Draft. Prepared from official sources for Adv. Varun Agarwal's review before publication.

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The case in brief

Sanjabij Tari v. Kishore S. Borcar was decided on 25 September 2025 (2025 INSC 1158) by Justices Manmohan, who wrote the judgment, and N.V. Anjaria. The trial court and the sessions court had convicted the accused under Section 138 of the Negotiable Instruments Act, 1881, for a dishonoured cheque given against a ₹6 lakh loan. The High Court acquitted him in revision, without hearing the complainant. The Supreme Court set that order aside, restored the conviction, and directed the accused to pay ₹7.5 lakh in 15 monthly instalments of ₹50,000.

The Court used the case to deal with two wider problems: whether a cash loan of ₹20,000 or more is a debt that Section 138 protects, and why cheque-bounce cases take so long.

Cash loans of ₹20,000 or more

The Income-tax Act bars taking a loan of ₹20,000 or more in cash. Some courts had held that such a loan is therefore not a “legally enforceable debt”, so a cheque given to repay it could not found a Section 138 case. The Supreme Court disagreed. Breaking that rule attracts an income-tax penalty, but it does not make the loan void, and it does not by itself rebut the presumption that a cheque was issued for a debt. The Kerala High Court’s contrary view was set aside.1 The judgment applies the Income-tax Act, 1961, which was replaced by the Income-tax Act, 2025 from April 2026. Check the corresponding provisions of the new Act for transactions after that date.

The presumptions still favour the payee

Once the accused admits signing and issuing the cheque, the law presumes it was given for a debt. The accused can rebut that presumption, but the burden is on him. Not replying to the statutory demand notice supports an inference against him. And a High Court in revision cannot overturn findings of fact on which two lower courts agree, unless they are perverse.

Settling late now costs more

The Court replaced the 2010 guidelines on the costs of compounding (settling) a Section 138 case. The extra cost is a percentage of the cheque amount, paid to the Legal Services Authority or another authority the court names:

  • before the accused’s defence evidence is recorded: nothing extra
  • after defence evidence, but before the trial court’s judgment: 5%
  • in revision or appeal before the Sessions Court or High Court: 7.5%
  • before the Supreme Court: 10%

Guidelines to speed up cases

High Courts and district courts were directed to put these in place by 1 November 2025. Among them:

  • Summons by every route: by the usual modes, handed over by the complainant (dastiDastiService of a summons by hand, through the party who asked for it, in addition to service by the court.), and electronically. The complainant must give the accused’s email address, mobile number and WhatsApp details on affidavitAffidavitA written statement of facts sworn before a notary or oath commissioner. Making a false affidavit is an offence., and file an affidavit of service. A false affidavit can lead to action against the complainant.
  • Pay at the outset: district courts are to provide QR-code or UPI payment, and the summons must tell the accused that the cheque amount can be paid at the first stage.
  • Tidier complaints: every complaint opens with a synopsis in a prescribed form, and no summons issue before the court takes cognizanceCognizanceThe point at which a court formally takes notice of an offence and decides to proceed with the complaint..
  • Interim deposits under Section 143A should be ordered as early as appropriate.
  • Evening courts need realistic monetary limits. The Court called Delhi’s limit of ₹25,000 too low.
  • Pendency dashboards in Delhi, Mumbai and Kolkata, reviewed monthly.

What it means for businesses

  • If you hold a dishonoured cheque: keep the drawer’s email, phone and WhatsApp details on record, because you will need to state them on affidavit. Accuracy matters; a false affidavit can rebound on you.
  • If you issued the cheque: settling early is now the cheapest course. Once defence evidence has been recorded, every later stage costs more.
  • If you lend in cash: a cheque given to repay a cash loan of ₹20,000 or more can still be enforced, but the income-tax penalty for taking or giving that loan in cash remains.2 Some reports say the judgment requires courts to inform the Income Tax Department of large cash claims. We found no such direction in the judgment.

Sources

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This article is general information about the law as of the date above. It is not legal advice. Policies and schemes change; check the current position before you act.