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MUNEESH DHAWAN (Advocate)     29 December 2008

Sec.138-Latest Judgement (SC)-Territorial Jurisdiction

Please find the Judgement


             CRIMINAL APPEAL NO. 2021                OF 2008
             [arising out of SLP (Criminal) No. 1712 of 2004]

& ANR.                                                ... APPELLANTS





1.    Leave granted.

2.    Territorial jurisdiction of a court to try an offence under Section 138

of the Negotiable Instruments Act, 1881 (for short, "the Act") is in question

in this appeal.

      The said question arose in the following circumstances.

      Appellants and respondent entered into a business transaction.

Appellant is a resident of Chandigarh. He carries on business in

Chandigarh. The cheque in question admittedly was issued at Chandigarh.

Complainant also has a branch office at Chandigarh although his Head

Office is said to be at Delhi. It is stated that the cheque was presented at

Chandigarh. However, it is in dispute as to whether the said cheque was

sent for collection to Delhi.       The cheque was dishonoured also at

Chandigarh. However, the complainant - respondent issued a notice upon

the appellant asking him to pay the amount from New Delhi. Admittedly,

the said notice was served upon the respondent at Chandigarh. On failure on

the part of the appellant to pay the amount within a period of 15 days from

the date of communication of the said letter, a complaint petition was filed

at Delhi. In the complaint petition, it was stated:

             "10. That the complainant presented aforesaid
             cheque for encashment through its banker Citi
             Bank NA. The Punjab & Sind Bank, the banker of
             the accused returned the said cheque unpaid with
             an endorsement "Payment stopped by drawer"
             vide their memo dated 30.12.2000. The aforesaid
             memo dated 30.12.2000 was received by the
             complainant on 3.1.2001.
             11. Upon dishonour of the above mentioned
             cheque, the complainant sent notice dt. 11.1.2001

in terms of section 138 of Negotiable Instruments
Act to the accused persons demanding payment of
aforesaid cheque amount at Delhi. The accused
persons were served with said notice by registered
12. By the said notice the accused persons were
called upon to pay to the complainant the sum of
Rs.5,00,000/- within 15 days of the receipt of said
13. Despite the service of notice dt. 11.1.2001
the accused persons have failed and/or neglected
to pay amount of aforesaid cheque within the
stipulated period of 15 days after the service of the
14. Accused persons clandestinely/deliberately
and with malafide intention and by failing to make
the payment of the said dishonoured cheque within
the stipulated period have committed the offence
under Section 138 read with Section 141 of the
Negotiable Instruments Act, 1881.
15. The complainant further submit that the
complaint is being filed within 1 month from the
date of expiring of the 15 days grace time given
under the notice for payment of said amount.
16. This Hon'ble Court has jurisdiction to
entertain the present complaint as complainant
carries on its business at Delhi. The demand notice
dt. 11.1.2001 was issued from Delhi and the
amount of cheque was payable at Delhi and
because accused failed to make the payment of
amount of said cheque within statutory period of
15 days from receipt of notice."

3.    Cognizance of the offence was taken against the appellant by the

learned judge.

      Questioning the jurisdiction of the court of Additional Sessions

Judge, New Delhi, an application was filed which was disposed of by the

learned Additional Sessions Judge, New Delhi in terms of an order dated

3.2.2003 stating:

            "2. The main grievance of the accused is that
            the accused persons, as well as the complainant
            are carrying their business at Chandigarh. The
            cheque in question was given by the accused to the
            complainant in Chandigarh, and it was present to
            their banker at Chandigarh. Only notice was given
            by the complainant to the accused persons, from
            Delhi. That the same was served on the accused
            admittedly, at Chandigarh and that both the parties
            are carrying out their business also at Chandigarh.
            Therefore, it is contended that it would amount to
            absurdity if the complaint of the complainant is
            entertained, in Delhi, in view of the case law
            reported in AIR 1999 Supreme Court 3782, K.
            Bhaskaran Vs. Sankaran Vaidyyan Balan and
            6.     I have considered the arguments advanced
            at the bar, and I am of the considered opinion that
            this court has jurisdiction to entertain this
            complaint, as admittedly the notice was sent by the
            complainant to the accused persons from Delhi,
            and the complainant is having its registered office
            at Delhi, and that they are carrying out the
            business at Delhi. Admittedly, it is also evident
            from the record that accused allegedly failed to
            make the payment at Delhi, as the demand was

             made from Delhi and the payment was to be made
             to the complainant at Delhi."

