A) ABSTRACT / HEADNOTE

Rekha Sharad Ushir v. Saptashrungi Mahila Nagari Sahkari Patsansta Ltd., Criminal Appeal No. 724 of 2025, concerns the maintainability of a complaint under Section 138, Negotiable Instruments Act, 1881 where the complainant suppressed material documentary communications that, if disclosed, would have materially affected the Magistrate’s satisfaction under Section 200, CrPC.

The respondent-credit society lodged the complaint after the deposit and dishonour of a security cheque. The appellant replied to the statutory demand by seeking production of documents relied upon in the notice; two letters from the appellant’s advocate dated 28 November 2016 and 13 December 2016 requesting loan documents were not produced with the complaint and were omitted from the complainant’s sworn statement.

The Supreme Court held that recording of the complainant’s statement under Section 200, CrPC is substantive and the Magistrate must test the veracity of facts and documents before issuing process. Where a complainant suppresses very material documents and thereby makes out a false case that the accused failed to reply to the demand notice, it amounts to abuse of process.

Reliance was placed on the principle in S.P. Chengalvaraya Naidu v. Jagannath & Ors. that a party must come to court with clean hands. The Court quashed the complaint and cognizance order, while leaving open civil/recovery remedies. The decision underscores the duty to disclose material documentary communications when initiating criminal proceedings under Section 138 and emphasises the Magistrate’s active role under Section 200, CrPC to elicit the truth.

Keywords: dishonour of cheque; suppression of material facts; abuse of process; Section 138 NI Act; Section 200 CrPC.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeal arises from a criminal complaint under Section 138, NI Act filed by a credit co-operative society alleging dishonour of a security cheque issued by the appellant. The respondent claimed an overdraft and relied on executed loan documents and acknowledgements to support the cheque liability.

After one earlier prosecution (on a different cheque) had resulted in the appellant paying the amount to the JMFC and that prosecution’s withdrawal and acquittal, the society allegedly granted another loan and later deposited the second security cheque which bounced.

A statutory demand notice was issued and, in response, the appellant through counsel sought production of the loan documents relied upon in the notice by letters dated 28 November 2016 and 13 December 2016, reserving the right to reply after inspection. The society filed a complaint on 15 December 2016 but did not annex or disclose those two letters; the sworn statement under Section 200, CrPC similarly omitted them. The Magistrate took cognizance.

On challenge, the High Court declined to interfere holding that such questions were for trial. The Supreme Court, however, examined whether the suppression of those communications amounted to an abuse of process and whether the Magistrate had been deprived of material facts required to exercise the preliminary screening under Section 200, CrPC.

The Court treated the recording of the complainant’s oath as more than formality and emphasised that the Magistrate must actively probe to determine whether prima facie grounds exist to issue process. Applying established standards that a litigant must come with clean hands, the Court found the omission material and prejudicial and quashed the complaint and cognizance order, while preserving the civil recovery remedy.

D) FACTS OF THE CASE

The respondent alleges that on 3 July 2006 the appellant took an overdraft of Rs. 3,50,000 and issued two security cheques. The first cheque (No. 010721) deposited in 2007 was dishonoured and led to a prosecution which was later withdrawn after the appellant paid Rs. 3,88,077 on 23 September 2016. Subsequently, on 25 July 2008, the respondent granted another loan of Rs. 11,97,000; cheque No. 010722 drawn for Rs. 27,27,460 was deposited and dishonoured on 14 October 2016.

The respondent issued a legal notice dated 11 November 2016. The appellant’s counsel replied on 28 November 2016 requesting the documents relied upon in the notice and again wrote on 13 December 2016 stating the documents were not supplied and reserving the right to reply after inspection.

The respondent filed its complaint on 15 December 2016 and produced an affidavit. The complaint and affidavit did not annex the two letters of 28 November and 13 December 2016; they instead asserted non-receipt or returned envelope issues and relied on the presumption under Section 139, NI Act.

Later, the respondent filed additional affidavits and exhibited loan statements bearing the appellant’s signature without dates; an afterthought affidavit in January 2025 claimed statements had been handed over on 29 November 2016. The appellant challenged the process on the ground of suppression and abuse of process; the High Court dismissed the writ and the appellant appealed to the Supreme Court.

E) LEGAL ISSUES RAISED

i. Whether suppression of material documentary communications by the complainant vitiates the complaint under Section 138, NI Act and amounts to an abuse of process?
ii. Whether the Magistrate’s recording of the complainant’s statement under Section 200, CrPC is a mere formality or requires active questioning to ascertain truth and sufficiency of grounds for proceeding?
iii. Whether a complainant must disclose production/inspection of documents relied upon in a demand notice before seeking criminal process under Section 138?
iv. Whether after suppression, the Magistrate ought to have exercised powers under Section 203, CrPC to dismiss the complaint?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The appellant’s counsel submitted that the appellant had earlier discharged the first loan and that the respondent maliciously used the second security cheque to institute false proceedings shortly after the earlier payment.
ii. It was contended that the respondent suppressed the 28 November 2016 and 13 December 2016 letters which explicitly sought documents and reserved the right to reply after inspection; suppression rendered the complaint false and an abuse of process.
iii. The appellant argued the omission prevented a fair preliminary inquiry under Section 200, CrPC and deprived the Magistrate of material facts that could have led to dismissal under Section 203, CrPC.

