THE NEGOTIABLE INSTRUMENT ACT, 1881 -...

READING MATERIAL ON

THE NEGOTIABLEINSTRUMENT ACT, 1881

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THE NEGOTIABLE INSTRUMENTSACT, 1881

READING MATERIALon

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INdExARTICLES

1. The Negotiable Instruments (Amendment) Act, 2018 .......................................1

2. Tools for quick disposal of cases under The Negotiable Instruments Act 1881 .....................................................................3

JUDGMENTS

3. Damodar S.Prabhu vERSUs Sayed Babalal H. .........................................................1 (2010) 5 Supreme Court Cases 663 Before Hon’ble Mr. Justice K.G. Balakrishnan, Hon’ble Mr. Justice P. Sathasivam, Hon’ble Mr. Justice J.M. Panchal

4. Dashrath Rupsingh Rathod versus State Of Maharashtra & Anr .....................9 (2014) 9 Supreme Court Cases 129 Before Hon’ble Mr. Justice T.S. Thakur, Hon’ble Mr. Justice Vikramajit Sen, Hon’ble Mr. Justice C. Nagappan

5. K. Bhaskaran versus Sankaran Vaidhyan Balan And Anr. ............................... 37 (1999) 7 Supreme Court Cases 510 Before Hon’ble Mr. Justice K.T. Thomas, Hon’ble Mr. Justice M.B. Shah

6. Madhya Pradesh State Legal Services Authority Versus Prateek Jain And Anr .................................................................................... 43

(2014) 10 Supreme Court Cases 690 Before Hon’ble Mr. Justice J. Chelameswar, Hon’ble Mr. Justice A.K. Sikri

7. Bridgestone India Private Limited Versus Inderpal Singh ............................. 51 (2016) 2 Supreme Court Cases 75 Before Hon’ble Mr. Justice Jagdish Singh Khehar and Hon’ble Mr. Justice R. Banumathi

8. Meters and Instruments private Limited & ANR. versus Kanchan Mehta ............................................................................................... 57

(2018) 1 Supreme Court Cases 560 Before Hon’ble Mr. Justice Adarsh Kumar Goel and Hon’ble Mr. Justice Uday U. Lalit

9. Kishan Rao Versus Shankargouda .......................................................................... 65 2018 SCC Online SC 651 Before Hon’ble Mr. Justice A.K. Sikri and Hon’ble Mr. Justice Ashok Bhushan

10. Indian Bank Association & Ors versus Union Of India & Anr ........................ 71 (2014) 5 Supreme Court Cases 590 Before Hon’ble Mr. Justice K.S. Radhakrishnan and Hon’ble Mr. Justice Vikramajit Sen

11. Msr Leathers versus S. Palaniappan And Anr ..................................................... 81 (2013) 1 Supreme Court Cases 177 Before Hon’ble Mr. Justice R.M. Lodha, Hon’ble Mr. Justice T.S. Thakur, Hon’ble Mr. Justice Anil R. Dave

12. Econ Antri Limited versus Rom Industries Limited & Anr ............................ 92 (2014) 11 Supreme Court Cases 769 Before Hon’ble Mr. Justice P Sathasivam, Hon’ble Mr. Justice Ranjana Prakash Desai, Hon’ble Mr. Justice Ranjan Gogoi

13. Dayawati vs Yogesh Kumar Gosain .......................................................................107 2017 SCC Online Del 11032 Before Hon’ble The Acting Chief Justice and Hon’ble Ms. Justice Anu Malhotra

14. N. ParaMeswaran Unni Versus G. Kannan and Another.................................151 (2017) 5 Supreme Court Cases 737 : 2017 SCC OnLine SC 293 Before Hon’ble Mr. Justice N.V. Ramana and Hon’ble Mr. Justice Prafulla C. Pant

15. Rameshchandra Ambalal Joshi versus State Of Gujarat & Anr ...............................................................................................155

(2014) 11 Supreme Court Cases 759 Before Hon’ble Mr. Justice Chandramauli Kr. Prasad, Hon’ble Mr. Justice Jagdish Singh Khehar

16. Kirshna Texport & Capital Markets Limited Versus Ila A. Agrawal & Ors .....................................................................................162

(2015) 8 Supreme Court Cases 28 Before Hon’ble Mr. Justice Pinaki Chandra Ghose and Hon’ble Mr. Justice Uday U. Lalit

17. Kamlesh Kumar versus State Of Bihar & Anr ....................................................170 (2014) 2 Supreme Court Cases 424 Before Hon’ble Mr. Justice K.S. Radhakrishnan, Hon’ble Mr. Justice A.K. Sikri

18. Jagdish Singh versus Natthu Singh .......................................................................176 (1992) 1 Supreme Court Cases 647 Before Hon’ble Mr. Justice M.N. Venkatachaliah and Hon’ble Mr. Justice S.C. Agrawal

the negotiable instruments (amendment) act, 2018

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THE NEGOTIABLE INSTRUMENTS (AMENdMENT) ACT, 2018

No. 20 of 2018(2nd August, 2018)

An Act further to amend the Negotiable Instruments Act, 1881.

Be it enacted by Parliament in the Sixty-ninth year of the Republic of India as follows :—

1. (1) ThisActmaybecalledtheNegotiableInstruments(Amendment)Act, 2018.

(2) It shall come into force on such date as the Central Government may,bynotificationintheOfficialGazette,appoint.

2. IntheNegotiableInstrumentsAct,1881(hereinafterreferredtoastheprincipalAct),aftersection143,thefollowingsectionshallbeinserted,namely:—

“143A.(1)NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973,theCourttryinganoffenceundersection138mayorderthedrawerofthechequetopay interimcompensationtothecomplainant—

(a) in a summary trial or a summon case, where he pleads not guiltytotheaccusationmadeinthecomplaint;and

(b) in any other case, upon framing of charge.

(2) Theinterimcompensationundersub-section(1)shallnotexceedtwenty per cent. of the amount of the cheque.

(3) Theinterimcompensationshallbepaidwithinsixtydaysfromthedateoftheorderundersub-section(1),orwithinsuchfurtherperiod not exceeding thirty days as may be directed by the Court onsufficientcausebeingshownbythedrawerofthecheque.

(4) If thedrawerofthecheque isacquitted,theCourtshalldirectthe complainant to repay to the drawer the amount of interim compensation,withinterestatthebankrateaspublishedbytheReserveBankofIndia,prevalentatthebeginningoftherelevantfinancial year,within sixtydays from thedateof theorder,orwithin such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by thecomplainant.

26 of 1881

2 of 1974

Short title and Commence-ment

Insertion of new section 143A. Power to direct interm compensation

READING MATERIAL ON NEGOTIABLE INSTRUMENTS ACT, 1881

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(5) Theinterimcompensationpayableunderthissectionmayberecoveredasifitwereafineundersection421oftheCodeofCriminalProcedure,1973.

(6) The amount of fine imposed under section 138 or theamount of compensation awarded under section 357 ofthe Code of Criminal Procedure, 1973, shall be reducedbytheamountpaidorrecoveredasinterimcompensationunderthissection.”

3. IntheprincipalAct,aftersection147,thefollowingsectionshallbe inserted.

“148. (1) Notwithstanding anything contained in the Code ofCriminalProcedure,1973,innappealbythedraweragainstconviction under section 138, the Appellate Court mayorder the appellant to deposit such sum which shall be a minimumoftwentypercentofthefineorcompensationawarded by the trial Court :

Providedthattheamountpayableunderthissub-sectionshallbe inadditiontoany interimcompensationpaidbytheappellantundersection143A.

(2) Theamountreferredtoinsub-section(1)shallbedepositedwithin sixty days from the date of the order, or within such further period not exceeding thirty days as may be directedbytheCourtonsufficientcausebeingshownbythe appellant.

(3) TheAppellateCourtmaydirectthereleaseoftheamountdepositedbytheappellanttothecomplainantatanytimeduring the pendency of the appeal :

Providedthatiftheappellantisacquitted,theCourtshalldirect the complainant to repay to the appellant the amount soreleased,withinterestatthebankrateaspublishedbytheReserveBankof India,prevalent at thebeginningoftherelevantfinancialyear,withinsixtydaysfromthedateof the order, or within such further period not exceeding thirtydaysasmaybedirectredbytheCourtonsufficientcausebeingshownbythecomplainant.”

qqq

Insertion of new section 148.

2 of 1974

Power of Appellate Court to order payment pending appeal against conviction.

2 of 1974

2 of 1974

Tools for quick disposal of cases under The negoTiable insTrumenTs acT 1881

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TOOLS fOR qUICk dISpOSAL Of CASES UNdER THE NEGOTIABLE INSTRUMENTS ACT 1881

TheNegotiable InstrumentsAct1881 came intobeingas anAct todefineandamend thelawrelatingtopromissorynotes,billofexchangeandcheques.ThechiefobjectbehindNegotiableInstrumentsActwastolegalisethesystemunderwhichNegotiableInstrumentspassfromonehandtootherinnegotiationslikeordinarygoods.MostlytheEnglishlawisfollowedincaseoftheN.I.Act except in the area where it was required in Indian context to change the applicability. It has also beensaidthatthelawofNegotiableInstrumentsisnotthelawofasinglecountrybutofthewholeofthecommercialworldandexceptforcertaindifferencesdependingonpeculiaritiesexisting ineachcountrythegeneralrulesofthelawisonthesamepatterninallthecountries.

TheearliestattempttocodifyalawrelatingtomercantileuseswasmadeinFranceasearlyasintheyear1818andtheFrenchCommercialCodewaslateradoptedasamodelbymanyothercountries. In England, themovement for such a codification of law relating to mercantile usesmaterializedonlyin1880withBillsofExchangeAct,1882andinIndiaitcameintoexistencein1881.Thelawinitsmorethan135yearsofexistencehasbeensubjectedtoasmanyas27amendmentsandthemostrelevantoneinpresentcontextbeingTheBanking,PublicFinancialInstitutionsandNegotiableInstrumentLaws(Amending)Act,1988andthesubsequenttheNegotiableInstruments(AmendmentandMiscellaneousProvisions)Act,2002andthelastonebeingNegotiableInstruments(Amendment)Act,2015withretrospectiveeffectfrom15/6/2015.

OutofthethreespecifictypeofinstrumentsreferredintheNegotiableInstrumentsActnamelythe promissory note bill of exchange and cheques it was only the Cheques which became one of the most common instruments for trade and commerce because of certainty and convenience.

NegotiableInstrumentshasbeendefinedinsection13oftheactandifextractedthewayitexists would read:-

S.13. ‘‘Negotiable instrument”

(1)1 A“negotiableinstrument”meansapromissorynote,billofexchangeorchequepayableeither to order or to bearer.

Explanation(i).—Apromissorynote,billofexchangeorchequeispayabletoorderwhichisexpressedtobesopayableorwhichisexpressedtobepayabletoaparticularperson,anddoesnotcontainwordsprohibitingtransferorindicatinganintentionthatitshallnotbetransferable.

Explanation (ii).—A promissory note, bill of exchange or cheque is payable to bearer which isexpressedtobesopayableoronwhichtheonlyorlastendorsementisanendorsementinblank.

Explanation (iii).—Where a promissory note, bill of exchange or cheque, either originally or byendorsement,isexpressedtobepayabletotheorderofaspecifiedperson,andnottohimorhisorder,itisneverthelesspayabletohimorhisorderathisoption.]

1 Subs. by Act 8 of 1919, sec. 3, for sub-section (1)


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(2)2 Anegotiableinstrumentmaybemadepayabletotwoormorepayeesjointly,oritmaybemadepayableinthealternativetooneoftwo,oroneorsomeofseveralpayees.]

Section5oftheN.I.Act1881providesthedefinitionofbillofexchangeinthefollowingwords –

S.5. Bill of exchange

A“billofexchange”isaninstrumentinwritingcontaininganunconditionalorder,signedbythemaker,directingacertainpersontopayacertainsumofmoneyonlyto,ortotheorderof,acertain person or to the bearer of the instrument.

Apromiseorordertopayisnot“conditional”,withinthemeaningofthissectionandsection4,byreasonofthetimeforpaymentoftheamountoranyinstallmentthereofbeingexpressedtobeonthelapseofacertainperiodaftertheoccurrenceofaspecifiedeventwhich,accordingtotheordinaryexpectationofmankind,iscertaintohappen,althoughthetimeofitshappeningmaybeuncertain.

Thesumpayablemaybe“certain’’,withinthemeaningofthissectionandsection4,althoughit includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an installment, the balance unpaid shall become due.

Thepersontowhomitisclearthatthedirectionisgivenorthatpaymentistobemademaybea“certainperson”,withinthemeaningofthissectionandsection4,althoughheismis-namedordesignatedbydescriptiononly.

Thechequehasbeendefinedinsection6oftheNegotiableInstrumentsActandaspersection6 –

S.6.3 Cheque

A“cheque”isabillofexchangedrawnonaspecifiedbankerandnotexpressedtobepayableotherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

ExplanationI.—Forthepurposesofthissection,theexpressions—

(a)4 “a cheque in the electronic form”means a cheque drawn in electronic form by using anycomputer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or with electronic signature, as the case maybe;]

(b) “atruncatedcheque”meansachequewhichistruncatedduringthecourseofaclearingcycle,eitherbytheclearinghouseorbythebankwhetherpayingorreceivingpayment,immediatelyon generation of an electronic image for transmission, substituting the further physicalmovementofthechequeinwriting.

2 Ins. by Act 5 of 1914, sec. 2.3 Subs.byAct55of2002,sec.2,for“A“cheque”isabillofexchangedrawnonaspecifiedbankerandnotexpressedtobepaya-

ble otherwise than on demand” (w.e.f. 6-2-2003).4 Substituted by Act 26 of 2015 , sec. 2 Prior to its substitution Cl (a) read as under (a) “a cheque in the electronic form” means a

cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensur-ing the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;


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Explanation II.Forthepurposesof thissection,theexpression“clearinghouse”meanstheclearinghousemanagedbytheReserveBankofIndiaoraclearinghouserecognisedassuchbytheReserveBankofIndia.]

[Explanation III5 .—For the purposes of this section, the expressions “asymmetric cryptosystem”,“computerresource”,“digitalsignature”,“electronicform”and“electronicsignature”shallhavethesamemeaningsrespectivelyassignedtothemintheInformationTechnologyAct,2000(21of2000).]

CHAPTER XIII Special rules of evidence

Section – 118 Presumptions as to negotiable instruments.—Until the contrary is proved, the following presumptions shall be made:—

(a) ofconsideration.—thateverynegotiableinstrumentwasmadeordrawnforconsideration,andthateverysuchinstrument,whenithasbeenaccepted,endorsed,negotiatedortransferred,wasaccepted,endorsednegotiatedortransferred,forconsideration;

(b) astodate.—thateverynegotiableinstrumentbearingadatewhenmadeordrawnonsuchdate;

(c) as to time of acceptance.—that every accepted bill of exchange was accepted within areasonabletimeafteritsdateandbeforeitsmaturity;

(d) astotimeoftransfer.—thateverytransferofanegotiable instrumentwasmadebefore itsmaturity;

(e) astoorderofendorsement.—thattheendorsementsappearinguponanegotiableinstrumentweremadeintheorderinwhichtheyappearthereon;

(f) astostamps.—thatalostpromissorynote,billofexchangechequewasdulystamped;

(g) thatholderisaholderinduecourse.—thattheholderofnegotiableinstrumentisaholderindue course: provided that, where instrument has been obtained from its lawful owner, or from anypersonsinlawfulcustodythereof,bymeansofanoffenceorfraud,orhasobtainedfromthemakeroracceptorthereofbymeansofanoffenceorfraud,orforunlawfulconsideration,the burden of proving that the he is a holder in due course lies upon him.

Section 9 Holder in due course

Holder indue coursemeansanypersonwho for considerationbecame thepossessorof apromissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payabletoorder,beforetheamountmentionedinitbecamepayable,andwithouthavingsufficientcausetobelievethatanydefectexistedinthetitleofthepersonfromwhomhedeliveredhistitle.

Chequeshavebeenused incommercialword foravery longperiodoftimeasoneof theconvenientmodefortransferringmoneyandwithdevelopmentofbankingsectorsandwithincreaseinnumberofbrancheschequesbecameoneofthefavoriteNegotiableInstruments.WhenchequeswereissuedasaNegotiableInstruments,therewasalwayspossibilityandlikelihoodofthesamebeingissuewithoutsufficientamountintheaccount.ThedishonorofachequecreatedacivilliabilityunlessbecauseofanincreasingtrendinuseofchequesthegovernmentfeltitimperativetoamendtheNegotiableInstrumentsActbyintroducingchapterXVIIintheNegotiableInstrumentsActbythe

5 Substituted by Act 26 of 2015 , sec. 2


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bankingpublicfinancialinstitutionsandNegotiableInstrumentslaw(amendment)Act1988(66of1988)witheffectfrom1stApril1989.WithamendmentofNegotiableInstrumentsActasreferredhereinabovesection138to142wereinsertedwithaviewtoprotectthedrawingofthecheque.Byintroducingthenewprovisionsthedrawerwasmadeliableforpenaltiesincaseof“bouncing” of thechequeduetoinsufficiencyoffundsetc.withadequatesafeguardtopreventharassmentofthehonestdrawer.Theobjectofthesaidamendmentmaybeextractedhereandwouldreadasunder–

STATEMENT OF OBJECTS AND REASON OF AMENDING ACT, 1988

Toenhancetheacceptabilityofchequesinsettlementofliabilitiesformakingthedrawerliableforpenalties in caseofbouncingof chequedue to insufficiencyetc.of funds in theaccountsorfor the reason that it exceeds the arrangements made by the drawer with adequate safeguards to prevent harassment of honest drawers.

Clause – 4:Thisclause insertsanewchapterXVII intheNegotiableInstrumentsAct,1881.The provisions contained in the new Chapter provide that where any cheque drawn by any person forthedischargeofanyliabilityisreturnedbythebankunpaidforthereasonoftheinsufficiencyof the amount of money standing to the credit of the account on which the cheque was drawn or forthereasonthatitexceedsthearrangementsmadebythedrawerofthechequewiththebankerforthataccount,thedrawerofsuchchequeshallbedeemedtohavecommittedanoffence.Inthatcase,thedrawerwithoutprejudicetotheotherprovisionsofthesaidAct,shallbepunishablewithan imprisonment for a term which may extend to one year6,orwithfinewhichmayextendtotwicetheamountofthecheque,orwithboth.Theprovisionshavealsobeenmadethattoconstitutethesaidoffence–

(a) suchchequeshouldhavebeenpresentedtothebankwithinaperiodofsix7 months of the dateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier;and

(b) the payee or holder in due course of such cheque should have made a demand for the payment ofthesaidamountofmoneybygivinganotice,inwriting,tothedrawerofthechequewithinfifteendaysofthereceiptof informationbyhimfromthebankregardingthereturnofthechequeunpaid;and

(c) Thedrawerofsuchchequeshouldhavefailedtomakethepaymentofthesaidamountofmoneytothepayeeortheholder induecourseof thechequewithinfifteendays8 of the receiptofthesaidnotice.

It has also been provided that it shall be presumed, unless the contrary is proved, that the holder of cheque received the cheque in discharge of liability. Defenses which may or may not beallowed inanyprosecution for suchoffencehavealsobeenprovided tomake theprovisionseffective.Usualprovisionsrelatingtooffencesbycompanieshavealsobeen included inthesaidnewChapter.Inordertoensurethatgenuineandhonestbankcustomersarenotharassedorputtoinconvenience,sufficientsafeguardshavealsobeenprovidedinthenewChapter.Suchsafeguardsare –

(a) thatnocourtshalltakecognizanceofsuchoffenceexceptonacomplaint,inwriting,madebythepayeeortheholderinduecourseofthecheque;

6 Substituted by Act 55 of 2002, S.7, “for a term which may extend to two years” (w.e.f. 06/02/2003)7 (RBI,circularu/s35(A)BankingRegulationAct,1949-w.e.f.1.4.2012validityperiodofcheque/draft/payorder-3months.)8 Substituted by Act 55 of 2002, S.7, “ within thirty days” (w.e.f. 06/02/2003)


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(b) that such complaints ismadewithinonemonthof thedateonwhich the causeof actionarises;

(c) thatnocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshalltryanysuchoffence.

With the incorporation of a separate Chapter XVII containing sections 138 to 142, theNegotiableInstrumentsAct,wasamended.Pursuanttotheamendment,apersondrawingachequeonhisaccountwithabankforthedischarge,inwholeorinpart,ofanydebtorotherliability,whichisreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofsuchaccountisinsufficienttohonourthechequeorthatitexceedsthatamountarrangedtobepaidfromthataccountbyanarrangementmadewiththeBank,shallbedeemedtohavecommittedanoffenceandbepunishedwithimprisonmentforatermextendinguptooneyearorwithfinewhichmayextendtotwicetheamountofthechequeorevenwithboththepenalties.

Thussuchpersoninadditiontobeingmadeliableinacivilsuit,canalsobemadecriminallyliable.Tosafeguardthehonestandgenuinebankcustomers,thecourtwillnottakecognizanceoftheoffenceexceptinacomplaintinwritingandnocourtinferiortothatofaMetropolitanMagistrateor a first class Judicial Magistrate shall try the offence. With this amendment, the NegotiableInstrumentsActwillacquireadoublecharacter.Earlieritwasanenactmentfallingexclusivelyundercivillawconfinedtocivilliability,henceforth;itwillalsohaveapenalprovision.

It was also found over the years that the punishment provided was inadequate and the procedure prescribed where cumbersome and the courts were unable to dispose of the cases expeditiouslyandintimeboundmannerandhencetheNegotiableInstrumentsActwasamendedbytheNegotiableInstruments(amendmentandmiscellaneousprovisions)Act2002

The Negotiable Instruments (amendment And Miscellaneous Provisions) Bill, 2002

ABILLfurthertoamendtheNegotiableInstrumentsAct,1881,theBankers’BooksEvidenceAct,1891andtheInformationTechnologyAct,2000.

With the insertion of 1988 amandment in the Act the situation certainly improved andthe instancesofdishonourhaverelativelycomedownbutonaccountofapplicationofdifferentinterpretative techniques by different High Courts on different provisions of the Act althoughit further complicated the situation on dishonour of cheques. Having regard to the working ofthesepenalprovisionsondishonourofchequesandthebottlenecksthathavesurfacedinstrictlyimplementingtheseprovisions,ParliamentenactedtheNegotiableInstruments(AmendmentandMiscellaneous Provisions) Act, 2002 (55 of 2002),which is intended to plug the loopholes. ThisamendmentActinsertsfivenewsectionsfrom143to147touchingvariouslimbsoftheparentActandtheamendmentActhasbeenrecentlybroughtintoforceonFeb.6,2003.

Section 143 is intended to achieve speedy trial. By applying provisions of Sections 262 to265CrPCitenablesaJudicialMagistrateorMagistrateoftheFirstClasstoconductthetrial.Thenit contemplatessummary trialandprovides forcontinuousday-to-dayhearingof thecasetill itsconclusionandfurtherstipulatesthatthetrialistobecompletedwithin6monthsfromthedateoffilingofthecomplaint.ItfurtherempowerstheMagistratetopassasentenceforimprisonmentforatermnotexceedingtwoyearorafinenotexceedingtwicetheamountofthechequenotwithstandinganything contained to the contrary in CrPC.


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ThenewSection144dealswiththeserviceofsummons.ItwouldnowenabletheMagistratenottofollowtheelaborateprocedureforservingsummonsasrequiredbySections61to90CrPC.Thesub-sectionofthissectionallowsthesummonstobeservedthroughthespeedpostandnotifiedprivatecouriersbesidesthenormalprocess.Preciselyspeaking,thissectionhasbroughtabouttheconceptof“constructiveservice”.ThisprovisionisanalogoustotheprincipleincorporatedinSection27oftheGeneralClausesAct,1897.Accordingtothiswherethesenderhasdispatchedthenoticebypostwithcorrectaddresswrittenonit,thenitcanbedeemedtohavebeenservedonthesenderunlessheprovesthatitwasreallynotserved.ThisisthepositionwhichgotendorsedbytheSupremeCourt in K. Bhaskaran case9Alsoonrefusaltotakedeliveryofthesummons,theCourtcandeclarethat the summons have been duly served.

Section145contemplatesevidenceonaffidavitanditappearswhilebringingthisamendmenttheGovernmenthadinitsmindtheratiodecidendiinthecaseofBIPSSystemLtd.v.State,ofDelhiHighCourt.Accordingtothissectionthecomplainantcangivehisevidencebywayofanaffidavitandthesamemaybeattachedwiththecomplaintandiftheaccusedwantstocontradictthecontentsoftheaffidavitthecomplainantmaybecalledforexamination.

Then Section 146 provides for presumption to bank memorandums. Earlier whenever aquestionarosewhethertherewasinsufficientfundsintheaccountofthedrawerofthecheque,itwasconceivedtobeamatterofevidencebeingaquestionoffactandonuswasplacedonthecomplainantandfordischargingthisonusthebankpersonnelwastobeexamined.Thisnaturallydelayedthings.IthasthereforebeenprovidedthatbasedonthebanksliptheCourtwouldpresumethefactofdishonour,unlessanduntilsuchfactisdisproved.

Section147providesforcompoundingofoffencesunderthisAct.TherewasadifferenceofopinionindifferentHighCourtsonthequestionwhetheroffencesundertheprovisionsoftheActwerecompoundableornot.TheKeralaHighCourt’sviewwasinthenegativewhereastheviewoftheAndhraPradeshHighCourtwasintheaffirmative.UnfortunatelythematterdidnotreachtheApexCourt.ParliamentthereforehasresolvedthecontroversyandprovidedthatoffencesundertheAct would be compoundable.

BesidesthisSection138,141and142havealsobeenamendedbydoublingtheimprisonmenttermfromoneyeartotwoyearsandtheperiodoftimetoissuedemandnoticetothedrawerfrom15daysto30daysandbyprovidingimmunityfromprosecutionfornomineedirector. IthasalsobeenprovidedthattheMagistratecancondonethedelayifanyinfilingthecomplaintinspecialandpeculiarcircumstances.AnobjectiveperusaloftheaforesaidamendmentwouldrevealthattheActhasnowbecomeaself-containedstatutewhereinan“in-housemechanism”hasbeenprovidedintheActitselfwhichwouldtakecarethatthetrialisaspeedyone,nounduedelayoccursandthatamore deterrent punishment is provided. Similarly the service of summons has been made easy and theoffenceismadecompoundable.

STATEMENT OF OBJECTS AND REASONS of 2015 AMENDMENT

TheNegotiableInstrumentsAct,1881wasenactedtodefineandamendthelawrelatingtoPromissoryNotes, Bills of Exchange and Cheques. TheBanking, Public Financial Institutions andNegotiableInstrumentsLaws(Amendment)Act,1988insertedintheNegotiableInstrumentsAct,1881 (hereinafter called the saidAct), a newChapter XVII, comprising sections138 to 142with

9 1997 (7) SCC 510


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effectfrom1stApril,1989.Section138ofthesaidActprovidesforpenaltiesincaseofdishonourofchequesduetoinsufficiencyoffundsintheaccountofthedrawerofthecheque.

As sections 138 to 142 of the said Actwere found deficient in dealingwith dishonour ofcheques,theNegotiableInstruments(AmendmentandMiscellaneousProvisions)Act,2002,interalia,amendedsections138,141and142andinsertednewsections143to147inthesaidActaimedat speedydisposalof cases relating todishonourof cheque through their summary trial aswellasmakingthemcompoundable.Punishmentprovidedundersection138toowasenhancedfromoneyeartotwoyears.Theselegislativereformsareaimedatencouragingtheusageofchequeandenhancingthecredibilityoftheinstrumentsothatthenormalbusinesstransactionsandsettlementofliabilitiescouldbeensured.

TheSupremeCourt,initsjudgmentdated1stAugust,2014,inthecaseofDashrath Rupsingh Rathod versus State of Maharashtra and another (Criminal Appeal No. 2287 of 2009)10, held that the territorial jurisdiction fordishonourof cheques is restricted to the courtwithinwhose localjurisdiction the offence was committed, which in the present context is where the cheque isdishonouredbythebankonwhichitisdrawn.TheSupremeCourthasdirectedthatonlythosecaseswhere, post the summoning and appearance of the alleged accused, the recording of evidence has commencedasenvisagedinsection145(2)oftheNegotiableInstrumentsAct,1881,willproceedandcontinueatthatplace.Allothercomplaints(includingthosewheretheaccused/respondenthasnotbeenproperlyservedsummons)shallbereturnedtothecomplainantforfilinginthepropercourt,inconsonancewithexpositionofthelaw,asdeterminedbytheSupremeCourt.

Amendment of section 142

IntheprincipalAct,section142shallbenumberedassub-section(1)thereofandaftersub-section(1)assonumbered,thefollowingsub-sectionshallbeinserted,namely:-

“(2) Theoffenceundersection138shallbeinquiredintoandtriedonlybyacourtwithinwhoselocal jurisdiction the bank branch of the payee,where the payee presents the cheque forpayment,issituated.”.

Insertion of new section 142A

IntheprincipalAct,aftersection142,thefollowingsectionshallbeinserted,namely:-

142A. - Validation for transfer of pending cases

‘‘142A. (1)Notwithstandinganythingcontained intheCodeofCriminalProcedure,1973(2of1974)oranyjudgment,decree,orderordirectionsofanycourt,allcasesarisingoutofsection138 which were pending in any court, whether filed before it, or transferred to it, before thecommencementoftheNegotiableInstruments(Amendment)Act,2015,shallbetransferredtothecourthavingjurisdictionundersub-section(2)ofsection142asifthatsub-sectionhadbeeninforceatallmaterialtimes.

(2) Notwithstandinganythingcontainedinsub-section(2)ofsection142orsub-section(1),wherethepayeeortheholderinduecourse,asthecasemaybe,hasfiledacomplaintagainstthedrawerofachequeinthecourthavingjurisdictionundersub-section(2)ofsection142orthecasehasbeentransferredtothatcourtundersub-section(1),allsubsequentcomplaintsarisingoutofsection138againstthesamedrawershallbefiledbeforethesamecourtirrespectiveof

10 (2014)9 SCC 219


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whetherthosechequeswerepresentedforpaymentwithintheterritorialjurisdictionofthatcourt.

(3) If,onthedateofthecommencementoftheNegotiableInstruments(Amendment)Act,2015,morethanoneprosecutionfiledbythesamepersonagainstthesamedrawerofchequesispendingbeforedifferentcourts,uponthesaidfacthavingbeenbroughttothenoticeofthecourt,suchcourtshalltransferthecasetothecourthavingjurisdictionundersub-section(2)ofsection142beforewhichthefirstcasewasfiledasifthatsub-sectionhadbeeninforceatallmaterialtimes.’’.

Pursuant to the judgment of the Supreme Court, representations have beenmade to theGovernment by various stakeholders, including industry associations and financial institutions,expressingconcernsaboutthewideimpactthisjudgmentwouldhaveonthebusinessinterestsasitwillofferundueprotectiontodefaultersattheexpenseoftheaggrievedcomplainant;willgiveacompletego-bytothepractice/conceptof‘PayableatParcheques’andwouldignorethecurrentrealitiesofchequeclearingwiththeintroductionofCTS(ChequeTruncationSystem)wherechequeclearance happens only through scanned image in electronic form and cheques are not physically requiredtobepresentedtotheissuingbranch(draweebankbranch)butaresettledbetweentheservice branches of the drawee and payee banks;will give rise tomultiplicity of cases coveringseveralchequesdrawnonbank(s)atdifferentplaces;andadheringtoitisimpracticableforasinglewindow agency with customers spread all over India.

Toaddressthedifficulties facedbythepayeeor the lenderof themoney infilingthecaseundersection138ofthesaidAct,becauseofwhich,largenumberofcasesarestuck,thejurisdictionforoffenceundersection138hasbeenclearlydefined.TheNegotiableInstruments(Amendment)Bill, 2015 provides for the following, namely:–

(i) filingofcasesonlybyacourtwithinwhoselocaljurisdictionthebankbranchofthepayee,wherethepayeepresentsthechequeforpayment,issituated;

(ii) stipulatingthatwhereacomplainthasbeenfiledagainstthedrawerofachequeinthecourthavingjurisdictionunderthenewschemeofjurisdiction,allsubsequentcomplaintsarisingoutofsection138ofthesaidActagainstthesamedrawershallbefiledbeforethesamecourt,irrespective of whether those cheques were presented for payment within the territorialjurisdictionofthatcourt;

(iii) stipulating that ifmore than one prosecution is filed against the samedrawer of chequesbeforedifferentcourts,upon thesaid facthavingbeenbrought to thenoticeof thecourt,thecourtshall transfer thecase to thecourthaving jurisdictionasper thenewschemeofjurisdiction;and

(iv) amendingExplanationIundersection6ofthesaidActrelatingtothemeaningofexpression“a cheque in theelectronic form”, as the saidmeaning is found tobedeficientbecause itpresumesdrawingofaphysicalcheque,whichisnottheobjectiveinpreparing“achequeintheelectronicform”andinsertinganewExplanationIIIinthesaidsectiongivingreferenceoftheexpressionscontainedintheInformationTechnologyAct,2000.

ItisexpectedthattheproposedamendmentstotheNegotiableInstrumentsAct,1881wouldhelpinensuringthatafairtrialofcasesundersection138ofthesaidActisconductedkeepingin


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viewtheinterestsofthecomplainantbyclarifyingtheterritorialjurisdictionfortryingthecasesfordishonour of cheques.

TheActwasamendedlastbytheNegotiableInstrumentsamendmentAct2015andafterthesaid amendment the provision of law stands as follows –

CHAPTERXVII

OFPENALTIESINCASEOFDISHONOUROFCERTAINCHEQUESFORINSUFFICIENCYOFFUNDSINTHEACCOUNTS

138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any chequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamountofmoney to another person from out of that account for the discharge, in whole or in part, of any debt orotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingto thecreditof thataccount is insufficient tohonour thechequeor that itexceeds theamountarrangedtobepaidfromthataccountbyanagreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudicetoanyotherprovisionofthisAct, be punished with imprisonment for 11[atermwhichmaybeextendedtotwoyears’],orwithfinewhichmayextendtotwicetheamountofthecheque,orwithboth:

Providedthatnothingcontainedinthissectionshallapplyunless—

(a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonths(RBI, circular u/s 35 (A) Banking Regulation Act, 1949- w.e.f. 1.4.2012 validity period of cheque/draft/pay order- 3 months.) from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganotice;inwriting,tothedrawerofthecheque, 12[withinthirtydays]ofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

(c) thedrawerofsuchchequefails tomakethepaymentofthesaidamountofmoneytothepayeeor,asthecasemaybe,totheholderinduecourseofthecheque,withinfifteendaysofthereceiptofthesaidnotice.

Explanation.—Forthepurposesofthissection,“debtofotherliability”meansalegallyenforceabledebt or other liability.

139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved, that theholderofachequereceivedthechequeofthenaturereferredtoinsection138forthedischarge, in whole or in part, of any debt or other liability.

140. Defence which may not be allowed in any prosecution under section 138.—It shall not be a defenceinaprosecutionforanoffenceundersection138thatthedrawerhadnoreasontobelieve when he issued the cheque that the cheque may be dishonoured on presentment for thereasonsstatedinthatsection.

141. Offences by companies.—(1) If the person committing an offence under section 138 is acompany,everypersonwho,atthetimetheoffencewascommitted,wasinchargeof,and

11 Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002(Act 55 of 2002)12 SubstitutedbyAct55of2002,S.7,“forwithinfifteendays”(w.e.f.06/02/2013)


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was responsible to, the company for the conduct of the business of the company, as well as thecompany,shallbedeemedtobeguiltyoftheoffenceandshallbeliabletobeproceededagainst and punished accordingly:

Providedthatnothingcontainedinthissub-sectionshallrenderanypersonliabletopunishmentifheprovesthattheoffencewascommittedwithouthisknowledge,orthathehadexercisedallduediligencetopreventthecommissionofsuchoffence:

13[Provided further that where a person is nominated as a Director of a company by virtue of hisholdinganyofficeoremploymentintheCentralGovernmentorStateGovernmentorafinancialcorporationownedorcontrolledbytheCentralGovernmentortheStateGovernment,asthecasemaybe,heshallnotbeliableforprosecutionunderthisChapter.]

(2) Notwithstandinganythingcontainedinsub-section(1),whereanyoffenceunderthisActhasbeencommittedbyacompanyanditisprovedthattheoffencehasbeencommittedwiththeconsentorconnivanceof,orisattributableto,anyneglectonthepartof,anydirector,manager, secretaryorotherofficerof the company, suchdirector,manager,secretaryorotherofficershallalsobedeemedtobeguiltyofthatoffenceandshallbeliable to be proceeded against and punished accordingly.

Explanation.—Forthepurposesofthissection,—

(a) “company” means anybody corporate and includes a firm or other association ofindividuals;and

(b) “director”,inrelationtoafirm,meansapartnerinthefirm.

142. Cognizance of offences.— 14[(1)]NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974),—

(a) nocourtshalltakecognizanceofanyoffencepunishableundersection138exceptuponacomplaint,inwriting,madebythepayeeor,asthecasemaybe,theholderinduecourseofthecheque;

(b) suchcomplaintismadewithinonemonthofthedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotosection138:

15[ProvidedthatthecognizanceofacomplaintmaybetakenbytheCourtaftertheprescribedperiod,ifthethecomplainantsatisfiestheCourtthathehadsufficientcausefornotmakingacomplaintwithinsuchperiod;]

(c) nocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshalltryanyoffencepunishableundersection138.].

16[(2)Theoffenceundersection138shallbeinquiredintoandtriedonlybyacourtwithinwhoselocaljurisdiction,—

(a) if the cheque is delivered for collection through an account, thebranchof thebankwherethepayeeorholderinduecourse,asthecasemaybe,maintainstheaccount,issituated;or

13 Ins. by Act 55 of 2002, s. 8, (w.e.f. 6-2-2003).14 Section 142 numbered as sub-section (1) thereof by Act 26 of 2015, s. 3 (w.e.f. 15-6-2015).15 Ins. by Act 55 of 2002, s. 9, (w.e.f. 6-2-2003).16 Ins. Act 26 of 2015, s. 3, (w.e.f. 15-6-2015).


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(b) if the cheque is presented for payment by the payee or holder in due course, otherwisethroughanaccount,thebranchofthedraweebankwherethedrawermaintains the account, is situated.

Explanation.—For thepurposes of clause (a),where a cheque is delivered for collection at anybranchofthebankofthepayeeorholderinduecourse,then,thechequeshallbedeemedtohavebeendeliveredtothebranchofthebankinwhichthepayeeorholderinduecourse,asthecasemaybe,maintainstheaccount.]17[142A. Validation for transfer of pending cases.—

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974)oranyjudgment,decree,orderordirectionofanycourt,allcasestransferredtothecourthavingjurisdictionundersub-section(2)ofsection142,asamendedbytheNegotiableInstruments(Amendment)Ordinance,2015(Ord.6of2015),shallbedeemedtohavebeentransferredunderthisAct,asifthatsub-sectionhadbeeninforceatallmaterialtimes.

(2) Notwithstandinganythingcontainedinsub-section(2)ofsection142orsub-section(1),wherethepayeeortheholderinduecourse,asthecasemaybe,hasfiledacomplaintagainstthedrawerofachequeinthecourthavingjurisdictionundersub-section(2)ofsection142orthecasehasbeentransferredtothatcourtundersub-section(1)andsuchcomplaintispendinginthatcourt,allsubsequentcomplaintsarisingoutofsection138againstthesamedrawershallbefiledbeforethesamecourtirrespectiveofwhetherthosechequesweredeliveredforcollectionorpresentedforpaymentwithintheterritorialjurisdictionofthatcourt.

(3) If,onthedateofthecommencementoftheNegotiableInstruments(Amendment)Act,2015(26of2015),morethanoneprosecutionfiledbythesamepayeeorholder induecourse,asthecasemaybe,againstthesamedrawerofchequesispendingbeforedifferentcourts,uponthesaidfacthavingbeenbroughttothenoticeofthecourt,suchcourtshalltransferthecasetothecourthavingjurisdictionundersubsection(2)ofsection142,asamendedbytheNegotiableInstruments(Amendment)Ordinance,2015(Ord.6of2015),beforewhichthefirstcasewasfiledandispending,asifthatsub-sectionhadbeeninforceatallmaterialtimes.]

18[143. Power of Court to try cases summarily.—

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974)alloffencesunderthisChaptershallbetriedbyaJudicialMagistrateofthefirstclassorbyaMetropolitanMagistrateandtheprovisionsofsections262to265(bothinclusive)of the said Code shall, as far as may be, apply to such trials:

Providedthatinthecaseofanyconvictioninasummarytrialunderthissection,itshallbelawfulfortheMagistratetopassasentenceofimprisonmentforatermnotexceedingoneyearandanamountoffineexceedingfivethousandrupees:

Provided further that when at the commencement of, or in the course of, a summary trialunderthissection,itappearstotheMagistratethatthenatureofthecaseissuchthat a sentence of imprisonment for a term exceeding one year may have to be passed orthatitis,foranyotherreason,undesirabletotrythecasesummarily,theMagistrateshallafterhearingtheparties,recordanordertothateffectandthereafterrecallany

17 Ins. by Act 26 of 2015, s. 4, (w.e.f. 15-6-2015).18 Ins. by Act 55 of 2002, s. 10, (w.e.f. 6-2-2003).


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witness who may have been examined and proceed to hear or rehear the case in the manner provided by the said Code.

(2) Thetrialofacaseunderthissectionshall,sofaraspracticable,consistentlywiththeinterestsofjustice,becontinuedfromdaytodayuntilitsconclusion,unlesstheCourtfindstheadjournmentofthetrialbeyondthefollowingdaytobenecessaryforreasonstoberecordedinwriting.

(3) Every trial under this section shall be conducted as expeditiously as possible and anendeavourshallbemadetoconcludethetrialwithinsixmonthsfromthedateoffilingof the complaint.

144. Mode of service of summons.—

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974)andforthepurposesofthisChapter,aMagistrateissuingasummonstoanaccusedorawitness may direct a copy of summons to be served at the place where such accused or witnessordinarilyresidesorcarriesonbusinessorpersonallyworksforgain,byspeedpost or by such courier services as are approved by a Court of Session.

(2) Whereanacknowledgmentpurportingtobesignedbytheaccusedorthewitnessoranendorsement purported to be made by any person authorised by the postal department or the courier services that the accused or the witness refused to take delivery ofsummons has been received, the Court issuing the summons may declare that the summons has been duly served.

145. Evidence on affidavit.—

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974),theevidenceofthecomplainantmaybegivenbyhimonaffidavitandmay,subjecttoalljustexceptionsbereadinevidenceinanyenquiry,trialorotherproceedingunderthesaid Code.

(2) TheCourtmay, if it thinksfit,andshall,on theapplicationof theprosecutionor theaccused,summonandexamineanypersongivingevidenceonaffidavitastothefactscontained therein.