4.    By reason of the impugned judgment, Criminal Miscellaneous

Petition filed by the appellant has been dismissed.

5.    Mr. Ashok Grover, learned Senior Counsel appearing on behalf of the

appellant would submit that as the entire cause of action arose within the

jurisdiction of the courts at Chandigarh, the learned Additional Sessions

Judge, New Delhi had no jurisdiction to take cognizance of the offence.

6.    Mr. Sakesh Kumar, learned counsel appearing on behalf of the

respondent, on the other hand, would contend:

      i.     The cheque although was deposited at Chandigarh, the same

             having been sent by Citi Bank NA for collection at Delhi, the

             amount became payable at Delhi.

      ii.    Giving of a notice being a condition precedent for filing a

             complaint petition under Section 138 of the Negotiable

             Instruments Act, a notice having been issued from Delhi, the

             Delhi Court had the requisite jurisdiction, particularly when

           demand was made upon the appellant to pay the complainant at


7.   Section 138 of the Negotiable Instruments Act reads as under:

           "138. Dishonour of cheque for insufficiency,
           etc., of funds in the account. - Where any cheque
           drawn by a person on an account maintained by
           him with a banker for payment of any amount of
           money to another person from out of that account
           for the discharge, in whole or in part, of any debt
           or other liability, is returned by the bank unpaid,
           either because of the amount of money standing to
           the credit of that account is insufficient to honour
           the cheque or that it exceeds the amount arranged
           to be paid from that account by an agreement
           made with that bank, such person shall be deemed
           to have committed an offence and shall, without
           prejudice to any other provisions of this Act, be
           punished with imprisonment for a term which may
           be extended to two years, or with fine which may
           extend to twice the amount of the cheque, or with
                  Provided that nothing contained in this
           section shall apply unless--

                  (a) the cheque has been presented to the
           bank within a period of six months from the date
           on which it is drawn or within the period of its
           validity, whichever is earlier;

                  (b) the payee or the holder in due course of
           the cheque, as the case may be, makes a demand
           for the payment of the said amount of money by
           giving a notice in writing, to the drawer of the
           cheque, within thirty days of the receipt of
           information by him from the bank regarding the
           return of the cheque as unpaid; and

                  (c) the drawer of such cheque fails to make
            the payment of the said amount of money to the
            payee or, as the case may be, to the holder in due
            course of the cheque, within fifteen days of the
            receipt of the said notice.

            Explanation.-- For the purposes of this section,
            "debt or other liability" means a legally
            enforceable debt or other liability."

8.    The proviso appended thereto imposes certain conditions before a

complaint petition can be entertained.

9.    Reliance has been placed by both the learned Additional Sessions

Judge as also the High Court on a decision of this Court in K. Bhaskaran v.

Sankaran Vaidhyan Balan and Anr. [(1999) 7 SCC 510]
. This Court opined

that the offence under Section 138 of the Act can be completed only with

the concatenation of a number of acts, namely, (1) Drawing of the cheque,

(2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid

by the drawee bank, (4) Giving notice in writing to the drawer of the cheque

demanding payment of the cheque amount, (5) failure of the drawer to make

payment within 15 days of the receipt of the notice. It was opined that if

five different acts were done in five different localities, any one of the

courts exercising jurisdiction in one of the five local areas can become the

place of trial for the offence under Section 138 of the Act and the

complainant would be at liberty to file a complaint petition at any of those

places.   As regards the requirements of giving a notice as also receipt

thereof by the accused, it was stated:

