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Reinstating Faith in Cheques – Sanjabij Tari v. Kishore S. Borcar & Anr.

Harshvardhan Melanta

October 12, 2025

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Introduction

Negotiable instruments occupy a central role in modern commercial transactions, representing more than just payment documents, they are instruments that guarantee mobility, security, and efficiency in transferring monetary value across parties in various economic activities.¹

Despite the dominance of electronic transfers and digital wallets in today’s financial landscape, negotiable instruments remain relevant for they provide a convenient and secure way to transfer money without needing physical currency. They can be freely transferred from one person to another through negotiation, typically by endorsement or delivery and serve as evidence of a debt. The new instrument holder then gains the rights and obligations associated with it.

Although negotiable instruments is akin to a contract, the consequence of breach of latter is not as serious as the former as negotiable instruments tend to have widespread impact and there is sanctity of faith reposed on a negotiable instruments. In India, the Negotiable Instruments Act, 1881 (“NI Act“) deals with regulating the negotiable instruments namely, (i) promissory note, (ii) bill of exchange, (iii) cheque.

Among its various provisions, Section 138, dealing with the dishonour of cheques due to insufficiency of funds, is perhaps the most frequently litigated provision in Indian courts. Commonly referred to as “cheque bounce cases,” these matters form an overwhelming part of the dockets of criminal courts across India.

Recognizing this crisis and the need to restore public faith in cheque transactions, the Supreme Court in Sanjabij Tari v. Kishore S. Borcar & Anr. (2025)² undertook a comprehensive review of how Section 138 cases are handled. The Division Bench of Justice Manmohan and Justice N.V. Anjaria not only reaffirmed the legal principles governing cheque dishonour prosecutions but also introduced far-reaching procedural reforms aimed at clearing the massive backlog that clogs the judicial system.

Facts

The case had its origins in a friendly transaction between two individuals. The Appellant, Sanjabij Tari, and the Respondent, Kishore Borcar, were friends. Tari alleged that he had lent Borcar a friendly loan of Rs. 6 lakhs, which Borcar agreed to repay. To discharge this liability, Borcar issued a cheque, which was later dishonoured for insufficiency of funds.

Following the prescribed procedure under Section 138 of the NI Act, Tari issued a statutory legal notice demanding payment within 15 days. When Borcar failed to comply, Tari filed a criminal complaint before the Magistrate.

The Trial Court, after evaluating the oral and documentary evidence, convicted the accused in April 2007. It found that Borcar had not rebutted the statutory presumptions under Sections 118 and 139 of the NI Act, which presume that a cheque was issued for consideration and towards a legally enforceable debt. The Trial Court noted that Tari, though earning a modest salary of Rs. 2,300 per month, had arranged funds by borrowing from his father and by using a portion of his institutional loan.

The Sessions Court, hearing the appeal, upheld the conviction in September, 2008. It agreed that the complainant’s testimony was credible and that the accused had failed to provide any reliable evidence to disprove the loan transaction.

The High Court’s Reversal

In 2009, the Bombay High Court at Goa reversed the concurrent findings and acquitted the accused. The judgment was passed ex parte, as the complainant’s lawyer was absent on the date of hearing. When Tari sought recall of this decision, citing sufficient cause for non-appearance, the High Court refused, holding that it had become functus officio (having exhausted its authority).

This denial of a fair hearing and reversal of concurrent factual findings became a central concern before the Supreme Court.

Supreme Court’s Intervention

The Supreme Court began by reaffirming the object and purpose of Chapter XVII of the NI Act (under which Section 138 is part of), which was introduced through the 1988 Amendment. The Court observed that the intent behind Section 138 was to enhance the credibility of cheques as substitutes for cash³, by imposing penal consequences for their dishonour.

The ruling underscored that cheques form the backbone of commercial trust, and their sanctity must be preserved to sustain the efficiency of financial transactions.

Key Legal Issues and Principles Clarified

1. Statutory Presumptions under Sections 118 & 139

The Supreme Court reaffirmed that once the execution of a cheque is admitted, two presumptions automatically arise:

• Under Section 118, that the cheque was drawn for consideration etc; and
• Under Section 139, that it was issued towards a legally enforceable debt or liability and that it was issued in favour of holder i.e. who has it (here it is Tari)⁴.

Under NI Act, even if the accused claims that only the signature was his and that he did not fill in the contents, these presumptions still operate. This principle, earlier upheld in Bir Singh v. Mukesh Kumar (2019)⁵, was reaffirmed to reinforce the statutory intent of protecting cheque transactions.

2. Burden of Proof in Cheque Bounce Cases

The Court set out a clear framework for burden of proof under Section 138 NI Act:

• Once cheque execution is admitted, presumptions arise in the complainant’s favour.
• The accused must rebut these presumptions by raising a probable defence that creates doubt about the existence of a debt.
• This rebuttal can be based on the preponderance of probabilities, not proof beyond reasonable doubt.
• The accused may rely on evidence from the complainant’s own record or external evidence.
• Only if the accused successfully rebuts the presumption does the burden shift back to the complainant.

This structured approach provides clarity and consistency in how courts must assess evidence in cheque dishonour cases.

3. On Financial Capacity

The Accused had argued that the Complainant lacked the financial capacity to lend Rs. 6 lakhs. However, the Supreme Court found that no independent evidence was led by the accused to support this claim. Citing Rajaram S/o Sriramulu Naidu v. Maruthachalam (2023)⁶, the Court observed that the defence of financial incapacity must be substantiated through credible proof such as testimony of income-tax officers or bank records.

