagarik Suraksha Sanhita - Section 223 -There shall be no requirement to issue summons to the accused in terms of Section 223 of BNSS i.e., at the pre-cognizance stage. (Para 36(E))

Negotiable Instruments Act - Section 138,139 - Modified Guidelines of compounding :- (a) If the accused pays the cheque amount before recording of his evidence (namely defence evidence), then the Trial Court may allow compounding of the offence without imposing any cost or penalty on the accused. (b) If the accused makes the payment of the cheque amount post the recording of his evidence but prior to the pronouncement of judgment by the Trial Court, the Magistrate may allow compounding of the offence on payment of additional 5% of the cheque amount with the Legal Services Authority or such other Authority as the Court deems fit. (c) Similarly, if the payment of cheque amount is made before the Sessions Court or a High Court in Revision or Appeal, such Court may compound the offence on the condition that the accused pays 7.5% of the cheque amount by way of costs. (d) Finally, if the cheque amount is tendered before this Court, the figure would increase to 10% of the cheque amount. if the Accused is willing to pay in accordance with the aforesaid guidelines, the Court may suggest to the parties to go for compounding. If for any reason, the financial institutions/complainant asks for payment other than the cheque amount or settlement of entire loan or other outstanding dues, then the Magistrate may suggest to the Accused to plead guilty and exercise the power under Section 255(2) and/or 255(3) of the Cr.P.C. or 278 of the BNSS, 2023 and/or give the benefit under the Probation of Offenders Act, 1958 to the Accused. (Para 38-39)

Negotiable Instruments Act - Section 138,139,143 -Trial Courts shall record cogent and sufficient reasons before converting a summary trial to summons trial. To facilitate this process, Trial Court shall be at liberty (at the initial post cognizance stage) to ask questions, it deems appropriate, under Section 251 Cr.P.C. / Section 274 BNSS, 2023 including the following questions:- (i) Do you admit that the cheque belongs to your account? Yes/No (ii) Do you admit that the signature on the cheque is yours? Yes/No (iii) Did you issue/deliver this cheque to the complainant? Yes/No (iv) Do you admit that you owed liability to the complainant at the time of issuance? Yes/No (v) If you deny liability, state clearly the defence: (a) Security cheque only; (b)Loan repaid already; (c) Cheque altered/misused; (d)Other (specify). (vi) Do you wish to compound the case at this stage? Yes/No -The Court shall record the responses to the questions in the ordersheet in the presence of the accused and his/her counsel and thereafter determine whether the case is fit to be tried summarily under Chapter XXI of the Cr.P.C. / Chapter XXII of the BNSS, 2023. (Para 36(F-G))

Negotiable Instruments Act - Section 138,139- The fact that the accused has failed to reply to the statutory notice under Section 138 of the NI Act leads to an inference that there is merit in Complainant’s version. The accused has the initial burden to set up the defence in his reply to the demand notice that the complainant did not have the financial capacity to advance the loan. (Para 29) When a statutory notice is not replied, it has to be presumed that the cheque was issued towards the discharge of liability. (Para 30)

Negotiable Instruments Act - Section 138,139-Probation of Offenders Act, 1958- Not only a voluntary compromise can bring the proceedings under Section 138 NI Act to an end, but the accused under the said offence are entitled to benefit under the Probation of Offenders Act, 1958. (Para 35)

Negotiable Instruments Act - Section 118,138,139- Once the execution of the cheque is admitted, the presumption under Section 118 of the NI Act that the cheque in question was drawn for consideration and the presumption under Section 139 of the NI Act that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability arises against the accused. (Para 15) By creating this presumption, the law reinforces the reliability of cheques as a mode of payment in commercial transactions - The presumption contemplated under Section 139 of the NI Act, is a rebuttable presumption. However, the initial onus of proving that the cheque is not in discharge of any debt or other liability is on the accused/drawer of the cheque (Para 16-17) [Context: SC rejected the contention that in cases of dishonour of cheques, in lieu of cash loans, the presumption under Section 139 of the NI Act does not arise - Also disapproved approach of District Courts and some High Courts which treat the proceedings under the NI Act as another civil recovery proceedings and are directing the complainant to prove the antecedent debt or liability] (Para 18,21)

Negotiable Instruments Act - Section 138- Since physical courtrooms create a conducive environment for direct and informal interactions encouraging early resolution, the High Courts shall ensure that after service of summons, the matters are placed before the physical Courts. Exemptions from personal appearances should be granted only when facts so warrant. It is clarified that prior to the service of summons the matters may be listed before the digital Courts.(Para 36)

Negotiable Instruments Act - Section 143A- Wherever, the Trial Court deems it appropriate, it shall use its power to order payment of interim deposit as early as possible under Section 143A of the NI Act. (Para 36)

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