146. Bank’s slip prima facie evidence of certain facts.—

TheCourtshall,inrespectofeveryproceedingunderthisChapter,onproductionofBank’sslipormemohavingthereontheofficialmarkdenotingthatthechequehasbeendishonoured,presumethefactofdishonourofsuchcheque,unlessanduntilsuchfactisdisproved.

147. Offences to be compoundable.—Notwithstanding anything contained in the Code of Criminal Procedure,1973(2of1974),everyoffencepunishableunderthisActshallbecompoundable].

Negotiable Instruments (Amendment) Bill of 2017 Withtheobjectiveofreducingdelayinproceedingspertainingtodishonourofchequesandtoprovideinterimrelieftothepayeeinsuchcases,theNegotiableInstruments(Amendment)Billof2017wastabledbeforetheLokSabhaonTuesday.TheCentralGovernmenthasbeenreceivingseveralrepresentationsfromthepublic,includingthetradingcommunity,relatingtothependencyofchequebouncecases.Thesamemaybeimputedtothedelaytacticsadoptedbyunscrupulous


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drawersofdishonouredchequesonaccountoftheeaseoffilingofappealsandobtainingstayonproceedings.Asaresultofthis,injusticeiscausedtothepayeeofadishonouredchequewhohastospendconsiderabletimeandresourcesincourtproceedingstorealisethevalueofthecheque.Suchdelayscompromisethesanctityofchequetransactions

AspertheStatementofObjectsandReasonsoftheBillof2017,theNegotiableInstrumentsActof1881isproposedtobeamended“withaviewtoaddresstheissueofunduedelayinfinalresolutionofchequedishonourcasessoastoproviderelieftopayeesofdishonouredchequesandtodiscouragefrivolousandunnecessarylitigationwhichwouldsavetimeandmoney”.Further,itisexpected that “the proposed amendments will strengthen the credibility of cheques and help trade andcommerceingeneralbyallowinglendinginstitutions, includingbanks,tocontinuetoextendfinancingtotheproductivesectorsoftheeconomy”.

TheAmendmentBillinsertsanewSection143AintheActof1881,makingprovisionforthepaymentbythedrawerofthedishonouredchequetothepayeethereofofinterimcompensationofan amount not exceeding 20% of the value of the instrument during the pendency of proceedings fortheoffenceofdishonourunderSection138oftheAct

(a) inasummarytrialorasummonscase,wherethedrawerpleadsnotguiltytotheaccusationmadeinthecomplaint;and

(b) in any other case, upon framing of charge.

Thesaid interimcompensationhastobepaidwithinaperiodof60daysfromthedateonwhichtheordertothateffectismade.Theinterimcompensationsorecoveredshallbedeductiblefromtheamountoffineimposedundersection138bytheMagistrateuponconvictionofthedraweroranycompensationdirectedtobepaidundersection357oftheCrPCSection138oftheActof1881providesforimpositionofasentenceofimprisonmentnotexceedingaperiodof2yearsorfineextendingtotwicetheamountofthedishonouredchequeorboth.Thesaidamountofinterimcompensationmayberecovered inthemannerprovidedundersection421ofCrPC–bywayofattachmentandsaleofanymovablepropertyofthedrawerorawarranttotheCollectoroftheconcerned district to recover the same as arrears of land revenue from the movable or immovable property of the drawer.

If thedrawerofthechequeisacquitted,thecourtshalldirectthecomplainanttorepaytothedrawertheamountofinterimcompensation,withinterestatthebankrateaspublishedbytheReserveBankofIndia,prevalentatthebeginningoftherelevantyear.

Further,theBillprovidesfortheinsertionofSection148intheActof1881whereunder,inanappealbythedraweragainstconvictionunderSection138,theappellatecourt isempoweredtoordertheappellanttodepositsuchsumwhichshallbeaminimumof20%ofthefineorcompensationawardedbythetrialcourt.TheamountsopayableshallbeinadditiontoanyinterimcompensationpaidbytheappellantunderSection143A.Also,thesamehastobedepositedwithinaperiodof60days from the date of order in this behalf

IMPORTANT INGREDIENTS OF S. 138Object & Purpose:

The Parliament in itswisdom had chosen to bring section 138 on the Statute book in order tointroducefinancialdisciplineinbusinessdealings.Priortoinsertionofsection138oftheNegotiable


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InstrumentsAct, adishonouredcheque left thepersonaggrievedwith theonly remedyoffilingaclaim.Theobjectandpurposeofbringingnewprovisions in theActwas tomake thepersonsdealingincommercialtransactionsworkwithasenseofresponsibilityandforthatreason,underthe amended provisions of law, lapse on their part to honour their commitment renders the person liableforcriminalprosecution.Inourcountry,inalargenumberofcommercialtransactions,itwasnoted that the cheques were issued even merely as a device not only to stall but even to defraud the creditors.Thesanctityandcredibilityofissuanceofchequesincommercialtransactionswaserodedto a large extent. The Parliament, in order to restore the credibility of cheques as a trustworthy substituteforcashpayment,enactedtheaforesaidprovisions.TheremedyavailableinCivilCourtisalongdrawnmatterandanunscrupulousdrawernormallytakesvariouspleastodefeatthegenuineclaim of the payee. Goa Plast (P) Ltd. v. Chico Urrsula D’souza, (2004) 2 SCC 235.

Scope:

Section138ofNegotiableInstrumentsAct,reflectstheanxietyofthelegislaturetousherinanewhealthy commercial morality through the instrumentality of the penal law. Here is a classic example where,aspartofanattempttoevolveahealthynormofcommercialbehaviour,theprincipalofsocialengineeringthroughtheinstrumentalityofpenallawisputintooperation.Whatwas,priortotheamendmentoftheNegotiableInstrumentsActin1988onlyamoralorcivilwrong,hasbeentransformedandexaltedtothepositionofacrimebyadeftamendmentoftheStatute.

Theessentialrequirementstoattractsection138,NegotiableInstrumentsActare:

(a) The cheque for an amount is issuedby thedrawer to thepayee / complainanton abankaccount maintained by him.

(b) The said cheque is issued for the discharge, in whole or in part of any debt or other liability.

(c) Thechequeisreturnedbythebankunpaidonaccountofinsufficientamounttohonourthecheque or it exceeds the amount arranged to be paid from that account by an agreement madewiththebank.

(d) Thechequeispresentedwithin3monthsfromthedateonwhichit isdrawnorwithintheperiod of its validity.

(e) 30 days demand notice is issued by the payee or the holder in due course on receipt ofinformationbyhimfromthebankregardingthedishonourofthecheque.

(f) Thedrawerofsaidchequefails tomakepaymentof thesaidamountof themoneytothepayeeortheholderonduecoursewithin15daysofthesaidnotice.

(g) The debt or liability against which the cheque was issued is legally enforceable. (Kusum Ingots and Alloys Ltd. Vs Pennar Peterson Securities Ltd (2000)2 SCC 745)

Component of offence:

Section138oftheActmakesitanoffencewheremaychequedrawnbyapersononanyaccountmaintainedbyhim inaBank forpaymentofanyamount tootherperson is returnedunpaidbytheBank for insufficiencyof thedepositor for theamountpayableexceedingsuchdeposit.Thecomponentsofoffenceunderthisprovisionare

(a) drawingofthechequeforsomeamount;

(b) presentationofthechequetothebanker;


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(c) returnofthechequeunpaidbythedraweebank;

(d) givingofnoticebytheholderofthechequeorpayeetodrawerofthechequedemandingpaymentofchequeamount;

(e) failureofdrawertomakepaymentwithin15daysofreceiptofsuchnotice.

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

Complaint

Indra Kumar Patodia Vs. Reliance Industries Ltd.(2012) 13 SCC 1 – Complaint without the signature ofcomplainantismaintainablewhenitisverifiedbythecomplainantandtheprocessisissuedbytheMagistrateafterdueverification.(AIR2013SC426)

Drawing of a Cheque:

Thedrawerinpaymentofalegalliabilitytodischargetheexistingdebtshouldhavedrawncheque.Thereforeanychequegivensaybywayofgiftwouldnotcomewithinthepurviewofthesection.Itshouldbealegallyenforceabledebt;thereforetimebarreddebtandmoney-lendingactivitiesarebeyonditsscope.Thewordsanydebtoranyotherliabilityappearinginsection138makeitveryclearthatitisnotinrespectofanyparticulardebtorliabilityThepresumptionwhichtheCourtwillhavetomakeinallsuchcasesisthattherewassomedebtorliabilityonceachequeisissued.Itwill be for the accused to prove the contrary. i.e., there is no debt or any other liability. The Court shallstatutorilymakeapresumptionthatthechequeswereissuedfortheliabilityindicatedbytheprosecutionunlesscontraryistobeprovedSivakumar Vs. Natrajan (2009) 13 SCC 623.

Cheque not issued from the account of the accused : Where the Complaint lacks necessaryingredientsoftheoffenceunderSection138:Hon’bleSupremeCourtinJugesh Sehgal v. Shamsher Singh Gogi, (2009) 14 SCC 683 has observed

“22. Asalreadynotedhereinbefore, inPara3of the complaint, there is a clear averment thatthe cheque in questionwas issued froman accountwhichwas non-existent on theday itwas issued or that the account from where the cheque was issued “pertained to someone else”.Asperthecomplainant’sownpleadings,thebankaccountfromwherethechequehadbeen issued, was not held in the name of the appellant and therefore, one of the requisite ingredientsofSection138oftheActwasnotsatisfied.”

TheCourtalsonotedthatoneoftheessential ingredientsoftheoffencepunishableunderSection138ofNegotiableInstrumentsActisthatthechequemusthavebeendrawnonanaccount maintained by the accused. Since the cheque in the case before the Supreme Court wasnotissuedfromtheaccountmaintainedbythepetitioner,itwasheldthatoneessentialingredientofoffenceunderSection138ofNegotiableInstrumentsActwasnotpresent.”

ThematterwasreferredtoalargerbenchinthecaseofAneeta Hada Vs God father Tour and Travels Ltd (2008)13 SCC 703 tobeultimatelydecidedbytheHon’bleSupremeCourtofindiainthefollowingterms“ArraigningoftheCompanyasaccusedimperative(2012) 5 SCC 661.

It was further held in the case of Aparna A. Shah Vs Sheth Developers Pvt Ltd and Anr(2013)8 SCC 71 thatincaseofjointaccountonlythedrawerisliable.Thesameviewhasbeenretreatedbythe Apex Court in the recent ruling of N Harihara Krishna Vs J. Thomas reported in 2017 SCC Online SC 1017.


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Ss.138,141&142–Dishonourofcheque–offencebycompany–IssuanceofindividualnoticesunderS.138tothem,held,notrequiredasFordishonorofchequedrawnbycompany,appellantissuednoticeu/s138 toaccusedcompany,butno individualnoticesweregiven to itsDirectors-Held,S.138doesnotadmitofanynecessityorscopeforreadingintoit,requirementthatDirectorsofcompanyinquestionmustalsobeissuedindividualnoticesu/s.138–SuchDirectorswhoareinchargeofandresponsibleforaffairsofcompany,wouldbeawareofreceiptofnoticebycompanyu/s.138(2015)8SCCases28AIR2015SC2091KirshnaTexportandCapitalmarketslimitedVs.IlaA.Agarwal and others

Presentation of Cheque:

Thepresentationofchequeshouldbewithin itsvalidityperiod.Generallyachequeisvalidfor six months, but there are cheques whose validity period is restricted to three months etc. The questionarisesastowhichbankthechequeshouldreachwithinthevalidityperiod,isitthepayeetohisbankpresentsthatofdrawer’sbankoritisenoughifthechequebeforesixmonths.CommonsensedemandsthatthechequeshouldreachthedrawerbankwithintheperiodofvalidityasitisthatbankthateiherpaysorrejectspaymentasperthesituationexistingonthatdayCentral Bank Of India and Another Vs. Saxon Farms and others (1999)8 SCC 221.

Thesupremecourthasheld Ifwithin limitation-Twoconsecutivenoticessentbypayeebyregisteredposttocorrectaddressofdrawerofcheque:firstonesentwithinlimitation;periodof15daysbutsamewasreturnedwithpostalendorsement“intimationserved,addresseeabsent”,whereassecondonesentafterexpiryofstipulatedperiodoflimitationHeld,firstnoticewouldbedeemedtohavebeendulyeffectedbyvirtueofS.27ofGeneralClausesActandS.114ofEvidenceAct-Thoughdrawerentitledtorebutthatpresumption,butinabsenceofrebuttal,requirementofS.138proviso(b)wouldstandcompliedwith-subsequentnoticeshouldbetreatedonlyasreminderandwouldnotaffectvalidityoffirsttoachievethatrightofhonestlenderisnotdefeated.(2017)5SCcases737:2017SCCOnlineSC293AIR2017SC1681:(2017)2Crimes62(SC)N.ParameswaranUnniVs.G.KannanandAnother

Supreme Court in Sadanandan Bhadran vs. Madhavan Sunil Kuar [(1998) 6 SCC 514], held that whilethepayeewasfreetopresentthechequerepeatedlywithinitsvalidityperiod,oncenoticehadbeenissuedandpaymentsnotreceivedwithin15daysofthereceiptofthenotice,thepayeehastoavailtheverycauseofactionarisingthereuponandfilethecomplaint[Prem Chand Vijay Kumar vs. Yashpal Singh & Anr. [(2005) 4 SCC 417].Dishonourofthechequeoneachre-presentationdoesnotgiverisetoafreshcauseofaction.Butthelawwassettledfinallyoverrulingallthecontraryviewsintermsofthejudgementof(2013) 1 SCC 177 MSR Leathers Vs. S. Planniappan and Another that so longthechequeremainsvalidtheprosecutionbasedonsubsequentpresentationispermissiblesolongasitsatisfiesalltherequirementsofsection138.

Re-presentationofchequeafterdishonor–Limitationperiodforfilingcomplaintfordishonorof chequeupon re-presentationof cheque –Date fromwhich to be reckoned – Legal notice todrawermustbeissuedwithin30daysofthatdishonorofcheque,whichmaturesintocomplaint–Thoughfirstlegalnoticewasissuedwithintwodaysoffirstdishonorofcheque,secondlegalnoticeissuedtodrawerofchequeon17-12-2008pursuanttodishonorofsamechequesecondtimeon10-11-2008i.e.beyondlimitationperiodof30days–InformationastoseconddishonorwasreceivedfromBankonthesamedayitself(i.e.10-11-2008)


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Held, although the complainant had right to present the said cheque for encashment a second timeafter itsdishonor, the legalnoticepursuant to seconddishonorhad tobe issuedwithin30daysofthereceiptofinformationastoseconddishonorfromBank,whichwasnotdone-Hence,complaintfiledonbasisofnoticedt.17-12-2008wasnotmaintainableinviewofnon-compliancewithallthethreeconditionslaiddowninS.138NIActasexplainedinMSRLeather,(2013)1SCC177(2014)2SCcases424AIR2014SC660KamleshKumar.Vs.StateofBiharandanother.

Practice and procedure :

DIRECTIONS FOR EARLY DISPOSAL OF CASES:

2014 5 SCC 590 Indian Bank Association and others. Versus Union of India and others –

(1) MetropolitanMagistrate/JudicialMagistrate(MM/JM),onthedaywhenthecomplaintunderSection138of theAct is presented, shall scrutinize the complaint and, if the complaint isaccompaniedbytheaffidavit,andtheaffidavitandthedocuments,ifany,arefoundtobeinorder,takecognizanceanddirectissuanceofsummons.

(2) MM/JMshouldadoptapragmaticandrealisticapproachwhileissuingsummons.Summonsmust be properly addressed and sent by post as well as by e-mail address got from the complainant.Court,inappropriatecases,maytaketheassistanceofthepoliceorthenearbyCourttoservenoticetotheaccused.Fornoticeofappearance,ashortdatebefixed.Ifthesummonsisreceivedbackun-served,immediatefollowupactionbetaken.

(3) Courtmayindicateinthesummonthatiftheaccusedmakesanapplicationforcompoundingofoffencesatthefirsthearingofthecaseand,ifsuchanapplicationismade,Courtmaypassappropriate orders at the earliest.

(4) Court should direct the accused, when he appears to furnish a bail bond, to ensure hisappearanceduringtrialandaskhimtotakenoticeunderSection251Cr.P.C.toenablehimtoenterhispleaofdefenceandfixthecasefordefenceevidence,unlessanapplicationismadebytheaccusedunderSection145(2)forre-callingawitnessforcross-examination.

(5) The Court concerned must ensure that examination-in-chief, cross-examination andreexaminationofthecomplainantmustbeconductedwithinthreemonthsofassigningthecase.TheCourthasoptionofacceptingaffidavitsofthewitnesses,insteadofexaminingtheminCourt.Witnessestothecomplaintandaccusedmustbeavailableforcross-examinationasandwhenthereisdirectiontothiseffectbytheCourt.

We,therefore,directalltheCriminalCourtsinthecountrydealingwithSection138casestofollowtheabove-mentionedproceduresforspeedyandexpeditiousdisposalofcasesfallingunderSection138oftheNegotiableInstrumentsAct.

Returning Of the Cheque Unpaid:

Lotofcontroversyhadarisenontheissue.Whatreasonsarerelevanttoholdthedrawerofthechequecriminallyresponsibleforbouncingofacheque.Thecaselawsonthesubjecthavenowmadethepositionclear.Itisnotwhatthebanksaysinitsreturnmemothatisrelevantbuttheactualpositionason thedatewhen thecheque reaches thedrawerbankwhether therewereenoughfundsinthedraweraccounttohonourthecheque.Thefollowingjudgmentsbringoutthecorrectlegalposition:


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NEPC Ltd. Vs. Magma Leasing Ltd. 1999 (4) SCC 253 – Relying upon Modi Cement Ltd. 1998 (3) SCC 249 – Held that cheque returned bymentioning account closed is also an offence u/s.138N.I.Act.Despitebeingpenalprovisionithasbeeninterpretedpurposefullyinfurtherancetoeffectivenessandworkabilityoftheenactment.Accountclosed,stoppaymentarespeciesofthegenusinsufficientfund.MMTCCo.Vs.Medchilpharmaceuticals2002(1)SCC234

Anyreasonfordishonourisanoffence.S.138oftheNIActMarginalNotestating“Dishonourofchequeforinsufficiencyetc.offundsinaccounts”additionofword“etc.”cannotbeconsideredtobe an accident.

M/s Laxmi Deyechem Vs. State of Gujarat(2012) 13 SCC 375 – overruling Vinod Tawa & others vs. Zahir & Ors. 2002 (7) SCC 541- Held that dishonour of cheque on the ground of non-resemblance ofsignaturewillalsoattractoffenceu/s138N.I.Act.Subjecttorebuttalevidenceofdefenceagainstpresumptionu/s.139N.I.Act.Itwasheldthatthereasons for dishonour like “as account closed “,”payment” “stopped” ,”referred to drawer”, “signature do not match” or “image is not found “ are only the genus of the species “ either because of the amount of money standing to the credit of that account is insufficient to honour the cheque”

Notice:

Noticeisaveryimportantstage.Itisthenon-paymentofdishonouredchequewithinfifteendaysfromthereceiptofthenoticethatconstitutesanoffence.Issuingofachequeanditsdishonourisnotanoffence.Theoffenceiswhenthedrawerreceivesanoticefromthepayeeandhefailstopaythedishonouredchequeamountwithinthegraceperiodof15daysthatconstituteanoffence.Anydemandmadeafterthedishonourofchequewillconstituteanotice.ItisnotnecessarythatthenoticeshouldbesentbyRegisteredPostalone,itcouldbesentevenbyfax.Itisnotnecessarythatthenoticeshouldbeinanyparticularformorstyle.Whatisessentialisthatthereshouldbea demand to pay the dishonoured cheque amount. It is held by the Supreme Court that while the chequecouldbepresentedatanynumberoftimeshoweverthereshallbeonlyoneNotice.Thefollowingcasemaybenotedonthesubject:Sadanandan Bhadran v. Madhavan Sunil Kumar[ (1998) 6 SCC 514 ] ,

Shiv Kumar Vs. Natrajan(2009)13 SCC 623 – Periodofnoticehastobecalculateincludingthedateasthewordusedis“within”30days“fromthedateitisdrawn”invokingsection9oftheGeneralClauses Act.

Yogendra Pratap Singh v. Savitri Pandey, (2014) 10 SCC 713 : 2014 SCC OnLine SC 744 at page 730

S.138proviso(a)–Periodoflimitation–Determinationof–Principlethatchequeshouldbepresentedwithinsixmonthsfromdateonwhichitisdrawn–Sixmonths’period–Reckoningof–(i)Whetherthesixmonths’periodmeans6calendarmonthsorexactly180days,and(ii)whatisthedate from which the six months’ period must commence and end

Held, limitation period under S. 138 proviso (a)means six calendarmonths as per Britishcalendar[asperS.3(35),GeneralClausesAct,1897]and“month”doesnotmeanjustaperiodof30days as suggested by the accused, and the said period would commence from the day next when the cheque was drawn and will expire a day prior to the corresponding day of the corresponding month and in case no such day falls in the corresponding month, the said period would expire at the end of thelastdayoftheimmediatelypreviousmonth[asperS.9,GeneralClauses,Act,1897](2014)11SCCases759RameshchandraAmbalalJoshiVs.StateofGujaratandAnother


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Notices returned unserved on alleged refusal to accept by defendant – Held, notices cmust bepresumed to have been served as contemplated by S. 27 of General Clauses Act- High Court therefore rightly reliedupontheaverments in thenoticestreatingthesameasapart to theplainthavingbeenreferredtoandreliedupontherein..(1992)1SCCases647AIR1992SC1604JagdishSinghVs.NatthuSingh,Respondent

Question (i) Can an offence under Section 138 of the NI Act be said to have been committed when the period provided in clause (c) of the proviso has not expired? TheanswertothisQuestionisinthenegativeforthefollowingreasonsgivenintheaboveruling.

¾ Section2(d)oftheCodedefines“complaint”.Accordingtothisdefinition,complaintmeansanyallegationmadeorallyorinwritingtoaMagistratewithaviewtotakinghisactionagainstapersonwhohascommittedanoffence.Commissionofanoffenceisasinequanonforfilingacomplaintandfortakingcognizanceofsuchoffence.

¾ Abarereadingoftheprovisioncontainedinclause(c)oftheprovisomakesitclearthatnocomplaintcanbefiledforanoffenceunderSection138oftheNIActunlesstheperiodof15dayshaselapsed.Anycomplaintfiledbeforetheexpiryof15daysfromthedateonwhichthenoticehasbeenservedonthedrawer/accusedisnocomplaintatallintheeyeofthelaw.

¾ Itisnotthequestionofprematurityofthecomplaintwhereitisfiledbeforetheexpiryof15daysfromthedateonwhichnoticehasbeenservedonhim,itisnocomplaintatallunderlaw.

¾ Merely because at the time of taking cognizance by the court, the period of 15 days has expired from the date on which notice has been served on the drawer/accused, the court is not clothed with the jurisdiction to take cognizance of an offence under Section 138 on a complaint filed before the expiry of 15 days from the date of receipt of notice by the drawer of the cheque.

¾ Acomplaintfiledbeforetheexpiryof15daysfromthedateonwhichnoticehasbeenservedondrawer/accusedcannotbesaidtodisclosethecauseofactionintermsofclause(c)oftheprovisotoSection138anduponsuchcomplaintwhichdoesnotdisclosethecauseofactionthecourtisnotcompetenttotakecognizance.Therefore,acourtisbarredinlawfromtakingcognizanceofsuchcomplaint.

¾ WehavenodoubtthatallthefiveessentialfeaturesofSection138oftheNIAct,asnotedinthejudgmentofthisCourt inKusumIngots&AlloysLtd.v.PennarPetersonSecuritiesLtd.,(2000)2SCC745andwhichwehaveapproved,mustbesatisfiedforacomplainttobefiledunderSection138. If theperiodprescribed in clause (c)of theproviso toSection138hasnotexpired,thereisnocommissionofanoffencenoraccrualofcauseofactionforfilingofcomplaintunderSection138oftheNIAct.T

¾ heviewtakenbytheCourtinNarsinghDasTapadia[NarsinghDasTapadiav.GoverdhanDasPartani,(2000)7SCC183:2000SCC(Cri)1326]andsoalsothejudgmentsofvariousHighCourts following Narsingh Das Tapadia [Narsingh Das Tapadia v. Goverdhan Das Partani, that if thecomplaintunderSection138isfiledbeforetheexpiryof15daysfromthedateonwhichnoticehasbeenservedonthedrawer/accusedthesameisprematureandifonthedateoftakingcognizanceaperiodof15daysfromthedateofserviceofnoticeonthedrawer/accusedhas expired, such complaint was legally maintainable and, hence, the same is overruled.


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¾ Rather, the view taken by the Court in Sarav Investment & Financial Consultancy [SaravInvestment&FinancialConsultancy(P)Ltd.v.LlyodsRegisterofShippingIndianOfficeStaffProvidentFund,(2007)14SCC753:(2009)1SCC(Cri)935]whereinthisCourtheldthatserviceofnoticeintermsofSection138proviso(b)oftheNIActwasapartofthecauseofactionforlodgingthecomplaintandcommunicationtotheaccusedaboutthefactofdishonouringofthechequeandcallingupontopaytheamountwithin15dayswasimperativeincharacter,commends itself to us.

Question (ii)The other question is that if the answer to Question (i) is in the negative, can the complainant be permitted to present the complaint again notwithstanding the fact that the period of one month stipulated under Section 142(b) for the filing of such a complaint has expired.

Thepayeeortheholderinduecourseofthechequemayfileafreshcomplaintwithinonemonthfromthedateofdecisioninthecriminalcaseand,inthatevent,delayinfilingthecomplaintwillbetreatedashavingbeencondonedundertheprovisotoclause(b)ofSection142oftheNIAct.ThisdirectionshallbedeemedtobeapplicabletoallsuchpendingcaseswherethecomplaintdoesnotproceedfurtherinviewofouranswertoQuestion(i).Aswehavealreadyheldthatacomplaintfiledbeforetheexpiryof15daysfromthedateofreceiptofnoticeissuedunderclause(c)oftheproviso toSection138 isnotmaintainable, thecomplainantcannotbepermittedtopresent thevery same complaint at any later stage. His remedy is only to file a fresh complaint; and if the same could not be filed within the time prescribed under Section 142(b), his recourse is to seek the benefit of the proviso, satisfying the court of sufficient cause.

Complaint U/s. 138- Maintainability -conditionsprecedenttoapplicabilityofsec.138-Achequecanbepresentedanynumberoftimesduringtheperiodofitsvalidity-WhetherdishonourofthechequeoneachoccasionofitspresentationgivesrisetoafreshcauseofactionwithinthemeaningofSec.142(b)oftheact-HeldNo.-Acompetentcourtcantakecognizanceofawrittencomplaintofanoffenceu/s.138ifitismadewithinonemonthofthedateonwhichthecauseofactionarisesunderclausecofSec.142givesitisarestrictivemeaning-itisthefailuretomakepaymentwithin15daysfromdateofreceiptofnoticewhichwillgiverisetocauseofaction-Causeofactionwithinmeaning of Sec. 142 (c) arises and can arise only once - impedimentswhich negate concept ofsuccessivecausesofaction

Held.:

Oneachpresentationofthechequeanditsdishonourafreshrightandnotcauseofaction-accruesinhis favour.Hemay,therefore,withouttakingpre-emptoryaction inexerciseofhisrightunderclause(b)ofSection138,goonpresentingthechequesoastoenablehimtoexercisesuchrightatanypointoftimeduringthevalidityofthecheque.But,oncehegivesanoticeunderclause(b)ofSec.138heforfeitssuchrightforincaseoffailureofthedrawertopaythemoneywithinthestipulatedtimehewouldbeliablefortheoffenceandthecauseofactionforfilingthecomplaintwillarise.Needlesstosay,theperiodofonemonthforfilingthecomplaintwillbereckonedfromthedayimmediatelyfollowingthedayonwhichtheperiodoffifteendaysfromthedateofthereceiptofthenoticebythedrawerexpires.Noactiontakenonthefirstnotice-chequepresentedagain-secondnoticesent-onfailuretoreceivemoneycasefiledonthebasisofsecondnotice-Acquittalongroundthattherecouldnotbemorethanonecauseofactioninrespectofasinglecheque-sustainable-Appellanthadearliertakenrecoursetoclause(b)ofSec.138butdidnotavailofcauseofactionthataroseinhisfavouru/s.142(b)oftheAct.Thereforeitisessentialthatthenoticeshould


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beperfectandinconformitywithlaw.Amistakeinthenoticewillbefatal.Itiscommonmistakecommittedbymostofthepayeesthatassoonasthechequeisreturnedunpaidtowritealettertothedrawerthreateninghimthatincasehedoesnotpayagainstthedishonouredchequelegalactionwillbetakenetc.Suchletterwillalsobeconstruedasanotice.Sinceasecondnoticecannotnowbeissuedonthebasisofsubsequentdishonourofcheque,duecareandcautionshouldbetakenwhilesendingthenoticeondishonourofcheque.Asstatedalreadythatnon-paymentofchequeamountwithinthegraceperiodoffifteendaysfromthedateofreceiptofthenoticeconstitutesanoffenceandthereforeliabletoprosecutedforthecriminaloffencesocommitted.

Limitation:

Thesebeingaspeciallegislationcertaintimelimitshavebeenlaiddownandtheyshouldbestrictlyfollowed.Anylapseinadheringtotheschedule,shalltakeawayacauseofactionunderSec.138.Thetime limitsplacedcannotbecondonedby theCourts. Therefore thequestionofmakinganapplicationforcondonationofdelayasinthecaseofcivildoesnotariseatallunderthesaidsection.Whatthenarethelimitationsonehastokeepinonemindandfollowthemstrictlytoprosecutethedrawerofchequewhohasfailedtopaythesaidsumwithinfifteendaysfromthereceiptofthenotice?

• Chequeshouldbepresentedtothebankforencashmentwithinitsvalidityperiod.

• Withinfifteendaysfromthereceiptofreturnmemoindicatingreasonofdishonour,anoticeshould be sent demanding the amount of dishonored cheque.

• If thedrawerdoesnotpay theamountof dishonoured chequewithin the graceperiod, acomplaintthereaftershouldbefiledwithinonemonthintherelevantcourtofMetropolitanMagistrate/JudicialMagistrateasthecasemaybe,havingjurisdiction.

Jurisdiction:

Territorialjurisdiction-Dishonourofcheque-

FactsoftheCase

AcheuqeNo.1950,drawnon theUnionBankof India,Chandigarh,was issuedby InderpalSinghtotheappellant-M/sBridgestoneIndiaPvt.Ltd.ThechequewasinthesumofRs.26,958/-.Theappellant-M/sBridgestoneIndiaPvt.Ltd.presentedtheabovechequeattheIDBIBankinIndore.Theappellantreceivedintimationofitsbeingdishonouredonaccountof“…exceedsarrangement…”on04.08.2006atIndore.

ProceedingswereinitiatedbytheappellantintheCourtoftheJudicialMagistrate,FirstClass,Indore,underSection138oftheNegotiableInstrumentsAct,1881.

The accused-respondent -Inderpal Singh, preferred an application before the JudicialMagistrate,FirstClasscontestingtheterritorialjurisdictionwithrespecttotheabovechequedrawnontheUnionBankofIndia,Chandigarh.

The Judicial Magistrate, First Class, Indore held that he had the territorial jurisdiction toadjudicate upon the controversy raised by the appellant –M/s Bridgestone India Pvt.Ltd. underSection138oftheNegotiableInstrumentsAct,1881.

The High Court accepted the prayer made by the accused-respondent -Inderpal Singh by holding,thatthejurisdictionlayonlybeforetheCourtwhereintheoriginaldraweebankwaslocated,


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namely, at Chandigarh, where-from the accused-respondent had issued the concerned cheque bearingNo.1950,drawnontheUnionBankofIndia,Chandigarh.

FindingoftheCourt:

Inviewofsecondordinance2015,JMFCIndorewouldhavejurisdiction.

(2016) 2 SCC 75 M/S BRIDGESTONE INDIA PVT. LTD. VERSUS

INDERPAL SINGH This judgmentsupersededtheearlier judgmentof theHon’bleSupremeCourtpassed in Dashrath Rupsingh Rathod Vs. State of Maharashtra reported in (2014) 9 SCC 129

DashrathRupsinghRathodhasoverruledIsharAlloySteels(2001)3SCC609whichwasfollowedbyK.Bhaskaran(1999)7SCC510andbothwereoverruledonthispointbythejudgmentofBridgestoneIndia.EarlierinK.Bhaskaranhasprovidedthatthecomplainantcanchooseanyofthefollwingforinstitutionofcomplainant

Complaintcanbefiledatanyoftheplace:-

1. Wherethechequewasdrawn.

2. Wherethechequewaspresentedforencashment.

3. Wherethechequewasreturnedunpaidbydraweebank.

4. Wherenoticeinwritingwasgiventodrawerofchequedemandingpayment.

5. Wheredrawerofchequefailedtomakepaymentwithin15daysofreceiptofnotice.

Eachofthefiveactsconstitutingoffencecouldbedoneat5differentlocalities.HenceoneoftheCourtsexercising jurisdiction inoneof thefive local areas canbecome theplaceof trail for theoffenceundersec.138oftheAct. Inotherwords,thecomplainantcanchooseanyoneofthosecourtshavingjurisdictionoveranyoneofthelocalareaswithintheterritoriallimitsofwhichanyoneofthosefiveactswasdone.

Thepositionhasbeenclarifiedafteramendmentofsection142asdiscussedhereinaboveastheamendmenttoSection142(2)hasbeengivenforcewithretrospectiveeffects.

METERS AND INSTRUMENTS PRIVATE LIMITED AND ANOTHER VS. KANCHAN MEHTA (2018) 1 SCC 560 at page 566

7. ThisCourthasnoted that theobjectof thestatutewas to facilitatesmooth functioningofbusinesstransactions.Theprovisionisnecessaryasinmanytransactionschequeswereissuedmerely as a device to defraud the creditors. Dishonour of cheque causes incalculable loss, injuryandinconveniencetothepayeeandcredibilityofbusinesstransactionssuffersasetback.[GoaPlast(P)Ltd.v.ChicoUrsulaD’Souza,(2004)2SCC235,p.248,para26:2004SCC(Cri)499]Atthesametime,itwasalsonotedthatnatureofoffenceunderSection138primarilyrelatedtoacivilwrongandthe2002Amendmentspecificallymadeitcompoundable.[VinayDevannaNayakv.RyotSewaSahakariBankLtd.,(2008)2SCC305:(2008)1SCC(Civ)542:(2008)1SCC(Cri)351]Theoffencewasalsodescribedas“regulatoryoffence”.TheburdenofproofwasontheaccusedinviewofpresumptionunderSection139andthestandardofproofwasof“preponderanceofprobabilities”.[Rangappav.SriMohan,(2010)11SCC441,p.454,para28:(2010)4SCC(Civ)477:(2011)1SCC(Cri)184]Theobjectoftheprovisionwasdescribedasbothpunitiveaswellascompensatory.Theintentionoftheprovisionwasto


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ensurethatthecomplainantreceivedtheamountofchequebywayofcompensation.ThoughproceedingsunderSection138couldnotbetreatedascivilsuitsforrecovery,theschemeoftheprovision,providingforpunishmentwithimprisonmentorwithfinewhichcouldextendtotwicetheamountofthechequeortoboth,madetheintentionoflawclear.Thecomplainantcould be given not only the cheque amount but double the amount so as to cover interest and costs.Section357(1)(b)CrPCprovidesforpaymentofcompensationforthelosscausedbytheoffenceoutofthefine.[R.Vijayanv.Baby,(2012)1SCC260,p.264,para9:(2012)1SCC(Civ)79:(2012)1SCC(Cri)520]Wherefineisnotimposed,compensationcanbeawardedunderSection357(3)CrPCtothepersonwhosufferedloss.Sentenceindefaultcanalsobeimposed.Theobjectoftheprovisionisnotmerelypenalbuttomaketheaccusedhonourthenegotiableinstruments.[LafargeAggregates&ConcreteIndia(P)Ltd.v.SukarshAzad,(2014)13SCC779,p.781,para7:(2014)5SCC(Cri)818]

the court has further given guidelines in the following terms:-

8. In view of the above scheme, this Court held that the accused could make an application for compounding at the first or second hearing in which case the court ought to allow the same. If such application is made later, the accused was required to pay higher amount towards cost, etc. [DamodarS.Prabhuv.SayedBabalalH.,(2010)5SCC663:(2010)2SCC(Civ)520:(2010)2SCC(Cri)1328]This Court has also laid down that even if the payment of the cheque amount, in terms of proviso (b) to Section 138 of the Act was not made, the court could permit such payment being made immediately after receiving notice/summons of the court. [D.VinodShivappav.NandaBelliappa,(2006)6SCC456:(2006)3SCC(Cri)114;C.C.AlaviHajiv.PalapettyMuhammed,(2007)6SCC555:(2007)3SCC(Cri)236]TheguidelinesinDamodar[DamodarS.Prabhuv.SayedBabalalH.,(2010)5SCC663:(2010)2SCC(Civ)520:(2010)2SCC(Cri)1328]havebeenheldtobeflexibleasmaybenecessaryinagivensituation.[M.P.StateLegalServicesAuthorityv.PrateekJain,(2014)10SCC690,p.701,para23:(2015)1SCC(Civ)74:(2015)1SCC(Cri)211]Sincetheconceptofcompoundinginvolvesconsentofthecomplainant,thisCourtheldthatcompoundingcouldnotbepermittedmerelybyunilateralpayment,withouttheconsentofboththeparties.[RajneeshAggarwalv.AmitJ.Bhalla,(2001)1SCC631:2001SCC(Cri)229]

19. In view of the above, we hold that where the cheque amount with interest and cost as assessed by the court is paid by a specified date, the court is entitled to close the proceedings in exercise of its powers under Section 143 of the Act read with Section 258 CrPC. As already observed, normal rule for trial of cases under Chapter XVII of the Act is to follow the summary procedure and summons trial procedure can be followed where sentence exceeding one year may be necessary taking into account the fact that compensation under Section 357(3) CrPC with sentence of less than one year will not be adequate, having regard to the amount of cheque, conduct of the accused and other circumstances.

Vijayan Vs. Sadanandan 2009 (6) SCC 652 – Relying upon K Bhaskar Vs. Shankaran Balan 1997 (7) SCC 510 –WhereinitwasheldthatinchequebouncingcasestheMagistratehavinglimitedjurisdictiontoawardfineshouldinvokesection357(3)Cr.P.C.powersandawardcompensation,theamountofwhichisnotlimited;Held thatanordertopaycompensationmaybeenforcedby awarding sentence in default.


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Damodar S Prabhu Vs. S Babulal 2010 (3) SCC 663providedguidelinesofgradedscaleoffinetoencourageearlycompoundingofN.I.Actoffences.

(i) Inthesummonsdirectionbegiventhatifcompoundingispreferredinfirstandsecondhearingit shall be without any cost.

(ii) IfcompoundingispreferredatalaterstagebeforetheMagistrate10%ofthechequeamountshall be imposed as cost to be paid to legal Services Authority etc.

(iii) Ifcompoundingispreferredbeforethesessions/HighCourtthecostwillincreaseto15%andbefore Supreme Court it shall be 20% of the cheque amount.

Presumption

M/s. Kumar Exports Vs. M/s. Sharma Carpets (2009) 2 SCC 513 – The use of phrase “until thecontraryisproved”inSection118and139oftheActreadwithdefinitionof“maypresume”and“shall presume” as given in section 4 of the Evidence Actmakes it clear that the presumptionraisedarerebuttable.Oncetherebuttableevidenceareadducedandacceptedbythecourtonthebenchmarkofpreponderanceofprobability,theevidentiaryburdenshiftsbackonthecomplainant.

Krishna Rao Vs. Shankaragauda 2018 SCC Online SC 651

“ThisCourtinKumarExportsv.SharmaCarpets,(2009)2SCC513,hadconsideredtheprovisionsofNegotiableInstrumentsActaswellEvidenceAct.ReferringtoSection139,thisCourtlaiddownfollowinginparagraphs14,15,18and19:

“14. Section139oftheActprovidesthatitshallbepresumed,unlessthecontraryisproved,thattheholderofachequereceivedthechequeofthenaturereferredtoinSection138forthedischarge, in whole or in part, of any debt or other liability.

15. Presumptionsaredevicesbyuseofwhichthecourtsareenabledandentitledtopronounceonanissuenotwithstandingthatthereisnoevidenceorinsufficientevidence.UndertheEvidenceActallpresumptionsmustcomeunderoneortheotherclassofthethreeclassesmentionedin the Act, namely, (1) “may presume” (rebuttable), (2) “shall presume” (rebuttable), and(3) “conclusivepresumptions” (irrebuttable). The term “presumption” is used to designateaninference,affirmativeordisaffirmativeoftheexistenceofafact,convenientlycalledthe“presumedfact”drawnbyajudicialtribunal,byaprocessofprobablereasoningfromsomematterof fact,either judiciallynoticedoradmittedorestablishedby legalevidence to thesatisfactionofthetribunal.Presumptionliterallymeans“takingastruewithoutexaminationorproof”.

18. Applyingthedefinitionoftheword“proved”inSection3oftheEvidenceActtotheprovisionsofSections118and139oftheAct,itbecomesevidentthatinatrialunderSection138oftheActapresumptionwillhavetobemadethateverynegotiableinstrumentwasmadeordrawnforconsiderationandthatitwasexecutedfordischargeofdebtorliabilityoncetheexecutionofnegotiableinstrumentiseitherprovedoradmitted.Assoonasthecomplainantdischargesthe burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptionsunderSections118and139oftheActhelphimshifttheburdenontheaccused.Thepresumptionswilllive,existandsurviveandshallendonlywhenthecontraryisprovedbytheaccused,thatis,thechequewasnotissuedforconsiderationandindischargeofanydebt


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orliability.Apresumptionisnotinitselfevidence,butonlymakesaprimafaciecaseforapartyforwhosebenefititexists.

19. The use of the phrase “until the contrary is proved” in Section 118 of theAct and use ofthewords“unlessthecontraryisproved”inSection139oftheActreadwithdefinitionsof“maypresume”and“shallpresume”asgiven inSection4of theEvidenceAct,makes itatonceclearthatpresumptionstoberaisedunderboththeprovisionsarerebuttable.Whenapresumptionisrebuttable,itonlypointsoutthatthepartyonwhomliesthedutyofgoingforward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumptionisover.”

19. ThisCourtheldthattheaccusedmayadduceevidencetorebutthepresumption,butmeredenialregardingexistenceofdebtshallnotserveanypurpose.Followingwasheldinparagraph20:

“20….Theaccusedmayadducedirectevidencetoprovethatthenoteinquestionwasnotsupportedbyconsiderationandthattherewasnodebtorliabilitytobedischargedbyhim.However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence ofnegativeevidenceisneitherpossiblenorcontemplated.Atthesametime,itisclearthatbaredenialofthepassingoftheconsiderationandexistenceofdebt,apparentlywouldnotservethe purpose of the accused. Something which is probable has to be brought on record for getting theburdenofproof shifted to thecomplainant.Todisprove thepresumptions, theaccusedshouldbringonrecordsuchfactsandcircumstances,uponconsiderationofwhich,thecourtmayeitherbelievethattheconsiderationanddebtdidnotexistortheirnon-existencewas so probable that a prudent man would under the circumstances of the case, act upon the pleathattheydidnotexist…”

In case of Breach of settlement accepted by the court - consequences?