             "18. On the part of the payee he has to make a
             demand by "giving a notice" in writing. If that
             was the only requirement to complete the offence
             on the failure of the drawer to pay the cheque
             amount within 15 days from the date of such
             "giving", the travails of the prosecution would
             have been very much lessened. But the legislature
             says that failure on the part of the drawer to pay
             the amount should be within 15 days "of the
             receipt" of the said notice. It is, therefore, clear
             that "giving notice" in the context is not the same
             as receipt of notice. Giving is a process of which
             receipt is the accomplishment. It is for the payee
             to perform the former process by sending the
             notice to the drawer at the correct address. "

10.   The court, however, refused to give a strict interpretation to the said

provisions despite noticing Black's Law Dictionary in regard to the

meaning of the terms `giving of notice' and `receiving of the notice' in the

following terms:

             "19. In Black's Law Dictionary, 'giving of notice'
             is distinguished from 'receiving of the notice.'
             (vide page 621) "A person notifies or gives notice

            to another by taking such steps as may be
            reasonably required to inform the other in the
            ordinary course, whether or not such other actually
            comes to know of it." A person 'receives' a notice
            when it is duly delivered to him or at the place of
            his business.

            20. If a strict interpretation is given that the drawer
            should have actually received the notice for the
            period of 15 days to start running no matter that
            the payee sent the notice on the correct address, a
            trickster cheque drawer would get the premium to
            avoid receiving the notice by different strategies
            and he could escape from the legal consequences
            of Section 138 of the Act. It must be borne in mind
            that Court should not adopt in interpretation which
            helps a dishonest evader and clips an honest payee
            as that would defeat the very legislative measure."

11.   For the said purpose, a presumption was drawn as regards refusal to

accept a notice. We may, before proceeding to advert to the contentions

raised by the parties hereto, refer to another decision of this Court in M/s

Dalmia Cement (Bharat) Ltd. vs. M/s Galaxy Traders & Agencies Ltd. &

ors. [AIR 2001 SC 676]
, wherein this Court categorically held:

            "6. Section 27 of the General Clauses Act deals
            with the presumption of service of a letter sent by
            post. The dispatcher of a notice has, therefore, a
            right to insist upon and claim the benefit of such a
            presumption. But as the presumption is rebuttable
            one, he has two options before him. One is to
            concede to the stand of the sendee that as a matter

      of fact he did not receive the notice, and the other
      is to contest the sendee's stand and take the risk for
      proving that he in fact received the notice. It is
      open to the despatcher to adopt either of the
      options. If he opts the former, he can afford to take
      appropriate steps for the effective service of notice
      upon the addressee. Such a course appears to have
      been adopted by the appellant-company in this
      case and the complaint filed, admittedly, within
      limitation from the date of the notice of service
      conceded to have been served upon the

                                     (Underlying is mine)

It was furthermore held:
      "The payee or holder of the cheque may, therefore,
      without taking peremptory action in exercise of his
      right under clause (b) of Section 138 of the Act, go
      on presenting the cheque so as to enable him to
      exercise such right at any point of time during the
      validity of the cheque. But once a notice under
      clause (b) of Section 138 of the Act is 'received' by
      the drawer of the cheque, the payee or the holder
      of the cheque forfeits his right to again present the
      cheque as cause of action has accrued when there
      was failure to pay the amount within the
      prescribed period and the period of limitation
      starts to run which cannot be stopped on any
      account. This Court emphasised that `needless to
      say the period of one month from filing the
      complaint will be reckoned from the date
      immediately falling the day on which the period of
      15 days from the date of the receipt of the notice
      by the drawer expires'.

12.   Indisputably, the parties had been carrying on business at Chandigarh.

The Head Office of the complainant - respondent may be at Delhi but it has

a branch office at Chandigarh. It is not in dispute that the transactions were

carried on only from Chandigarh. It is furthermore not in dispute that the

cheque was issued and presented at Chandigarh. The complaint petition is

totally silent as to whether the said cheque was presented at Delhi. As

indicated hereinbefore, the learned counsel appearing on behalf of the

complainant - respondent contended that in fact the cheque was put in a

drop box but as the payment was to be obtained from the Delhi Bank, it was

sent to Delhi. In support of the said contention, a purported certificate

issued by the Citi Bank NA has been enclosed with the counter affidavit,

which reads as under:

