The Supreme Court has ruled that every dishonoured cheque may create a separate cause of action under Section 138 NI Act, even when multiple cheques arise from the same transaction.

Each Dishonoured Cheque Creates a Separate Cause of Action: Supreme Court

Suggested Social Media Caption

In an important judgment concerning prosecutions under Section 138 of the Negotiable Instruments Act, 1881, the Supreme Court has held that the dishonour of each separate cheque may give rise to an independent cause of action, even when all the cheques originate from the same underlying transaction.

The decision was delivered in Sumit Bansal v. M/s MGI Developers and Promoters and Another, reported as 2026 INSC 40, on 8 January 2026 by a Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra.

The Supreme Court clarified that different cheque bounce complaints do not automatically merge into a single proceeding merely because the cheques were issued in connection with the same debt, agreement or commercial transaction. Where the cheques are separate instruments, are presented and dishonoured independently, and the statutory requirements under Section 138 are separately fulfilled, each dishonour can sustain an independent prosecution.

The judgment is significant for cheque bounce disputes involving:

• Several cheques issued against one loan or commercial transaction;

• Cheques issued by both a business concern and its proprietor;

• Replacement, security, supplementary or alternative cheques;

• Successive cheques issued after earlier cheques were dishonoured;

• Petitions seeking quashing of Section 138 complaints before trial.

Background of the Case

The dispute arose from an Agreement to Sell dated 7 November 2016 concerning three commercial units in a project known as “MGI Mansion” in Ghaziabad, Uttar Pradesh.

The total sale consideration was ₹1,72,21,200, which had admittedly been paid by the purchaser, Sumit Bansal. The developer was required to execute and register the sale deeds on or before 30 September 2018. In the event of failure, the amount was to be refunded along with an appreciation or compensation amount.

On 27 July 2018, the proprietor of the developer concern also executed a personal guarantee. Under this arrangement, both the proprietorship firm and its proprietor issued cheques towards repayment of the principal amount and the additional appreciation amount.

The firm issued two cheques:

1. A cheque for ₹1,72,21,200, representing the principal sale consideration; and

2. A cheque for ₹35,00,000, representing the appreciation amount.

The proprietor also issued two personal cheques for corresponding amounts.

The personal cheques were presented first but were dishonoured with the remark “Exceeds Arrangement.” The firm’s cheques were subsequently presented and were also returned unpaid with the remark “Funds Insufficient.”

Statutory notices were issued, but payment was not made. Separate complaints under Section 138 of the NI Act were thereafter instituted in respect of the personal cheques and the firm’s cheques.

Five Cheque Bounce Complaints Arising From the Transaction

Fresh cheques were subsequently issued in connection with the same transaction. Those cheques were presented on different dates and were also dishonoured.

As a result, a total of five complaint cases came to be filed against the accused. Each complaint related to distinct cheque instruments and separate dates of presentation and dishonour.

The accused approached the Delhi High Court under Section 482 of the Code of Criminal Procedure seeking quashing of the complaints and the summoning orders.

Conflicting Conclusions of the Delhi High Court

The Delhi High Court delivered two judgments on 17 April 2025.

In one set of proceedings, the High Court quashed the complaint relating to the firm’s cheques. It reasoned that the firm’s cheques and the proprietor’s personal cheques represented the same underlying liability. According to the High Court, once the complainant had presented the proprietor’s personal cheques, he could not prosecute another complaint on the firm’s cheques for the same liability.

The High Court treated the personal cheques as having been issued in lieu of the firm’s cheques and concluded that permitting both complaints to continue would amount to parallel prosecution for the same cause of action.

However, in relation to the later cheques, the High Court refused to quash the complaints. It observed that the subsequent cheques had been issued and dishonoured on different dates and therefore created independent and fresh causes of action. The question whether those cheques represented a legally enforceable liability was held to be a matter for trial.

The complainant challenged the quashing of one complaint before the Supreme Court, while the proprietor challenged the refusal to quash the remaining complaints.

Issues Before the Supreme Court

The Supreme Court principally considered the following questions:

1. Whether two or more Section 138 complaints can continue when separate cheques arise from the same underlying debt or transaction.

2. Whether the High Court can decide, at the stage of a petition under Section 482 CrPC, that one set of cheques had been issued in substitution of another set.

3. Whether disputes concerning payment, absence of liability, security cheques or alternative cheques can be determined without recording evidence.

