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SC: Landmark judgment on jurisdiction in cheque bounce cases

Vineet Kumar ,
  12 August 2014       Share Bookmark

Court :
Supreme Court of India
Brief :
The Supreme Court bench comprising of Justices T.S. Thakur, Vikramajit Sen and C. Nagappan held that a complaint of a bounced cheque must be only filed at the place of dishonour of cheque Justice T.S Thakur wrote a separate but concurrent opinion and summarized principles as following: (i) An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank. (ii) Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138. (iii) The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if (a) the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue. (b) If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonour of the cheque and (c) If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice. (iv) The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act. (v) The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant. (vi) Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured. (vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof.
Citation :
Dashrath Rupsingh Rathod Vs State of Maharashtra & Anr.




CRIMINAL APPEAL NO.   2287  OF 2009  

Dashrath Rupsingh Rathod …..Appellant


State of Maharashtra & Anr. …..Respondents



[Arising out of S.L.P.(Crl.)No.2077 of 2009]; 


[Arising out of S.L.P.(Crl.)No.2112 of 2009];


[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]; 


[Arising out of S.L.P.(Crl.)No.3762 of 2012];


[Arising out of S.L.P.(Crl.)No.3943 of 2012]; 


[Arising out of S.L.P.(Crl.)No.3944 of 2012]; AND


[Arising out of S.L.P.(Crl.)No.59 of 2013].


Page 1




1. Leave granted in Special  Leave Petitions.   These 

Appeals raise a legal nodus of substantial public importance 

pertaining  to  Court’s  territorial  jurisdiction  concerning 

criminal  complaints  filed  under  Chapter  XVII  of  the 

Negotiable Instruments  Act,  1881 (for  short,  ‘the NI  Act’). 

This  is  amply  adumbrated  by  the  Orders  dated 

3.11.2009 in I.A.No.1 in CC 15974/2009 of  the  three-

Judge Bench presided over by the then Hon’ble the Chief 

Justice of  India,  Hon’ble Mr.  Justice V.S.  Sirpurkar  and 

Hon’ble  Mr.  Justice  P.  Sathasivam  which  SLP  is  also 

concerned with the interpretation of Section 138 of the 

NI Act, and wherein the Bench after issuing notice on the 

petition directed that it be posted before the three-Judge 



2.   The earliest and the most often quoted decision 

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of  this  Court  relevant  to  the  present  conundrum is  K. 

Bhaskaran v.  Sankaran Vaidhyan Balan (1999) 7 SCC 510 

wherein  a  two-Judge  Bench  has,  inter  alia,  interpreted 

Section 138 of the NI Act to indicate that, “the offence under 

Section 138 can be completed only with the concatenation of 

a  number  of  acts.   Following  are  the  acts  which  are 

components of the said offence: (1) Drawing of the cheque, 

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

cheque  unpaid  by  the  drawee  bank,  (4)  Giving notice  in 

writing to the drawer of the cheque demanding payment of 

the  cheque  amount,  (5)  Failure  of  the  drawer  to  make 

payment within 15 days of the receipt of the notice.”  The 

provisions of  Sections 177 to 179 of  the Code of  Criminal 

Procedure, 1973 (for short, ‘CrPC’) have also been dealt with 

in  detail.   Furthermore,  Bhaskaran in  terms  draws  a 

distinction  between  ‘giving  of  notice’  and  ‘receiving  of 

notice’.  This is for the reason that clause (b) of proviso to 

Section 138 of the NI Act postulates a demand being made 

by the payee or the holder in due course of the dishonoured 

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cheque by giving a notice in writing to the drawer thereof. 

While doing so, the question of the receipt of the notice has 

also been cogitated upon.

3. The  issuance  and  the  receipt  of  the  notice  is 

significant  because  in  a  subsequent  judgment  of  a 

Coordinate Bench,  namely,  Harman Electronics Pvt. Ltd.  v. 

National  Panasonic  India  Pvt.  Ltd.  (2009)  1  SCC  720 

emphasis has been laid on the receipt  of  the notice,  inter  

alia, holding that the cause of action cannot arise by any act 

of  omission  or  commission  on  the  part  of  the  ‘accused’, 

which on a holistic reading has to be read as ‘complainant’. 

It  appears  that  Harman transacted  business  out  of 

Chandigarh only, where the Complainant also maintained an 

office, although its Head Office was in Delhi.  Harman issued 

the cheque to the Complainant at Chandigarh; Harman had 

its bank account in Chandigarh alone.  It is unclear where the 

Complainant  presented the cheque for  encashment  but  it 

issued  the  Section  138  notice  from  Delhi.   In  those 

circumstances,  this  Court  had  observed  that  the  only 

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question for  consideration was “whether  sending of  notice 

from Delhi  itself  would give rise to a cause of  action for 

taking cognizance under  the NI  Act.”   It  then went  on to 

opine  that  the  proviso  to  this  Section  “imposes  certain 

further  conditions which are required to be fulfilled before 

cognizance of  the offence can be taken.”  We respectfully 

agree  with  this  statement  of  law and underscore  that  in 

criminal  jurisprudence  there  is  a  discernibly  demarcated 

difference between the commission of  an offence and its 

cognizance leading to prosecution. The Harman approach is 

significant and sounds a discordant note to the Bhaskaran 

ratio.  Harman also highlights the reality that Section 138 of 

the NI  Act  is being rampantly misused so far as territorial  

jurisdiction for trial of the Complaint is concerned.  With the 

passage of time equities have therefore transferred from one 

end of the pendulum to the other.  It is now not uncommon 

for  the  Courts  to  encounter  the  issuance  of  a  notice  in 

compliance with clause (b) of the proviso to Section 138 of 

the NI Act from a situs which bears no connection with the 

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Accused or  with any facet  of  the transaction between the 

parties,  leave aside the place where the dishonour  of  the 

cheque has taken place.  This is also the position as regards 

the presentation of the cheque,  dishonour of which is then 

pleaded as the territorial  platform of  the Complaint  under 

Section 138 of the NI Act.  Harman, in fact, duly heeds the 

absurd and stressful situation, fast becoming common-place 

where  several  cheques  signed  by  the  same  drawer  are 

presented for encashment and requisite notices of demand 

are also despatched from different places.  It appears to us 

that justifiably so at that time, the conclusion in Bhaskaran 

was  influenced  in  large  measure  by  curial  compassion 

towards the unpaid payee/holder, whereas with the passage 

of  two  decades  the  manipulative  abuse  of  territorial 

jurisdiction has become a recurring and piquant factor.  The 

liberal  approach  preferred  in  Bhaskaran now calls  for  a 

stricter interpretation of the statute, precisely because of its 

misemployment  so  far  as  choice  of  place  of  suing  is 

concerned.   These  are  the  circumstances  which  have 

Page 6


propelled us to minutely consider the decisions rendered by 

two-Judge Benches of this Court.

4. It  is  noteworthy  that  the  interpretation  to  be 

imparted to Section 138 of  the NI  Act  also arose before a 

three-Judge  Bench  in  Shri  Ishar  Alloy Steels  Ltd.  v. 

Jayaswals Neco Ltd. (2001) 3 SCC 609 close on the heels of 

Bhaskaran.  So far as the factual matrix is concerned, the 

dishonoured cheque had been presented for encashment by 

the  Complainant/holder  in  his  bank  within  the  statutory 

period of six months but by the time it reached the drawer’s 

bank the aforementioned period of  limitation had expired. 

The question before the Court was whether the bank within 

the postulation of Section 138 read with Sections 3 and 72 of 

the NI Act was the drawee bank or the collecting bank and 

this Court held that it was the former.  It was observed that 

“non-presentation of the cheque to the drawee bank within 

the period specified in the Section would absolve the person 

issuing the cheque of his criminal liability under Section 138 

of the NI Act, who otherwise may be liable to pay the cheque 

Page 7


amount to the payee in a civil action initiated under the law. 

A combined reading of Sections 3, 72 and 138 of the NI Act 

would leave no doubt in our mind that the law mandates the 

cheque to be presented at the bank on which it is drawn if 

the drawer is to be held criminally liable.”  Clearly,  and in 

our  considered  opinion  rightly,  the  Section  had  been 

rendered 'accused-centric’.   This decision clarifies that  the 

place  where  a  complainant  may  present  the  cheque  for 

encashment  would  not  confer  or  create  territorial 

jurisdiction, and in this respect runs counter to the essence 

of  Bhaskaran which paradoxically,  in our  opinion,  makes 

actions  of  the  Complainant  an  integral  nay  nuclear 

constituent of the crime itself. 

5. The principle of  precedence should promptly and 

precisely be paraphrased.  A co-ordinate Bench is bound to 

follow  the  previously  published  view;  it  is  certainly 

competent to add to the precedent to make it logically and 

dialectically  compelling.   However,  once  a  decision  of  a 

larger  Bench has  been delivered it  is  that  decision which 

Page 8


mandatorily has to be applied; whereas a Co-ordinate Bench, 

in  the  event  that  it  finds  itself  unable  to  agree  with  an 

existing ratio, is competent to recommend the precedent for 

reconsideration by referring the case to the Chief Justice for 

constitution  of  a  larger  Bench.   Indubitably,  there  are  a 

number of decisions by two-Judge Benches on Section 138 of 

the NI Act, the majority of which apply Bhaskaran without 

noting or distinguishing on facts Ishar Alloy.  In our opinion, 

it  is imperative for  the Court  to diligently distill  and then 

apply the ratio of a decision; and the view of a larger Bench 

ought not to be disregarded.   Inasmuch as the three-Judge 

Bench  in  Ishar  Alloy has  categorically  stated  that  for 

criminal  liability to be attracted,  the subject cheque has to 

be presented to the bank on which it  is drawn within the 

prescribed  period,  Bhaskaran has  been  significantly 

whittled down if  not overruled.   Bhaskaran has also been 

drastically  diluted  by  Harman  inasmuch as  it  has  given 

primacy to the service of a notice on the Accused instead of 

its mere issuance by the Complainant.

Page 9


6. In  Prem  Chand Vijay  Kumar  v.  Yashpal  Singh 

(2005) 4 SCC 417, another two-Judge Bench held that upon a 

notice  under  Section  138  of  the  NI  Act  being  issued,  a 

subsequent  presentation  of  a  cheque  and  its  dishonour 

would not create another ‘cause of action’  which could set 

the Section 138 machinery in motion.   In that view,  if  the 

period of  limitation had run out,  a fresh notice of  demand 

was bereft  of  any legal  efficacy.   SIL Import,  USA v.  Exim 

Aides Silk Exporters (1999) 4 SCC 567 was applied in which 

the determination was that  since the requisite notice had 

been despatched by FAX on 26.6.1996 the limitation for filing 

the Section 138 Complaint expired on 26.7.1996.  What is 

interesting  is  the  observation  that  “four  constituents  of 

Section  138  are  required  to  be  proved  to  successfully 

prosecute the drawer of an offence under Section 138 of the 

NI  Act”  (emphasis  supplied).   It  is  also  noteworthy  that 

instead of the five Bhaskaran concomitants, only four have 

been spelt out in the subsequent judgment in Prem Chand. 

The  commission  of  a  crime  was  distinguished  from  its 

Page 10


prosecution which, in our considered opinion, is the correct 

interpretation of  the law.   In other  words,  the four  or  five 

concomitants of the Section have to be in existence for the 

initiation  as  well  as  the  successful  prosecution  of  the 

offence,  which  offence  however  comes  into  existence  as 

soon as subject cheque is dishonoured by the drawee bank. 

Another  two-Judge  Bench  in  Shamshad  Begum  v.  B. 