             "This is to confirm that M/s National Panasonic
             India Pvt. Ltd. (NPI) having registered office at
             AB- 11, Community Centre, Safdarjung Enclave,
             New Delhi - 110029 are maintaining a Current
             Account No. 2431009 with our Bank at Jeevan
             Bharti Building, 3, Parliament Street, New Delhi-
             110001 only and not at any other place in India
             including Chandigarh.
             Further confirmed that CITI bank has provided the
             facility for collection of Cheques/Demand Drafts
             from branches of NPI located at various
             places/cities in India. However, all amounts of
             cheques/Demand Drafts so collected on behalf of
             National Panasonic India Private Limited are
             forwarded and debited/credited to the aforesaid

             Current Account No. 2431009 with our Bank at
             Jeeval Bharti Building, 3, Parliament Street, New
             Delhi - 110001."

13.   The complaint petition does not show that the cheque was presented

at Delhi. It is absolutely silent in that regard. The facility for collection of

the cheque admittedly was available at Chandigrh and the said facility was

availed of. The certificate dated 24.6.2003, which was not produced before

the learned court taking cognizance, even if taken into consideration does

not show that the cheque was presented at the Delhi Branch of the Citi

Bank. We, therefore, have no other option but to presume that the cheque

was presented at Chandigarh. Indisputably, the dishonour of the cheque

also took place at Chandigarh. The only question, therefore, which arises

for consideration is that as to whether sending of notice from Delhi itself

would give rise to a cause of action for taking cognizance under the

Negotiable Instruments Act.

14.   It is one thing to say that sending of a notice is one of the ingredients

for maintaining the complaint but it is another thing to say that dishonour of

a cheque by itself constitutes an offence. For the purpose of proving its case

that the accused had committed an offence under Section 138 of the

Negotiable Instruments Act, the ingredients thereof are required to be

proved. What would constitute an offence is stated in the main provision.

The proviso appended thereto, however, imposes certain further conditions

which are required to be fulfilled before cognizance of the offence can be

taken. If the ingredients for constitution of the offence laid down in the

provisos (a), (b) and (c) appended to Section 138 of the Negotiable

Instruments Act intended to be applied in favour of the accused, there

cannot be any doubt that receipt of a notice would ultimately give rise to the

cause of action for filing a complaint. As it is only on receipt of the notice

the accused at his own peril may refuse to pay the amount. Clauses (b) and

(c) of the proviso to Section 138 therefore must be read together. Issuance

of notice would not by itself give rise to a cause of action but

communication of the notice would.

15.   It is in the aforementioned situation, the distinction noticed by the

Bench in M/s Dalmia Cement (Bharat) Ltd. (supra) and the meaning of

`giving of notice' and `receiving of notice' as contained in Black's Law

Dictionary assumes significant.

16.   What is meant by `communication' albeit in different context, has

been considered by a Constitution Bench of this Court in State of Punjab vs.

Amar Singh Harika [AIR 1966 SC 1313] stating:

            "It is plain that the mere passing of an order of
            dismissal would not be effective unless it is
            published and communicated to the officer

17.   The distinction between passing of an order which is final and a

communication thereof is not necessary has been noticed by this Court

subsequently in State of Punjab vs. Khemi Ram [(1969) 3 SCC 28] stating:

            "In our view, once an order is issued and it is sent
            out to the concerned Government servant, it must
            be held to have been communicated to him, no
            matter when he actually received it. We find it
            difficult to persuade ourselves to accept the view
            that it is only from the date of the actual receipt by
            him that the order becomes effective. If that be the
            true meaning of communication, it would be
            possible for a Government servant to effectively
            thwart an order by avoiding receipt of it by one
            method or the other till after the date of his
            retirement even though such an order is passed
            and despatched to him before such date. An officer
            against whom action is sought to be taken, thus,
            may go away from the address given by him for
            service of such orders or may deliberately give a
            wrong address and thus prevent or delay its receipt
            and be able to defeat its service on him. Such a
            meaning of the word 'communication' ought not to
            be given unless the provision in question expressly
            so provides. Actual knowledge by him of an order
            where it is one of dismissal, may, perhaps, become
            necessary because of the consequences which the
            decision in The State of Punjab v. Amar Singh
            (AIR 1966 SC 1313) contemplates. But such
            consequences would not occur in the case of an
            officer who has proceeded on leave and against

            whom an order of suspension is passed because in
            his case there is no question of his doing any act or
            passing any order and such act or order being
            challenged as invalid."

