1
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 2287 OF 2009
Dashrath Rupsingh Rathod …..Appellant
Versus
State of Maharashtra & Anr. …..Respondents
W I T H
CRIMINAL APPEAL NO. 1593 OF 2014
[Arising out of S.L.P.(Crl.)No.2077 of 2009];
CRIMINAL APPEAL NO. 1594 OF 2014
[Arising out of S.L.P.(Crl.)No.2112 of 2009];
CRIMINAL APPEAL NO. 1595 OF 2014
[Arising out of S.L.P.(Crl.)No.2117 of 2009];
CRIMINAL APPEAL NOS. 1596-1600 OF 2014
[Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009];
CRIMINAL APPEAL NO.1601 OF 2014
[Arising out of S.L.P.(Crl.)No.3762 of 2012];
CRIMINAL APPEAL NO. 1602 OF 2014
[Arising out of S.L.P.(Crl.)No.3943 of 2012];
CRIMINAL APPEAL NO.1603 OF 2014
[Arising out of S.L.P.(Crl.)No.3944 of 2012]; AND
CRIMINAL APPEAL NO. 1604 OF 2014
[Arising out of S.L.P.(Crl.)No.59 of 2013].
REPORTABLE
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VIKRAMAJIT SEN, J.
2
J U D G M E N T
1. Leave granted in Special Leave Petitions. These
Appeals raise a legal nodus of substantial public importance
pertaining to Court’s territorial jurisdiction concerning
criminal complaints filed under Chapter XVII of the
Negotiable Instruments Act, 1881 (for short, ‘the NI Act’).
This is amply adumbrated by the Orders dated
3.11.2009 in I.A.No.1 in CC 15974/2009 of the three-
Judge Bench presided over by the then Hon’ble the Chief
Justice of India, Hon’ble Mr. Justice V.S. Sirpurkar and
Hon’ble Mr. Justice P. Sathasivam which SLP is also
concerned with the interpretation of Section 138 of the
NI Act, and wherein the Bench after issuing notice on the
petition directed that it be posted before the three-Judge
Bench.
PRECEDENTS
2. The earliest and the most often quoted decision
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of this Court relevant to the present conundrum is K.
Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510
wherein a two-Judge Bench has, inter alia, interpreted
Section 138 of the NI Act to indicate that, “the offence under
Section 138 can be completed only with the concatenation of
a number of acts. Following are the acts which are
components of the said offence: (1) Drawing of the cheque,
(2) Presentation of the cheque to the bank, (3) Returning the
cheque unpaid by the drawee bank, (4) Giving notice in
writing to the drawer of the cheque demanding payment of
the cheque amount, (5) Failure of the drawer to make
payment within 15 days of the receipt of the notice.” The
provisions of Sections 177 to 179 of the Code of Criminal
Procedure, 1973 (for short, ‘CrPC’) have also been dealt with
in detail. Furthermore, Bhaskaran in terms draws a
distinction between ‘giving of notice’ and ‘receiving of
notice’. This is for the reason that clause (b) of proviso to
Section 138 of the NI Act postulates a demand being made
by the payee or the holder in due course of the dishonoured
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cheque by giving a notice in writing to the drawer thereof.
While doing so, the question of the receipt of the notice has
also been cogitated upon.
3. The issuance and the receipt of the notice is
significant because in a subsequent judgment of a
Coordinate Bench, namely, Harman Electronics Pvt. Ltd. v.
National Panasonic India Pvt. Ltd. (2009) 1 SCC 720
emphasis has been laid on the receipt of the notice, inter
alia, holding that the cause of action cannot arise by any act
of omission or commission on the part of the ‘accused’,
which on a holistic reading has to be read as ‘complainant’.
It appears that Harman transacted business out of
Chandigarh only, where the Complainant also maintained an
office, although its Head Office was in Delhi. Harman issued
the cheque to the Complainant at Chandigarh; Harman had
its bank account in Chandigarh alone. It is unclear where the
Complainant presented the cheque for encashment but it
issued the Section 138 notice from Delhi. In those
circumstances, this Court had observed that the only
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question for consideration was “whether sending of notice
from Delhi itself would give rise to a cause of action for
taking cognizance under the NI Act.” It then went on to
opine that the proviso to this Section “imposes certain
further conditions which are required to be fulfilled before
cognizance of the offence can be taken.” We respectfully
agree with this statement of law and underscore that in
criminal jurisprudence there is a discernibly demarcated
difference between the commission of an offence and its
cognizance leading to prosecution. The Harman approach is
significant and sounds a discordant note to the Bhaskaran
ratio. Harman also highlights the reality that Section 138 of
the NI Act is being rampantly misused so far as territorial
jurisdiction for trial of the Complaint is concerned. With the
passage of time equities have therefore transferred from one
end of the pendulum to the other. It is now not uncommon
for the Courts to encounter the issuance of a notice in
compliance with clause (b) of the proviso to Section 138 of
the NI Act from a situs which bears no connection with the
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Accused or with any facet of the transaction between the
parties, leave aside the place where the dishonour of the
cheque has taken place. This is also the position as regards
the presentation of the cheque, dishonour of which is then
pleaded as the territorial platform of the Complaint under
Section 138 of the NI Act. Harman, in fact, duly heeds the
absurd and stressful situation, fast becoming common-place
where several cheques signed by the same drawer are
presented for encashment and requisite notices of demand
are also despatched from different places. It appears to us
that justifiably so at that time, the conclusion in Bhaskaran
was influenced in large measure by curial compassion
towards the unpaid payee/holder, whereas with the passage
of two decades the manipulative abuse of territorial
jurisdiction has become a recurring and piquant factor. The
liberal approach preferred in Bhaskaran now calls for a
stricter interpretation of the statute, precisely because of its
misemployment so far as choice of place of suing is
concerned. These are the circumstances which have
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propelled us to minutely consider the decisions rendered by
two-Judge Benches of this Court.
4. It is noteworthy that the interpretation to be
imparted to Section 138 of the NI Act also arose before a
three-Judge Bench in Shri Ishar Alloy Steels Ltd. v.
Jayaswals Neco Ltd. (2001) 3 SCC 609 close on the heels of
Bhaskaran. So far as the factual matrix is concerned, the
dishonoured cheque had been presented for encashment by
the Complainant/holder in his bank within the statutory
period of six months but by the time it reached the drawer’s
bank the aforementioned period of limitation had expired.
The question before the Court was whether the bank within
the postulation of Section 138 read with Sections 3 and 72 of
the NI Act was the drawee bank or the collecting bank and
this Court held that it was the former. It was observed that
“non-presentation of the cheque to the drawee bank within
the period specified in the Section would absolve the person
issuing the cheque of his criminal liability under Section 138
of the NI Act, who otherwise may be liable to pay the cheque
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amount to the payee in a civil action initiated under the law.
A combined reading of Sections 3, 72 and 138 of the NI Act
would leave no doubt in our mind that the law mandates the
cheque to be presented at the bank on which it is drawn if
the drawer is to be held criminally liable.” Clearly, and in
our considered opinion rightly, the Section had been
rendered 'accused-centric’. This decision clarifies that the
place where a complainant may present the cheque for
encashment would not confer or create territorial
jurisdiction, and in this respect runs counter to the essence
of Bhaskaran which paradoxically, in our opinion, makes
actions of the Complainant an integral nay nuclear
constituent of the crime itself.
5. The principle of precedence should promptly and
precisely be paraphrased. A co-ordinate Bench is bound to
follow the previously published view; it is certainly
competent to add to the precedent to make it logically and
dialectically compelling. However, once a decision of a
larger Bench has been delivered it is that decision which
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mandatorily has to be applied; whereas a Co-ordinate Bench,
in the event that it finds itself unable to agree with an
existing ratio, is competent to recommend the precedent for
reconsideration by referring the case to the Chief Justice for
constitution of a larger Bench. Indubitably, there are a
number of decisions by two-Judge Benches on Section 138 of
the NI Act, the majority of which apply Bhaskaran without
noting or distinguishing on facts Ishar Alloy. In our opinion,
it is imperative for the Court to diligently distill and then
apply the ratio of a decision; and the view of a larger Bench
ought not to be disregarded. Inasmuch as the three-Judge
Bench in Ishar Alloy has categorically stated that for
criminal liability to be attracted, the subject cheque has to
be presented to the bank on which it is drawn within the
prescribed period, Bhaskaran has been significantly
whittled down if not overruled. Bhaskaran has also been
drastically diluted by Harman inasmuch as it has given
primacy to the service of a notice on the Accused instead of
its mere issuance by the Complainant.
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6. In Prem Chand Vijay Kumar v. Yashpal Singh
(2005) 4 SCC 417, another two-Judge Bench held that upon a
notice under Section 138 of the NI Act being issued, a
subsequent presentation of a cheque and its dishonour
would not create another ‘cause of action’ which could set
the Section 138 machinery in motion. In that view, if the
period of limitation had run out, a fresh notice of demand
was bereft of any legal efficacy. SIL Import, USA v. Exim
Aides Silk Exporters (1999) 4 SCC 567 was applied in which
the determination was that since the requisite notice had
been despatched by FAX on 26.6.1996 the limitation for filing
the Section 138 Complaint expired on 26.7.1996. What is
interesting is the observation that “four constituents of
Section 138 are required to be proved to successfully
prosecute the drawer of an offence under Section 138 of the
NI Act” (emphasis supplied). It is also noteworthy that
instead of the five Bhaskaran concomitants, only four have
been spelt out in the subsequent judgment in Prem Chand.
The commission of a crime was distinguished from its
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prosecution which, in our considered opinion, is the correct
interpretation of the law. In other words, the four or five
concomitants of the Section have to be in existence for the
initiation as well as the successful prosecution of the
offence, which offence however comes into existence as
soon as subject cheque is dishonoured by the drawee bank.
Another two-Judge Bench in Shamshad Begum v. B.
Mohammed (2008) 13 SCC 77 speaking through Pasayat J
this time around applied Bhaskaran and concluded that
since the Section 138 notice was issued from and replied to
Mangalore, Courts in that city possessed territorial
jurisdiction. As already noted above, this view is not
reconcilable with the later decision of Harman.
7. The two-Judge Bench decision in Mosaraf
Hossain Khan v. Bhagheeratha Engg. Ltd. (2006) 3 SCC 658
requires to be discussed in some detail. A Complaint under
Section 138 of the NI Act was filed and cognizance was taken
by the Chief Judicial Magistrate, Birbhum at Suri, West
Bengal for the dishonour of a number of cheques issued by
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the accused-company which had its headquarters in
Ernakulam, Kerala where significantly the accused-
company’s bank on whom the dishonoured cheques had
been drawn was located. Several judgments were referred
to, but not Bhaskaran. The third ingredient in Bhaskaran,
i.e. the returning of the cheque unpaid by the drawee bank,
was not reflected upon. Inasmuch as Mosaraf Hossain
refers copiously to the cause of action having arisen in West
Bengal without adverting at all to Bhaskaran, leave aside
the three-Judge Bench decision in Ishar Alloy, the decision
may be seen as per incuriam. Moreover, the concept of
forum non conveniens has no role to play under Section 138
of the NI Act, and furthermore that it can certainly be
contended by the accused-company that it was
justifiable/convenient for it to initiate litigation in Ernakulam.
