Multiple Dishonoured Cheques Do Not Create a Single Composite Cause of Action

Section 138 of the Negotiable Instruments Act, 1881 plays a central role in preserving the credibility of cheque-based commercial transactions. The offence created under the provision is not linked to the failure of a business deal as a whole, but to the dishonour of a specific negotiable instrument after compliance with the statutory scheme. In practice, commercial arrangements frequently involve the issuance of multiple cheques towards principal amounts, interest, compensation, or guarantees—often arising from the same underlying transaction.

The Supreme Court, in Sumit Bansal v. MGI Developers and Promoters (2026 INSC 40), has authoritatively clarified that each dishonour of a cheque constitutes a distinct cause of action under Section 138 of the NI Act, and multiple cheques issued in the course of one transaction do not merge into a single composite cause of action. The judgment reaffirms the cheque-centric nature of criminal liability under the NI Act and restricts premature interference by High Courts at the quashing stage.

Statutory Scheme of Section 138 NI Act

Before analysing the judgment, it is necessary to revisit the statutory architecture of Section 138.

An offence under Section 138 is complete only when five cumulative ingredients are satisfied:

1. A cheque is drawn for the discharge of a legally enforceable debt or liability
2. The cheque is presented within its validity period
3. The cheque is returned unpaid due to insufficient funds or arrangement
4. A statutory demand notice is issued within the prescribed period
5. The drawer fails to pay within the notice period

The provision is cheque-centric, not transaction-centric. The offence is triggered by the dishonour of “a cheque”, not by the failure of a transaction as a whole.

This statutory design is central to understanding why the Supreme Court rejected the concept of a “composite cause of action”.

Factual Background of the Case

The dispute in Sumit Bansal arose from a real-estate transaction involving commercial units. When the sale deeds were not executed within the stipulated time, the accused issued multiple cheques, some from the firm’s account and others from the proprietor’s personal account, towards the refund of the principal amount and an agreed appreciation component.

Key factual aspects included:

• Multiple cheques issued on different dates
• Cheques drawn on different bank accounts
• Cheques presented and dishonoured on different occasions
• Separate statutory notices issued after each dishonour
• Multiple complaints filed under Section 138 NI Act

The Delhi High Court partially quashed some complaints, holding that since the cheques arose from the same transaction, parallel prosecutions would amount to abuse of process.

This approach was decisively overturned by the Supreme Court.

Supreme Court’s Core Holding

The Supreme Court categorically held:

“A separate cause of action arises upon each dishonour of a cheque provided the statutory sequence is complete. The fact that multiple cheques arise from one transaction will not merge them into a single cause of action.”

The Court emphasised that:

• Each cheque is a distinct negotiable instrument.
• Dishonour of each cheque triggers an independent statutory offence.
• Presentation, dishonour, notice, and failure to pay are event-specific.

The NI Act does not recognise the concept of a “composite offence” for multiple cheques.

Rejection of the “Single Transaction = Single Cause” Theory

The Supreme Court expressly rejected the High Court’s reasoning that multiple cheques issued for the same liability must be treated as substitutes or alternatives, thereby giving rise to only one cause of action.

The Court clarified that:

• Whether cheques were issued as alternatives, guarantees, or substitutions is a question of fact.
• Such questions cannot be decided at the quashing stage under Section 482 CrPC (Section 528 BNSS).
• High Courts cannot conduct a “mini-trial” while exercising inherent powers.

This restores doctrinal consistency with the long-standing precedent that quashing jurisdiction is a narrow and exceptional measure.

Distinction Between “Same Debt” and “Same Cause of Action”

A critical contribution of the judgment lies in drawing a doctrinal distinction between:

• Underlying debt or transaction, and
• Cause of action under Section 138

The Court clarified:

• One debt may give rise to multiple cheques.
• Each cheque, upon dishonour, creates a separate statutory wrong.
• Criminal liability is instrument-specific, not debt-specific.

This distinction is crucial in commercial practice, where staggered cheques, post-dated cheques, and guarantee cheques are routine.

Conclusion

The Supreme Court’s decision in Sumit Bansal v. MGI Developers and Promoters decisively settles that the offence under Section 138 of the Negotiable Instruments Act is cheque-specific and not transaction-centric. Each dishonour of a cheque, once the statutory requirements are fulfilled, gives rise to an independent cause of action, even if multiple cheques originate from the same underlying transaction.

By rejecting the notion of a composite cause of action and cautioning against premature quashing under Section 482 CrPC (Section 528 BNSS), the Court has reinforced the legislative intent behind cheque-dishonour prosecutions and strengthened the credibility of negotiable instruments in commercial dealings.

Important Link

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