2026 INSC 327 REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2026

(@ SLP (CRL.) NO.7829 OF 2023)

RENUKA APPELLANT

VERSUS

THE STATE OF MAHARASHTRA RESPONDENTS

AND ANOTHER

J U D G M E N T

ATUL S. CHANDURKAR, J.

1. Leave granted.

2. On a complaint filed under Section 138 of the

Negotiable Instruments Act, 1881

1

, learned Metropolitan

Magistrate on being satisfied that there was prima-facie

material to proceed against the second respondent issued

process on 17

th

June 2022. The second respondent

invoked the revisional jurisdiction of the Sessions Court

1 For short, the N.I. Act

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 1 of 16

for challenging the said order. The Sessions Court was of

the view that on the date of issuance of the cheque in

question, there was no legally enforceable debt to be

satisfied by the drawer. By the order dated 30

th

December

2022, it set aside the order passed by the learned

Metropolitan Magistrate issuing process. The complainant

approached the High Court of Bombay by filing a writ

petition under Article 227 of the Constitution of India

and challenged the order passed by the Sessions Court.

The learned Single Judge, however, dismissed the writ

petition observing that no error of jurisdiction was found

in the impugned order. Being aggrieved, the complainant

has challenged the aforesaid orders in this Criminal

Appeal.

3. Shorn of necessary details, the facts relevant for

considering the challenge as raised are that it is the case

of the appellant that she had some disputes with her

husband, Mr. Ashwin Natwarlal Sheth in the matter of

alleged illegal and fraudulent transfer of shares

pertaining to Sheth Developers and Realtors (India)

Limited and Sheth Developers Private Limited. She had

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 2 of 16

filed various complaints after which her husband

commenced negotiations for amicable settlement of the

disputes. On 12

th

January 2022, a final draft settlement

agreement was finalised and drawn up between the

parties. One of the terms of the settlement was that the

appellant’s husband would gift to the appellant the fifth,

sixth and seventh floor premises of Natwar Bungalow

along with interest in a plot located in a Co-operative

Housing Society. He also agreed to pay the appellant a

sum of ₹50 crores on executing a Declaration-cum-

Indemnity document so as to withdraw the complaints

filed by her against her husband. With a view to

safeguard the interest of the appellant, the second

respondent, who was a close friend of the appellant’s

husband, agreed to act as a mediator and to keep the

amount of ₹50 crores in an escrow account till the actual

payment was made by the appellant’s husband.

Accordingly, on 12

th

January 2022, the second

respondent issued Cheque No.080261 for an amount of

₹50 crores in favour of the appellant. The appellant

claims to have signed the document titled as Declaration-

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 3 of 16

cum-Indemnity on 13

th

January 2022. It is the further

case of the appellant that the sale of shares of the

concerned entity was completed contrary to the

settlement agreement and the appellant’s husband

received the sale consideration. The appellant accordingly

deposited the cheque that had been issued by the second

respondent for encashment. However, on 06

th

April 2022,

the said cheque was dishonoured and returned with the

remark ‘payment stopped by drawer’. The appellant, on

20

th

April 2022, issued a notice under Section 138 of the

N.I. Act to the second respondent. The said notice was

replied by the second respondent on 04

th

May 2022,

denying any liability to make such payment. The

appellant gave her further reply to the second respondent

and again called upon him to make the necessary

payment. Since no further steps were taken by the

second respondent, the appellant on 16

th

June 2022 filed

a complaint against the second respondent under Section

138 of the N.I. Act.

4. Mr. Mukul Rohatgi, learned Senior Advocate for the

appellant submitted that the Sessions Court erred in

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 4 of 16

setting aside the order passed by the learned

Metropolitan Magistrate issuing process on the premise

that the dishonoured cheque had been issued for a debt

that was not legally enforceable. According to him, on a

plain reading of the complaint filed by the appellant

under Section 138 of the N.I. Act coupled with the

undisputed position as regards the issuance of the

cheque by the second respondent, its valid presentation,

its subsequent dishonour, issuance of the statutory

notice and failure on the part of the second respondent to

comply with the statutory notice were the only relevant

considerations at the stage of issuance of process in the

complaint. In other words, it was urged that the

presumption under Section 139 of the N.I. Act that

operated in favour of the payee could be dislodged by the

drawer of the cheque only during the course of trial and

not at the pre-trial stage. When the basic ingredients for

making out an offence under Section 138 of the N.I. Act

had been made out and process had been issued by the

learned Metropolitan Magistrate, scuttling the

proceedings at this stage was unjustified. To substantiate

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 5 of 16

this contention, reliance was placed on the decision in

Sunil Todi and others Vs. State of Gujarat and

another

2

by urging that the Sessions Court had misread

the said judgment. It was, thus, submitted that the

Sessions Court was not justified in coming to the

conclusion that the cheque in question had not been

issued for discharge of any legal liability. Such a finding

could be rendered only at the trial and not on the basis of

the statements made during the course of proceedings

challenging the issuance of process. He, therefore,

submitted that the impugned orders be set aside and the

complaint be restored for its adjudication on merits.

