DASHRATH RUPSINGH RATHOD vs. STATE OF MAHARASHTRA

1 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 W I T H CRIMINAL APPEAL NO. 1593 OF 2014 [Arising out of S.L.P.(Crl.)No.2077 of 2009]; CRIMINAL APPEAL NO. 1594 OF 2014 [Arising out of S.L.P.(Crl.)No.2112 of 2009]; CRIMINAL APPEAL NO. 1595 OF 2014 [Arising out of S.L.P.(Crl.)No.2117 of 2009]; CRIMINAL APPEAL NOS. 1596-1600 OF 2014 [Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009]; CRIMINAL APPEAL NO.1601 OF 2014 [Arising out of S.L.P.(Crl.)No.3762 of 2012]; JUDGMENT 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 1 2 J U D G M E N T VIKRAMAJIT SEN, J.

pertaining to Court’s territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881 (for short, ‘the NI Act’). This is amply adumbrated by the Orders dated 3.11.2009 in I.A.No.1 in CC 15974/2009 of the three- Judge Bench presided over by the then Hon’ble the Chief Justice of India, Hon’ble Mr. Justice V.S. Sirpurkar and Hon’ble Mr. Justice P. Sathasivam which SLP is also concerned with the interpretation of Section 138 of the JUDGMENT 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

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 JUDGMENT 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 Page 3 4 cheque by giving a notice in writing to the drawer thereof. While doing so, the question of the receipt of the notice has

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 JUDGMENT 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 Page 4 5 question for consideration was “whether sending of notice from Delhi itself would give rise to a cause of action for

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 JUDGMENT 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 Page 5 6 Accused or with any facet of the transaction between the parties, leave aside the place where the dishonour of the

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 JUDGMENT 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 Page 6 7 propelled us to minutely consider the decisions rendered by two-Judge Benches of this Court.

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 JUDGMENT 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 Page 7 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

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. JUDGMENT 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 Page 8 9 mandatorily has to be applied; whereas a Co-ordinate Bench, in the event that it finds itself unable to agree with an

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 JUDGMENT be presented to the bank on which it is drawn within the prescribed period, Bhaskaran has been significantly whittled down if not overruled. Bhaskaran has also been drastically diluted by Harman inasmuch as it has given primacy to the service of a notice on the Accused instead of its mere issuance by the Complainant. Page 9 10 6. In Prem Chand Vijay Kumar v. Yashpal Singh (2005) 4 SCC 417, another two-Judge Bench held that upon a

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 JUDGMENT 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 Page 10 11 prosecution which, in our considered opinion, is the correct interpretation of the law. In other words, the four or five

offence, which offence however comes into existence as soon as subject cheque is dishonoured by the drawee bank. Another two-Judge Bench in Shamshad Begum v. B. Mohammed (2008) 13 SCC 77 speaking through Pasayat J this time around applied Bhaskaran and concluded that since the Section 138 notice was issued from and replied to Mangalore, Courts in that city possessed territorial jurisdiction. As already noted above, this view is not reconcilable with the later decision of Harman. JUDGMENT 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 which had its headquarters in Ernakulam, Kerala where significantly the accused-

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 JUDGMENT contended by the accused-company that it was justifiable/convenient for it to initiate litigation in Ernakulam. If Bhaskaran was followed, Courts in Ernakulam unquestionably possessed territorial jurisdiction. It is, however, important to italicize that there was an unequivocal endorsement of the Bench of a previously Page 12 13 expressed view that, “where the territorial jurisdiction is concerned the main factor to be considered is the place

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 JUDGMENT 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 Page 13 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

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 JUDGMENT 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 Page 14 15 second Bhaskaran concomitant, namely, presentation of cheque to the bank refers to the drawee bank and not the

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. JUDGMENT 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 Page 15 16 complete only when the five factors are present. It is our considered view, which we shall expound upon, that 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 JUDGMENT entertain and decide the subject Complaint under Section 138 of the NI Act. Importantly, in a subsequent order, in FIL th Industries Ltd. v. Imtiyaz Ahmed Bhat passed on 12 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,

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 JUDGMENT 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 Page 17 18 arising at any place where it has also a subordinate office, at such place. Since this provision primarily keeps the