      For constitution of an offence under Section 138 of the Act, the

notice must be received by the accused. It may be deemed to have been

received in certain situations. The word `communicate' inter alia means `to

make known, inform, convey, etc.'

18.   This Court in Sultan Sadik vs. Sanjay Raj Subba and Ors [(2004) 2

SCC 377], held:

            "33. The decision of this Court in Khemi Ram
            [(1969) 3 SCC 28] relied upon by Mr. Bachawat is
            not apposite as therein an order of suspension was
            in question. This Court in the said decision itself
            referred to its decision in State of Punjab v. Amar
            Singh Harika [AIR 1966 SC 1313], which stated
            that communication of an order dismissing an
            employee from service is imperative. If
            communication of an order for terminating the
            jural relationship is imperative, a fortiori it would
            also be imperative at the threshold."

19.   Section 177 of the Code of Criminal Procedure determines the

jurisdiction of a court trying the matter. The court ordinarily will have the

jurisdiction only where the offence has been committed. The provisions of

Sections 178 and 179 of the Code of Criminal Procedure are exceptions to

Section 177. These provisions presuppose that all offences are local.

20.   Therefore, the place where an offence has been committed plays an

important role. It is one thing to say that a presumption is raised that notice

is served but it is another thing to say that service of notice may not be held

to be of any significance or may be held to be wholly unnecessary.

21.   In Mosaraf Hossain Khan vs. Bhagheeratha Engg. Ltd. [(2006) 3 SCC

658], this court held:

             "30. In terms of Section 177 of the Code of
             Criminal Procedure every offence shall ordinarily
             be inquired into and tried by a court within whose
             local jurisdiction it was committed. 178 provides
             for place of inquiry or trial in the following terms:

                    `178. (a) When it is uncertain in which of
                    several local areas an offence was
                    committed, or

                    (b) where an offence is committed partly in
                    one local area and partly in another, or

                  (c) where an offence is a continuing one,
                  and continues to be committed in more local
                  areas than one, or

                  (d) where it consists of several acts done in
                  different local areas.

            31. A bare perusal of the complaint petition would
            clearly go to show that according to the
            complainant the entire cause of action arose within
            the jurisdiction of the district courts of Birbhum
            and in that view of the matter it is that court which
            will have jurisdiction to take congnizance of the
            offence. In fact the jurisdiction of the court of
            CJM, Suri, Birbhum is not in question. It is not
            contended that the complainant had suppressed
            material fact and which if not disclosed would
            have demonstrated that the offence was committed
            outside the jurisdiction of the said court. Even if
            Section 178 of the Code of Criminal Procedure is
            attracted, the court of the Chief Judicial
            Magistrate, Birbhum will alone have jurisdiction
            in the matter.

                  32. Sending of cheques from Ernakulam or
                  the respondents having an office at that
                  place did not form an integral part of 'cause
                  of action' for which the complaint petition
                  was filed by the appellant and cognizance of
                  the offence under Section 138 of the
                  Negotiable Instruments Act, 1881 was taken
                  by the Chief Judicial Magistrate, Suri."

22.   In Y.A. Ajit. v. Sofana Ajit [AIR 2007 SC 3151), this Court held:

             "The crucial question is whether any part of the
             cause of action arose within the jurisdiction of the
             concerned Court. In terms of Section 177 of the
             Code it is the place where the offence was
             committed. In essence it is the cause of action for
             initiation of the proceedings against the accused.

             While in civil cases, normally the expression
             "cause of action" is used, in criminal cases as
             stated in Section 177 of the Code, reference is to
             the local jurisdiction where the offence is
             committed. These variations in etymological
             expression do not really make the position
             different. The expression "cause of action" is
             therefore not a stranger to criminal cases."