The matter has been put to rest now after the above referred verdict of M/s Meters and Instruments Pvt. Ltd case still the following case law has elucidated the matter with the following detailed discussion in the ruling of Dayawati Vs Yogesh Kumar Gosain 2017 Scc Online Del 11032

118. The instant reference has resulted because of the failure of the court to have recorded the settlementandundertakingsbindingtheaccusedpersoninthecomplaintunderSection138oftheNIActtoabidebythesettlementarrivedatduringmediation.Therecanbenomannerofdoubtthatonceasettlementisreportedtothecourtandmadethebasisofseekingthecourt’sindulgence,thepartiesoughtnottobeabletoresilefromsuchaposition.Sowhatistheremedyavailabletoacomplainant if therespondentcommitsbreachof themediationsettlementanddefaultsinmakingtheagreedpayments?

119. LetusexamineastowhetherthelegislaturehasprovidedanymechanismintheCr.P.C.forrecovery of monetary amounts.

120.WehaveextractedSection421oftheCr.P.C.abovewhichprovidesthemechanismtorecoverfines,byissuingawarrantforthelevyoftheamountbyattachmentandsaleofanymovablepropertybelongingtotheoffenderand/orbyissuingawarrantauthorizingtherealizationofamounts as arrears of land revenue from movable and immovable property of the defaulter.


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121. In the event of either party resiling from the agreed upon settlementwhich has receivedtheimprimaturofthecourt,thepartyattemptingtobreachthesettlementandundertakingcannotbepermittedtoavoidmakingthepayment.Suchpartyalsoshouldnotbeallowedtoviolatesuchundertakinggiventotheoppositesideaswellasthecourt.

122. In(2009)6SCC652,Vijayanv.SadanandanK.,itwasheldthatSection431readwithSection421oftheCr.P.C.isapplicabletorecoveryofcompensationorderedunderSection357(5).

123. Section431Cr.P.C.,alsoextractedabove,providesifanymoney,otherthanafine,ispayableby virtue of any order made under the Cr.P.C., the method of recovery whereof is not expressly providedfor,shallberecoverableintermsofSection421Cr.P.C.

124. Intheeventthatacriminalcourtpassesorderacceptingthemediatedsettlementbetweenthepartiesanddirectstheaccusedtomakepaymentintermsthereof,thesettlementamountbecomes payable under the order of the court. Such order having been passed in proceedings underSection138oftheNIAct,wouldbeanorderunderSection147oftheNIActandSection320oftheCr.P.C.

125. InproceedingswheresettlementispermittedunderSection320oftheCr.P.C.,itwouldbeanorder thereunder.

126.WhereproceedingsaredisposedonsettlementtermsbytheHighCourt,itwouldbeanorderpassedinexerciseofjurisdictionunderSection482oftheCr.P.C.Uponbreachofsuchorderandnon-paymentoftheagreedamounts,thesamemayberecoverableintermsofSection431readwithSection421Cr.P.C.

CONCLUSIONThough insertion of the penal provisions have helped to curtail the issuance of cheques lightheartedlyorinaplayfulmannerorwithadishonestintentionandthetradingcommunitynowfeelsmoresecuredinreceivingthepaymentthroughcheques.Aftergoingthroughtheabovediscussionsit is ample clear that it is not the case that there is no provision for recovery of the amount covered underthedishonouredcheque, inacasewhereaccused isconvictedundersection138andtheaccusedhasservedthesentencebut,unabletodepositamountoffine,itisalsonotthecasethattheonlyoptionleftwiththecomplainantistofilecivilsuit.TheprovisionsoftheActdonotprohibitanyotheralternativemethodofrealizationoftheamountduetothecomplainantonthechequebeingdishonoredforthereasonsof“insufficientfund”inthedrawer’saccountbuttheprovisionsof law as discussed in Meters and Instruments Private Limited and Another vs. Kanchan Mehta (2018) 1 scc 560andDayawati’scase19 show that the criminal courts are empowered to get even the amountawardedascompensationrecovered.Thepropercoursetobeadoptedbythecomplainantinsuchasituationshouldbebyfilinganapplicationbeforethesamecourtforrecoveryoffineundersection412or431Cr.P.C.asthecasemaybebutfilingofsuitbeforethecompetentcivilcourt,forrealization/recoveryoftheamountduetohimforthereasonofdishonouredchequemaynotberequired.

Biresh Kumar AdditionalDirectorCumSeniorFacultyMember,JudicialAcademyJharkhand,DhurvaRanchi

qqq

19 2017 SCC Online Del 11032

damodar s. prabhu versus sayed babalal h.

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dAMOdAR S.pRABHU vERSUS SAyEd BABALAL H.(2010) 5 Supreme Court Cases 663

AIR 2010 SC 1907

Supreme Court of India

Before Hon’ble Mr. Justice K.G. Balakrishnan, Hon’ble Mr. Justice P. Sathasivam, Hon’ble Mr. Justice J.M. Panchal

Damodar S. Prabhu ... Appellant (s) Versus

Sayed Babalal H. ... Respondent (s)Decided on 3 May, 2010

Criminal Appeal No. 963 of 2010†

[Arising out of SLP (Crl.) No. 6369 of 2007]

WITH

CRIMINAL APPEAL NOS. 964-966 OF 2010† [Arising out of SLP (Crl.) Nos. 6370-6372 of 2007]

For compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused. If the accused does not make an application for compounding as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the court deems fit. Similarly, if appeal, that the accused pays 15% of Supreme Court, the figure would increase to 20% of the cheque amount.

ORDER

1. Leavegranted.ThepresentappealsareinrespectoflitigationinvolvingtheoffenceenumeratedbySection138oftheNegotiableInstrumentsAct,1881[Hereinafter`Act’].Itisnotnecessaryforus todelve into the facts leadingupto the institutionofproceedingsbeforethisCourtsince the appellant and the respondent have arrived at a settlement and prayed for thecompoundingoftheoffenceascontemplatedbySection147oftheAct. Itwouldsufficetosaythatthepartieswere involved incommercial transactionsandthatdisputeshadarisenonaccountofthedishonouroffivechequesissuedbytheappellant.Thereafter,thepartieswentthroughtheseveralstagesoflitigationbeforetheirdisputereachedthisCourtbywayofspecialleavepetitions.

2. WithregardtotheimpugnedjudgmentsdeliveredbytheHighCourtofBombayatGoa,theappellant has prayed for the setting aside of his conviction in thesematters by relying ontheconsent termsthathavebeenarrivedatbetweentheparties.Therespondenthasnot


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opposedthispleaand,therefore,weallowthecompoundingoftheoffenceandsetasidetheappellant’sconvictionineachoftheimpugnedjudgments.

3. However,therearesomelargerissueswhichcanbeappropriatelyaddressedinthecontextofthepresentcase.ItmayberecalledthatChapterXVIIcomprisingsections138to142wasinsertedintotheActbytheBanking,PublicFinancialInstitutionsandNegotiableInstrumentsLaws(Amendment)Act,1988(66of1988).TheobjectofbringingSection138intothestatutewas to inculcate faith in the efficacy of banking operations and credibility in transactingbusiness on negotiable instruments. It was to enhance the acceptability of cheques insettlement of liabilities by making the drawer liable for penalties in case of bouncing ofchequesduetoinsufficientarrangementsmadebythedrawer,withadequatesafeguardstopreventharassmentofhonestdrawers.Ifthechequeisdishonouredforinsufficiencyoffundsin the drawer’s account or if it exceeds the amount arranged to be paid from that account, the drawer is to be punished with imprisonment for a term which may extend to two years, or with finewhichmayextendtotwicetheamountofthecheque,orwithboth.

4. Itmay be noted thatwhen the offencewas inserted in the statute in 1988, it carried theprovision for imprisonment up to one year, which was revised to two years following the amendmenttotheActin2002.Itisquiteevidentthatthelegislativeintentwastoprovideastrong criminal remedy in order to deter the worryingly high incidence of dishonour of cheques. Whilethepossibilityofimprisonmentuptotwoyearsprovidesaremedyofapunitivenature,theprovisionforimposinga`finewhichmayextenttotwicetheamountofthecheque’servesacompensatorypurpose.Whatmustberememberedisthatthedishonourofachequecanbebestdescribedasaregulatoryoffencethathasbeencreatedtoservethepublicinterestinensuringthereliabilityoftheseinstruments.Theimpactofthisoffenceisusuallyconfinedtotheprivatepartiesinvolvedincommercialtransactions.

5. Invariably,theprovisionofastrongcriminalremedyhasencouragedtheinstitutionofalargenumberofcasesthatarerelatabletotheoffencecontemplatedbySection138oftheAct.Somuchso,thatatpresentadisproportionatelylargenumberofcasesinvolvingthedishonourofchequesischokingourcriminaljusticesystem,especiallyatthelevelofMagistrates’Courts.Asperthe213thReportoftheLawCommissionofIndia,morethan38lakhchequebouncingcaseswerependingbeforevariouscourtsinthecountryasofOctober2008.Thisisputtinganunprecedentedstrainonourjudicialsystem.

6. Mr.GoolamE.Vahanvati,SolicitorGeneral (nowAttorney-General for India)hadappearedasamicuscuriae inthepresentmatterandreferredtothefactshereinasan illustrationofhowpartiesinvolvedinchequebouncecasesusuallyseekthecompoundingoftheoffenceataverylatestage.Theinterestsofjusticewouldindeedbebetterservedifpartiesresortedto compounding as a method to resolve their disputes at an early stage instead of engaging inprotractedlitigationbeforeseveralforums,therebycausingunduedelay,expenditureandstrainonpartofthejudicialsystem.Thisisclearlyasituationthatiscausingsomeconcern,sinceSection147oftheActdoesnotprescribeastowhatstageisappropriateforcompoundingtheoffenceandwhetherthesamecanbedoneattheinstanceofthecomplainantorwiththeleave of the court.

7. The learned Attorney General stressed on the importance of using compounding as anexpedientmethodtohastenthedisposalofcases.Inthisregard,thelearnedAttorneyGeneral


| 31 |

hasproposed that this Court should frame someguidelines todisincentivise litigants fromseekingthecompoundingoftheoffenceatanundulylatestageoflitigation.Inotherwords,judicial directions have been sought to nudge litigants in cheque bounce cases to opt forcompoundingduringtheearlystagesoflitigation,therebybringingdownthearrears.

8. BeforeexaminingtheguidelinesproposedbythelearnedAttorneyGeneral,itwouldbeusefultoclarifythepositionrelatingtothecompoundingofoffencesundertheNegotiableInstrumentsAct,1881.EvenbeforetheinsertionofSection147intheAct(bywayofanamendmentin2002) someHigh Courts had permitted the compounding of the offence contemplated bySection138duringthelaterstagesoflitigation.InfactinO.P.Dholakiav.StateofHaryana1, adivisionbenchof thisCourthadpermittedthecompoundingof theoffenceeventhoughthepetitioner’sconvictionhadbeenupheldbyallthethreedesignatedforums.Afternotingthatthepetitionerhadalreadyenteredintoacompromisewiththecomplainant,thebenchhadrejectedtheState’sargumentthatthisCourtneednotinterferewiththeconvictionandsentencesinceitwasopentothepartiestoenterintoacompromiseatanearlierstageandthat they had not done so. The bench had observed:-

“3. ...Taking intoconsiderationthenatureof theoffence inquestionandthe fact that thecomplainantandtheaccusedhavealreadyenteredintoacompromise,wethinkitappropriatetograntpermissioninthepeculiarfactsandcircumstancesofthepresentcase,tocompound.”

Similar reliefswere granted in orders reported as Sivasankaran v. State of Kerala2, Kishore Kumarv.J.K.CorporationLtd.3andSaileshShyamParsekarv.Baban4, among other cases.

9. Asmentionedabove,theNegotiableInstrumentsAct,1881wasamendedbytheNegotiableInstruments(AmendmentandMiscellaneousProvisions)Act,2002whichinsertedaspecificprovision,i.e.Section147`tomaketheoffencesundertheActcompoundable’.Wecanreferto the following extract from the StatementofObjects andReasons attached to the2002amendment which is self- explanatory:-

“PrefatoryNote-StatementofObjectsandReasons.-TheNegotiableInstrumentsAct,1881wasamendedbytheBanking,PublicFinancialInstitutionsandNegotiableInstrumentsLaws(Amendment)Act,1988whereinanewChapterXVIIwasincorporatedforpenaltiesincaseofdishonourofchequesduetoinsufficiencyoffundsintheaccountofthedrawerofthecheque.These provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The existing provisions in the NegotiableInstrumentsAct,1881,namely,Sections138to142inChapterXVIIhavebeenfounddeficientin dealing with dishonour of cheques. Not only the punishment provided in the Act has proved tobeinadequate,theprocedureprescribedforthecourtstodealwithsuchmattershasbeenfoundtobecumbersome.ThecourtsareunabletodisposeofsuchcasesexpeditiouslyinatimeboundmannerinviewoftheprocedurecontainedintheAct....” (emphasis supplied)

Inorder toaddress thedeficiencies referredtoabove,Section10of the2002amendmentinsertedSections143,144,145,146and147intotheAct,whichdealwithaspectssuchasthepoweroftheCourttotrycasessummarily(Section143),Modeofserviceofsummons(Section144),Evidenceonaffidavit(Section145),Bank’ssliptobeconsideredasprimafacieevidenceofcertainfacts(Section146)andOffencesundertheActtobecompoundable(Section147).


| 32 |

10. Atpresent,weareofcourseconcernedwithSection147oftheAct,whichreadsasfollows:-

“147.Offences tobe compoundable. -Notwithstandinganything contained in theCodeofCriminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall becompoundable.”

At this point, it would be apt to clarify that in view of the non-obstante clause, the compounding ofoffencesundertheNegotiableInstrumentsAct,1881iscontrolledbySection147andtheschemecontemplatedbySection320oftheCodeofCriminalProcedure[Hereinafter`CrPC’]willnotbeapplicable inthestrictsensesincethelatter ismeantforthespecifiedoffencesunder the Indian Penal Code, 1860.

11. SofarastheCrPC isconcerned,Section320dealswithoffenceswhicharecompoundable,eitherbythepartieswithouttheleaveofthecourtorbythepartiesbutonlywiththeleaveoftheCourt.Sub-section(1)ofSection320enumeratestheoffenceswhicharecompoundablewithouttheleaveoftheCourt,whilesub-section(2)ofthesaidsectionspecifiestheoffenceswhich are compoundable with the leave of the Court.

12. Section147oftheNegotiableInstrumentsAct,1881isinthenatureofanenablingprovisionwhich provides for the compounding of offences prescribed under the same Act, therebyservingasanexceptiontothegeneralruleincorporatedinsub-section(9)ofSection320oftheCrPCwhichstatesthat`NooffenceshallbecompoundedexceptasprovidedbythisSection’.AbarereadingofthisprovisionwouldleadustotheinferencethatoffencespunishableunderlawsotherthantheIndianPenalCodealsocannotbecompounded.However,sinceSection147wasinsertedbywayofanamendmenttoaspeciallaw,thesamewilloverridetheeffectofSection320(9)oftheCrPC,especiallykeepinginmindthatSection147carriesanon-obstanteclause.

13. InVinayDevannaNayakv.RyotSewaSahakariBankLtd.5thisCourthadexamined`whetheranoffencepunishableunderSection138oftheActwhichisaspeciallawcanbecompounded’.After taking note of a divergence of views in past decisions, this Court took the followingposition(C.K.Thakker,J.atPara.17):-

“17....Thisprovisionisintendedtopreventdishonestyonthepartofthedrawerofnegotiableinstrumentsinissuingchequeswithoutsufficientfundsorwithaviewtoinducingthepayeeorholderinduecoursetoactuponit.Itthusseekstopromotetheefficacyofbankoperationsandensurescredibility intransactingbusinessthroughcheques. Insuchmatters,therefore,normally compounding of offences should not be denied. Presumably, Parliament alsorealisedthisaspectandinsertedSection147bytheNegotiableInstruments(AmendmentandMiscellaneousProvisions)Act,2002(Act55of2002)....”

In the same decision, the court had also noted (Para. 11):-

“11....Certainoffencesareveryseriousinwhichcompromiseorsettlementisnotpermissible.Someotheroffences,ontheotherhand,arenotsoseriousandthelawmayallowthepartiestosettlethembyenteringintoacompromise.Thecompoundingofanoffencesignifiesthatthepersonagainstwhomanoffencehasbeencommittedhasreceivedsomegratificationtoanactasaninducementforhisabstainingfromproceedingfurtherwiththecase.”

14. ItwouldalsobepertinenttorefertothisCourt’sdecisioninR.Rajeshwariv.H.N.Jagadish6, whereinthefollowingobservationsweremade(S.B.Sinha,J.atPara.12):-


| 33 |

“12. Negotiable Instruments Act is a special Act. Section 147 provides for a non obstanteclause,stating:

147. Offences to be compoundable. - Notwithstanding anything contained in the Codeof Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall becompoundable.

Indisputably,theprovisionsoftheCodeofCriminalProcedure,1973wouldbeapplicabletotheproceedingspendingbefore the courts for trial of offencesunder the saidAct. Strictosensu,however,thetableappendedtoSection320oftheCodeofCriminalProcedureisnotattractedastheprovisionsmentionedthereinreferonlytoprovisionsofthePenalCodeandnoneother.”

15. ThecompoundingoftheoffenceatlaterstagesoflitigationinchequebouncingcaseshasalsobeenheldtobepermissibleinarecentdecisionofthisCourt,reportedasK.M.Ibrahimv.K.P.Mohammed&Anr.7,whereinKabir,J.hasnoted(atParas.13,14):-

“13.Asfarasthenon-obstanteclauseincludedinSection147ofthe1881Actisconcerned,the1881Actbeinga special statute, theprovisionsof Section147will haveanoverridingeffectovertheprovisionsoftheCoderelatingtocompoundingofoffences....

14. It istruethattheapplicationunderSection147oftheNegotiable InstrumentsActwasmadebythepartiesaftertheproceedingshadbeenconcludedbeforetheAppellateForum.However, Section147of theaforesaidActdoesnotbar theparties fromcompoundinganoffenceunderSection138evenattheappellatestageoftheproceedings.Accordingly,wefindnoreasontorejecttheapplicationunderSection147oftheaforesaidActeveninaproceedingunderArticle136oftheConstitution.”

16. Itisevidentthatthepermissibilityofthecompoundingofanoffenceislinkedtotheperceivedseriousnessoftheoffenceandthenatureoftheremedyprovided.Onthispointwecanrefertothefollowingextractsfromanacademiccommentary[Citedfrom:K.N.C.Pillai,R.V.Kelkar’sCriminalProcedure,5thedn.(Lucknow:EasternBookCompany,2008)atp.444]:-

“17.2.Compoundingofoffences.—AcrimeisessentiallyawrongagainstthesocietyandtheState.Therefore,anycompromisebetweentheaccusedpersonandtheindividualvictimofthe crime should not absolve the accused from criminal responsibility. However, where the offencesareessentiallyofaprivatenatureandrelativelynotquiteserious,theCodeconsidersit expedient to recognize some of them as compoundable offences and some others ascompoundableonlywiththepermissionofthecourt....”

17. Inarecentlypublishedcommentary,thefollowingobservationshavebeenmadewithregardtotheoffencepunishableunderSection138oftheAct[Citedfrom:ArunMohan,Somethoughtstowards lawreformson the topicofSection138,Negotiable InstrumentsAct -Tacklinganavalancheofcases(NewDelhi:UniversalLawPublishingCo.Pvt.Ltd.,2009)atp.5]

“...Unlikethatforotherformsofcrime,thepunishmenthere(insofarasthecomplainantisconcerned)isnotameansofseekingretribution,butismoreameanstoensurepaymentofmoney. The complainant’s interest lies primarily in recovering the money rather than seeing thedrawerofthechequeinjail.Thethreatofjailisonlyamodetoensurerecovery.Asagainsttheaccusedwhoiswillingtoundergoa jail term,there is littleavailableasremedyfortheholder of the cheque.


| 34 |

Ifweweretoexaminethenumberofcomplaintsfiledwhichwere`compromised’or`settled’before the final judgment on one side and the cases which proceeded to judgment andconvictionontheother,wewillfindthatthebulkwassettledandonlyaminisculenumbercontinued.”

18. It is quite obvious that with respect to the offence of dishonour of cheques, it is thecompensatoryaspectoftheremedywhichshouldbegivenpriorityoverthepunitiveaspect.There is also some support for the apprehensions raised by the learnedAttorneyGeneralthatamajorityofchequebouncecasesareindeedbeingcompromisedorsettledbywayofcompounding,albeitduringthelaterstagesoflitigationtherebycontributingtounduedelayinjustice-delivery.Theproblemhereiniswiththetendencyoflitigantstobelatedlychoosecompoundingasameanstoresolvetheirdispute.Furthermore,thewrittensubmissionsfiledonbehalfofthelearnedAttorneyGeneralhavestressedonthefactthatunlikeSection320oftheCrPC,Section147oftheNegotiableInstrumentsActprovidesnoexplicitguidanceastowhat stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave of the court.

19. Asmentioned earlier, the learnedAttorneyGeneral’s submission is that in the absence ofstatutoryguidance,partiesarechoosingcompoundingasamethodoflastresortinsteadofoptingforitassoonastheMagistratestakecognizanceofthecomplaints.Oneexplanationforsuchbehaviourcouldbethattheaccusedpersonsarewillingtotakethechanceofprogressingthroughthevariousstagesoflitigationandthenchoosetherouteofsettlementonlywhennootherrouteremains.Whilesuchbehaviourmaybeviewedasrationalfromtheviewpointoflitigants,thehardfactsarethattheunduedelayinoptingforcompoundingcontributestothearrearspendingbeforethecourtsatvarious levels. If theaccused iswillingtosettleorcompromisebywayofcompoundingoftheoffenceatalaterstageoflitigation,itisgenerallyindicativeofsomemeritinthecomplainant’scase.Insuchcasesitwouldbedesirableifpartieschoosecompoundingduringtheearlierstagesoflitigation.Ifhowever,theaccusedhasavaliddefencesuchasamistake,forgeryorcoercionamongothergrounds,thenthemattercanbelitigatedthroughthespecifiedforums.

20. ItmaybenotedherethatSection143oftheActmakesanoffenceunderSection138triablebyaJudicialMagistrateFirstClass(JMFC).Aftertrial,theprogressionoffurtherlegalproceedingswoulddependonwhethertherehasbeenaconvictionoranacquittal.

¾ In thecaseofconviction,anappealwould lie to theCourtofSessionsunderSection374(3)(a)oftheCrPC;thereafteraRevisiontotheHighCourtunderSection397/401oftheCrPCandfinallyapetitionbeforetheSupremeCourt,seekingspecialleavetoappealunder136oftheConstitutionofIndia.Thus,incaseofconvictiontherewillbefourlevelsoflitigation.

¾ InthecaseofacquittalbytheJMFC,thecomplainantcouldappealtotheHighCourtunder Section 378(4) of the CrPC, and thereafter for special leave to appeal to theSupremeCourtunderArticle136. In suchan instance, therefore, therewill be threelevels of proceedings.

21. Withregardtotheprogressionoflitigationinchequebouncingcases,thelearnedAttorneyGeneral has urged this Court to frame guidelines for a graded scheme of imposing costs on partieswhoundulydelaycompoundingoftheoffence.Itwassubmittedthattherequirement


| 35 |

ofdepositofthecostswillactasadeterrentfordelayedcomposition,sinceatpresent,freeandeasycompoundingofoffencesatanystage,howeverbelated,givesanincentivetothedrawerofthechequetodelaysettlingthecasesforyears.Anapplicationforcompoundingmadeafterseveralyearsnotonlyresultsinthesystembeingburdenedbutthecomplainantisalsodeprivedofeffectivejustice. Inviewofthissubmission,wedirectthatthefollowingguidelines be followed:-

THE GUIDELINES

(i) In the circumstances, it is proposed as follows:

(a) ThatdirectionscanbegiventhattheWritofSummonsbesuitablymodifiedmakingitcleartotheaccusedthathecouldmakeanapplicationforcompoundingoftheoffencesat the first or second hearing of the case and that if such an application is made,compounding may be allowed by the court without imposing any costs on the accused.

(b) Iftheaccuseddoesnotmakeanapplicationforcompoundingasaforesaid,thenifanapplication for compounding is made before the Magistrate at a subsequent stage,compoundingcanbeallowedsubjecttotheconditionthattheaccusedwillberequiredtopay10%ofthechequeamounttobedepositedasaconditionforcompoundingwiththeLegalServicesAuthority,orsuchauthorityastheCourtdeemsfit.

(c) Similarly,iftheapplicationforcompoundingismadebeforetheSessionsCourtoraHighCourtinrevisionorappeal,suchcompoundingmaybeallowedontheconditionthattheaccused pays 15% of the cheque amount by way of costs.

(d) Finally,iftheapplicationforcompoundingismadebeforetheSupremeCourt,thefigurewould increase to 20% of the cheque amount.

22. Let it also be clarified that any costs imposed in accordancewith these guidelines shouldbe depositedwith the Legal Services Authority operating at the level of the Court beforewhichcompoundingtakesplace.Forinstance,incaseofcompoundingduringthependencyof proceedings before a Magistrate’s Court or a Court of Sessions, such costs should bedepositedwith theDistrict Legal ServicesAuthority. Likewise, costs imposed in connectionwith compositionbefore theHighCourt shouldbedepositedwith theState Legal ServicesAuthority and those imposed in connection with composition before the Supreme CourtshouldbedepositedwiththeNationalLegalServicesAuthority.

22. WearealsoinagreementwiththeLearnedAttorneyGeneral’ssuggestionsforcontrollingthefilingofmultiplecomplaintsthatarerelatabletothesametransaction.Itwassubmittedthatcomplaintsarebeingincreasinglyfiledinmultiplejurisdictionsinavexatiousmannerwhichcauses tremendousharassment andprejudice to thedrawersof the cheque. For instance,in the same transactionpertaining to a loan takenon an installmentbasis tobe repaid inequatedmonthlyinstallments,severalchequesaretakenwhicharedatedforeachmonthlyinstallmentanduponthedishonorofeachofsuchcheques,differentcomplaintsarebeingfiledindifferentcourtswhichmayalsohavejurisdictioninrelationtothecomplaint.Inlightof this submission, we direct that it should be mandatory for the complainant to disclose that noothercomplainthasbeenfiledinanyothercourtinrespectofthesametransaction.SuchadisclosureshouldbemadeonaswornaffidavitwhichshouldaccompanythecomplaintfiledunderSection200oftheCrPC. If it is foundthatsuchmultiplecomplaintshavebeenfiled,


| 36 |

ordersfortransferofthecomplainttothefirstcourtshouldbegiven,generallyspeaking,bytheHighCourtafterimposingheavycostsonthecomplainantforresortingtosuchapractice.Thesedirectionsshouldbegiveneffectprospectively.

24. Wearealsoconsciousoftheviewthatthejudicialendorsementoftheabovequotedguidelinescouldbeseenasanactofjudiciallaw-makingandthereforeanintrusionintothelegislativedomain.ItmustbekeptinmindthatSection147oftheActdoesnotcarryanyguidanceonhowtoproceedwiththecompoundingofoffencesundertheAct.WehavealreadyexplainedthattheschemecontemplatedunderSection320oftheCrPCcannotbefollowedinthestrictsense.Inviewofthelegislativevacuum,weseenohurdletotheendorsementofsomesuggestionswhichhavebeendesignedtodiscouragelitigantsfromundulydelayingthecompositionoftheoffenceincasesinvolvingSection138oftheAct.

25. The graded scheme for imposing costs is a means to encourage compounding at an early stage oflitigation.Inthestatusquo,valuabletimeoftheCourtisspentonthetrialofthesecasesandthepartiesarenotliabletopayanyCourtfeesincetheproceedingsaregovernedbytheCodeofCriminalProcedure,eventhoughtheimpactoftheoffenceislargelyconfinedtotheprivateparties.Eventhoughthe impositionofcostsby thecompetentcourt isamatterofdiscretion,thescaleofcostshasbeensuggestedintheinterestofuniformity.ThecompetentCourtcanofcoursereducethecostswithregardtothespecificfactsandcircumstancesofacase,whilerecordingreasonsinwritingforsuchvariance.Bonafidelitigantsshouldofcoursecontest the proceedings to their logical end.

26. Eveninthepast,thisCourthasuseditspowertodocompletejusticeunderArticle142oftheConstitutionto frameguidelines inrelationtosubject-matterwheretherewasa legislativevacuum.

27. The present set of appeals are disposed of accordingly.

qqq

† Arising out of SLPs (Cri.) Nos. 6370-72 of 20071. (2000) 1 SCC 762 : 2000 SCC (Cri) 3102. (2002) 8 SCC 164 : 2002 SCC (Cri) 18723. (2004) 13 SCC 494 : 2006 1 SCC (Cri) 3484. (2005) 4 SCC 162 : 2005 SCC (Cri) 13215. (2008) 2 SCC 305 : 2008 1 SCC (Cri) 3516. (2008) 4 SCC 82 : 2008 2 SCC (Cri) 1867. (2010) 1 SCC 798 : 2010 1 SCC (Cri) 921 : (2009) 14 Scale 262

dashrath rupsingh rathod versus state of maharashtra and anr.

| 37 |

dASHRATH RUpSINGH RATHOd vERSUS STATE Of MAHARASHTRA & ANR

(2014) 9 Supreme Court Cases 129Supreme Court of India

Before Hon’ble Mr. Justice T.S. Thakur, Hon’ble Mr. Justice Vikramajit Sen, Hon’ble Mr. Justice C. Nagappan

Dashrath Rupsingh Rathod ..Appellant Versus

State of Maharashtra & Anr. ..RespondentsDecided on 1 August, 2014

CRIMINAL APPEAL NO. 2287 OF 2009WITH

CRIMINAL APPEAL NO. 1593 OF 2014 [Arising out of S.L.P.(Crl.)No.2077 of 2009];



CRIMINAL APPEAL NOS. 1596-1600 OF 2014 [Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009];

CRIMINAL APPEAL NO.1601 OF 2014 [Arising out of S.L.P.(Crl.)No.3762 of 2012];


CRIMINAL APPEAL NO.1603 OF 2014 [Arising out of S.L.P.(Crl.)No.3944 of 2012]; AND

CRIMINAL APPEAL NO. 1604 OF 2014 [Arising out of S.L.P.(Crl.)No.59 of 2013].

Complainant is statutority bound to comply with Ss, 177 to 179 CrPC and therefore the place or situs where the S. 138 NI Act complaint is to be filed is not of the choosing of complainant K. Bhaskaran, (1999) 7 SCC 510 overruled on this point. All other complaints shall be returned to the complainant for filing in the proper court – Thus, criminal appeals pending before Supreme Court on the issue of territorial jurisdiction disposed of in light of law laid down herein – Criminal Procedure Code, 1973, Ss. 177 to 179. Proviso to S. 138 simply postpones the actual prosecution of the offender till such time he fails to pay the amount within the statutory period prescribed for such payment – Parliament in its


| 38 |

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. To this extent K. Bhaskaran, (1999) 7 SCC 510 is correct in that the satisfaction of all these ingredients of Section 138 and its proviso, is essential for the successful initiation or launch of the prosecution. No manner of adoubt that the return of the cheque by the drawee bank alone constitutes the commission of the offence and indicates the place where the offence is committed. The place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located.

JUDGMENT

VIKRAMAJIT SEN, J.

Leavegranted in Special LeavePetitions. TheseAppeals raise a legal nodusof substantial publicimportancepertainingtoCourtsterritorialjurisdictionconcerningcriminalcomplaintsfiledunderChapterXVIIoftheNegotiableInstrumentsAct,1881(forshort,theNIAct).ThisisamplyadumbratedbytheOrdersdated3.11.2009inI.A.No.1inCC15974/2009ofthethree-JudgeBenchpresidedoverbythethenHonbletheChiefJusticeofIndia,HonbleMr.JusticeV.S.SirpurkarandHonbleMr.JusticeP.SathasivamwhichSLPisalsoconcernedwiththeinterpretationofSection138oftheNIAct,andwhereintheBenchafterissuingnoticeonthepetitiondirectedthatitbepostedbeforethethree-JudgeBench.

PRECEDENTSTheearliestandthemostoftenquoteddecisionofthisCourtrelevanttothepresentconundrumisK.Bhaskaranv.SankaranVaidhyanBalan(1999)7SCC510whereinatwo-JudgeBenchhas,interalia,interpretedSection138oftheNIActtoindicatethat,theoffenceunderSection138canbecompletedonlywiththeconcatenationofanumberofacts.Followingaretheactswhicharecomponentsofthesaidoffence:(1)Drawingofthecheque,(2)Presentationofthechequetothebank,(3)Returningthechequeunpaidbythedraweebank,(4)Givingnoticeinwritingtothedrawerofthechequedemandingpaymentofthechequeamount,(5)Failureofthedrawertomakepaymentwithin15daysofthereceiptofthenotice.TheprovisionsofSections177to179oftheCodeofCriminalProcedure,1973(forshort,CrPC)havealsobeendealtwithindetail.

Furthermore, Bhaskaran in terms draws a distinction between giving of notice and receiving ofnotice.This is for thereasonthatclause (b)ofproviso toSection138of theNIActpostulatesademand being made by the payee or the holder in due course of the dishonoured cheque by giving anoticeinwritingtothedrawerthereof.Whiledoingso,thequestionofthereceiptofthenoticehas also been cogitated upon.

The issuanceand the receiptof thenotice is significantbecause ina subsequent judgmentof aCoordinateBench,namely,HarmanElectronicsPvt.Ltd.v.NationalPanasonicIndiaPvt.Ltd.(2009)1SCC720emphasishasbeenlaidonthereceiptofthenotice,interalia,holdingthatthecauseofactioncannotarisebyanyactofomissionorcommissiononthepartoftheaccused,whichonaholisticreadinghastobereadascomplainant.ItappearsthatHarmantransactedbusinessoutofChandigarhonly,wheretheComplainantalsomaintainedanoffice,althoughitsHeadOfficewasinDelhi.HarmanissuedthechequetotheComplainantatChandigarh;Harmanhaditsbankaccountin Chandigarh alone. It is unclear where the Complainant presented the cheque for encashment but it issuedtheSection138noticefromDelhi. In thosecircumstances, thisCourthadobservedthat the only question for considerationwaswhether sending of notice fromDelhi itselfwould


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giverisetoacauseofactionfortakingcognizanceundertheNIAct.Itthenwentontoopinethatthe proviso to this Section imposes certain further conditionswhich are required to be fulfilledbeforecognizanceof theoffencecanbetaken.Werespectfullyagreewiththisstatementof lawandunderscorethatincriminaljurisprudencethereisadiscerniblydemarcateddifferencebetweenthecommissionofanoffenceanditscognizanceleadingtoprosecution.TheHarmanapproachissignificantandsoundsadiscordantnotetotheBhaskaranratio.HarmanalsohighlightstherealitythatSection138oftheNIActisbeingrampantlymisusedsofarasterritorialjurisdictionfortrialoftheComplaintisconcerned.Withthepassageoftimeequitieshavethereforetransferredfromone end of the pendulum to the other. It is now not uncommon for the Courts to encounter the issuanceofanoticeincompliancewithclause(b)oftheprovisotoSection138oftheNIActfromasituswhichbearsnoconnectionwiththeAccusedorwithanyfacetofthetransactionbetweentheparties,leaveasidetheplacewherethedishonourofthechequehastakenplace.Thisisalsothepositionasregardsthepresentationofthecheque,dishonourofwhichisthenpleadedastheterritorialplatformoftheComplaintunderSection138oftheNIAct.Harman,infact,dulyheedstheabsurdandstressfulsituation,fastbecomingcommon-placewhereseveralchequessignedbythesamedrawerarepresentedforencashmentandrequisitenoticesofdemandarealsodespatchedfromdifferentplaces.Itappearstousthatjustifiablysoatthattime,theconclusioninBhaskaranwasinfluencedinlargemeasurebycurialcompassiontowardstheunpaidpayee/holder,whereaswith thepassageof twodecades themanipulativeabuseof territorial jurisdictionhasbecomearecurringandpiquant factor.The liberalapproachpreferred inBhaskarannowcalls forastricterinterpretationofthestatute,preciselybecauseofitsmisemploymentsofaraschoiceofplaceofsuing is concerned. These are the circumstances which have propelled us to minutely consider the decisionsrenderedbytwo-JudgeBenchesofthisCourt.ItisnoteworthythattheinterpretationtobeimpartedtoSection138oftheNIActalsoarosebeforeathree-JudgeBenchinShriIsharAlloySteelsLtd.v.JayaswalsNecoLtd.(2001)3SCC609closeontheheelsofBhaskaran.Sofarasthefactual matrix is concerned, the dishonoured cheque had been presented for encashment by the Complainant/holderinhisbankwithinthestatutoryperiodofsixmonthsbutbythetimeitreachedthedrawersbank theaforementionedperiodof limitationhadexpired.Thequestionbefore theCourtwaswhetherthebankwithinthepostulationofSection138readwithSections3and72oftheNIActwasthedraweebankorthecollectingbankandthisCourtheldthatitwastheformer.Itwasobservedthatnon-presentationofthechequetothedraweebankwithintheperiodspecifiedintheSectionwouldabsolvethepersonissuingthechequeofhiscriminalliabilityunderSection138oftheNIAct,whootherwisemaybeliabletopaythechequeamounttothepayeeinacivilactioninitiatedunderthelaw.AcombinedreadingofSections3,72and138oftheNIActwouldleavenodoubtinourmindthatthelawmandatesthechequetobepresentedatthebankonwhichitisdrawnifthedraweristobeheldcriminallyliable.Clearly,andinourconsideredopinionrightly,theSectionhadbeenrendered‘accused-centric.Thisdecisionclarifiesthattheplacewhereacomplainantmaypresentthechequeforencashmentwouldnotconferorcreateterritorial jurisdiction,andinthisrespectrunscountertotheessenceofBhaskaranwhichparadoxically,inouropinion,makesactionsoftheComplainantanintegralnaynuclearconstituentofthecrimeitself.

The principle of precedence should promptly and precisely be paraphrased. A co-ordinate Bench is boundtofollowthepreviouslypublishedview;itiscertainlycompetenttoaddtotheprecedenttomakeitlogicallyanddialecticallycompelling.However,onceadecisionofalargerBenchhasbeendelivereditisthatdecisionwhichmandatorilyhastobeapplied;whereasaCo-ordinateBench,intheeventthatitfindsitselfunabletoagreewithanexistingratio,iscompetenttorecommendthe


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precedentforreconsiderationbyreferringthecasetotheChiefJusticeforconstitutionofalargerBench.Indubitably,thereareanumberofdecisionsbytwo-JudgeBenchesonSection138oftheNIAct,themajorityofwhichapplyBhaskaranwithoutnotingordistinguishingonfactsIsharAlloy.Inouropinion,itisimperativefortheCourttodiligentlydistillandthenapplytheratioofadecision;andtheviewofalargerBenchoughtnottobedisregarded.Inasmuchasthethree-JudgeBenchinIsharAlloyhascategoricallystatedthatforcriminalliabilitytobeattracted,thesubjectchequehastobepresentedtothebankonwhichitisdrawnwithintheprescribedperiod,Bhaskaranhasbeensignificantlywhittleddownifnotoverruled.BhaskaranhasalsobeendrasticallydilutedbyHarmaninasmuch as it has given primacy to the service of a notice on theAccused instead of itsmereissuance by the Complainant.

In Prem Chand Vijay Kumar v. Yashpal Singh (2005) 4 SCC 417, another two- Judge Bench heldthatuponanoticeunderSection138oftheNIActbeingissued,asubsequentpresentationofachequeanditsdishonourwouldnotcreateanothercauseofactionwhichcouldsettheSection138machineryinmotion.Inthatview,iftheperiodoflimitationhadrunout,afreshnoticeofdemandwasbereftofanylegalefficacy.SILImport,USAv.EximAidesSilkExporters(1999)4SCC567wasapplied inwhich thedeterminationwas that since the requisitenoticehadbeendespatchedbyFAXon26.6.1996the limitationforfilingtheSection138Complaintexpiredon26.7.1996.WhatisinterestingistheobservationthatfourconstituentsofSection138arerequiredtobeprovedtosuccessfullyprosecutethedrawerofanoffenceunderSection138oftheNIAct(emphasissupplied).

