Cheque Bounce Guidelines and Section 269SS: Sanjabij Tari

Section 269SS Breach Does Not Bar Cheque Case; Supreme Court Issues Guidelines to Cut Cheque-Bounce Backlog

Published: 21 October 2026 · NyayVidhan

The Supreme Court restored a cheque-bounce conviction set aside by the Bombay High Court in revision, holding that once a cheque's execution is admitted the presumptions under Sections 118 and 139 of the NI Act arise, and that a cash loan above Rs. 20,000 in breach of Section 269SS of the Income Tax Act remains enforceable. It issued directions on dasti and electronic summons, online payment, a case synopsis and dashboards, and revised the compounding costs (paras 15, 20, 36, 38).

Key holdings

A cash loan above Rs. 20,000 in breach of Section 269SS of the Income Tax Act is still a legally enforceable debt (para 20).

Failure to reply to the statutory notice supports an inference that the complainant's version has merit (para 29).

Summons in Section 138 cases are also to be served dasti and by electronic means, with online payment links for early settlement (para 36).

Compounding before defence evidence carries no cost; later stages carry 5%, 7.5% or 10% of the cheque amount (para 38).

High Courts and District Courts must implement the guidelines by 1 November 2025 (para 40).

Case explainer by NyayVidhan: an account of this judgment and the law it laid down, not the court's text. The judgment itself is the authoritative version.

Brief Facts

The appellant alleged that a cheque issued by his friend, the first respondent, for a friendly loan of Rs. 6,00,000 was dishonoured (paras 2-3, 26). The Trial Court convicted the first respondent, and the Sessions Court affirmed, rejecting his plea that the appellant lacked the means to lend (paras 1-2, 25-26). The High Court of Bombay at Goa, in revision, acquitted him by an ex-parte judgment of 16 April 2009 and later declined to recall it (paras 1, 5). Before this Court, the accused relied on the appellant's monthly salary of Rs. 2,300 and his defence that a blank cheque had been given to help the appellant obtain a bank loan (paras 7, 10).

Court's Findings

Chapter XVII of the NI Act aims to restore the credibility of cheques as a substitute for cash (para 14). Once execution is admitted, the presumptions under Sections 118 and 139 arise, and the accused bears the initial onus to rebut them (paras 15, 17). APS Forex does not say that the presumption fails for cash loans (para 18). A breach of Section 269SS attracts only a penalty under Section 271D and does not make the debt unenforceable, so the Kerala High Court's contrary view in P.C. Hari was set aside (paras 19-20). Courts treating cheque cases as civil recovery proceedings and demanding proof of the debt defeat the mandate of Parliament (para 21). The accused led no evidence of the appellant's financial incapacity, and the appellant's evidence, read whole, showed he could lend (paras 22-24). In revision the High Court could not upset concurrent findings without perversity (paras 27-28). Failure to reply to the statutory notice supports an inference against the accused, and the blank-cheque defence was unbelievable (paras 29-32). As Section 138 proceedings are quasi-criminal and compoundable and pendency is very high, directions and lower compounding costs followed (paras 33, 35-38).

Legal Principle

Once the drawer admits signing the cheque, Sections 118 and 139 presume consideration and a legally enforceable debt; the accused must rebut them by evidence, a cash loan in breach of Section 269SS remains enforceable, and a revisional court cannot reverse concurrent findings without perversity (paras 15, 20, 28).

Precedents Relied Upon

Rangappa vs. Sri Mohan (2010) 11 SCC 441
Relied Upon Discussed at ¶ 8, 15
The Section 139 presumption arises once execution is admitted; it set aside the contrary view in Krishna Janardhan Bhat.
APS Forex Services Private Limited vs. Shakti International Fashion Linkers and Ors. (2020) 12 SCC 724
Explained Discussed at ¶ 9, 18
Once the presumption is rebutted the onus shifts to the complainant; it does not exclude cash loans from the presumption.
Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197
Relied Upon Discussed at ¶ 17, 27
The initial onus to rebut the presumption is on the drawer; a revisional court does not upset concurrent findings absent perversity.

View all precedents (6)

Tedhi Singh vs. Narayan Dass Mahant (2022) 6 SCC 735
Relied Upon Discussed at ¶ 29
The accused has the initial burden to set up, in the reply to the demand notice, the defence that the complainant lacked the financial capacity to lend.
MMTC Ltd. and Another vs. Medchl Chemicals & Pharma (P) Ltd. and Another (2002) 1 SCC 234
Relied Upon Discussed at ¶ 30
Where the statutory notice is not replied, the cheque is presumed issued in discharge of liability.
Damodar S. Prabhu vs. Sayed Babalal H. (2010) 5 SCC 663
Explained Discussed at ¶ 33, 37
Graded costs for compounding Section 138 offences; the guidelines were revisited and reduced.

Statutory Provisions