Mohammed (2008) 13 SCC 77 speaking through Pasayat  J 

this  time  around  applied  Bhaskaran and  concluded  that 

since the Section 138 notice was issued from and replied to 

Mangalore,  Courts  in  that  city  possessed  territorial 

jurisdiction.   As  already  noted  above,  this  view  is  not 

reconcilable with the later decision of Harman.

7. The  two-Judge  Bench  decision  in  Mosaraf 

Hossain Khan v. Bhagheeratha Engg. Ltd. (2006) 3 SCC 658 

requires to be discussed in some detail.  A Complaint under 

Section 138 of the NI Act was filed and cognizance was taken 

by  the  Chief  Judicial  Magistrate,  Birbhum at  Suri,  West 

Bengal for the dishonour of a number of cheques issued by 

Page 11


the  accused-company  which  had  its  headquarters  in 

Ernakulam,  Kerala  where  significantly  the  accused-

company’s  bank  on  whom the  dishonoured  cheques  had 

been drawn was located.   Several  judgments were referred 

to, but not Bhaskaran.  The third ingredient in Bhaskaran,  

i.e. the returning of the cheque unpaid by the drawee bank, 

was  not  reflected upon.   Inasmuch as  Mosaraf  Hossain 

refers copiously to the cause of action having arisen in West 

Bengal  without adverting at all  to  Bhaskaran,  leave aside 

the three-Judge Bench decision in Ishar Alloy,  the decision 

may be seen as  per  incuriam.   Moreover,  the concept  of 

forum non conveniens has no role to play under Section 138 

of  the  NI  Act,  and  furthermore  that  it  can  certainly  be 

contended  by  the  accused-company  that  it  was 

justifiable/convenient for it to initiate litigation in Ernakulam. 

If  Bhaskaran was  followed,  Courts  in  Ernakulam 

unquestionably possessed territorial jurisdiction.  It  is, 

however,  important  to  italicize  that  there  was  an 

unequivocal  endorsement  of  the  Bench  of  a  previously 

Page 12


expressed  view that,  “where  the  territorial  jurisdiction  is 

concerned the  main  factor  to  be  considered is  the place 

where the alleged offence was committed”.  In similar vein, 

this Court has opined in Om Hemrajani v. State of U.P. (2005) 

1 SCC 617, in the context of Sections 177 to 180 CrPC that 

“for jurisdiction emphasis is on the place where the offence 

is committed.”

8. The  territorial  jurisdiction  conundrum  which, 

candidly is currently in the cauldron owing to varying if not 

conflicting ratios, has been cogitated upon very recently by a 

two-Judge Bench in Criminal  Appeal  No.808 of  2013 titled 

Nishant Aggarwal  v.  Kailash  Kumar  Sharma  decided  on 

1.7.2013 and again by the same Bench in Criminal  Appeal 

No.1457 of 2013 titled Escorts Limited v. Rama Mukherjee 

decided on 17.09.2013.  Bhaskaran was followed and Ishar 

Alloy and  Harman  were  explained.   In  Nishant the 

Appellant  issued a post-dated cheque drawn on Standard 

Chartered  Bank,  Guwahati  in  favour  of  complainant-

respondent.  It appears that the Appellant had endeavoured 

Page 13


to create a case or rather a defence by reporting to his bank 

in Guwahati  as well  as to the local  police station that ‘one 

cheque  (corresponding  to  the  cheque  in  question)  was 

missing  and  hence  payment  should  be  stopped.’   The 

Respondent-drawer  was  a  resident  of  District  Bhiwani, 

Haryana;  he  presented  the  cheque  for  encashment  at 

Canara  Bank,  Bhiwani  but  it  was  returned  unpaid.   The 

holder  then issued a legal  notice which failed to elicit  the 

demanded  sum of  money  corresponding  to  the  cheque 

value,  and thereupon followed it by the filing of a criminal  

complaint  under  Sections  138  and  141  of  the  NI  Act  at 

Bhiwani.  The Judicial Magistrate, Bhiwani, vide order dated 

5.3.2011,  concluded  that  the  court  in  Bhiwani  did  not 

possess territorial  jurisdiction and he accordingly returned 

the complaint for presentation before the proper Court. The 

five concomitants of  Section 138 extracted in  Bhaskaran, 

were  reiterated  and  various  paragraphs  from  it  were 

reproduced by this Court.  Nishant also did not follow Ishar 

Alloy which,  as already analysed,  has concluded that  the 

Page 14


second  Bhaskaran concomitant,  namely,  presentation  of 

cheque to the bank refers to the drawee bank and not the 

holder’s bank, is not primarily relevant for the determination 

of territorial jurisdiction.  Nishant distinguished Ishar Alloy 

on the predication that the question of territorial jurisdiction 

had not been raised in that case.  It is axiomatic that when a 

Court  interprets  any  statutory  provision,  its  opinion  must 

apply  to  and  be  determinate  in  all  factual  and  legal 

permutations and situations.   We think that  the dictum in 

Ishar Alloy is very relevant and conclusive to the discussion 

in hand.   It also justifies emphasis that  Ishar Alloy is the 

only  case before us  which was  decided by a three-Judge 

Bench and,  therefore,  was binding on all  smaller  Benches. 

We  ingeminate  that  it  is  the  drawee  Bank  and  not  the 

Complainant’s  Bank  which  is  postulated  in  the  so-called 

second constituent of Section 138 of the NI Act, and it is this 

postulate that spurs us towards the conclusion that we have 

arrived at in the present Appeals.  There is also a discussion 

of Harman to reiterate that the offence under Section 138 is 

Page 15


complete only when the five factors are present.   It is our 

considered  view,  which  we  shall  expound  upon,  that  the 

offence in the contemplation of Section 138 of the NI Act is 

the  dishonour  of  the  cheque  alone,  and  it  is  the 

concatenation of the five concomitants of that Section that 

enable the prosecution of the offence in contradistinction to 

the completion/commission of the offence.

9. We  have  also  painstakingly  perused  Escorts 

Limited which was also decided by the  Nishant two-Judge 

Bench.   Previous  decisions  were  considered,  eventually 

leading to the conclusion that since the concerned cheque 

had  been  presented  for  encashment  at  New  Delhi,  its 

Metropolitan Magistrate possessed territorial  jurisdiction to 

entertain and decide the subject  Complaint  under  Section 

138 of the NI Act.  Importantly, in a subsequent order, in FIL 

Industries Ltd. v. Imtiyaz Ahmed Bhat passed on 12

2013, it was decided that the place from where the statutory 

notice  had  emanated  would  not  of  its  own  have  the 

consequence  of  vesting  jurisdiction  upon  that  place. 



Page 16


Accordingly, it bears repetition that the ratio in Bhaskaran 

has been drastically diluted in that the situs of the notice, 

one of the so-called five ingredients of Section 138, has now 

been  held  not  to  clothe  that  Court  with  territorial 

competency.  The conflicting or incongruent opinions need to 

be resolved. 


10. We shall  take a short digression in terms of brief 

discussion of  the approach preferred by this  Court  in the 

context of  Section 20 of  the Code of Civil  Procedure,  1908 

(hereinafter referred to as, ‘CPC’),  which inter alia,  enjoins 

that a suit must be instituted in a court within the local limits 

of whose jurisdiction the Defendant actually and voluntarily 

resides, or carries on business, or personally works for gain, 

or where the cause of action wholly or in part arises.   The 

Explanation to that Section is important; it prescribes that a 

corporation shall be deemed to carry on business at its sole 

or  principal  office,  or,  in  respect  of  any  cause  of  action 

Page 17


arising at any place where it has also a subordinate office, at 

such  place.   Since  this  provision  primarily  keeps  the 

Defendant in perspective,  the corporation spoken of in the 

Explanation,  obviously  refers  to  the  Defendant.   A  plain 

reading of Section 20 of the CPC arguably allows the Plaintiff 

a multitude of choices in regard to where it may institute its 

lis, suit or action.   Corporations and partnership firms, and 

even sole proprietorship concerns, could well be transacting 

business simultaneously in several cities.  If sub-sections (a) 

and (b) of Section 20 are to be interpreted disjunctively from 

sub-section (c), as the use of the word ‘or’ appears to permit 

the Plaintiff  to file the suit at any of  the places where the 

cause of action may have arisen regardless of whether the 

Defendant  has  even  a  subordinate  office  at  that  place. 

However, if the Defendants’ location is to form the fulcrum of 

jurisdiction, and it has an office also at the place where the 

cause  of  action  has  occurred,  it  has  been  held  that  the 

Plaintiff is precluded from instituting the suit anywhere else. 

Obviously,  this  is  also  because  every  other  place  would 

Page 18


constitute  a  forum  non  conveniens.   This  Court  has 

harmonised the various hues of the conundrum of the place 

of  suing in several  cases  and has  gone to the  extent  of 

laying down that it should be courts endeavour to locate the 

place where the cause of action has substantially arisen and 

reject others where it  may have incidentally arisen.   Patel 

Roadways Limited, Bombay v. Prasad Trading Company, AIR 

1992 SC 1514 = (1991)  4 SCC 270 prescribes that  if  the 

Defendant-corporation has a subordinate office in the place 

where the cause of action arises, litigation must be instituted 

at that place alone,  regardless of  the amplitude of  options 

postulated in Section 20 of the CPC.  We need not dilate on 

this  point  beyond  making  a  reference  to  ONGC  v.  Utpal 

Kumar Basu (1994) 4 SCC 711 and South East Asia Shipping 

Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. (1996) 3 SCC 443.

11. We are alive to the possible incongruities that are 

fraught  in extrapolating decisions relating to civil  law onto 

criminal law, which includes importing the civil law concept 

of  “cause  of  action”  to  criminal  law  which  essentially 

Page 19


envisages  the  place  where  a  crime  has  been  committed 

empowers  the  Court  at  that  place  with  jurisdiction.   In 

Navinchandra N.  Majithia v.  State of  Maharashtra (2000) 7 

SCC 640  this  Court  had  to  consider  the  powers  of  High 

Courts  under  Article  226(2)  of  the  Constitution  of  India. 

Noting the presence of the phrase “cause of action” therein 

it  was  clarified  that  since  some  events  central  to  the 

investigation  of  the  alleged  crime  asseverated  in  the 

Complaint  had  taken  place  in  Mumbai  and  especially 

because the fundamental  grievance was the falsity of  the 

Complaint  filed  in  Shillong,  the  writ  jurisdiction  of  the 

Bombay  High  Court  was  unquestionably  available.   The 

infusion of the concept of ‘cause of action’ into the criminal  

dispensation has led to subsequent confusion countenanced 

in  High  Courts.   It  seems  to  us  that  Bhaskaran allows 

multiple venues to the Complainant  which runs counter to 

this Court’s preference for  simplifying the law.   Courts are 

enjoined to interpret the law so as to eradicate ambiguity or 

nebulousness, and to ensure that legal proceedings are not 

Page 20


used  as  a  device  for  harassment,  even  of  an  apparent 

transgressor  of  the law.   Law’s endeavour  is to bring the 

culprit  to  book  and to  provide succour  for  the aggrieved 

party  but  not  to  harass  the  former  through  vexatious 

proceedings.   Therefore,  precision  and  exactitude  are 

necessary  especially  where  the  location  of  a  litigation  is 



12. The provisions which will have to be examined and 

analysed are reproduced for facility of reference :

Negotiable Instruments Act, 1881

“138. Dishonour of cheque for insufficiency, etc., of funds

in the account.-Where any cheque drawn by a person on an account



























in whole or in part,  of any debt or other liability,  is returned











































an agreement made with that bank, such person shall

be deemed to have committed an offence and shall, without preju-

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dice to any other provisions of this Act, be punished with imprisonment


for a term which may be extended to two years,  or with

fine which may extend to twice the amount of the cheque, or with


Provided that nothing contained in this section shall  apply


(a) the cheque has been presented to the bank within a period























(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


















(c) the drawer of such cheque fails to make the payment of

the said amount of money to the payee or,  as the case

may  be,  to  the  holder  in  due  course  of  the  cheque,

within fifteen days of the receipt of the said notice.

