Case: RENUKA v. THE STATE OF MAHARASHTRA AND ANOTHER
PETITION NUMBER: SLP (CRL.) NO.7829 OF 2023
CITATION: 2026 INSC 327
DATE OF JUDGEMENT: 07.04.2026
HON’BLE JUDGE/ CORUM: HON’BLE JUSTICE J.K. MAHESHWARI AND HON’BLE JUSTICE ATUL S. CHANDURKAR
INTRODUCTION
Hon’ble Justice J.K. Maheshwari and Hon’ble Justice Atul S. Chandurkar on April 7, 2026, decided on a matter of law centring on the procedural and evidentiary requirements of Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act) and decided on the timing and stage at which the statutory presumption under Section 139 of the NI Act can be rebutted, specifically whether a complaint can be dismissed at the pre-trial stage on the grounds that no legally enforceable debt existed at the time the cheque was issued.
FACTUAL MATRIX
The appellant was involved in matrimonial and financial disputes with her husband, regarding the alleged fraudulent transfer of shares in several companies. To resolve these disputes, a settlement agreement was drafted and under the terms of this settlement, the husband agreed to transfer certain real estate properties and pay the appellant ₹ 50 crores upon her executing a Declaration-cum-Indemnity document to withdraw her various complaints.
To safeguard the appellant’s interest during this process, the second respondent acted as a mediator and issued a cheque for ₹ 50 crores in favour of the appellant, intended to be held as security/escrow until the final payment was made by the husband. Subsequently, the appellant signed the indemnity document.
Later, the husband sold the shares in violation of the agreement. Consequently, the appellant deposited the ₹ 50 crore cheque for encashment. However, the cheque was dishonoured with the remark payment stopped by drawer. The appellant followed by sending multiple notices, but the second respondent refused to pay, after which the appellant filed a complaint under Section 138 of the N.I. Act. While the Magistrate initially issued process, the Sessions Court quashed it, arguing that since the settlement agreement was not signed by the second respondent and the underlying debt was contingent, there was no legally enforceable liability.
ISSUES OF THE CASE
The Supreme Court primarily considered:
- Whether a court can quash a complaint under Section 138 of the N.I. Act at the pre-trial stage by concluding that there was no legally enforceable debt, despite the drawer admitting to the signature and issuance of the cheque?
- Whether the non-signing of a collateral settlement agreement by the guarantor (the drawer) is sufficient to dismiss a cheque dishonour complaint before evidence is led?
SUBMISSIONS BY THE PARTIES
Senior Advocate Mukul Rohatgi, on behalf of the appellant, contended that the Sessions Court exceeded its jurisdiction by prematurely concluding that no legally enforceable debt existed. He maintained that at the stage of the issuing process, the court must limit its inquiry to undisputed facts: the issuance of the cheque, valid presentation, dishonour, and non-compliance with the statutory notice. Rohatgi argued that the statutory presumption under Section 139 of the NI Act, which assumes a cheque is issued for a debt, favours the payee and can only be rebutted during trial. Consequently, scuttling proceedings at an early stage when the basic ingredients of an offence are established is unjustified, as legal liability is a matter of evidence for trial adjudication.
Per Contra, Senior Advocate Dr A. M. Singhvi, for the respondent, argued that no legally enforceable debt was proven. He emphasised that the second respondent never signed the settlement agreement, exempting him from its obligations. The defence asserted that liability under a cheque arises only if the underlying agreement is completed; since payment depended on specific events that never occurred, there was no recoverable debt. Singhvi maintained that continuing criminal proceedings under Section 138 would constitute an abuse of the legal process, justifying the complaint’s dismissal at the revisional stage.
JUDGEMENT ANALYSIS
The Supreme Court, observed that the Sessions Court and the High Court were not justified in dismissing the complaint at the pre-trial stage on the grounds that the cheque was not issued for a legally enforceable debt.
The Court emphasized that at the stage of issuance of process, a Magistrate is only required to prima facie verify the issuance of the cheque, its dishonor, the service of a statutory notice, and the filing of the complaint within the prescribed period. Since the second respondent did not dispute his signature or the issuance of the cheque, the statutory presumption under Section 139 of the N.I. Act was automatically triggered.
This presumption, which includes the existence of a legally enforceable debt, shifts the evidentiary burden to the drawer to prove otherwise. The Court clarified that such a rebuttal is a matter of trial and cannot be undertaken in a summary manner at the outset of the proceedings. Furthermore, the Bench noted that the Sessions Court misdirected itself by giving undue weight to the fact that the settlement agreement was not signed by the respondent. By concluding that the cheque lacked a legally enforceable basis at the pre-trial stage, the lower courts effectively ignored the reverse onus clause intended by the legislature to improve the credibility of negotiable instruments.
The Court reiterated that once the basic ingredients of Section 138 NI Act are satisfied, the presumption remains in favor of the complainant until the accused leads evidence to the contrary. Consequently, it was held that dismissing the complaint without granting the appellant an opportunity to lead evidence resulted in the statutory presumption being washed away prematurely. The Court concluded that disputed questions regarding outstanding liability are matters of fact that must be determined during a trial based on evidence.
CONCLUSION
The Supreme Court concluded that the lower courts’ dismissal of the complaint was totally unjustified. By setting aside the process, the lower courts effectively washed away the statutory presumption before the appellant had a chance to present her case. Through the judgment, the Court reaffirmed that the N.I. Act is designed to enhance the credibility of negotiable instruments by placing a heavy burden on the drawer once a cheque is issued.