If Bhaskaran was followed, Courts in Ernakulam
unquestionably possessed territorial jurisdiction. It is,
however, important to italicize that there was an
unequivocal endorsement of the Bench of a previously
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expressed view that, “where the territorial jurisdiction is
concerned the main factor to be considered is the place
where the alleged offence was committed”. In similar vein,
this Court has opined in Om Hemrajani v. State of U.P. (2005)
1 SCC 617, in the context of Sections 177 to 180 CrPC that
“for jurisdiction emphasis is on the place where the offence
is committed.”
8. The territorial jurisdiction conundrum which,
candidly is currently in the cauldron owing to varying if not
conflicting ratios, has been cogitated upon very recently by a
two-Judge Bench in Criminal Appeal No.808 of 2013 titled
Nishant Aggarwal v. Kailash Kumar Sharma decided on
1.7.2013 and again by the same Bench in Criminal Appeal
No.1457 of 2013 titled Escorts Limited v. Rama Mukherjee
decided on 17.09.2013. Bhaskaran was followed and Ishar
Alloy and Harman were explained. In Nishant the
Appellant issued a post-dated cheque drawn on Standard
Chartered Bank, Guwahati in favour of complainant-
respondent. It appears that the Appellant had endeavoured
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to create a case or rather a defence by reporting to his bank
in Guwahati as well as to the local police station that ‘one
cheque (corresponding to the cheque in question) was
missing and hence payment should be stopped.’ The
Respondent-drawer was a resident of District Bhiwani,
Haryana; he presented the cheque for encashment at
Canara Bank, Bhiwani but it was returned unpaid. The
holder then issued a legal notice which failed to elicit the
demanded sum of money corresponding to the cheque
value, and thereupon followed it by the filing of a criminal
complaint under Sections 138 and 141 of the NI Act at
Bhiwani. The Judicial Magistrate, Bhiwani, vide order dated
5.3.2011, concluded that the court in Bhiwani did not
possess territorial jurisdiction and he accordingly returned
the complaint for presentation before the proper Court. The
five concomitants of Section 138 extracted in Bhaskaran,
were reiterated and various paragraphs from it were
reproduced by this Court. Nishant also did not follow Ishar
Alloy which, as already analysed, has concluded that the
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second Bhaskaran concomitant, namely, presentation of
cheque to the bank refers to the drawee bank and not the
holder’s bank, is not primarily relevant for the determination
of territorial jurisdiction. Nishant distinguished Ishar Alloy
on the predication that the question of territorial jurisdiction
had not been raised in that case. It is axiomatic that when a
Court interprets any statutory provision, its opinion must
apply to and be determinate in all factual and legal
permutations and situations. We think that the dictum in
Ishar Alloy is very relevant and conclusive to the discussion
in hand. It also justifies emphasis that Ishar Alloy is the
only case before us which was decided by a three-Judge
Bench and, therefore, was binding on all smaller Benches.
We ingeminate that it is the drawee Bank and not the
Complainant’s Bank which is postulated in the so-called
second constituent of Section 138 of the NI Act, and it is this
postulate that spurs us towards the conclusion that we have
arrived at in the present Appeals. There is also a discussion
of Harman to reiterate that the offence under Section 138 is
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complete only when the five factors are present. It is our
considered view, which we shall expound upon, that the
offence in the contemplation of Section 138 of the NI Act is
the dishonour of the cheque alone, and it is the
concatenation of the five concomitants of that Section that
enable the prosecution of the offence in contradistinction to
the completion/commission of the offence.
9. We have also painstakingly perused Escorts
Limited which was also decided by the Nishant two-Judge
Bench. Previous decisions were considered, eventually
leading to the conclusion that since the concerned cheque
had been presented for encashment at New Delhi, its
Metropolitan Magistrate possessed territorial jurisdiction to
entertain and decide the subject Complaint under Section
138 of the NI Act. Importantly, in a subsequent order, in FIL
Industries Ltd. v. Imtiyaz Ahmed Bhat passed on 12
2013, it was decided that the place from where the statutory
notice had emanated would not of its own have the
consequence of vesting jurisdiction upon that place.
th
August
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Accordingly, it bears repetition that the ratio in Bhaskaran
has been drastically diluted in that the situs of the notice,
one of the so-called five ingredients of Section 138, has now
been held not to clothe that Court with territorial
competency. The conflicting or incongruent opinions need to
be resolved.
JUDICIAL APPROACH ON JURISDICTION
10. We shall take a short digression in terms of brief
discussion of the approach preferred by this Court in the
context of Section 20 of the Code of Civil Procedure, 1908
(hereinafter referred to as, ‘CPC’), which inter alia, enjoins
that a suit must be instituted in a court within the local limits
of whose jurisdiction the Defendant actually and voluntarily
resides, or carries on business, or personally works for gain,
or where the cause of action wholly or in part arises. The
Explanation to that Section is important; it prescribes that a
corporation shall be deemed to carry on business at its sole
or principal office, or, in respect of any cause of action
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arising at any place where it has also a subordinate office, at
such place. Since this provision primarily keeps the
Defendant in perspective, the corporation spoken of in the
Explanation, obviously refers to the Defendant. A plain
reading of Section 20 of the CPC arguably allows the Plaintiff
a multitude of choices in regard to where it may institute its
lis, suit or action. Corporations and partnership firms, and
even sole proprietorship concerns, could well be transacting
business simultaneously in several cities. If sub-sections (a)
and (b) of Section 20 are to be interpreted disjunctively from
sub-section (c), as the use of the word ‘or’ appears to permit
the Plaintiff to file the suit at any of the places where the
cause of action may have arisen regardless of whether the
Defendant has even a subordinate office at that place.
However, if the Defendants’ location is to form the fulcrum of
jurisdiction, and it has an office also at the place where the
cause of action has occurred, it has been held that the
Plaintiff is precluded from instituting the suit anywhere else.
Obviously, this is also because every other place would
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constitute a forum non conveniens. This Court has
harmonised the various hues of the conundrum of the place
of suing in several cases and has gone to the extent of
laying down that it should be courts endeavour to locate the
place where the cause of action has substantially arisen and
reject others where it may have incidentally arisen. Patel
Roadways Limited, Bombay v. Prasad Trading Company, AIR
1992 SC 1514 = (1991) 4 SCC 270 prescribes that if the
Defendant-corporation has a subordinate office in the place
where the cause of action arises, litigation must be instituted
at that place alone, regardless of the amplitude of options
postulated in Section 20 of the CPC. We need not dilate on
this point beyond making a reference to ONGC v. Utpal
Kumar Basu (1994) 4 SCC 711 and South East Asia Shipping
Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. (1996) 3 SCC 443.
11. We are alive to the possible incongruities that are
fraught in extrapolating decisions relating to civil law onto
criminal law, which includes importing the civil law concept
of “cause of action” to criminal law which essentially
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envisages the place where a crime has been committed
empowers the Court at that place with jurisdiction. In
Navinchandra N. Majithia v. State of Maharashtra (2000) 7
SCC 640 this Court had to consider the powers of High
Courts under Article 226(2) of the Constitution of India.
Noting the presence of the phrase “cause of action” therein
it was clarified that since some events central to the
investigation of the alleged crime asseverated in the
Complaint had taken place in Mumbai and especially
because the fundamental grievance was the falsity of the
Complaint filed in Shillong, the writ jurisdiction of the
Bombay High Court was unquestionably available. The
infusion of the concept of ‘cause of action’ into the criminal
dispensation has led to subsequent confusion countenanced
in High Courts. It seems to us that Bhaskaran allows
multiple venues to the Complainant which runs counter to
this Court’s preference for simplifying the law. Courts are
enjoined to interpret the law so as to eradicate ambiguity or
nebulousness, and to ensure that legal proceedings are not
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used as a device for harassment, even of an apparent
transgressor of the law. Law’s endeavour is to bring the
culprit to book and to provide succour for the aggrieved
party but not to harass the former through vexatious
proceedings. Therefore, precision and exactitude are
necessary especially where the location of a litigation is
concerned.
RELEVANT PROVISIONS
12. The provisions which will have to be examined and
analysed are reproduced for facility of reference :
Negotiable Instruments Act, 1881
“138. Dishonour of cheque for insufficiency, etc., of funds
in the account.-Where any cheque drawn by a person on an account
maintained
by
him
with
a
banker
for
payment
of
any
amount
of
money
to
another
person
from
out
of
that
account
for
the
discharge,
in whole or in part, of any debt or other liability, is returned
by
the
bank
unpaid,
either
because
of
the
amount
of
money
standing
to
the
credit
of
that
account
is
insufficient
to
honour
the
cheque
or
that
it
exceeds
the
amount
arranged
to
be
paid
from
that
account
by
an agreement made with that bank, such person shall
be deemed to have committed an offence and shall, without preju-
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dice to any other provisions of this Act, be punished with imprisonment
for a term which may be extended to two years, or with
fine which may extend to twice the amount of the cheque, or with
both:
Provided that nothing contained in this section shall apply
unless-
(a) the cheque has been presented to the bank within a period
of
six
months
from
the
date
on
which
it
is
drawn
or
within
the
period
of
its
validity,
whichever
is
earlier.
(b) the payee or the holder in due course of the cheque, as
the case may be, makes a demand for the payment of the
said amount of money by giving a notice in writing, to
the drawer of the cheque, within thirty days of the receipt
of
information
by
him
from
the
bank
regarding
the
return
of
the
cheque
as
unpaid;
and
(c) the drawer of such cheque fails to make the payment of
the said amount of money to the payee or, as the case
may be, to the holder in due course of the cheque,
within fifteen days of the receipt of the said notice.
Explanation. For the purposes of this section, “debt or
other liability” means a legally enforceable debt or other liability.
142. Cognizance of offences.-Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974)-
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(a) no court shall take cognizance of any offence punishable
under section 138 except upon a complaint, in writing,
made by the payee or, as the case may be, the holder in
due course of the cheque;
(b) such complaint is made within one month of the date on
which the cause of action arises under clause (c) of the
proviso to section 138;
Provided that the cognizance of a complaint may be
taken by the Court after the prescribed period, if the
complainant satisfies the Court that he had sufficient
cause for not making a complaint within such period.
(c) no court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any offence
punishable under section 138.”
Code of Criminal Procedure, 1973
“177. Ordinary place of inquiry and trial.- Every offence shall
ordinarily be inquired into and tried by a Court within whose local
jurisdiction it was committed.