Explanation. For the purposes of this section, “debt or

other liability” means a legally enforceable debt or other liability.

142.  Cognizance  of  offences.-Notwithstanding  anything

contained in the Code of Criminal Procedure, 1973 (2 of 1974)-

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(a) no court shall take cognizance of any offence punishable

under section 138 except upon a complaint, in writing,

made by the payee or, as the case may be, the holder in

due course of the cheque;

(b)  such complaint is made within one month of the date on

which the cause of action arises under clause (c) of the

proviso to section 138;

Provided that the cognizance of a complaint may be

taken by the Court  after  the prescribed period,  if  the

complainant  satisfies  the Court  that  he  had sufficient

cause for not making a complaint within such period.

(c)  no court inferior to that of a Metropolitan Magistrate or a

Judicial Magistrate of the first class shall try any offence

punishable under section 138.”

Code of Criminal Procedure, 1973

“177. Ordinary place of inquiry and trial.- Every offence shall

ordinarily be inquired into and tried by a Court within whose local

jurisdiction it was committed.

178. Place of inquiry or trial.- (a) When it is uncertain in which

of several local areas an offence was committed, or

(b) where an offence is committed partly in one local area

and partly in another, or

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(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


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.”


13. The XVIIth fasciculus of the Negotiable Instruments 

Act containing Sections 138 to 142 was introduced into the 

statute in 1988.  The avowed intendment of the amendment 

was to enhance the acceptability of cheques.  It was based 

on the Report  of  the Committee on Banking Laws  by Dr. 

Rajamannar, submitted in 1975, which suggested, inter alia, 

penalizing the issuance of  cheque without  sufficient  funds. 

The  Minister  of  Finance  had  assuaged  apprehensions  by 

Page 24


arguing  that  safeguards  for  honest  persons  had  been 

incorporated in the provisions, viz.,   (i)  the cheque should 

have been issued in discharge of  liability;  (ii)  the cheque 

should be presented within its validity period;  (iii) a Notice 

had to be sent by the Payee demanding payment within 15 

days of  receiving notice of  dishonour;  (iv)  the drawer  was 

allowed to make payment within 15 days from the date of 

receipt of notice; (v) Complaint was to be made within one 

month of the cause of action arising; (vi) no Court inferior to 

that  of  MM or  JMFC was to  try the offence.   The Finance 

Minister  had  also  stated  that  the  Court  had  discretion 

whether  the  Drawer  would  be  imprisoned  or/and  fined. 

Detractors,  however,  pointed  out  that  the  IPC  already 

envisioned  criminal  liability  for  cheque-bouncing  where 

dishonest or fraudulent intention or mens rea on part of the 

Drawer  was  evident,  namely,  cheating,  fraud,  criminal 

breach of trust etc.  Therefore, there was no justification to 

make the dishonour of cheques a criminal offence, ignoring 

factors  like  illiteracy,  indispensable  necessities, 

Page 25


honest/innocent  mistake,  bank  frauds,  bona  fide belief, 

and/or unexpected attachment or freezing of account in any 

judicial  proceedings as it would bring even honest persons 

within the ambit  of  Section 138 NI  Act.   The possibility of 

abusing the provision as a tool of harassment could also not 

be ruled out.  Critics also decried the punishment for being 

harsh; that civil liability can never be converted into criminal 

liability; that singling out cheques out of all other negotiable 

instruments would be violative of Article 14 of Constitution of 

India.    Critics  contended  that  there  was  insufficient 

empirical  enquiry  into  statutes  or  legislation  in  foreign 

jurisdictions  criminalizing  the  dishonour  of  cheques  and 

statistics  had  not  been  made  available  bearing  out  that 

criminalization would increase the acceptability of  cheque. 

The Minister of Finance was not entirely forthright when he 

stated  in  Parliament  that  the  drawer  was  also  allowed 

sufficient opportunity to say whether the dishonour was by 

mistake.  It must be borne in mind that in the U.K. deception 

and dishonesty are key elements which require to be proved. 

Page 26


In  the  USA,  some  States  have  their  own  laws,  requiring 

fraudulent  intent  or  knowledge of  insufficient  funds  to  be 

made  good.  France  has  criminalized  and  subsequently 

decriminalized  the  dishonour  except  in  limited 

circumstances.  Instead, it provides for disqualification from 

issuing cheques, a practice which had been adopted in Italy 

and Spain also.   We have undertaken this  succinct  study 

mindful of the fact that Parliamentary debates have a limited 

part  to play in interpretation of  statutes,  the presumption 

being that  Legislators  have the experience,  expertise and 

language skills to draft  laws which unambiguously convey 

their intentions and expectations for the enactments.  What 

is palpably clear is that Parliament was aware that they were 

converting civil liability into criminal content inter alia by the 

deeming  fiction  of  culpability  in  terms  of  the  pandect 

comprising Section 138 and the succeeding Sections, which 

severely  curtail  defences  to  prosecution.   Parliament  was 

also  aware  that  the  offence  of  cheating  etc.,  already 

envisaged in the IPC, continued to be available. 

Page 27



14. We  have  already  cautioned  against  the 

extrapolation of civil law concepts such as “cause of action” 

onto criminal  law.   Section 177 of the CrPC unambiguously 

states that every offence shall ordinarily be inquired into and 

tried  by  a  Court  within  whose  local  jurisdiction  it  was 

committed.  “Offence”, by virtue of the definition ascribed to 

the  word by  Section  2(n)  of  the  CrPC means  any  act  or 

omission made punishable by any law.  Halsbury states that 

the venue for the trial of a crime is confined to the place of 

its  occurrence.   Blackstone opines that  crime is local  and 

jurisdiction over it vests in the Court and Country where the 

crime is committed.   This is obviously the  raison d’etre for 

the CrPC making a departure from the CPC in not making the 

“cause of action” routinely relevant for the determination of 

territoriality  of  criminal  courts.   The  word  “action”  has 

traditionally been understood to be synonymous to “suit”, or 

as ordinary proceedings in a Court of justice for enforcement 

Page 28


or protection of the rights of the initiator of the proceedings. 

“Action, generally means a litigation in a civil  Court for the 

recovery of  individual  right  or  redress of  individual  wrong, 

inclusive, in its proper legal sense, of suits by the Crown” - 

[Bradlaugh v. Clarke 8 Appeal Cases 354 p.361].  Unlike civil 

actions,  where  the  Plaintiff  has  the  burden  of  filing  and 

proving its case, the responsibility of investigating a crime, 

marshalling evidence and witnesses,  rests  with the State. 

Therefore, while the convenience of the Defendant in a civil 

action may be relevant,  the convenience of  the so called 

complainant/victim has little or  no role to play in criminal 

prosecution.   Keeping in  perspective  the  presence  of  the 

word  “ordinarily”  in  Section  177  of  CrPC,  we  hasten  to 

adumbrate  that  the exceptions  to it  are contained in the 

CrPC itself, that is, in the contents of the succeeding Section 

178.  The CrPC also contains an explication of “complaint” as 

any  allegation  to  a  Magistrate  with  a  view to  his  taking 

action in respect of the commission of an offence; not being 

a police report.   Prosecution ensues  from a Complaint  or 

Page 29


police report for the purpose of determining the culpability of 

a person accused of the commission of a crime; and unlike a 

civil  action or  suit  is  carried out  (or  ‘prosecuted’)  by the 

State or  its  nominated agency.   The principal  definition of 

“prosecution” imparted by Black’s Law Dictionary 5

is “a criminal  action;  the proceeding instituted and carried 

on by due process of law,  before a competent Tribunal,  for 

the  purpose  of  determining  the  guilt  or  innocence  of  a 

person charged with crime.”  These reflections are necessary 

because Section 142(b)  of  the NI  Act  contains the words, 

“the  cause  of  action  arises  under  the  proviso  to  Section 

138”,  resulting arguably,  but in our opinion irrelevantly,  to 

the blind borrowing of  essentially civil  law attributes onto 

criminal proceedings.  We reiterate that Section 178 admits 

of  no debate  that  in criminal  prosecution,  the concept  of 

“cause of action”,  being the bundle of facts required to be 

proved in a suit and accordingly also being relevant for the 

place of  suing, is not pertinent or germane for determining 

territorial  jurisdiction of  criminal  Trials.   Section 178, CrPC 



Page 30


explicitly  states  that  every  offence  shall  ordinarily  be 

inquired  into  and  tried  by  a  Court  within  whose  local 

jurisdiction it was committed.  Section 179 is of similar tenor. 

We are also unable to locate  any provision of  the NI  Act 

which  indicates  or  enumerates  the  extraordinary 

circumstances  which  would  justify  a  departure  from the 

stipulation that the place where the offence is committed is 

where the prosecution has to be conducted.   In fact, since 

cognizance of the offence is subject to the five Bhaskaran 

components  or  concomitants  the  concatenation  of  which 

ripens the already committed offence under Section 138 NI 

Act  into  a  prosecutable  offence,  the  employment  of  the 

phrase  “cause  of  action”  in Section 142 of  the NI  Act  is 

apposite  for  taking  cognizance,  but  inappropriate  and 

irrelevant for determining commission of the subject offence. 

There are myriad examples of the commission of a crime the 

prosecution  of  which  is  dependent  on  extraneous 

contingencies  such  as  obtainment  of  sanction  for 

prosecution under Section 19 of the Prevention of Corruption 

Page 31


Act 1988.  Similar situation is statutorily created by Section 

19 of the Environmental  Protection Act 1986, Section 11 of 

the Central  Sales Tax Act 1956, Section 279 of the Income 

Tax Act,  Sections  132 and 308,  CrPC,  Section 137 of  the 

Customs  Act  etc.   It  would  be  idle  to  contend  that  the 

offence comes into existence only on the grant of permission 

for  prosecution,  or  that  this  permission  constitutes  an 

integral part of the offence itself.  It would also be futile to 

argue that the place where the permission is granted would 

provide the venue for the trial.  If sanction is not granted the 

offence does not vanish.  Equally, if sanction is granted from 

a place other than where the crime is committed,  it is the 

latter which will remain the place for its prosecution.


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


of  legislation are normally not  strictly or  comprehensively 

determinative of the sweep of the actual Section itself, but it 

does presage its intendment.  See: Frick India Ltd. v. Union of 

India  (1990)  1  SCC  400  and  Forage  &  Co.  v.  Municipal 

Corporation  of  Greater  Bombay  (1999)  8  SCC  577. 

Accordingly, unless the provisions of the Section clearly point 

to the contrary, the offence is concerned with the dishonour 

of  a cheque;  and in the conundrum before us the body of 

this provision speaks in the same timbre since it refers to a 

cheque being “returned by the bank unpaid”.   None of the 

provisions  of  the  IPC  have  been  rendered  nugatory  by 

Section 138 of the NI Act and both operate on their own.  It is 

trite that mens rea is the quintessential of every crime. The 

objective  of  Parliament  was  to  strengthen  the  use  of 

cheques,  distinct  from  other  negotiable  instruments,  as 

mercantile tender and therefore it became essential for the 

Section 138 NI Act offence to be freed from the requirement 

of proving  mens rea.   This has been achieved by deeming 

the commission of  an offence de hors  mens rea not  only 

Page 33


under Section 138 but also by virtue of the succeeding two 

Sections.  Section 139 carves out the presumption that the 

holder of a cheque has received it for the discharge of any 

liability.  Section 140 clarifies that it will not be available as a 

defence to  the drawer  that  he had no reason to  believe, 

when he issued the cheque,  that it would be dishonoured. 