4. Whether the statutory presumption under Section 139 of the NI Act must be considered while deciding a petition for quashing.

Each Dishonoured Cheque Creates a Separate Cause of Action

The Supreme Court expressly held that under Section 138 of the NI Act, a separate cause of action arises upon the dishonour of each cheque, provided the statutory sequence is completed.

That sequence ordinarily involves:

1. Presentation of the cheque within its validity period;

2. Dishonour and receipt of information from the bank;

3. Issuance of a written demand notice within the prescribed period;

4. Failure of the drawer to make payment within 15 days of receiving the notice; and

5. Filing of the complaint within the limitation prescribed by law.

The Court held:

“The fact that multiple cheques arise from one transaction will not merge them into a single cause of action.”

In the present case, the cheques were distinct instruments, drawn on different accounts, presented on different dates and dishonoured separately. The dishonours were also followed by statutory notices. The Supreme Court therefore found that the scheme of Section 138 did not prohibit separate prosecutions.

Same Transaction Does Not Mean Same Cause of Action

The judgment draws an important distinction between:

• the underlying transaction or liability, and

• the statutory cause of action created by the dishonour of a cheque.

A loan agreement, property transaction, supply contract or settlement may constitute one underlying transaction. However, when several cheques are issued under that transaction, every cheque remains a separate negotiable instrument.

If each cheque is separately presented, dishonoured and followed by compliance with the statutory notice procedure, its dishonour can create an independent cause of action.

Therefore, the mere fact that the amount claimed in different complaints is connected with the same agreement does not, by itself, make the later complaint legally impermissible.

Whether Cheques Were Alternative or Supplementary Is a Matter for Trial

The accused argued that the personal cheques were issued as an alternative to the firm’s cheques. It was contended that once one set had been presented, the complainant had no right to present the other set.

The Supreme Court declined to decide this contention at the quashing stage.

It held that questions such as the following require evidence:

• Whether the firm’s cheques were substituted by the personal cheques;

• Whether the personal cheques were issued only as security;

• Whether both sets were intended to be simultaneously enforceable;

• Whether the later cheques represented fresh undertakings;

• Whether the complainant had agreed to return or cancel the earlier cheques;

• Whether the liability had already been discharged.

These were characterised as disputed or mixed questions of fact. Such questions could not be conclusively decided by the High Court while exercising its inherent jurisdiction under Section 482 CrPC.

High Court Cannot Conduct a Mini-Trial Under Section 482 CrPC

The Supreme Court reiterated that although the High Court possesses wide powers under Section 482 CrPC, those powers must be exercised with caution.

At the quashing stage, the High Court is not expected to:

• Determine the truth or genuineness of disputed allegations;

• Compare competing versions of the parties;

• Assess the probable defence of the accused;

• Decide whether the complainant will ultimately succeed;

• Examine disputed documents as if conducting a trial; or

• Return findings on questions that require oral and documentary evidence.

The Court relied upon the principles governing quashing laid down in decisions including State of Haryana v. Bhajan Lal and Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra.

The relevant enquiry at the threshold is generally whether the complaint, read as a whole, prima facie discloses the ingredients of the offence. The High Court cannot take over the function of the trial court by conducting a detailed examination of disputed facts.

Presumption Under Section 139 NI Act Must Be Given Due Weight

Another important aspect of the judgment concerns the statutory presumption under Section 139 of the Negotiable Instruments Act.

Once execution or issuance of the cheque is established, the law raises a presumption that the cheque was issued towards the discharge, wholly or partly, of a legally enforceable debt or liability.

This presumption is rebuttable. However, the burden of rebutting it lies upon the accused.

The accused may attempt to rebut the presumption by showing, for example, that:

• No debt or liability existed when the cheque was issued;

• The cheque was not issued towards discharge of a debt or liability;

• The cheque was misused;

• The amount had already been paid;

• The cheque was subject to a condition that was never fulfilled; or

• Mandatory statutory requirements were not complied with.

However, such defences ordinarily require evidence and must be considered during trial.

The Supreme Court observed that when an accused seeks quashing even before the commencement of trial, the court must not prematurely terminate the prosecution by overlooking the statutory presumption operating in favour of the complainant.

Defence of Full Payment Must Be Proved at Trial

The accused contended that the complainant had already received payment and that no legally enforceable liability remained.

