Security cheque plea no ground to quash NI Act case mid-trial: HC

20/08/2026

JAMMU, Aug 19: The High Court of Jammu & Kashmir and Ladakh has held that a claim that dishonoured cheques were issued merely as "security cheques" cannot be a ground to quash proceedings under Section 138 of the Negotiable Instruments Act when the trial has already reached an advanced stage.
Justice Shahzad Azeem, while dismissing two clubbed petitions filed by Manzoor Ahmad Khan, held that disputed issues concerning the nature of the cheques, existence of a legally enforceable debt, service of statutory notice and any subsequent settlement must be examined by the Trial Court on the basis of evidence.
The judgment was pronounced on August 18 in CRM(M) Nos. 392/2024 and 219/2024, which sought quashing of two complaints filed by Javaid Ahmad Malik under Section 138 of the NI Act and the corresponding cognizance orders.
The case arose from a land transaction in Srinagar. According to the complaints, the respondent had paid Rs 45.50 lakh to the petitioner for purchase of land, with the sale deed to be executed in favour of the respondent's wife.
When the sale deed was allegedly not executed, the petitioner issued 10 cheques towards repayment. The cheques were dishonoured, following which two statutory demand notices were issued and separate complaints were filed for recovery of Rs 45.50 lakh.
The petitioner, represented by senior advocate S.T. Hussain with advocate Nida Nazir, contended that the cheques were merely security instruments and had allegedly been obtained forcibly under political pressure at the office of the Sub-Divisional Magistrate, Srinagar West.
It was also argued that only Rs 32 lakh had actually been received, whereas the cheques totalled Rs 45.50 lakh. The petitioner questioned service of the demand notice and claimed that the parties had subsequently agreed to settle the matter for Rs 5 lakh, though the settlement did not materialise.
Senior advocate M.Y. Bhat, assisted by advocate Sajad Ahmad Bhat, appeared for the complainant and opposed the petitions.
The High Court noted that the complainant's evidence had already been completed and the accused had examined two defence witnesses, leaving the trial at an advanced stage.
Justice Azeem held that once defence evidence had commenced and was almost complete, interference under Section 482 CrPC was ordinarily unwarranted as appreciation of evidence was within the domain of the Trial Court.
The Court also took exception to repeated attempts to stall the proceedings, noting that the petitioner had approached the High Court again at the "fag end" of the trial despite an earlier direction for speedy disposal.
"Such practice is required to be deprecated in no uncertain terms," the Bench observed.
Rejecting the argument that two complaints arising from 10 cheques were not maintainable, the Court noted that two separate demand notices had been issued and the Trial Magistrate was competent to entertain separate complaints arising from the transaction.
On the contention that the alleged transaction was not reflected in the complainant's income-tax returns, the Court held that such non-disclosure by itself would not defeat the statutory presumption under Section 139 of the NI Act.
The Court further observed that even violation of Section 269SS of the Income Tax Act would not, by itself, render a transaction unenforceable under Section 138 of the NI Act or automatically rebut the presumptions under Sections 118 and 139.
It also termed reliance on Section 269-B of the Income Tax Act misconceived and held that the provision had no relevance to the cheque dishonour proceedings.
The High Court reiterated that its inherent jurisdiction under Section 482 CrPC is exceptional and cannot be used to conduct a "mini trial" or short-circuit proceedings that have substantially progressed.
Finding that the basic ingredients of Section 138 of the NI Act were prima facie made out, the Court dismissed both petitions and directed the Trial Court to examine the remaining witnesses on a day-to-day basis and conclude both complaints expeditiously, preferably within one month.

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