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 JUDGMENT 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 Page 18 19 constitute a forum non conveniens . This Court has harmonised the various hues of the conundrum of the place

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 JUDGMENT 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 Page 19 20 envisages the place where a crime has been committed empowers the Court at that place with jurisdiction. In

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 JUDGMENT 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 Page 20 21 used as a device for harassment, even of an apparent transgressor of the law. Law’s endeavour is to bring the

Page 21 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 JUDGMENT 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)- Page 22 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 JUDGMENT “ 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 Page 23 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 JUDGMENT 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

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 JUDGMENT 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

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 JUDGMENT 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

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 JUDGMENT 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

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 JUDGMENT crime is committed. This is obviously the raison d’etre for the CrPC making a departure from the CPC in not making the “cause of action” routinely relevant for the determination of territoriality of criminal courts. The word “action” has traditionally been understood to be synonymous to “suit”, or as ordinary proceedings in a Court of justice for enforcement Page 28 29 or protection of the rights of the initiator of the proceedings. “Action, generally means a litigation in a civil Court for the

[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 JUDGMENT adumbrate that the exceptions to it are contained in the CrPC itself, that is, in the contents of the succeeding Section 178. The CrPC also contains an explication of “complaint” as any allegation to a Magistrate with a view to his taking action in respect of the commission of an offence; not being a police report. Prosecution ensues from a Complaint or Page 29 30 police report for the purpose of determining the culpability of a person accused of the commission of a crime; and unlike a

th “prosecution” imparted by Black’s Law Dictionary 5 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 JUDGMENT 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 Page 30 31 explicitly states that every offence shall ordinarily be inquired into and tried by a Court within whose local

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 JUDGMENT apposite for taking cognizance, but inappropriate and irrelevant for determining commission of the subject offence. There are myriad examples of the commission of a crime the prosecution of which is dependent on extraneous contingencies such as obtainment of sanction for prosecution under Section 19 of the Prevention of Corruption Page 31 32 Act 1988. Similar situation is statutorily created by Section 19 of the Environmental Protection Act 1986, Section 11 of

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. JUDGMENT SECTION 138 NI ACT 15. The marginal note of Section 138 of the NI Act explicitly defines the offence as being the dishonour of cheques for insufficiency, etc., of funds in the account. Of course, the headings, captions or opening words of a piece Page 32 33 of legislation are normally not strictly or comprehensively determinative of the sweep of the actual Section itself, but it

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 JUDGMENT 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 Page 33 34 under Section 138 but also by virtue of the succeeding two Sections. Section 139 carves out the presumption that the

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 JUDGMENT 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 Page 34 35 provided. …. A clause or part of a clause in a statute, the office of which is either to except something from the

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 JUDGMENT for prosecution to be successful. In this aspect Section 142 correctly employs the term “cause of action” as compliance with the three factors contained in the proviso are essential for the cognizance of the offence, even though they are not part of the action constituting the crime. To this extent we respectfully concur with Bhaskaran in that the Page 35 36 concatenation of all these concomitants, constituents or ingredients of Section 138 NI Act, is essential for the

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. JUDGMENT The law should not be warped for commercial exigencies. As it is Section 138 of the NI Act has introduced a deeming fiction of culpability, even though, Section 420 is still available in case the payee finds it advantageous or convenient to proceed under that provision. An interpretation should not be imparted to Section 138 which Page 36 37 will render it as a device of harassment i.e. by sending notices from a place which has no casual connection with the

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 JUDGMENT 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 Page 37 38 payee who has been duped or deluded by a swindler into accepting a cheque as consideration for delivery of any of

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 JUDGMENT place where the cheque has been dishonoured. All remedies under the IPC and CrPC are available to such a payee if he chooses to pursue this course of action, rather than a Complaint under Section 138 of the NI Act. And of course, he can always file a suit for recovery wherever the cause of action arises dependent on his choosing. Page 38 39 19. The interpretation of Section 138 of the NI Act which commends itself to us is that the offence