Section  138  unequivocally  states  that  the  offence  is 

committed no sooner the drawee bank returns the cheque 


16. Section 138 NI Act is structured in two parts – the 

primary and the provisory.  It must be kept in mind that the 

Legislature does not ordain with one hand and immediately 

negate  it  with  the  other.  The  proviso  often  carves  out  a 

minor detraction or diminution of the main provision of which 

it  is  an  appendix  or  addendum or  auxiliary.   Black  Law 

Dictionary states in the context of a proviso that it is – “a 

limitation  or  exception  to  a  grant  made  or  authority 

conferred, the effect of which is to declare that the one shall 

not  operate,  or the other  be exercised,  unless in the case 

Page 34


provided.  …. A clause or part of a clause in a statute,  the 

office  of  which  is  either  to  except  something  from the 

enacting clause, or to qualify or restrain its generality, or to 

exclude  some  possible  ground  of  misinterpretation  of  its 

extent.”  It should also be kept in perspective that a proviso 

or a condition are synonymous.    In our  perception in the 

case in hand the contents of the proviso place conditions on 

the operation of  the main provision,  while it  does form a 

constituent of  the crime itself, it modulates or regulates the 

crime  in  circumstances  where,  unless  its  provisions  are 

complied  with,  the  already  committed  crime  remains 

impervious to prosecution.  The proviso to Section 138 of the 

NI Act features three factors which are additionally required 

for prosecution to be successful.  In this aspect Section 142 

correctly employs the term “cause of action” as compliance 

with the three factors contained in the proviso are essential 

for the cognizance of the offence, even though they are not 

part of the action constituting the crime.   To this extent we 

respectfully  concur  with  Bhaskaran in  that  the 

Page 35


concatenation  of  all  these  concomitants,  constituents  or 

ingredients  of  Section  138  NI  Act,  is  essential  for  the 

successful  initiation  or  launch  of  the  prosecution.   We, 

however, are of the view that so far as the offence itself the 

proviso has no role to play.  Accordingly a reading of Section 

138 NI Act in conjunction with Section 177, CrPC leaves no 

manner  of  doubt  that  the  return  of  the  cheque  by  the 

drawee  bank  alone  constitutes  the  commission  of  the 

offence  and  indicates  the  place  where  the  offence  is 


17. In this  analysis  we hold that  the place,  situs  or 

venue  of  judicial  inquiry  and  trial  of  the  offence  must 

logically be restricted to where the drawee bank, is located. 

The law should not be warped for commercial exigencies.  As 

it  is Section 138 of  the NI  Act  has introduced a deeming 

fiction  of  culpability,  even  though,  Section  420  is  still 

available  in  case  the  payee  finds  it  advantageous  or 

convenient  to  proceed  under  that  provision.   An 

interpretation should not be imparted to Section 138 which 

Page 36


will  render  it  as  a  device  of  harassment  i.e.  by  sending 

notices from a place which has no casual connection with the 

transaction itself, and/or by presenting the cheque(s) at any 

of the banks where the payee may have an account.  In our 

discernment,  it  is  also  now  manifest  that  traders  and 

businessmen  have  become  reckless  and  incautious  in 

extending credit  where  they  would heretofore  have  been 

extremely  hesitant,  solely  because  of  the  availability  of 

redress by way of criminal proceedings.  It is always open to 

the creditor to insist that the cheques in question be made 

payable at  a place of  the creditor’s convenience.   Today’s 

reality  is  that  the  every  Magistracy  is  inundated  with 

prosecutions under Section 138 NI Act, so much so that the 

burden  is  becoming  unbearable  and  detrimental  to  the 

disposal  of other equally pressing litigation.   We think that 

Courts  are not  required to  twist  the law to  give relief  to 

incautious or impetuous persons; beyond Section 138 of the 

NI Act. 

18. We feel compelled to reiterate our empathy with a 

Page 37


payee who has been duped or deluded by a swindler  into 

accepting a cheque as consideration for delivery of  any of 

his  property;  or  because  of  the  receipt  of  a  cheque  has 

induced the payee to omit to do anything resulting in some 

damage to the payee.  The relief introduced by Section 138 

of the NI Act is in addition to the contemplations in the IPC. 

It  is still  open to such a payee recipient  of  a dishonoured 

cheque to lodge a First Information Report with the Police or 

file a Complaint directly before the concerned Magistrate.  If 

the payee succeeds in establishing that the inducement for 

accepting  a  cheque  which  subsequently  bounced  had 

occurred where he resides or ordinarily transacts business, 

he will  not  have to suffer the travails of  journeying to the 

place where the cheque has been dishonoured.  All remedies 

under the IPC and CrPC are available to such a payee if he 

chooses  to  pursue  this  course  of  action,  rather  than  a 

Complaint under Section 138 of the NI Act.  And of course, 

he can always file a suit for recovery wherever the cause of 

action arises dependent on his choosing. 

Page 38


19. The  interpretation  of  Section  138  of  the  NI  Act 

which  commends  itself  to  us  is  that  the  offence 

contemplated therein stands committed on the dishonour of 

the cheque, and accordingly the JMFC at the place where this 

occurs  is  ordinarily  where  the  Complaint  must  be  filed, 

entertained and tried.  The cognizance of the crime by the 

JMFC at  that  place however,  can be taken only when the 

concomitants  or  constituents  contemplated by the Section 

concatenate with each other.  We clarify that the place of the 

issuance  or  delivery of  the statutory notice  or  where the 

Complainant chooses to present the cheque for encashment 

by  his  bank  are  not  relevant  for  purposes  of  territorial 

jurisdiction of  the Complaints even though non-compliance 

thereof will inexorably lead to the dismissal of the complaint. 

It cannot be contested that considerable confusion prevails 

on  the  interpretation  of  Section  138  in  particular  and 

Chapter XVII in general of the NI Act.  The vindication of this 

view is  duly  manifested  by  the  decisions  and  conclusion 

arrived at by the High Courts even in the few cases that we 

Page 39


shall  decide  by  this  Judgment.   We  clarify  that  the 

Complainant is statutorily bound to comply with Section 177 

etc. of the CrPC and therefore the place or situs where the 

Section 138 Complaint is to be filed is not of his choosing.  

The territorial  jurisdiction is  restricted to the Court  within 

whose local jurisdiction the offence was committed, which in 

the present context is where the cheque is dishonoured by 

the bank on which it is drawn. 

20. We are quite alive to the magnitude of the impact 

that the present decision shall have to possibly lakhs of cases 

pending in various Courts spanning across the country.   One 

approach could be to declare that  this judgment  will  have 

only prospective pertinence,  i.e.  applicability to Complaints 

that may be filed after this pronouncement.   However, keep-

ing in perspective the hardship that this will continue to bear 

on alleged accused/respondents who may have to travel long 

distances in conducting their defence, and also mindful of the 

legal implications of proceedings being permitted to continue 

in a Court devoid of jurisdiction, this recourse in entirety does 

Page 40


not commend itself to us.  Consequent on considerable  con-

sideration  we  think  it  expedient  to  direct  that  only  those 

cases where, post the summoning and appearance of the al-

leged Accused, the recording of evidence has commenced as 

envisaged in Section 145(2)  of  the Negotiable Instruments 

Act, 1881, will proceeding continue  at that place.  To clarify, 

regardless of whether evidence has been led before the Mag-

istrate at the pre-summoning stage, either by affidavit or by 

oral  statement,  the Complaint  will  be maintainable only at 

the place where the cheque stands dishonoured.  To obviate 

and eradicate any legal complications, the category of Com-

plaint  cases where proceedings have gone to the stage of 

Section  145(2)  or  beyond shall  be  deemed to  have  been 

transferred by us from the Court ordinarily possessing territo-

rial  jurisdiction,  as  now clarified,  to  the  Court  where it  is 

presently pending.   All other Complaints (obviously including 

those where the accused/respondent has not been properly 

served) shall be returned to the Complainant for filing in the 

proper Court, in consonance with our exposition of the law.  If 

Page 41


such Complaints are filed/refiled within thirty days of their re-

turn, they shall be deemed to have been filed within the time 

prescribed by law,  unless the initial  or prior filing was itself 

time barred. 


Crl. Appeal No.2287 of 2009

21. A learned Single Judge of the High Court of Judicature at 

Bombay,  Nagpur  Bench  has,  pursuant  to  a  threadbare 

discussion  of  Bhaskaran concluded  that  since  the 

concerned cheque was drawn on the Bank of India, Bhandara 

Branch, Maharashtra where it was dishonoured, the Judicial 

Magistrate  First  Class,  Digras,  District  Yavatmal  had  no 

jurisdiction to entertain the Complaint.  It is pertinent to note 

that  the subject  cheque was presented at  Digras,  District 

Yavatmal  where  the  Complainant  had  a  bank  account 

although he was a resident of District Washim, Maharashtra. 

The learned Single Judge,  in the impugned judgment,  had 

rightly  rejected  the  argument  that  the  Complaint  itself 

Page 42


should be dismissed; instead he ordered that it be returned 

to the complainant for filing in the appropriate Court.  

The Appeal is accordingly dismissed.

Crl. Appeal No.  1593   of 2014

[Arising out of S.L.P.(Crl.)No.2077 of 2009

22. In  this  Appeal  the  Respondent-accused,  having 

purchased  electronic  items  from the  Appellant-company, 

issued the cheque in question drawn on UCO Bank,  Tangi, 

Orissa which was presented by the Complainant-company at 

State Bank of India, Ahmednagar Branch, Maharashtra as its 

branch office was located at Ahmednagar.  The cheque was 

dishonoured by UCO Bank,  Tangi, Orissa.   A Complaint was 

filed before JMFC, Ahmednagar.  An application was filed by 

the Respondent-accused under Section 177 CrPC questioning 

the jurisdiction of the JMFC Ahmednagar, who held that since 

the demand notice was issued from and the payment was 

claimed at Ahmednagar, he possessed jurisdiction to try the 

Complaint.  The High Court disagreed with the conclusion of 

the JMFC,  Ahmednagar that  the receipt  of  notice and non-

payment  of  the demanded amount  are factors  which will 

Page 43


have prominence over  the place wherefrom the notice of 

demand was issued and held that JMFC, Ahmednagar did not 

have the territorial jurisdiction to entertain the Complaint.  In 

view of  the foregoing discussion on the issue above,  the 

place where the concerned cheque had been dishonoured, 

which in the case in hand was Tangi,  Orissa,  the Appeal  is 

allowed with the direction that the Complaint be returned to 

the Complainant for further action in accordance with law.

Crl. Appeal Nos. 1594, 1595  & 1601 to 1603    of 2014

[Arising  out  of  S.L.P.(Crl.)Nos.2112  of  2009  and  2117  of


 3762 of 2012; 3943 of 2012; 3944 of 2012]

23. The facts being identical to Criminal Appeal arising out 

of  S.L.P.(Crl.)No.2077  of  2009,  these  Appeals  stand 


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


carrying on their business.   The cheques in question were 

issued  by  the  Respondent  No.2-accused  drawn  on  Indian 

Overseas Bank, Connaught Place, New Delhi.  However, the 

same  were  presented  and  dishonoured  at  Nagpur, 

Maharashtra where the Complainant  states  it  also has  an 

office.  There is  no clarification why  the cheques  had not 

been  presented  in  Delhi  where  the  Complainant  had  its 

Registered Office, a choice which we think is capricious and 

perfidious,  intended to  cause harassment.   Upon cheques 

having been dishonoured by the concerned bank at  Delhi, 

five  Complaints  were  filed  before  Judicial  Magistrate  First 

Class, Nagpur who heard the Complaints, and also recorded 

the evidence led by both the parties.   However,  the JMFC, 

Nagpur  acquitted  the  Respondent  No.2-accused  on  the 

ground  of  not  having  territorial  jurisdiction.   On  appeals 

being filed before the High Court of Bombay, the judgment 

of  the  JMFC,  Nagpur  was  partly  set  aside  so  far  as  the 

acquittal  of  the  Respondent  No.2-accused  was  concerned 

and it was ordered that the Complaints be returned for filing 

Page 45


before the proper Court.  In view of the conclusion arrived at 

by us above, these Appeals are also dismissed.

