The dishonoring of checks for insufficiency of funds or other reasons is criminalized under Section 138 of the Negotiable Instruments Act, 1881. The 1988 amendment was implemented with the intention of promoting commercial confidence in negotiable instruments and ensuring the reliability of checks. The offense necessitates the following: the cheque must be for a legally enforceable debt, dishonor must occur, a demand notice must be sent within 30 days, and the payee must fail to pay within 15 days of the notice.
A statutory presumption in favor of the holder that the cheque was issued for valid consideration is established by Sections 118 and 139 of the Act, unless rebutted.
Timeline of Key Legal Developments
- Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129: The Supreme Court restricted territorial jurisdiction to courts at the place where the cheque was dishonoured or the drawee bank is located, resulting in significant hardship for complainants and prompting a legislative fix. Indian Kanoon
- The Negotiable Instruments (Amendment) Act, 2015 (deemed to come into force 15 June 2015) clarified venue rules—permitting the holder to institute complaints at the place where the cheque was presented or where the payee’s bank branch is located—a reform aimed at remedying the jurisdictional restriction that arose after Dashrath Rupsingh Rathod (2014). PRS Legislative Research
- 2015–2025: The Supreme Court and High Courts have clarified procedural, evidentiary, and liability issues, consistently upholding the section’s quasi-criminal nature but emphasizing fair processes.
Major Supreme Court Judgments (2015–2025)
Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, Criminal Appeal No.1497/2022, decided 11 Oct 2022
The Supreme Court held that if part-payment is made after a cheque is drawn but before it is presented for encashment and is not endorsed on the cheque as required by Section 56, then the cheque does not represent a legally enforceable debt and Section 138 is not attracted.
Judgment PDF (SCI)
Dilip Hariramani v. Bank of Baroda, (2022)—Vicarious Liability
The Court held that a partner cannot be held liable under Section 138 read with Section 141 unless the partnership firm itself is arraigned as an accused and it is shown that the partner was in charge of and responsible for the conduct of business.
Judgment summary (The Edu Law)
Gajanand Burange v. Laxmi Chand Goyal, decided 12 Aug 2022
The Supreme Court stated that a complaint filed before the expiry of the 15-day statutory notice period is not a complaint in law (i.e., not maintainable), but a fresh complaint may be filed if within the limitation period.
CaseMine
In Re: Expeditious Trial of Cases under Section 138 of NI Act (Suo Motu), SC order/judgment 16 Apr 2021 & 19 May 2021 and follow-ups (2022)
The Supreme Court, alarmed by the case pendency, directed the establishment of Special NI Courts in high-pendency states, encouraged electronic hearings and mediation, and issued guidelines for efficient disposal of cheque bounce disputes.
Judgment PDF (SCI)
Oriental Bank of Commerce v. Prabodh Kumar Tewari, decided 16 Aug 2022
The Court clarified that while it may permit requests for handwriting expert examination, it should not serve as a tool for delay. Signed blank cheques and their evidentiary value were discussed.
IBCLaw
Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat, (2025)
The Supreme Court held that jurisdiction lies at the place where the payee maintains the bank account—i.e., the branch where a cheque is delivered for collection—consolidating the legislative move to more accessible forums for complainants.
Judgment summary (LiveLaw)
Dhanasingh Prabhu v. Chandrasekar, Supreme Court, decided 14 July 2025
The Supreme Court’s July 14, 2025 judgment (INSC 831 / PDF) allows prosecution of partners even if the firm is not impleaded under certain circumstances—a doctrinal shift from the earlier strict readings in Aneeta Hada and Dilip Hariramani.
Judgment PDF (SCI)
Sanjabij Tari v. Kishore S. Borcar, Supreme Court, decided 25 Sept 2025
The 25 Sept 2025 judgment (2025 INSC 1158) is a major reformative ruling, confirming compounding/compromise principles, probation-type relief in appropriate cases, and issuing broad procedural directions to tackle backlog.
Legal Bites
Other Important Earlier Rulings
Mainuddin Abdul Sattar Shaikh v. Vijay D. Salvi, (2015)
Where a cheque is personally issued by an individual (not the company account) to discharge the employer’s liability, directors are generally not liable—liability is personal.
Gunamala Sales Pvt. Ltd. v. Anu Mehta, (AIR 2015 SC 1072)
The Supreme Court held that criminal liability under Section 138/141 attaches only to those who were in charge of and responsible for the conduct of the business when the offence was committed.
Recent Trends and 2025 Developments
Post-2022 jurisprudence shows:
- Liberal application of settlement and compounding in S.138 prosecutions;
- Acceptance of complaints against individual partners even when the firm is not arraigned;
- The Supreme Court has modernized trial processes and issued strong directives to reduce case pendency and enhance procedural justice.
Conclusion
The development from the early restrictive view on territorial jurisdiction to the more flexible, accessible forums for complainants—coupled with doctrine on vicarious liability and increased acceptance of compounding—demonstrates the Supreme Court’s consistent effort to foster commercial reliability while ensuring procedural fairness.
Joseph P. Chacko is the publisher of Frontier India Technology. He holds an MBA in International Business and Finance. He is currently a student of law. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author: Warring Navies—India and Pakistan. *views are personal.
