Introduction
A cheque is supposed to offer something close to certainty in a commercial transaction. When a cheque is issued, the recipient ordinarily expects that it will be honoured when presented. A dishonoured cheque, therefore, is not merely a failed payment; it can have wider consequences for the credibility and discipline of commercial dealings.
This is one of the reasons why dishonour of cheques was made a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”). At the same time, the sheer volume of cheque-bounce litigation has created a problem of its own. Cases intended to secure payment often remain pending for years, defeating the very commercial purpose for which the provision was introduced. Over the years, the Supreme Court has repeatedly attempted to address this problem. The latest intervention in Sanjabij Tari v. Kishore S. Borcar & Anr. (2025) is significant because it goes beyond laying down legal principles. The Court has attempted to bring greater structure to the way Section 138 complaints are filed, summons are served, accused persons respond, settlement is explored and cases are ultimately brought to an end. The judgment, therefore, deserves attention not only for what it says about cheque dishonour, but also for what it says about the future conduct of these cases.
How Section 138 Reached This Point
Section 138 was introduced into the NI Act to attach penal consequences to the dishonour of cheques for insufficiency of funds. The provision itself is relatively straightforward, but its interpretation has developed considerably through judicial decisions and subsequent legislative amendments.
In K. Bhaskaran v. Sankaran Vaidhyan Balan (1999), the Supreme Court identified the different stages that constitute the offence—drawing of the cheque, presentation, dishonour, issuance of notice and failure to make payment. The judgment also took a broad approach to territorial jurisdiction. Over time, however, this resulted in competing jurisdictional claims and, in some cases, multiple proceedings. The position changed with Dashrath Rupsingh Rathod v. State of Maharashtra (2014), where the Supreme Court restricted jurisdiction to the court having territorial jurisdiction over the drawee bank. Parliament subsequently intervened through the 2015 amendment, particularly Sections 142(2) and 142A, and substantially altered the jurisdictional position once again. Meanwhile, other decisions dealt with different aspects of Section 138 litigation. Rangappa v. Sri Mohan (2010) reaffirmed the statutory presumption under Section 139 regarding the existence of a legally enforceable debt once the execution of the cheque is admitted. In Damodar S. Prabhu v. Sayed Babalal H. (2010), the Supreme Court recognised the importance of early settlements and introduced graded costs for compounding at different stages of the proceedings.
Parliament also introduced Sections 143A and 148 through the 2018 amendment, providing for interim compensation during trial and deposit pending appeal. The Supreme Court subsequently addressed the issue of delay more directly in In Re: Expeditious Trial of Cases under Section 138 of NI Act (2021). The interaction between Section 138 proceedings and insolvency proceedings was also considered in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021). Against this background, Sanjabij Tari represents another attempt to bring together these principles and translate them into a more workable procedure at the trial-court level.
Why did the Supreme Court Feel the Need to Intervene Again?
The answer lies largely in the numbers. Despite repeated directions from the Supreme Court, cheque-bounce cases continue to form a substantial part of the criminal docket of trial courts. The judgment noted that, as of September 2025, more than 6.5 lakh such cases were pending before the district courts in Delhi alone. In some States, Section 138 matters account for a significant proportion of the overall pendency. The problem, therefore, is no longer simply one of interpreting Section 138. It is also one of case management. The Court identified several practical reasons for the continuing delay. Service of summons frequently becomes a stumbling block. Proceedings are sometimes conducted in much the same manner as ordinary criminal trials, even though Section 138 contains statutory presumptions and is designed for comparatively expeditious disposal. At the same time, opportunities for settlement and compounding are not always explored at an early stage.
The Court also emphasised an important aspect of Section 138 jurisprudence: the provision is intended to maintain confidence in cheque transactions and encourage payment, rather than turn every dishonoured cheque into a prolonged criminal trial. The latest directions are an attempt to address precisely these practical difficulties.
What has the Supreme Court Changed?
The directions in Sanjabij Tari seek to make the initial stages of a Section 138 case more structured and less dependent on repeated adjournments.
1. Greater emphasis on effective service
The Court has directed that summons should also be served through dasti mode and electronically. The complainant is expected to provide available contact details of the accused, including email and telephone details, and file an affidavit concerning service. The objective is simple: a case should not remain stuck for months merely because the summons has not reached the accused.
2. Digital payment at the initial stage
District courts have been directed to facilitate payment through QR codes or UPI links. The idea is to make it easier for an accused who is willing to pay the cheque amount to do so without waiting for the litigation to progress through several stages. This is particularly relevant because many Section 138 cases are ultimately settled rather than contested to judgment.
3. A standardised synopsis with every complaint
The Court has prescribed a structured synopsis containing basic information such as the particulars of the parties, cheque details, dishonour, statutory notice, cause of action and relief claimed. This may appear to be a small procedural change, but it can make a significant difference in a docket where thousands of complaints are pending. A standard format allows the court to identify the essential facts without repeatedly searching through lengthy pleadings.
4. No summons at the pre-cognizance stage
The Court has clarified that summons need not be issued to the accused at the pre-cognizance stage. This is intended to prevent unnecessary procedural steps before the Magistrate has formally taken cognizance of the complaint.
5. A more structured first hearing
Perhaps one of the more practical directions is the introduction of a structured set of questions for the accused at the first hearing. The Magistrate is expected to ascertain matters such as whether the accused admits issuance of the cheque, whether the signature is admitted, whether there was a legally enforceable liability, what the defence is and whether the accused is willing to compound the offence. The purpose is not to conduct the entire trial at the first hearing. Rather, it is to identify at an early stage what is actually in dispute.