Crl. Appeal No. 1604   of 2014

[Arising out of S.L.P.(Crl.)No.59 of 2013]

25. The cheque in question was drawn by the Respondent-

accused on State Bank of Travancore, Delhi. However, it was 

presented by the Appellant-complainant at Aurangabad.   A 

Complaint  was  filed before JMFC,  Aurangabad who issued 

process.   Respondent-accused  filed  an  application  under 

Section 203 of CrPC seeking dismissal of the Complaint.  The 

application  was  dismissed  on  the  predication  that  once 

process  had  been  initiated,  the  Complaint  could  not  be 

dismissed.   On a writ  petition being filed before the High 

Court of Bombay, Aurangabad Bench, the order of issuance 

of process was set aside and the Complaint was ordered to 

be returned for being presented before a competent  court 

having jurisdiction to entertain the same.   The High Court 

had  correctly  noted  that  the  objection  pertained  to  the 

territorial  jurisdiction  of  the  JMFC,  Aurangabad,  a  feature 

Page 46


which had not been comprehensively grasped by the latter. 

The  High  Court  noted  that  the  Registered  Office  of  the 

Complainant  was  at  Chitegaon,  Tehsil  Paithan,  District 

Aurangabad whereas the Accused was transacting business 

from Delhi.   The  High  Court  pithily  underscored  that  in 

paragraph  4  of  the  Complaint  it  had  been  specifically 

contended that  credit  facility was given to the Accused in 

Delhi,  where the Complainant-company also had its branch 

office.   The  statutory  notice  had  also  emanated  from 

Aurangabad,  and  it  had  been  demanded  that  payment 

should be made in that city within the specified time.  It was 

also  the  Complainant’s  case  that  the  Invoice,  in  case  of 

disputes,  restricted jurisdiction to Aurangabad courts;  that 

intimation of the bouncing of  the cheques was received at 

Aurangabad.  It is however necessary to underscore that the 

Accused had clarified that the subject transaction took place 

at Delhi  where the goods were supplied and the offending 

cheque was handed over  to the Complainant.   It  appears 

that  a Civil  Suit  in respect  of  the recovery of  the cheque 

Page 47


amount  has  already  been  filed  in  Delhi.   We  may 

immediately reiterate  that  the principles pertaining to the 

cause of action as perceived in civil law are not relevant in 

criminal  prosecution.   Whilst  the  clause  restricting 

jurisdiction to courts at  Aurangabad may have efficacy for 

civil  proceedings,  provided any part of  the cause of  action 

had arisen in Aurangabad, it has no bearing on the situs in 

criminal  prosecutions.   Since  a  Civil  Suit  is  pending,  we 

hasten to clarify that we are not expressing any opinion on 

the question of whether the courts at Delhi enjoy jurisdiction 

to try the Suit for recovery.  In the impugned judgment, the 

High Court duly noted Bhaskaran  and Harman.  However, 

it committed an error in analyzing the cause of action as well 

as  the  covenant  restricting  jurisdiction  to  Aurangabad  as 

these  are  relevant  only  for  civil  disputes.   However,  the 

impugned judgment  is beyond interference inasmuch as it 

concludes  that  the  JMFC,  Aurangabad  has  no  jurisdiction 

over the offence described in the Complaint.  The Appeal is 

accordingly dismissed.

Page 48








New Delhi 

August 1, 2014.  

Page 49











(Arising out of S.L.P. (Crl.) No.2077 of 2009)


(Arising out of S.L.P. (Crl.) No.2112 of 2009)


(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)


(Arising out of S.L.P. (Crl.) No.3762 of 2012)


(Arising out of S.L.P. (Crl.) No.3943 of 2012)


(Arising out of S.L.P. (Crl.) No.3944 of 2012)



(Arising out of S.L.P. (Crl.) No.59 of 2013)

Page 50

T.S. Thakur, J.



1. I  have had the advantage of going through the draft  order 

proposed by my esteemed brother  Vikramajit  Sen,  J.  I  entirely 

agree with the conclusions which my erudite brother  has drawn 

based  on  a  remarkably  articulate  process  of  reasoning  that 

illumines the draft judgment authored by him. I would all the same 

like  to  add  a  few lines  of  my  own  not  because  the  order  as 

proposed  leaves  any  rough  edges  to  be  ironed  out  but  only 

because the question of law that arises for determination is not 

only substantial but of considerable interest and importance for the 

commercial world.  The fact that the view being taken by us strikes 

a discordant  note on certain aspects  which  have for  long been 

considered settled by earlier decisions of this Court being     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


territorial  jurisdiction  of  the  Courts  to  try  offences  punishable 

under  Section  138  of  the  Negotiable  Instruments  Act,  1881 

(hereinafter called “NI Act”).  Bhaskaran’s case was heard by a 

two-judge  Bench  of  this  Court  who  took  the  view  that  the 

jurisdiction  to  try  an  offence  under  Section  138  could  not  be 

determined only by reference to the place where the cheque was 

dishonoured. That is because dishonour of the cheque was not by 

itself an offence under Section 138 of The Negotiable Instruments 

Act, 1881, observed the Court. The offence is complete only when 

the drawer  fails to pay the cheque amount  within the period of 

fifteen days stipulated under clause (c) of the proviso to Section 

138 of the Act. Having said that the Court recognised the difficulty 

in fixing a place where such failure could be said to have taken 

place.  It  could,  said the Court,  be the place where the drawer 

resides or the place where the payee resides or the place where 

either of them carries on business. To resolve this uncertainty the 

Court turned to Sections 178 and 179 of the Cr.P.C. to hold that 

since an offence under Section 138 can be completed only with the 

Page 52


concatenation of five acts that constituted the components of the 

offence any Court within whose jurisdiction any one of those acts 

was committed would have the jurisdiction to try the offence.  The 

Court held:

“The offence under Section 138 of the Act can be completed 

only with the concatenation of a number of acts. The following












(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













receipt of the notice.

It is not necessary that all the above five acts should have 

been perpetrated at  the same locality.  It  is  possible  that 

each of those five acts could be done at five different localities.














non for the completion of the offence under Section 138 of 

the Code. In this context a reference to Section 178(d) of 

the Code is useful. It is extracted below:

“178. (a)-(c) * * *

(d) where the offence consists of several acts done in  

different local areas, it may be enquired into or tried

by a court having jurisdiction over any of  such local 


Thus it is clear, if the five different acts were done in five 

different localities any one of the courts exercising jurisdiction














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


done. As the amplitude stands so widened and so expansive

it is an idle exercise to raise jurisdictional question regarding 

the offence under Section 138 of the Act.”

2. Bhaskaran held the field for two years. The first blow to the 

view taken by this  Court  in  Bhaskaran’s case  was  dealt  by a 

three-Judge Bench decision in  Shri Ishar  Alloy Steels Ltd. v.  

Jayaswals  Neco Ltd. (2001)  3 SCC 609.  The  question  that 

arose in that case was whether  the limitation of six months for 

presentation of a cheque for encashment was applicable viz-a-viz 

presentation to the bank of the payee or that of the drawer. High 

Courts in this country had expressed conflicting opinions on the 

subject.   This  Court  resolved  the  cleavage  in  those 

pronouncements by holding that the cheque ought to be presented 

to  the  drawee  bank  for  its  dishonour  to  provide  a  basis  for 

prosecution under Section 138. The Court observed:

“The use of the words “a bank” and “the bank” in the section

are an indicator  of  the intention of  the legislature.   “The 

bank”  referred to in proviso (a) to the proviso to Section

138 of the Act would mean the drawee bank on which the

cheque is drawn and not all banks where the cheque is presented

 for  collection including  the  bank of  the payee,  in 

whose favour the cheque is issued.

Page 54


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

presented to the drawer’s bank on which the cheque is issued.



a combined reading of Sections 3, 72 and 

138 of the Act would clearly show that the law mandates the 

cheque to be presented at the bank on which it is drawn if 

the drawer is to be held criminally liable. Such presentation

is necessarily to be made within six months at the bank on 

which the cheque is drawn, whether presented personally or 

through another  bank,  namely,  the collecting bank of  the


3. Ishar Alloy’s case (supra) did not deal with the question of 

jurisdiction of the Courts nor was Bhaskaran noticed by the Court 

while  holding that  the  presentation  of  the  cheque  ought  to  be 

within six months to the drawee bank. But that does not, in our 

view,  materially  affect  the  logic  underlying the  pronouncement, 

which pronouncement coming as it is from a bench of coordinate 

jurisdiction binds us. When logically extended to the question of 

jurisdiction of the Court to take cognizance, we find it difficult to 

appreciate how a payee of the cheque can by presentation of the 

cheque to his own bank confer jurisdiction upon the Court where 

such bank is situate.   If  presentation referred to in Section 138 

means presentation to the “drawee bank”, there is no gainsaying 

that dishonour would be localised and confined to the place where 

Page 55


such bank is situated.   The question is not whether  or not the 

payee can deposit  his cheque in any bank of  his choice at  any 

place.   The question is whether  by such deposit  can the payee 

confer jurisdiction on a Court of his choice? Our answer is in the 

negative.  The payee may and indeed can present the cheque to 

any  bank  for  collection  from  the  drawee  bank,  but  such 

presentation will  be valid only  if  the drawee bank receives  the 

cheque for payment within the period of six months from the date 

of issue.  Dishonour of the cheque would be localised at the place 

where the drawee bank is situated. Presentation of the cheque at 

any place, we have no manner of doubt, cannot confer jurisdiction 

upon the Court  within whose territorial  limits  such presentation 

may have taken place. 

4. Then  came  Harman  Electronics  (P)  Ltd.  v.  National  

Panasonic India (P) Ltd. (2009) 1 SCC 720. That was a case 

where the complaint under Section 138 was filed in a Delhi Court, 

only because the statutory notice required to be issued under the 

proviso to Section 138 was issued from Delhi.  If Bhaskaran was 

Page 56


correctly decided,  Harman should not  have interfered with the 

exercise of jurisdiction by the Delhi Court for issue of a notice was 

in terms of Bhaskaran, one of the factors that clothed the Court in 

Delhi to take cognizance and try the case. Harman did not do so. 

In  Harman’s case this Court, emphasized three distinct aspects. 

Firstly, it said that there was a world of difference between issue of 

a notice, on the one hand, and receipt, thereof, on the other.  Issue 

of notice did not give rise to a cause of action while receipt did, 

declared the Court.