The Supreme Court held that this contention could not be accepted merely on the basis of assertions made in the quashing petitions.

Whether payment had actually been made, whether the entire liability had been discharged, and whether the cheques continued to represent an enforceable liability were matters requiring proof during trial.

The Court reiterated that the burden of showing the absence of debt or liability must be discharged by the accused in accordance with law. A complaint cannot ordinarily be quashed merely because the accused alleges that payment has already been made.

Supreme Court Restored the Quashed Complaint

The Supreme Court held that the Delhi High Court had exceeded its jurisdiction in quashing Complaint Case No. 3298 of 2019.

The Court found that the complaint, on its face, disclosed the ingredients of an offence under Section 138 of the NI Act. Accordingly:

• The complainant’s appeal was allowed;

• The Delhi High Court judgment quashing Complaint Case No. 3298 of 2019 was set aside;

• The complaint and summoning order were restored;

• The matter was directed to proceed before the trial court;

• The appeals filed by the proprietor against continuation of the other complaints were dismissed.

The Supreme Court clarified that all contentions of both sides would remain open and that the trial court would decide the complaints independently on the basis of evidence.

Important Principles Laid Down by the Supreme Court

The judgment may be summarised through the following legal principles:

1. Every cheque is a separate negotiable instrument

Separate cheques do not lose their independent character merely because they were issued under one agreement or transaction.

2. Each dishonour may create an independent cause of action

Where statutory requirements are independently completed for each dishonoured cheque, separate complaints may be maintainable.

3. One underlying liability does not automatically bar multiple complaints

The identity of the underlying transaction is not, by itself, sufficient to merge separate statutory causes of action.

4. Substitution of cheques is a question of fact

Whether one cheque replaced another depends on the agreement, communications and conduct of the parties. It cannot ordinarily be decided without evidence.

5. A security-cheque defence does not automatically justify quashing

The description of a cheque as a security cheque is not conclusive. The court must examine whether a legally enforceable liability existed on the date of presentation.

6. Alleged repayment must be proved

An assertion that the debt has already been discharged is a defence for trial unless conclusively established by unimpeachable material.

7. Section 139 presumption operates in favour of the complainant

The High Court must consider the statutory presumption and should not effectively require the complainant to prove the entire transaction before trial.

8. Section 482 jurisdiction cannot be used for a mini-trial

Competing factual versions and disputed documents must ordinarily be tested before the trial court.

Practical Impact on Cheque Bounce Cases

The ruling has considerable practical importance for business, loan, property and settlement disputes.

Multiple instalment cheques

Where several post-dated cheques are issued towards different instalments, dishonour of each cheque may create an independent cause of action.

Firm’s cheque and proprietor’s personal cheque

Where a proprietor issues a personal cheque in addition to a cheque drawn from the proprietorship concern’s account, the question whether one was merely a substitute for the other may require trial.

A proprietorship concern is not a legal entity separate from its proprietor in the same manner as a company. Nevertheless, where distinct cheque instruments drawn on different accounts are involved, their legal effect must be examined on the evidence and terms under which they were issued.

Replacement cheques

The issuance of a fresh cheque does not automatically extinguish liability under an earlier dishonoured cheque. The parties’ agreement and intention become relevant.

Security cheques

Even a cheque initially issued as security may attract Section 138 if a legally enforceable liability exists when it is presented for payment.

Property transactions

Purchasers frequently receive multiple refund or security cheques when a builder fails to deliver possession or execute sale documents. This judgment confirms that separate dishonours cannot be treated as a single cause of action merely because they arise from the same property transaction.

Important Caution: Multiple Complaints Do Not Permit Multiple Recovery

The judgment should not be interpreted to mean that a complainant can recover the same debt multiple times.

It recognises that separate cheque dishonours may sustain separate prosecutions. However, the ultimate enforceability of the amount, extent of outstanding liability, payments already received and adjustment of amounts remain matters for adjudication.

Therefore, while more than one complaint may proceed to trial, the complainant cannot obtain an unjust or duplicate recovery exceeding the legally enforceable liability.

The trial court may examine:

• The amount originally payable;

• Payments already received;

• Whether any cheque replaced an earlier cheque;

• Whether any instrument was conditional;

• Whether the liability was reduced or discharged;

• Whether simultaneous enforcement was contractually intended; and

• Whether the statutory presumption has been rebutted.