178. Place of inquiry or trial.- (a) When it is uncertain in which
of several local areas an offence was committed, or
(b) where an offence is committed partly in one local area
and partly in another, or
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24
(c) where an offence is a continuing one, and continues to be
committed in more local areas than one, or
(d) where it consists of several acts done in different local
areas,
it may be inquired into or tried by a Court having jurisdiction over
any of such local areas.
179. Offence triable where act is done or consequence ensues.-
When an act is an offence by reason of anything which has been
done and of a consequence which has ensued, the offence may be
inquired into or tried by a Court within whose local jurisdiction
such thing has been done or such consequence has ensued.”
PARLIAMENTARY DEBATES
13. The XVIIth fasciculus of the Negotiable Instruments
Act containing Sections 138 to 142 was introduced into the
statute in 1988. The avowed intendment of the amendment
was to enhance the acceptability of cheques. It was based
on the Report of the Committee on Banking Laws by Dr.
Rajamannar, submitted in 1975, which suggested, inter alia,
penalizing the issuance of cheque without sufficient funds.
The Minister of Finance had assuaged apprehensions by
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25
arguing that safeguards for honest persons had been
incorporated in the provisions, viz., (i) the cheque should
have been issued in discharge of liability; (ii) the cheque
should be presented within its validity period; (iii) a Notice
had to be sent by the Payee demanding payment within 15
days of receiving notice of dishonour; (iv) the drawer was
allowed to make payment within 15 days from the date of
receipt of notice; (v) Complaint was to be made within one
month of the cause of action arising; (vi) no Court inferior to
that of MM or JMFC was to try the offence. The Finance
Minister had also stated that the Court had discretion
whether the Drawer would be imprisoned or/and fined.
Detractors, however, pointed out that the IPC already
envisioned criminal liability for cheque-bouncing where
dishonest or fraudulent intention or mens rea on part of the
Drawer was evident, namely, cheating, fraud, criminal
breach of trust etc. Therefore, there was no justification to
make the dishonour of cheques a criminal offence, ignoring
factors like illiteracy, indispensable necessities,
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26
honest/innocent mistake, bank frauds, bona fide belief,
and/or unexpected attachment or freezing of account in any
judicial proceedings as it would bring even honest persons
within the ambit of Section 138 NI Act. The possibility of
abusing the provision as a tool of harassment could also not
be ruled out. Critics also decried the punishment for being
harsh; that civil liability can never be converted into criminal
liability; that singling out cheques out of all other negotiable
instruments would be violative of Article 14 of Constitution of
India. Critics contended that there was insufficient
empirical enquiry into statutes or legislation in foreign
jurisdictions criminalizing the dishonour of cheques and
statistics had not been made available bearing out that
criminalization would increase the acceptability of cheque.
The Minister of Finance was not entirely forthright when he
stated in Parliament that the drawer was also allowed
sufficient opportunity to say whether the dishonour was by
mistake. It must be borne in mind that in the U.K. deception
and dishonesty are key elements which require to be proved.
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27
In the USA, some States have their own laws, requiring
fraudulent intent or knowledge of insufficient funds to be
made good. France has criminalized and subsequently
decriminalized the dishonour except in limited
circumstances. Instead, it provides for disqualification from
issuing cheques, a practice which had been adopted in Italy
and Spain also. We have undertaken this succinct study
mindful of the fact that Parliamentary debates have a limited
part to play in interpretation of statutes, the presumption
being that Legislators have the experience, expertise and
language skills to draft laws which unambiguously convey
their intentions and expectations for the enactments. What
is palpably clear is that Parliament was aware that they were
converting civil liability into criminal content inter alia by the
deeming fiction of culpability in terms of the pandect
comprising Section 138 and the succeeding Sections, which
severely curtail defences to prosecution. Parliament was
also aware that the offence of cheating etc., already
envisaged in the IPC, continued to be available.
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28
CIVIL LAW CONCEPTS NOT STRICTLY APPLICABLE
14. We have already cautioned against the
extrapolation of civil law concepts such as “cause of action”
onto criminal law. Section 177 of the CrPC unambiguously
states that every offence shall ordinarily be inquired into and
tried by a Court within whose local jurisdiction it was
committed. “Offence”, by virtue of the definition ascribed to
the word by Section 2(n) of the CrPC means any act or
omission made punishable by any law. Halsbury states that
the venue for the trial of a crime is confined to the place of
its occurrence. Blackstone opines that crime is local and
jurisdiction over it vests in the Court and Country where the
crime is committed. This is obviously the raison d’etre for
the CrPC making a departure from the CPC in not making the
“cause of action” routinely relevant for the determination of
territoriality of criminal courts. The word “action” has
traditionally been understood to be synonymous to “suit”, or
as ordinary proceedings in a Court of justice for enforcement
Page 28
29
or protection of the rights of the initiator of the proceedings.
“Action, generally means a litigation in a civil Court for the
recovery of individual right or redress of individual wrong,
inclusive, in its proper legal sense, of suits by the Crown” -
[Bradlaugh v. Clarke 8 Appeal Cases 354 p.361]. Unlike civil
actions, where the Plaintiff has the burden of filing and
proving its case, the responsibility of investigating a crime,
marshalling evidence and witnesses, rests with the State.
Therefore, while the convenience of the Defendant in a civil
action may be relevant, the convenience of the so called
complainant/victim has little or no role to play in criminal
prosecution. Keeping in perspective the presence of the
word “ordinarily” in Section 177 of CrPC, we hasten to
adumbrate that the exceptions to it are contained in the
CrPC itself, that is, in the contents of the succeeding Section
178. The CrPC also contains an explication of “complaint” as
any allegation to a Magistrate with a view to his taking
action in respect of the commission of an offence; not being
a police report. Prosecution ensues from a Complaint or
Page 29
30
police report for the purpose of determining the culpability of
a person accused of the commission of a crime; and unlike a
civil action or suit is carried out (or ‘prosecuted’) by the
State or its nominated agency. The principal definition of
“prosecution” imparted by Black’s Law Dictionary 5
is “a criminal action; the proceeding instituted and carried
on by due process of law, before a competent Tribunal, for
the purpose of determining the guilt or innocence of a
person charged with crime.” These reflections are necessary
because Section 142(b) of the NI Act contains the words,
“the cause of action arises under the proviso to Section
138”, resulting arguably, but in our opinion irrelevantly, to
the blind borrowing of essentially civil law attributes onto
criminal proceedings. We reiterate that Section 178 admits
of no debate that in criminal prosecution, the concept of
“cause of action”, being the bundle of facts required to be
proved in a suit and accordingly also being relevant for the
place of suing, is not pertinent or germane for determining
territorial jurisdiction of criminal Trials. Section 178, CrPC
th
Edition
Page 30
31
explicitly states that every offence shall ordinarily be
inquired into and tried by a Court within whose local
jurisdiction it was committed. Section 179 is of similar tenor.
We are also unable to locate any provision of the NI Act
which indicates or enumerates the extraordinary
circumstances which would justify a departure from the
stipulation that the place where the offence is committed is
where the prosecution has to be conducted. In fact, since
cognizance of the offence is subject to the five Bhaskaran
components or concomitants the concatenation of which
ripens the already committed offence under Section 138 NI
Act into a prosecutable offence, the employment of the
phrase “cause of action” in Section 142 of the NI Act is
apposite for taking cognizance, but inappropriate and
irrelevant for determining commission of the subject offence.
There are myriad examples of the commission of a crime the
prosecution of which is dependent on extraneous
contingencies such as obtainment of sanction for
prosecution under Section 19 of the Prevention of Corruption
Page 31
32
Act 1988. Similar situation is statutorily created by Section
19 of the Environmental Protection Act 1986, Section 11 of
the Central Sales Tax Act 1956, Section 279 of the Income
Tax Act, Sections 132 and 308, CrPC, Section 137 of the
Customs Act etc. It would be idle to contend that the
offence comes into existence only on the grant of permission
for prosecution, or that this permission constitutes an
integral part of the offence itself. It would also be futile to
argue that the place where the permission is granted would
provide the venue for the trial. If sanction is not granted the
offence does not vanish. Equally, if sanction is granted from
a place other than where the crime is committed, it is the
latter which will remain the place for its prosecution.
SECTION 138 NI ACT
15. The marginal note of Section 138 of the NI Act
explicitly defines the offence as being the dishonour of
cheques for insufficiency, etc., of funds in the account. Of
course, the headings, captions or opening words of a piece
Page 32
33
of legislation are normally not strictly or comprehensively
determinative of the sweep of the actual Section itself, but it
does presage its intendment. See: Frick India Ltd. v. Union of
India (1990) 1 SCC 400 and Forage & Co. v. Municipal
Corporation of Greater Bombay (1999) 8 SCC 577.
Accordingly, unless the provisions of the Section clearly point
to the contrary, the offence is concerned with the dishonour
of a cheque; and in the conundrum before us the body of
this provision speaks in the same timbre since it refers to a
cheque being “returned by the bank unpaid”. None of the
provisions of the IPC have been rendered nugatory by
Section 138 of the NI Act and both operate on their own. It is
trite that mens rea is the quintessential of every crime. The
objective of Parliament was to strengthen the use of
cheques, distinct from other negotiable instruments, as
mercantile tender and therefore it became essential for the
Section 138 NI Act offence to be freed from the requirement
of proving mens rea. This has been achieved by deeming
the commission of an offence de hors mens rea not only
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34
under Section 138 but also by virtue of the succeeding two
Sections. Section 139 carves out the presumption that the
holder of a cheque has received it for the discharge of any
liability. Section 140 clarifies that it will not be available as a
defence to the drawer that he had no reason to believe,
when he issued the cheque, that it would be dishonoured.
Section 138 unequivocally states that the offence is
committed no sooner the drawee bank returns the cheque
unpaid.
16. Section 138 NI Act is structured in two parts – the
primary and the provisory. It must be kept in mind that the
Legislature does not ordain with one hand and immediately
negate it with the other. The proviso often carves out a
minor detraction or diminution of the main provision of which
it is an appendix or addendum or auxiliary. Black Law
Dictionary states in the context of a proviso that it is – “a
limitation or exception to a grant made or authority
conferred, the effect of which is to declare that the one shall
not operate, or the other be exercised, unless in the case
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35
provided. …. A clause or part of a clause in a statute, the
office of which is either to except something from the
enacting clause, or to qualify or restrain its generality, or to
exclude some possible ground of misinterpretation of its
extent.” It should also be kept in perspective that a proviso
or a condition are synonymous. In our perception in the
case in hand the contents of the proviso place conditions on
the operation of the main provision, while it does form a
constituent of the crime itself, it modulates or regulates the
crime in circumstances where, unless its provisions are
complied with, the already committed crime remains
impervious to prosecution. The proviso to Section 138 of the
NI Act features three factors which are additionally required
for prosecution to be successful. In this aspect Section 142
correctly employs the term “cause of action” as compliance
with the three factors contained in the proviso are essential
for the cognizance of the offence, even though they are not
part of the action constituting the crime. To this extent we
respectfully concur with Bhaskaran in that the
Page 35
36
concatenation of all these concomitants, constituents or
ingredients of Section 138 NI Act, is essential for the
successful initiation or launch of the prosecution. We,
however, are of the view that so far as the offence itself the
proviso has no role to play. Accordingly a reading of Section
138 NI Act in conjunction with Section 177, CrPC leaves no
manner of doubt that the return of the cheque by the
drawee bank alone constitutes the commission of the
offence and indicates the place where the offence is
committed.