5. Secondly,  the Court held that the main provision of Section 

138  stated  what  would  constitute  an  offence.  The  proviso 

appended thereto simply imposed certain further conditions which 

must be fulfilled for taking cognizance of the offence. The following 

passage deals with both these aspects:

“It is one thing to say that sending of a notice is one of the 

ingredients for maintaining the complaint but it  is another 

thing to say that dishonour of a cheque by itself constitutes 

an offence. For the purpose of proving its case that the accused



committed an offence under Section 138 of the 

Negotiable Instruments Act, the ingredients thereof are required


to be proved.  What would constitute an offence is 

stated in the main provision. The proviso appended thereto, 

however,  imposes certain further  conditions which are re-

Page 57


quired to be fulfilled before cognizance of the offence can be 

taken. If the ingredients for constitution of the offence laid 

down in provisos (a), (b) and (c) appended to Section 138

of the Negotiable Instruments Act are intended to be applied

in favour of the accused, there cannot be any doubt that receipt

 of a notice would ultimately give rise to the cause of 

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

notice that the accused at his own peril may refuse to pay

the amount.  Clauses (b) and (c) of the proviso to Section

138 therefore must  be read together.  Issuance of  notice 

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





6. Thirdly, the Court held that if presentation of the cheque or 

issue of notice was to constitute a good reason for vesting courts 

with jurisdiction to try offences under Section 138, it would lead to 

harassment of the drawer of the cheques thereby calling for the 

need to strike a balance between the rights of the parties to the 

transaction. The Court said:

“We cannot, as things stand today, be oblivious of the fact 

that a banking institution holding several cheques signed by

the same borrower can not only present the cheque for its 

encashment at four different places but also may serve notices














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


diluted and the logic behind vesting of jurisdiction based on the 

place  from  where  the  notice  was  issued  questioned.  Even 

presentation  of  the  cheque  as  a  reason  for  assumption  of 

jurisdiction to take cognizance was doubted for a unilateral act of 

the complainant/payee of the cheque could without any further or 

supporting  reason  confer  jurisdiction  on  a  Court  within  whose 

territorial limits nothing except the presentation of the cheque had 


8. Three recent decisions need be mentioned at this stage which 

have followed Bhaskaran and attempted to reconcile the ratio of 

that case with the subsequent decisions in Ishar Alloy Steels and 

Harman Electronics. In  Nishant Aggarwal  v. Kailash Kumar  

Sharma (2013) 10 SCC 72 this Court  was once again dealing 

with a case where the complaint had been filed in Court at Bhiwani 

in Haryana within whose territorial jurisdiction the complainant had 

presented the cheque for encashment,  although the cheque was 

drawn on a bank at Gauhati in Assam. Relying upon the view taken 

in  Bhaskaran this  Court  held  that  the  Bhiwani  Court  had 

Page 59


jurisdiction to deal with the matter. While saying so, the Court tried 

to  distinguish  the  three-Judge  Bench  decision  in  Ishar  Alloy 

Steels (supra)  and that  rendered in  Harman Electronics case 

(supra) to hold that the ratio of those decisions did not dilute the 

principle stated in Bhaskaran case. That exercise was repeated by 

this  Court  in  FIL  Industries  Ltd.  v.  Imtiyaz  Ahmad  Bhat  

(2014) 2 SCC 266 and in  Escorts Ltd.  v.  Rama Mukherjee 

(2014) 2 SCC 255 which too followed Bhaskaran and held that 

complaint under Section 138 Negotiable Instrument Act could be 

instituted at any one of the five places referred to in Bhaskaran’s 


9. We have,  with utmost respect to the Judges comprising the 

Bench that heard the above cases, found it difficult to follow suit 

and subscribe to the view stated in Bhasakaran.  The reasons are 

not far too seek and may be stated right away.        

10. Section 138 is a penal provision that prescribes imprisonment 

upto two years and fine upto twice the cheque amount. It must, 

therefore, be interpreted strictly, for it is one of the accepted rules 

Page 60


of interpretation that in a penal statute, the Courts would hesitate 

to  ascribe  a  meaning,  broader  than  what  the  phrase  would 

ordinarily bear.  Section 138 is in two parts. The enacting part of 

the provision makes it abundantly clear that what constitutes an 

offence punishable with imprisonment and/or fine is the dishonour 

of  a  cheque  for  insufficiency  of  funds  etc.  in  the  account 

maintained by the drawer with a bank for discharge of a debt or 

other  liability whether  in full  or part.  The language used in the 

provision is unambiguous and the ingredients of the offence clearly 

discernible viz. (a) Cheque is drawn by the accused on an account 

maintained by him with a banker.  (b) The cheque amount  is in 

discharge of  a debt  or  liability and  (c) The cheque is  returned 

unpaid for insufficiency of funds or that the amount exceeds the 

arrangement  made  with  the  bank.  But  for  the  proviso  that 

comprises the second part of the provision, any dishonour falling 

within  the  four  corners  of  the  enacting  provision  would  be 

punishable  without  much  ado.  The  proviso,  however,  draws  an 

exception to the generality of the enacting part of the provision, by 

Page 61


stipulating two steps that ought  to be taken by the complainant 

holder of the cheque before the failure of the drawer gives to the 

former the cause of action to file a complaint and the competent 

Court to take cognizance of the offence. These steps are distinct 

from the ingredients of the offence which the enacting provision 

creates and makes punishable. It follows that an offence within the 

contemplation of Section 138 is complete with the dishonour of the 

cheque  but  taking  cognizance  of  the  same  by  any  Court  is 

forbidden so long as the complainant does not have the cause of 

action to file a complaint in terms of clause (c) of the proviso read 

with Section 142 which runs as under:

”Section 142:

Cognizance  of  offences.  —Notwithstanding  anything

contained in  the Code of  Criminal  Procedure,  1973 (2 of 


(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


(c) no court inferior to that of a Metropolitan Magistrate or a 

Judicial  Magistrate of  the first  class  shall  try any offence 

Page 62

punishable under section 138.“


11. The following would constitute ‘cause of action’ referred to in 

sub clause (b) above:

(a) The complainant has presented the cheque for payment 

within the period of  six months  from the date of  the 

issue thereof.

(b) The  complainant  has  demanded  the  payment  of  the 

cheque  amount  from the  drawer  by  issuing a  written 

notice within thirty days of receipt of information by him 

from the bank regarding the dishonour. 

(c) The drawer has failed to pay the cheque amount within 

fifteen days of the receipt of the notice.

12. A  proper  understanding  of  the  scheme  underlying  the 

provision  would  thus  make  it  abundantly  clear  that  while  the 

offence is complete upon dishonour, prosecution for such offence is 

deferred  till  the  time  the  cause  of  action  for  such  prosecution 

accrues  to  the  complainant.  The  proviso  in  that  sense,  simply 

postpones the actual prosecution of the offender till such time he 

Page 63


fails to pay the amount within the statutory period prescribed for 

such payment.   There is, in our opinion,  a plausible reason why 

this was done.  The Parliament in its wisdom considered it just and 

proper  to  give  to  the  drawer  of  a  dishonoured  cheque  an 

opportunity  to  pay  up  the  amount,  before  permitting  his 

prosecution no matter  the offence is complete,  the moment  the 

cheque was dishonoured.  The law has to that  extent  granted a 

concession and prescribed a scheme under which dishonour need 

not  necessarily lead to penal  consequence  if  the drawer  makes 

amends by making payment  within the time stipulated once the 

dishonour is notified to him. Payment of the cheque amount within 

the  stipulated  period  will  in  such  cases  diffuse  the  element  of 

criminality that Section 138 attributes to dishonour  by way of a 

legal fiction implicit in the use of the words “shall  be deemed to 

have committed an offence”.  The drawer would by such payment 

stand  absolved  by  the  penal  consequences  of  dishonour.   This 

scheme may be unique to Section 138 NI Act, but there is hardly 

any doubt  that  the Parliament  is  competent  to  legislate so to 

Page 64


provide for situations where a cheque is dishonoured even without 

any criminal intention on the part of the drawer. 

13. The scheme of Section 138 thus not only saves the honest 

drawer  but  gives a chance to even the dishonest  ones to make 

amends and escape prosecution.  Compliance with the provision is, 

in that view,  a mandatory requirement.  (See  C.C.  Alavi  Haji  v.  

Palapetty Muhammed and Another (2007) 6 SCC 555).          

14. Harman in that view correctly held that “what would consti-

tute an offence is stated in the main provision.  The proviso ap-

pended thereto however imposes certain further conditions which  

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

taken.”  If the Parliament intended to make the conditions stipu-

lated in the proviso, also as ingredients of the offence, the provi-

sion would have read differently.  It would then have specifically 

added the words  “and the drawer has despite receipt of a notice 

demanding the payment  of the amount,  failed to pay the same 

within a period of fifteen days from the date of such demand made 

in writing by a notice”.  That,  however,  is not how the enacting 

Page 65


provision of Section 138 reads. The legislature has, it is obvious, 

made a clear distinction between what would constitute an offence 

and what would give to the complainant the cause of action to file 

a complaint for the court competent to take cognizance.  That a 

proviso is an exception to the general rule is well settled.  A pro-

viso is added to an enactment to qualify or create an exception to 

what is contained in the enactment.  It does not by itself state a 

general rule.  It simply qualifies the generality of the main enact-

ment, a portion which but for the proviso would fall within the main 


15. The P. Ramanatha Aiyar, Law Lexicon, 2nd Edition, Wadhwa & 

Co. at page 1552 defines proviso as follows:

“The word “proviso” is used frequently to denote the clause 

the first words of which are “provided that” inserted in deeds 

and  instruments  generally.  And containing  a condition  or 

stipulation on the performance or non-performance of which, 

as the case maybe. The effect of a proceeding clause or of 

the deed depends.

A Clause inserted in  a legal  or  formal  document,  making 

some condition, stipulation, exception or limitation or upon

the  observance  of  which  the  operation  or  validity  of  the 

instrument depends [ S. 105, Indian Evidence Act].

A  proviso  is  generally  intended  to  restrain  the  enacting 

clause and to except something which would have otherwise 

been within it  or in some measure to modify the enacting 


Page 66


16. To quote “Craies on Statute Law”, 7th Edn., Sweet & Maxwell 

at page 220  “If the principal object of the Act can be accomplished 

and stand under the restriction of the saving clause or proviso, the  

same is not to be held void for repugnancy.”

17. One of the earliest judgments on the subject is a three Judge 

Bench  decision  in  Kedarnath  Jute  Manufacturing  Co.  v.  

Commercial Tax Officer, Calcutta and Ors. AIR 1966 SC 12. 

The Court was in that case examining the effect of a proviso which 

imposed a condition on getting exemption from tax and observed: 

“...  The  substantive  clause  gives  the  exemption  and  the 

proviso qualifies the substantive clause. In effect the proviso 

says that part of the turnover of the selling dealer covered 

by the terms  of  sub-cl.  (ii)  will  be exempted provided a 

declaration in the from prescribed is furnished. To put it in 

other words, a dealer cannot get the exemption unless he 

furnishes the declaration in the prescribed form.  It is well 

settled that "the effect of an excepting or qualifying proviso, 

according to the ordinary rules of construction, is to except 

out of the preceding portion of the enactment, or to qualify

something enacted therein, which but for the proviso would 

be within it"  :  see "Craies on Statute Law",  6th Edn.,  p. 


18. Also pertinent is a four-Judge Bench decision of this Court in 

Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128 where 

this Court was examining whether a cinema theatre equipped with 

Page 67


projectors and other fittings ready to be launched as entertainment 

house was covered under the definition of ‘accommodation’ as de-

fined in Section 2 (1) (d) of Uttar Pradesh (Temporary) Control of 

Rent and Eviction Act, 1947. The proviso provided for some excep-

tion for factories and business carried in a building.  It was held 

that sometimes draftsmen include proviso by way of over caution 

to remove any doubts and accommodation would include this cin-

ema hall: 

“18.  A proviso must  be limited to the subject-matter  of  the enacting 

clause. It is a settled rule of construction that a proviso must prima facie 

be read and considered in relation to the principal matter to which it is a 

proviso. It is not a separate or independent enactment. 'Words are dependent














proviso. They cannot be read as divorced from their context' 1912 A.C. 