At the same time, relying on APS Forex Services Pvt. Ltd. v. Shakti International Fashion Linkers (2020)⁷, the Court noted that if the presumption under Section 139 is rebutted, the complainant may then need to prove financial capacity particularly in cases involving cash loans.

4. Non-Reply to Statutory Notice: Legal Consequences

The Court placed heavy emphasis on the accused’s failure to reply to the statutory notice under Section 138. Drawing from Tedhi Singh v. Narayan Dass Mahant (2022)⁸ and MMTC Ltd. v. Medchl Chemicals & Pharma (P) Ltd. (2002)⁹, it held that non-reply creates a strong inference in favour of the complainant, suggesting that the cheque was indeed issued for a valid debt.

If the accused wishes to raise a defence of absence of liability or lack of financial capacity etc. it should be stated in the reply to the notice itself.

5. Revisional Jurisdiction: Limits Reinforced

The Supreme Court reminded High Courts that revisional powers under Section 401 CrPC are not appellate powers. Revisional interference with concurrent factual findings is permissible only when there is gross perversity or jurisdictional error. Citing Bir Singh and Southern Sales & Services v. Sauermilch Design (2008)¹⁰, the Court held that the Bombay High Court’s interference was unwarranted, as both lower courts had recorded consistent findings of guilt.

Pendency of Section 138 cases

The Supreme Court voiced concern over a recurring trend where trial and appellate courts treat cheque dishonour proceedings as ordinary civil recovery suits, ignoring the statutory presumptions that Parliament intended to attach. The Court warned that such judicial laxity erodes public trust in cheques and undermines the legislative purpose of the Negotiable Instruments Act.

The Court’s judgment also delves into the shocking volume of pending Section 138 cases in District Courts, noting figures such as:

• Delhi District Courts: 6,50,283 cases
• Mumbai District Courts: 1,17,190 cases
• Calcutta District Courts: 2,65,985 cases

In Delhi alone, cheque bounce cases constituted nearly 49.45% of total trial court pendency.
To address this alarming situation, the Supreme Court issued comprehensive guidelines to streamline case management and ensure faster disposal.¹¹

Supreme Court’s Procedural Directions / Reforms

• Service of Summons: Must include dasti service (meaning privately serving the summons) and electronic means like email, mobile, and WhatsApp (as per BNSS Rules 2025).
• Digital Payment Options: Each District Court to set up QR codes and UPI links for direct settlement of cheque amounts.
• Standardized Complaint Format: Mandatory synopsis detailing cheque particulars, parties, and jurisdiction.
• Summary Trial Efficiency: Courts must record specific reasons before converting a summary trial to a regular trial.
• Monitoring Mechanism: Creation of digital dashboards in major cities for pendency tracking and monthly performance review, which shall be examined by a Committee
• No unnecessary summons: Adoption of Ashok v. Fayaz Ahmad (2025) principles to avoid unnecessary summons procedures.
• Interim Deposit: Trial Court if deems appropriate shall use its power to order payment of interim deposit as early as possible¹²

In addition to the above reforms, in this writer’s opinion, mandatory pre-litigation mediation can also be incorporated by making appropriate amendments to the NI Act similar to Section 12A of the Commercial Courts Act, 2015

Revised Compounding and Sentencing Framework

Recognizing that Section 138 offences are quasi-criminal and essentially aimed at securing repayment, the Court revised the compounding costs earlier fixed in Damodar S. Prabhu v. Sayed Babalal H. (2010)¹³¹⁴.

The Court also affirmed that benefits under the Probation of Offenders Act, 1958 can be extended in appropriate Section 138 cases, highlighting that the goal is payment, not punishment.

The Supreme Court directed all High Courts and District Courts to implement these reforms by 1st November, 2025. From digital summons and online settlements to standardized formats and compounding cost rationalization, this judgment marks a decisive step toward reducing backlog and modernizing cheque bounce litigation.

Conclusion

The Sanjabij Tari v. Kishore S. Borcar judgment can be a judicial reform blueprint for Section 138 matter. The Court while reinforcing the statutory presumptions under Sections 118 and 139 at the same time introducing robust procedural mechanisms has reaffirmed the sanctity of the cheque as a trustworthy instrument of payment.

The judgment combines legal clarity with administrative and practical foresight. It restores confidence in cheques as secure and dependable commercial instruments, not merely because they serve as a convenient means of payment, but also because in the event of dishonour, the law now ensures quicker, more efficient recovery for the rightful payee. By coupling substantive presumptions with procedural reform, the Court has created a framework where faith in the cheque extends beyond its issuance to the assurance that justice will be swift if that faith is breached.

1. Evolution & Key Features: Negotiable Instruments Act, 1881,” Business Law as Applicable to Co-operative II, TheLaw.Institute, https://thelaw.institute/business-law-as-applicable-to-co-operative-ii/evolution-key-features-negotiable-instruments-act-1881/ ↩︎
2. Citation: 2025 SCC OnLine SC 2069 ↩︎
3. Ibid Para 14 ↩︎
4. Ibid Para 15 ↩︎
5. (2019) 4 SCC 197 ↩︎
6. (2023) 16 SCC 125 ↩︎
7. (2020) 12 SCC 724 ↩︎
8. (2022) 6 SCC 735 ↩︎
9. (2002) 1 SCC 234 ↩︎
10. (2008) 14 SCC 457 ↩︎
11. Supra 2, Para 33 ↩︎
12. Ibid, Para 36 ↩︎
13. (2010) 5 SCC 663 ↩︎
14. Supra 2, Para 37 & 38 ↩︎