It isalsonoteworthy that insteadof thefiveBhaskaranconcomitants,only fourhavebeenspeltoutinthesubsequentjudgmentinPremChand.Thecommissionofacrimewasdistinguishedfromitsprosecutionwhich,inourconsideredopinion,isthecorrectinterpretationofthelaw.Inotherwords,thefourorfiveconcomitantsoftheSectionhavetobeinexistencefortheinitiationaswellasthesuccessfulprosecutionoftheoffence,whichoffencehowevercomesintoexistenceassoonassubjectchequeisdishonouredbythedraweebank.Anothertwo-JudgeBenchinShamshadBegumv.B.Mohammed(2008)13SCC77speakingthroughPasayatJthistimearoundappliedBhaskaranandconcludedthatsincetheSection138noticewasissuedfromandrepliedtoMangalore,Courtsinthatcitypossessedterritorialjurisdiction.Asalreadynotedabove,thisviewisnotreconcilablewiththelaterdecisionofHarman.Thetwo-JudgeBenchdecisioninMosarafHossainKhanv.BhagheerathaEngg.Ltd.(2006)3SCC658requirestobediscussedinsomedetail.AComplaintunderSection138oftheNIActwasfiledandcognizancewastakenbytheChiefJudicialMagistrate,BirbhumatSuri,WestBengalforthedishonourofanumberofchequesissuedbytheaccused-companywhichhaditsheadquartersinErnakulam,Keralawheresignificantlytheaccused-companysbankonwhomthedishonouredchequeshadbeendrawnwas located.Several judgmentswerereferredto,butnotBhaskaran.ThethirdingredientinBhaskaran,i.e.thereturningofthechequeunpaidbythedraweebank,wasnotreflectedupon.InasmuchasMosarafHossainreferscopiouslytothecauseofactionhavingariseninWestBengalwithoutadvertingatalltoBhaskaran,leaveasidethethree-JudgeBenchdecisioninIsharAlloy,thedecisionmaybeseenasperincuriam.Moreover,theconceptofforumnonconvenienshasnoroletoplayunderSection138oftheNIAct,andfurthermorethatitcancertainlybecontendedbytheaccused-companythatitwasjustifiable/convenientforittoinitiatelitigationinErnakulam.IfBhaskaranwasfollowed,CourtsinErnakulamunquestionablypossessedterritorialjurisdiction. It is, however, important to italicize that therewas an unequivocal endorsement oftheBenchofapreviouslyexpressedviewthat,wheretheterritorial jurisdictionisconcernedthemainfactortobeconsideredistheplacewheretheallegedoffencewascommitted.Insimilarvein,


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thisCourthasopinedinOmHemrajaniv.StateofU.P.(2005)1SCC617,inthecontextofSections177to180CrPCthatforjurisdictionemphasisisontheplacewheretheoffenceiscommitted.Theterritorialjurisdictionconundrumwhich,candidlyiscurrentlyinthecauldronowingtovaryingifnotconflictingratios,hasbeencogitateduponveryrecentlybyatwo-JudgeBenchinCriminalAppealNo.808of2013titledNishantAggarwalv.KailashKumarSharmadecidedon1.7.2013andagainbythesameBenchinCriminalAppealNo.1457of2013titledEscortsLimitedv.RamaMukherjeedecidedon17.09.2013.Bhaskaranwas followedand IsharAlloyandHarmanwereexplained. InNishanttheAppellant issuedapost-datedchequedrawnonStandardCharteredBank,Guwahatiin favour of complainant-respondent. It appears that the Appellant had endeavoured to create a caseorratheradefencebyreportingtohisbankinGuwahatiaswellastothelocalpolicestationthatonecheque(correspondingtothechequeinquestion)wasmissingandhencepaymentshouldbestopped.TheRespondent-drawerwasaresidentofDistrictBhiwani,Haryana;hepresentedthechequeforencashmentatCanaraBank,Bhiwanibutitwasreturnedunpaid.Theholderthenissuedalegalnoticewhichfailedtoelicitthedemandedsumofmoneycorrespondingtothechequevalue,andthereuponfolloweditbythefilingofacriminalcomplaintunderSections138and141oftheNIActatBhiwani.TheJudicialMagistrate,Bhiwani,videorderdated5.3.2011,concludedthatthecourtinBhiwanididnotpossessterritorialjurisdictionandheaccordinglyreturnedthecomplaintforpresentationbeforetheproperCourt.ThefiveconcomitantsofSection138extractedinBhaskaran,were reiterated and various paragraphs from it were reproduced by this Court. Nishant also did not followIsharAlloywhich,asalreadyanalysed,hasconcludedthatthesecondBhaskaranconcomitant,namely,presentationofchequetothebankreferstothedraweebankandnottheholdersbank,isnotprimarilyrelevantforthedeterminationofterritorial jurisdiction.NishantdistinguishedIsharAlloyonthepredicationthatthequestionofterritorialjurisdictionhadnotbeenraisedinthatcase.ItisaxiomaticthatwhenaCourtinterpretsanystatutoryprovision,itsopinionmustapplytoandbedeterminate in all factual and legal permutations and situations.We think that hedictum inIsharAlloyisveryrelevantandconclusivetothediscussioninhand.ItalsojustifiesemphasisthatIsharAlloyistheonlycasebeforeuswhichwasdecidedbyathree-JudgeBenchand,therefore,wasbindingonallsmallerBenches.WeingeminatethatitisthedraweeBankandnottheComplainantsBankwhichispostulatedintheso-calledsecondconstituentofSection138oftheNIAct,anditisthis postulate that spurs us towards the conclusion that we have arrived at in the present Appeals. ThereisalsoadiscussionofHarmantoreiteratethattheoffenceunderSection138iscompleteonlywhenthefivefactorsarepresent.Itisourconsideredview,whichweshallexpoundupon,thattheoffenceinthecontemplationofSection138oftheNIActisthedishonourofthechequealone,anditistheconcatenationofthefiveconcomitantsofthatSectionthatenabletheprosecutionoftheoffenceincontradistinctiontothecompletion/commissionoftheoffence.

WehavealsopainstakinglyperusedEscortsLimitedwhichwasalsodecidedbytheNishant two-JudgeBench.Previousdecisionswereconsidered,eventuallyleadingtotheconclusionthatsincetheconcernedchequehadbeenpresentedforencashmentatNewDelhi,itsMetropolitanMagistratepossessedterritorialjurisdictiontoentertainanddecidethesubjectComplaintunderSection138oftheNIAct.Importantly,inasubsequentorder,inFILIndustriesLtd.v.ImtiyazAhmedBhatpassedon12thAugust2013,itwasdecidedthattheplacefromwherethestatutorynoticehademanatedwouldnotofitsownhavetheconsequenceofvestingjurisdictionuponthatplace.Accordingly,itbearsrepetitionthattheratioinBhaskaranhasbeendrasticallydilutedinthatthesitusofthenotice,oneoftheso-calledfiveingredientsofSection138,hasnowbeenheldnottoclothethatCourtwithterritorialcompetency.Theconflictingorincongruentopinionsneedtoberesolved.


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JUDICIALAPPROACHONJURISDICTIONWeshalltakeashortdigressionintermsofbriefdiscussionoftheapproachpreferredbythisCourtinthecontextofSection20oftheCodeofCivilProcedure,1908(hereinafterreferredtoas,CPC),whichinteralia,enjoinsthatasuitmustbeinstitutedinacourtwithin the local limitsofwhose jurisdictiontheDefendantactuallyandvoluntarily resides,orcarriesonbusiness,orpersonallyworksforgain,orwherethecauseofactionwhollyorinpartarises.TheExplanationtothatSectionisimportant;itprescribesthatacorporationshallbedeemedtocarryonbusinessat its soleorprincipaloffice,or, in respectofanycauseofactionarisingatanyplacewhereithasalsoasubordinateoffice,atsuchplace.SincethisprovisionprimarilykeepstheDefendantinperspective,thecorporationspokenofintheExplanation,obviouslyreferstotheDefendant.Aplain readingof Section20of theCPCarguably allows thePlaintiffamultitudeofchoicesinregardtowhereitmayinstituteitslis,suitoraction.Corporationsandpartnershipfirms,andevensoleproprietorshipconcerns,couldwellbetransactingbusinesssimultaneouslyinseveralcities.Ifsub-sections(a)and(b)ofSection20aretobeinterpreteddisjunctivelyfromsub-section(c),astheuseofthewordorappearstopermitthePlaintifftofilethesuitatanyoftheplaceswherethecauseofactionmayhavearisenregardlessofwhethertheDefendanthasevenasubordinateofficeatthatplace.However,iftheDefendantslocationistoformthefulcrumofjurisdiction,andithasanofficealsoattheplacewherethecauseofactionhasoccurred,ithasbeenheldthatthePlaintiffisprecludedfrominstitutingthesuitanywhereelse.Obviously,thisisalsobecauseeveryotherplacewouldconstituteaforumnonconveniens.ThisCourthasharmonisedthevarioushuesof the conundrum of the place of suing in several cases and has gone to the extent of laying down thatitshouldbecourtsendeavourtolocatetheplacewherethecauseofactionhassubstantiallyarisenandrejectotherswhereitmayhaveincidentallyarisen.PatelRoadwaysLimited,Bombayv.PrasadTradingCompany,AIR1992SC1514=(1991)4SCC270prescribesthat if theDefendant-corporationhasasubordinateofficeintheplacewherethecauseofactionarises,litigationmustbeinstitutedatthatplacealone,regardlessoftheamplitudeofoptionspostulatedinSection20oftheCPC.WeneednotdilateonthispointbeyondmakingareferencetoONGCv.UtpalKumarBasu(1994)4SCC711andSouthEastAsiaShippingCo.Ltd.v.NavBharatEnterprisesPvt.Ltd.(1996)3SCC443.

Wearealivetothepossibleincongruitiesthatarefraughtinextrapolatingdecisionsrelatingtocivillawontocriminallaw,whichincludesimportingthecivillawconceptofcauseofactiontocriminallawwhichessentiallyenvisagestheplacewhereacrimehasbeencommittedempowerstheCourtat thatplacewith jurisdiction. InNavinchandraN.Majithiav.StateofMaharashtra (2000)7SCC640thisCourthadtoconsiderthepowersofHighCourtsunderArticle226(2)oftheConstitutionofIndia.Notingthepresenceofthephrasecauseofactionthereinitwasclarifiedthatsincesomeevents central to the investigationof the alleged crime asseverated in the Complaint had takenplaceinMumbaiandespeciallybecausethefundamentalgrievancewasthefalsityoftheComplaintfiledinShillong,thewritjurisdictionoftheBombayHighCourtwasunquestionablyavailable.Theinfusion of the concept of cause of action into the criminal dispensationhas led to subsequentconfusioncountenanced inHighCourts. ItseemstousthatBhaskaranallowsmultiplevenuestothe Complainant which runs counter to this Courts preference for simplifying the law. Courts are enjoinedtointerpretthelawsoastoeradicateambiguityornebulousness,andtoensurethatlegalproceedings are not used as a device for harassment, even of an apparent transgressor of the law.


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Lawsendeavouristobringtheculprittobookandtoprovidesuccourfortheaggrievedpartybutnot toharass the formerthroughvexatiousproceedings.Therefore,precisionandexactitudearenecessaryespeciallywherethelocationofalitigationisconcerned.

RELEVANTPROVISIONSTheprovisionswhichwillhavetobeexaminedandanalysedarereproducedfor facility of reference :

1 NegotiableInstrumentsAct,1881138.Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.-Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamountofmoneytoanotherpersonfromoutofthataccountforthedischarge,inwholeorinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficientto honour the cheque or that it exceeds the amount arranged to be paid from that account byanagreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffence and shall,without prejudice to any other provisions of this Act, be punishedwithimprisonmentforatermwhichmaybeextendedtotwoyears,orwithfinewhichmayextendto twice the amount of the cheque, or with both:

Providedthatnothingcontainedinthissectionshallapplyunless-

(a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateon which it is drawn or within the period of its validity, whichever is earlier.

(b) thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerof thecheque,within thirtydaysof thereceiptof informationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

(c) thedrawerof such cheque fails tomake thepaymentof the said amountofmoneyto the payee or, as the case may be, to the holder in due course of the cheque, within fifteendaysofthereceiptofthesaidnotice.

Explanation.Forthepurposesofthissection,debtorotherliabilitymeansalegallyenforceabledebtor other liability.

142. Cognizanceofoffences.-NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974)-

(a) nocourtshalltakecognizanceofanyoffencepunishableundersection138exceptuponacomplaint, inwriting,madebythepayeeor,asthecasemaybe,theholder induecourseofthecheque;

(b) suchcomplaintismadewithinonemonthofthedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotosection138;

Provided that the cognizance of a complaint may be taken by the Court after theprescribedperiod,ifthecomplainantsatisfiestheCourtthathehadsufficientcausefornotmakingacomplaintwithinsuchperiod.

(c) nocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshall tryanyoffencepunishableundersection138.CodeofCriminalProcedure,1973


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177.Ordinaryplaceofinquiryandtrial.-EveryoffenceshallordinarilybeinquiredintoandtriedbyaCourtwithinwhoselocaljurisdictionitwascommitted.

178. Placeofinquiryortrial.-(a)Whenitisuncertaininwhichofseverallocalareasanoffencewascommitted,or

(b) whereanoffenceiscommittedpartlyinonelocalareaandpartlyinanother,or

(c) whereanoffenceisacontinuingone,andcontinuestobecommittedinmorelocalareasthan one, or

(d) whereitconsistsofseveralactsdoneindifferentlocalareas,itmaybeinquiredintoortriedbyaCourthavingjurisdictionoveranyofsuchlocalareas.

179.Offence triablewhere act is done or consequence ensues.-When an act is an offence byreasonofanythingwhichhasbeendoneandofaconsequencewhichhasensued,theoffencemaybeinquiredintoortriedbyaCourtwithinwhoselocaljurisdictionsuchthinghasbeendoneorsuchconsequencehasensued.PARLIAMENTARYDEBATESTheXVIIthfasciculusoftheNegotiableInstrumentsActcontainingSections138to142wasintroducedintothestatutein1988. The avowed intendment of the amendment was to enhance the acceptability of cheques. ItwasbasedontheReportoftheCommitteeonBankingLawsbyDr.Rajamannar,submittedin1975,whichsuggested,interalia,penalizingtheissuanceofchequewithoutsufficientfunds.TheMinisterofFinancehadassuagedapprehensionsbyarguingthatsafeguardsforhonestpersonshadbeenincorporatedintheprovisions,viz.,(i)thechequeshouldhavebeenissuedindischargeof liability; (ii) thechequeshouldbepresentedwithin itsvalidityperiod;(iii)aNoticehadtobesentbythePayeedemandingpaymentwithin15daysofreceivingnoticeofdishonour; (iv) thedrawerwasallowed tomakepaymentwithin15days from thedateofreceiptofnotice;(v)Complaintwastobemadewithinonemonthofthecauseofactionarising;(vi)noCourtinferiortothatofMMorJMFCwastotrytheoffence.TheFinanceMinisterhadalsostatedthattheCourthaddiscretionwhethertheDrawerwouldbeimprisonedor/andfined.Detractors,however,pointedoutthattheIPCalreadyenvisionedcriminalliabilityfor cheque-bouncingwhere dishonest or fraudulent intention ormens rea on part of theDrawerwasevident,namely,cheating, fraud,criminalbreachof trustetc.Therefore, therewasnojustificationtomakethedishonourofchequesacriminaloffence,ignoringfactorslikeilliteracy, indispensablenecessities,honest/innocentmistake,bank frauds,bonafidebelief,and/orunexpectedattachmentorfreezingofaccountinanyjudicialproceedingsasitwouldbringevenhonestpersonswithintheambitofSection138NIAct.Thepossibilityofabusingtheprovision as a tool of harassment could alsonot be ruledout. Critics alsodecried thepunishmentforbeingharsh;thatcivil liabilitycanneverbeconvertedintocriminalliability;thatsinglingoutchequesoutofallothernegotiableinstrumentswouldbeviolativeofArticle14of Constitutionof India. Critics contended that therewas insufficient empirical enquiryintostatutesorlegislationinforeignjurisdictionscriminalizingthedishonourofchequesandstatisticshadnotbeenmadeavailablebearingout that criminalizationwould increase theacceptabilityofcheque.TheMinisterofFinancewasnotentirelyforthrightwhenhestatedin Parliament that the drawerwas also allowed sufficient opportunity to saywhether thedishonourwasbymistake.ItmustbeborneinmindthatintheU.K.deceptionanddishonestyarekeyelementswhichrequiretobeproved.IntheUSA,someStateshavetheirownlaws,requiringfraudulentintentorknowledgeofinsufficientfundstobemadegood.Francehas


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criminalizedandsubsequentlydecriminalizedthedishonourexceptinlimitedcircumstances.Instead, it provides for disqualification from issuing cheques, a practice which had beenadoptedinItalyandSpainalso.WehaveundertakenthissuccinctstudymindfulofthefactthatParliamentarydebateshavealimitedparttoplayininterpretationofstatutes,thepresumptionbeingthatLegislatorshavetheexperience,expertiseandlanguageskillstodraftlawswhichunambiguouslyconveytheirintentionsandexpectationsfortheenactments.WhatispalpablyclearisthatParliamentwasawarethattheywereconvertingcivilliabilityintocriminalcontentinteraliabythedeemingfictionofculpabilityintermsofthepandectcomprisingSection138andthesucceedingSections,whichseverelycurtaildefencestoprosecution.Parliamentwasalsoawarethat theoffenceofcheatingetc.,alreadyenvisaged in the IPC,continuedtobeavailable.

CIVILLAWCONCEPTSNOTSTRICTLYAPPLICABLEWehavealreadycautionedagainsttheextrapolationofcivillawconceptssuchascauseofactionontocriminallaw.Section177oftheCrPCunambiguouslystatesthateveryoffenceshallordinarilybeinquiredintoandtriedbyaCourtwithinwhoselocaljurisdictionitwascommitted.Offence,byvirtueofthedefinitionascribedtothewordbySection2(n) of the CrPC means any act or omission made punishable by any law. Halsbury states that the venueforthetrialofacrimeisconfinedtotheplaceofitsoccurrence.BlackstoneopinesthatcrimeislocalandjurisdictionoveritvestsintheCourtandCountrywherethecrimeiscommitted.ThisisobviouslytheraisondetrefortheCrPCmakingadeparturefromtheCPCinnotmakingthecauseofactionroutinelyrelevantforthedeterminationofterritorialityofcriminalcourts.Thewordactionhastraditionallybeenunderstoodtobesynonymoustosuit,orasordinaryproceedingsinaCourtof justice forenforcementorprotectionof the rightsof the initiatorof theproceedings.Action,generallymeansalitigationinacivilCourtfortherecoveryofindividualrightorredressofindividualwrong,inclusive,initsproperlegalsense,ofsuitsbytheCrown-[Bradlaughv.Clarke8AppealCases354p.361].Unlikecivilactions,wherethePlaintiffhastheburdenoffilingandprovingitscase,theresponsibility of investigating a crime,marshalling evidence andwitnesses, restswith the State.Therefore,whiletheconvenienceoftheDefendantinacivilactionmayberelevant,theconvenienceofthesocalledcomplainant/victimhaslittleornoroletoplayincriminalprosecution.KeepinginperspectivethepresenceofthewordordinarilyinSection177ofCrPC,wehastentoadumbratethattheexceptionstoitarecontainedintheCrPCitself,thatis,inthecontentsofthesucceedingSection178.TheCrPCalsocontainsanexplicationofcomplaintasanyallegationtoaMagistratewithaviewtohistakingactioninrespectofthecommissionofanoffence;notbeingapolicereport.Prosecutionensues from a Complaint or police report for the purpose of determining the culpability of a person accusedofthecommissionofacrime;andunlikeacivilactionorsuitiscarriedout(orprosecuted)bytheStateoritsnominatedagency.TheprincipaldefinitionofprosecutionimpartedbyBlacksLawDictionary5thEditionisacriminalaction;theproceedinginstitutedandcarriedonbydueprocessof law, before a competent Tribunal, for the purpose of determining the guilt or innocence of a personchargedwithcrime.ThesereflectionsarenecessarybecauseSection142(b)oftheNIActcontainsthewords,thecauseofactionarisesundertheprovisotoSection138,resultingarguably,butinouropinionirrelevantly,totheblindborrowingofessentiallycivillawattributesontocriminalproceedings.WereiteratethatSection178admitsofnodebatethat incriminalprosecution,theconceptofcauseofaction,beingthebundleoffactsrequiredtobeprovedinasuitandaccordinglyalsobeingrelevantfortheplaceofsuing, isnotpertinentorgermanefordeterminingterritorialjurisdictionofcriminalTrials.Section178,CrPCexplicitlystatesthateveryoffenceshallordinarilybe inquired into and tried by a Courtwithinwhose local jurisdiction itwas committed. Section


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179isofsimilartenor.WearealsounabletolocateanyprovisionoftheNIActwhichindicatesorenumeratestheextraordinarycircumstanceswhichwouldjustifyadeparturefromthestipulationthattheplacewheretheoffenceiscommittediswheretheprosecutionhastobeconducted. Infact,sincecognizanceoftheoffenceissubjecttothefiveBhaskarancomponentsorconcomitantstheconcatenationofwhichripensthealreadycommittedoffenceunderSection138NIActintoaprosecutableoffence,theemploymentofthephrasecauseofactioninSection142oftheNIActisappositefortakingcognizance,butinappropriateandirrelevantfordeterminingcommissionofthesubjectoffence.Therearemyriadexamplesofthecommissionofacrimetheprosecutionofwhich isdependentonextraneouscontingenciessuchasobtainmentofsanctionforprosecutionunderSection19ofthePreventionofCorruptionAct1988.SimilarsituationisstatutorilycreatedbySection19oftheEnvironmentalProtectionAct1986,Section11oftheCentralSalesTaxAct1956,Section279oftheIncomeTaxAct,Sections132and308,CrPC,Section137oftheCustomsActetc.Itwouldbeidletocontendthattheoffencecomesintoexistenceonlyonthegrantofpermissionforprosecution,orthatthispermissionconstitutesan integralpartoftheoffenceitself. Itwouldalsobefutiletoarguethattheplacewherethepermissionisgrantedwouldprovidethevenueforthetrial.Ifsanctionisnotgrantedtheoffencedoesnotvanish.Equally,ifsanctionisgrantedfromaplaceotherthanwherethecrimeiscommitted,itisthelatterwhichwillremaintheplaceforitsprosecution.

SECTION138NIACTThemarginalnoteofSection138oftheNIActexplicitlydefinestheoffenceasbeingthedishonourofchequesforinsufficiency,etc.,offundsintheaccount.Ofcourse,theheadings,captionsoropeningwordsof apieceof legislationarenormallynot strictlyor comprehensivelydeterminativeofthesweepoftheactualSectionitself,butitdoespresageitsintendment.See:FrickIndiaLtd.v.UnionofIndia(1990)1SCC400andForage&Co.v.MunicipalCorporationofGreaterBombay (1999) 8 SCC577.Accordingly, unless theprovisionsof the Section clearly point to thecontrary,theoffenceisconcernedwiththedishonourofacheque;andintheconundrumbeforeusthebodyofthisprovisionspeaksinthesametimbresinceitreferstoachequebeingreturnedby thebankunpaid.Noneof theprovisionsof the IPChavebeen renderednugatorybySection138oftheNIActandbothoperateontheirown.Itistritethatmensreaisthequintessentialofeverycrime.TheobjectiveofParliamentwastostrengthentheuseofcheques,distinctfromothernegotiableinstruments,asmercantiletenderandthereforeitbecameessentialfortheSection138NIActoffencetobefreedfromtherequirementofprovingmensrea.ThishasbeenachievedbydeemingthecommissionofanoffencedehorsmensreanotonlyunderSection138butalsobyvirtueofthesucceedingtwoSections.Section139carvesoutthepresumptionthattheholderofachequehasreceived it for thedischargeofany liability.Section140clarifiesthat itwillnotbeavailable as a defence to the drawer that he had no reason to believe, when he issued the cheque, that itwouldbedishonoured.Section138unequivocallystatesthattheoffenceiscommittednosoonerthedraweebankreturnsthechequeunpaid.Section138NIActisstructuredintwopartstheprimaryandtheprovisory.ItmustbekeptinmindthattheLegislaturedoesnotordainwithonehandandimmediatelynegateitwiththeother.Theprovisooftencarvesoutaminordetractionordiminutionofthemainprovisionofwhich it isanappendixoraddendumorauxiliary.BlackLawDictionarystatesinthecontextofaprovisothatitisalimitationorexceptiontoagrantmadeorauthorityconferred,theeffectofwhichistodeclarethattheoneshallnotoperate,ortheotherbeexercised,unlessinthecaseprovided..Aclauseorpartofaclauseinastatute,theofficeofwhichiseithertoexceptsomethingfromtheenactingclause,ortoqualifyorrestrainitsgenerality,ortoexcludesomepossiblegroundofmisinterpretationofitsextent.Itshouldalsobekeptinperspective


| 47 |

thataprovisooraconditionaresynonymous.Inourperceptioninthecaseinhandthecontentsoftheprovisoplaceconditionsontheoperationofthemainprovision,whileitdoesformaconstituentof the crime itself, it modulates or regulates the crime in circumstances where, unless its provisions arecompliedwith,thealreadycommittedcrimeremainsimpervioustoprosecution.TheprovisotoSection138oftheNIActfeaturesthreefactorswhichareadditionallyrequiredforprosecutiontobesuccessful.InthisaspectSection142correctlyemploysthetermcauseofactionascompliancewiththethreefactorscontainedintheprovisoareessentialforthecognizanceoftheoffence,eventhoughtheyarenotpartoftheactionconstitutingthecrime.TothisextentwerespectfullyconcurwithBhaskaraninthattheconcatenationofalltheseconcomitants,constituentsoringredientsofSection138NIAct,isessentialforthesuccessfulinitiationorlaunchoftheprosecution.We,however,areoftheviewthatsofarastheoffenceitselftheprovisohasnoroletoplay.AccordinglyareadingofSection138NIActinconjunctionwithSection177,CrPCleavesnomannerofdoubtthatthereturnofthechequebythedraweebankaloneconstitutesthecommissionoftheoffenceandindicatestheplacewheretheoffenceiscommitted. Inthisanalysisweholdthattheplace,situsorvenueofjudicialinquiryandtrialoftheoffencemustlogicallyberestrictedtowherethedraweebank,islocated.Thelawshouldnotbewarpedforcommercialexigencies.AsitisSection138oftheNIActhas introducedadeemingfictionofculpability,eventhough,Section420 isstillavailable incasethepayeefindsitadvantageousorconvenienttoproceedunderthatprovision.AninterpretationshouldnotbeimpartedtoSection138whichwillrenderitasadeviceofharassmenti.e.bysendingnoticesfromaplacewhichhasnocasualconnectionwiththetransactionitself,and/orbypresentingthecheque(s)atanyofthebankswherethepayeemayhaveanaccount.Inourdiscernment,itisalsonowmanifestthattradersandbusinessmenhavebecomerecklessandincautiousinextendingcredit 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 inquestionbemadepayableataplaceofthecreditorsconvenience.TodaysrealityisthattheeveryMagistracyisinundatedwithprosecutionsunderSection138NIAct,somuchsothattheburdenis becomingunbearable anddetrimental to thedisposal of other equally pressing litigation.WethinkthatCourtsarenotrequiredtotwistthelawtogiverelieftoincautiousorimpetuouspersons;beyondSection138oftheNIAct.

Wefeelcompelledtoreiterateourempathywithapayeewhohasbeendupedordeludedbyaswindlerintoacceptingachequeasconsiderationfordeliveryofanyofhisproperty;orbecauseofthereceiptofachequehasinducedthepayeetoomittodoanythingresultinginsomedamagetothepayee.ThereliefintroducedbySection138oftheNIActisinadditiontothecontemplationsintheIPC.ItisstillopentosuchapayeerecipientofadishonouredchequetolodgeaFirstInformationReportwiththePoliceorfileaComplaintdirectlybeforetheconcernedMagistrate. If thepayeesucceedsinestablishingthattheinducementforacceptingachequewhichsubsequentlybouncedhadoccurredwhereheresidesorordinarilytransactsbusiness,hewillnothavetosufferthetravailsof journeying to theplacewhere thechequehasbeendishonoured.All remediesunder the IPCandCrPCareavailabletosuchapayeeifhechoosestopursuethiscourseofaction,ratherthanaComplaintunderSection138oftheNIAct.Andofcourse,hecanalwaysfileasuitforrecoverywhereverthecauseofactionarisesdependentonhischoosing.TheinterpretationofSection138oftheNIActwhichcommendsitselftousisthattheoffencecontemplatedthereinstandscommittedonthedishonourofthecheque,andaccordinglytheJMFCattheplacewherethisoccursisordinarilywheretheComplaintmustbefiled,entertainedandtried.ThecognizanceofthecrimebytheJMFCatthatplacehowever,canbetakenonlywhentheconcomitantsorconstituentscontemplatedby


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theSectionconcatenatewitheachother.WeclarifythattheplaceoftheissuanceordeliveryofthestatutorynoticeorwheretheComplainantchoosestopresentthechequeforencashmentbyhisbankarenotrelevant forpurposesof territorial jurisdictionof theComplaintseventhoughnon-compliance thereof will inexorably lead to the dismissal of the complaint. It cannot be contested thatconsiderableconfusionprevailsontheinterpretationofSection138inparticularandChapterXVII ingeneraloftheNIAct.ThevindicationofthisviewisdulymanifestedbythedecisionsandconclusionarrivedatbytheHighCourtseveninthefewcasesthatweshalldecidebythisJudgment.WeclarifythattheComplainantisstatutorilyboundtocomplywithSection177etc.oftheCrPCandthereforetheplaceorsituswheretheSection138Complaintistobefiledisnotofhischoosing.TheterritorialjurisdictionisrestrictedtotheCourtwithinwhoselocaljurisdictiontheoffencewascommitted,whichinthepresentcontextiswherethechequeisdishonouredbythebankonwhichitisdrawn.Wearequitealivetothemagnitudeoftheimpactthatthepresentdecisionshallhavetopossibly lakhsof casespending in variousCourts spanning across the country.Oneapproachcould be to declare that this judgment will have only prospective pertinence, i.e. applicabilitytoComplaints thatmaybefiled after this pronouncement.However, keeping in perspective thehardship that thiswill continuetobearonallegedaccused/respondentswhomayhavetotravellongdistancesinconductingtheirdefence,andalsomindfulofthelegalimplicationsofproceedingsbeing permitted to continue in a Court devoid of jurisdiction, this recourse in entirety does notcommenditselftous.Consequentonconsiderableconsiderationwethinkitexpedienttodirectthatonly those cases where, post the summoning and appearance of the alleged Accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Negotiable Instruments Act,1881,willproceedingcontinueatthatplace.Toclarify,regardlessofwhetherevidencehasbeenled before theMagistrate 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 obviateanderadicateanylegalcomplications,thecategoryofComplaintcaseswhereproceedingshavegonetothestageofSection145(2)orbeyondshallbedeemedtohavebeentransferredbyusfromtheCourtordinarilypossessingterritorialjurisdiction,asnowclarified,totheCourtwhereitispresentlypending.AllotherComplaints(obviouslyincludingthosewheretheaccused/respondenthasnotbeenproperlyserved)shallbereturnedtotheComplainantforfilingintheproperCourt,inconsonancewithourexpositionofthelaw.IfsuchComplaintsarefiled/refiledwithinthirtydaysoftheirreturn,theyshallbedeemedtohavebeenfiledwithinthetimeprescribedbylaw,unlesstheinitialorpriorfilingwasitselftimebarred.

DISPOSALOFPRESENTAPPEALSCrl.AppealNo.2287of2009

21. AlearnedSingleJudgeoftheHighCourtofJudicatureatBombay,NagpurBenchhas,pursuanttoathreadbarediscussionofBhaskaranconcludedthatsincetheconcernedchequewasdrawnontheBankofIndia,BhandaraBranch,Maharashtrawhereitwasdishonoured,theJudicialMagistrateFirstClass,Digras,DistrictYavatmalhadnojurisdictiontoentertaintheComplaint.It is pertinent to note that the subject chequewas presented at Digras, District YavatmalwheretheComplainanthadabankaccountalthoughhewasaresidentofDistrictWashim,Maharashtra.ThelearnedSingleJudge,intheimpugnedjudgment,hadrightlyrejectedtheargumentthattheComplaintitselfshouldbedismissed;insteadheorderedthatitbereturnedtothecomplainantforfilingintheappropriateCourt.

The Appeal is accordingly dismissed.


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Crl. AppealNo. 1593of 2014 [Arisingout of S.L.P.(Crl.)No.2077of 200922. In thisAppealthe Respondent-accused, having purchased electronic items from the Appellant-company, issuedthechequeinquestiondrawnonUCOBank,Tangi,OrissawhichwaspresentedbytheComplainant-companyatStateBankofIndia,AhmednagarBranch,MaharashtraasitsbranchofficewaslocatedatAhmednagar.ThechequewasdishonouredbyUCOBank,Tangi,Orissa.AComplaintwasfiledbeforeJMFC,Ahmednagar.AnapplicationwasfiledbytheRespondent-accused under Section 177 CrPC questioning the jurisdiction of the JMFC Ahmednagar,whoheld that since thedemandnoticewas issued fromand thepaymentwas claimedatAhmednagar,hepossessedjurisdictiontotrytheComplaint.TheHighCourtdisagreedwiththeconclusionoftheJMFC,Ahmednagarthatthereceiptofnoticeandnon-paymentofthedemanded amount are factors which will have prominence over the place wherefrom the noticeofdemandwas issuedandheldthat JMFC,AhmednagardidnothavetheterritorialjurisdictiontoentertaintheComplaint.Inviewoftheforegoingdiscussionontheissueabove,the place where the concerned cheque had been dishonoured, which in the case in hand was Tangi,Orissa,theAppealisallowedwiththedirectionthattheComplaintbereturnedtotheComplainantforfurtheractioninaccordancewithlaw.

Crl.AppealNos.1594,1595&1601to1603of2014[ArisingoutofS.L.P.(Crl.)Nos.2112of2009and2117of2009;3762of2012;3943of2012;3944of2012]

23. ThefactsbeingidenticaltoCriminalAppealarisingoutofS.L.P.(Crl.)No.2077of2009,theseAppeals stand dismissed.

Crl.AppealNos.1596-1600of2014[ArisingoutofS.L.P.(Crl.)Nos.1308-1312of2009]

24. The Appellant-complainant herein has its Registered Office in Delhi from where theRespondents-accusedarealsocarryingontheirbusiness.Thechequesinquestionwereissuedby the Respondent No.2-accused drawn on Indian Overseas Bank, Connaught Place, NewDelhi.

However, the same were presented and dishonoured at Nagpur, Maharashtra where theComplainant states italsohasanoffice.There isnoclarificationwhy thechequeshadnotbeen presented in Delhiwhere the Complainant had its RegisteredOffice, a choicewhichwethink iscapriciousandperfidious, intendedtocauseharassment.UponchequeshavingbeendishonouredbytheconcernedbankatDelhi,fiveComplaintswerefiledbeforeJudicialMagistrateFirstClass,NagpurwhoheardtheComplaints,andalsorecordedtheevidenceledbyboththeparties.However,theJMFC,NagpuracquittedtheRespondentNo.2-accusedonthegroundofnothavingterritorialjurisdiction.OnappealsbeingfiledbeforetheHighCourtofBombay,thejudgmentoftheJMFC,NagpurwaspartlysetasidesofarastheacquittaloftheRespondent No.2-accused was concerned and it was ordered that the Complaints be returned for filingbefore theproperCourt. In viewof the conclusion arrived at byus above, theseAppeals are also dismissed.

Crl.AppealNo.1604of2014[ArisingoutofS.L.P.(Crl.)No.59of2013]

25. ThechequeinquestionwasdrawnbytheRespondent-accusedonStateBankofTravancore,Delhi. However, it was presented by the Appellant- complainant at Aurangabad. A Complaint was filedbeforeJMFC,Aurangabadwhoissuedprocess.Respondent-accusedfiledanapplicationunderSection203ofCrPCseekingdismissaloftheComplaint.Theapplicationwasdismissed


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onthepredicationthatonceprocesshadbeeninitiated,theComplaintcouldnotbedismissed.OnawritpetitionbeingfiledbeforetheHighCourtofBombay,AurangabadBench,theorderof issuance of process was set aside and the Complaint was ordered to be returned for being presentedbeforeacompetentcourthavingjurisdictiontoentertainthesame.TheHighCourthadcorrectlynoted that theobjectionpertained to the territorial jurisdictionof the JMFC,Aurangabad,afeaturewhichhadnotbeencomprehensivelygraspedbythelatter.TheHighCourtnotedthattheRegisteredOfficeoftheComplainantwasatChitegaon,TehsilPaithan,DistrictAurangabadwhereastheAccusedwastransactingbusinessfromDelhi.TheHighCourtpithilyunderscoredthatinparagraph4oftheComplaintithadbeenspecificallycontendedthat credit facility was given to the Accused in Delhi, where the Complainant-company also had itsbranchoffice.ThestatutorynoticehadalsoemanatedfromAurangabad,andithadbeendemandedthatpaymentshouldbemadeinthatcitywithinthespecifiedtime.ItwasalsotheComplainantscasethattheInvoice,incaseofdisputes,restrictedjurisdictiontoAurangabadcourts; that intimation of the bouncing of the cheques was received at Aurangabad. It ishowevernecessarytounderscorethattheAccusedhadclarifiedthatthesubjecttransactiontookplaceatDelhiwherethegoodsweresuppliedandtheoffendingchequewashandedoverto the Complainant. It appears that a Civil Suit in respect of the recovery of the cheque amount hasalreadybeenfiledinDelhi.Wemayimmediatelyreiteratethattheprinciplespertainingtothecauseofactionasperceivedincivillawarenotrelevantincriminalprosecution.WhilsttheclauserestrictingjurisdictiontocourtsatAurangabadmayhaveefficacyforcivilproceedings,providedanypartofthecauseofactionhadariseninAurangabad,ithasnobearingonthesitusincriminalprosecutions.SinceaCivilSuitispending,wehastentoclarifythatwearenotexpressinganyopiniononthequestionofwhetherthecourtsatDelhienjoyjurisdictiontotrythe 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 aswell as the covenant restrictingjurisdictiontoAurangabadasthesearerelevantonlyforcivildisputes.However,theimpugnedjudgmentisbeyondinterferenceinasmuchasitconcludesthattheJMFC,AurangabadhasnojurisdictionovertheoffencedescribedintheComplaint.TheAppealisaccordinglydismissed.

[T.S. THAKUR] [VIKRAMAJIT SEN]

[C. NAGAPPAN]

New Delhi August 1, 2014.


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REPORTABLE IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.2287 OF 2009

DASHRATH RUPSINGH RATHOD Appellant Versus

STATE OF MAHARASHTRA & ANR. RespondentsWITH

CRIMINAL APPEAL NO. 1593 OF 2014 (Arising out of S.L.P. (Crl.) No.2077 of 2009)



CRIMINAL APPEAL NO. 1596-1600 OF 2014 (Arising out of S.L.P. (Crl.) Nos.1308-1312 of 2009)




AND


JUDGMENT

T.S. Thakur, J.

1. IhavehadtheadvantageofgoingthroughthedraftorderproposedbymyesteemedbrotherVikramajitSen,J. Ientirelyagreewiththeconclusionswhichmyeruditebrotherhasdrawnbased on a remarkably articulate process of reasoning that illumines the draft judgmentauthoredbyhim.Iwouldallthesameliketoaddafewlinesofmyownnotbecausetheorderasproposedleavesanyroughedgestobeironedoutbutonlybecausethequestionoflawthatarisesfordeterminationisnotonlysubstantialbutofconsiderableinterestandimportanceforthecommercialworld.Thefactthattheviewbeingtakenbyusstrikesadiscordantnoteoncertainaspectswhichhave for longbeenconsideredsettledbyearlierdecisionsof thisCourtbeingonly an additional reason for themodest addition that I propose tomake.OfthesedecisionsBhaskaranscasestandsoutastheearliestinwhichthisCourtexaminedthevexedquestionofterritorialjurisdictionoftheCourtstotryoffencespunishableunderSection138oftheNegotiableInstrumentsAct,1881(hereinaftercalledNIAct).Bhaskaranscasewasheardbyatwo-judgeBenchofthisCourtwhotooktheviewthatthe jurisdictiontotryanoffenceunderSection138couldnotbedeterminedonlybyreferencetotheplacewherethechequewasdishonoured.Thatisbecausedishonourofthechequewasnotbyitselfanoffence


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underSection138ofTheNegotiableInstrumentsAct,1881,observedtheCourt.Theoffenceiscompleteonlywhenthedrawerfailstopaythechequeamountwithintheperiodoffifteendaysstipulatedunderclause(c)oftheprovisotoSection138oftheAct.HavingsaidthattheCourtrecognisedthedifficultyinfixingaplacewheresuchfailurecouldbesaidtohavetakenplace. 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 theCourtturnedtoSections178and179oftheCr.P.C.toholdthatsinceanoffenceunderSection138canbecompletedonlywiththeconcatenationoffiveactsthatconstitutedthecomponentsof theoffenceanyCourtwithinwhose jurisdictionanyoneof thoseactswascommittedwouldhavethejurisdictiontotrytheoffence.TheCourtheld:TheoffenceunderSection138oftheActcanbecompletedonlywiththeconcatenationofanumberofacts.Thefollowingaretheactswhicharecomponentsofthesaidoffence:(1)drawingofthecheque,(2)presentationofthechequetothebank,(3)returningthechequeunpaidbythedraweebank,(4)givingnoticeinwritingtothedrawerofthechequedemandingpaymentofthechequeamount,(5)failureofthedrawertomakepaymentwithin15daysofthereceiptofthenotice.

It is not necessary that all the above five acts should have been perpetrated at the samelocality.Itispossiblethateachofthosefiveactscouldbedoneatfivedifferentlocalities.ButaconcatenationofalltheabovefiveisasinequanonforthecompletionoftheoffenceunderSection138oftheCode.

InthiscontextareferencetoSection178(d)oftheCodeisuseful.Itisextractedbelow:

178. (a)-(c) * * *

(d) where the offence consists of several acts done in different local areas, it may beenquiredintoortriedbyacourthavingjurisdictionoveranyofsuchlocalareas.Thusitisclear,ifthefivedifferentactsweredoneinfivedifferentlocalitiesanyoneofthecourtsexercising jurisdiction inoneof thefive localareas canbecome theplaceof trial fortheoffenceunderSection138oftheAct.Inotherwords,thecomplainantcanchooseanyoneofthosecourtshavingjurisdictionoveranyoneofthelocalareaswithintheterritoriallimitsofwhichanyoneofthosefiveactswasdone.AstheamplitudestandssowidenedandsoexpansiveitisanidleexercisetoraisejurisdictionalquestionregardingtheoffenceunderSection138oftheAct.

2. Bhaskaran held the field for two years. The first blow to the view taken by this Court inBhaskaranscasewasdealtbyathree-JudgeBenchdecision inShri IsharAlloySteelsLtd.v.JayaswalsNecoLtd.(2001)3SCC609.Thequestionthataroseinthatcasewaswhetherthelimitationof sixmonths forpresentationofacheque forencashmentwasapplicableviz-a-vizpresentationtothebankofthepayeeorthatofthedrawer.HighCourtsinthiscountryhadexpressedconflictingopinionsonthesubject.ThisCourtresolvedthecleavageinthosepronouncementsbyholdingthatthechequeoughttobepresentedtothedraweebankforitsdishonourtoprovideabasisforprosecutionunderSection138.TheCourtobserved:Theuseofthewordsabankandthebankinthesectionareanindicatoroftheintentionofthelegislature.Thebankreferredtoinproviso(a)totheprovisotoSection138oftheActwouldmeanthedraweebankonwhichthechequeisdrawnandnotallbankswherethechequeispresentedforcollectionincludingthebankofthepayee,inwhosefavourthechequeisissued.It,however,doesnotmeanthatthechequeisalwaystobepresentedtothedrawersbank


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onwhichthechequeisissued.However,acombinedreadingofSections3,72and138oftheActwouldclearlyshowthatthe lawmandatesthechequetobepresentedatthebankonwhichitisdrawnifthedraweristobeheldcriminallyliable.Suchpresentationisnecessarilytobemadewithinsixmonthsatthebankonwhichthechequeisdrawn,whetherpresentedpersonallyorthroughanotherbank,namely,thecollectingbankofthepayee.

3. IsharAlloyscase(supra)didnotdealwiththequestionofjurisdictionoftheCourtsnorwasBhaskarannoticedbytheCourtwhileholdingthatthepresentationofthechequeoughttobewithinsixmonthstothedraweebank.Butthatdoesnot,inourview,materiallyaffectthelogic underlying the pronouncement, which pronouncement coming as it is from a bench of coordinatejurisdictionbindsus.WhenlogicallyextendedtothequestionofjurisdictionoftheCourttotakecognizance,wefinditdifficulttoappreciatehowapayeeofthechequecanbypresentationofthechequetohisownbankconfer jurisdictionupontheCourtwheresuchbankissituate.IfpresentationreferredtoinSection138meanspresentationtothedraweebank,thereisnogainsayingthatdishonourwouldbelocalisedandconfinedtotheplacewheresuchbankissituated.Thequestionisnotwhetherornotthepayeecandeposithischequeinanybankofhischoiceatanyplace.ThequestioniswhetherbysuchdepositcanthepayeeconferjurisdictiononaCourtofhischoice?Ouranswerisinthenegative.Thepayeemayandindeedcanpresent thechequetoanybank forcollection fromthedraweebank,butsuchpresentationwillbevalidonlyifthedraweebankreceivesthechequeforpaymentwithintheperiod of six months from the date of issue. Dishonour of the cheque would be localised at the placewherethedraweebankissituated.Presentationofthechequeatanyplace,wehavenomannerofdoubt,cannotconferjurisdictionupontheCourtwithinwhoseterritoriallimitssuchpresentationmayhavetakenplace.