544. If the rule of construction is that prima facie a proviso should be 

limited in its operation to the subject-matter of the enacting clause, the 

stand we have taken is sound.  To expand the enacting clause, inflated

by the proviso, sins against the fundamental rule of construction that a 

proviso must be considered in relation to the principal matter to which it 

stands as a proviso. A proviso ordinarily is but a proviso, although the

golden rule is to read the whole section, inclusive of the proviso, in such 

manner that they mutually throw light on each other and result in a harmonious


The proper  course is to apply the broad general  rule of  construction

which is that a section or enactment must be construed as a whole, each 

portion throwing light if need be on the rest.

The  true  principle  undoubtedly  is,  that  the  sound  interpretation and

meaning of the statute, on a view of the enacting clause, saving clause, 

and proviso, taken and construed together is to prevail. (Maxwell on Interpretation







(emphasis supplied)

Page 68


19. In Sreenivasa General Traders & Ors. v. State of Andhra 

Pradesh & Ors. (1983) 4 SCC 353 another three- Judge bench 

of this Court examined the role of a proviso while interpreting Rule 

74(1)  of  the Andhra Pradesh  (Agricultural  Produce  & Livestock) 

Markets Rules, 1969. 

“The normal function of a proviso is to except something out 

of  the main enacting part or to qualify  something enacted

therein  which  but  for  the  proviso  would  be  within  the

purview of the enactment. Proviso to Rule 74(1) is added to 

qualify or create an exception.”

20. Reference  may  also  be  made  to  Tribhovandas  Haribhai  

Tamboli v. Gujarat Revenue Tribunal  and others (1991) 3 

SCC 442 wherein this Court clearly held that when the language of 

the main enactment is clear, the proviso can have no effect on the 

interpretation of the main clause. 

”7. It is a cardinal rule of interpretation that a proviso to a particular provision 

of a statute only embraces the field, which is covered by the main provision. It 

carves out an exception to the main provision to which it has been enacted by 

the proviso and to no other. The proper function of a proviso is to except and 

deal with a case which would otherwise fall within the general language of the 

main enactment, and its effect is to confine to that case. Where the language

of the main enactment is explicit and unambiguous, the proviso can have no

repercussion on the interpretation of  the main enactment,  so as to exclude 

from it, by implication what clearly falls within its express terms. The scope of 

the proviso, therefore, is to carve out an exception to the main enactment and

it excludes something which otherwise would have been within the rule. It has 

to operate in the same field and if  the language of  the main enactment  is 

clear, the proviso cannot be torn apart from the main enactment nor can it be 

used  to  nullify  by  implication what  the  enactment  clearly  says  nor  set  at  

Page 69


naught the real object of the main enactment, unless the words of the proviso 

are such that it is its necessary effect.”

       (emphasis supplied)

21. The same line of reasoning was followed in A.N. Sehgal and 

Ors. v. Raje Ram Sheoram and Ors. 1992 Supp (1) SCC 304 

while interpreting a proviso in the Haryana Service of Engineers 

Rules, 1960 where the Court held that the proviso to Rule 5(2)(a) 

cannot be applied to confer the benefit of regular appointment on 

every  promotee  appointed in  excess  of  50% quota.  This  Court 

harmoniously read the main provision and the proviso and gave 

effect to the rule.

22. In  Kerala State Housing Board and Ors.  v.  Ramapriya 

Hotels (P) Ltd. and Ors. 1994 (5) SCC 672  this Court was ex-

amining whether the period of 4 years envisaged in proviso to Sec-

tion 16(i) under Kerala Land Acquisition Act, 1961 could be reck-

oned from date when agreement  was executed or from date of 

publication of notification under Section 3(1) of the Act after the 

agreement was executed. After relying on  Tribhovandas Harib-

hai Tamboli (supra) and A.N. Sehgal (supra) this Court held that 

Page 70


the proviso should be harmoniously read with the section. To quote 

Tribhovandas (supra) as followed in this judgment: 

“In  Tribhovandas  Haribhai  Tamboli  v.  Gujarat  Revenue  Tribunal this

Court held that the proper function of a proviso is to except and deal 

with a case which would otherwise fall  within the general language of 

the main enactment and its effect is to be confined to that case. Where

the language of  the main enactment is explicit and unambiguous, the 

proviso can have no repercussion on the interpretation of the main enactment,














its express terms. The scope of the proviso, therefore, is to carve out an

exception to the main enactment and it excludes something which otherwise












































by implication what the enactment clearly says, nor set at naught the

real object of the main enactment, unless the words of the proviso are 

such that it is its necessary effect. In that case it was held that by reading


























(emphasis supplied)

23. In Kush Sahgal  & Ors.  v.  M.C.  Mitter & Ors. (2000) 4 

SCC 526 a landlady made an application for eviction of the tenant 

on the basis that she wanted the place for business purposes which 

was not allowed as per  the proviso to Section 21(2) U.P.  Urban 

Buildings (Regulation of Letting, Rent and Eviction) Act, 1972.  The 

Court examined the role and purport of the proviso and observed :

“This we say because the normal function of a proviso is to 

except  something out  of  the  enactment  or  to  qualify

something enacted therein which but for the proviso would 

be within the purview of the enactment. (See : Kedarnath  

Page 71


Jute  Manufacturing  Co.  Ltd.  v. Commercial  Tax  Office

[1965]3SCR626). Since the natural presumption is that but 

for the proviso, the enacting part of the section would have 

included the subject-matter of the proviso, the enacting part 

has to be given such a construction which would make the

exceptions  carved  out  by  the  proviso  necessary  and  a

construction which would make the exceptions unnecessary 

and redundant should be avoided (See: Justice G. P. Singh's 

"Principles  of  Statutory  Interpretation"  Seventh  Edition

1999,  p-163).  This  principle  has  been  deduced  from the

decision of  the Privy  Council  in  Govt.  of  the Province of 

Bombay v. Hormusji Manekji (AIR 1947 PC 200) as also the

decision of  this  Court  in  Durga Dutt  Sharma v.Navaratna

Pharmaceutical Laboratories (AIR 1965 SC 980).”

24. To the same effect are the decisions of this Court in Ali M.K.  

and Ors.  v.  State of Kerala and Ors. (2003) 11 SCC 632,  

Nagar Palika  (supra) and in Steel Authority of India Ltd. v.  

S.U.T.N.I Sangam & Ors. (2009) 16 SCC 1.

25. In conclusion,  we may refer  to Maxwell,  “Interpretation of  

Statutes” Edn. 12, 1969, on P. 189-190 which states that  it is a 

general finding and practice “that inconsistencies can be avoided 

by applying the general rule that the words of a proviso are not to  

be taken “absolutely in their  strict  literal  sense”  [R v.  Dimbdin  

(1910)] but that a proviso is “of necessity ... limited in its opera-

tion to the ambit of the section which it qualifies” [Lloyds and Scot-

tish  Finance  Ltd v.  Modern Cars  and Canavans  (Kingston)  Ltd.

Page 72


(1966)]. And, so far as that section itself is concerned, the proviso  

receives a restricted construction: where the section confers pow-

ers, “it would be contrary to the ordinary operation of a proviso to 

give it an effect which would cut down those powers beyond what  

compliance with the proviso renders necessary.” [Re Tabrisky v.  

Board of Trade (1947)]”

26. Bhaskaran, in our view, reads the proviso as prescribing the 

ingredients of the offence instead of treating it as an exception to 

the generality of the enacting part by stipulating further conditions 

before a competent Court may take cognizance of the same.  Seen 

in the light of the provisions of Section 142 of the Act, the proviso 

simply defers prosecution of the offender  till  the conditions pre-

scribed therein are satisfied. Bhaskaran does not view the matter 

in that perspective while Harman (supra) does.  We find ourselves 

in respectful  agreement with the view in  Harman’s case on this 


27. In  Bhaskaran,  this   Court   resolved the confusion as to the 

place of commission of the offence by relying upon Sections 177 to 

Page 73


179 of the Cr.P.C.  But the confusion arises only if one were to treat 

the proviso as stipulating the ingredients of the offence. Once it is 

held that the conditions precedent  for taking cognizance are not 

the ingredients constituting the offence of dishonour of the cheque, 

there is no room for any such confusion or vagueness about the 

place where the offence is committed.  Applying the general rule 

recognised under Section 177 of the Cr.P.C. that all offences are lo-

cal, the place where the dishonour occurs is the place for commis-

sion of the offence vesting the Court exercising territorial jurisdic-

tion over the area with the power to try the offences. Having said 

that we must hasten to add, that in cases where the offence under 

Section 138 is out of the offences committed in a single transaction 

within the meaning of Section 220 (1) of the Cr.P.C. then the of-

fender may be charged with and tried at one trial for every such 

offence and any such inquiry or trial  may be conducted by any 

Court competent to enquire into or try any of the offences as pro-

vided by Section 184 of the Code.  So also, if an offence punishable 

under Section 138 of the Act is committed as a part of single trans-

Page 74


action with the offence of cheating and dishonestly inducing deliv-

ery of property then in terms of Section 182 (1) read with Sections 

184 and 220 of the Cr.P.C. such offence may be tried either at the 

place where the inducement took place or where the cheque form-

ing part of the same transaction was dishonoured or at the place 

where the property which the person cheated was dishonestly in-

duced to deliver or at the place where the accused received such 

property.   These provisions make it clear that in the commercial 

world a party who is cheated and induced to deliver property on 

the basis of a cheque which is dishonoured has the remedy of insti-

tuting prosecution not only at the place where the cheque was dis-

honoured which  at  times  may be a place other  than the place 

where the inducement or cheating takes place but also at the place 

where the offence of cheating was committed. To that extent the 

provisions of Chapter XIII of the Code will bear relevance and help 

determine the place where the offences can be tried. 

28. We may at this stage refer to two other decisions of this Court 

which  bear  some  relevance  to  the  question  that  falls  for  our 

Page 75


determination.  In  Sadanandan  Bhadran  v.  Madhavan  Sunil  

Kumar (1998) 6 SCC 514 a two-judge bench of this Court held 

that clause (a) of proviso to Section 138 does not disentitle the 

payee  to  successively  present  cheque  for  payment  during  the 

period of its validity.  On each such presentation of the cheque and 

its dishonour a fresh right - and not cause of action – accrues in his 

favour.  He may, therefore, without taking pre-emptory action in 

exercise  of  such  right  under  clause  (b)  of  Section  138  go  on 

presenting the cheque so long as the cheque is valid for payment. 

But  once he gives a notice under  clause (b)  of  Section 138 he 

forfeits such right for in case of failure of the drawer to pay the 

money within the stipulated time he would be liable for the offence 

and the cause of action for prosecution will arise.  The correctness 

of this view was questioned in MSR Leathers v. S. Palaniappan 

&  Anr. (2013)  1  SCC  177 before  a  bench  comprising  of 

Markandey Katju and B. Sudershan Reddy,  J.J.  who referred the 

issue to a larger bench.  The larger bench in MSR Leathers’s case 

(supra)  overruled  Sadanandan  Bhadran  (supra)  holding  that 

Page 76


there  was  no  reason  why  a  fresh  cause  of  action  within  the 

meaning of Section 142 (b) read with section 138 should not be 

deemed to have arisen to the complainant every time the cheque 

was presented but dishonoured and the drawer of cheque failed to 

pay the amount within the stipulated period in terms of proviso to 

138. This Court said:

“In  the  result,  we  overrule  the  decision  in  Sadanandan

Bhadran's  case  (supra)  and  hold  that  prosecution  based

upon second or successive dishonour of the cheque is also 

permissible so long as the same satisfies the requirements 

stipulated in  the proviso to Section 138 of  the Negotiable 

Instruments Act. The reference is answered accordingly. The 

appeals  shall  now be listed before the regular  Bench for 

hearing  and  disposal  in  light  of  the  observations  made


29. What is important is that in  Sadanandan Bhadran (supra) 

this Court had, on a careful analysis of Section 138, held that an 

offence is created when a cheque is returned by the bank unpaid 

for any reasons mentioned therein, although the proviso to Section 

138 stipulates three conditions for the applicability of the section. 