6. Greater use of interim compensation
The Court has encouraged courts to consider the power to award interim compensation under Section 143A at an early stage, where appropriate. This is consistent with the broader objective of preventing the complainant from being left without any meaningful financial relief while the proceedings continue.
7. Greater emphasis on physical hearings after service
The Court has also directed that, after service of summons, hearings should ordinarily be conducted physically rather than allowing proceedings to remain unnecessarily dependent on virtual appearances. The larger objective is to ensure that cases move towards substantive progress rather than becoming a sequence of procedural appearances.
8. Monitoring of pendency
The judgment also provides for greater monitoring of Section 138 cases, including monthly dashboards and reviews in Delhi, Mumbai and Calcutta. This is significant because the problem of pendency cannot be solved merely by issuing directions to individual Magistrates. It also requires courts and administrative authorities to know where cases are accumulating and why.
The Change in Compounding Costs
Another important aspect of the judgment concerns the guidelines laid down in Damodar S. Prabhu for compounding. The earlier graded costs have been revised. The Supreme Court has reduced the applicable slabs from the earlier 10%, 15% and 20% levels to 5%, 7.5% and 10%, depending on the stage at which the matter is compounded. The reduction appears to be aimed at making early settlement more attractive.
That makes commercial sense. If the primary objective of Section 138 proceedings is to secure payment and maintain confidence in cheque transactions, there is little benefit in encouraging parties to remain in litigation simply because settlement becomes progressively more expensive.
Guilty Plea, Probation and the Question that Deserves Closer Attention
The most interesting—and potentially controversial—aspect of the judgment is the Court’s discussion in paragraph 39 regarding guilty pleas and probation. The situation contemplated by the Court is a fairly specific one. Suppose an accused is prepared to pay the cheque amount in accordance with the revised compounding framework, but the complainant refuses to settle because the complainant wants to recover more than the amount represented by the dishonoured cheque—for example, the balance amount of a loan, additional interest or other alleged dues. In such circumstances, the Court indicates that the Magistrate may guide the accused towards pleading guilty under the applicable procedural law, with the possibility of extending the benefit of probation rather than imposing imprisonment. The reasoning is important.
Section 138 is technically a criminal provision, but the underlying dispute is usually commercial and monetary. This is why the Supreme Court in P. Mohanraj famously described a Section 138 proceeding as a “civil sheep in a criminal wolf’s clothing.” The offence is also compoundable. Seen from that perspective, if the accused is willing to pay the amount covered by the dishonoured cheque, the central objective of the provision may be substantially achieved. Section 138, after all, cannot automatically be converted into a mechanism for recovering every amount that may be outstanding between the parties. This reasoning protects an accused from a situation where the threat of criminal imprisonment is used principally as leverage to recover a larger civil claim. But there is another side to the issue.
Could Probation Weaken the Deterrent Effect of Section 138?
This is where the judgment raises an important policy question. Section 138 was introduced precisely because ordinary civil remedies were not considered sufficient to maintain the credibility of cheque transactions. The possibility of criminal consequences was intended to encourage drawers to honour their commitments. If an accused knows that a cheque can be dishonoured, litigation can continue for years and, even after a guilty plea, probation may be available, the deterrent effect of the provision could potentially be weakened. The concern is not that probation should never be granted. The concern is that it should not become predictable. A person who has deliberately avoided payment should not be able to treat the criminal process as merely another stage in a long-running debt dispute. Otherwise, the very delay that the Supreme Court is attempting to eliminate could become commercially rational for a defaulting drawer. There is therefore a delicate balance to be maintained.
On one side is the legitimate concern that Section 138 should not be used as a substitute for a civil recovery proceeding covering every alleged outstanding amount. On the other is the equally legitimate need to ensure that dishonouring a cheque does not become a consequence without meaningful consequences.
Conclusion: The way Forward
The Supreme Court’s latest directions are clearly aimed at making Section 138 proceedings faster, more predictable and more settlement-oriented. That is a welcome objective, particularly when the sheer volume of pending cases has become a systemic problem. However, the discussion around guilty pleas and probation may require careful application at the trial-court level. Probation should arguably remain a fact-sensitive judicial discretion, rather than an almost automatic consequence of a guilty plea. The conduct of the accused should matter. So should the timing of the offer to pay, the actual tender of the cheque amount and the circumstances in which the complainant has refused settlement. For instance, there is a meaningful difference between an accused who comes forward at the earliest opportunity with the cheque amount in hand and one who contests the matter for several years before offering payment only when conviction appears imminent. The former conduct may support the rehabilitative rationale behind probation. The latter should not necessarily receive the same treatment. Courts could therefore apply the guidelines in a manner that preserves both objectives: preventing Section 138 from becoming an instrument of coercive recovery beyond the cheque amount, while ensuring that the provision continues to carry sufficient deterrent value to protect the credibility of cheques.
Ultimately, the success of Sanjabij Tari will not be measured merely by the number of procedural directions issued. It will be measured by whether those directions actually change what happens to a Section 138 complaint after it reaches the Magistrate’s court. If summons are served promptly, the issues are identified at the first hearing, genuine settlements take place early and contested matters are tried without unnecessary adjournments, the judgment could go a long way towards addressing the problem it seeks to solve. But the larger objective must remain unchanged: a cheque should remain a credible promise of payment, while the criminal process should remain a proportionate means of protecting that credibility—not a substitute for every form of civil debt recovery.
