Whether offence comes in to existence on grant of permission to prosecute?

CIVIL LAW CONCEPTS NOT STRICTLY APPLICABLE

 We have already cautioned against the extrapolation of civil law concepts such as "cause of action" onto criminal law. Section 177 of the Code of Criminal Procedure 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 Code of Criminal Procedure 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 Code of Criminal Procedure making a departure from the Code of Civil Procedure 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 Code of Criminal Procedure, we hasten to adumbrate that the exceptions to it are contained in the Code of Criminal Procedure itself, that is, in the contents of the succeeding Section 178. The Code of Criminal Procedure 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 5th 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, Code of Criminal Procedure 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 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, Code of Criminal Procedure, 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.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 2287 OF 2009

Dashrath Rupsingh Rathod

Versus

State of Maharashtra & Anr.

Citation;2014 CRLJ 4350 SC

Dated;1-8-2014

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

Page 2

3

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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4

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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5

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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6

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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7

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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8

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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9

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.

Page 9

10

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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11

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

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13

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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14

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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15

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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16

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.

Page 16

17

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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18

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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19

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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20

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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21

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-

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22

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)-

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23

(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

Page 24

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,

Page 25

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.

Page 26

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.

Page 27

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

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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

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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 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

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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

contingencies

of

which

such

as

is

dependent

obtainment

on

of

extraneous

sanction

for

prosecution under Section 19 of the Prevention of Corruption

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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

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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.

respectfully

concur

with

Bhaskaran

To this extent we

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

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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.

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

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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

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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

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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.

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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

51

JUDGMENT

T.S. Thakur, J.

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

an additional

to make. Of

reason for

the modest addition

these decisions Bhaskaran’s

that I

case

only

propose

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 follow-

ing 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) fail-

ure 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 locali-

ties. 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 jurisdic-

tion 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 pre-

sented for collection including the bank of the payee, in

whose favour the cheque is issued.

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55

It, however, does not mean that the cheque is always to be

presented to the drawer’s bank on which the cheque is is-

sued. 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 ac-

cused had committed an offence under Section 138 of the

Negotiable Instruments Act, the ingredients thereof are re-

quired 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-

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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 re-

ceipt 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 commu-

nication 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 no-

tices 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

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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

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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

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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

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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

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63

punishable under section 138.“

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

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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

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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

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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...”

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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

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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 de-

pendent 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 har-

monious 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 In-

terpretation of Statutes, 10th Edn. p. 162)”

(emphasis supplied)

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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

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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

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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 en-

actment, 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 oth-

erwise 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 can-

not 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 read-

ing the proviso consistent with the provisions of Section 88 of the Bom-

bay 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

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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.

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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

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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-

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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

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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

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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

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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 pre-

sented 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 no-

tice 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 Sec-

tion 138 does not put any embargo upon the payee to suc-

cessively 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 in-

sufficient 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 compul-

sion 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 Kumaresan1 which struck a dis-

cordant note with the observation that for the first dishon-

our of the cheque, only a prosecution can be launched for

there cannot be more than one cause of action for prosecu-

tion.”

(emphasis supplied)

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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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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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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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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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(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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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 th

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 st

June 2008. The position is no different in other cities where large

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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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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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proposed by my noble Brother, Vikramajit Sen, J.

.....................................J.

(T.S. Thakur)

New Delhi

August 1, 2014

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