4. ThencameHarmanElectronics(P)Ltd.v.NationalPanasonicIndia(P)Ltd.(2009)1SCC720.ThatwasacasewherethecomplaintunderSection138wasfiledinaDelhiCourt,onlybecausethestatutorynoticerequiredtobeissuedundertheprovisotoSection138wasissuedfromDelhi.IfBhaskaranwascorrectlydecided,HarmanshouldnothaveinterferedwiththeexerciseofjurisdictionbytheDelhiCourtforissueofanoticewasintermsofBhaskaran,oneofthefactorsthatclothedtheCourtinDelhitotakecognizanceandtrythecase.Harmandidnotdoso.InHarmanscasethisCourt,emphasizedthreedistinctaspects.Firstly,itsaidthattherewasaworldofdifferencebetweenissueofanotice,ontheonehand,andreceipt,thereof,ontheother.Issueofnoticedidnotgiverisetoacauseofactionwhilereceiptdid,declaredtheCourt.

5. Secondly,theCourtheldthatthemainprovisionofSection138statedwhatwouldconstituteanoffence.Theprovisoappendedtheretosimply imposedcertainfurtherconditionswhichmustbefulfilledfortakingcognizanceoftheoffence.Thefollowingpassagedealswithboththese aspects:

It isonething tosay thatsendingofanotice isoneof the ingredients formaintaining thecomplaintbut it isanotherthingtosaythatdishonourofachequeby itselfconstitutesanoffence.ForthepurposeofprovingitscasethattheaccusedhadcommittedanoffenceunderSection138of theNegotiable InstrumentsAct, the ingredients thereof are required tobeproved.Whatwouldconstituteanoffenceisstatedinthemainprovision.Theprovisoappendedthereto,however,imposescertainfurtherconditionswhicharerequiredtobefulfilledbeforecognizanceoftheoffencecanbetaken.Iftheingredientsforconstitutionoftheoffencelaiddowninprovisos(a),(b)and(c)appendedtoSection138oftheNegotiableInstrumentsAct


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are intended to be applied in favour of the accused, there cannot be any doubt that receipt [pic]ofanoticewouldultimatelygiverisetothecauseofactionforfilingacomplaint.Asitisonlyonreceiptofthenoticethattheaccusedathisownperilmayrefusetopaytheamount.Clauses(b)and(c)oftheprovisotoSection138thereforemustbereadtogether.Issuanceofnoticewouldnotbyitselfgiverisetoacauseofactionbutcommunicationofthenoticewould.

6. Thirdly,theCourtheldthatifpresentationofthechequeorissueofnoticewastoconstituteagoodreasonforvestingcourtswithjurisdictiontotryoffencesunderSection138,itwouldleadtoharassmentofthedrawerofthechequestherebycallingfortheneedtostrikeabalancebetweentherightsofthepartiestothetransaction.TheCourtsaid:

Wecannot,asthingsstandtoday,beobliviousofthefactthatabankinginstitutionholdingseveral cheques signed by the same borrower can not only present the cheque for its encashmentatfourdifferentplacesbutalsomayservenoticesfromfourdifferentplacessoas to enable it to file four complaint cases at four different places. This only causes graveharassmenttotheaccused.Itis,therefore,necessaryinacaseofthisnaturetostrikeabalancebetween the right of the complainant and the right of an accused vis-à-vis the provisions of the Code of Criminal Procedure.

7. Bhaskaranwas,inthewakeoftheabove,considerablydilutedandthelogicbehindvestingof jurisdiction based on the place from where the notice was issued questioned. Evenpresentationofthechequeasareasonforassumptionofjurisdictiontotakecognizancewasdoubtedforaunilateralactofthecomplainant/payeeofthechequecouldwithoutanyfurtheror supporting reason confer jurisdiction on a Courtwithinwhose territorial limits nothingexceptthepresentationofthechequehadhappened.

8. ThreerecentdecisionsneedbementionedatthisstagewhichhavefollowedBhaskaranandattemptedtoreconciletheratioofthatcasewiththesubsequentdecisionsinIsharAlloySteelsandHarmanElectronics.InNishantAggarwalv.KailashKumarSharma(2013)10SCC72thisCourtwasonceagaindealingwithacasewherethecomplainthadbeenfiledinCourtatBhiwaniinHaryanawithinwhoseterritorialjurisdictionthecomplainanthadpresentedthechequeforencashment,althoughthechequewasdrawnonabankatGauhatiinAssam.RelyingupontheviewtakeninBhaskaranthisCourtheldthattheBhiwaniCourthadjurisdictiontodealwiththematter.Whilesayingso,theCourttriedtodistinguishthethree-JudgeBenchdecisioninIsharAlloySteels(supra)andthatrenderedinHarmanElectronicscase(supra)toholdthattheratioofthosedecisionsdidnotdilutetheprinciplestatedinBhaskarancase.ThatexercisewasrepeatedbythisCourtinFILIndustriesLtd.v.ImtiyazAhmadBhat(2014)2SCC266andinEscortsLtd.v.RamaMukherjee(2014)2SCC255whichtoofollowedBhaskaranandheldthatcomplaintunderSection138NegotiableInstrumentActcouldbeinstitutedatanyoneofthefiveplacesreferredtoinBhaskaranscase.

9. Wehave,withutmostrespecttotheJudgescomprisingtheBenchthatheardtheabovecases,founditdifficulttofollowsuitandsubscribetotheviewstatedinBhasakaran.Thereasonsarenotfartooseekandmaybestatedrightaway.

10. Section138isapenalprovisionthatprescribesimprisonmentuptotwoyearsandfineuptotwice the cheque amount. It must, therefore, be interpreted strictly, for it is one of the acceptedrulesofinterpretationthatinapenalstatute,theCourtswouldhesitatetoascribeameaning,broaderthanwhatthephrasewouldordinarilybear.Section138isintwoparts.


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Theenactingpartoftheprovisionmakesitabundantlyclearthatwhatconstitutesanoffencepunishablewith imprisonmentand/orfineisthedishonourofachequefor insufficiencyoffundsetc. in theaccountmaintainedbythedrawerwithabank fordischargeofadebtorother liability whether in full or part. The language used in the provision is unambiguous and theingredientsoftheoffenceclearlydiscernibleviz.(a)Chequeisdrawnbytheaccusedonanaccountmaintainedbyhimwithabanker.(b)Thechequeamountisindischargeofadebtorliabilityand(c)Thechequeisreturnedunpaidforinsufficiencyoffundsorthattheamountexceedsthearrangementmadewiththebank.Butfortheprovisothatcomprisesthesecondpartoftheprovision,anydishonourfallingwithinthefourcornersoftheenactingprovisionwouldbepunishablewithoutmuchado. Theproviso, however, drawsanexception to thegenerality of the enacting part of the provision, by stipulating two steps that ought to betakenbythecomplainantholderofthechequebeforethefailureofthedrawergivestotheformerthecauseofactiontofileacomplaintandthecompetentCourttotakecognizanceoftheoffence.Thesestepsaredistinctfromtheingredientsoftheoffencewhichtheenactingprovisioncreatesandmakespunishable.ItfollowsthatanoffencewithinthecontemplationofSection138iscompletewiththedishonourofthechequebuttakingcognizanceofthesamebyanyCourtisforbiddensolongasthecomplainantdoesnothavethecauseofactiontofileacomplaintintermsofclause(c)oftheprovisoreadwithSection142whichrunsasunder:Section142:

Cognizanceofoffences.NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973(2of1974)

(a) nocourtshalltakecognizanceofanyoffencepunishableundersection138exceptuponacomplaint, inwriting,madebythepayeeor,asthecasemaybe,theholder induecourseofthecheque;

(b) such complaint ismadewithinonemonthof thedateonwhich the causeof actionarisesunderclause(c)oftheprovisotosection138:[ProvidedthatthecognizanceofacomplaintmaybetakenbytheCourtaftertheprescribedperiod,ifthecomplainantsatisfiestheCourtthathehadsufficientcausefornotmakingacomplaintwithinsuchperiod.]

(c) nocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshalltryanyoffencepunishableundersection138.

11. The following would constitute cause of action referred to in sub clause (b) above: Thecomplainant has presented the cheque for payment within the period of six months from the date of the issue thereof.

The complainant has demanded the payment of the cheque amount from the drawer by issuing awrittennoticewithinthirtydaysofreceiptofinformationbyhimfromthebankregardingthedishonour.Thedrawerhasfailedtopaythechequeamountwithinfifteendaysofthereceiptofthenotice.

12. Aproperunderstandingoftheschemeunderlyingtheprovisionwouldthusmakeitabundantlyclear that while the offence is complete upon dishonour, prosecution for such offence isdeferredtillthetimethecauseofactionforsuchprosecutionaccruestothecomplainant.Theprovisointhatsense,simplypostponestheactualprosecutionoftheoffendertillsuchtime


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he 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 itjustandpropertogivetothedrawerofadishonouredchequeanopportunitytopayuptheamount,beforepermittinghisprosecutionnomattertheoffenceiscomplete,themomentthecheque 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 makesamendsbymakingpaymentwithinthetimestipulatedoncethedishonourisnotifiedtohim.PaymentofthechequeamountwithinthestipulatedperiodwillinsuchcasesdiffusetheelementofcriminalitythatSection138attributestodishonourbywayofalegalfictionimplicitintheuseofthewordsshallbedeemedtohavecommittedanoffence.Thedrawerwouldbysuch payment stand absolved by the penal consequences of dishonour. This scheme may be uniquetoSection138NIAct,butthereishardlyanydoubtthattheParliamentiscompetenttolegislatesotoprovideforsituationswhereachequeisdishonouredevenwithoutanycriminalintentiononthepartofthedrawer.

13. TheschemeofSection138thusnotonlysavesthehonestdrawerbutgivesachancetoeventhedishonestonestomakeamendsandescapeprosecution.Compliancewiththeprovisionis, inthatview,amandatoryrequirement.(SeeC.C.AlaviHajiv.PalapettyMuhammedandAnother (2007) 6 SCC 555).

14. Harmaninthatviewcorrectlyheldthatwhatwouldconstituteanoffenceisstatedinthemainprovision.Theprovisoappendedtheretohoweverimposescertainfurtherconditionswhicharerequiredtobefulfilledbeforecognizanceoftheoffencecanbetaken.IftheParliamentintendedtomaketheconditionsstipulatedintheproviso,alsoasingredientsoftheoffence,theprovisionwouldhavereaddifferently.Itwouldthenhavespecificallyaddedthewordsandthedrawerhasdespitereceiptofanoticedemandingthepaymentoftheamount,failedtopaythesamewithinaperiodoffifteendaysfromthedateofsuchdemandmadeinwritingbyanotice.That,however,isnothowtheenactingprovisionofSection138reads.Thelegislaturehas, it isobvious,madea cleardistinctionbetweenwhatwould constituteanoffenceandwhatwould give to the complainant the cause of action to file a complaint for the courtcompetenttotakecognizance.Thataprovisoisanexceptiontothegeneralruleiswellsettled.Aprovisoisaddedtoanenactmenttoqualifyorcreateanexceptiontowhatiscontainedintheenactment.Itdoesnotbyitselfstateageneralrule.Itsimplyqualifiesthegeneralityofthemainenactment,aportionwhichbutfortheprovisowouldfallwithinthemainenactment.

15. TheP.RamanathaAiyar,LawLexicon,2ndEdition,Wadhwa&Co.atpage1552definesprovisoas follows:

Thewordprovisoisusedfrequentlytodenotetheclausethefirstwordsofwhichareprovidedthatinsertedindeedsandinstrumentsgenerally.Andcontainingaconditionorstipulationontheperformanceornon-performanceofwhich,asthecasemaybe.Theeffectofaproceedingclause or of the deed depends.

AClauseinsertedinalegalorformaldocument,makingsomecondition,stipulation,exceptionor limitationor upon theobservanceofwhich the operationor validity of the instrumentdepends[S.105,IndianEvidenceAct].

Aprovisoisgenerallyintendedtorestraintheenactingclauseandtoexceptsomethingwhichwouldhaveotherwisebeenwithinitorinsomemeasuretomodifytheenactingclause...


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16. ToquoteCraiesonStatuteLaw,7thEdn.,Sweet&Maxwellatpage220IftheprincipalobjectoftheActcanbeaccomplishedandstandundertherestrictionofthesavingclauseorproviso,the same is not to be held void for repugnancy.

17. OneoftheearliestjudgmentsonthesubjectisathreeJudgeBenchdecisioninKedarnathJuteManufacturingCo.v.CommercialTaxOfficer,CalcuttaandOrs.AIR1966SC12.TheCourtwasinthatcaseexaminingtheeffectofaprovisowhichimposedaconditionongettingexemptionfrom tax and observed:

...Thesubstantiveclausegivestheexemptionandtheprovisoqualifiesthesubstantiveclause.Ineffecttheprovisosaysthatpartoftheturnoverofthesellingdealercoveredbythetermsofsub-cl.(ii)willbeexemptedprovidedadeclarationinthefromprescribedisfurnished.Toputitinotherwords,adealercannotgettheexemptionunlesshefurnishesthedeclarationintheprescribed form.

Itiswellsettledthat“theeffectofanexceptingorqualifyingproviso,accordingtotheordinaryrulesofconstruction,istoexceptoutoftheprecedingportionoftheenactment,ortoqualifysomethingenacted therein,whichbut for theprovisowouldbewithin it” : see“CraiesonStatuteLaw”,6thEdn.,p.217.

18. Alsopertinentisafour-JudgeBenchdecisionofthisCourtinDwarkaPrasadv.DwarkaDasSaraf(1976) 1 SCC 128 where this Court was examining whether a cinema theatre equipped with projectorsandotherfittingsreadytobelaunchedasentertainmenthousewascoveredunderthedefinitionofaccommodationasdefinedinSection2(1)(d)ofUttarPradesh(Temporary)ControlofRentandEvictionAct,1947.Theprovisoprovidedforsomeexceptionforfactoriesandbusinesscarriedinabuilding.Itwasheldthatsometimesdraftsmenincludeprovisobywayofovercautiontoremoveanydoubtsandaccommodationwouldincludethiscinemahall:18.Aprovisomustbelimitedtothesubject-matteroftheenactingclause.Itisasettledruleofconstructionthataprovisomustprimafaciebereadandconsideredinrelationtotheprincipalmattertowhichitisaproviso.

It is not a separate or independent enactment. ‘Words are dependent on the principalenactingwords,towhichtheyaretackedasaproviso.Theycannotbereadasdivorcedfromtheircontext’1912A.C.544.Iftheruleofconstructionisthatprimafacieaprovisoshouldbelimitedinitsoperationtothesubject-matteroftheenactingclause,thestandwehavetakenissound.Toexpandtheenactingclause,inflatedbytheproviso,sinsagainstthefundamentalruleofconstructionthataprovisomustbeconsideredinrelationtotheprincipalmattertowhich it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to readthewholesection,inclusiveoftheproviso,insuchmannerthattheymutuallythrowlightoneachotherandresultinaharmoniousconstruction.

Thepropercourseistoapplythebroadgeneralruleofconstructionwhichisthatasectionorenactmentmustbeconstruedasawhole,eachportionthrowinglightifneedbeontherest.Thetrueprincipleundoubtedlyis,thatthesoundinterpretationandmeaningofthestatute,onaviewoftheenactingclause,savingclause,andproviso,takenandconstruedtogetheristoprevail.(MaxwellonInterpretationofStatutes,10thEdn.p.162)(emphasissupplied)

19. In SreenivasaGeneral Traders&Ors. v. State of Andhra Pradesh&Ors. (1983) 4 SCC 353anotherthree-JudgebenchofthisCourtexaminedtheroleofaprovisowhile interpreting


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Rule74(1)oftheAndhraPradesh(AgriculturalProduce&Livestock)MarketsRules,1969.Thenormalfunctionofaprovisoistoexceptsomethingoutofthemainenactingpartortoqualifysomething enacted therein which but for the proviso would be within the purview of the enactment.ProvisotoRule74(1)isaddedtoqualifyorcreateanexception.

20. ReferencemayalsobemadetoTribhovandasHaribhaiTamboliv.GujaratRevenueTribunalandothers(1991)3SCC442whereinthisCourtclearlyheldthatwhenthelanguageofthemainenactment is clear, theproviso canhavenoeffecton the interpretationof themainclause.7. It is a cardinal ruleof interpretation thataproviso toaparticularprovisionofastatute only embraces the field, which is covered by themain provision. It carves out anexceptiontothemainprovisiontowhichithasbeenenactedbytheprovisoandtonoother.Theproperfunctionofaprovisoistoexceptanddealwithacasewhichwouldotherwisefallwithinthegenerallanguageofthemainenactment,anditseffectistoconfinetothatcase.Wherethelanguageofthemainenactmentisexplicitandunambiguous,theprovisocanhaveno repercussionon the interpretationof themainenactment, soas toexclude from it,byimplicationwhatclearlyfallswithinitsexpressterms.Thescopeoftheproviso,therefore,istocarveoutanexceptiontothemainenactmentanditexcludessomethingwhichotherwisewouldhavebeenwithintherule.Ithastooperateinthesamefieldandifthelanguageofthemain enactment is clear, the proviso cannot be torn apart from the main enactment nor can itbeusedtonullifybyimplicationwhattheenactmentclearlysaysnorsetatnaughttherealobjectofthemainenactment,unlessthewordsoftheprovisoaresuchthatitisitsnecessaryeffect.(emphasissupplied)

21. Thesamelineofreasoningwasfollowed inA.N.SehgalandOrs.v.RajeRamSheoramandOrs.1992Supp(1)SCC304whileinterpretingaprovisointheHaryanaServiceofEngineersRules, 1960 where the Court held that the proviso to Rule 5(2)(a) cannot be applied to confer thebenefitofregularappointmentoneverypromoteeappointedinexcessof50%quota.ThisCourtharmoniouslyreadthemainprovisionandtheprovisoandgaveeffecttotherule.

22. InKeralaStateHousingBoardandOrs.v.RamapriyaHotels(P)Ltd.andOrs.1994(5)SCC672thisCourtwasexaminingwhethertheperiodof4yearsenvisagedinprovisotoSection16(i)underKeralaLandAcquisitionAct,1961couldbereckonedfromdatewhenagreementwasexecutedor fromdateofpublicationofnotificationunderSection3(1)oftheActaftertheagreementwas executed.After relyingon TribhovandasHaribhai Tamboli (supra) andA.N.Sehgal(supra)thisCourtheldthattheprovisoshouldbeharmoniouslyreadwiththesection.ToquoteTribhovandas(supra)asfollowedinthisjudgment:

InTribhovandasHaribhaiTamboliv.GujaratRevenueTribunalthisCourtheldthattheproperfunction of a proviso is to except and dealwith a casewhichwould otherwise fallwithinthe general language of themain enactment and its effect is to be confined to that case.Wherethelanguageofthemainenactmentisexplicitandunambiguous,theprovisocanhaveno repercussionon the interpretationof themainenactment, soas toexclude from it,byimplicationwhatclearlyfallswithinitsexpressterms.Thescopeoftheproviso,therefore,istocarveoutanexceptiontothemainenactmentanditexcludessomethingwhichotherwisewouldhavebeenwithintherule.Ithastooperateinthesamefieldandifthelanguageofthemain enactment is clear, the proviso cannot be torn apart from the main enactment nor can itbeusedtonullifybyimplicationwhattheenactmentclearlysays,norsetatnaughttherealobjectofthemainenactment,unlessthewordsoftheprovisoaresuchthatitisitsnecessary


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effect.InthatcaseitwasheldthatbyreadingtheprovisoconsistentwiththeprovisionsofSection88oftheBombayTenancyandAgriculturalAct,theobjectofthemainprovisionwassustained. (emphasis supplied)

23. InKushSahgal&Ors.v.M.C.Mitter&Ors.(2000)4SCC526alandladymadeanapplicationforevictionofthetenantonthebasisthatshewantedtheplaceforbusinesspurposeswhichwasnotallowedaspertheprovisotoSection21(2)U.P.UrbanBuildings(RegulationofLetting,RentandEviction)Act,1972.TheCourtexamined the roleandpurportof theprovisoandobserved :

This we say because the normal function of a proviso is to except something out of theenactment or to qualify something enacted therein which but for the proviso would be within thepurviewoftheenactment.(See:KedarnathJuteManufacturingCo.Ltd.v.CommercialTaxOffice[1965]3SCR626).Sincethenaturalpresumptionisthatbutfortheproviso,theenactingpartofthesectionwouldhaveincludedthesubject-matteroftheproviso,theenactingparthastobegivensuchaconstructionwhichwouldmaketheexceptionscarvedoutbytheprovisonecessaryandaconstructionwhichwouldmaketheexceptionsunnecessaryandredundantshouldbeavoided(See:JusticeG.P.Singh’s“PrinciplesofStatutoryInterpretation”SeventhEdition1999,p-163).ThisprinciplehasbeendeducedfromthedecisionofthePrivyCouncilinGovt.oftheProvinceofBombayv.HormusjiManekji(AIR1947PC200)asalsothedecisionofthisCourtinDurgaDuttSharmav.NavaratnaPharmaceuticalLaboratories(AIR1965SC980).

24. TothesameeffectarethedecisionsofthisCourtinAliM.K.andOrs.v.StateofKeralaandOrs.(2003)11SCC632,NagarPalika(supra)andinSteelAuthorityofIndiaLtd.v.S.U.T.N.ISangam&Ors.(2009)16SCC1.

25. Inconclusion,wemayrefertoMaxwell,InterpretationofStatutesEdn.12,1969,onP.189-190whichstatesthatitisageneralfindingandpracticethatinconsistenciescanbeavoidedbyapplyingthegeneralrulethatthewordsofaprovisoarenottobetakenabsolutelyintheirstrictliteralsense[Rv.Dimbdin(1910)]butthataprovisoisofnecessity...limitedinitsoperationtotheambitofthesectionwhichitqualifies[LloydsandScottishFinanceLtdv.ModernCarsandCanavans(Kingston)Ltd.(1966)].And,sofarasthatsectionitselfisconcerned,theprovisoreceivesarestrictedconstruction:wherethesectionconferspowers,itwouldbecontrarytotheordinaryoperationofaprovisotogiveitaneffectwhichwouldcutdownthosepowersbeyondwhatcompliancewiththeprovisorendersnecessary.[ReTabriskyv.BoardofTrade(1947)]

26. Bhaskaran,inourview,readstheprovisoasprescribingtheingredientsoftheoffenceinsteadof treating it as an exception to the generality of the enacting part by stipulating furtherconditionsbeforeacompetentCourtmaytakecognizanceofthesame.SeeninthelightoftheprovisionsofSection142oftheAct,theprovisosimplydefersprosecutionoftheoffendertilltheconditionsprescribedthereinaresatisfied.BhaskarandoesnotviewthematterinthatperspectivewhileHarman(supra)does.Wefindourselvesinrespectfulagreementwiththeview in Harmans case on this aspect.

27. InBhaskaran,thisCourtresolvedtheconfusionastotheplaceofcommissionoftheoffencebyrelyinguponSections177to179oftheCr.P.C.Buttheconfusionarisesonlyifoneweretotreattheprovisoasstipulatingtheingredientsoftheoffence.Onceit isheldthattheconditionsprecedentfortakingcognizancearenottheingredientsconstitutingtheoffenceofdishonour


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of the cheque, there is no room for any such confusion or vagueness about the place where theoffenceiscommitted.ApplyingthegeneralrulerecognisedunderSection177oftheCr.P.C.thatalloffencesarelocal,theplacewherethedishonouroccursistheplaceforcommissionoftheoffencevestingtheCourtexercisingterritorialjurisdictionovertheareawiththepowertotrytheoffences.Havingsaidthatwemusthastentoadd,thatincaseswheretheoffenceunderSection138isoutoftheoffencescommittedinasingletransactionwithinthemeaningofSection220(1)oftheCr.P.C.thentheoffendermaybechargedwithandtriedatonetrialforeverysuchoffenceandanysuchinquiryortrialmaybeconductedbyanyCourtcompetenttoenquireintoortryanyoftheoffencesasprovidedbySection184oftheCode.Soalso,ifanoffencepunishableunderSection138oftheActiscommittedasapartofsingletransactionwiththeoffenceofcheatinganddishonestlyinducingdeliveryofpropertythenintermsofSection182(1)readwithSections184and220oftheCr.P.C.suchoffencemaybetriedeitherattheplacewheretheinducementtookplaceorwherethechequeformingpartofthesametransactionwasdishonouredorattheplacewherethepropertywhichthepersoncheatedwas dishonestly induced to deliver or at the place where the accused received such property. Theseprovisionsmakeitclearthatinthecommercialworldapartywhoischeatedandinducedtodeliverpropertyonthebasisofachequewhichisdishonouredhastheremedyofinstitutingprosecutionnotonlyattheplacewherethechequewasdishonouredwhichattimesmaybeaplaceotherthantheplacewheretheinducementorcheatingtakesplacebutalsoattheplacewheretheoffenceofcheatingwascommitted.TothatextenttheprovisionsofChapterXIIIoftheCodewillbearrelevanceandhelpdeterminetheplacewheretheoffencescanbetried.

28. WemayatthisstagerefertotwootherdecisionsofthisCourtwhichbearsomerelevancetothequestionthatfallsforourdetermination. InSadanandanBhadranv.MadhavanSunilKumar (1998)6SCC514a two-judgebenchof thisCourtheld thatclause (a)ofprovisotoSection138doesnotdisentitlethepayeetosuccessivelypresentchequeforpaymentduringtheperiodofitsvalidity.Oneachsuchpresentationofthechequeanditsdishonourafreshright-andnotcauseofactionaccruesinhisfavour.Hemay,therefore,withouttakingpre-emptoryactioninexerciseofsuchrightunderclause(b)ofSection138goonpresentingthechequesolongasthechequeisvalidforpayment.Butoncehegivesanoticeunderclause(b)ofSection138heforfeitssuchrightforincaseoffailureofthedrawertopaythemoneywithinthestipulatedtimehewouldbeliablefortheoffenceandthecauseofactionforprosecutionwillarise.ThecorrectnessofthisviewwasquestionedinMSRLeathersv.S.Palaniappan&Anr.(2013)1SCC177beforeabenchcomprisingofMarkandeyKatjuandB.SudershanReddy,J.J.whoreferredtheissuetoalargerbench.ThelargerbenchinMSRLeathersscase(supra)overruled Sadanandan Bhadran (supra) holding that there was no reason why a fresh cause ofactionwithinthemeaningofSection142(b)readwithsection138shouldnotbedeemedtohavearisentothecomplainanteverytimethechequewaspresentedbutdishonouredandthedrawerofchequefailedtopaytheamountwithinthestipulatedperiodintermsofprovisoto138.ThisCourtsaid:Intheresult,weoverrulethedecisioninSadanandanBhadran’scase(supra)andholdthatprosecutionbaseduponsecondorsuccessivedishonourofthechequeisalsopermissiblesolongasthesamesatisfiestherequirementsstipulatedintheprovisotoSection138of theNegotiable InstrumentsAct.Thereference isansweredaccordingly.Theappeals shall now be listed before the regular Bench for hearing and disposal in light of the observationsmadeabove.


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29. WhatisimportantisthatinSadanandanBhadran(supra)thisCourthad,onacarefulanalysisof Section 138, held that an offence is created when a cheque is returned by the bankunpaid for any reasonsmentioned therein, although the proviso to Section 138 stipulatesthreeconditionsfortheapplicabilityofthesection.It isonlyuponsatisfactionofthethreeconditions that prosecution canbe launched for anoffenceunder Section138. This Courtobserved:Onacarefulanalysisoftheabovesection,itisseenthatitsmainpartcreatesanoffencewhen a cheque is returnedby thebankunpaid for anyof the reasonsmentionedtherein.Thesignificantfact,however,isthattheprovisolaysdownthreeconditionsprecedenttotheapplicabilityoftheabovesectionand,forthatmatter,creationofsuchoffenceandtheconditionsare:(i)thechequeshouldhavebeenpresentedtothebankwithinsixmonthsofitsissueorwithintheperiodofitsvalidity,whicheverisearlier;(ii)thepayeeshouldhavemadeademandforpaymentbyregisterednoticeafterthechequeisreturnedunpaid;and(iii)thatthedrawershouldhavefailedtopaytheamountwithin15daysofthereceiptofthenotice.Itisonlywhenallthe[pic]abovethreeconditionsaresatisfiedthataprosecutioncanbelaunchedfortheoffenceunderSection138.Sofarasthefirstconditionisconcerned,clause(a)oftheprovisotoSection138doesnotputanyembargouponthepayeetosuccessivelypresentadishonoured cheque during the period of its validity. This apart, in the course of business transactionsitisnotuncommonforachequebeingreturnedduetoinsufficientfundsorsimilarsuchreasonsandbeingpresentedagainbythepayeeaftersometime,onhisownvolitionorattherequestofthedrawer,inexpectationthatitwouldbeencashed.Needlesstosay,theprimaryinterestofthepayeeistogethismoneyandnotprosecutionofthedrawer,recoursetowhich,normally,istakenoutofcompulsionandnotchoice.Fortheabovereasonsitmustbeheldthatachequecanbepresentedanynumberoftimesduringtheperiodofitsvalidity.Indeed that is also the consistent view of all the High Courts except that of the Division Bench oftheKeralaHighCourtinKumaresan1whichstruckadiscordantnotewiththeobservationthatforthefirstdishonourofthecheque,onlyaprosecutioncanbelaunchedfortherecannotbemorethanonecauseofactionforprosecution.(emphasissupplied)

30. MSRLeathers(supra)alsolookedatSection138andheldthatacomplaintcouldbefiledunderSection138aftercauseofactiontodosohadaccruedintermsofclause(c)oftheprovisotoSection138whichhappensnosoonerthedrawerofthechequefailstomakethepaymentof thechequeamounttothepayeewithinfifteendays intermsofclause(b) toprovisotoSection138.MSRLeatherswasnotsomuchconcernedwiththequestionwhethertheprovisostipulated ingredients of the offenceor conditions precedent for filing a complaint. Itwasprimarilyconcernedwiththequestionwhetherthesecondorsuccessivedishonourfollowedbystatutorynoticesandfailureof thedrawertomakepaymentcouldbemadeabasis forlaunchingprosecutionagainstthedrawer.Thatquestion,asnoticedabove,wasansweredintheaffirmativeholding that successivecauseofactioncouldarise if thereweresuccessivedishonoursfollowedbystatutorynoticesasrequiredunderthelawandsuccessivefailureofthedrawertomakethepayment.MSRLeatherscannot,therefore,betakenasanauthorityfordeterminingwhethertheprovisostipulatesconditionsprecedentforlaunchingaprosecutionoringredientsoftheoffencepunishableunderSection138.SadanandanBhadranmayhavebeenoverruledtotheextentitheldthatsuccessivecausesofactioncannotbemadeabasisforprosecution,butthedistinctionbetweentheingredientoftheoffence,ontheonehand,andconditionsprecedentforlaunchingprosecution,ontheother,drawninthesaidjudgementhasnotbeenfaulted.ThatdistinctionpermeatesthepronouncementsofthisCourtinSadanandan


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BhadranandMSRLeathers.HighCourtofKeralahas,inourview,correctlyinterpretedSection138oftheActinKairaliMarketing&ProcessingCooperativeSocietyLtd.V.PullengadiServiceCooperativeLtd.(2007)1KLT287whenitsaid:

It isevidentfromthelanguageofSection138oftheN.I.ActthatthedrawerisdeemedtohavecommittedtheoffencewhenachequeissuedbyhimofthevarietycontemplatedunderSection138isdishonouredforthereasonscontemplatedintheSection.Thecrucialwordsare“isreturnedbythebankunpaid”.Whenthathappens,suchpersonshallbedeemedtohavecommittedtheoffence.WiththedeeminginthebodyofSection138,theoffenceisalreadycommittedordeemedtohavebeencommitted.AcarefulreadingofthebodyofSection138cannot leadtoanyotherconclusion.ProvisotoSection138accordingtomeonly insistsoncertainconditionsprecedentwhichhavetobesatisfiedifthepersonwhoisdeemedtohavecommittedtheoffenceweretobeprosecutedsuccessfully.Theoffenceisalreadycommittedwhen the cheque is returnedby thebank.But the causeof action forprosecutionwill beavailabletothecomplainantnotwhentheoffenceiscommittedbutonlyaftertheconditionsprecedentenumeratedintheprovisoaresatisfied.Aftertheoffenceiscommitted,onlyiftheoptiongiventoavoidtheprosecutionundertheprovisoisnotavailedofbytheoffender,cantheaggrievedpersongetarightorcourseofactiontoprosecutetheoffender.Theoffenceisalreadydeemedanddeclaredbuttheoffendercanbeprosecutedonlywhentherequirementsoftheprovisoaresatisfied.Thecauseofactionforprosecutionwillariseonlywhentheperiodstipulatedintheprovisoelapseswithoutpayment.Ingredientsoftheoffencehavegottobedistinguishedfromtheconditionsprecedentforvalidinitiationofprosecution.Thestipulationsintheprovisomustalsobeprovedcertainlybeforetheoffendercanbesuccessfullyprosecuted.But in the strict sense they arenot ingredients of thedeemedoffenceunder thebodyofSection138oftheN.I.Act,thoughthesaidstipulations;mustalsobeprovedtoensureandclaimconviction.ItisinthissensethatitissaidthattheprovisodoesnotmakeorunmaketheoffenceunderSection138oftheN.I.Act.ThatisalreadydonebythebodyoftheSections.Thisdisputeastowhetherthestipulationsoftheprovisoareconditionsprecedentoringredients/componentsoftheoffenceunderSection138oftheN.I.Actmayonlybeacademicinmostcases.Undoubtedlytheingredientsstrictosensuasalsotheconditionsprecedentwillhavetobeestablishedsatisfactorilyinallcases.Ofcourseinanappropriatecaseitmayhavetobeconsideredwhethersubstantialcomplianceoftheconditionsprecedentcanbereckonedtobesufficienttojustifyaconviction.Bethatasitmay,thedistinctionbetweentheingredientsandconditionsprecedentiscertainlyrealandexistent.Thatdistinctioniscertainlyvitalwhileascertainingcomplicityofan indicteewhofaces indictment inaprosecutionunderSection138withtheaidofSection141oftheN.I.Act.Thatishowthequestionassumessuchcrucialsignificancehere.

31. Tosumup:

(i) Anoffenceunder Section138of theNegotiable InstrumentsAct, 1881 is committedno sooner a cheque drawn by the accused on an account being maintained by him in a bankfordischargeofdebt/liabilityisreturnedunpaidforinsufficiencyoffundsorforthereasonthattheamountexceedsthearrangementmadewiththebank.

(ii) CognizanceofanysuchoffenceishoweverforbiddenunderSection142oftheActexceptuponacomplaintinwritingmadebythepayeeorholderofthechequeinduecourse


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withinaperiodofonemonthfromthedatethecauseofactionaccruestosuchpayeeorholderunderclause(c)ofprovisotoSection138.

(iii) The cause of action to file a complaint accrues to a complainant/payee/holder of acheque in due course if

(a) thedishonouredchequeispresentedtothedraweebankwithinaperiodofsixmonths from the date of its issue.

(b) If the complainant has demanded payment of cheque amount within thirty days of receiptof informationbyhim from thebank regarding thedishonourof thecheque and

(c) Ifthedrawerhasfailedtopaythechequeamountwithinfifteendaysofreceiptofsuchnotice.

(iv) ThefactsconstitutingcauseofactiondonotconstitutetheingredientsoftheoffenceunderSection138oftheAct.

(v) TheprovisotoSection138simplypostpones/defersinstitutionofcriminalproceedingsandtakingofcognizancebytheCourttillsuchtimecauseofactionintermsofclause(c)of proviso accrues to the complainant.

(vi) Oncethecauseofactionaccruestothecomplainant,thejurisdictionoftheCourttotrythe case will be determined by reference to the place where the cheque is dishonoured.

(vii) ThegeneralrulestipulatedunderSection177ofCr.P.CappliestocasesunderSection138oftheNegotiableInstrumentsAct.Prosecutioninsuchcasescan,therefore,belaunchedagainst the drawer of the cheque only before the Court within whose jurisdictionthedishonourtakesplaceexcept insituationswheretheoffenceofdishonourof thechequepunishableunderSection138iscommittedalongwithotheroffencesinasingletransactionwithinthemeaningofSection220(1)readwithSection184oftheCodeofCriminalProcedureoriscoveredbytheprovisionsofSection182(1)readwithSections184and220thereof.

32. Beforepartingwiththisaspectofthematter,weneedtoremindourselvesthatanavalancheofcasesinvolvingdishonourofchequeshascomeupontheMagistracyofthiscountry.ThenumberofsuchcasesasofOctober2008wereestimatedtobemorethan38lakhsbytheLawCommissionofIndiainits213thReport.TheresultisthatcasesinvolvingdishonourofchequeisinallmajorcitieschokingthecriminaljusticesystemattheMagistrateslevel.Courtsin the four metropolitan cities and other commercially important centres are particularlyburdenedasthefilingofsuchcasesisinverylargenumbers.MorethanfivelakhsuchcaseswerependingincriminalcourtsinDelhialoneasof1stJune2008.ThepositionisnodifferentinothercitieswherelargenumberofcomplaintsarefiledunderS.138notnecessarilybecausetheoffenceiscommittedinsuchcitiesbutbecausemultinationalandothercompaniesandcommercialentitiesandagencieschoosetheseplacesforfilingthecomplaintsfornobetterreasonthanthefactthatnoticesdemandingpaymentofchequeamountswereissuedfromsuchcitiesorthechequesweredepositedforcollectionintheirbanksinthosecities.RelianceisoftenplacedonBhaskaranscasetojustifyinstitutionofsuchcasesfarawayfromwherethetransactionformingbasisofthedishonouredchequehadtakenplace.Itisnotuncommontofindcomplaintsfiledindifferentjurisdictionforchequesdishonouredinthesametransaction


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andatthesameplace.Thisprocedureismoreoftenthannotintendedtousesuchoppressivelitigationtoachievethecollateralpurposeofextractingmoneyfromtheaccusedbydenyinghimafairopportunitytocontesttheclaimbydragginghimtoadistantplace.Bhaskaranscasecouldneverhaveintendedtogivetothecomplainant/payeeofthechequesuchanadvantage.Evenso,experiencehasshownthattheviewtakeninBhaskaranscasepermittingprosecutionatanyoneofthefivedifferentplacesindicatedthereinhasfailednotonlytomeettheapprovalof otherbenchesdealingwith thequestionbut also resulted inhardship, harassment andinconveniencetotheaccusedpersons.Whileanyoneissuingachequeisandoughttobemaderesponsibleifthesameisdishonoureddespitecompliancewiththeprovisionsstipulatedintheproviso,theCourtoughttoavoidaninterpretationthatcanbeusedasaninstrumentofoppressionbyoneoftheparties.Theunilateralactsofacomplainantinpresentingachequeataplaceofhischoiceorissuinganoticeforpaymentofthedishonouredamountcannotinourviewarmthecomplainantwiththepowertochoosetheplaceoftrial.Sufficeittosay,thatnotonlyonthePrinciplesofInterpretationofStatutesbutalsothepotentialmischiefwhichanerroneous interpretationcancause intermsof injusticeandharassmenttotheaccusedtheviewtaken in theBhaskaranscaseneeds tobe revisitedaswehavedone in foregoingparagraphs.

33. Withtheaboveobservations,IconcurwiththeorderproposedbymynobleBrother,VikramajitSen,J.

qqq

k. bhaskaran versus sankaran vaidhyan balan and anr.

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k. BHASkARAN vERSUS SANkARAN vAIdHyAN BALAN ANd ANR.(1999) 7 Supreme Court Cases 510


Before Hon’ble Mr. Justice K.T. Thomas, Hon’ble Mr. Justice M.B. Shah

K. Bhaskaran ... Petitioner Versus

Sankaran Vaidhyan Balan And Anr. ... Respondent

Appeal (crl.) 1015 of 1999Decided on 29 September, 1999

General Clauses Act, 1897 – S. 27 – Notice to drawer returned as “unclaimed” – invites a liberal interpretation favouring the person who has the statutory obligation to give notice, because he is presumed to be the loser in the transaction and the provision itself has been made in his interest – Thrust in the clause is on the need to “make a demand” – Strict interpretation would give a handle to a trickster cheque drawer – Further held, the where sender has despatched the notice by post with correct address written thereon – Such actually served and that he was not responsible for the non-service.

JUDGMENT

JUDGMENT1999Supp(3)SCR271TheJudgmentoftheCourtwasdeliveredbyTHOMAS,J.Leavegranted.

This is a case where the complainant and the accused are siblings, being sons of the same parents.Theyarefightingoveradishonouredcheque.Bothmusthaveexperiencedaroller-coasterrideinthiscriminallitigation.Fortunefavouredtheaccusedinthefirstroundashescoredanacquittalfromthe Trial Court, but it favoured the complainant in the next round when the High Court reversed the acquittalandconvictedhisbrotheroftheoffenceunderSection138oftheNegotiableInstrumentsAct (for short `the Act’). Perhaps the accusedwould have remained quiet by then, but for thesentenceofimprisonment(sixmonths)whichhehasnowtoundergobesidesafineofrupeesonelakhwhichtheHighCourthasimposedonhim.Sothistimeitistheturnoftheaccusedtomoveandhencehehasfiledthisappeal.

Wethoughtthatthetwobrotherswouldsettletheirdisputesoverthischequecaseandwegrantedsufficientopportunitytoboth.Butthebattleisdestinedtocontinueastheexpectedsettlementeludeslikeamirage.Wedonotknowatwhosefaulttheparleyswentaway.Wecannotbutproceedwith the case and so we heard the counsel for both.

Before dealing with the two main points on which the counsel argued in this Court we may set out the factsinbrief.Therespondent(whowillhereinafterbereferredtoasthe`complainant’)presentedachequewhichbearsthesignatureoftheappellant(hereinafterreferredtoasthe`accused’)beforetheSyndicateBank’sbranchofficeatKayamkulam(Kerala)on29.1.1993forencashment.Thechequewasforanamountofrupeesonelakh.Thebankbouncedthechequeduetoinsufficiencyoffundsintheaccountoftheaccused.Complainantthenissuedanoticebyregisteredpostintheaddress


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of theaccusedon2.2.1993.Thenoticewas returned to thecomplainanton15.2.1993with thefollowing endorsements inscribed thereon:

3.2.1993 Addresseeabsent



6.2.1993 Intimationservedonaddressee’shouse

Asthepostalarticleremainedunclaimedtill15.2.1993itwasreturnedtothesenderwithafurtherendorsement`unclaimed.’Acomplaintwasfiledbythecomplainanton4.3.1993beforetheCourtoftheJudicialMagistrate,1stClass,Adoor(inPathanamthittaDistrictinKerala)againsttheaccusedunderSection138oftheAct.Amongthecontentionswhichtheaccusedraised,onewasregardingtheterritorialjurisdictionofthesaidmagistrateCourttotrythecaseasthechequewasdishonouredat the SyndicateBank’s Branchofficeat Kayam-kulam (it is situate in another district in Kerala).Accused denied having issued the cheque although he owned his signature therein. According to theaccused,hisbrother(thecomplainant)hadsnatchedawaysomesignedblankcheque”leavesfromhispossessionandutilisedonesuchchequeleafforthepresentcase.Healsocontendedthathedidnotreceiveanynoticefromthecomplainantregardingdishonourofthechequeandhencenocauseofactionwouldhaveariseninthiscase.Thecomplaint,accordingtohim,isnotmaintainableon that score also.