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 JUDGMENT thereof will inexorably lead to the dismissal of the complaint. It cannot be contested that considerable confusion prevails on the interpretation of Section 138 in particular and Chapter XVII in general of the NI Act. The vindication of this view is duly manifested by the decisions and conclusion arrived at by the High Courts even in the few cases that we Page 39 40 shall decide by this Judgment. We clarify that the Complainant is statutorily bound to comply with Section 177

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 JUDGMENT that may be filed after this pronouncement. However, keep- ing in perspective the hardship that this will continue to bear on alleged accused/respondents who may have to travel long distances in conducting their defence, and also mindful of the legal implications of proceedings being permitted to continue in a Court devoid of jurisdiction, this recourse in entirety does Page 40 41 not commend itself to us. Consequent on considerable con- sideration we think it expedient to direct that only those

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 JUDGMENT transferred by us from the Court ordinarily possessing territo- rial jurisdiction, as now clarified, to the Court where it is presently pending. All other Complaints (obviously including those where the accused/respondent has not been properly served) shall be returned to the Complainant for filing in the proper Court, in consonance with our exposition of the law. If Page 41 42 such Complaints are filed/refiled within thirty days of their re- turn, they shall be deemed to have been filed within the time

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 JUDGMENT jurisdiction to entertain the Complaint. It is pertinent to note that the subject cheque was presented at Digras, District Yavatmal where the Complainant had a bank account although he was a resident of District Washim, Maharashtra. The learned Single Judge, in the impugned judgment, had rightly rejected the argument that the Complaint itself Page 42 43 should be dismissed; instead he ordered that it be returned to the complainant for filing in the appropriate Court. The Appeal is accordingly dismissed. Crl. Appeal No. 1593 of 2014 [Arising out of S.L.P.(Crl.)No.2077 of 2009 22. In this Appeal the Respondent-accused, having purchased electronic items from the Appellant-company, issued the cheque in question drawn on UCO Bank, Tangi, Orissa which was presented by the Complainant-company at State Bank of India, Ahmednagar Branch, Maharashtra as its branch office was located at Ahmednagar. The cheque was dishonoured by UCO Bank, Tangi, Orissa. A Complaint was filed before JMFC, Ahmednagar. An application was filed by JUDGMENT the Respondent-accused under Section 177 CrPC questioning the jurisdiction of the JMFC Ahmednagar, who held that since the demand notice was issued from and the payment was claimed at Ahmednagar, he possessed jurisdiction to try the Complaint. The High Court disagreed with the conclusion of the JMFC, Ahmednagar that the receipt of notice and non- payment of the demanded amount are factors which will Page 43 44 have prominence over the place wherefrom the notice of demand was issued and held that JMFC, Ahmednagar did not

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 JUDGMENT of S.L.P.(Crl.)No.2077 of 2009, these Appeals stand dismissed. Crl. Appeal Nos.1596-1600 of 2014 [Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009] 24. The Appellant-complainant herein has its Registered Office in Delhi from where the Respondents-accused are also Page 44 45 carrying on their business. The cheques in question were issued by the Respondent No.2-accused drawn on Indian

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, JUDGMENT Nagpur acquitted the Respondent No.2-accused on the ground of not having territorial jurisdiction. On appeals being filed before the High Court of Bombay, the judgment of the JMFC, Nagpur was partly set aside so far as the acquittal of the Respondent No.2-accused was concerned and it was ordered that the Complaints be returned for filing Page 45 46 before the proper Court. In view of the conclusion arrived at by us above, these Appeals are also dismissed. Crl. Appeal No. 1604 of 2014 [Arising out of S.L.P.(Crl.)No.59 of 2013] 25. The cheque in question was drawn by the Respondent- accused on State Bank of Travancore, Delhi. However, it was presented by the Appellant-complainant at Aurangabad. A Complaint was filed before JMFC, Aurangabad who issued process. Respondent-accused filed an application under Section 203 of CrPC seeking dismissal of the Complaint. The application was dismissed on the predication that once process had been initiated, the Complaint could not be JUDGMENT 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 Page 46 47 which had not been comprehensively grasped by the latter. The High Court noted that the Registered Office of the

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 JUDGMENT 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 Page 47 48 amount has already been filed in Delhi. We may immediately reiterate that the principles pertaining to the

