Cheque Bounce Complaints can be filed against Cash Loans even when Amount Exceeds ₹20000: Supreme Court sets aside Kerala HC Ruling [Read Order]

The bench of Justices Manmohan and N.V. Anjaria, overturned the Kerala High Court’s recent ruling in P.C. Hari v. Shine Varghese(2025), which had held that cash transactions above ₹20,000 in violation of Section 269SS of the Income Tax Act, 1961 cannot create a “legally enforceable debt” for the purpose of Section 138 of the NI Act.

The Supreme Court ruled that a breach of Section 269SS attracts only a penalty under Section 271D of the Income Tax Act. It does not render the underlying cash loan illegal, void, or unenforceable. Therefore, such loans continue to be legally enforceable debts, and cheque bounce complaints arising out of them are maintainable.

The Apex Court noted that once the execution of a cheque is admitted, statutory presumptions under Sections 118 and 139 of the NI Act automatically arise in favour of the complainant, unless successfully rebutted by the accused. The bench found that the accused in this case failed to provide credible evidence regarding the complainant’s alleged financial incapacity to advance the loan. The plea that a blank cheque was issued only to help the complainant secure a bank loan was termed “unbelievable and absurd.”

Importantly, the Top Court expressed concern over the massive backlog of cheque bounce cases across Indian courts, with nearly 50% of trial court pendency in some states consisting of Section 138 matters. It issued detailed procedural guidelines to expedite such trials, including:

• ●permitting service of summons through email, WhatsApp, and dasti modes;
• ●creation of dedicated online payment platforms via QR codes or UPI links for accused to settle cheque amounts early;
• ●mandatory filing of a structured case synopsis in all complaints; and
• ●revising compounding cost guidelines to encourage early settlements.

Repayment of cash loans, even if advanced in violation of income tax cash transaction limits, remains enforceable through cheque bounce proceedings. It restores the trial court’s conviction in the case and directs the accused to repay ₹7.5 lakh in 15 instalments.

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By setting aside the Kerala High Court’s contrary view, the apex court reaffirmed the credibility of cheques as substitutes for cash and clarified that income tax restrictions cannot dilute criminal liability under the NI Act.

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