Cheque Signed, Sealed, and Bounced – No Escape from Liability: Delhi High Court

Bare Allegations Without Proof Cannot Be a Defence in Summary Suits – Delhi High Court upheld the rejection of leave to defend in a summary suit, reaffirming that mere allegations of coercion and the absence of criminal proceedings under Section 138 of the Negotiable Instruments Act cannot absolve a debtor from liability in a civil claim.

Justice Girish Kathpalia dismissed Rohit Singh’s appeal against the trial court’s decree ordering him to pay Rs. 14,04,000 to Anil Kumar Poddar, holding that his defence was frivolous and vexatious. “A party who issues cheques and later disowns them without any substantive proof cannot be allowed to evade liability under the garb of baseless allegations,” the court observed.

Cheques as an Admission of Debt – No Defence Without Genuine Triable Issues

The case revolved around post-dated cheques issued by Rohit Singh to Anil Kumar Poddar towards repayment of an investment. When the cheques bounced due to insufficient funds, the respondent filed a summary suit under Order XXXVII CPC. The appellant, in his defence, argued that the cheques had been forcibly taken from him and that since no proceedings were initiated under Section 138 of the NI Act, no enforceable liability existed.

Rejecting this defence, the Court held: “The issuance of a cheque itself raises a presumption of a legally enforceable debt. The absence of proceedings under Section 138 NI Act does not bar a civil suit for recovery.”

The Court further noted that the appellant failed to provide any credible evidence of coercion, nor did he file a police complaint or instruct his bank to stop payment. “A bare assertion without contemporaneous action cannot be treated as a substantial defence,” the judgment emphasized.

“Courts Must Prevent Abuse of Summary Suit Provisions”

The High Court relied on the Supreme Court's rulings in IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2017) 1 SCC 568 and Mechelec Engineers & Manufacturers v. Basic Equipment Corpn. (1976) 4 SCC 687, which laid down the principles for granting leave to defend in summary suits. The Court reiterated that leave must be granted only when there is a bona fide, substantial defence.

Quoting the apex court, the judgment emphasized:

“Frivolous or vexatious defences, leading to refusal of leave to defend, are sworn enemies of justice. Courts must ensure that the object of Order XXXVII – expeditious disposal of commercial disputes – is not defeated by baseless contentions.”

Delhi High Court Denies Relief, Upholds Summary Judgment

Finding no merit in the appeal, the Delhi High Court refused to interfere with the trial court’s decree, stating: “There exists no substantial defence or triable issue. The appellant’s defence is an afterthought, a desperate attempt to escape liability, which the law cannot permit.”

With this ruling, the Delhi High Court reaffirmed that in commercial disputes, those who sign cheques cannot later hide behind unsubstantiated claims. The judgment reinforces the principle that the law protects bona fide transactions and prevents abuse of procedural safeguards.

Date of decision: 18/02/2025