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 JUDGMENT 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. Page 48 49 .......................................................J. [T.S. THAKUR]

…………......…………….........…………J. [C. NAGAPPAN] New Delhi August 1, 2014. JUDGMENT Page 49 50 REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.2287 OF 2009 DASHRATH RUPSINGH RATHOD …Appellant Versus STATE OF MAHARASHTRA & ANR. …Respondents WITH CRIMINAL APPEAL NO. 1593 OF 2014 (Arising out of S.L.P. (Crl.) No.2077 of 2009) CRIMINAL APPEAL NO. 1594 OF 2014 (Arising out of S.L.P. (Crl.) No.2112 of 2009) CRIMINAL APPEAL NO. 1595 OF 2014 (Arising out of S.L.P. (Crl.) No.2117 of 2009) CRIMINAL APPEAL NO. 1596-1600 OF 2014 (Arising out of S.L.P. (Crl.) Nos.1308-1312 of 2009) JUDGMENT 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 J U D G M E N T 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 JUDGMENT commercial world. The fact that the view being taken by us strikes a discordant note on certain aspects which have for long been considered settled by earlier decisions of this Court being only an additional reason for the modest addition that I propose to make. Of these decisions Bhaskaran’s case stands out as the earliest in which this Court examined the vexed question of Page 51 52 territorial jurisdiction of the Courts to try offences punishable under Section 138 of the Negotiable Instruments Act, 1881

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 JUDGMENT 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 Page 52 53 concatenation of five acts that constituted the components of the offence any Court within whose jurisdiction any one of those acts

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: JUDGMENT “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 Page 53 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.”

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 JUDGMENT 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. Page 54 55

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 JUDGMENT 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 Page 55 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

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 JUDGMENT 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 Page 56 57 correctly decided, Harman should not have interfered with the exercise of jurisdiction by the Delhi Court for issue of a notice was

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 JUDGMENT 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- Page 57 58

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: JUDGMENT “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 Page 58 59 diluted and the logic behind vesting of jurisdiction based on the place from where the notice was issued questioned. Even

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 JUDGMENT Sharma (2013) 10 SCC 72 this Court was once again dealing with a case where the complaint had been filed in Court at Bhiwani in Haryana within whose territorial jurisdiction the complainant had presented the cheque for encashment, although the cheque was drawn on a bank at Gauhati in Assam. Relying upon the view taken in Bhaskaran this Court held that the Bhiwani Court had Page 59 60 jurisdiction to deal with the matter. While saying so, the Court tried to distinguish the three-Judge Bench decision in Ishar Alloy

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 JUDGMENT Bench that heard the above cases, found it difficult to follow suit and subscribe to the view stated in Bhasakaran . The reasons are not far too seek and may be stated right away. 10. Section 138 is a penal provision that prescribes imprisonment upto two years and fine upto twice the cheque amount. It must, therefore, be interpreted strictly, for it is one of the accepted rules Page 60 61 of interpretation that in a penal statute, the Courts would hesitate to ascribe a meaning, broader than what the phrase would

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 JUDGMENT unpaid for insufficiency of funds or that the amount exceeds the arrangement made with the bank. But for the proviso that comprises the second part of the provision, any dishonour falling within the four corners of the enacting provision would be punishable without much ado. The proviso, however, draws an exception to the generality of the enacting part of the provision, by Page 61 62 stipulating two steps that ought to be taken by the complainant holder of the cheque before the failure of the drawer gives to the

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 JUDGMENT Page 62 63 punishable under section 138.“ 11. The following would constitute ‘cause of action’ referred to in sub clause (b) above:

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 JUDGMENT provision would thus make it abundantly clear that while the offence is complete upon dishonour, prosecution for such offence is deferred till the time the cause of action for such prosecution accrues to the complainant. The proviso in that sense, simply postpones the actual prosecution of the offender till such time he Page 63 64 fails to pay the amount within the statutory period prescribed for such payment. There is, in our opinion, a plausible reason why

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 JUDGMENT criminality that Section 138 attributes to dishonour by way of a legal fiction implicit in the use of the words “shall be deemed to have committed an offence”. The drawer would by such payment stand absolved by the penal consequences of dishonour. This scheme may be unique to Section 138 NI Act, but there is hardly any doubt that the Parliament is competent to legislate so to Page 64 65 provide for situations where a cheque is dishonoured even without any criminal intention on the part of the drawer.