ThecomplainantexaminedhimselfasPW-1andtwomorewitnessesfortheprosecution.(PW-2istheManagerofSyndicateBank’sbranchofficeandPW-3Devarajanwhoclaimedtohaveseentheaccusedissuingthechequeathisshop).AccusedexaminedhiswifeasDW-1.

The trial magistrate repelled the defence contention that the cheque leaf was stolen by thecomplainant.ItwasheldthatthechequeWasactuallyissuedbytheaccusedtothecomplainant.

However,themagistrateupheldthecontentionthathisCourthadnoterritorialjurisdictiontotrythecaseasthechequewasdishonouredbytheBranchofficeof thebanksituated inadifferentdistrict.Themagistratefurtherheldthatastheaccuseddidnotreceivethenoticenocauseofactionhasarisen.AsacorollarythereoftheMagistrateacquittedtheaccused.

TheHighCourtofKerala,ontheappealpreferredbythecomplainant,setasidetheorderofacquittalandconvictedhimandsentencedhimasaforesaid.LearnedsinglejudgeoftheHighCourtacceptedtheversionofthecomplainantthatchequewasissuedattheshopofPW-3whichissituatedwithinthe territorial limitsof theTrialCourt’s jurisdiction.Regardingnotice, learnedsingle judgereliedonthedecisionofaDivisionBenchofthesameHighCourtKunjanPanickerv.Christudas,(1997)2KeralaLawTimes539whereinitwasheldthat“refusalandevenfailuretoclaimincircumstancesasherewilltantamounttoserviceofnotice.”

Asthesignatureinthechequeisadmittedtobethatoftheaccused,thepresumptionenvisagedinSection118oftheActcanlegallybeinferredthatthechequewasmadeordrawnforconsiderationonthedatewhichthechequebears.Section139oftheActenjoinsontheCourttopresumethatthe holder of the cheque received it for the discharge of any debt or liability. The burden was on theaccusedtorebuttheaforesaidpresumption.TheTrialCourtwasnotpersuadedtorelyontheinterestedtestimonyofDW-1torebutthepresumption.ThesaidfindingwasupheldbytheHighCourt.Itisnotnowopentotheaccusedtocontenddifferentlyonthataspect.


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Learned counsel for the appellant first contended that the Trial Court has no jurisdiction to trythiscaseandhencetheHighCourtshouldnothaveconvertedtheacquittalintoconvictiononthestrengthoftheevidencecollectedinsuchatrial.Ofcourse,theTrialCourthadupheldthepleaoftheaccusedthatithadnojurisdictiontotrythecase.

We fail to comprehendas tohow theTrial Court couldhave found so regarding the jurisdictionquestion.UnderSection177oftheCode“everyoffenceshallordinarilybeinquiredintoandtriedinacourtwithinwhosejurisdictionitwascommitted.”Thelocalitywherethebank(whichdishonouredthecheque)issituatedcannotberegardedasthesolecriteriatodeterminetheplaceofoffence.ItmustberememberedthatoffenceunderSection138wouldnotbecompletedwiththedishonourofthecheque.Itattainscompletiononlywiththefailureofthedrawerofthechequetopaythechequeamountwithintheexpiryof15daysmentionedinclause(c)oftheprovisotoSection138oftheAct.Itisnormallydifficulttofixupaparticularlocalityastheplaceoffailuretopaytheamountcoveredby the cheque. A place, for that purpose, would depend upon a variety of factors. It can either be at the place where the drawer resides or at the place where the payee resides or at the place where eitherofthemcarriesonbusiness.Hence,thedifficultytofixupanyparticularlocalityastheplaceofoccurrencefortheoffenceunderSection138oftheAct.

Evenotherwisetherulethateveryoffenceshallbetriedbyacourtwithinwhosejurisdictionitwascommittedisnotanunexceptionalorunchangeableprinciple.Section177itselfhasbeenframedbythelegislaturethoughtfullybyusingtheprecautionaryword`ordinarily’toindicatethattheruleisnotinvariableinallcases.Section178oftheCodesuggeststhatifthereisuncertaintyastowhere,amongdifferentlocalities,theoffencewouldhavebeencommittedthetrialcanbehadinaCourthaving’ jurisdictionoveranyof those localities. Theprovisionhas furtherwidened the scopebystatingthatincasewheretheoffencewascommittedpartlyinonelocalareaandpartlyinanotherlocalareatheCourtineitherofthelocalitiescanexercisejurisdictiontotrythecase.Furtheragain,Section179oftheCodestretchesitsscopetoastillwiderhorizon.Itreadsthus:

“179.Offence triablewhere act is doneor consequence ensues. -When an act is an offence byreasonofanythingwhichhasbeendoneandofaconsequencewhichhasensued,theoffencemaybeinquiredintoortriedbyaCourtwithinwhoselocaljurisdictionsuchthinghasbeendoneorsuchconsequencehasensued.”

Theaboveprovisions in theCodeshouldhavebeenborne inmindwhenthequestionregardingterritorialjurisdictionoftheCourtstotrytheoffencewassoughttobedetermined.

TheoffenceunderSection138oftheActcanbecompletedonlywiththeconcatenationofanumberofacts.Followingaretheactswhicharecomponentsofthesaidoffence:(1)Drawingofthecheque,(2)Presentationofthechequetothebank,(3)Returningthechequeunpaidbythedraweebank,(4)Givingnoticeinwritingtothedrawerofthechequedemandingpaymentofthechequeamount,(5)failureofthedrawertomakepaymentwithin15daysofthereceiptofthenotice.

Itisnotnecessarythatalltheabovefiveactsshouldhavebeenperpetratedatthesamelocality.Itispossiblethateachofthosefiveactscouldbedoneat5differentlocalities.ButconcatenationofalltheabovefiveisasinequanonforthecompletionoftheoffenceunderSection138oftheCode.InthiscontextareferencetoSection178(d)oftheCodeisuseful.Itisextractedbelow:

“Wheretheoffenceconsistsofseveralactsdoneindifferentlocalareas,itmaybeinquiredintoortriedbyaCourthavingjurisdictionoveranyofsuchlocalareas.”


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Thusitisclear,ifthefivedifferentactsweredoneinfivedifferentlocalitiesanyoneofthecourtsexercising jurisdiction inoneofthefive localareascanbecometheplaceoftrial fortheoffenceunderSection138oftheAct.Inotherwords,thecomplainantcanchooseanyoneofthosecourtshavingjurisdictionoveranyoneofthelocalareaswithintheterritoriallimitsofwhichanyoneofthosefiveactswasdone.AstheamplitudestandssowidenedandsoexpansiveitisanidleexercisetoraisejurisdictionalquestionregardingtheoffenceunderSection138oftheAct.

Themoreimportantpointtobedecidedinthiscaseiswhetherthecauseofactionhasarisenatallasthenoticesentbythecomplainanttotheaccusedwasreturnedas`unclaimed.’Theconditionspertainingtothenoticetobegiventothedrawer,havebeenformulatedandincorporatedinclauses(b)and(c)oftheprovisotoSection138(1)oftheAct.Thesaidclausesareextractedbelow:

“(b) Thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerofthecheque,withinfifteendaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

(c) thedrawerofsuchchequefails tomakethepaymentofthesaidamountofmoneytothepayeeorasthecasemaybe,totheholderinduecourseofthechequewithinfifteendaysofthereceiptofthesaidnotice.”

Onthepartofthepayeehehastomakeademandby`givinganotice’inwriting.Ifthatwastheonlyrequirementtocompletetheoffenceonthefailureofthedrawertopaythechequeamountwithin15daysfromthedateofsuch`giving’thetravailsoftheprosecutionwouldhavebeenverymuchlessened. But the legislature says that failure on the part of the drawer to pay the amount should be within15days ofthereceipt’ofthesaidnotice.Itis,therefore,clearthat givingnotice’inthecontextisnotthesameasreceiptofnotice.Givingisaprocessofwhichreceiptistheaccomplishment.Itisforthepayeetoperformtheformerprocessbysendingthenoticetothedrawerinthecorrectaddress.

InBlack’sLawDictionary,`givingofnotice’isdistinguishedfrom`receivingofthenotice.’(videpage621)“Apersonnotifiesorgivesnoticetoanotherbytakingsuchstepsasmaybereasonablyrequiredtoinformtheotherintheordinarycourse,whetherornotsuchotheractuallycomestoknowofit.”Aperson`receives’anoticewhenitisdulydeliveredtohimorattheplaceofhisbusiness.

Ifastrict interpretation isgiventhatthedrawershouldhaveactuallyreceivedthenoticefortheperiodof15daystostartrunningnomatterthatthepayeesentthenoticeonthecorrectaddress,atricksterchequedrawerwouldgetthepremiumtoavoidreceivingthenoticebydifferentstrategiesandhecouldescape-fromthelegalconsequencesofSection138oftheAct.ItmustbeborneinmindthatCourtshouldnotadoptininterpretationwhichhelpsadishonestevaderandclipsanhonestpayeeasthatwoulddefeattheverylegislativemeasure.

InMaxwell’s`InterpretationofStatues’thelearnedauthorhasemphasizedthat“provisionsrelatingtogivingofnoticeoftenreceiveliberalinterpretation.”(videpage99ofthe12thedn.)Thecontextenvisaged in Section 138 of the Act invites a liberal interpretation for the person who has thestatutoryobligationtogivenoticebecauseheispresumedtobetheloserinthetransactionanditis for his interest the very provision is made by the legislature. The words in clause (b) of the proviso toSection138oftheActshowthatpayeehasthestatutoryobligationto`makeademand’bygivingnotice.Thethrustintheclauseisontheneedto`makea-demand’.Itisonlythemodeformaking


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suchdemandwhichthelegislaturehasprescribed.Apayeecansendthenoticefordoinghispartforgivingthenotice.Onceitisdespatchedhispartisoverandthenextdependsonwhatthesendeedoes.

Itiswellsettledthatanoticerefusedtobeacceptedbytheaddresseecanbepresumedtohavebeenservedonhim,[videHarcharanSinghv.Smt.ShivraniandOrs.,[1981]2SCC535,andJagdishSinghv.NatthuSingh,[1992]1SCC647.]Herethenoticeisreturnedasunclaimedandnotasrefused.Willtherebeanysignificantdifferentbetweenthetwosofarasthepresumptionofserviceisconcerned?InthisconnectionareferencetoSection27oftheGeneralClausesActwillbeuseful.

TheSectionreadsthus:

“27.Meaningofservicebypost.-WhereanycentralActorRegulationmadeafterthecommencementofthisActauthorizesorrequiresanydocumenttobeservedbypost,whethertheexpression serve’oreitheroftheexpressions`give’or`send’oranyotherexpressionisused,then,unlessadifferentintentionappears,theserviceshallbedeemedtobeeffectedbyproperlyaddressing,pre-payingandpostingbyregisteredpost,alettercontainingthedocument,andunlessthecontraryisproved,tohavebeeneffectedatthetimeatwhichtheletterwouldbedeliveredintheordinarycourseofpost”

NodoubtSection138oftheActdoesnotrequirethatthenoticeshouldbegivenonlyby`post’.

NonethelesstheprincipleincorporatedinSection27(quotedabove)canprofitablybeimportedinacasewherethesenderhasdespatchedthenoticebypostwiththecorrectaddresswrittenonit.Then it can be deemed to have been served on the sendee unless he proves that it was not really servedandthathewasnotresponsibleforsuchnon-service.Anyotherinterpretationcanleadtoaverytenuouspositionasthedrawerofthechequewhoisliabletopaytheamountwouldresorttothestrategyofsubterfugebysuccessfullyavoidingthenotice.

Thus,whenanoticeisreturnedbythesendeeasunclaimedsuchdatewouldbethecommencingdate inreckoningtheperiodof15dayscontemplated inclause(c) totheprovisoofSection138oftheAct.Ofcoursesuchreckoningwouldbewithoutprejudicetotherightofthedrawerofthechequetoshowthathehadnoknowledgethatthenoticewasbroughttohisaddress.Inthepresentcasetheaccuseddidnotevenattempttodischargetheburdentorebuttheaforesaidpresumption.

TheHighCourtis,therefore,rightinholdingtheaccusedguiltyoftheoffenceunderSection138oftheAct.Stillthereisonemoreaspect,thoughneithersidehasarguedaboutitbeforeus,whichrequireselucidation.Wewilldealwiththataspectnow.

TheHighCourthasimposedasentenceofimprisonmentfor6monthsandafineofRs.onelakhontheaccused.Section138oftheActprovidespunishmentwith“imprisonmentforatermwhichmayextendtooneyear,orwithfinewhichmayextendtotwicetheamountofchequeorwithboth”.ButthecourtcannotobviatethejurisdictionallimitprescribedinSection386oftheCode.ThoughthesaidprovisionconferspowerontheCourtofappealtoreverseanorderofacquittalandfindtheaccused guilty and pass sentence on him according to law, even the High Court when it is the Court ofappealhastoconformtothesecondprovisototheSection386oftheCode.Itreadsthus:

“ProvidedfurtherthattheAppellateCourtshallnotinflictgreaterpunishmentfortheoffencewhichin itsopiniontheaccusedhascommitted,thanmighthavebeeninflictedforthatoffencebytheCourtpassingtheorderorsentenceunderappeal”.


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InthiscontextareferencetoSection29(2)oftheCodeisnecessaryasitcontainsalimitationforthemagistrateoffirstclassinthematterofimposingfineasasentenceorasapartofthesentence.

Section29(2)readsthus:

“ThecourtofaMagistrateofthefirstclassmaypassasentenceofimprisonmentforatermnotexceedingthreeyears,oroffinenotexceedingfivethousandrupees,orofboth.”

ThetrialinthiscasewasheldbeforeaJudicialMagistrateoffirstclasswhocouldnothaveimposedafineexceedingRs.5,000besidesimprisonment.TheHighCourtwhileconvictingtheaccusedinthesamecasecouldnotimposeasentenceoffineexceedingthesaidlimit.Itistrue,ifajudicialmagistrateoffirstclassweretoordercompensationtobepaidtothecomplainantfromoutofthefinerealisedthecomplainantwillbetheloserwhenthechequeamountexceededthesaidlimit.InsuchacaseacomplainantwouldgetonlythemaximumamountofRupeesfivethousand.

However, themagistrate in suchcasescanalleviate thegrievanceof thecomplainantbymakingreporttoSection357(3)oftheCode.ItiswelltorememberthatthisCourthasemphasizedtheneedformakingliberaluseofthatprovision,(HariKishanandStateofHaryanav.SukhbirSinghandOrs.,AIR(1988)SC2127).Nolimitismentionedinthesub-sectionandtherefore,amagistratecanawardanysumascompensation.OfcoursewhilefixingthequantumofsuchcompensationtheMagistratehastoconsiderwhatwouldbethereasonableamountofcompensationpayabletothecomplainant.Thus,evenifthetrialwasbeforeacourtofmagistrateoffirstclassinrespectofachequewhichcoversanamountexceedingRs.5,000theCourthaspowertoawardcompensationtobepaidtothe complainant.

ThequestionofsentenceandawardofcompensationmustbeconsideredbytheTrialCourt.Wedeemitfeasiblethatthemagistrateshallheartheprosecutionandtheaccusedonthoseaspects.Ofcourse,ifthecomplainantandaccusedsettletheirdisputesregardingthischeque,inthemeanwhile,thatfactcancertainlybetakenintoconsiderationindeterminingtheextentorquantumofsentence.

We,therefore,upholdtheconvictionoftheoffenceunderSection138oftheAct,butwesetasidethesentenceawardedbytheHighCourtforenablingthetrialcourttopassordersonthequestionofsentenceandthecompensation,ifanypayable.

qqq

madhya pradesh state legal services authority versus prateek jain and anr.

| 71 |

MAdHyA pRAdESH STATE LEGAL SERvICES AUTHORITy vERSUS pRATEEk JAIN ANd ANR


Before Hon’ble Mr. Justice J. Chelameswar, Hon’ble Mr. Justice A.K. Sikri

Madhya Pradesh State Legal Services Authority ...Appellant (S) Versus

Prateek Jain And Anr ...Respondent (S)Decided on 10 September, 2014

CIVIL APPEAL NO. 8614 OF 2014(arising out of Special Leave Petition (Civil) No. 38519 of 2012)

Guidelines laid down by Supreme Court in Damodar S. Prabhu, (2010) 5 SCC 663 in relation to – Adherence to, in cases which are resolved/settled in Lok Adalats – Scope of deviation therefrom – Whether it would frustrate the object of Lok Adalats if imposition of costs as per the Guidelines contained in Damodar S. Prabhu case is insisted upon. However, as observed in Damodar S. Prabhu case itself, the court concerned can deviate from the said Guidelines in a particular case, recording special/specific reasons in writing therefor – Thus, in those matters where case has to be decided/settled in Lok Adalat, if court finds that it is a result of positive attitude of the parties, then in such appropriate cases, court can reduce the costs indicated in Damodar S. Prabhu case by imposing minimal costs or even walve the same. Damodar S. Prabhu case – Legal Aid and ADR.

JUDGMENT

A.K. SIKRI, J.

Leavegranted.

MadhyaPradeshStateLegalServicesAuthority,theappellantherein,hasfiledtheinstantappealchallengingtheproprietyofordersdatedFebruary27,2012passedbytheHighCourtofMadhyaPradeshinWritPetitionNo.1519of2012,whichwasfiledbyoneRakeshKumarJain(respondentNo.2herein)impleadingPrateekJain(respondentNo.1herein)asthesolerespondent.EssentiallytheliswasbetweenrespondentNos.1and2.RespondentNo.1hadfiledacomplaintunderSection138oftheNegotiableInstrumentsAct,1881(hereinafterreferredtoasthe‘Act’)againstrespondentNo.2.MatterreachedbeforetheAdditionalSessionsJudgeintheformofcriminalappeal.Duringthependencyofthesaidappeal,thematterwassettledbetweentheparties.Ontheirapplication,thematterwasreferredtoMegaLokAdalat.However,theconcernedPresidingOfficerintheLokAdalatdidnotgivehisimprimaturtothesaidsettlementintheabsenceofdepositmadeasperthedirectiongiveninthejudgmentofthisCourtinDamodarS.Prabhuv.SayedBabalalH.,(2010)5SCC663.AgainsttheorderofAdditionalSessionsJudge,awritpetitionwasfiledbyrespondentNo.2but


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thesameisalsodismissedbytheHighCourt,acceptingtheviewtakenbytheAdditionalSessionsJudge.

Fromtheaforesaid,itwouldbeclearthatthematterinissuewasbetweenrespondentNos.1and2.

The appellant comes in picture only because the parties had approached theMega Lok Adalatorganised by the appellant. The reason for filing the present appeal is the apprehension of theappellantthatifthesettlementarrivedatintheLokAdalatsarenotacceptedbytheCourts,oneoftheessentialfunctionanddutyofLegalServicesAuthoritycastuponbytheLegalServicesAuthoritiesAct,1987(hereinafterreferredtoasthe‘1987Act’)wouldbegreatlyprejudicedand,therefore,itisnecessarytostraightenthelawonthesubjectmatter.Acknowledgingthesignificanceoftheissueinvolved,permissionwasgrantedtotheappellanttofilethespecialleavepetitionandnoticewasissuedinthespecialleavepetitiononDecember06,2012.OperationoftheimpugnedorderoftheHigh Court was also stayed in the following words:

Inthemeantime,havingregardtotheobjectstobeachievedbytheprovisionsoftheLegalServicesAuthorities Act, 1987, the operation of the order passed by the Lok Adalat-I, Gwalior,MadhyaPradesh, on 30th July, 2011, and that of theHigh Court impugned in this petition, shall remainstayed.Noticehasbeendulyserveduponboththerespondents,butneitherofthemhaveputinappearance.Bethatasitmay,sinceweareconcernedwiththelargerquestionraisedinthisappeal,wehardthelearnedcounselfortheappellantintheabsenceofanyrepresentationonthepartofthe respondents.

Withtheaforesaidgistofthecontroversyinvolved,wenowproceedtotakenoteoftherelevantfacts in some detail.

As pointed out above, there was some dispute between respondent Nos. 1 and 2. Nature of thedispute isnot reflected fromthepapersfiledby theappellant.However, since itpertains toacomplaintfiledunderSection138of theAct,onecansafely infer that thecomplaintwasfiledbecauseofdishonourofthecheque.ItalsoappearsfromtherecordthatthiscomplaintwasfiledbyrespondentNo.1againstrespondentNo.2andhadresulted insomeconviction/adverseorderagainst respondentNo.2, thoughexactnatureof theorderspassedby the learnedMagistrate isnoton record.Be thatas itmay, respondentNo.2hadfiled theappealagainst theorderof theMagistrateintheCourtofAdditionalSessionsJudge.

Duringthependencyofthisappeal,ajointapplicationwasfiledbyboththepartiesstatingthatacompromisehadtakenplacebetweenthemwithmutualconsentandtheyhavereestablishedtheirrelationshipandwantedtomaintainthesamecordialrelationinfutureaswell.OnthatbasisitwasstatedintheapplicationthatrespondentNo.1hereindidnotwanttoproceedagainstrespondentNo.2andwantedtheappealtobedisposedofonthebasisofcompromisebyfilingacompromisedeedintheappeal.ThisapplicationwasfiledunderSection147oftheActwhichpermitscompoundingofsuchoffences.Wewouldliketopointoutatthisstagethatonwhattermsthepartieshadsettledthematterisnotonrecordascompromisedeedhasnotbeenfiled.

When thisapplicationcameup forhearingon July30,2011before the learnedappellateCourt,counselforboththepartiesrequestedthatthematterbeforwardedtotheMegaLokAdalatwhichwas being organized on the same date. On this application, following orderwas passed by thelearnedAdditionalSessionsJudge:

30.07.2011


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xx xx xx

Anapplicationundersection147Negotiation(sic)InstrumentActfiledonbehalfofbothsidesforcompromiseandrequestismadetodirectthematterbetakenupbeforetheLokAdalatorganizedtoday’s date.

Inviewofthefactsmentionedintheapplication,forabrogationofthecompromiseapplication,thematterbetakenuptodaybeforetheconcernedbenchofLok-Adalat.WhenthematterwasplacedbeforetheLokAdalat,thePresidingOfficerrefusedtoactuponthesettlementrecordedbetweenthepartiesonthegroundthattheaccusedpersonhadnotdeposited15%amountofthechequeforcompoundingofmatterattheappealstageasperTheGuidelinescontainedinthejudgmentofthis Court in the case of Damodar S. Prabhu (supra). The exact order passed is reproduced below: 30.07.2011ThematterproducedbeforethebenchofLokAdalatNo.1.

AppellantalongwithShriN.S.Yadav,Advocate.

Non-ApplicantalongwithShriMohanBabuMangalAdvocate.

TheinstantmatterisrelatedtotheappealfiledagainsttheconvictionorderpassedunderSection138ofNegotiation(sic)ofInstrumentAct,wherein,bothparties,beingappearedalongwiththeircounsels,whilefilingapplicationforcompromise,haverequestedtomitigatethematter.But,thedefendant/accusedhasnotdeposited15percentamountofchequeformitigationofmatterattheappealstageaccordingtotheguidelinesofjudgmentdated3.5.2010passedinCriminalAppealNo.963/2010inthematterofDamodarM.PrabhuVs.SayyadBabaLalpassedbytheHon’bleSupremeCourt,intheDistrictLegalServicesAuthority,duetosaidreason,itisnotlawfultograntpermissionofmitigationofthemattertobothsides.Hence,thecompromiseapplicationisherebydismissed.

ThematterbereturnedbacktotheRegularCourtforabrogationinaccordancewithlaw.ItisthisorderwhichwaschallengedbyrespondentNo.2byfilingawritpetitionunderArticle227oftheConstitutionofIndia.TheHighCourthasdismissedthesaidwritpetitionstatingthatthejudgmentofthisCourtinDamodarS.Prabhu(supra)isbindingonthesubordinateCourtsunderArticle141oftheConstitutionand,therefore,thesubordinateCourthadnotcommittedanylegalerror.

TheGuidelinesintheformofdirectionsgivenintheaforesaidjudgmentreadasunder:

THEGUIDELINES(I)Inthecircumstances,itisproposedasfollows:

(a) ThatdirectionscanbegiventhattheWritofSummonsbesuitablymodifiedmakingitcleartotheaccusedthathecouldmakeanapplicationforcompoundingoftheoffencesatthefirstorsecondhearingofthecaseandthatifsuchanapplicationismade,compoundingmaybeallowed by the court without imposing any costs on the accused.

(b) Iftheaccuseddoesnotmakeanapplicationforcompoundingasaforesaid,thenifanapplicationforcompoundingismadebeforetheMagistrateatthesubsequentstage,compoundingcanbeallowedsubjecttotheconditionthattheaccusedwillberequiredtopay10%ofthechequeamounttobedepositedasaconditionforcompoundingwiththeLegalServicesAuthority,orsuchauthorityastheCourtdeemsfit.

(c) Similarly,iftheapplicationforcompoundingismadebeforetheSessionsCourtoraHighCourtinrevisionorappeal,suchcompoundingmaybeallowedontheconditionthattheaccusedpays 15% of the cheque amount by way of costs.


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(d) Finally,iftheapplicationforcompoundingismadebeforetheSupremeCourt,thefigurewouldincreaseto20%ofthechequeamount.”

Thequestionofconsiderationintheaforesaidbackdropisastowhetherdirections/guidelinesgivenbythisCourtintheaforesaidjudgmentareinapplicableincaseswhichareresolved/settledinLokAdalats.

Whatwas argued before us by the learned counsel for the appellantwas that these guidelinescontainingthescheduleofcostsshouldnotbemadeapplicabletothesettlementswhicharearrivedat in the Lok Adalats inasmuch as provision for imposition of such costswould run contrary totheverypurposeofLokAdalatsconstitutedunderSection19ofthe1987Act.ItwasemphasizedthatLokAdalatswereconstitutedtopromotetheresolutionofdisputespendingbeforeCourtbyamicablesettlementbetweenthepartiesandinordertoreducethependencyofcasesbeforetheCourts,includingappellateCourts.LearnedcounselalsoreferredtothejudgmentofthisCourtinK.N.GovindanKuttyMenonv.C.D.Shaji,(2012)2SCC51,whereinitisheldthatacompromiseorsettlementarrivedatbeforetheLokAdalatandawardpassedpursuanttheretoistobetreatedasdecreeofcivilCourtbyvirtueofdeemingprovisioncontainedinSection21andSection2(aaa)and(c)ofthe1987Act.TheCourtheldthatevenasettlementofacaseunderSetion138oftheActandLokAdalatawardpassedpursuanttheretowouldbeadecreeexecutableundertheCodeofCivilProcedure,1908.Thepositioninthisbehalfissummedupinpara26ofthesaidjudgment,whichreads as under:

26. Fromtheabovediscussion,thefollowingpropositionsemerge:

(1) InviewoftheunambiguouslanguageofSection21oftheAct,everyawardoftheLokAdalat shall be deemed to be a decree of a civil court and as such it is executable by that court.

(2) TheActdoesnotmakeoutanysuchdistinctionbetweenthereferencemadebyacivilcourt and a criminal court.

(3) ThereisnorestrictiononthepoweroftheLokAdalattopassanawardbasedonthecompromisearrivedatbetweentheparties inrespectofcasesreferredtobyvariouscourts(bothcivilandcriminal),tribunals,FamilyCourt,RentControlCourt,ConsumerRedressalForum,MotorAccidentsClaimsTribunalandotherforumsofsimilarnature.

(4) Even if amatter is referred by a criminal court under Section 138 of theNegotiableInstruments Act, 1881 and by virtue of the deeming provisions, the award passed by the LokAdalatbasedonacompromisehastobetreatedasadecreecapableofexecutionbyacivilcourt.Takingsustenancefromtheaforesaiddicta,thesubmissionoflearnedcounselfortheappellantwasthateventheproceedingsunderSection138oftheActweregovernedbytheCodeofCriminalProcedure,1973,suchanawardwasexecutableas a decree of the civil Court under the Code of Civil Procedure, 1908.

Thesubmission,therefore,wasthatonceawardoftheLokAdalatisgiventheeffectofthedecreeandattachesthiskindofsanctitybehindit,itshouldbecarvedoutasanexceptionto‘TheGuidelines’framed by this Court in Damodar S. Prabhu’s case (supra).

We have considered the aforesaid submission of the learned counsel with utmost intensity ofthought.ItappearstobeofsubstanceinthefirstblushwhenthissubmissionistobeconsideredinthecontextofthepurposeandobjectivewithwhichLokAdalatshavebeenconstitutedunder


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Section19ofthe1987Act.Nodoubt,themanifestobjectiveistohavespeedyresolutionofthedisputes through these Lok Adalats, with added advantage of cutting the cost of litigation andavoidingfurtherappeals.Theadventofthe1987ActgaveastatutorystatustoLokAdalats,pursuanttotheconstitutionalmandateinArticle39-AoftheConstitutionofIndia,containsvariousprovisionsof settlementofdisputes through LokAdalat. It is anAct to constitute legal servicesauthoritiestoprovidefreeandcompetentlegalservicestotheweakersectionsofthesocietytoensurethatopportunities for securing justice are not denied to any citizen by reason of economic or otherdisabilities,andtoorganizeLokAdalatstosecurethattheoperationofthelegalsystempromotesjusticeonabasisofequalopportunity. In fact, theconceptofLokAdalat isan innovative Indiancontribution to theworld jurisprudence. It isanew formof the justicedispensationsystemandhas largely succeeded inprovidinga supplementary forumto thevictims for settlementof theirdisputes. This system is based on Gandhian principles. It is one of the components of Alternate DisputeResolutionsystemsspecificallyprovidedinSection89oftheCodeofCivilProcedure,1908aswell.Ithasprovedtobeaveryeffectivealternativetolitigation.LokAdalatshavebeencreatedtorestoreaccesstoremediesandprotectionsandalleviatetheinstitutionalburdenofthemillionsofpettycasescloggingtheregularcourts.Itofferstheaggrievedclaimantwhosecasewouldotherwisesit in the regular courts fordecades,at least somecompensationnow.ThePresiding JudgeofaLokAdalatisanexperiencedadjudicatorwithadocumentedrecordofpublicserviceandhaslegalacumen.ExperiencehasshownthatnotonlyhugenumberofcasesaresettledthroughLokAdalats,thissystemhasdefiniteadvantages,someofwhicharelistedbelow:

(a) speedyjusticeandsavingfromthelengthycourtprocedures;

(b) justiceatnocost;

(c) solvingproblemsofbacklogcases;and

(d) maintenanceofcordialrelations.

Thus,itcannotbedoubtedthatLokAdalatsareservinganimportantpublicpurpose.Havingsaidso,it needs to be examined as to whether in the given case it becomes derogatory to the movement of theLokAdalatsifthecostsamountingto15%ofthechequeamount,aspertheguidelinescontainedinDamodarS.Prabhu(supra),isinsisted?However,beforediscussingthiscentralissue,wewouldliketoanalysetheeventsofthepresentcase,asthatwouldbeofhelptoanswerthepivotalissueraised before us.

Aspointedoutabovewhiletakingnoteofthefactualdetailsofthecase,itwasnotasituationwheretheCourtpersuadedthepartiestousethemediumofLokAdalatforthesettlementoftheirdispute

Onthecontrary,thepartieshadalreadysettledthematterbetweenthemselvesbeforehandandfiledtheapplicationinthisbehalfbeforethelearnedAdditionalSessionsJudgeonJuly30,2011witharequestwhichthematterbetakenupbeforetheLokAdalatthatwasbeingorganizedonthesamedate.ItisclearfromtheorderpassedbythelearnedAdditionalSessionsJudgeonJuly30,2011,which is already extracted above.

Inthefirstinstance,wedonotunderstandastowhythematterwassenttoLokAdalatwhenthepartieshadsettledthematterbetweenthemselvesandapplicationtothiseffectwasfiledintheCourt. Insuchasituation, theCourtcouldhavepassedtheorder itself, insteadofrelegatingthematter to the LokAdalat.Wehaveourselveshighlighted the importanceand significanceof theInstitutionofLokAdalat.Wewouldbefailinginourdutyifwedonotmentionthat,oflate,there


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issomecriticismaswellwhich,interalia,relatestothemannerinwhichcasesarepostedbeforetheLokAdalats.Wehavetodevisethemethodstoensurethatfaithinthesystemismaintainedasintheholistictermsaccesstojusticeisachievedthroughthissystem.We,therefore,deprecatethistendencyofreferringeventhosematterstotheLokAdalatwhichhavealreadybeensettled.ThistendencyofsendingsettledmatterstotheLokAdalatsjusttoinflatethefiguresofdecision/settlementthereinforstatisticalpurposesisnotahealthypractice.Wearealsonotobliviousofthecriticismfromthelawyers,intelligentsiaandgeneralpublicinadoptingthiskindofmethodologyforwindowdressingandshowinglucrativeoutcomeofparticularLokAdalats.

Bethatasitmay,revertingtothefactsofthepresentcase,wefindthatwhenthecasehadbeensettledbetweenthepartiesandapplicationinthisbehalfwasmadebeforetheCourt,itcannotbedeniedthathadtheCourtpassedthecompoudingorderonthisapplicationunderSection147oftheAct, as per the rigours of Damodar S. Prabhu (supra), 15% f the cheque amount had to be necessarily deposited by the accused person (respondent No.2). If we hold that such a cost is not to be paid whenthematterissenttotheLokAdalat,thisroutewouldbegenerallyresortedto,tobypasstheapplicabilityofthedirectionscontainedinDamodarS.Prabhu(supra).Suchasituationcannotbecountenanced.

The purpose of laying down the guidelines in Damodar S. Prabhu (supra) is explained in the said judgmentitself.TheCourtinthatcasewasconcernedwiththestageofthecasewhencompoundingofoffenceunderSection147oftheActistobepermitted.Toputitotherwise,thequestionwasas to whether such a compounding can be only at the trial Court stage or it is permissible even at theappellatestage. Itwasnotedthatevenbefore the insertionofSection147of theAct,bywayofamendmentintheyear2002,someHighCourtshadpermittedthecompoundingofoffencecontemplatedbySection138oftheActduringthelaterstagesoflitigation.ThiswassodonebythisCourtalsoinO.P.Dholakiav.StateofHaryana,(2000)1SCC672andinsomeothercaseswhichwerenoticedbytheBench.FromthesejudgmentstheCourtconcludedthatthecompoundingofoffenceatlaterstagesoflitigationinchequeboundingcaseswasheldtobepermissible.

Whileholdingso, theCourtalso tooknoteof thephenomenawhichwaswidelyprevalent in themannerinwhichcasesunderSection138oftheActproceedinthiscountry.Itnoticedthattherewasatendencyonthepartoftheaccusedpersonstodragontheseproceedingsandresorttosettlementprocess only at a stage when the accused persons were driven to wall. It is for this reason that most ofthecomplaintsfiledresultincompromiseorsettlementbeforethefinaljudgmentontheonesideandeveninthosecaseswherejudgmentispronouncedandconvictionisrecorded,suchcasesaresettledatappellatestage.Thiswassonotedinpara13ofthejudgment,whichreadsasunder:

13. It is quite obvious that with respect to the offence of dishonour of cheques, it is thecompensatoryaspectoftheremedywhichshouldbegivenpriorityoverthepunitiveaspect.There is also some support for the apprehensions raised by the learnedAttorneyGeneralthatamajorityofchequebouncecasesareindeedbeingcompromisedorsettledbywayofcompounding,albeitduringthelaterstagesoflitigationtherebycontributingtounduedelayin justice-delivery.Theproblemherein iswiththetendencyof litigantstobelatedlychoosecompoundingasameanstoresolvetheirdispute.Furthermore,thewritensubmissionsfiledonbehalfofthelearnedAttorneyGeneralhavestressedonthefactthatunlikeSection320oftheCrPC,Section147oftheNegotiableInstrumentsActprovidesnoexplicitguidanceastowhat stage compounding can or cannot be done and whether compounding can be done at the instanceofthecomplainantorwiththeleaveofthecourt.Asmentionedearlier,thelearned


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AttorneyGeneral’ssubmissionisthatintheabsenceofstatutoryguidance,partiesarechoosingcompoundingasamethodoflastresortinsteadofoptingforitassoonastheMagistratestakecognizanceofthecomplaints.Oneexplanationforsuchbehaviourcouldbethattheaccusedpersonsarewillingtotakethechanceofprogressingthroughthevariousstagesoflitigationandthenchoosetherouteofsettlementonlywhennootherrouteremains.Whilesuchbehaviourmaybeviewedasrational fromtheviewpointof litigants, thehard factsarethat theunduedelayinoptingforcompoundingcontributestothearrearspendingbeforethecourtsatvariouslevels.Iftheaccusediswillingtosettleorcompromisebywayofcompoundingoftheoffenceatalaterstageoflitigation,itisgenerallyindicativeofsomemeritinthecomplainant’scase.Insuchcasesitwouldbedesirableifpartieschoosecompoundingduringtheearlierstagesoflitigation.Ifhowever,theaccusedhasavaliddefencesuchasamistake,forgeryorcoercionamongothergrounds,thenthemattercanbelitigatedthroughthespecifiedforums.ThisparticulartendencyhadpromptedtheCourttoacceptthesubmissionoftheAttorneyGeneraltoframeguidelinesforagradedschemeofimposingcostsonpartieswhoundulydelaycompoundingoftheoffenceinasmuch as such a requirement of deposit of the costs will act as a deterrent for delayed compositionsincefreeandeasycompoundingofoffencesatanystage,howeverbelated,wasgivenincentivetothedrawerofthechequetodelaysettlingofcasesforyears.Forthisreason,theCourtframedtheguidelinespermittingcompoundingwiththeimpositionofvaryingcostsdependinguponthestageatwhichthesettlementtookplaceinaparticularcase.

After formulatingTheGuidelines,whicharealreadyextractedabove, theCourtmadeverypertinent observations in para 17 of the said judgment which would have bearing in thepresent case. Thus, we reproduce the same below:

17. Wearealsoconsciousoftheviewthatthejudicialendorsementoftheabovequotedguidelinescouldbeseenasanactof judicial law-makingandthereforeanintrusionintothelegislativedomain.ItmustbekeptinmindthatSection147oftheActdoesnotcarryanyguidanceonhowtoproceedwiththecompoundingofoffencesundertheAct.WehavealreadyexplainedthattheschemecontemplatedunderSection320oftheCrPCcannotbefollowedinthestrictsense.Inviewofthelegislativevacuum,weseenohurdletotheendorsementofsomesuggestionswhichhavebeendesignedtodiscouragelitigantsfromundulydelayingthecompositionoftheoffenceincasesinvolvingSection138oftheAct.Thegradedschemeforimposingcostsisameanstoencouragecompoundingatanearlystageoflitigation.Inthestatusquo,valuabletimeoftheCourtisspentonthetrialofthesecasesandthepartiesarenotliabletopayanyCourtfeesincethe proceedings are governed by the Code of Criminal Procedure, even though the impact of theoffenceislargelyconfinedtotheprivateparties.Eventhoughtheimpositionofcostsbythecompetentcourtisamatterofdiscretion,thescaleofcostshasbeensuggestedintheinterestofuniformity.ThecompetentCourtcanofcoursereducethecostswithregardtothespecificfactsandcircumstancesofacase,whilerecordingreasonsinwritingforsuchvariance.Bonafidelitigantsshouldofcoursecontesttheproceedingstotheirlogicalend.Eveninthepast,thisCourthasuseditspowertodocompletejusticeunderArticle142oftheConstitutiontoframeguidelinesinrelationtosubject-matterwheretherewasalegislativevacuum.Itisclearfromthe reading of the aforesaid para that the Court made it clear that framing of the said guidelines didnotamounttojudiciallegislation.IntheopinionoftheCourt,sinceSection147oftheActdidnotcarryanyguidanceonhowtoproceedwithcompoundingoftheoffencesundertheActandSection320oftheCodeofCriminalProcedure,1973couldnotbefollowedinstrictsense


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inrespectofoffencespertainingtoSection138oftheAct,therewasalegislativevacuumwhichpromptedtheCourttoframethoseguidelinestoachievethefollowingobjectives:

(i) todiscourage litigants fromundulydelaying thecompositionofoffences in cases involvingSection138oftheAct;

(ii) itwouldresultinencouragingcompoundingatanearlystageoflitigationsavingvaluabletimeoftheCourtwhichisspentonthetrialofsuchcases;and

(iii) eventhoughimpositionofcostsbythecompetentCourtisamatterofdiscretion,thescaleofcosthadbeensuggestedtoattainuniformity.

Atthesametime,theCourtalsomadeitabundantlyclearthattheconcernedCourtwouldbeatlibertytoreducethecostswithregardtospecificfactsandcircumstancesofacase,whilerecordingreasonsinwritingforsuchvariance.

Whatfollowsfromtheaboveisthatnormallycostsasspecifiedintheguidelineslaiddowninthesaid judgmenthas tobe imposedon theaccusedpersonswhilepermittingcompounding.Therecanbedeparturetherefrominaparticularcase,forgoodreasonstoberecordedinwritingbytheconcernedCourt.ItisforthisreasonthattheCourtmentionedthreeobjectiveswhichweresoughttobeachievedbyframingthoseguidelines,astakennoteofabove.ItisthusmanifestlytheframingofGuidelinesinthisjudgmentwasalsotoachieveaparticularpublicpurpose.Herecomestheissueforconsiderationastowhethertheseguidelinesaretobegivenagobywhenacaseisdecided/settledintheLokAdalat?Ouransweristhatitmaynotbenecessarilysoandaproperbalancecanbestrucktakingcareofboththesituations.

Havingregardthereto,weareoftheopinionthatevenwhenacaseisdecidedinLokAdalat,therequirement of following the guidelines contained in Damodar S. Prabhu (supra) should normally notbedispensedwith.However,ifthereisaspecial/specificreasontodeviatetherefrom,theCourtisnotremedilessasDamodarS.Prabhu(supra)itselfhasgivendiscretiontotheconcernedCourttoreducethecostswithregardtospecificfactsandcircumstancesofthecase,whilerecordingreasonsinwriting about such variance. Therefore, in thosematterswhere the case has to be decided/settledintheLokAdalat, iftheCourtfindsthatit isaresultofpositiveattitudeoftheparties,insuch appropriate cases, the Court can always reduce the costs by imposing minimal costs or even waivethesame.Forthat,itwouldbefortheparties,particularlytheaccusedperson,tomakeoutaplausiblecaseforthewaiver/reductionofcostsandtoconvincetheconcernedCourtaboutthesame.Thiscourseofaction,accordingtous,wouldstrikeabalancebetweenthetwocompetingbutequallyimportantinterests,namely,achievingtheobjectivesdelineatedinDamodarS.Prabhu(supra) on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolutionofcasethroughLokAdalats.

Havingstraightenedthepositioninthemannerabove,insofarasthepresentcaseisconcerned,aswefindthatthepartieshadalreadysettledthematterandthepurposeofgoingtotheLokAdalatwasonlytohavearubberstampoftheLokAdalatintheformofitsimprimaturthereto,wedonotfindanyerrorintheimpugnedjudgment,thoughwearegivingourownreasonsinsupportoftheconclusionarrivedatbytheHighCourtindismissingthewritpetitionfiledbyrespondentNo.2,whilestraighteningtheapproachthatshouldbefollowedhenceforthinsuchmatterscomingbeforetheLokAdalats.

The appeal stands disposed of in the aforesaid terms.

qqq

bridgestone india private limited versus inderpal singh

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BRIdGESTONE INdIA pRIvATE LIMITEd vERSUS INdERpAL SINGH(2016) 2 Supreme Court Cases 75

In the Supreme Court of India

Before Hon’ble Mr. Justice Jagdish Singh Khehar and Hon’ble Mr. Justice R. Banumathi

Bridgestone India Private Limited ...Appellant Versus

Inderpal Singh ...Respondent

Criminal Appeals No. 1557 of 2015Criminal Appeal No.1557 of 2015 (Arising out of SLP(Crl.)No.7850 of 2011)

[Criminal Appeal No.1562 of 2015 arising out of SLP (CRL.) No.9758 of 2011] [Criminal Appeal No.1563 of 2015 arising out of SLP (CRL.) No.10019 of 2011] [Criminal Appeal No.1564 of 2015 arising out of SLP (CRL.) No.10020 of 2011] [Criminal Appeal No.1557 of 2015 arising out of SLP (CRL.) No.7850 of 2011]

Decided on 24 November, 2015

Ss. 142(2) & 142-A – As Dishonour of cheque – Territorial jurisdiction for filing complaint – Retrospective effect of Ss. 142(2) and 142-A – Supersession of legal position declared by Supreme Court in Dashrath Rupsingh Rathod, (2014) 9 SCC 129 and provisions of CrPC by said Ss. 142(2) & 142-A – as if [S. 142(2)] had been in force at all material times, give retrospectivity to them

Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 : (2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673, held, statutorily superseded.

JUDGMENT

JAGDISH SINGH KHEHAR, J.

1. Leavegranted.

2. Despite service, no one has entered appearance on behalf of the respondent.

3. AchequeNo.1950,drawnontheUnionBankofIndia,Chandigarh,wasissuedbyInderpalSingh(therespondentherein)totheappellant-M/sBridgestoneIndiaPvt.Ltd.ThechequewasinthesumofRs.26,958/-.Theappellant-M/sBridgestoneIndiaPvt.Ltd.presentedtheabovechequeattheIDBIBankinIndore.Theappellantreceivedintimationofitsbeingdishonouredonaccountof“...exceedsarrangement...”on04.08.2006atIndore.

4. The appellant issued a legal notice on 26.08.2006,whichwas served on the respondent -Inderpal Singh on 06.09.2006, demanding the amount depicted in the cheque. The appellant informedtherespondent,thathewouldbecompelledtoinitiateproceedingsunderSection138of theNegotiable InstrumentsAct,1881, ifpaymentwasnotmadebytherespondentwithin15daysfromthedateofreceiptofthelegalnotice.


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5. Consequentuponthe issuanceoftheaforementionedlegalnoticewhereintherespondentwas required to reimburse the cheuqe amount to the appellant, and the respondent having failedtodischargehisobligation,proceedingswereinitiatedbytheappellanton13.10.2006intheCourtoftheJudicialMagistrate,FirstClass,Indore,underSection138oftheNegotiableInstruments Act, 1881.

6. The accused-respondent - Inderpal Singh, preferred an application before the JudicialMagistrate,FirstClass,Indore,MadhyaPradesh,underSection177oftheCriminalProcedureCode, contesting the territorial jurisdiction with respect to the above cheque drawn ontheUnionBankof India,Chandigarh.Theprayermadebytherespondent,thattheJudicialMagistrate, First Class, Indore, did not have the jurisdiction to entertain the proceedingsinitiatedbytheappellant-M/sBridgestoneIndianPvt.Ltd.wasdeclinedon02.06.2009.

TheJudicialMagistrate,FirstClass,Indore,reliedonthejudgmentrenderedbythisCourtinK.Bhaskaranvs.SankaranVaidhyanBalanandanother,AIR1999SC3762,torecordafindinginfavouroftheappellant.DissatisfiedwiththeorderpassedbytheJudicialMagistrate,FirstClass, Indore, dated 02.06.2009, the respondent-Inderpal Singh preferred a petition underSection482oftheCriminalProcedureCode,intheHighCourtofMadhyaPradeshbeforeitsIndore Bench.

Having examined the controversy in hand and keeping inmind the fact, that a numberofdocuments were presented by the respondent - Inderpal Singh during the course of hearing before the High Court, by an order dated 03.12.2009, the petition filed by the accused-respondentwasdisposedof,byremittingthecasetotheJudicialMagistrate,FirstClass,Indore,requiringhimtopassafreshorderaftertakingintoconsiderationtheadditionaldocumentsreliedupon,andthejudgmentscitedbeforetheHighCourt.

7. TheJudicialMagistrate,FirstClass,Indore,yetagain,byanorderdated11.01.2010held,thathehadtheterritorialjurisdictiontoadjudicateuponthecontroversyraisedbytheappellant-M/sBridgestoneIndiaPvt.Ltd.underSection138oftheNegotiableInstrumentsAct,1881.ThedecisionrenderedbytheJudicialMagistrate,FirstClass,Indore,wasagainassailedbytheaccused-respondent inyetanotherpetitionfiledbyhimunderSection482of theCriminalProcedureCode,intheHighCourtofMadhyaPradeshbeforeitsIndoreBench.TheHighCourtaccepted the prayer made by the accused-respondent - Inderpal Singh by holding, that the jurisdictionlayonlybeforetheCourtwhereintheoriginaldraweebankwaslocated,namely,at Chandigarh, where-from the accused-respondent had issued the concerned cheque bearing No.1950,drawnontheUnionBankofIndia,Chandigarh.

8. DissatisfiedwiththeorderpassedbytheHighCourtofMadhyaPradesh,dated05.05.2011,the appellant has approached this Court through the instant appeal.

9. During the course of hearing, learned counsel for the appellant cited the decision rendered by athree-JudgeBenchofthisCourtinDashrathRupsinghRathodvs.StateofMaharashtraandanother,(2014)9SCC129,andpointedlyinvitedourattentiontotheconclusionsdrawnbythisCourt in paragraph 58, which is extracted hereunder:

“58. To sum up:

58.1 AnoffenceunderSection138oftheNegotiableInstrumentsAct,1881iscommittedno sooner a cheque drawn by the accused on an account being maintained by him


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inabankfordischargeofdebt/liabilityisreturnedunpaidforinsufficiencyoffundsorforthereasonthattheamountexceedsthearrangementmadewiththebank.

58.2 CognizanceofanysuchoffenceishoweverforbiddenunderSection142oftheActexceptuponacomplaintinwritingmadebythepayeeorholderofthechequeinduecoursewithinaperiodofonemonthfromthedatethecauseofactionaccruestosuchpayeeorholderunderclause(c)ofprovisotoSection138.

58.3 Thecauseofactiontofileacomplaintaccruestoacomplainant/payee/holderofacheque in due course if

(a) thedishonouredchequeispresentedtothedraweebankwithinaperiodofsix months from the date of its issue.

(b) If the complainant has demanded payment of cheque amount within thirty daysofreceiptofinformationbyhimfromthebankregardingthedishonourof the cheque, and (c) If the drawer has failed to pay the cheque amount withinfifteendaysofreceiptofsuchnotice.

58.4 The facts constituting cause of action do not constitute the ingredients of theoffenceunderSection138oftheAct.

58.5 The proviso to Section 138 simply postpones/defers institution of criminalproceedingsandtakingofcognizancebythecourttillsuchtimecauseofactioninterms of clause (c) of proviso accrues to the complainant.

58.6Oncethecauseofactionaccruestothecomplainant,thejurisdictionoftheCourtto try the case will be determined by reference to the place where the cheque is dishonoured.

58.7 ThegeneralrulestipulatedunderSection177CrPCappliestocasesunderSection138oftheNegotiableInstrumentsAct.

Prosecutioninsuchcasescan,therefore,belaunchedagainstthedrawerofthechequeonlybeforethecourtwithinwhosejurisdictionthedishonourtakesplaceexceptinsituationswheretheoffenceofdishonourofthechequepunishableunderSection138iscommittedalongwithotheroffencesinasingletransactionwithinthemeaningofSection220(1)readwithSection184oftheCodeofCriminalProcedureoriscoveredbytheprovisionsofSection182(1)readwithSections184and220thereof.”InviewofthedecisionrenderedbythisCourtinDashrathRupsingh Rathod’s case, it is apparent, that the impugned order dated 05.05.2011, passed by theHighCourtofMadhyaPradesh,BenchatIndore,waswhollyjustified.

10. InordertoovercomethelegalpositiondeclaredbythisCourtinDashrathRupsinghRathod’scase,learnedcounselfortheappellanthasdrawnourattentiontotheNegotiableInstruments(Amendment)SecondOrdinance,2015(hereinafterreferredtoas`theOrdinance’).AperusalofSection1(2)thereofreveals,thattheOrdinancewouldbedeemedtohavecomeintoforcewitheffectfrom15.06.2015.Itisthereforepointedouttous,thattheNegotiableInstruments(Amendment)SecondOrdinance,2015isinforce.OurattentionwastheninvitedtoSection3thereof,whereby,theoriginalSection142oftheNegotiableInstrumentsAct,1881,cameto be amended, and also, Section 4 thereof,whereby, Section 142Awas inserted into the


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Negotiable InstrumentsAct. Sections3and4of theNegotiable Instruments (Amendment)SecondOrdinance,2015arebeingextractedhereunder:

“3. IntheprincipalAct,section142shallbenumberedassub-section(1)thereofandaftersub-section(1)assonumbered,thefollowingsub-sectionshallbeinserted,namely:-

(2) Theoffenceunder section138 shall be inquired into and tried only by a courtwithinwhoselocaljurisdiction,--

(a) ifthechequeisdeliveredforcollectionthroughanaccount,thebranchofthebankwherethepayeeorholderinduecourse,asthecasemaybe,maintainstheaccount,issituated;or

(b) if the cheque is presented for payment by the payee or holder in due course otherwise throughanaccount, thebranchof thedraweebankwhere thedrawer maintains the account, is situated.

Explanation-Forthepurposesofclause(a),whereachequeisdeliveredforcollectionatanybranchofthebankofthepayeeorholderinduecourse,then,thechequeshallbedeemedtohavebeendeliveredtothebranchofthebankinwhichthepayeeorholderinduecourse,asthecasemaybe,maintainstheaccount.”

4. IntheprincipalAct,aftersection142,thefollowingsectionshallbeinserted,namely:-142A.

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973oranyjudgment,decree,orderordirectionsofanycourt,allcasestransferredtothecourthavingjurisdictionundersub-section(2)ofsection142,asamendedbytheNegotiableInstruments(Amendment)Ordinance,2015,shallbedeemedtohavebeentransferredunderthisOrdinance,asifthatsub-sectionhadbeeninforceatallmaterialtimes.

(2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section(1),wherethepayeeortheholderinduecourse,asthecasemaybe,hasfiledacomplaintagainstthedrawerofachequeinthecourthavingjurisdictionundersub-section(2)ofsection142orthecasehasbeentransferredtothatcourtundersub-section(1),andsuchcomplaintispendinginthatcourt,allsubsequentcomplaintsarisingoutofsection138againstthesamedrawershallbefiledbeforethesamecourtirrespectiveofwhetherthosechequesweredeliveredforcollectionorpresentedforpaymentwithintheterritorialjurisdictionofthatcourt.

(3) If,onthedateofthecommencementofthisOrdinance,morethanoneprosecutionfiledbythesamepayeeorholderinduecourse,asthecasemaybe,againstthesamedrawer of cheques is pending before different courts, upon the said facthavingbeenbroughttothenoticeofthecourt,suchcourtshalltransferthecasetothecourthavingjurisdictionundersub-section(2)ofsection142,asamendedbytheNegotiableInstruments(Amendment)Ordinance,2015,beforewhichthefirstcasewasfiledandispending,asifthatsub-sectionhadbeeninforceatallmaterialtimes.” (Emphasisisours)


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Aperusalof theamendedSection142(2),extractedabove, leavesno room foranydoubt,specially in view of the explanation thereunder, that with reference to an offence underSection138oftheNegotiableInstrumentsAct,1881,theplacewhereachequeisdeliveredforcollectioni.e.thebranchofthebankofthepayeeorholderinduecourse,wherethedraweemaintainsanaccount,wouldbedeterminativeoftheplaceofterritorialjurisdiction.

11. Itis,however,imperativeforthepresentcontroversy,thattheappellantovercomesthelegalpositiondeclaredbythisCourt,aswellas,theprovisionsoftheCodeofCriminalProcedure.Insofarastheinstantaspectofthematterisconcerned,areferencemaybemadetoSection4 of the Negotiable Instruments (Amendment) Second Ordinance, 2015, whereby Section142AwasinsertedintotheNegotiableInstrumentsAct.AperusalofSub-section(1)thereofleavesnoroomforanydoubt,thatinsofarastheoffenceunderSection138oftheNegotiableInstrumentsActisconcerned,ontheissueofjurisdiction,theprovisionsoftheCodeofCriminalProcedure,1973,wouldhavetogivewaytotheprovisionsoftheinstantenactmentonaccountofthenon-obstanteclauseinsub-section(1)ofSection142A.Likewise,anyjudgment,decree,orderordirectionissuedbyaCourtwouldhavenoeffectinsofarastheterritorialjurisdictionforinitiatingproceedingsunderSection138oftheNegotiableInstrumentsActisconcerned.Intheaboveviewofthematter,wearesatisfied,thatthejudgmentrenderedbythisCourtinDashrath Rupsingh Rathod’s case would also not non-suit the appellant for the relief claimed.

12. Weare in completeagreementwith thecontentionadvancedat thehandsof the learnedcounsel for the appellant.We are satisfied, that Section 142(2)(a), amended through theNegotiableInstruments(Amendment)SecondOrdinance,2015,vestsjurisdictionforinitiatingproceedingsfortheoffenceunderSection138oftheNegotiableInstrumentsAct,interaliaintheterritorialjurisdictionoftheCourt,wherethechequeisdeliveredforcollection(throughanaccountofthebranchofthebankwherethepayeeorholderinduecoursemaintainsanaccount).Wearealso satisfied,basedonSection142A(1) to theeffect, that the judgmentrendered by this Court in Dashrath Rupsingh Rathod’s case, would not stand in the way of the appellant, insofarastheterritorial jurisdictionfor initiatingproceedingsemergingfromthedishonor of the cheque in the present case arises.

13. SincechequeNo.1950,inthesumofRs.26,958/-,drawnontheUnionBankofIndia,Chandigarh,dated02.05.2006,waspresentedforencashmentattheIDBIBank,Indore,whichintimateditsdishonortotheappellanton04.08.2006,weareoftheviewthattheJudicialMagistrate,FirstClass,Indore,wouldhavetheterritorialjurisdictiontotakecognizanceoftheproceedingsinitiatedbytheappellantunderSection138oftheNegotiableInstrumentsAct,1881,afterthepromulgationoftheNegotiableInstruments(Amendment)SecondOrdinance,2015.Thewords“...asifthatsub-sectionhadbeeninforceatallmaterialtimes...”usedwithreferencetoSection142(2),inSection142A(1)givesretrospectivitytotheprovision.

14. In the above view of the matter, the instant appeal is allowed, and the impugned orderpassedbytheHighCourtofMadhyaPradesh,byitsIndoreBench,dated05.05.2011,issetaside.ThepartiesaredirectedtoappearbeforetheJudicialMagistrate,FirstClass, Indore,on15.01.2016.Incasethecomplaintfiledbytheappellanthasbeenreturned,itshallbere-presentedbeforetheJudicialMagistrate,FirstClass,Indore,MadhyaPradesh,onthedateofappearanceindicatedhereinabove.CriminalAppealNo.1562of2015(ArisingoutofSLP(Crl.)No.9758of 2011), CriminalAppealNo.1563of 2015 (Arisingout of SLP(Crl.)No. 10019of2011)andCriminalAppealNo.1564of2015(ArisingoutofSLP(Crl.)No.10020of2011)


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1. Leavegranted.

2. Despite service, no one has entered appearance on behalf of the respondent.

3. Learnedcounselfortheappellantstates,thatthecontroversyraisedintheinstantappealsisidenticaltotheoneadjudicateduponbythisCourtinCriminalAppealNo.1557of2015(Arising out of SLP(Crl.)No.7850 of 2011)[M/s Bridgestone India Pvt.Ltd. vs. InderpalSingh]on24.11.2015.TheinstantappealsareaccordinglyallowedintermsoftheorderpassedbythisCourtinCriminalAppealNo.1557of2015[M/sBridgestoneIndiaPvt.Ltd.vs.InderpalSingh]on24.11.2015.

qqq

meters and instruments private limited and anr. versus kanchan mehta

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METERS ANd INSTRUMENTS pRIvATE LIMITEd & ANR. vERSUS kANCHAN MEHTA(2018) 1 Supreme Court Cases 560


Before Hon’ble Mr. Justice Adarsh Kumar Goel and Hon’ble Mr. Justice Uday U. Lalit

Meters and Instruments private Limited & ANR. ...Appellants versus

Kanchan Mehta ...Respondent

Criminal Appeal No. 1731 of 2017With

[Criminal Appeal No. 1732 of 2017 [Criminal Appeal No. 1733 of 2017

Decided on 5 October, 2017

How proceedings for offence under S. 138 can be regulated where accused willing to deposit cheque amount. Courts has jurisdiction under S. 357(3) CrPC to award suitable compensation with default sentence under S. 64 IPC with further powers of recovery under S. 431 CrPC – Court may close proceedings if accused deposits amount as assessed by it having regard to cheque amount, interest/costs, etc. within stipulated period – Affidavit evidence can be received as evidence at all stages of trial or proceedings – When can accused’s appearance before court be exempted.

JUDGMENT

ADARSH KUMAR GOEL, J.

1. Leavegranted.

These appeals have been preferred against the order dated 21st April, 2017 of the High Court ofPunjabandHaryanaatChandigarhinCRLMNos.13631,13628and13630of2017.TheHighCourtrejectedtheprayeroftheappellantsforcompoundingtheoffenceunderSection138oftheNegotiableInstrumentsAct,1881(theAct)onpaymentofthechequeamountandinthealternativeforexemptionfrompersonalappearance.

2. WhenthematterscameupforhearingbeforethisCourtearlier,noticewasissuedtoconsiderthe question “as to how proceedings for an offence under Section 138 of the Act can beregulatedwheretheaccusediswillingtodepositthechequeamount.Whetherinsuchacase,theproceedingscanbeclosedorexemptiongrantedfrompersonalappearanceoranyotherordercanbepassed.”TheCourtalsoappointedMr.K.V.Viswanathan,learnedseniorcounseltoassist theCourtasamicusandMr.RishiMalhotra, learnedcounsel toassist theamicus.Accordingly,learnedamicushasmadehissubmissionsandalsofiledwrittensubmissionsduly


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assistedbyS/ShriRishiMalhotra,RaviRaghunath,DhananjayRayandSidhantBuxy,advocates.Weplace on record our appreciation for the services renderedby learned amicus and histeam.

3. FewFacts:TheRespondentKanchanMehtafiledcomplaintdated15thJuly,2016allegingthattheappellantsweretopayamonthlyamounttoherunderanagreement.Chequedated31stMarch,2016wasgivenforRs.29,319/-indischargeoflegalliabilitybutthesamewasreturnedunpaidforwantofsufficientfunds.Inspiteofserviceoflegalnotice,theamounthavingnotbeenpaid,theappellantscommittedtheoffenceunderSection138oftheAct.TheMagistratevide order dated 24th August, 2016, after considering the complaint and the preliminaryevidence,summonedtheappellants.TheMagistrateintheorderdated9thNovember,2016observed that the case could not be tried summarily as sentence of more than one year may havetobepassedandbetriedassummonscase.Noticeofaccusationdated9thNovember,2016wasservedunderSection251Cr.P.C.

4. AppellantNo.2,whoistheDirectorofappellantNo.1,madeastatementthathewasreadytomakethepaymentofthechequeamount.However,thecomplainantdeclinedtoacceptthedemanddraft.Thecasewasadjournedforevidence.TheappellantsfiledanapplicationunderSection147oftheActon12thJanuary,2017relyinguponthejudgmentofthisCourtinDamodarS.PrabhuversusSayedBabalalH.1Theapplicationwasdismissedinviewofthejudgmentof thisCourt in JIK Industries Ltd. versusAmarlal versus Jumani2which requiredconsent of the complainant for compounding. The High Court did not find any ground tointerferewiththeorderoftheMagistrate.Factsofothertwocasesareidentical.Hencetheseappeals.

5. WehaveheardlearnedcounselforthepartiesandlearnedamicuswhohasbeendulyandablyassistedbyS/ShriRishiMalhotra,RaviRaghunath,DhananjayRayandSidhantBuxy,advocates.Weproceedtoconsiderthequestion.

6. TheobjectofintroducingSection138andotherprovisionsofChapterXVIIintheActintheyear19883wastoenhancetheacceptabilityofchequesinthesettlementofliabilities.Thedrawerofchequeismadeliabletoprosecutionondishonourofchequewithsafeguardstopreventharassmentofhonestdrawers.TheNegotiableInstruments(AmendmentandMiscellaneousProvisions) Act, 2002 to amend the Act was brought in, inter-alia, to simplify the procedure to dealwithsuchmatters.TheamendmentincludesprovisionforserviceofsummonsbySpeedPost/Courier,summarytrialandmakingtheoffencecompoundable.

7. ThisCourthasnoted that theobjectof thestatutewas to facilitatesmooth functioningofbusinesstransactions.Theprovisionisnecessaryasinmanytransactionschequeswereissuedmerely as a device to defraud the creditors. Dishonour of cheque causes incalculable loss, injuryandinconveniencetotheVidetheBanking,PublicFinancialInstitutionsandNegotiableInstruments Laws (Amendment)Act, 19885payeeand credibility of business transactionssuffersasetback4.Atthesametime,itwasalsonotedthatnatureofoffenceunderSection138primarilyrelatedtoacivilwrongandthe2002amendmentspecificallymadeitcompoundable.

Theoffencewasalsodescribedas‘regulatoryoffence’.TheburdenofproofwasontheaccusedinviewofpresumptionunderSection139andthestandardofproofwasof“preponderanceof probabilities”. The object of the provision was described as both punitive as well as


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compensatory.Theintentionoftheprovisionwastoensurethatthecomplainantreceivedtheamountofchequebywayofcompensation.

ThoughproceedingsunderSection138couldnotbe treatedas civil suits for recovery, theschemeoftheprovision,providingforpunishmentwithimprisonmentorwithfinewhichcouldextendtotwicetheamountofthechequeortotheboth,madetheintentionoflawclear.Thecomplainant could be given not only the cheque amount but double the amount so as to cover interestandcosts.Section357(1)(b)oftheCr.P.C.providesforpaymentofcompensationforthelosscausedbytheoffenceoutofthefine.

Wherefineisnotimposed,compensationcanbetothepersonwhosufferedloss.Sentenceindefaultcanalsobeimposed.Theobjectoftheprovisionisnotmerelypenalbuttomaketheaccusedhonourthenegotiableinstruments.

8. Inviewoftheabovescheme,thisCourtheldthattheaccusedcouldmakeanapplicationforcompoundingatthefirstorsecondhearinginwhichcasetheCourtoughttoallowthesame.Ifsuchapplicationismadelater,theaccusedwasrequiredtopayhigheramounttowardscostetc9. This Court has also laid down that even if the payment of the cheque amount, in terms of proviso(b)toSection138oftheActwasnotmade,theCourtcouldpermitsuchpaymentbeingmadeimmediatelyafterreceivingnotice/summonsofthecourt.TheguidelinesinDamodar(Supra)havebeenheldtobeflexibleasmaybenecessaryinagivensituation.Sincetheconceptof compounding involves consent of the complainant, this Court held that compounding could notbepermittedmerelybyunilateralpayment,withouttheconsentofboththeparties.

9. Whiletheobjectoftheprovisionwastolendcredibilitytochequetransactions,theeffectwasthatitputenormousburdenonthecourts’dockets.TheLawCommissioninits213thReport,submittedon24thNovember,2008notedthatoutoftotalpendencyof1.8crorescasesinthecountry(atthattime),38lakhcases(about20%oftotalpendency)relatedtoSection138oftheAct.ThisCourtdealtwiththeissueofinterpretationof2002amendmentwhichwasincorporated for simplifiedandspeedy trials. Itwasheld that thesaidprovision laiddowna special code to do away with all stages and processes in regular criminal trial. This Court heldthatonceevidencewasgivenonaffidavit,theextentandnatureofexaminationofsuchwitness was to be determined by the Court.

TheobjectofSection145(2)wassimplerandswiftertrialprocedure.Onlyrequirementisthattheevidencemustbeadmissibleandrelevant.Theaffidavitcouldalsoprovedocuments.TheschemeofSections143to147oftheActwasadeparturefromprovisionsofCr.P.C.andtheEvidenceActandcomplaintscouldbetriedinasummarymannerexceptwheretheMagistratefeels thatsentenceofmorethanoneyearmayhavetobepassed.Even insuchcases, theprocedure to be followed may not be exactly the same as in Cr.P.C.

Theexpression“as faraspossible” inSection143 leaves13MandviCooperativeBankLtd.v.NimeshB.Thakore(2010)3SCC83,paras25,2614Para41,ibid8sufficientflexibilityfortheMagistratesoasnottoaffectthequickflowofthetrialprocess.Thetrialhastoproceedondaytodaybasiswithendeavourtoconcludethesamewithinsixmonths.Affidavitofthecomplainantcanbereadasevidence.Bank’sslipormemoofchequedishonourcangiverisetothepresumptionofdishonourofthecheque,unlessanduntilthatfactwasdisproved.


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10. Again,thisCourtconsideredthematterinJ.V.BaharuniandAnr.etc.versusStateofGujaratandAnretc.andobservedthattheprocedureprescribedforcasesunderSection138oftheActwasflexibleandapplicabilityofSection326(3)oftheCr.P.C.innotactingontheevidencealready recorded ina summary trialdidnot strictlyapply to theschemeofSection143oftheAct.ThisCourtobservedthattheprocedurebeingfollowedbytheMagistrateswasnotcommensuratewith the summary trialprovisionsanda successorMagistrateoughtnot tomechanicallyorderdenovotrial.ThisCourtobservedthattheCourtshouldmakeendeavourtoexpeditehearingofcasesinatimeboundmanner.TheMagistrateshouldmakeattemptstoencouragecompoundingofoffenceatanearlystageoflitigation.Thecompensatoryaspectofremedyshouldbegivenpriorityoverthepunitiveaspect.

11. While it istruethat inSubramaniumSethuramanversusStateofMaharashtra18thisCourtobservedthatoncethepleaoftheaccusedisrecordedunderSection252oftheCr.P.C.,theprocedurecontemplatedunderChapterXXoftheCr.P.C.hastobefollowedtotakethetrialto its logical conclusion, the said judgmentwas rendered as per statutoryprovisions priorto2002amendment.Thestatutoryschemepost2002amendmentasconsideredinMandviCooperativeBankandJ.V.Baharuni(supra)hasbroughtaboutachangeinlawanditneedstoberecognised.After2002amendment,Section143oftheActconfersimpliedpowerontheMagistratetodischargetheaccusedifthecomplainantiscompensatedtothesatisfactionofthe Court, where the accused tenders the cheque amount with interest and reasonable cost oflitigationasassessedbytheCourt.Suchaninterpretationwasconsistentwiththeintentionof legislature.

The court has to balance the rights of the complainant and the accused and also to enhance accesstojustice.Basicobjectofthelawistoenhancecredibilityofthechequetransactionsbyproviding speedy remedy to the complainant without intending to punish the drawer of the chequewhoseconductisreasonableorwherecompensationtothecomplainantmeetstheendsofjustice.AppropriateordercanbepassedbytheCourtinexerciseofitsinherentpowerunderSection143oftheActwhichisdifferentfromcompoundingbyconsentofparties.

Thus,Section258Cr.P.C.whichenablesproceedingstobestoppedinasummonscase,eventhoughstrictlyspeakingisnotapplicabletocomplaintcases,sincetheprovisionsoftheCr.P.C.areapplicable“sofarasmaybe”,theprincipleofthesaidprovisionisapplicabletoacomplaintcase covered by Section 143 of theActwhich contemplates applicability of summary trialprovisions,asfaraspossible,i.e.withsuchdeviationasmaybenecessaryforspeedytrialinthe context.

12. ThesentenceprescribedunderSection138oftheActisuptotwoyearsorwithfinewhichmayextendtotwicetheamountorwithboth.WhatneedstobenotedisthefactthatpowerunderSection357(3)Cr.P.C.todirectpaymentofcompensationisinadditiontothesaidprescribedsentence,ifsentenceoffineisnotimposed.TheamountofcompensationcanbefixedhavingregardtotheextentoflosssufferedbytheactionoftheaccusedasassessedbytheCourt.ThedirectiontopaycompensationcanbeenforcedbydefaultsentenceunderSection64IPCandbyrecoveryprocedureprescribedunderSection431Cr.P.C.19

13. ThisCourtinIndianBankAssociationandOrs.versusUnionofIndiaandOrs.20approvedthedirectionsof theBombayHighCourt,CalcuttaHighCourtandDelhiHighCourt inKSLandIndustriesLtd.v.MannalalKhandelwal21,IndoInternationalLtd.versusStateofMaharashtra22,


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HarishchandraBiyaniversusStockHoldingCorporationof IndiaLtd.23,MagmaLeasingLtd.versusStateofW.B.24andRajeshAgarwalversusState25layingdownsimplerprocedurefordisposalofcasesunderSection138oftheAct.ThisCourtdirectedasfollows:

“23. Many of the directions given by the various High Courts, in our view, areworthy ofemulationbythecriminalcourtsalloverthecountrydealingwithcasesunderSection138 of the Negotiable Instruments Act, for which the following directions are beinggiven:

23.1 TheMetropolitanMagistrate/JudicialMagistrate(MM/JM),onthedaywhenthecomplaintunderSection138oftheActispresented,shallscrutinisethecomplaintand, if thecomplaint isaccompaniedby theaffidavit,and theaffidavitand thedocuments,ifany,arefoundtobeinorder,takecognizanceanddirectissuanceofsummons.

23.2.The MM/JM should adopt a pragmatic and realistic approach while issuingsummons. Summons must be properly addressed and sent by post as well as by e-mailaddressgotfromthecomplainant.Thecourt,inappropriatecases,maytaketheassistanceofthepoliceorthenearbycourttoservenoticeontheaccused.Fornoticeofappearance,ashortdatebefixed.Ifthesummonsisreceivedbackunserved,immediatefollow-upactionbetaken.

23.3.Thecourtmayindicateinthesummonsthatiftheaccusedmakesanapplicationforcompoundingofoffencesatthefirsthearingofthecaseand,ifsuchanapplicationis made, the court may pass appropriate orders at the earliest.

23.4. The court should direct the accused,when he appears to furnish a bail bond,toensurehisappearanceduring trialandaskhim to takenoticeunderSection251CrPCtoenablehimtoenterhispleaofdefenceandfixthecasefordefenceevidence,unlessanapplicationismadebytheaccusedunderSection145(2)forrecallingawitnessforcross-examination.

23.5. The court concernedmust ensure that examination-in-chief, cross-examinationandre-examinationofthecomplainantmustbeconductedwithinthreemonthsofassigningthecase.Thecourthasoptionofacceptingaffidavitsofthewitnessesinstead of examining them in the court. The witnesses to the complaint and the accusedmustbeavailableforcross-examinationasandwhenthereisdirectiontothiseffectbythecourt.

24. We, therefore, direct all the criminal courts in the country dealingwith Section 138casestofollowtheabovementionedproceduresforspeedyandexpeditiousdisposalofcasesfallingunderSection138oftheNegotiableInstrumentsAct.Thewritpetitionis,accordingly,disposedof,asabove.”

14. Wemay,however,notethat thisCourtheld thatgeneraldirectionsoughtnot tobe issuedwhichmaydeprivetheMagistrate13toexercisepowerunderSection205Cr.P.C.

26 WeneedtoclarifythatthejudgmentofthisCourtisnotabartoissuedirectionswhichdonotaffecttheexerciseofpowerunderSection205,torequirepersonalattendancewherevernecessary.NeedlesstosaythatthejudgmentcannotbereadasaffectingthepoweroftheHighCourtunderArticle225oftheConstitutionreadwithArticles227and


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235toissuedirectionstosubordinatecourtswithoutaffectingtheprevailingstatutoryscheme.

15. InBhaskarIndustriesLtd.versusBhiwaniDenim&ApparelsLtd.,thisCourtconsideredtheissueofhardshipcausedinpersonalattendancebyanaccusedparticularlywhereaccusedislocatedfarawayfromthejurisdictionoftheCourtwherethecomplaintisfiled.ThisCourtheldthateveninabsenceofaccused,evidencecanberecordedinpresenceofcounselunderSection273Cr.P.C.andSection317Cr.P.C.permittedtrialtobeheldinabsenceofaccused.Section205Cr.P.C.specificallyenabledtheMagistratetodispensewiththepersonalappearance.HavingregardtothenatureofoffenceunderSection138,thisCourtheldthattheMagistratesoughtto consider exercise of the jurisdiction under Section 205 Cr.P.C. to relieve accused of thehardshipwithoutprejudicetotheprosecutionproceedings.

It was observed :

“15. ThesearedayswhenprosecutionsfortheoffenceunderSection138aregallopingupincriminalcourts.Duetotheincreaseofinter-Statetransactionsthroughthefacilitiesof thebanks it is not uncommon thatwhenprosecutions are instituted inone StatetheaccusedmightbelongtoadifferentState,sometimesafardistantState.Notveryrarelysuchaccusedwouldbeladiesalso.ForprosecutionunderSection138oftheNIActthetrialshouldbethatofsummonscase.Whenamagistratefeelsthatinsistenceofpersonalattendanceoftheaccusedinasummonscase,inaparticularsituation,wouldinflictenormoushardshipandcosttoaparticularaccused,itisopentothemagistrateto consider how he can relieve such an accused of the great hardships, without causing prejudicetotheprosecutionproceedings.”

16. It is, thus, clear that the trials under Chapter XVII of theAct are expectednormally to besummarytrial.Oncethecomplaintisfiledwhichisaccompaniedbythedishonoredchequeand the bank’s slip and the affidavit, the Court ought to issue summons. The service ofsummonscanbebypost/e-mail/courierandoughttobeproperlymonitored.Thesummonsoughttoindicatethattheaccusedcouldmakespecifiedpaymentbydeposit inaparticularaccountbeforethespecifieddateandinformthecourtandthecomplainantbye-mail.Insuchasituation,hemaynotberequiredtoappearifthecourtissatisfiedthatthepaymenthasnotbeendulymadeandif15thecomplainanthasnovalidobjection.Iftheaccusedisrequiredtoappear,hisstatementoughttoberecordedforthwithandthecasefixedfordefenceevidence,unlesscomplaintant’switnessesarerecalledforexamination.

17. HavingregardtomagnitudeofchallengeposedbycasesfiledunderSection138oftheAct,whichconstituteabout20%of the totalnumberof casesfiled in theCourts (asper213thReportoftheLawCommission)andearlierdirectionsofthisCourtinthisregard,itappearstobenecessarythatthesituationisreviewedbytheHighCourtsandupdateddirectionsareissued.Interactions,actionplansandmonitoringarecontinuingstepsmandatedbyArticles39Aand21oftheConstitutiontoachievethegoalofaccesstojustice28.

Useofmoderntechnologyneedstobeconsiderednotonlyforpaperlesscourtsbutalsotoreduce overcrowding of courts. There appears to be need to consider categories of cases whichcanbepartlyorentirelyconcluded“online”withoutphysicalpresenceofthepartiesbysimplifyingprocedureswhereseriouslydisputedquestionsarenotrequiredtobeadjudicated.Trafficchallansmayperhapsbeonesuchcategory.AtleastsomenumberofSection138cases


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canbedecidedonline.Ifcomplaintwithaffidavitsanddocumentscanbefiledonline,processissued online and accused pays the specified amount online, itmay obviate the need forpersonal appearance of the complainant or the accused.

Onlyiftheaccusedcontests,needforappearanceofpartiesmayarisewhichmaybethroughcounsel and wherever viable, video conferencing can be used. Personal appearances can be dispensedwithonsuitableselfoperatingconditions.ThisisamattertobeconsideredbytheHighCourtsandwhereverviable,appropriatedirectionscanbeissued.

18. Fromtheabovediscussionfollowingaspectsemerge:

i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof ison accused in view presumption under Section 139 but the standard of such proofis “preponderanceofprobabilities”. The samehas tobenormally tried summarily asper provisions of summary trial under the Cr.P.C. butwith such variation asmay beappropriatetoproceedingsunderChapterXVIIoftheAct.Thusread,principleofSection258 Cr.P.C. will apply and the Court can close the proceedings and discharge the accused onsatisfactionthatthechequeamountwithassessedcostsandinterestispaidandifthereisnoreasontoproceedwiththepunitiveaspect.

ii) Theobjectoftheprovisionbeingprimarilycompensatory,punitiveelementbeingmainlywith the object of enforcing the compensatory element, compounding at the initialstagehas tobeencouragedbut isnotdebarredat later stage subject toappropriatecompensationasmaybefoundacceptabletothepartiesortheCourt.

iii) Thoughcompoundingrequiresconsentofbothparties,eveninabsenceofsuchconsent,theCourt,intheinterestsofjustice,onbeingsatisfiedthatthecomplainanthasbeendulycompensated,caninitsdiscretionclosetheproceedingsanddischargetheaccused.

iv) ProcedurefortrialofcasesunderChapterXVIIoftheActhasnormallytobesummary.ThediscretionoftheMagistrateundersecondprovisotoSection143,toholdthatitwasundesirable to try the case summarily as sentence of more than one year may have to be passed,istobeexercisedafterconsideringthefurtherfactthatapartfromthesentenceofimprisonment,theCourthasjurisdictionunderSection357(3)Cr.P.C.toawardsuitablecompensationwithdefaultsentenceunderSection64IPCandwithfurtherpowersofrecoveryunderSection431Cr.P.C.Withthisapproach,prisonsentenceofmorethanoneyear may not be required in all cases.

v) Sinceevidenceofthecomplaintcanbegivenonaffidavit,subjecttotheCourtsummoningthe person giving affidavit and examining him and the bank’s slip being prima facieevidenceofthedishonorofcheque,itisunnecessaryfortheMagistratetorecordanyfurtherpreliminaryevidence.Suchaffidavitevidencecanbereadasevidenceatallstagesoftrialorotherproceedings.ThemannerofexaminationofthepersongivingaffidavitcanbeasperSection264Cr.P.C.Thescheme is to followsummaryprocedureexceptwhereexerciseofpowerundersecondprovisotoSection143becomesnecessary,wheresentenceofoneyearmayhavetobeawardedandcompensationunderSection357(3)is considered inadequate, having regard to the amount of the cheque, the financialcapacity and the conduct of the accused or any other circumstances.


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19. In view of the above, we hold that where the cheque amount with interest and cost as assessed bytheCourtispaidbyaspecifieddate,theCourtisentitledtoclosetheproceedingsinexerciseofitspowersunderSection143oftheActreadwithSection258Cr.P.C.Asalreadyobserved,normalrulefortrialofcasesunderChapterXVIIoftheActistofollowthesummaryprocedureand summons trial procedure can be followed where sentence exceeding one year may be necessarytaking intoaccountthe fact thatcompensationunderSection357(3)Cr.P.C.withsentence of less than one year will not be adequate, having regard to the amount of cheque, conduct of the accused and other circumstances.

20. IneverycomplaintunderSection138oftheAct,itmaybedesirablethatthecomplainantgiveshisbankaccountnumberandifpossiblee-mailIDoftheaccused.Ife-mailIDisavailablewiththeBankwhere theaccusedhasanaccount, suchBank,onbeing required, should furnishsuch e-mail ID to the payee of the cheque. In every summons, issued to the accused, it may be indicatedthatiftheaccuseddepositsthespecifiedamount,whichshouldbeassessedbytheCourthavingregardtothechequeamountandinterest/cost,byaspecifieddate,theaccusedneednotappearunlessrequiredandproceedingsmaybeclosedsubjecttoanyvalidobjectionof the complainant .

If the accused complies with such summons and informs the Court and the complainant by e-mail, the Court can ascertain the objection, if any, of the complainant and close theproceedingsunless itbecomesnecessarytoproceedwiththecase. Insuchasituation,theaccused’spresencecanberequired,unless thepresence isotherwiseexemptedsubject tosuchconditionsasmaybeconsideredappropriate.Theaccused,whowantstocontestthecase,mustberequiredtodisclosespecificdefenceforsuchcontest.ItisopentotheCourttoaskspecificquestionstotheaccusedatthatstage.

Incasethetrialistoproceed,itwillbeopentotheCourttoexplorethepossibilityofsettlement.ItwillalsobeopentotheCourttoconsidertheprovisionsofpleabargaining.Subjecttothis,the trial can be on day to day basis and endeavour must be to conclude it within six months. The guilty must be punished at the earliest as per law and the one who obeys the law need not be held up in proceedings for long unnecessarily.

21. It will be open to the High Courts to consider and lay down category of cases where proceedings or part thereof can be conducted online by designated courts or otherwise. The High Courts mayalsoconsiderissuinganyfurtherupdateddirectionsfordealingwithSection138casesin the lightof judgmentsof thisCourt.Theappealsaredisposedof. Itwillbeopen to theappellantstomovetheTrialCourtafreshforanyfurtherorderinthelightofthisjudgment.

qqq

kishan rao versus shankargouda

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kISHAN RAO vERSUS SHANkARGOUdA2018 SCC Online SC 651


Before Hon’ble Mr. Justice A.K. Sikri and Hon’ble Mr. Justice Ashok Bhushan

Kishan Rao ...Appellant Versus

Shankargouda ...Respondent

Criminal Appeal No.803 of 2018 [arising out of SLP (CRL.) No.10030 of 2016]

Decided on 02 July, 2018

JUDGMENT

ASHOK BHUSHAN, J.