17. In this analysis we hold that the place, situs or
venue of judicial inquiry and trial of the offence must
logically be restricted to where the drawee bank, is located.
The law should not be warped for commercial exigencies. As
it is Section 138 of the NI Act has introduced a deeming
fiction of culpability, even though, Section 420 is still
available in case the payee finds it advantageous or
convenient to proceed under that provision. An
interpretation should not be imparted to Section 138 which
Page 36
37
will render it as a device of harassment i.e. by sending
notices from a place which has no casual connection with the
transaction itself, and/or by presenting the cheque(s) at any
of the banks where the payee may have an account. In our
discernment, it is also now manifest that traders and
businessmen have become reckless and incautious in
extending credit where they would heretofore have been
extremely hesitant, solely because of the availability of
redress by way of criminal proceedings. It is always open to
the creditor to insist that the cheques in question be made
payable at a place of the creditor’s convenience. Today’s
reality is that the every Magistracy is inundated with
prosecutions under Section 138 NI Act, so much so that the
burden is becoming unbearable and detrimental to the
disposal of other equally pressing litigation. We think that
Courts are not required to twist the law to give relief to
incautious or impetuous persons; beyond Section 138 of the
NI Act.
18. We feel compelled to reiterate our empathy with a
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38
payee who has been duped or deluded by a swindler into
accepting a cheque as consideration for delivery of any of
his property; or because of the receipt of a cheque has
induced the payee to omit to do anything resulting in some
damage to the payee. The relief introduced by Section 138
of the NI Act is in addition to the contemplations in the IPC.
It is still open to such a payee recipient of a dishonoured
cheque to lodge a First Information Report with the Police or
file a Complaint directly before the concerned Magistrate. If
the payee succeeds in establishing that the inducement for
accepting a cheque which subsequently bounced had
occurred where he resides or ordinarily transacts business,
he will not have to suffer the travails of journeying to the
place where the cheque has been dishonoured. All remedies
under the IPC and CrPC are available to such a payee if he
chooses to pursue this course of action, rather than a
Complaint under Section 138 of the NI Act. And of course,
he can always file a suit for recovery wherever the cause of
action arises dependent on his choosing.
Page 38
39
19. The interpretation of Section 138 of the NI Act
which commends itself to us is that the offence
contemplated therein stands committed on the dishonour of
the cheque, and accordingly the JMFC at the place where this
occurs is ordinarily where the Complaint must be filed,
entertained and tried. The cognizance of the crime by the
JMFC at that place however, can be taken only when the
concomitants or constituents contemplated by the Section
concatenate with each other. We clarify that the place of the
issuance or delivery of the statutory notice or where the
Complainant chooses to present the cheque for encashment
by his bank are not relevant for purposes of territorial
jurisdiction of the Complaints even though non-compliance
thereof will inexorably lead to the dismissal of the complaint.
It cannot be contested that considerable confusion prevails
on the interpretation of Section 138 in particular and
Chapter XVII in general of the NI Act. The vindication of this
view is duly manifested by the decisions and conclusion
arrived at by the High Courts even in the few cases that we
Page 39
40
shall decide by this Judgment. We clarify that the
Complainant is statutorily bound to comply with Section 177
etc. of the CrPC and therefore the place or situs where the
Section 138 Complaint is to be filed is not of his choosing.
The territorial jurisdiction is restricted to the Court within
whose local jurisdiction the offence was committed, which in
the present context is where the cheque is dishonoured by
the bank on which it is drawn.
20. We are quite alive to the magnitude of the impact
that the present decision shall have to possibly lakhs of cases
pending in various Courts spanning across the country. One
approach could be to declare that this judgment will have
only prospective pertinence, i.e. applicability to Complaints
that may be filed after this pronouncement. However, keep-
ing in perspective the hardship that this will continue to bear
on alleged accused/respondents who may have to travel long
distances in conducting their defence, and also mindful of the
legal implications of proceedings being permitted to continue
in a Court devoid of jurisdiction, this recourse in entirety does
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41
not commend itself to us. Consequent on considerable con-
sideration we think it expedient to direct that only those
cases where, post the summoning and appearance of the al-
leged Accused, the recording of evidence has commenced as
envisaged in Section 145(2) of the Negotiable Instruments
Act, 1881, will proceeding continue at that place. To clarify,
regardless of whether evidence has been led before the Mag-
istrate at the pre-summoning stage, either by affidavit or by
oral statement, the Complaint will be maintainable only at
the place where the cheque stands dishonoured. To obviate
and eradicate any legal complications, the category of Com-
plaint cases where proceedings have gone to the stage of
Section 145(2) or beyond shall be deemed to have been
transferred by us from the Court ordinarily possessing territo-
rial jurisdiction, as now clarified, to the Court where it is
presently pending. All other Complaints (obviously including
those where the accused/respondent has not been properly
served) shall be returned to the Complainant for filing in the
proper Court, in consonance with our exposition of the law. If
Page 41
42
such Complaints are filed/refiled within thirty days of their re-
turn, they shall be deemed to have been filed within the time
prescribed by law, unless the initial or prior filing was itself
time barred.
DISPOSAL OF PRESENT APPEALS
Crl. Appeal No.2287 of 2009
21. A learned Single Judge of the High Court of Judicature at
Bombay, Nagpur Bench has, pursuant to a threadbare
discussion of Bhaskaran concluded that since the
concerned cheque was drawn on the Bank of India, Bhandara
Branch, Maharashtra where it was dishonoured, the Judicial
Magistrate First Class, Digras, District Yavatmal had no
jurisdiction to entertain the Complaint. It is pertinent to note
that the subject cheque was presented at Digras, District
Yavatmal where the Complainant had a bank account
although he was a resident of District Washim, Maharashtra.
The learned Single Judge, in the impugned judgment, had
rightly rejected the argument that the Complaint itself
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43
should be dismissed; instead he ordered that it be returned
to the complainant for filing in the appropriate Court.
The Appeal is accordingly dismissed.
Crl. Appeal No. 1593 of 2014
[Arising out of S.L.P.(Crl.)No.2077 of 2009
22. In this Appeal the Respondent-accused, having
purchased electronic items from the Appellant-company,
issued the cheque in question drawn on UCO Bank, Tangi,
Orissa which was presented by the Complainant-company at
State Bank of India, Ahmednagar Branch, Maharashtra as its
branch office was located at Ahmednagar. The cheque was
dishonoured by UCO Bank, Tangi, Orissa. A Complaint was
filed before JMFC, Ahmednagar. An application was filed by
the Respondent-accused under Section 177 CrPC questioning
the jurisdiction of the JMFC Ahmednagar, who held that since
the demand notice was issued from and the payment was
claimed at Ahmednagar, he possessed jurisdiction to try the
Complaint. The High Court disagreed with the conclusion of
the JMFC, Ahmednagar that the receipt of notice and non-
payment of the demanded amount are factors which will
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44
have prominence over the place wherefrom the notice of
demand was issued and held that JMFC, Ahmednagar did not
have the territorial jurisdiction to entertain the Complaint. In
view of the foregoing discussion on the issue above, the
place where the concerned cheque had been dishonoured,
which in the case in hand was Tangi, Orissa, the Appeal is
allowed with the direction that the Complaint be returned to
the Complainant for further action in accordance with law.
Crl. Appeal Nos. 1594, 1595 & 1601 to 1603 of 2014
[Arising out of S.L.P.(Crl.)Nos.2112 of 2009 and 2117 of
2009;
3762 of 2012; 3943 of 2012; 3944 of 2012]
23. The facts being identical to Criminal Appeal arising out
of S.L.P.(Crl.)No.2077 of 2009, these Appeals stand
dismissed.
Crl. Appeal Nos.1596-1600 of 2014
[Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009]
24. The Appellant-complainant herein has its Registered
Office in Delhi from where the Respondents-accused are also
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45
carrying on their business. The cheques in question were
issued by the Respondent No.2-accused drawn on Indian
Overseas Bank, Connaught Place, New Delhi. However, the
same were presented and dishonoured at Nagpur,
Maharashtra where the Complainant states it also has an
office. There is no clarification why the cheques had not
been presented in Delhi where the Complainant had its
Registered Office, a choice which we think is capricious and
perfidious, intended to cause harassment. Upon cheques
having been dishonoured by the concerned bank at Delhi,
five Complaints were filed before Judicial Magistrate First
Class, Nagpur who heard the Complaints, and also recorded
the evidence led by both the parties. However, the JMFC,
Nagpur acquitted the Respondent No.2-accused on the
ground of not having territorial jurisdiction. On appeals
being filed before the High Court of Bombay, the judgment
of the JMFC, Nagpur was partly set aside so far as the
acquittal of the Respondent No.2-accused was concerned
and it was ordered that the Complaints be returned for filing
Page 45
46
before the proper Court. In view of the conclusion arrived at
by us above, these Appeals are also dismissed.
Crl. Appeal No. 1604 of 2014
[Arising out of S.L.P.(Crl.)No.59 of 2013]
25. The cheque in question was drawn by the Respondent-
accused on State Bank of Travancore, Delhi. However, it was
presented by the Appellant-complainant at Aurangabad. A
Complaint was filed before JMFC, Aurangabad who issued
process. Respondent-accused filed an application under
Section 203 of CrPC seeking dismissal of the Complaint. The
application was dismissed on the predication that once
process had been initiated, the Complaint could not be
dismissed. On a writ petition being filed before the High
Court of Bombay, Aurangabad Bench, the order of issuance
of process was set aside and the Complaint was ordered to
be returned for being presented before a competent court
having jurisdiction to entertain the same. The High Court
had correctly noted that the objection pertained to the
territorial jurisdiction of the JMFC, Aurangabad, a feature
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47
which had not been comprehensively grasped by the latter.