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- JUDGMENT lated in the proviso, also as ingredients of the offence, the provi- sion would have read differently. It would then have specifically added the words “and the drawer has despite receipt of a notice demanding the payment of the amount, failed to pay the same within a period of fifteen days from the date of such demand made in writing by a notice”. That, however, is not how the enacting Page 65 66 provision of Section 138 reads. The legislature has, it is obvious, made a clear distinction between what would constitute an offence

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: JUDGMENT

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Page 68 69 19. In Sreenivasa General Traders & Ors. v. State of Andhra Pradesh & Ors. (1983) 4 SCC 353 another three- Judge bench

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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

Page 70 71

SCC 526 a landlady made an application for eviction of the tenant JUDGMENT on the basis that she wanted the place for business purposes which was not allowed as per the proviso to Section 21(2) U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972. The Court examined the role and purport of the proviso and observed : “This we say because the normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. (See : Kedarnath Page 71 72

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Page 73 74

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28. We may at this stage refer to two other decisions of this Court which bear some relevance to the question that falls for our Page 75 76 determination. In Sadanandan Bhadran v. Madhavan Sunil Kumar (1998) 6 SCC 514 a two-judge bench of this Court held

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 JUDGMENT and the cause of action for prosecution will arise. The correctness of this view was questioned in MSR Leathers v. S. Palaniappan & Anr. (2013) 1 SCC 177 before a bench comprising of Markandey Katju and B. Sudershan Reddy, J.J. who referred the issue to a larger bench. The larger bench in MSR Leathers’s case (supra) overruled Sadanandan Bhadran (supra) holding that Page 76 77 there was no reason why a fresh cause of action within the meaning of Section 142 (b) read with section 138 should not be

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) JUDGMENT this Court had, on a careful analysis of Section 138, held that an offence is created when a cheque is returned by the bank unpaid for any reasons mentioned therein, although the proviso to Section 138 stipulates three conditions for the applicability of the section. It is only upon satisfaction of the three conditions that prosecution Page 77 78 can be launched for an offence under Section 138. This Court observed: “ On a careful analysis of the above section, it is seen that its main part creates an offence when a cheque is returned by the bank unpaid for any of the reasons mentioned therein. The significant fact, however, is that the proviso lays down three conditions precedent to the applicability of the above section and, for that matter, creation of such offence and the conditions are: (i) the cheque should have been 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 JUDGMENT 1 of the Kerala High Court in Kumaresan 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) Page 78 79 30. MSR Leathers (supra) also looked at Section 138 and held that a complaint could be filed under Section 138 after cause of

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 JUDGMENT 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 Page 79 80 proviso stipulates conditions precedent for launching a prosecution or ingredients of the offence punishable under Section 138.

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 JUDGMENT 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 Section 138 according to me Page 80 81

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 JUDGMENT Page 81 82 of Section 141 of the N.I. Act. That is how the question assumes such crucial significance here.” 31. To sum up: (i) An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank. (ii) Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of JUDGMENT 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. Page 82 83 (b) If the complainant has demanded payment of cheque amount within thirty days of receipt of information by

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 JUDGMENT 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 Page 83 84 jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section

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 th more than 38 lakhs by the Law Commission of India in its 213 Report. The result is that cases involving dishonour of cheque is in JUDGMENT 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 st such cases were pending in criminal courts in Delhi alone as of 1 June 2008. The position is no different in other cities where large Page 84 85 number of complaints are filed under S.138 not necessarily because the offence is committed in such cities but because

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 JUDGMENT 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 Page 85 86 in Bhaskaran’s case permitting prosecution at any one of the five different places indicated therein has failed not only to meet the

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 JUDGMENT 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 Page 86 87 proposed by my noble Brother, Vikramajit Sen, J. ……………….……….…..…J. (T.S. Thakur) New Delhi August 1, 2014 JUDGMENT Page 87