G) RESPONDENT’S ARGUMENTS

i. The respondent relied on the statutory presumption under Section 139, NI Act that cheques issued in discharge of debt are prima facie evidence of liability and argued such presumption is rebuttable only at trial.
ii. It was submitted that the complaint contained essential ingredients and that replies of the appellant were not material for the Magistrate to issue process.
iii. The respondent later produced account statements said to be provided to the appellant, asserting that some documents were in fact handed over and that signatures appeared on the statements, and that any omission was harmless.

H) RELATED LEGAL PROVISIONS 

i. Section 138, Negotiable Instruments Act, 1881 (dishonour of cheque and conditions a–c).
ii. Section 139, Negotiable Instruments Act, 1881 (presumption in favour of holder).
iii. Section 200, Code of Criminal Procedure, 1973 (examination of complainant on oath).
iv. Section 203, CrPC (dismissal of complaint if no sufficient ground).
v. Section 204(1), CrPC (issue of process on satisfaction).

I) JUDGEMENT

The Supreme Court analysed the statutory scheme of Section 138 together with the procedural safeguard under Section 200, CrPC. It held that recording the complainant’s statement on oath is not a mere formality; the Magistrate must actively elicit the truth and should apply judicial mind after considering complaint documents and statements to decide if sufficient grounds exist to issue process.

The Court reiterated the principle that a litigant who suppresses material facts or produces a false case cannot seek relief from the court, relying on S.P. Chengalvaraya Naidu v. Jagannath & Ors. The materiality of the two letters dated 28 November 2016 and 13 December 2016 was emphasised: they directly stated that the appellant had requested the documents relied upon in the demand notice and had reserved her right to reply only after inspection.

Their absence from the complaint and the sworn statement rendered the complainant’s case incomplete and misleading because the complainant effectively stated no reply had been received. The Court observed that had those letters been disclosed the Magistrate could and should have questioned the complainant about supply/inspection of documents and possibly dismissed the complaint under Section 203, CrPC as the appellant could not meaningfully reply to the demand without access to the relied-upon documents.

The subsequent production, years later, of undated statements and a belated affidavit claiming delivery on 29 November 2016 was held to be an afterthought and insufficient to cure the initial suppression. Applying the clean-hands doctrine, the Court held that setting criminal law in motion by suppressing material facts is an abuse of process and quashed the complaint and the order of cognizance. The Court preserved the respondent’s civil remedies for recovery of amounts.

a. RATIO DECIDENDI

The operative legal ratio is that where a complainant omits to disclose very material documentary communications that bear directly on the complainant’s entitlement to initiate criminal proceedings under Section 138, NI Act, the omission vitiates the complaint and constitutes an abuse of process; the Magistrate, while recording the complainant’s statement under Section 200, CrPC, must actively test such material and may dismiss the complaint under Section 203, CrPC if the omission prevents a fair reply to the statutory notice. The duty to disclose is part of the complainant’s obligation to present a true case; process cannot be employed as a tactical lever where material facts are concealed.

b. OBITER DICTA 

The Court observed, by way of guidance, that the presumption under Section 139 is rebuttable and is not a substitute for fair preliminary disclosure. The Court also noted that signatures on later-produced account statements without dates weaken the respondent’s claim of timely supply and that after-the-fact affidavits are treated with caution.

Finally, it reiterated the broader proposition from S.P. Chengalvaraya Naidu that courts should not become instruments for perpetrating or perpetuating falsehoods and that the finality principle cannot protect litigants who approach courts with unclean hands.

c. GUIDELINES

i. Magistrates must treat Section 200, CrPC examinations as substantive: they must put questions to the complainant to elicit the truth and record answers before issuing process.
ii. Complainants in Section 138 cases must disclose material communications and documents relied upon in the demand notice when filing the complaint; non-disclosure that affects the accused’s ability to reply will be treated as abuse.
iii. Where the accused has asked for inspection/production of documents in writing and the complainant has not supplied them, the Magistrate should consider dismissal under Section 203, CrPC rather than mechanically issuing process.
iv. Courts should view belated production of documents and afterthought affidavits skeptically and evaluate whether they cure earlier suppression.
v. Civil remedies for recovery ought to remain available where criminal prosecution is quashed for abuse of process.

J) CONCLUSION & COMMENTS

The decision reinforces prosecutorial candour in cheque dishonour prosecutions: a complainant who omits material documentary communications that bear on the ability of the accused to reply to a statutory demand cannot be permitted to use criminal process. The ruling strengthens the protective role of the Magistrate under Section 200, CrPC by requiring active interrogation of complainants rather than perfunctory acceptance of allegations.

Practically, the judgment will deter creditors from instituting criminal proceedings while withholding documents expressly requested by the drawer and will encourage pre-complaint disclosure or provision for inspection. The preservation of civil remedies balances the decision by ensuring that genuine monetary recovery claims can still be pursued by proper civil process.

For practitioners, the judgment underlines that reliance on Section 139 cannot justify suppression and that preliminary compliance with procedural fairness is indispensable before invoking penal sanctions under Section 138.

K) REFERENCES

a. Important Cases Referred
i. Rekha Sharad Ushir v. Saptashrungi Mahila Nagari Sahkari Patsansta Ltd., [2025] 3 S.C.R. 1189 : 2025 INSC 399.
ii. S.P. Chengalvaraya Naidu v. Jagannath & Ors., (1994) 1 SCC 1.

b. Important Statutes Referred
i. Negotiable Instruments Act, 1881 (Sections 138, 139).
ii. Code of Criminal Procedure, 1973 (Sections 200, 203, 204).
iii. Bhartiya Nagarik Suraksha Sanhita, 2023 (Sections 223, 227 — corresponding provisions).