Case at a Glance
A cheque of ₹50 crore, issued in connection with a draft settlement of disputes between a wife and her husband, was dishonoured with the remark ‘payment stopped by drawer’. The Magistrate issued process under Section 138 of the Negotiable Instruments Act, but the Sessions Court set it aside, holding there was no legally enforceable debt because the settlement agreement was unsigned, and the Bombay High Court declined to interfere. The Supreme Court restored the complaint, holding that at the stage of issuing process the presumption under Section 139 cannot be treated as rebutted; whether there was an enforceable liability is a question for trial.
The appellant had disputes with her husband relating to share transfers in family business entities. A draft settlement was finalised on 12 January 2022, under which the husband was to gift properties and pay ₹50 crore. The second respondent, described as a friend of the husband acting as mediator, issued a cheque for ₹50 crore on 12 January 2022, and the appellant signed a declaration-cum-indemnity on 13 January 2022.
The cheque was dishonoured on 6 April 2022 with the remark ‘payment stopped by drawer’. After a statutory notice dated 20 April 2022 and a reply denying liability, the appellant filed a complaint on 16 June 2022, and the Metropolitan Magistrate issued process on 17 June 2022. On 30 December 2022 the Sessions Court set aside the process order, finding no legally enforceable debt, since the settlement agreement was not signed by the second respondent. The Bombay High Court dismissed the appellant’s petition under Article 227, and she appealed.
The Key Question Before the Court
Can a Section 138 NI Act complaint be dismissed at the pre-trial stage, by setting aside the summoning order, on the ground that the cheque was not issued for a legally enforceable debt?
Presumption Under Section 139 at the Summoning Stage
The second respondent relied on Sunil Todi v. State of Gujarat, (2021) 12 SC CK 0012, contending that a payment dependent on an event that never occurred creates no recoverable liability, and that the unsigned settlement meant there was no concluded obligation. The appellant argued that the ingredients of Section 138 were satisfied and the presumption under Section 139 could be rebutted only at trial. The Court held that the Sessions Court had given undue weight to the unsigned agreement and ignored that, at least for issuance of process, the ingredients of the offence were made out.
Relying on Rangappa v. Sri Mohan, (2010) 05 SC CK 0036 and Rajesh Jain v. Ajay Singh, (2023) 10 SC CK 0014, the Court reiterated that the presumption under Section 139 operates in favour of the holder and must be rebutted by the accused through evidence at trial. Setting aside process on the basis of the defence version would mean that “the presumption under Section 139 of the N.I. Act gets washed away even prior to commencement of the trial.” It held that “the dismissal of the complaint as a consequence of setting aside the order issuing process is totally unjustified,” and that disputed questions about outstanding liability are factual matters for trial.
What the Court Actually Held
- At the stage of issuance of process, the statutory presumption under Section 139 of the NI Act cannot be treated as rebutted.
- Whether the cheque was issued for a legally enforceable debt or liability is a disputed question of fact to be decided at trial.
- The orders of the Sessions Court and the Bombay High Court were set aside, and the Magistrate’s order of 17 June 2022 issuing process was restored.
- The complaint stands restored for adjudication on its own merits; the Court’s observations are not an opinion on the merits.
Why This Judgment Matters
- It curbs the practice of challenging summoning orders in cheque-bounce cases by raising disputed defences in revision.
- It reaffirms that the burden is on the accused to rebut the presumption, and only at trial.
- It applies equally to large-value cheques issued in settlement of family and business disputes.
What Should Advocates Take Away From the Judgment?
For Complainants
- If the ingredients of Section 138 are met, the summoning order should not be set aside merely because the accused disputes liability.
- Keep the settlement papers, notices and bank memo ready for trial, where liability will be tested.
For Counsel
- Defences such as ‘no enforceable debt’ or ‘conditional liability’ belong at trial, not in revision against summons.
- Cite Rangappa v. Sri Mohan and Rajesh Jain v. Ajay Singh on the Section 139 presumption.
- Distinguish Sunil Todi v. State of Gujarat where liability depends on facts that must be proved.
Key Takeaways
- The Section 139 presumption cannot be displaced at the summoning stage.
- Disputes over enforceable debt are matters for trial.
- Revisional courts should not dismiss complaints on the accused’s version.
- The cheque-bounce complaint was restored to the Magistrate.
Frequently Asked Questions
Can a cheque bounce case be quashed by saying there was no legal debt?
Not at the summoning stage, according to this judgment. Whether there was a legally enforceable debt is decided at trial, where the accused must rebut the Section 139 presumption.
What does Section 139 of the NI Act say?
It presumes that the holder of a cheque received it for the discharge of a debt or other liability, unless the contrary is proved.
What happens next in this case?
The complaint goes back to the Metropolitan Magistrate for decision on its merits.
Conclusion
Renuka v. State of Maharashtra, (2026) 04 SC CK 0455 reinforces a settled but often ignored principle: the statutory presumption in favour of the cheque-holder cannot be neutralised before trial. A revisional court that dismisses the complaint on the defence version effectively reverses the burden the statute places on the accused.
Practical takeaway: Accused persons in Section 138 cases should prepare to rebut the presumption with evidence at trial; challenging the summons on disputed facts is unlikely to succeed.
Read the full judgment on CourtKutchehry: View judgment →
For more judgments, legal opinions and case analysis, visit courtkutchehry.com