The High Court noted that the Registered Office of the
Complainant was at Chitegaon, Tehsil Paithan, District
Aurangabad whereas the Accused was transacting business
from Delhi. The High Court pithily underscored that in
paragraph 4 of the Complaint it had been specifically
contended that credit facility was given to the Accused in
Delhi, where the Complainant-company also had its branch
office. The statutory notice had also emanated from
Aurangabad, and it had been demanded that payment
should be made in that city within the specified time. It was
also the Complainant’s case that the Invoice, in case of
disputes, restricted jurisdiction to Aurangabad courts; that
intimation of the bouncing of the cheques was received at
Aurangabad. It is however necessary to underscore that the
Accused had clarified that the subject transaction took place
at Delhi where the goods were supplied and the offending
cheque was handed over to the Complainant. It appears
that a Civil Suit in respect of the recovery of the cheque
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48
amount has already been filed in Delhi. We may
immediately reiterate that the principles pertaining to the
cause of action as perceived in civil law are not relevant in
criminal prosecution. Whilst the clause restricting
jurisdiction to courts at Aurangabad may have efficacy for
civil proceedings, provided any part of the cause of action
had arisen in Aurangabad, it has no bearing on the situs in
criminal prosecutions. Since a Civil Suit is pending, we
hasten to clarify that we are not expressing any opinion on
the question of whether the courts at Delhi enjoy jurisdiction
to try the Suit for recovery. In the impugned judgment, the
High Court duly noted Bhaskaran and Harman. However,
it committed an error in analyzing the cause of action as well
as the covenant restricting jurisdiction to Aurangabad as
these are relevant only for civil disputes. However, the
impugned judgment is beyond interference inasmuch as it
concludes that the JMFC, Aurangabad has no jurisdiction
over the offence described in the Complaint. The Appeal is
accordingly dismissed.
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49
.......................................................J.
[T.S. THAKUR]
.......................................................J.
[VIKRAMAJIT SEN]
…………......…………….........…………J.
[C. NAGAPPAN]
New Delhi
August 1, 2014.
Page 49
50
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.2287 OF 2009
DASHRATH RUPSINGH RATHOD …Appellant
Versus
STATE OF MAHARASHTRA & ANR. …Respondents
WITH
CRIMINAL APPEAL NO. 1593 OF 2014
(Arising out of S.L.P. (Crl.) No.2077 of 2009)
CRIMINAL APPEAL NO. 1594 OF 2014
(Arising out of S.L.P. (Crl.) No.2112 of 2009)
CRIMINAL APPEAL NO. 1595 OF 2014
(Arising out of S.L.P. (Crl.) No.2117 of 2009)
CRIMINAL APPEAL NO. 1596-1600 OF 2014
(Arising out of S.L.P. (Crl.) Nos.1308-1312 of 2009)
CRIMINAL APPEAL NO. 1601 OF 2014
(Arising out of S.L.P. (Crl.) No.3762 of 2012)
CRIMINAL APPEAL NO. 1602 OF 2014
(Arising out of S.L.P. (Crl.) No.3943 of 2012)
CRIMINAL APPEAL NO. 1603 OF 2014
(Arising out of S.L.P. (Crl.) No.3944 of 2012)
AND
CRIMINAL APPEAL NO. 1604 OF 2014
(Arising out of S.L.P. (Crl.) No.59 of 2013)
Page 50
T.S. Thakur, J.
51
J U D G M E N T
1. I have had the advantage of going through the draft order
proposed by my esteemed brother Vikramajit Sen, J. I entirely
agree with the conclusions which my erudite brother has drawn
based on a remarkably articulate process of reasoning that
illumines the draft judgment authored by him. I would all the same
like to add a few lines of my own not because the order as
proposed leaves any rough edges to be ironed out but only
because the question of law that arises for determination is not
only substantial but of considerable interest and importance for the
commercial world. The fact that the view being taken by us strikes
a discordant note on certain aspects which have for long been
considered settled by earlier decisions of this Court being only
an additional reason for the modest addition that I propose
to make. Of these decisions Bhaskaran’s case stands out as
the earliest in which this Court examined the vexed question of
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52
territorial jurisdiction of the Courts to try offences punishable
under Section 138 of the Negotiable Instruments Act, 1881
(hereinafter called “NI Act”). Bhaskaran’s case was heard by a
two-judge Bench of this Court who took the view that the
jurisdiction to try an offence under Section 138 could not be
determined only by reference to the place where the cheque was
dishonoured. That is because dishonour of the cheque was not by
itself an offence under Section 138 of The Negotiable Instruments
Act, 1881, observed the Court. The offence is complete only when
the drawer fails to pay the cheque amount within the period of
fifteen days stipulated under clause (c) of the proviso to Section
138 of the Act. Having said that the Court recognised the difficulty
in fixing a place where such failure could be said to have taken
place. It could, said the Court, be the place where the drawer
resides or the place where the payee resides or the place where
either of them carries on business. To resolve this uncertainty the
Court turned to Sections 178 and 179 of the Cr.P.C. to hold that
since an offence under Section 138 can be completed only with the
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53
concatenation of five acts that constituted the components of the
offence any Court within whose jurisdiction any one of those acts
was committed would have the jurisdiction to try the offence. The
Court held:
“The offence under Section 138 of the Act can be completed
only with the concatenation of a number of acts. The following
are
the
acts
which
are
components
of
the
said
offence:
(1) drawing of the cheque, (2) presentation of the cheque to
the bank, (3) returning the cheque unpaid by the drawee
bank, (4) giving notice in writing to the drawer of the
cheque demanding payment of the cheque amount, (5) failure
of
the
drawer
to
make
payment
within
15
days
of
the
receipt of the notice.
It is not necessary that all the above five acts should have
been perpetrated at the same locality. It is possible that
each of those five acts could be done at five different localities.
But
a
concatenation
of
all
the
above
five
is
a
sine
qua
non for the completion of the offence under Section 138 of
the Code. In this context a reference to Section 178(d) of
the Code is useful. It is extracted below:
“178. (a)-(c) * * *
(d) where the offence consists of several acts done in
different local areas, it may be enquired into or tried
by a court having jurisdiction over any of such local
areas.”
Thus it is clear, if the five different acts were done in five
different localities any one of the courts exercising jurisdiction
in
one
of
the
five
local
areas
can
become
the
place
of
trial for the offence under Section 138 of the Act. In other
words, the complainant can choose any one of those courts
having jurisdiction over any one of the local areas within the
territorial limits of which any one of those five acts was
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54
done. As the amplitude stands so widened and so expansive
it is an idle exercise to raise jurisdictional question regarding
the offence under Section 138 of the Act.”
2. Bhaskaran held the field for two years. The first blow to the
view taken by this Court in Bhaskaran’s case was dealt by a
three-Judge Bench decision in Shri Ishar Alloy Steels Ltd. v.
Jayaswals Neco Ltd. (2001) 3 SCC 609. The question that
arose in that case was whether the limitation of six months for
presentation of a cheque for encashment was applicable viz-a-viz
presentation to the bank of the payee or that of the drawer. High
Courts in this country had expressed conflicting opinions on the
subject. This Court resolved the cleavage in those
pronouncements by holding that the cheque ought to be presented
to the drawee bank for its dishonour to provide a basis for
prosecution under Section 138. The Court observed:
“The use of the words “a bank” and “the bank” in the section
are an indicator of the intention of the legislature. “The
bank” referred to in proviso (a) to the proviso to Section
138 of the Act would mean the drawee bank on which the
cheque is drawn and not all banks where the cheque is presented
for collection including the bank of the payee, in
whose favour the cheque is issued.
Page 54
55
It, however, does not mean that the cheque is always to be
presented to the drawer’s bank on which the cheque is issued.
However,
a combined reading of Sections 3, 72 and
138 of the Act would clearly show that the law mandates the
cheque to be presented at the bank on which it is drawn if
the drawer is to be held criminally liable. Such presentation
is necessarily to be made within six months at the bank on
which the cheque is drawn, whether presented personally or
through another bank, namely, the collecting bank of the
payee.”
3. Ishar Alloy’s case (supra) did not deal with the question of
jurisdiction of the Courts nor was Bhaskaran noticed by the Court
while holding that the presentation of the cheque ought to be
within six months to the drawee bank. But that does not, in our
view, materially affect the logic underlying the pronouncement,
which pronouncement coming as it is from a bench of coordinate
jurisdiction binds us. When logically extended to the question of
jurisdiction of the Court to take cognizance, we find it difficult to
appreciate how a payee of the cheque can by presentation of the
cheque to his own bank confer jurisdiction upon the Court where
such bank is situate. If presentation referred to in Section 138
means presentation to the “drawee bank”, there is no gainsaying
that dishonour would be localised and confined to the place where
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56
such bank is situated. The question is not whether or not the
payee can deposit his cheque in any bank of his choice at any
place. The question is whether by such deposit can the payee
confer jurisdiction on a Court of his choice? Our answer is in the
negative. The payee may and indeed can present the cheque to
any bank for collection from the drawee bank, but such
presentation will be valid only if the drawee bank receives the
cheque for payment within the period of six months from the date
of issue. Dishonour of the cheque would be localised at the place
where the drawee bank is situated. Presentation of the cheque at
any place, we have no manner of doubt, cannot confer jurisdiction
upon the Court within whose territorial limits such presentation
may have taken place.
4. Then came Harman Electronics (P) Ltd. v. National
Panasonic India (P) Ltd. (2009) 1 SCC 720. That was a case
where the complaint under Section 138 was filed in a Delhi Court,
only because the statutory notice required to be issued under the
proviso to Section 138 was issued from Delhi. If Bhaskaran was
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57
correctly decided, Harman should not have interfered with the
exercise of jurisdiction by the Delhi Court for issue of a notice was
in terms of Bhaskaran, one of the factors that clothed the Court in
Delhi to take cognizance and try the case. Harman did not do so.
In Harman’s case this Court, emphasized three distinct aspects.
Firstly, it said that there was a world of difference between issue of
a notice, on the one hand, and receipt, thereof, on the other. Issue
of notice did not give rise to a cause of action while receipt did,
declared the Court.
5. Secondly, the Court held that the main provision of Section
138 stated what would constitute an offence. The proviso
appended thereto simply imposed certain further conditions which
must be fulfilled for taking cognizance of the offence. The following
passage deals with both these aspects:
“It is one thing to say that sending of a notice is one of the
ingredients for maintaining the complaint but it is another
thing to say that dishonour of a cheque by itself constitutes
an offence. For the purpose of proving its case that the accused
had
committed an offence under Section 138 of the
Negotiable Instruments Act, the ingredients thereof are required
to be proved. What would constitute an offence is
stated in the main provision. The proviso appended thereto,
however, imposes certain further conditions which are re-
Page 57
58
quired to be fulfilled before cognizance of the offence can be
taken. If the ingredients for constitution of the offence laid
down in provisos (a), (b) and (c) appended to Section 138
of the Negotiable Instruments Act are intended to be applied
in favour of the accused, there cannot be any doubt that receipt
of a notice would ultimately give rise to the cause of
action for filing a complaint. As it is only on receipt of the
notice that the accused at his own peril may refuse to pay
the amount. Clauses (b) and (c) of the proviso to Section
138 therefore must be read together. Issuance of notice
would not by itself give rise to a cause of action but communication
of
the
notice
would.”