5. On the other hand, Dr. A. M. Singhvi, learned

Senior Advocate for the second respondent supported the

impugned orders and opposed the contentions raised on

behalf of the appellant. He submitted that both the

Courts were justified in coming to the conclusion that the

cheque in question had not been shown to have been

issued towards the discharge of any legally enforceable

debt. The document dated 12

th

January 2022, which was

2 2021 INSC 823

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 6 of 16

in the form of a settlement agreement, was admittedly not

signed by the second respondent. There was no

concluded agreement as such and, therefore, the second

respondent could not be bound by the statements made

in that agreement. The liability under the cheque issued

by the second respondent would arise only after the

agreement between the parties was complete. The Courts

were justified in relying upon the decision in Sunil Todi

(supra) wherein it was held that where the payment of

debt was dependent on the happening of an event which

never occurred, there would be no legally recoverable

liability to be satisfied. In view of this position on record,

no useful purpose would be served by continuing the

proceedings under Section 138 of the N.I. Act as it would

amount to an abuse of the process of law. It was, thus,

submitted that the complaint having been rightly

dismissed by the learned Sessions Judge, which order

was upheld by the High Court, no interference therein

was called for. He, therefore, urged that the appeal ought

to be dismissed.

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 7 of 16

6. We have heard the learned Senior Advocates

appearing for the parties at length and we have also

perused the relevant documentary material on record.

Having given due consideration to the rival submissions,

we are of the view that the Sessions Court as well as the

High Court were not justified in coming to the conclusion

that the complaint as filed by the appellant under Section

138 of the N.I. Act was liable to be dismissed at the pre-

trial stage on the ground that the cheque issued by the

second respondent was not towards any legally

enforceable debt.

7. Perusal of the complaint filed by the appellant

under Section 138 of the N.I. Act indicates reference to an

amicable settlement of various disputes between the

appellant and her husband, pursuant to which the

appellant’s husband executed a registered irrevocable

Power of Attorney dated 10

th

December 2022 in favour of

the appellant. It was agreed under the settlement

agreement that the appellant’s husband would transfer

by way of gift three properties and also pay an amount of

₹50 crores on the execution of a Declaration-cum-

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 8 of 16

Indemnity document. In reciprocation, complaints made

by the appellant as regards fraudulent transfer of her

shares in two companies were to be withdrawn. To ensure

execution of the Declaration-cum-Indemnity document,

the second respondent acted as a guarantor and issued

the cheque in question drawn in favour of the appellant.

The appellant accordingly signed the Declaration-cum

Indemnity document on 13

th

January 2022. On getting

knowledge of the sale of certain shares contrary to the

settlement agreement, the appellant presented the

cheque issued by the second respondent for being

honoured. It has been further stated that said cheque

was dishonoured with the remark ‘payment stopped by

drawer’. A reference is thereafter made to the issuance of

a statutory notice under Section 138 of the N.I. Act dated

20

th

April 2022, its service on the second respondent and

his reply dated 04

th

May 2022 denying any liability.

Accordingly, the said complaint came to be filed by the

appellant. The appellant’s statement was duly verified by

the learned Metropolitan Magistrate and on being prima

facie satisfied that the ingredients of Section 138 of the

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 9 of 16

N.I. Act were present, process came to be issued to the

second respondent.

8. It is to be borne in mind that at the stage of

issuance of process by the learned Metropolitan

Magistrate, what is prima facie required to be seen is the

issuance of cheque by the drawer in favour of the

complainant, its dishonour on presentation by the payee,

issuance of statutory notice under Section 138 of the N.I.

Act and filing of the complaint within the prescribed

statutory period. If the drawer does not dispute issuance

of such a cheque nor does he deny his signature on the

dishonoured cheque, the statutory presumption as

contemplated under Section 139 of the N.I. Act comes

into play. As a result, the burden would shift on the

drawer of the cheque to prove that the cheque was not

issued for any legally enforceable debt or liability. This

exercise has to be undertaken during the trial either by

relying upon the material brought on record by the

complainant or by the drawer leading evidence in

rebuttal. At the stage of issuance of process, the statutory

presumption under Section 139 of the N.I. Act cannot be

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 10 of 16

dislodged in a summary manner merely by contending

that the cheque issued was not for any legally enforceable

debt or liability.

9. We may in this regard refer to two decisions of this

Court that have reiterated the view that once the basic

ingredients of Section 138 of the N.I. Act are duly

satisfied by the complainant, the rebuttal of statutory

presumption by the drawer can only be made during the

course of trial.

In Rangappa Vs. Sri Mohan

3

, it has been explicitly

reiterated that the presumption mandated by Section 139

of the N.I. Act includes the presumption as regards

existence of a legally enforceable debt or liability. It has

been held that Section 139 is an example of a reverse

onus clause that has been included in furtherance of the

legislative object of improving the credibility of negotiable

instruments. The presumption is rebuttable and the

accused can raise a defence wherein the existence of a

legally enforceable debt or liability can be contested.