What Should a Complainant Do When Several Cheques Are Dishonoured?

A complainant dealing with multiple dishonoured cheques should maintain a separate and accurate record for each cheque, including:

• Cheque number and date;

• Name of the drawer and account holder;

• Amount of the cheque;

• Date of presentation;

• Bank return memo;

• Reason for dishonour;

• Date of receipt of dishonour information;

• Date of statutory demand notice;

• Proof of dispatch and service;

• Date on which the cause of action arose;

• Limitation period for filing the complaint; and

• Details of payments, settlements or replacement cheques.

Where separate notices or complaints are filed, the pleadings should transparently disclose the connected cheques and proceedings. Such disclosure can prevent allegations of concealment, double recovery or abuse of process.

What Defences Remain Available to the Accused?

The Supreme Court did not hold that every complaint involving multiple cheques must necessarily result in conviction.

The accused remains entitled to establish before the trial court that:

• The debt had already been paid;

• One set of cheques had been substituted or cancelled;

• The complainant was not entitled to present both sets;

• The cheque amount exceeded the actual liability;

• The cheque had been materially altered or misused;

• The statutory notice was invalid or not served as required;

• The complaint was barred by limitation;

• No enforceable debt existed on the date of presentation; or

• The statutory presumption stood rebutted on the standard of preponderance of probabilities.

The judgment primarily concerns the stage at which such defences should be examined. Unless the defence is established by clear and unimpeachable material, disputed questions should ordinarily be decided during trial rather than in proceedings for quashing.

Frequently Asked Questions

Can separate cheque bounce cases be filed for cheques issued in the same transaction?

Yes. The Supreme Court has held that each dishonoured cheque may create a separate cause of action when the statutory requirements under Section 138 are independently completed.

Will all cheques merge into one complaint because the debt is the same?

Not automatically. Separate instruments presented and dishonoured independently do not merge merely because they relate to one underlying debt or transaction.

Can both the firm’s cheque and the proprietor’s personal cheque be prosecuted?

Potentially, yes. Whether one cheque was issued in substitution of the other is a factual issue depending on the parties’ arrangement and evidence.

Can the High Court quash a complaint because the accused claims that payment was already made?

Ordinarily, a disputed claim of repayment must be proved during trial. Quashing may be justified only where the defence is demonstrated by clear, undisputed and unimpeachable material.

Does a security cheque attract Section 138 NI Act?

A security cheque can attract Section 138 if a legally enforceable debt or liability exists when it is presented.

Does filing multiple complaints allow the complainant to recover the same amount more than once?

No. Maintainability of separate complaints does not confer a right to duplicate recovery. The actual outstanding liability and adjustment of payments must be decided on evidence.

Can disputed questions be decided in a Section 482 petition?

The High Court should not conduct a mini-trial under Section 482. Disputed questions concerning substitution, security, payment or enforceability ordinarily require trial.

Conclusion

The Supreme Court’s decision in Sumit Bansal v. M/s MGI Developers and Promoters and Another strengthens the statutory framework governing cheque dishonour cases.

The Court has clarified that the legal consequences of dishonour attach to each cheque as an independent instrument. Multiple cheques issued under the same transaction do not automatically merge into a single cause of action. If every cheque is separately presented, dishonoured and followed by compliance with the statutory procedure, separate complaints may proceed.

At the same time, the judgment preserves the accused’s right to contest the existence or extent of liability during trial. Questions concerning substitution of cheques, repayment, security, double recovery or simultaneous enforceability must be decided on evidence and not through a premature mini-trial in proceedings under Section 482 CrPC.

The ruling will be particularly relevant in cheque bounce disputes arising from property transactions, commercial agreements, repayment arrangements, personal guarantees, settlement agreements and cases involving multiple post-dated cheques.

Case Details

Case: Sumit Bansal v. M/s MGI Developers and Promoters and Another
Neutral Citation: 2026 INSC 40
Court: Supreme Court of India
Judgment Date: 8 January 2026
Coram: Justice Sanjay Karol and Justice Prashant Kumar Mishra
Lead Appeal: Criminal Appeal No. 141 of 2026, arising out of SLP (Criminal) No. 10770 of 2025
Relevant Provisions: Sections 138, 139, 141 and 142 of the Negotiable Instruments Act, 1881; Section 482 CrPC