6. Thirdly, the Court held that if presentation of the cheque or
issue of notice was to constitute a good reason for vesting courts
with jurisdiction to try offences under Section 138, it would lead to
harassment of the drawer of the cheques thereby calling for the
need to strike a balance between the rights of the parties to the
transaction. The Court said:
“We cannot, as things stand today, be oblivious of the fact
that a banking institution holding several cheques signed by
the same borrower can not only present the cheque for its
encashment at four different places but also may serve notices
from
four
different
places
so
as
to
enable
it
to
file
four
complaint cases at four different places. This only causes
grave harassment to the accused. It is, therefore, necessary
in a case of this nature to strike a balance between the right
of the complainant and the right of an accused vis-à-vis the
provisions of the Code of Criminal Procedure.”
7. Bhaskaran was, in the wake of the above, considerably
Page 58
59
diluted and the logic behind vesting of jurisdiction based on the
place from where the notice was issued questioned. Even
presentation of the cheque as a reason for assumption of
jurisdiction to take cognizance was doubted for a unilateral act of
the complainant/payee of the cheque could without any further or
supporting reason confer jurisdiction on a Court within whose
territorial limits nothing except the presentation of the cheque had
happened.
8. Three recent decisions need be mentioned at this stage which
have followed Bhaskaran and attempted to reconcile the ratio of
that case with the subsequent decisions in Ishar Alloy Steels and
Harman Electronics. In Nishant Aggarwal v. Kailash Kumar
Sharma (2013) 10 SCC 72 this Court was once again dealing
with a case where the complaint had been filed in Court at Bhiwani
in Haryana within whose territorial jurisdiction the complainant had
presented the cheque for encashment, although the cheque was
drawn on a bank at Gauhati in Assam. Relying upon the view taken
in Bhaskaran this Court held that the Bhiwani Court had
Page 59
60
jurisdiction to deal with the matter. While saying so, the Court tried
to distinguish the three-Judge Bench decision in Ishar Alloy
Steels (supra) and that rendered in Harman Electronics case
(supra) to hold that the ratio of those decisions did not dilute the
principle stated in Bhaskaran case. That exercise was repeated by
this Court in FIL Industries Ltd. v. Imtiyaz Ahmad Bhat
(2014) 2 SCC 266 and in Escorts Ltd. v. Rama Mukherjee
(2014) 2 SCC 255 which too followed Bhaskaran and held that
complaint under Section 138 Negotiable Instrument Act could be
instituted at any one of the five places referred to in Bhaskaran’s
case.
9. We have, with utmost respect to the Judges comprising the
Bench that heard the above cases, found it difficult to follow suit
and subscribe to the view stated in Bhasakaran. The reasons are
not far too seek and may be stated right away.
10. Section 138 is a penal provision that prescribes imprisonment
upto two years and fine upto twice the cheque amount. It must,
therefore, be interpreted strictly, for it is one of the accepted rules
Page 60
61
of interpretation that in a penal statute, the Courts would hesitate
to ascribe a meaning, broader than what the phrase would
ordinarily bear. Section 138 is in two parts. The enacting part of
the provision makes it abundantly clear that what constitutes an
offence punishable with imprisonment and/or fine is the dishonour
of a cheque for insufficiency of funds etc. in the account
maintained by the drawer with a bank for discharge of a debt or
other liability whether in full or part. The language used in the
provision is unambiguous and the ingredients of the offence clearly
discernible viz. (a) Cheque is drawn by the accused on an account
maintained by him with a banker. (b) The cheque amount is in
discharge of a debt or liability and (c) The cheque is returned
unpaid for insufficiency of funds or that the amount exceeds the
arrangement made with the bank. But for the proviso that
comprises the second part of the provision, any dishonour falling
within the four corners of the enacting provision would be
punishable without much ado. The proviso, however, draws an
exception to the generality of the enacting part of the provision, by
Page 61
62
stipulating two steps that ought to be taken by the complainant
holder of the cheque before the failure of the drawer gives to the
former the cause of action to file a complaint and the competent
Court to take cognizance of the offence. These steps are distinct
from the ingredients of the offence which the enacting provision
creates and makes punishable. It follows that an offence within the
contemplation of Section 138 is complete with the dishonour of the
cheque but taking cognizance of the same by any Court is
forbidden so long as the complainant does not have the cause of
action to file a complaint in terms of clause (c) of the proviso read
with Section 142 which runs as under:
”Section 142:
Cognizance of offences. —Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of
1974)—
(a) no court shall take cognizance of any offence punishable
under section 138 except upon a complaint, in writing, made
by the payee or, as the case may be, the holder in due
course of the cheque;
(b) such complaint is made within one month of the date on
which the cause of action arises under clause (c) of the
proviso to section 138: [Provided that the cognizance of a
complaint may be taken by the Court after the prescribed
period, if the complainant satisfies the Court that he had
sufficient cause for not making a complaint within such
period.]
(c) no court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any offence
Page 62
punishable under section 138.“
63
11. The following would constitute ‘cause of action’ referred to in
sub clause (b) above:
(a) The complainant has presented the cheque for payment
within the period of six months from the date of the
issue thereof.
(b) The complainant has demanded the payment of the
cheque amount from the drawer by issuing a written
notice within thirty days of receipt of information by him
from the bank regarding the dishonour.
(c) The drawer has failed to pay the cheque amount within
fifteen days of the receipt of the notice.
12. A proper understanding of the scheme underlying the
provision would thus make it abundantly clear that while the
offence is complete upon dishonour, prosecution for such offence is
deferred till the time the cause of action for such prosecution
accrues to the complainant. The proviso in that sense, simply
postpones the actual prosecution of the offender till such time he
Page 63
64
fails to pay the amount within the statutory period prescribed for
such payment. There is, in our opinion, a plausible reason why
this was done. The Parliament in its wisdom considered it just and
proper to give to the drawer of a dishonoured cheque an
opportunity to pay up the amount, before permitting his
prosecution no matter the offence is complete, the moment the
cheque was dishonoured. The law has to that extent granted a
concession and prescribed a scheme under which dishonour need
not necessarily lead to penal consequence if the drawer makes
amends by making payment within the time stipulated once the
dishonour is notified to him. Payment of the cheque amount within
the stipulated period will in such cases diffuse the element of
criminality that Section 138 attributes to dishonour by way of a
legal fiction implicit in the use of the words “shall be deemed to
have committed an offence”. The drawer would by such payment
stand absolved by the penal consequences of dishonour. This
scheme may be unique to Section 138 NI Act, but there is hardly
any doubt that the Parliament is competent to legislate so to
Page 64
65
provide for situations where a cheque is dishonoured even without
any criminal intention on the part of the drawer.
13. The scheme of Section 138 thus not only saves the honest
drawer but gives a chance to even the dishonest ones to make
amends and escape prosecution. Compliance with the provision is,
in that view, a mandatory requirement. (See C.C. Alavi Haji v.
Palapetty Muhammed and Another (2007) 6 SCC 555).
14. Harman in that view correctly held that “what would consti-
tute an offence is stated in the main provision. The proviso ap-
pended thereto however imposes certain further conditions which
are required to be fulfilled before cognizance of the offence can be
taken.” If the Parliament intended to make the conditions stipu-
lated in the proviso, also as ingredients of the offence, the provi-
sion would have read differently. It would then have specifically
added the words “and the drawer has despite receipt of a notice
demanding the payment of the amount, failed to pay the same
within a period of fifteen days from the date of such demand made
in writing by a notice”. That, however, is not how the enacting
Page 65
66
provision of Section 138 reads. The legislature has, it is obvious,
made a clear distinction between what would constitute an offence
and what would give to the complainant the cause of action to file
a complaint for the court competent to take cognizance. That a
proviso is an exception to the general rule is well settled. A pro-
viso is added to an enactment to qualify or create an exception to
what is contained in the enactment. It does not by itself state a
general rule. It simply qualifies the generality of the main enact-
ment, a portion which but for the proviso would fall within the main
enactment.
15. The P. Ramanatha Aiyar, Law Lexicon, 2nd Edition, Wadhwa &
Co. at page 1552 defines proviso as follows:
“The word “proviso” is used frequently to denote the clause
the first words of which are “provided that” inserted in deeds
and instruments generally. And containing a condition or
stipulation on the performance or non-performance of which,
as the case maybe. The effect of a proceeding clause or of
the deed depends.
A Clause inserted in a legal or formal document, making
some condition, stipulation, exception or limitation or upon
the observance of which the operation or validity of the
instrument depends [ S. 105, Indian Evidence Act].
A proviso is generally intended to restrain the enacting
clause and to except something which would have otherwise
been within it or in some measure to modify the enacting
clause...”
Page 66
67
16. To quote “Craies on Statute Law”, 7th Edn., Sweet & Maxwell
at page 220 “If the principal object of the Act can be accomplished
and stand under the restriction of the saving clause or proviso, the
same is not to be held void for repugnancy.”
17. One of the earliest judgments on the subject is a three Judge
Bench decision in Kedarnath Jute Manufacturing Co. v.
Commercial Tax Officer, Calcutta and Ors. AIR 1966 SC 12.
The Court was in that case examining the effect of a proviso which
imposed a condition on getting exemption from tax and observed:
“... The substantive clause gives the exemption and the
proviso qualifies the substantive clause. In effect the proviso
says that part of the turnover of the selling dealer covered
by the terms of sub-cl. (ii) will be exempted provided a
declaration in the from prescribed is furnished. To put it in
other words, a dealer cannot get the exemption unless he
furnishes the declaration in the prescribed form. It is well
settled that "the effect of an excepting or qualifying proviso,
according to the ordinary rules of construction, is to except
out of the preceding portion of the enactment, or to qualify
something enacted therein, which but for the proviso would
be within it" : see "Craies on Statute Law", 6th Edn., p.
217.”
18. Also pertinent is a four-Judge Bench decision of this Court in
Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128 where
this Court was examining whether a cinema theatre equipped with
Page 67
68
projectors and other fittings ready to be launched as entertainment
house was covered under the definition of ‘accommodation’ as de-
fined in Section 2 (1) (d) of Uttar Pradesh (Temporary) Control of
Rent and Eviction Act, 1947. The proviso provided for some excep-
tion for factories and business carried in a building. It was held
that sometimes draftsmen include proviso by way of over caution
to remove any doubts and accommodation would include this cin-
ema hall:
“18. A proviso must be limited to the subject-matter of the enacting
clause. It is a settled rule of construction that a proviso must prima facie
be read and considered in relation to the principal matter to which it is a
proviso. It is not a separate or independent enactment. 'Words are dependent
on
the
principal
enacting
words,
to
which
they
are
tacked
as
a
proviso. They cannot be read as divorced from their context' 1912 A.C.
544. If the rule of construction is that prima facie a proviso should be
limited in its operation to the subject-matter of the enacting clause, the
stand we have taken is sound. To expand the enacting clause, inflated
by the proviso, sins against the fundamental rule of construction that a
proviso must be considered in relation to the principal matter to which it
stands as a proviso. A proviso ordinarily is but a proviso, although the
golden rule is to read the whole section, inclusive of the proviso, in such
manner that they mutually throw light on each other and result in a harmonious
construction.
