SC allows separate criminal cases from multiple bounced cheques in single deal

Those cheques bounced, not once but repeatedly. The personal cheques were presented first and dishonoured, followed by the firm’s cheques, which also failed. Cheques presented later for additional amounts were also dishonoured on different dates. Each bounce led to a separate complaint, adding up to five cases.

What Section 138 of the Negotiable Instruments Act states

Section 138 of the Negotiable Instruments Act lays down a fixed sequence for when an offence of a cheque dishonour is carried out. A cheque should be drawn for the discharge of a legally enforceable debt or a liability, and must be presented within its validity period.

The bank must return it unpaid, usually with endorsements such as “funds insufficient” or “exceeds arrangement”. Section 138 (b) further states that when the payee deposits the cheque in the bank, and the same is bounced, they have 30 days to “demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque.”

Section 138 (c) states that, upon receiving the notice, the drawer must repay the debt within 15 days, after which the cause of action arises from the 16th day. It is then that the payee can file a suit in court.

Commercially, payments are rarely secured by a single cheque, and instalments are split across dates. Separate cheques cover different components of the same liability. Firms issue cheques from business accounts while promoters issue personal cheques as guarantees. When earlier cheques bounce, fresh ones are issued in an attempt to keep the transaction ongoing. Each of these cheques can independently satisfy the requirements under Section 138. If a cheque is presented on a different date, dishonoured on a different date, followed by its own notice and failure to pay, it creates a separate cause of action. Thus, five complaints followed one agreement to sell in the present case.

Once these elements are shown at the preliminary level, Section 139 of the NI Act comes into play. It creates a presumption that the cheque was issued for the discharge of a debt or liability. The complainant does not have to establish the entire financial background at the filing stage. The burden shifts to the accused to rebut the presumption during trial.

The SC has held on multiple occasions that dishonour alone does not trigger criminal liability, and it is the failure to pay after notice that does. This structure explains why cheque bounce cases often outnumber the transactions that give rise to them

The Delhi High Court’s intervention

The Delhi High Court in April 2025 quashed both the complaint cases and held that both sets of cheques related to the same underlying liability, i.e., the refund of sale consideration under the agreement to sell. The High Court reasoned that both sets of cheques related to the same underlying liability, which was the refund of sale consideration under the agreement to sell.

It noted that the personal cheques were issued as a guarantee “in lieu of” the firm’s cheques. By presenting the personal cheques first, the complainant was seen to have exercised an option. By that logic, the firm’s cheques should not have been given later. Allowing both complaints to continue, the Court held, would amount to “parallel prosecution” for a single cause of action and an abuse of process.

What the Supreme Court said

The Supreme Court reversed that conclusion. It held that under Section 138, the cause of action is linked to the cheque, not to the underlying transaction. The court said that “each dishonour of a cheque, followed by failure to make payment within the statutory period, constitutes a separate offence.” Whether cheques were meant as alternatives, substitutes, or part of a continuing arrangement is a matter for evidence. It cannot be settled by reading complaints side by side and drawing conclusions.

A second issue was the scope of the High Court’s inherent powers under Section 482 CrPC. The Supreme Court reiterated settled law that quashing is permissible only in limited situations where, even if the allegations are accepted at face value, no offence is made out.

The Court held that the High Court exceeded its jurisdiction by deciding disputed questions on facts at the quashing stage. Whether the personal cheques were issued “in lieu of” the firm’s cheques, whether the complainant had exercised an option, or whether liability stood satisfied are all matters that require evidence. Resolving these questions at the Section 482 stage amounts to conducting a “mini trial”, which is impermissible.

The court also reaffirmed the operation of Section 139 of the NI Act, which creates a presumption that a dishonoured cheque was issued for a debt or liability. At the stage of filing a complaint, the complainant is not required to prove liability in detail. The burden lies on the accused to rebut this presumption during trial by leading evidence.