23.   Presumption raised in support of service of notice would depend upon

the facts and circumstances of each case. Its application is on the question

of law or the fact obtaining. Presumption has to be raised not on the

hypothesis or surmises but if the foundational facts are laid down therefor.

Only because presumption of service of notice is possible to be raised at the

trial, the same by itself may not be a ground to hold that the distinction

between giving of notice and service of notice ceases to exist.

24.   Indisputably all statutes deserve their strict application, but while

doing so the cardinal principles therefor cannot be lost sight of. A Court

derives a jurisdiction only when the cause of action arose within his

jurisdiction.   The same cannot be conferred by any act of omission or

commission on the part of the accused. A distinction must also be borne in

mind between the ingredient of an offence and commission of a part of the

offence. While issuance of a notice by the holder of a negotiable instrument

is necessary, service thereof is also imperative. Only on a service of such

notice and failure on the part of the accused to pay the demanded amount

within a period of 15 days thereafter, commission of an completes. Giving

of notice, therefore, cannot have any precedent over the service. It is only

from that view of the matter in Dalmia Cement (Bharat) Ltd. v. Galaxy

Traders & Agencies Ltd., [ (2001) 6 SCC 463 ] emphasis has been laid on

service of notice.

25.   We cannot, as things stand today, be oblivious of the fact that a

banking institution holding several cheques signed by the same borrower

cannot only present the cheque for its encashment at four different places

but also may serve notices from four different places so as to enable it to file

four complaint cases at four different places.       This only causes grave

harassment to the accused. It is, therefore, necessary in a case of this nature

to strike a balance between the right of the complainant and the right of an

accused vis-`-vis the provisions of the Code of Criminal Procedure.

26.   Learned counsel for the respondent contends that the principle that

the debtor must seek the creditor should be applied in a case of this nature.

27.   We regret that such a principle cannot be applied in a criminal case.

Jurisdiction of the Court to try a criminal case is governed by the provisions

of the Criminal Procedure Code and not on common law principle.

28.   For the views we have taken it must be held that Delhi High Court

has no jurisdiction to try the case. We, however, while exercising our

jurisdiction under Article 142 of the Constitution of India direct that

Complaint Case No.1549 pending in the Court of Shri N.K. Kaushik,

Additional Sessions Judge, New Delhi, be transferred to the Court of the

District and Sessions Judge, Chandigarh who shall assign the same to a

court of competent jurisdiction. The transferee court shall fix a specific date

of hearing and shall not grant any adjournment on the date on which the

complainant and its witnesses are present.          The transferee court is

furthermore directed to dispose of the matter within a period of six months

from the date of receipt of the records of the case on assignment by the

learned District and Sessions Judge, Chandigarh.

29.   The appeal is allowed with the aforementioned observations and

directions. There shall, however, be no order as to costs.

                                                    New Delhi
December 12, 2008


 8 Replies


very helpful judgement! thanx a lot.

Pankaj Kundra (Advocate)     29 December 2008

Yes very helpful :)

sreedhar (advocate)     29 December 2008

Great work. Keep on doing such a great things.

Ravi Arora (Advocate)     29 December 2008

good keep it up sir

rajannarang (advocate)     30 December 2008

good judgement , mr. dhawan. will help no. of lawyers.

naveen (advocate&legal service provider)     30 December 2008

Dear All, as this judgement is pronounced by a division bench, so it does not overrule the previous judgement passed in SHANKARAN VAIDHYAN BALAN case as the same was also pronounced by a division bench.



Ramakrishnan.V (Lawyer)     02 July 2009

K. Bhaskaran v. Sankaran Vaidhyan Balan and Anr. [(1999) 7 SCC 510]. is the best pronounced judgement discussing the point in law and five places have been ennumerated.  Hence the judgement of forceful precednt is this case

Ramakrishnan.V (Lawyer)     02 July 2009

would anyone tell a better judgement than this Sankar vaidhyabalan's case rendered by K.T. Thomas. J

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