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The Supreme Court (Court) on 25 September 2025, in Sanjabij Tari v. Kishore S. Borcar & Anr., examined the presumptions under the Negotiable Instruments Act, 1881 (NI Act) and clarified the law on the complainant's financial capacity in cheque dishonour cases. The Court also issued systemic directions to address the large backlog of Section 138 NI Act matters pending across trial courts.
Facts in Brief:
The complainant had advanced a friendly loan of ₹6,00,000, which was returned by a cheque that was dishonoured. The Trial Court and Sessions Court convicted the accused, but the Bombay High Court at Goa, in revision, acquitted him ex parte on the grounds that the complainant lacked the financial capacity to advance such a loan. The complainant appealed, contending that the High Court exceeded its revisional powers and disregarded the statutory presumptions under the NI Act.
Findings of the Court:
The Supreme Court restored the conviction, holding that once the execution of a cheque is admitted, presumptions under Sections 118 and 139 NI Act arise in favour of the complainant. These are rebuttable, but the burden initially lies on the accused, who, in this case, produced no evidence to challenge the complainant's capacity. The defence that the cheque was issued blank for securing a bank loan was dismissed as implausible.
The Court clarified that a breach of Section 269SS of the Income Tax Act, which restricts cash loans above ₹20,000, may attract tax penalties but does not make such loans unenforceable under the NI Act. It also criticised the High Court for reappraising factual f indings in revision, reiterating that concurrent findings of lower courts cannot be disturbed absent perversity. The failure of the accused to reply to the statutory notice further supported the inference of liability.
Guidelines for Expeditious Disposal:
Observing that cheque dishonour cases constitute nearly half the dockets in metropolitan magistrate courts, the Supreme Court issued wide-ranging directions effective 1 November 2025. These include electronic and dasti service of summons, creation of online payment platforms for settlement, mandatory synopses in complaints, elimination of pre-cognizance summons under BNSS, encouragement of summary trials with preliminary questioning, and early use of interim deposit powers under Section 143A of the NI Act.
The Court also directed prioritisation of physical hearings post-summons to encourage settlement, the establishment of dashboards in Delhi, Mumbai and Kolkata for case monitoring, and active High Court oversight to facilitate ADR mechanisms. It further modified earlier compounding guidelines, holding that if payment is made before the accused's evidence is recorded, compounding may be permitted without costs. Payments made thereafter but before judgment will attract costs of five per cent, while compounding at appellate stages will attract 7.5 per cent before the High Courts and ten per cent before the Supreme Court.
MHCO Comment:
The judgment strengthens statutory presumptions under the NI Act, clarifies that f inancial capacity cannot be doubted without evidence, and introduces systemic reforms to address pendency. The Court by issuing clear guidelines, has reinforced the credibility of cheques while laying down a roadmap for efficient disposal of Section 138 cases. This article was released on 1 October 2025.
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