The proper course is to apply the broad general rule of construction
which is that a section or enactment must be construed as a whole, each
portion throwing light if need be on the rest.
The true principle undoubtedly is, that the sound interpretation and
meaning of the statute, on a view of the enacting clause, saving clause,
and proviso, taken and construed together is to prevail. (Maxwell on Interpretation
of
Statutes,
10th
Edn.
p.
162)”
(emphasis supplied)
Page 68
69
19. In Sreenivasa General Traders & Ors. v. State of Andhra
Pradesh & Ors. (1983) 4 SCC 353 another three- Judge bench
of this Court examined the role of a proviso while interpreting Rule
74(1) of the Andhra Pradesh (Agricultural Produce & Livestock)
Markets Rules, 1969.
“The normal function of a proviso is to except something out
of the main enacting part or to qualify something enacted
therein which but for the proviso would be within the
purview of the enactment. Proviso to Rule 74(1) is added to
qualify or create an exception.”
20. Reference may also be made to Tribhovandas Haribhai
Tamboli v. Gujarat Revenue Tribunal and others (1991) 3
SCC 442 wherein this Court clearly held that when the language of
the main enactment is clear, the proviso can have no effect on the
interpretation of the main clause.
”7. It is a cardinal rule of interpretation that a proviso to a particular provision
of a statute only embraces the field, which is covered by the main provision. It
carves out an exception to the main provision to which it has been enacted by
the proviso and to no other. The proper function of a proviso is to except and
deal with a case which would otherwise fall within the general language of the
main enactment, and its effect is to confine to that case. Where the language
of the main enactment is explicit and unambiguous, the proviso can have no
repercussion on the interpretation of the main enactment, so as to exclude
from it, by implication what clearly falls within its express terms. The scope of
the proviso, therefore, is to carve out an exception to the main enactment and
it excludes something which otherwise would have been within the rule. It has
to operate in the same field and if the language of the main enactment is
clear, the proviso cannot be torn apart from the main enactment nor can it be
used to nullify by implication what the enactment clearly says nor set at
Page 69
70
naught the real object of the main enactment, unless the words of the proviso
are such that it is its necessary effect.”
(emphasis supplied)
21. The same line of reasoning was followed in A.N. Sehgal and
Ors. v. Raje Ram Sheoram and Ors. 1992 Supp (1) SCC 304
while interpreting a proviso in the Haryana Service of Engineers
Rules, 1960 where the Court held that the proviso to Rule 5(2)(a)
cannot be applied to confer the benefit of regular appointment on
every promotee appointed in excess of 50% quota. This Court
harmoniously read the main provision and the proviso and gave
effect to the rule.
22. In Kerala State Housing Board and Ors. v. Ramapriya
Hotels (P) Ltd. and Ors. 1994 (5) SCC 672 this Court was ex-
amining whether the period of 4 years envisaged in proviso to Sec-
tion 16(i) under Kerala Land Acquisition Act, 1961 could be reck-
oned from date when agreement was executed or from date of
publication of notification under Section 3(1) of the Act after the
agreement was executed. After relying on Tribhovandas Harib-
hai Tamboli (supra) and A.N. Sehgal (supra) this Court held that
Page 70
71
the proviso should be harmoniously read with the section. To quote
Tribhovandas (supra) as followed in this judgment:
“In Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal this
Court held that the proper function of a proviso is to except and deal
with a case which would otherwise fall within the general language of
the main enactment and its effect is to be confined to that case. Where
the language of the main enactment is explicit and unambiguous, the
proviso can have no repercussion on the interpretation of the main enactment,
so
as
to
exclude
from
it,
by
implication
what
clearly
falls
within
its express terms. The scope of the proviso, therefore, is to carve out an
exception to the main enactment and it excludes something which otherwise
would
have
been
within
the
rule.
It
has
to
operate
in
the
same
field
and
if
the
language
of
the
main
enactment
is
clear,
the
proviso
cannot
be
torn
apart
from
the
main
enactment
nor
can
it
be
used
to
nullify
by implication what the enactment clearly says, nor set at naught the
real object of the main enactment, unless the words of the proviso are
such that it is its necessary effect. In that case it was held that by reading
the
proviso
consistent
with
the
provisions
of
Section
88
of
the
Bombay
Tenancy
and
Agricultural
Act,
the
object
of
the
main
provision
was
sustained.”
(emphasis supplied)
23. In Kush Sahgal & Ors. v. M.C. Mitter & Ors. (2000) 4
SCC 526 a landlady made an application for eviction of the tenant
on the basis that she wanted the place for business purposes which
was not allowed as per the proviso to Section 21(2) U.P. Urban
Buildings (Regulation of Letting, Rent and Eviction) Act, 1972. The
Court examined the role and purport of the proviso and observed :
“This we say because the normal function of a proviso is to
except something out of the enactment or to qualify
something enacted therein which but for the proviso would
be within the purview of the enactment. (See : Kedarnath
Page 71
72
Jute Manufacturing Co. Ltd. v. Commercial Tax Office
[1965]3SCR626). Since the natural presumption is that but
for the proviso, the enacting part of the section would have
included the subject-matter of the proviso, the enacting part
has to be given such a construction which would make the
exceptions carved out by the proviso necessary and a
construction which would make the exceptions unnecessary
and redundant should be avoided (See: Justice G. P. Singh's
"Principles of Statutory Interpretation" Seventh Edition
1999, p-163). This principle has been deduced from the
decision of the Privy Council in Govt. of the Province of
Bombay v. Hormusji Manekji (AIR 1947 PC 200) as also the
decision of this Court in Durga Dutt Sharma v.Navaratna
Pharmaceutical Laboratories (AIR 1965 SC 980).”
24. To the same effect are the decisions of this Court in Ali M.K.
and Ors. v. State of Kerala and Ors. (2003) 11 SCC 632,
Nagar Palika (supra) and in Steel Authority of India Ltd. v.
S.U.T.N.I Sangam & Ors. (2009) 16 SCC 1.
25. In conclusion, we may refer to Maxwell, “Interpretation of
Statutes” Edn. 12, 1969, on P. 189-190 which states that it is a
general finding and practice “that inconsistencies can be avoided
by applying the general rule that the words of a proviso are not to
be taken “absolutely in their strict literal sense” [R v. Dimbdin
(1910)] but that a proviso is “of necessity ... limited in its opera-
tion to the ambit of the section which it qualifies” [Lloyds and Scot-
tish Finance Ltd v. Modern Cars and Canavans (Kingston) Ltd.
Page 72
73
(1966)]. And, so far as that section itself is concerned, the proviso
receives a restricted construction: where the section confers pow-
ers, “it would be contrary to the ordinary operation of a proviso to
give it an effect which would cut down those powers beyond what
compliance with the proviso renders necessary.” [Re Tabrisky v.
Board of Trade (1947)]”
26. Bhaskaran, in our view, reads the proviso as prescribing the
ingredients of the offence instead of treating it as an exception to
the generality of the enacting part by stipulating further conditions
before a competent Court may take cognizance of the same. Seen
in the light of the provisions of Section 142 of the Act, the proviso
simply defers prosecution of the offender till the conditions pre-
scribed therein are satisfied. Bhaskaran does not view the matter
in that perspective while Harman (supra) does. We find ourselves
in respectful agreement with the view in Harman’s case on this
aspect.
27. In Bhaskaran, this Court resolved the confusion as to the
place of commission of the offence by relying upon Sections 177 to
Page 73
74
179 of the Cr.P.C. But the confusion arises only if one were to treat
the proviso as stipulating the ingredients of the offence. Once it is
held that the conditions precedent for taking cognizance are not
the ingredients constituting the offence of dishonour of the cheque,
there is no room for any such confusion or vagueness about the
place where the offence is committed. Applying the general rule
recognised under Section 177 of the Cr.P.C. that all offences are lo-
cal, the place where the dishonour occurs is the place for commis-
sion of the offence vesting the Court exercising territorial jurisdic-
tion over the area with the power to try the offences. Having said
that we must hasten to add, that in cases where the offence under
Section 138 is out of the offences committed in a single transaction
within the meaning of Section 220 (1) of the Cr.P.C. then the of-
fender may be charged with and tried at one trial for every such
offence and any such inquiry or trial may be conducted by any
Court competent to enquire into or try any of the offences as pro-
vided by Section 184 of the Code. So also, if an offence punishable
under Section 138 of the Act is committed as a part of single trans-
Page 74
75
action with the offence of cheating and dishonestly inducing deliv-
ery of property then in terms of Section 182 (1) read with Sections
184 and 220 of the Cr.P.C. such offence may be tried either at the
place where the inducement took place or where the cheque form-
ing part of the same transaction was dishonoured or at the place
where the property which the person cheated was dishonestly in-
duced to deliver or at the place where the accused received such
property. These provisions make it clear that in the commercial
world a party who is cheated and induced to deliver property on
the basis of a cheque which is dishonoured has the remedy of insti-
tuting prosecution not only at the place where the cheque was dis-
honoured which at times may be a place other than the place
where the inducement or cheating takes place but also at the place
where the offence of cheating was committed. To that extent the
provisions of Chapter XIII of the Code will bear relevance and help
determine the place where the offences can be tried.
28. We may at this stage refer to two other decisions of this Court
which bear some relevance to the question that falls for our
Page 75
76
determination. In Sadanandan Bhadran v. Madhavan Sunil
Kumar (1998) 6 SCC 514 a two-judge bench of this Court held
that clause (a) of proviso to Section 138 does not disentitle the
payee to successively present cheque for payment during the
period of its validity. On each such presentation of the cheque and
its dishonour a fresh right - and not cause of action – accrues in his
favour. He may, therefore, without taking pre-emptory action in
exercise of such right under clause (b) of Section 138 go on
presenting the cheque so long as the cheque is valid for payment.
But once he gives a notice under clause (b) of Section 138 he
forfeits such right for in case of failure of the drawer to pay the
money within the stipulated time he would be liable for the offence
and the cause of action for prosecution will arise. The correctness
of this view was questioned in MSR Leathers v. S. Palaniappan
& Anr. (2013) 1 SCC 177 before a bench comprising of
Markandey Katju and B. Sudershan Reddy, J.J. who referred the
issue to a larger bench. The larger bench in MSR Leathers’s case
(supra) overruled Sadanandan Bhadran (supra) holding that
Page 76
77
there was no reason why a fresh cause of action within the
meaning of Section 142 (b) read with section 138 should not be
deemed to have arisen to the complainant every time the cheque
was presented but dishonoured and the drawer of cheque failed to
pay the amount within the stipulated period in terms of proviso to
138. This Court said:
“In the result, we overrule the decision in Sadanandan
Bhadran's case (supra) and hold that prosecution based
upon second or successive dishonour of the cheque is also
permissible so long as the same satisfies the requirements
stipulated in the proviso to Section 138 of the Negotiable
Instruments Act. The reference is answered accordingly. The
appeals shall now be listed before the regular Bench for
hearing and disposal in light of the observations made
above.”
