Recent judgment on dishonour of cheque;new Interpretation

We feel compelled to reiterate our empathy with a
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.


REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 2287 OF 2009
Dashrath Rupsingh Rathod

Versus
State of Maharashtra & Anr.


Dated;August 1, 2014.

Leave granted in Special Leave Petitions.
1.
These
Appeals raise a legal nodus of substantial public importance
pertaining
criminal
to
Court’s
complaints
territorial
filed
jurisdiction
under
Chapter
concerning
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

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

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

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

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

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

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

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
whittled down if not overruled.
has
been
significantly
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.

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

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
jurisdiction.
in
that
city
possessed
territorial
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
Page 11
12
the
accused-company
Ernakulam,
Kerala
which
where
had
its
significantly
headquarters
the
in
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
however,
important
to
italicize
that
there
is,
was
an
unequivocal endorsement of the Bench of a previously

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

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

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

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 th August
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.

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

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

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

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

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 ac-
count maintained by him with a banker for payment of any amount
of money to another person from out of that account for the dis-
charge, in whole or in part, of any debt or other liability, is re-
turned 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-

dice to any other provisions of this Act, be punished with impris-
onment 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 pe-
riod 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 re-
ceipt 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 lia-
bility.
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
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

(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

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,

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.

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.

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

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

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 th Edition
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

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
contingencies
of
which
such
as
is
dependent
obtainment
on
of
extraneous
sanction
for
prosecution under Section 19 of the Prevention of Corruption

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

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

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

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.
respectfully
concur
with
Bhaskaran
To this extent we
in
that
the

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

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
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.
which
The interpretation of Section 138 of the NI Act
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
Page 40
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
Page 42
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
Page 43
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
Page 44
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

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

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

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.

.......................................................J.
[T.S. THAKUR]
.......................................................J.
[VIKRAMAJIT SEN]
......................................................J.
[C. NAGAPPAN]
New Delhi
August 1, 2014.

Print Page