3 2010 INSC 289

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 11 of 16

In Rajesh Jain Vs. Ajay Singh

4

, it has been held

as under:

“34. The NI Act provides for two presumptions: Section 118 and

Section 139. Section 118 of the Act inter alia directs that it shall

be presumed, until the contrary is proved, that every negotiable

instrument was made or drawn for consideration. Section 139 of

the Act stipulates that 'unless the contrary is proved, it shall be

presumed, that the holder of the cheque received the cheque, for

the discharge of, whole or part of any debt or liability'. It will be

seen that the 'presumed fact' directly relates to one of the crucial

ingredients necessary to sustain a conviction under Section 138.

35. Section 139 of the NI Act, which takes the form of a ‘shall

presume’ clause is illustrative of a presumption of law. Because

Section 139 requires that the Court ‘shall presume’ the fact

stated therein, it is obligatory on the Court to raise this

presumption in every case where the factual basis for the raising

of the presumption had been established. But this does not

preclude the person against whom the presumption is drawn

from rebutting it and proving the contrary as is clear from the

use of the phrase ‘unless the contrary is proved’.

36. The Court will necessarily presume that the cheque had

been issued towards discharge of a legally enforceable

debt/liability in two circumstances. Firstly, when the drawer of

the cheque admits issuance/execution of the cheque and

secondly, in the event where the complainant proves that cheque

was issued/executed in his favour by the drawer. The

circumstances set out above form the fact(s) which bring about

the activation of the presumptive clause. [Bharat Barrel Vs.

Amin Chand] [(1999) 3 SCC 35]

xxxxxxxxxxxxxxxxxxx

38. As soon as the complainant discharges the burden to

4 2023 INSC 888

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 12 of 16

prove that the instrument, say a cheque, was issued by the

accused for discharge of debt, the presumptive device under

Section 139 of the Act helps shifting the burden on the accused.

The effect of the presumption, in that sense, is to transfer the

evidential burden on the accused of proving that the cheque was

not received by the Bank towards the discharge of any liability.

Until this evidential burden is discharged by the accused, the

presumed fact will have to be taken to be true, without expecting

the complainant to do anything further.”

10.A perusal of the revisional order passed by the

learned Judge of the Sessions Court indicates that he has

given much importance to the fact that the agreement

dated 12

th

January 2022 was not signed by the second

respondent and, hence, the issuance of the cheque in

question was not for any enforceable debt. He also

appears to have given importance to the dispute between

the appellant and her husband by stating that it was a

matrimonial dispute and civil litigation between the said

parties was pending in various Courts. In our view, the

learned Judge misdirected himself when he proceeded to

give more weightage to the document dated 12

th

January

2022 and in the process, ignored the fact that the basic

ingredients for attracting the provisions of Section 138 of

the N.I. Act had been duly satisfied by the appellant, at

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 13 of 16

least for issuance of process. The drawing of the cheque

by the second respondent, its presentation and

subsequent dishonour at the instructions of the second

respondent is not in dispute. The second respondent does

not also dispute that he had issued the said cheque and

that it was duly signed by him. The issuance of statutory

notice as well as filing of the complaint within the

prescribed period are also not in dispute. In such a

situation, when the basic ingredients of Section 138

stand duly satisfied and the statutory presumption under

Section 139 gets triggered, coming to a conclusion that

the cheque was not issued for a legally enforceable debt

at the pre-trial stage itself without granting an

opportunity to the complainant to substantiate her case

by leading evidence would amount to ignoring the

statutory presumption that the cheque had been issued

for a legally enforceable debt or liability. As a

consequence, the presumption under Section 139 of the

N.I. Act gets washed away even prior to commencement of

the trial. We are of the view that in the facts of the

present case, the dismissal of the complaint as a

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 14 of 16

consequence of setting aside the order issuing process is

totally unjustified in the absence of any material being

brought on record by the second respondent to rebut the

statutory presumption and prove his contention that the

cheque was issued not towards any enforceable debt or

liability.

Since we are inclined to restore the complaint for

being tried on merits, it is not necessary to deal with the

decision in Sunil Todi and others (supra) in detail. Suffice

it to observe that even in the said decision, it has been

held that disputed questions as regards existence of

outstanding liability are questions of fact that have to be

determined at the trial on the basis of evidence.

11.For all these reasons, we are of the view that the

learned Judge of the Sessions Court committed an error

in setting aside the order dated 17

th

June 2022 passed by

the learned Metropolitan Magistrate issuing process

under Section 138 of the N.I. Act. The High Court also

fell into error in upholding the order passed by the

learned Sessions Judge. Accordingly, both the aforesaid

orders are set aside. The complaint filed by the appellant

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 15 of 16

being CC1831/SC/2022 stands restored for its

adjudication on merits.

We clarify that the complaint shall be decided on

its own merits and in accordance with law after giving

due opportunity to all parties concerned. Any

observations made in this judgment shall not be

construed as an expression of opinion on the merits of

the said case.

12.The Criminal Appeal is allowed in aforesaid terms.

…….……………………..J.

[J.K. MAHESHWARI ]

…..………………………..J.

[ATUL S. CHANDURKAR]

NEW DELHI,

APRIL 7

th

, 2026.

Criminal appeal arising out of SLP (Crl.) No.7829 of 2023 Page 16 of 16