It is only upon satisfaction of the three conditions that prosecution 

Page 77


can  be  launched  for  an  offence  under  Section  138.  This  Court 


“  On a careful analysis of the above section, it is seen that its  

main part creates an offence when a cheque is returned by 

the bank unpaid for any of the reasons mentioned therein.

The significant fact, however, is that the proviso lays down

three conditions precedent to the applicability of the above 

section and,  for that matter,  creation of  such offence and 

the conditions are:  (i)  the cheque should have been presented













the period of its validity, whichever is earlier; (ii) the payee

should have made a demand for payment by registered notice
























of  the receipt of  the notice.  It is only when all the  above

three  conditions  are  satisfied  that  a  prosecution  can  be 

launched for the offence under Section 138. So far as the

first condition is concerned, clause (a) of the proviso to Section





















its validity. This apart, in the course of business transactions 

it is not uncommon for a cheque being returned due to insufficient










again by the payee after sometime, on his own volition or at 

the request of the drawer,  in expectation that it  would be 

encashed.  Needless  to  say,  the  primary  interest  of  the

payee  is  to  get  his  money  and  not  prosecution  of  the

drawer, recourse to which, normally, is taken out of compulsion













that a cheque can be presented any number of times during 

the period of its validity. Indeed that is also the consistent 

view of all the High Courts except that of the Division Bench 

of the Kerala High Court in Kumaresan


 which struck a dis-

cordant note with the observation that for the first dishonour












there cannot be more than one cause of action for prosecution.”

(emphasis supplied)

Page 78


30. MSR Leathers (supra) also looked at Section 138 and held 

that a complaint could be filed under Section 138 after cause of 

action to do so had accrued in terms of clause (c) of the proviso to 

Section 138 which happens no sooner the drawer of the cheque 

fails  to make the payment  of  the cheque amount  to the payee 

within fifteen days in terms of clause (b) to proviso to Section 138. 

MSR Leathers was  not  so  much  concerned  with  the  question 

whether  the  proviso  stipulated  ingredients  of  the  offence  or 

conditions  precedent  for  filing  a  complaint.  It  was  primarily 

concerned  with  the  question  whether  the  second  or  successive 

dishonour followed by statutory notices and failure of the drawer to 

make payment  could be made a basis for launching prosecution 

against  the  drawer.   That  question,  as  noticed  above,  was 

answered in the affirmative holding that successive cause of action 

could  arise  if  there  were  successive  dishonours  followed  by 

statutory notices as required under the law and successive failure 

of  the  drawer  to  make  the  payment.  MSR  Leathers cannot, 

therefore,  be taken as an authority for determining whether the 

Page 79


proviso stipulates conditions precedent for launching a prosecution 

or  ingredients  of  the  offence  punishable  under  Section  138. 

Sadanandan Bhadran may have been overruled to the extent it 

held that successive causes of action cannot be made a basis for 

prosecution,  but  the  distinction  between  the  ingredient  of  the 

offence, on the one hand, and conditions precedent for launching 

prosecution,  on the other,  drawn in the said judgement  has not 

been faulted.  That  distinction permeates  the pronouncements of 

this Court  in  Sadanandan Bhadran  and  MSR Leathers.   High 

Court of Kerala has, in our view, correctly interpreted Section 138 

of  the  Act  in  Kairali  Marketing  & Processing  Cooperative 

Society Ltd. V. Pullengadi Service Cooperative Ltd. (2007) 1 

KLT 287 when it said:

“It is evident from the language of Section 138 of the N.I. 

Act  that  the  drawer  is  deemed  to  have  committed  the

offence  when  a  cheque  issued  by  him  of  the  variety 

contemplated  under  Section 138 is  dishonoured  for  the

reasons contemplated in the Section. The crucial words are

"is returned by the bank unpaid". When that happens, such

person  shall  be  deemed  to  have  committed  the  offence. 

With the deeming in the body of Section 138, the offence is

already committed or deemed to have been committed.  A

careful  reading  of  the body of  Section 138 cannot  lead to

any other conclusion. Proviso to Section138 according to me 

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only insists on certain conditions precedent which have to be 

satisfied if the person who is deemed to have committed the 

offence were to be prosecuted successfully.  The offence is 

already  committed  when  the  cheque  is  returned  by  the 

bank.  But  the  cause  of  action  for  prosecution  will  be 

available  to  the  complainant  not  when  the  offence  is 

committed  but  only  after  the  conditions  precedent 

enumerated in the proviso are satisfied. After the offence is 

committed, only if the option given to avoid the prosecution

under the proviso is not availed of by the offender, can the

aggrieved person get a right or course of action to prosecute

the offender.  The offence is  already deemed and declared 

but  the  offender  can  be  prosecuted  only  when  the

requirements  of  the  proviso  are  satisfied.  The  cause  of 

action  for  prosecution  will  arise  only  when  the  period 

stipulated  in  the  proviso  elapses  without  payment. 

Ingredients of the offence have got to be distinguished from

the conditions precedent for valid initiation of prosecution.”

The stipulations in  the proviso must  also be proved

certainly before the offender can be successfully prosecuted. 

But  in  the  strict  sense  they  are  not  ingredients  of  the 

deemed offence under the body of  Section 138 of  the N.I. 

Act,  though the said stipulations; must  also be proved to

ensure and claim conviction. It is in this sense that it is said 

that  the  proviso  does  not  make  or  unmake  the  offence 

under Section 138 of the N.I. Act. That is already done by

the body of  the Sections.  This dispute as to whether  the

stipulations  of  the  proviso  are  conditions  precedent  or 

ingredients/components of the offence under Section 138 of 

the  N.I.  Act  may  only  be  academic  in  most  cases. 

Undoubtedly  the  ingredients  stricto  sensu  as  also  the

conditions  precedent  will  have  to  be  established

satisfactorily in all cases. Of course in an appropriate case it 

may have to be considered whether substantial compliance 

of the conditions precedent can be reckoned to be sufficient 

to justify a conviction.  Be that as  it  may,  the distinction 

between  the  ingredients  and  conditions  precedent  is 

certainly real and existent. That distinction is certainly vital 

while  ascertaining  complicity  of  an  indictee  who  faces 

indictment in a prosecution under Section 138 with the aid 

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of  Section 141 of  the  N.I.  Act.  That  is  how the  question

assumes such crucial significance here.”

31. To sum up:

(i) An offence under Section 138 of the Negotiable Instruments 

Act, 1881 is committed no sooner a cheque drawn by the accused 

on an account being maintained by him in a bank for discharge of 

debt/liability is returned unpaid for insufficiency of funds or for the 

reason that the amount exceeds the arrangement made with the 


(ii) Cognizance of any such offence is however forbidden under 

Section 142 of the Act except upon a complaint in writing made by 

the payee or holder of the cheque in due course within a period of 

one month from the date the cause of action accrues to such payee 

or holder under clause (c) of proviso to Section 138.

(iii) The  cause  of  action  to  file  a  complaint  accrues  to  a 

complainant/payee/holder of a cheque in due course if

(a) the dishonoured cheque is presented to the drawee bank

within a period of six months from the date of its issue.

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(b)  If  the  complainant  has  demanded  payment  of  cheque

amount  within thirty days of receipt  of information by

him from  the  bank  regarding  the  dishonour  of  the

cheque and

(c) If the drawer has failed to pay the cheque amount within

fifteen days of receipt of such notice.

(iv) The facts constituting cause of action do not constitute the 

ingredients of the offence under Section 138 of the Act.

(v) The proviso to Section 138 simply postpones/defers institution 

of criminal proceedings and taking of cognizance by the Court till  

such time cause of action in terms of clause (c) of proviso accrues 

to the complainant.

(vi) Once  the  cause  of  action  accrues  to  the  complainant,  the 

jurisdiction of  the  Court  to try  the case  will  be  determined by 

reference to the place where the cheque is dishonoured.

(vii)  The  general  rule  stipulated  under  Section  177  of  Cr.P.C 

applies to cases under Section 138 of the Negotiable Instruments 

Act.  Prosecution in such cases can, therefore, be launched against 

the  drawer  of  the  cheque  only  before  the  Court  within  whose 

Page 83


jurisdiction the dishonour  takes place except  in situations where 

the offence of dishonour of the cheque punishable under Section 

138 is committed along with other offences in a single transaction 

within the meaning of Section 220(1) read with Section 184 of the 

Code  of  Criminal  Procedure  or  is  covered  by  the  provisions  of 

Section 182(1) read with Sections 184 and 220 thereof.

32. Before  parting with this  aspect  of  the  matter,  we need to 

remind ourselves that an avalanche of cases involving dishonour of 

cheques  has  come  upon  the  Magistracy  of  this  country.  The 

number of such cases as of October 2008 were estimated to be 

more than 38 lakhs by the Law Commission of India in its 213

Report. The result is that cases involving dishonour of cheque is in 

all  major  cities  choking  the  criminal  justice  system  at  the 

Magistrate’s level.  Courts in the four metropolitan cities and other 

commercially important  centres are particularly burdened as the 

filing of such cases is in very large numbers. More than five lakh 

such cases were pending in criminal courts in Delhi alone as of 1

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

Page 84




number  of  complaints  are  filed  under  S.138  not  necessarily 

because  the  offence  is  committed  in  such  cities  but  because 

multinational  and other  companies  and commercial  entities  and 

agencies choose these places for filing the complaints for no better 

reason than the fact that notices demanding payment of cheque 

amounts  were  issued  from  such  cities  or  the  cheques  were 

deposited for collection in their banks in those cities. Reliance is 

often placed on  Bhaskaran’s case to justify institution of  such 

cases far away from where the transaction forming basis of the 

dishonoured cheque had taken place. It is not uncommon to find 

complaints filed in different jurisdiction for cheques dishonoured in 

the same transaction and at  the same place.  This  procedure is 

more often than not intended to use such oppressive litigation to 

achieve  the  collateral  purpose  of  extracting  money  from  the 

accused by denying him a fair opportunity to contest the claim by 

dragging him to a distant place.   Bhaskaran’s  case could never 

have intended to give to the complainant/payee of the cheque such 

an advantage. Even so, experience has shown that the view taken 

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in Bhaskaran’s case permitting prosecution at any one of the five 

different places indicated therein has failed not only to meet the 

approval  of  other  benches  dealing  with  the  question  but  also 

resulted in hardship, harassment and inconvenience to the accused 

persons. While anyone issuing a cheque is and ought to be made 

responsible if the same is dishonoured despite compliance with the 

provisions stipulated in the proviso,  the Court ought to avoid an 

interpretation that can be used as an instrument of oppression by 

one  of  the  parties.  The  unilateral  acts  of  a  complainant  in 

presenting a cheque at a place of his choice or issuing a notice for 

payment of the dishonoured amount cannot in our view arm the 

complainant with the power to choose the place of trial. Suffice it 

to say, that not only on the Principles of Interpretation of Statutes 

but also the potential  mischief  which an erroneous interpretation 

can cause in terms of injustice and harassment to the accused the 

view taken in the Bhaskaran’s case needs to be revisited as we 

have done in foregoing paragraphs.

33. With  the  above  observations,  I  concur  with  the  order 

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proposed by my noble Brother, Vikramajit Sen, J.

New Delhi

August 1, 2014


      (T.S. Thakur)

Page 87

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