29. What is important is that in Sadanandan Bhadran (supra)
this Court had, on a careful analysis of Section 138, held that an
offence is created when a cheque is returned by the bank unpaid
for any reasons mentioned therein, although the proviso to Section
138 stipulates three conditions for the applicability of the section.
It is only upon satisfaction of the three conditions that prosecution
Page 77
78
can be launched for an offence under Section 138. This Court
observed:
“ On a careful analysis of the above section, it is seen that its
main part creates an offence when a cheque is returned by
the bank unpaid for any of the reasons mentioned therein.
The significant fact, however, is that the proviso lays down
three conditions precedent to the applicability of the above
section and, for that matter, creation of such offence and
the conditions are: (i) the cheque should have been presented
to
the
bank
within
six
months
of
its
issue
or
within
the period of its validity, whichever is earlier; (ii) the payee
should have made a demand for payment by registered notice
after
the
cheque
is
returned
unpaid;
and
(iii)
that
the
drawer
should
have
failed
to
pay
the
amount
within
15
days
of the receipt of the notice. It is only when all the above
three conditions are satisfied that a prosecution can be
launched for the offence under Section 138. So far as the
first condition is concerned, clause (a) of the proviso to Section
138
does
not
put
any
embargo
upon
the
payee
to
successively
present
a
dishonoured
cheque
during
the
period
of
its validity. This apart, in the course of business transactions
it is not uncommon for a cheque being returned due to insufficient
funds
or
similar
such
reasons
and
being
presented
again by the payee after sometime, on his own volition or at
the request of the drawer, in expectation that it would be
encashed. Needless to say, the primary interest of the
payee is to get his money and not prosecution of the
drawer, recourse to which, normally, is taken out of compulsion
and
not
choice.
For
the
above
reasons
it
must
be
held
that a cheque can be presented any number of times during
the period of its validity. Indeed that is also the consistent
view of all the High Courts except that of the Division Bench
of the Kerala High Court in Kumaresan
1
which struck a dis-
cordant note with the observation that for the first dishonour
of
the
cheque,
only
a
prosecution
can
be
launched
for
there cannot be more than one cause of action for prosecution.”
(emphasis supplied)
Page 78
79
30. MSR Leathers (supra) also looked at Section 138 and held
that a complaint could be filed under Section 138 after cause of
action to do so had accrued in terms of clause (c) of the proviso to
Section 138 which happens no sooner the drawer of the cheque
fails to make the payment of the cheque amount to the payee
within fifteen days in terms of clause (b) to proviso to Section 138.
MSR Leathers was not so much concerned with the question
whether the proviso stipulated ingredients of the offence or
conditions precedent for filing a complaint. It was primarily
concerned with the question whether the second or successive
dishonour followed by statutory notices and failure of the drawer to
make payment could be made a basis for launching prosecution
against the drawer. That question, as noticed above, was
answered in the affirmative holding that successive cause of action
could arise if there were successive dishonours followed by
statutory notices as required under the law and successive failure
of the drawer to make the payment. MSR Leathers cannot,
therefore, be taken as an authority for determining whether the
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80
proviso stipulates conditions precedent for launching a prosecution
or ingredients of the offence punishable under Section 138.
Sadanandan Bhadran may have been overruled to the extent it
held that successive causes of action cannot be made a basis for
prosecution, but the distinction between the ingredient of the
offence, on the one hand, and conditions precedent for launching
prosecution, on the other, drawn in the said judgement has not
been faulted. That distinction permeates the pronouncements of
this Court in Sadanandan Bhadran and MSR Leathers. High
Court of Kerala has, in our view, correctly interpreted Section 138
of the Act in Kairali Marketing & Processing Cooperative
Society Ltd. V. Pullengadi Service Cooperative Ltd. (2007) 1
KLT 287 when it said:
“It is evident from the language of Section 138 of the N.I.
Act that the drawer is deemed to have committed the
offence when a cheque issued by him of the variety
contemplated under Section 138 is dishonoured for the
reasons contemplated in the Section. The crucial words are
"is returned by the bank unpaid". When that happens, such
person shall be deemed to have committed the offence.
With the deeming in the body of Section 138, the offence is
already committed or deemed to have been committed. A
careful reading of the body of Section 138 cannot lead to
any other conclusion. Proviso to Section138 according to me
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81
only insists on certain conditions precedent which have to be
satisfied if the person who is deemed to have committed the
offence were to be prosecuted successfully. The offence is
already committed when the cheque is returned by the
bank. But the cause of action for prosecution will be
available to the complainant not when the offence is
committed but only after the conditions precedent
enumerated in the proviso are satisfied. After the offence is
committed, only if the option given to avoid the prosecution
under the proviso is not availed of by the offender, can the
aggrieved person get a right or course of action to prosecute
the offender. The offence is already deemed and declared
but the offender can be prosecuted only when the
requirements of the proviso are satisfied. The cause of
action for prosecution will arise only when the period
stipulated in the proviso elapses without payment.
Ingredients of the offence have got to be distinguished from
the conditions precedent for valid initiation of prosecution.”
The stipulations in the proviso must also be proved
certainly before the offender can be successfully prosecuted.
But in the strict sense they are not ingredients of the
deemed offence under the body of Section 138 of the N.I.
Act, though the said stipulations; must also be proved to
ensure and claim conviction. It is in this sense that it is said
that the proviso does not make or unmake the offence
under Section 138 of the N.I. Act. That is already done by
the body of the Sections. This dispute as to whether the
stipulations of the proviso are conditions precedent or
ingredients/components of the offence under Section 138 of
the N.I. Act may only be academic in most cases.
Undoubtedly the ingredients stricto sensu as also the
conditions precedent will have to be established
satisfactorily in all cases. Of course in an appropriate case it
may have to be considered whether substantial compliance
of the conditions precedent can be reckoned to be sufficient
to justify a conviction. Be that as it may, the distinction
between the ingredients and conditions precedent is
certainly real and existent. That distinction is certainly vital
while ascertaining complicity of an indictee who faces
indictment in a prosecution under Section 138 with the aid
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82
of Section 141 of the N.I. Act. That is how the question
assumes such crucial significance here.”
31. To sum up:
(i) An offence under Section 138 of the Negotiable Instruments
Act, 1881 is committed no sooner a cheque drawn by the accused
on an account being maintained by him in a bank for discharge of
debt/liability is returned unpaid for insufficiency of funds or for the
reason that the amount exceeds the arrangement made with the
bank.
(ii) Cognizance of any such offence is however forbidden under
Section 142 of the Act except upon a complaint in writing made by
the payee or holder of the cheque in due course within a period of
one month from the date the cause of action accrues to such payee
or holder under clause (c) of proviso to Section 138.
(iii) The cause of action to file a complaint accrues to a
complainant/payee/holder of a cheque in due course if
(a) the dishonoured cheque is presented to the drawee bank
within a period of six months from the date of its issue.
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83
(b) If the complainant has demanded payment of cheque
amount within thirty days of receipt of information by
him from the bank regarding the dishonour of the
cheque and
(c) If the drawer has failed to pay the cheque amount within
fifteen days of receipt of such notice.
(iv) The facts constituting cause of action do not constitute the
ingredients of the offence under Section 138 of the Act.
(v) The proviso to Section 138 simply postpones/defers institution
of criminal proceedings and taking of cognizance by the Court till
such time cause of action in terms of clause (c) of proviso accrues
to the complainant.
(vi) Once the cause of action accrues to the complainant, the
jurisdiction of the Court to try the case will be determined by
reference to the place where the cheque is dishonoured.
(vii) The general rule stipulated under Section 177 of Cr.P.C
applies to cases under Section 138 of the Negotiable Instruments
Act. Prosecution in such cases can, therefore, be launched against
the drawer of the cheque only before the Court within whose
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84
jurisdiction the dishonour takes place except in situations where
the offence of dishonour of the cheque punishable under Section
138 is committed along with other offences in a single transaction
within the meaning of Section 220(1) read with Section 184 of the
Code of Criminal Procedure or is covered by the provisions of
Section 182(1) read with Sections 184 and 220 thereof.
32. Before parting with this aspect of the matter, we need to
remind ourselves that an avalanche of cases involving dishonour of
cheques has come upon the Magistracy of this country. The
number of such cases as of October 2008 were estimated to be
more than 38 lakhs by the Law Commission of India in its 213
Report. The result is that cases involving dishonour of cheque is in
all major cities choking the criminal justice system at the
Magistrate’s level. Courts in the four metropolitan cities and other
commercially important centres are particularly burdened as the
filing of such cases is in very large numbers. More than five lakh
such cases were pending in criminal courts in Delhi alone as of 1
June 2008. The position is no different in other cities where large
Page 84
th
st
85
number of complaints are filed under S.138 not necessarily
because the offence is committed in such cities but because
multinational and other companies and commercial entities and
agencies choose these places for filing the complaints for no better
reason than the fact that notices demanding payment of cheque
amounts were issued from such cities or the cheques were
deposited for collection in their banks in those cities. Reliance is
often placed on Bhaskaran’s case to justify institution of such
cases far away from where the transaction forming basis of the
dishonoured cheque had taken place. It is not uncommon to find
complaints filed in different jurisdiction for cheques dishonoured in
the same transaction and at the same place. This procedure is
more often than not intended to use such oppressive litigation to
achieve the collateral purpose of extracting money from the
accused by denying him a fair opportunity to contest the claim by
dragging him to a distant place. Bhaskaran’s case could never
have intended to give to the complainant/payee of the cheque such
an advantage. Even so, experience has shown that the view taken
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86
in Bhaskaran’s case permitting prosecution at any one of the five
different places indicated therein has failed not only to meet the
approval of other benches dealing with the question but also
resulted in hardship, harassment and inconvenience to the accused
persons. While anyone issuing a cheque is and ought to be made
responsible if the same is dishonoured despite compliance with the
provisions stipulated in the proviso, the Court ought to avoid an
interpretation that can be used as an instrument of oppression by
one of the parties. The unilateral acts of a complainant in
presenting a cheque at a place of his choice or issuing a notice for
payment of the dishonoured amount cannot in our view arm the
complainant with the power to choose the place of trial. Suffice it
to say, that not only on the Principles of Interpretation of Statutes
but also the potential mischief which an erroneous interpretation
can cause in terms of injustice and harassment to the accused the
view taken in the Bhaskaran’s case needs to be revisited as we
have done in foregoing paragraphs.
33. With the above observations, I concur with the order
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87
proposed by my noble Brother, Vikramajit Sen, J.
New Delhi
August 1, 2014
……………….……….…..…J.
(T.S. Thakur)
Page 87
