Quashing under Section 528 BNSS in Section 138 NI Act Complaints: “Lost Cheque/Stop-Payment” Defence Must Go to Trial Once Prima Facie Ingredients and Section 139 Presumption Are Triggered

1. Introduction

The Jammu & Kashmir and Ladakh High Court (Justice Wasim Sadiq Nargal) in SANJAY GUPTA v. VIPAN KUMAR MEHTA (03-08-2026) considered the scope of inherent powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) to quash criminal proceedings arising from a complaint under Sections 138 and 142 of the Negotiable Instruments Act, 1881.

The petitioner (accused) sought quashing of (i) the Magistrate’s order dated 27.06.2024 issuing process and (ii) the underlying complaint titled “Vipan Kumar Mehta v. Sanjay Gupta” (File No. 84/2024). His central defence was that the cheque book had been misplaced in 2022 and that he had issued stop-payment instructions on 13.12.2022. The respondent (complainant) asserted a financial transaction, issuance of cheque towards discharge of liability, dishonour for “Payment Stopped by Drawer,” and compliance with statutory notice requirements.

The key issue before the High Court was whether such “lost cheque/stop-payment/misuse/no liability” pleas—raising disputed facts—justify quashing at the threshold, despite the statutory presumption under Section 139 NI Act and the limited inquiry at the cognizance/process stage.

2. Summary of the Judgment

  • The High Court dismissed the petition under Section 528 BNSS.
  • It upheld the Magistrate’s order dated 27.06.2024 issuing process in the Section 138 NI Act complaint.
  • It held that the petitioner’s assertions (cheque misplaced, stop-payment instructions, misuse, no enforceable debt) are matters of defence requiring evidence and trial.
  • Since the complaint disclosed prima facie compliance with Section 138 NI Act requirements and the petitioner did not dispute his signature, the Section 139 presumption operated; rebuttal must occur before the trial court.
  • Interim protection, if any, was vacated, and the trial court was directed to proceed expeditiously, uninfluenced by the High Court’s observations.

3. Analysis

3.1 Precedents Cited

(a) “Indian Bank Association & Ors. v. Union of India &Anr.”, (2014) 5 SCC 590

The High Court relied on the Supreme Court’s articulation that once the complainant shows compliance with proviso requirements of Section 138, “technically the commission of the offence stands completed” and it is for the accused to show why no offence could have been committed on “specific reasons and defences.”

“... if the proviso (a), (b) & (c) to Section 138 of the Act are shown to have been complied with, technically the commission of the offence stands completed and it is for the accused to show that no offence could have been committed by him for specific reasons and defences.”

Influence on the outcome: This precedent underpinned the High Court’s refusal to convert Section 528 proceedings into a merits adjudication of the accused’s factual defence. Once prima facie statutory compliance is shown, the accused’s case is ordinarily tested at trial.

(b) „Sanjay Gupta v. M/s Glare Glass Traders', CRM(M) No. 740/2024, decided on 01.03.2025

The High Court noted that the same petitioner had previously raised substantially identical grounds (lost cheque, stop-payment, no legally enforceable liability) in relation to a different cheque and complaint. In that earlier decision, the Court held that such pleas constitute defence and cannot be considered at the initial stage, permitting the accused to raise them during trial.

Influence on the outcome: The Court applied its own recent ratio to maintain consistency and reinforce the procedural boundary: threshold quashing is not the forum to decide contested factual defences in Section 138 prosecutions.

3.2 Legal Reasoning

(i) The cognizance/process stage involves a prima facie assessment, not a “mini trial”

The Court reiterated a procedural principle: at the stage of taking cognizance and issuing process, the Magistrate examines whether the complaint and accompanying material disclose a prima facie offence. The Court will not weigh competing versions, test credibility, or decide disputed facts at this threshold.

(ii) Operation and consequence of the Section 139 NI Act presumption

The judgment pivots on Section 139 NI Act:

“It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque ... for the discharge, in whole or in part, of any debt or other liability.”

Two points were decisive:

  • Foundational facts pleaded: The complaint asserted financial assistance, issuance of cheque, dishonour with “Payment Stopped by Drawer,” statutory notice, and non-payment.
  • Signature not disputed: The petitioner “does not dispute his signatures on the cheque,” triggering the presumption.

As a result, the Court treated “no liability,” “misuse,” and “lost cheque” as rebuttal contentions—not grounds for quashing. The accused must rebut the presumption through evidence and permissible trial mechanisms.

(iii) Stop-payment instructions do not, by themselves, nullify Section 138 liability at the quashing stage

The dishonour reason was “Payment Stopped by Drawer.” The Court accepted the respondent’s submission that such endorsement does not automatically exonerate the drawer, especially when the presumption under Section 139 applies. Whether stop-payment was genuine (e.g., arising from loss) or a device to defeat liability is factual and trial-bound.

(iv) Limits of Section 528 BNSS inherent jurisdiction

The Court characterised Section 528 BNSS as a power to prevent abuse of process or secure ends of justice, but not a license to adjudicate disputed facts or to evaluate an accused’s defence before trial. Accepting the petitioner’s factual version at this stage would amount to an impermissible “mini trial.”

3.3 Impact

  • On Section 528 BNSS practice: The decision clarifies that inherent jurisdiction will be sparingly exercised in cheque dishonour matters where the complaint discloses prima facie compliance with Section 138 and the defence requires evidence.
  • On Section 138 litigation strategy: Accused persons relying on “lost cheque,” “misuse,” or “prior stop-payment” must be prepared to rebut the Section 139 presumption at trial rather than expecting pre-trial quashing.
  • On judicial economy: By discouraging defence-based factual adjudication in quashing petitions, the judgment channels disputes to the trial court, reducing premature High Court interference in routine Section 138 prosecutions.
  • On consistency: The Court’s reliance on its own earlier decision involving the same petitioner strengthens predictability in how similar defences are treated procedurally.

4. Complex Concepts Simplified

  • “Cognizance”: The Magistrate’s decision to take notice of alleged facts and proceed under criminal law. It is not a finding of guilt—only that the complaint warrants continuation.
  • “Issuance of process”: The court’s step to summon the accused to face proceedings after forming a prima facie view.
  • “Quashing” (Section 528 BNSS): The High Court’s exceptional power to end criminal proceedings early to prevent misuse of court process. It is typically not used to decide disputed facts requiring evidence.
  • “Statutory presumption” (Section 139 NI Act): A legal assumption in favour of the cheque holder that the cheque was issued for a debt/liability. The accused must rebut it with a credible defence—usually by evidence during trial.
  • “Payment Stopped by Drawer”: A return memo reason indicating the bank dishonoured the cheque because the drawer instructed it not to honour payment. Whether that instruction was justified (e.g., genuine loss) is generally a factual issue.
  • “Legally enforceable debt/liability”: A real, lawful obligation to pay. Under Section 139, it is presumed unless rebutted.

5. Conclusion

The judgment in SANJAY GUPTA v. VIPAN KUMAR MEHTA reinforces a clear procedural rule in cheque dishonour prosecutions: where the complaint prima facie satisfies Section 138 requirements and the cheque execution/signature is not disputed, the Section 139 presumption operates and defences such as “lost cheque,” “prior stop-payment,” “misuse,” or “no liability” are trial issues, not grounds for quashing under Section 528 BNSS.

By upholding process issuance and refusing to undertake defence evaluation at the threshold, the High Court strengthens the delineation between (i) a limited prima facie inquiry at the summoning stage and (ii) full adjudication through evidence at trial—thereby shaping how future Section 528 BNSS quashing petitions in Section 138 matters are assessed.