Section 138 Complaints Cannot Be Thrown Out at the Threshold: Supreme Court Reins in Section 482 Jurisdiction

The Supreme Court’s decision in this case is a clear reaffirmation of long-settled principles governing cheque dishonour prosecutions and the limited scope of inherent powers under Section 482 of the Code of Criminal Procedure.

The judgment draws a firm line against premature judicial intervention that short-circuits statutory presumptions under the Negotiable Instruments Act, 1881.

What's The Matter?

The case arose from a complaint filed under Section 138 of the Negotiable Instruments Act alleging dishonour of a cheque for ₹20 lakh issued towards payment for goods supplied.

The cheque was presented twice and dishonoured on both occasions for insufficiency of funds. Statutory demand notice was served and payment was not made within the prescribed period, leading to initiation of criminal proceedings.

The Magistrate took cognizance and issued summons.

However, the Patna High Court, exercising its inherent powers under Section 482 CrPC, quashed the entire complaint.

The High Court reasoned that the cheque had not been issued in discharge of a legally enforceable debt or liability.

This approach became the central issue before the Supreme Court.

What Court Said?

Setting aside the High Court’s order, the Supreme Court held that such an enquiry was wholly impermissible at the pre-trial stage.

The Court reiterated that Section 139 of the Negotiable Instruments Act creates a statutory presumption that a cheque is issued for the discharge, in whole or in part, of a debt or liability.

While this presumption is rebuttable, it can only be displaced by evidence, ordinarily during trial.

A High Court, while exercising jurisdiction under Section 482, cannot conduct a roving enquiry into disputed questions of fact or weigh the defence of the accused as if sitting in trial.

The Court emphasised that the role of a court at the stage of quashing is limited to examining whether the complaint, on its face, discloses the essential ingredients of the offence.

In the present case, the complaint clearly pleaded issuance of cheque, dishonour for insufficient funds, service of statutory notice, and failure to pay within the prescribed time.

These facts were sufficient to constitute a prima facie offence under Section 138.

Relying on earlier precedents , the Court cautioned that allowing High Courts to test the defence version at the threshold would defeat the legislative intent behind the NI Act.

Cheque dishonour provisions were enacted to enhance the credibility of commercial transactions, and diluting statutory presumptions through premature quashing would undermine that objective.

The Supreme Court underscored that indiscriminate use of Section 482 powers risks usurping the function of trial courts.

When proceedings are scuttled at a nascent stage, parties are denied the opportunity to lead evidence, and the criminal process is brought to an abrupt end without adjudication on merits.

By restoring the complaint and directing the Magistrate to proceed in accordance with law, the Court clarified that it had expressed no opinion on the ultimate merits of the dispute.

The accused remains free to rebut the presumption under Section 139 during trial, but not before.

For cheque dishonour litigation, the ruling strengthens the complainant’s position at the threshold stage and serves as a reminder that defences must ordinarily wait their turn in evidence, not be adjudicated in summary fashion under Section 482 CrPC.