1. ThisappealhasbeenfiledagainstthejudgmentandorderoftheHighCourtdated18.03.2016bywhichjudgment,CriminalRevisionPetitionfiledbytherespondent-accusedwasallowedby settingaside theorderof conviction and sentence recorded against the accusedunderSection138oftheNegotiableInstrumentsAct,1881(hereinafterreferredtoas“Act1881”).ThepartiesshallbehereinafterreferredtoasdescribedintheMagistrate’sCourt.

2. Brieffactsofcaseare:Theappellant(complainant)andtherespondent(accused)wereknownto each other and had good relations. Accused approached the complainant for a loan ofRs.2,00,000/- for the purpose of his business expenses and promised to repay the samewithinonemonth.On25.12.2005,complainanthadpaidsumofRs.2,00,000/-asaloan.Forrepayment of the loan accused issued post dated cheque dated 25.01.2006 in the name of complainantfortheamountofRs.2,00,000/-.ThechequewaspresentedforcollectionatBankofMaharashtraBranchatGulbargawhichcouldnotbeencashedduetoinsufficientfunds.Attherequestoftheaccusedthechequewasagainrepresentedon01.03.2006forcollectionwhichwasreturnedon02.03.2006bytheBankwiththeendorsement“insufficientfunds”.

3. A notice was issued by the complainant demanding payment of Rs.2,00,000/- which wasreceivedbytheaccusedon14.03.2006towhichreplywassenton31.03.2006.AcomplaintwasfiledbytheappellantallegingtheoffenceunderSection138oftheAct,1881.CognizancewastakenbytheMagistrate.Accusedstatednotguiltyoftheoffence,hence,trialproceeded.Inorder toprove theguilt, the complainanthimself examinedasPW.1andexamined twootherwitnessesPW.2andPw.3.HefileddocumentaryevidenceExhs.P1andP6,statementoftheaccusedwasrecordedunderSection313Cr.P.C.

Thereafter,thecaseproceededfordefenceevidence.Accusedneitherexaminedhimselfnorproducedanyevidenceeitheroralordocumentary.Inthereplytothenoticewhichwassentby the complainant, it was alleged that the said cheque was stolen by the complainant. The complainantwas cross-examinedby thedefence. In the cross-examinationdefencedenied


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accused’ssignaturesonthecheque.Thetrialcourtrejectedthedefenceoftheaccusedthatchequewasstolenbythecomplainant.ThetrialcourtdrewpresumptionunderSection139oftheAct,1881againsttheaccused.Accusedfailedtorebutthepresumptionbyleadinganyevidenceonhisbehalf.Theoffencehavingbeenfoundproved,thetrialcourtconvictedtheaccusedunderSection138oftheAct,1881andsentencedhimtopayafineofRs.2,50,000/-and simple imprisonment for six months.

4. Theappealwasfiledbytheaccusedagainstthesaidjudgment.TheAppellateCourtconsideredthesubmissionsofthepartiesanddismissedtheappealbyaffirmingtheorderofconviction.

5. CriminalRevisionwasfiledbytheaccusedintheHighCourt.TheHighCourtbytheimpugnedjudgmenthasallowedtherevisionbysettingasidetheconvictionorder.TheHighCourtheldthattheaccusedhasbeensuccessfulincreatingdoubtinthemindoftheCourtwithregardtotheexistenceofthedebtorliability.ComplainantaggrievedbythejudgmentoftheHighCourthas come in this appeal.

6. Learnedcounselfortheappellantsubmitsthattheoffencehavingbeenprovedbeforethetrialcourtbyleadingevidence,theconvictionwasrecordedbythetrialcourtafterappreciatingbothoralanddocumentaryevidenceledbytheappellantwhichorderwasalsoaffirmedbytheAppellateCourt.TherewasnojurisdictionintheHighcourttore-appreciatetheevidenceon record and come to the conclusion that accused has been able to raise a doubt regarding existence of the debt or liability of the accused. He submits that the High court in exercise of jurisdictionunder Section379/401Cr.P.C. can interferewith theorderof the convictiononlywhenthefindingsrecordedbythecourtsbelowareperverseandtherewasnoevidenceto prove the offence against the accused. It is submitted that in exercise of the revisionaljurisdictiontheHighCourtcannotsubstituteitsownopinionafterre-appreciationofevidence.

7. ItissubmittedthatthepresumptionunderSection139wasrightlydrawnagainsttheaccusedandaccusedfailedtorebutthesaidpresumptionbyleadingevidence.Therewasnogroundforsettingasidetheconvictionorder.

8. Although,therespondentwasservedbutnooneappearedatthetimeofhearing.

9. Wehaveconsideredthesubmissionsoftheappellantandperusedtherecords.

10. The trial court after considering the evidence on record has returned the finding that thecheque was issued by the accused which contained his signatures. Although, the complainant led oral as well as documentary evidence to prove his case, no evidence was led by the accused torebutthepresumptionregardingexistenceofdebtorliabilityoftheaccused.

11. ThisCourthastimeandagainexaminedthescopeofSection397/401Cr.P.C.andthegroundforexercisingtherevisional jurisdictionbytheHighCourt. InStateofKeralavs.PuttumanaIllathJathavedanNamboodiri,1999(2)SCC452,whileconsideringthescopeoftherevisionaljurisdictionoftheHighCourtthisCourthaslaiddownthefollowing:

“5......Initsrevisionaljurisdiction,theHighCourtcancallforandexaminetherecordofanyproceedingsforthepurposeofsatisfyingitselfastothecorrectness,legalityorproprietyofanyfinding,sentenceororder.Inotherwords,thejurisdictionisoneofsupervisoryjurisdictionexercisedbytheHighCourtforcorrectingmiscarriageofjustice.Butthesaidrevisionalpowercannot be equated with the power of an appellate court nor can it be treated even as a second appellatejurisdiction.


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Ordinarily, therefore, it would not be appropriate for the High Court to reappreciate theevidence and come to its own conclusion on the same when the evidence has already been appreciated by theMagistrate aswell as the Sessions Judge in appeal, unless any glaringfeatureisbroughttothenoticeoftheHighCourtwhichwouldotherwisetantamounttogrossmiscarriageof justice.On scrutinizing the impugned judgmentof theHighCourt from theaforesaidstandpoint,wehavenohesitationtocometotheconclusionthattheHighCourtexceededitsjurisdictionininterferingwiththeconvictionoftherespondentbyreappreciatingtheoralevidence.....”

12. AnotherjudgmentwhichhasalsobeenreferredtoandreliedbytheHighCourtisthejudgmentofthisCourtinSanjaysinhRamraoChavanvs.DattatrayGulabraoPhalkeandothers,2015(3)SCC123. ThisCourtheld that theHighCourt inexerciseof revisional jurisdiction shall notinterferewiththeorderoftheMagistrateunlessitisperverseorwhollyunreasonableorthereisnon-considerationofanyrelevantmaterial, theordercannotbesetasidemerelyonthegroundthatanotherviewispossible.Followinghasbeenlaiddowninparagraph14:

“14.....UnlesstheorderpassedbytheMagistrateisperverseortheviewtakenbythecourtiswhollyunreasonableorthereisnon-considerationofanyrelevantmaterialorthereispalpablemisreadingofrecords,theRevisionalCourtisnotjustifiedinsettingasidetheorder,merelybecause another view is possible. The Revisional Court is not meant to act as an appellate court.Thewholepurposeoftherevisionaljurisdictionistopreservethepowerinthecourttodojusticeinaccordancewiththeprinciplesofcriminaljurisprudence.

TherevisionalpowerofthecourtunderSections397to401CrPCisnottobeequatedwiththatofanappeal.Unlessthefindingofthecourt,whosedecisionissoughttoberevised,isshownto be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where thejudicialdiscretionisexercisedarbitrarilyorcapriciously,thecourtsmaynotinterferewithdecisioninexerciseoftheirrevisionaljurisdiction.”

13. Intheabovecasealsoconvictionoftheaccusedwasrecorded,theHighCourtsetasidetheorderofconvictionbysubstitutingitsownview.ThisCourtsetasidetheHighCourt’sorderholdingthattheHigh9Courtexceededitsjurisdictioninsubstitutingitsviewsandthattoowithout any legal basis.

14. Now,weproceedtoexamineorderoftheHighCourtinthelightofthelawaslaiddownintheabovementionedcases.TheHighCourtitselfinparagraph40hasgivenitsreasonsforsettingasidetheorderofconviction,ithasobservedthatthoughperceptionofapersondiffersfromoneanotherwithregardtotheacceptanceofevidenceonrecordbutinitsperceptionandconsideration,theaccusedhasbeensuccessfulincreatingdoubtinthemindoftheCourtwithregardtotheexistenceofthedebtorliability.Itisrelevanttonoticewhathasbeensaidinparagraph40ofthejudgmentwhichistothefollowingeffect:

“40.Inviewoftheabovesaid“factsandcircumstances,thoughperceptionofapersondiffersfromoneanotherwithregardtotheacceptanceofevidenceonrecordbutinmyperceptionandconsideration,theaccusedhasbeensuccessfulincreatingdoubtinthemindoftheCourtwithregardtotheexistenceofthedebtorliabilityparticularlywithreferencetotheallegedtransactiondated25.12.2005asallegedbythecomplainant.


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Hence,inmyopiniontheHighCourthasfullpowertointerferewithsuchjudgmentoftheTrialCourtassubject10matterexactlyfallswithintheparametersofSection397oftheCodeandalso guidelines of the Apex Court as noted in the above said decisions. Therefore, I am of the consideredopiniontheTrialCourtandtheFirstAppellateCourthavecommittedseriouserrorinmerelyproceedingonthebasisofthepresumptionunderSection139oftheActandalsoonthe basis that, the accused has not proved his defence with reference to the loss of cheque etc. Hence,Iansweredthepointintheaffirmativeandproceededtopassthefollowing:ORDERTherevisionpetitionisherebyallowed.Consequently,thejudgmentandsentencepassedbytheIII-Addl.CivilJudge(Jr.Dn.)&JMFC,KalaburagiinC.C.No.1362/2006whichisaffirmedbyFastTrackCourt-1atKalaburagiinCr.A.No.46/2009areherebysetaside.Consequently,theaccusedisacquittedofthechargeslevelledagainsthimunderSection138ofN.I.Act.Ifanyfineamount isdepositedbytheaccused/petitioner,thesameisorderedtoberefundedtohim....”

15. TheHighCourthasnotreturnedanyfindingthatorderofconvictionbasedonevidenceonrecordsuffersfromanyperversityorbasedonnomaterialorthereisothervalidgroundforexerciseofrevisionaljurisdiction.ThereisnovalidbasisfortheHighCourttoholdthattheaccusedhasbeensuccessful increatingdoubt in themindof theCourtwithregardto theexistence of the debt or liability. The appellant has proved the issuance of cheque which contained signatures of the accused and on presentation of the cheque, the chequewasreturnedwith endorsement “insufficient funds”. Bank officialwas produced as one of thewitnesses who proved that the cheque was not returned on the ground that it did not contain signaturesoftheaccusedratheritwasreturnedduetoinsufficientfunds.WeareoftheviewthatthejudgmentofHighCourtisliabletobesetasideonthisgroundalone.

16. Even though judgmentof theHighCourt is liable tobe set asideon theground thatHighCourtexceededitsrevisionaljurisdiction,tosatisfyourselveswiththemeritsofthecase,weproceeded to examine as to whether there was any doubt with regard to the existence of the debt or liability of the accused.

17. Section139oftheAct,1881providesfordrawingthepresumptioninfavourofholder.Section139istothefollowingeffect:

“139.Presumptioninfavourofholder.-Itshallbepresumed,unlessthecontraryisproved,thattheholderofachequereceivedthechequeofthenaturereferredtoinsection138forthedischarge,inwholeorinpart,ofanydebtorotherliability.”

18. This Court in Kumar Exports vs. Sharma Carpets, 2009 (2) SCC 513, had considered theprovisionsofNegotiableInstrumentsActaswellEvidenceAct.ReferringtoSection139,thisCourtlaiddownfollowinginparagraphs14,15,18and19:

“14. Section139oftheActprovidesthatitshallbepresumed,unlessthecontraryisproved,thattheholderofachequereceivedthechequeofthenaturereferredtoinSection138for the discharge, in whole or in part, of any debt or other liability.

15. Presumptions are devices by use of which the courts are enabled and entitled topronounce on an issue notwithstanding that there is no evidence or insufficientevidence.UndertheEvidenceActallpresumptionsmustcomeunderoneortheotherclassofthethreeclassesmentionedintheAct,namely,(1)“maypresume”(rebuttable),


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(2)“shallpresume”(rebuttable),and(3)“conclusivepresumptions”(irrebuttable).Theterm“presumption”isusedtodesignateaninference,affirmativeordisaffirmativeofthe existence of a fact, conveniently called the “presumed fact” drawn by a judicialtribunal,byaprocessofprobable13reasoningfromsomematteroffact,eitherjudiciallynoticedoradmittedorestablishedbylegalevidencetothesatisfactionofthetribunal.Presumptionliterallymeans“takingastruewithoutexaminationorproof”.

18. Applying the definition of theword “proved” in Section 3 of the Evidence Act to theprovisionsofSections118and139of theAct, itbecomesevident that ina trialunderSection138oftheActapresumptionwillhavetobemadethateverynegotiableinstrumentwasmadeordrawnforconsiderationandthatitwasexecutedfordischargeofdebtorliabilityoncetheexecutionofnegotiableinstrumentiseitherprovedoradmitted.Assoonas the complainant discharges the burden to prove that the instrument, say a note, was executedbytheaccused,therulesofpresumptionsunderSections118and139oftheActhelphimshifttheburdenontheaccused.Thepresumptionswilllive,existandsurviveand shall end only when the contrary is proved by the accused, that is, the cheque was not issuedforconsiderationandindischargeofanydebtorliability.Apresumptionisnotinitselfevidence,butonlymakesaprimafaciecaseforapartyforwhosebenefititexists.

19. Theuseofthephrase“untilthecontraryisproved”inSection118oftheActanduseofthewords“unlessthecontraryisproved”inSection139oftheActreadwithdefinitionsof“maypresume”and“shallpresume”asgiveninSection4oftheEvidenceAct,makesitatonceclearthatpresumptionstoberaisedunderboththeprovisionsarerebuttable.Whenapresumptionisrebuttable,itonlypointsoutthatthepartyonwhomliestheduty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed,thepurposeofthepresumptionisover.”

19. ThisCourtheldthattheaccusedmayadduceevidencetorebutthepresumption,butmeredenialregardingexistenceofdebtshallnotserveanypurpose.Followingwasheldinparagraph20:

“20....Theaccusedmayadducedirectevidence toprove that thenote inquestionwasnotsupportedbyconsiderationandthattherewasnodebtorliabilitytobedischargedbyhim.However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence ofnegativeevidenceisneitherpossiblenorcontemplated.Atthesametime,itisclearthatbaredenialofthepassingoftheconsiderationandexistenceofdebt,apparentlywouldnotservethe purpose of the accused. Something which is probable has to be brought on record for gettingtheburdenofproofshiftedtothecomplainant.

Todisprovethepresumptions,theaccusedshouldbringonrecordsuchfactsandcircumstances,uponconsiderationofwhich, thecourtmayeitherbelievethattheconsiderationanddebtdid not exist or their non-existence was so probable that a prudent man would under the circumstancesofthecase,actuponthepleathattheydidnotexist...”

20. In the present case, the trial court as well as the Appellate Court having found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bankof thepresumptionunder Section139was rightly raisedwhichwas not rebuttedbytheaccused.Theaccusedhadnotledanyevidencetorebuttheaforesaidpresumption.The


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accusedevendidnotcomeinthewitnessboxtosupporthiscase.Inthereplytothenoticewhichwasgivenbytheappellanttheaccusedtookthedefencethatthechequewasstolenbytheappellant.Thesaiddefencewasrejectedbythetrialcourtafterconsideringtheevidenceon record with regard to which no contrary view has also been expressed by the High Court.

21. AnotherjudgmentwhichneedstobelookedintoisRangappavs.SriMohan,2010(11)SCC441.AthreeJudgeBenchofthisCourthadoccasiontoexaminethepresumptionunderSection139oftheAct,1881.ThisCourtintheaforesaidcasehasheldthatintheevent16theaccusedis able to raise a probable defence which creates doubt with regard to the existence of a debt orliability,thepresumptionmayfail.Followingwaslaiddowninparagraphs26and27:

“26. In light of these extracts, we are in agreement with the respondent claimant that the presumptionmandatedbySection139oftheActdoesindeedincludetheexistenceofalegallyenforceabledebtorliability.Tothatextent,theimpugnedobservationsinKrishnaJanardhanBhat,(2008)4SCC54,maynotbecorrect.However,thisdoesnotinanywaycastdoubtonthecorrectnessofthedecisioninthatcasesinceitwasbasedonthespecificfactsandcircumstancestherein.Asnotedinthecitations,thisisofcourseinthenatureofarebuttablepresumptionanditisopentotheaccusedtoraiseadefencewhereintheexistence of a legally enforceable debt or liability can be contested. However, there can be nodoubtthatthereisaninitialpresumptionwhichfavoursthecomplainant.

27. Section139oftheAct isanexampleofareverseonusclausethathasbeenincludedin furtherance of the legislative objective of improving the credibility of negotiableinstruments.WhileSection138oftheActspecifiesastrongcriminalremedyinrelationtothedishonourofcheques,therebuttablepresumptionunderSection139isadevicetopreventunduedelayinthecourseoflitigation.However,itmustberememberedthattheoffencemadepunishablebySection138canbebetterdescribedasaregulatoryoffencesince the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to theprivateparties involved incommercial transactions. In suchascenario, the testofproportionality shouldguide theconstructionand interpretationof reverse onus clauses and the defendant-accused cannot be expected to discharge an undulyhighstandardorproof.”

22. Noevidencewasledbytheaccused.Thedefencetakeninthereplytothenoticethatchequewasstolenhavingbeenrejectedbythetwocourtsbelow,wedonotseeanybasisfortheHighcourtcomingtotheconclusionthattheaccusedhasbeensuccessfulincreatingdoubtinthemindoftheCourtwithregardtotheexistenceofthedebtorliability.HowthepresumptionunderSection139canberebuttedontheevidenceofPW.1,himselfhasnotbeenexplainedby the High court.

23. Inviewoftheaforesaiddiscussion,weareoftheviewthattheHighCourtcommittederrorinsettingasidetheorderofconvictioninexerciseofrevisionaljurisdiction.NosufficientgroundhasbeenmentionedbytheHighCourtinitsjudgmenttoenableittoexerciseitsrevisionaljurisdictionforsettingasidetheconviction.

24. Intheresult,theappealisallowed,judgmentoftheHighCourtissetasideandjudgmentoftrialcourtasaffirmedbytheAppellateCourtisrestored.

qqq

indian bank association and ors. versus union of india and ors.

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INdIAN BANk ASSOCIATION & ORS vERSUS UNION Of INdIA & ANR


Before Hon’ble Mr. Justice K.S. Radhakrishnan and Hon’ble Mr. Justice Vikramajit Sen

Indian Bank Association and others ...Petitioners Versus

Union of India and others ...Respondents

WRIT PETITION (CIVIL) NO.18 OF 2013Decided on 21 April, 2014

Debt, Financial and Monetary Laws – Negotiable Instruments Act, 1881 – Ss. 143 to 147 and 138 – Cheque dishonour cases – Directions issued for expeditious disposal of – Objectives of Amendment Act, 2002 – Fulfilment of – In order to have uniform practice in dealing with cases of dishonour of cheques, and to achieve objectives of speedy summary trial in view of amended provisions of NI Act viz. Ss. 143 to 147, held, amended provisions must be given effect to in letter and spirit – Held, court has option of accepting affidavits of complainant and other witnesses instead of examining them in the court, for their examination-in-chief – However, witnesses to the complaint and the accused must be avaible for cross-examination as and when there is direction to this effect by the court – Constitution of India – Arts. 21, 32 and 142 – Criminal Procedure Code, 1973, Ss. 262 to 264 and 202 to 204.

JUDGMENT

K.S. Radhakrishnan, J.

1. ThisWritPetition,underArticle32of theConstitutionof India,hasbeenpreferredby theIndian Banks Association (IBA) along with Punjab National Bank and another, seeking thefollowing reliefs

a. Layingdownappropriateguidelines/directionstobefollowedbyallCourtswithintheterritory of India competent to try a complaint under Section 138 of theNegotiableInstrumentsAct,1881(theAct)tofollowandcomplywiththemandateofSection143ofthesaidActreadwithSections261to265ofCriminalProcedureCode,1973(Cr.P.C.)forsummarytrialofsuchcomplaintsfiledorpendingbeforethesaidCourts.

b. Issue a writ of mandamus for compliance with the guidelines of this Honble Court indicatingvariousstepstobefollowedforsummarytrialofcomplaintsunderSection138ofthesaidActandreporttothisHonbleCourt.

c. Issue awrit ofmandamus, directing the respondents, to adopt necessary policy andlegislativechangestodealwithcasesrelatingtodishonorofcheqeussothatthesameareexpeditiouslydisposedoffinaccordancewiththeintentoftheActandtheguidelinesto be laid down by this Honble Court.


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2. Thefirstpetitioner,which isanAssociationofPersonswith174banks/financial institutionsasitsmembers, isavoluntaryassociationofbanksandfunctionsasthinktankforbanksinthemattersofconcernforthewholebankingindustry.ThePetitionerssubmitthattheissueraisedinthiscaseisofconsiderablenationalimportanceowingtothereasonthatintheeraofglobalizationandrapidtechnologicaldevelopments,financialtrustandcommercialinteresthave to be restored.

3. ThePetitionerssubmitthatthebankingindustryhasbeenputtoaconsiderabledisadvantageduetothedelayindisposingofthecasesrelatingtoNegotiableInstrumentsAct.ThePetitionerbanksbeingcustodianofpublicfundsfinditdifficulttoexpeditiouslyrecoverhugeamountofpublicfundwhichareblockedincasespendingunderSection138oftheNegotiableInstrumentsAct,1881.Petitionerssubmit that, in spiteof the fact,ChapterXIVhasbeen introduced inthe Negotiable Instruments Act by Section 4 of the Banking, Public Financial InstitutionsandNegotiable Instruments Laws (Amendment)Act,1988, toenhance theacceptabilityofchequesinsettlementofliabilitybymakingthedrawerliableforpenaltiesincaseofbouncingofchequesduetoinsufficiencyoffunds,thedesiredobjectoftheAmendmentActhasnotachieved.

4. LegislaturehasnoticedthattheintroductionofSections138to142oftheActhasnotachieveddesiredresultfordealingwithdishonouredcheques,hence,itinsertednewSections143to147intheNegotiableInstrumentsActvideNegotiableInstruments(AmendmentandMiscellaneousProvisions)Act,2002forspeedydisposalofcasesrelatingtodishonourofchequesthroughsummarytrialaswellasmakingtheoffencecompoundable.But,nouniformpracticeisseenfollowedbythevariousMagistrateCourtsinthecountry,asaresultofwhich,theobjectandpurpose for which the amendments were incorporated, have not been achieved.

5. Cheque, thoughacknowledgedasabillofexchangeunder theNegotiable InstrumentsActand readilyaccepted in lieuofpaymentofmoneyand isnegotiable, the fact remains thatthe chequeasanegotiable instrument started losing its credibilitybynotbeinghonouredon presentation. Chapter XVII was introduced, as already indicated, so as to enhance theacceptabilityof cheques in settlementof liabilities. TheStatementofObjectsandReasonsappended with the Bill explaining the provisions of the new Chapter reads as follows

Thisclause[Clause(4)oftheBill] insertsanewChapterXVII intheNegotiableInstrumentsAct, 1881. The provisions contained in the new Chapter provide that where any cheque drawn byapersonforthedischargeofanyliabilityisreturnedbythebankunpaidforthereasonoftheinsufficiencyoftheamountofmoneystandingtothecreditoftheaccountonwhichthecheque was drawn or for the reason that it exceeds the arrangements made by the drawer of thechequewiththebankersforthataccount,thedrawerofsuchchequeshallbedeemedtohavecommittedanoffence.Inthatcase,thedrawer,withoutprejudicetotheotherprovisionsof the said Act, shall be punishable with imprisonment for a term which may extend to one year,orwithfinewhichmayextendtotwicetheamountofthecheque,orwithboth.

Theprovisionshavealsobeenmadethattoconstitutethesaidoffence:

(a) suchchequeshouldhavebeenpresentedtothebankwithinaperiodofsixmonthsofthedateofitsdrawalorwithintheperiodofitsvalidity,whicheverisearlier;and


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(b) the payee or holder in due course of such cheque should have made a demand for the paymentofthesaidamountofmoneybygivinganotice,inwriting,tothedrawerofthechequewithinfifteendaysofthereceiptoftheinformationbyhimfromthebankregardingthereturnofthechequeunpaid;and

(c) thedrawerofsuchchequeshouldhavefailedtomakethepaymentofthesaidamountofmoneytothepayeeortheholderinduecourseofthechequewithinfifteendaysofthereceiptofthesaidnotice.

It has also been provided that it shall be presumed, unless the contrary is proved, that the holder of such cheque received the cheque in the discharge of a liability. Defences which mayormaynotbeallowedinanyprosecutionforsuchoffencehavealsobeenprovidedtomaketheprovisionseffective.UsualprovisionrelatingtooffencesbycompanieshasalsobeenincludedinthesaidnewChapter.Inordertoensurethatgenuineandhonestbankcustomersarenotharassedorputtoinconvenience,sufficientsafeguardshavealsobeenprovidedintheproposed new Chapter. Such safeguards are:

(a) thatnocourtshall takecognizanceofsuchoffenceexceptonacomplaint, inwriting,madebythepayeeortheholderinduecourseofthecheque;

(b) thatsuchcomplaintismadewithinonemonthofthedateonwhichthecauseofactionarises;and

(c) thatnocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateoraJudicialMagistrateoftheFirstClassshalltryanysuchoffence.

6. TheobjectivesoftheproceedingsofSection138oftheActarethatthechequesshouldnotbe used by persons as a tool of dishonesty and when cheque is issued by a person, it must be honoured and if it is not honoured, the person is given an opportunity to pay the cheque amountbyissuanceofanoticeandifhestilldoesnotpay,hemustfacethecriminaltrialandconsequences.Section138oftheNegotiableInstrumentsAct,1881,isgivenbelowforeasyreference

138. Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.-Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamount of money to another person from out of that account for the discharge, in whole orinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthe cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudicetoanyotherprovisionofthisAct,bepunishedwithimprisonmentforatermwhichmayextendtooneyear,orwithfinewhichmayextendto twice the amount of the cheque, or with both:


(a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier;

(b) thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganotice,inwriting,tothedrawer


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ofthecheque,withinfifteendaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and


Explanation.- For the purposes of this section, “debt or other liability” means a legallyenforceable debt or other liability.

7. ThisCourtinElectronicsTrade&TechnologyDevelopmentCorporationLtd.,Secunderabadv.IndianTechnologists&Engineers(Electronics)(P)Ltd.andAnother(1996)2SCC739,heldasfollows:

6...TheobjectofbringingSection138onstatuteappearstobetoinculcatefaithintheefficacyof banking operations and credibility in transacting business on negotiable instruments.Despitecivilremedy,Section138intendedtopreventdishonestyonthepartofthedrawerofnegotiableinstrumenttodrawachequewithoutsufficientfundsinhisaccountmaintainedbyhiminabookandinducethepayeeorholder induecoursetoactuponit.Section138drawspresumptionthatonecommitstheoffenceifheissuesthechequedishonestly.Itisseenthat once the cueque has been drawn and issued to the payee and the payee has presented thechequeand thereafter, ifany instructionsare issued to thebank fornon-paymentandthe cheque is returned to the payee with such an endorsement, it amounts to dishonour of chequeanditcomeswithinthemeaningofSection138.

8. InGoaPlast(P)Ltd.v.ChicoUrsulaDSouza(2004)2SCC235,thisCourt,whiledealingwiththeobjectsandingredientsofSections138and139oftheAct,observedasfollows

Theobjectandtheingredientsundertheprovisions,inparticular,Sections138and139oftheActcannotbeignored.Properandsmoothfunctioningofallbusinesstransactions,particularly,ofchequesasinstruments,primarilydependsupontheintegrityandhonestyoftheparties.Inourcountry,inalargenumberofcommercialtransactions,itwasnotedthatthechequeswere issued even merely as a device not only to stall but even to defraud the creditors. The sanctityandcredibilityof issuanceofcheques incommercial transactionswaseroded toalargeextent.Undoubtedly,dishonourofachequebythebankcausesincalculableloss,injuryandinconveniencetothepayeeandtheentirecredibilityofthebusinesstransactionswithinandoutsidethecountrysuffersaserioussetback.Parliament,inordertorestorethecredibilityofchequesasatrustworthysubstituteforcashpaymentenactedtheaforesaidprovisions.Theremedyavailableinacivilcourtisalong-drawnmatterandanunscrupulousdrawernormallytakesvariouspleastodefeatthegenuineclaimofthepayee.

9. Wehaveindicated,Sections138to142oftheActwerefoundtobedeficientindealingwiththedishonoured cheques. In the said circumstances, the legislature insertednewSections143to147bytheNegotiable Instruments (AmendmentandMiscellaneousProvisions)Act,2002,whichisbroughtintoforcew.e.f.6thFebruary,2003.TheobjectandreasonsforthesaidAmendment Act are of some importance and are given below

1. TheNegotiable InstrumentsAct,1881wasamendedby theBanking,PublicFinancialInstitutionsandNegotiable InstrumentsLaws(Amendment)Act,1988whereinanewChapter XVIIwas incorporated for penalties in case of dishonour of cheques due to


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insufficiencyoffundsintheaccountofthedrawerofthecheque.Theseprovisionswereincorporated with a view to encourage the culture of use of cheques and enhancing thecredibilityoftheinstrument.TheexistingprovisionsintheNegotiableInstrumentsAct,1881, namely, sections 138 to 142 in Chapter XVII have been found deficient indealing with dishonour of cheques. Not only the punishment provided in the Act has proved to be inadequate, the procedure prescribed for the Courts to deal with such mattershasbeenfoundtobecumbersome.TheCourtsareunabletodisposeofsuchcasesexpeditiouslyinatimeboundmannerinviewoftheprocedurecontainedintheAct.

2. Alargenumberofcasesarereportedtobependingundersections138to142oftheNegotiableInstrumentsActinvariouscourtsinthecountry.KeepinginviewthelargenumberofcomplaintsunderthesaidActpendinginvariouscourts,aWorkingGroupwasconstitutedtoreviewsection138oftheNegotiableInstrumentsAct,1881andmakerecommendationsastowhatchangeswereneededtoeffectivelyachievethepurposeofthatsection.

3. The recommendations of theWorking Group alongwith other representations fromvariousinstitutionsandorganisationswereexaminedbytheGovernmentinconsultationwiththeReserveBankofIndiaandotherlegalexperts,andaBill,namely,theNegotiableInstruments (Amendment) Bill, 2001 was introduced in the Lok Sabha on 24th July,2001. The Bill was referred to Standing Committee on Finance which made certainrecommendationsinitsreportsubmittedtoLokSabhainNovember,2001.

4. KeepinginviewtherecommendationsoftheStandingCommitteeonFinanceandotherrepresentations,ithasbeendecidedtobringout,interalia,thefollowingamendmentsintheNegotiableInstrumentsAct,1881,namely:

(i) to increase the punishment as prescribed under the Act from one year to two years;

(ii) toincreasetheperiodforissueofnoticebythepayeetothedrawerfrom15daysto30days;

(iii) toprovidediscretiontotheCourttowaivetheperiodofonemonth,whichhasbeenprescribedfortakingcognizanceofthecaseundertheAct;

(iv) toprescribeprocedurefordispensingwithpreliminaryevidenceofthecomplainant;

(v) to prescribe procedure for servicing of summons to the accused or witness by the Courtthroughspeedpostorempanelledprivatecouriers;

(vi) to provide for summary trial of the cases under the Act with a view to speeding up disposalofcases;

(vii) tomaketheoffencesundertheActcompoundable;

(viii) to exempt those directors fromprosecution under section 141 of theActwhoare nominated as directors of a company by virtue of their holding any officeor employment in the Central Government or StateGovernment or a financialcorporation owned or controlled by the Central Government, or the StateGovernment,asthecasemaybe;


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(ix) toprovidethattheMagistratetryinganoffenceshallhavepowertopasssentenceofimprisonmentforatermexceedingoneyearandamountoffineexceedingfivethousandrupees;

(x) to make the Information Technology Act, 2000 applicable to the NegotiableInstruments Act,1881 in relation to electronic cheques and truncated chequessubject to suchmodifications and amendments as the Central Government, inconsultationwiththeReserveBankofIndia,considersnecessaryforcarryingoutthepurposesoftheAct,bynotificationintheOfficialGazette;and

(xi) toamenddefinitionsof“bankers’books”and“certifiedcopy”givenintheBankers’BooksEvidenceAct,1891.

5. Theproposedamendments intheActareaimedatearlydisposalofcasesrelatingtodishonour of cheques, enhancing punishment for offenders, introducing electronicimageofatruncatedchequeandachequeintheelectronicformaswellasexemptinganofficialnomineedirectorfromprosecutionundertheNegotiableInstrumentsAct,1881.

6. TheBillseekstoachievetheaboveobjects.

10. Section143oftheActintroducedby2002Amendmentreadsasfollows

| | | |

||143.PowerofCourttotrycasessummarily.-

| | | |

| | (1) Notwithstanding anything contained in the Code of | |

||CriminalProcedure,1973,alloffencesunderthisChapter ||

||shallbetriedbyaJudicialMagistrateofthefirstclassor||||byaMetropolitanMagistrateandtheprovisionsofSections||||262to265(bothinclusive)ofthesaidCodeshall,asfaras||||maybe,applytosuchtrials:||||||||Providedthatinthecaseofanyconvictionina summary||||trialunder this section, it shallbe lawful for the||||Magistrate topass a sentence of imprisonment for a term not | | | |exceeding one year and an amount of fineexceedingfive||||thousandrupees:||||||||Providedfurtherthatwhenatthecommencementof,orinthe||||courseof,asummarytrialunderthissection,itappearsto||||theMagistratethatthenatureofthecaseissuchthata||||sentenceofimprisonmentfor a term exceeding one year may | | | |have to be passed or that it is, for any other reason, || | |undesirable to try the case summarily, theMagistrate shall | | | |afterhearing theparties,recordanordertothateffectand||||thereafterrecallanywitnesswhomayhavebeen examined and | | | |proceed to hear or rehear the case in the manner provided by | |||thesaidCode.||||||||(2)Thetrialofacaseunderthissectionshall,sofaras||||practicable,consistentlywiththeinterestsofjustice,be||||continuedfromdaytodayuntilitsconclusion,unlessthe||||Courtfindstheadjournmentofthetrialbeyondthefollowing||||daytobenecessaryforreasonstoberecordedinwriting.||||||||(3)Everytrialunderthissectionshallbeconductedas||||expeditiouslyaspossibleandanendeavourshallbemadeto||||concludethetrialwithinsixmonthsfromthedateoffiling||||ofthecomplaint. | |


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11. Section145oftheActdealswiththeevidenceonaffidavitandreadsasfollows:

145. Evidenceonaffidavit.

(1) NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973,(2of1974.)theevidenceofthecomplainantmaybegivenbyhimonaffidavitandmay,subjecttoalljustexceptions,bereadinevidenceinanyenquiry,trialorotherproceeding under the said Code.

(2) TheCourtmay,ifitthinksfit,andshall,ontheapplicationoftheprosecutionortheaccused,summonandexamineanypersongivingevidenceonaffidavitastothefacts contained therein.

12. ThescopeofSection145cameupforconsiderationbeforethisCourtinMandviCooperativeBank Limited v. Nimesh B. Thakore (2010) 3 SCC 83, and the samewas explained in thatjudgment stating that the legislatureprovided for thecomplainant togivehisevidenceonaffidavit,butdidnotprovidethesamefortheaccused.TheCourtheldthateventhoughthelegislature in their wisdom did not deem it proper to incorporate a word accused with the wordcomplainantinSection145(1),itdoesnotmeanthattheMagistratecouldnotallowthecomplainanttogivehisevidenceonaffidavit,unlesstherewasjustandreasonablegroundtorefuse such permission.

13. ThisCourtwhileexaminingthescopeofSection145inRadheyShyamGargv.NareshKumarGupta(2009)13SCC201,heldasfollows:-

IfanaffidavitintermsoftheprovisionsofSection145oftheActistobeconsideredtobeanevidence,itisdifficulttocomprehendastowhythecourtwillaskthedeponentofthesaidaffidavit to examine himselfwith regard to the contents thereof once over again.Hemaybecross-examinedanduponcompletionofhisevidence,hemaybere-examined.Thus,thewordsexamineanypersongivingevidenceonaffidavitastothefactscontainedtherein,intheevent,thedeponentissummonedbythecourtintermsofsub-section(2)ofSection145oftheAct,inouropinion,wouldmeanforthepurposeofcross-examination.Theprovisionseekstoattendasalutarypurpose.

14. Considerable time is usually spent for recording the statement of the complainant. ThequestioniswhethertheCourtcandispensewiththeappearanceofthecomplainant,instead,totakestepstoaccepttheaffidavitofthecomplainantandtreatthesameasexamination-in-chief.Section145(1)givescompletefreedomtothecomplainanteithertogivehisevidencebywayofaffidavitorbywayoforalevidence.TheCourthastoacceptthesameevenifitisgivenbywayofanaffidavit.SecondpartofSection145(1)providesthatthecomplainantsstatementonaffidavitmay,subjecttoalljustexceptions,bereadinevidenceinanyinquiry,trialorotherproceedings. Section145 isa ruleofprocedurewhich laysdown themanner inwhich theevidence of the complainant may be recorded and once the Court issues summons and the presenceoftheaccusedissecured,anoptionbegiventotheaccusedwhether,atthatstage,he would be willing to pay the amount due along with reasonable interest and if the accused isnotwillingtopay,Courtmayfixupthecaseatanearlydateandensureday-to-daytrial.

15. Section143empowerstheCourttotrycasesfordishonourofchequessummarilyinaccordancewiththeprovisionsofSection262to265oftheCodeofCriminalProcedure,1973.TherelevantprovisionsbeingSections262to264areextractedhereinbelowforeasyreference:


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262. Procedure for summary trials.

(1) In trialsunderthisChapter, theprocedurespecified in thisCodefor thetrialofsummons-easeshallbefollowedexceptashereinaftermentioned.

(2) No sentence of imprisonment for a term exceeding three months shall be passed inthecaseofanyconvictionunderthisChapter.

263. Recordinsummarytrials.-

In every case tried summarily, theMagistrate shall enter, in such form as the StateGovernmentmaydirect,thefollowingparticulars,namely:-

(a) the serial number of the case:

(b) thedateofthecommissionoftheoffence;

(c) thedateofthereportorcomplaint;

(d) thenameofthecomplainant(ifany);

(e) thename,parentageandresidenceoftheaccused;

(f) theoffencecomplainedofandtheoffence(ifany)proved,and incasescomingunderclause(ii),clause(iii)orclause(iv)ofsub-section(1)ofsection260,thevalueofthepropertyinrespectofwhichtheoffencehasbeencommitted;

(g) thepleaoftheaccusedandhisexamination(ifany);

(h) thefinding;

(i) thesentenceorotherfinalorder

(j)thedateonwhichproceedingsterminated.

264. Judgmentincasestriedsummarily.Ineverycasetriedsummarilyinwhichtheaccuseddoesnotpleadguilty,theMagistrateshallrecordthesubstanceoftheevidenceandajudgmentcontainingabriefstatementofthereasonsforthefinding.

16. WehaveindicatedthatunderSection145oftheAct,thecomplainantcangivehisevidencebywayofanaffidavitandsuchaffidavitshallbereadinevidenceinanyinquiry,trialorotherproceedingsintheCourt,whichmakesitclearthatacomplainantisnotrequiredtoexaminehimselftwicei.e.oneafterfilingthecomplaintandoneaftersummoningoftheaccused.Affidavitandthedocumentsfiledbythecomplainantalongwithcomplaintfortakingcognizanceoftheoffencearegoodenoughtobereadinevidenceatboththestagesi.e.pre-summoningstageand the post summoning stage. In other words, there is no necessity to recall and re- examine thecomplaintaftersummoningofaccused,unlesstheMagistratepassesaspecificorderastowhythecomplainantistoberecalled.SuchanorderistobepassedonanapplicationmadebytheaccusedorunderSection145(2)oftheActsuomotobytheCourt.Insummarytrial,aftertheaccusedissummoned,hispleaistoberecordedunderSection263(g)Cr.P.C.andhisexamination,ifany,canbedonebyaMagistrateandafindingcanbegivenbytheCourtunderSection263(h)Cr.P.C.andthesameprocedurecanbefollowedbyaMagistrateforoffenceofdishonourofchequesinceoffenceunderSection138oftheActisadocumentbasedoffence.Wemakeitclearthatiftheproviso(a),(b)&(c)toSection138oftheActareshowntohavebeencompliedwith,technicallythecommissionoftheoffencestandscompletedanditisfor


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theaccusedtoshowthatnooffencecouldhavebeencommittedbyhimforspecificreasonsand defences.

17. ProcedureforsummarycasehasitselfbeenexplainedbythisCourtinNitinbhaiSaevantilalShahandanotherv.ManubhaiManjibhaiPanchalandanother(2011)9SCC638,whereinthisCourt held as under :

12. ProvisionforsummarytrialsismadeinChapterXXIoftheCode.Section260oftheCodeconfers power upon any Chief JudicialMagistrate or anyMetropolitanMagistrate oranyMagistrateoftheFirstClassspeciallyempoweredinthisbehalfbytheHighCourttotryinasummarywayalloranyoftheoffencesenumeratedtherein.Section262laysdowntheprocedureforsummarytrialandsub-section(1)thereofinteraliaprescribesthatinsummarytrialstheprocedurespecifiedintheCodeforthetrialofsummonscaseshallbefollowedsubjecttotheconditionthatnosentenceofimprisonmentforatermexceedingthreemonthsispassedincaseofanyconvictionunderthechapter.

13. Themanner inwhich therecord insummary trials is tobemaintained isprovided inSection263of theCode.Section264mentions that ineverycase triedsummarily inwhichtheaccuseddoesnotpleadguilty,theMagistrateshallrecordthesubstanceoftheevidenceandajudgmentcontainingabriefstatementofthereasonsforthefinding.Thus,theMagistrateisnotexpectedtorecordfullevidencewhichhewouldhavebeen,otherwiserequiredtorecordinaregulartrialandhisjudgmentshouldalsocontainabriefstatementofthereasonsforthefindingandnotelaboratereasonswhichotherwisehe would have been required to record in regular trials.

18. AmendmentAct, 2002has to be given effect to in its letter and spirit. Section 143of theAct,asalreadyindicated,hasbeeninsertedbythesaidActstipulatingthatnotwithstandinganythingcontainedintheCodeofCriminalProcedure,alloffencescontainedinChapterXVIIoftheNegotiableInstrumentsActdealingwithdishonourofchequesforinsufficiencyoffunds,etc.shallbetriedbya JudicialMagistrateandtheprovisionsofSections262to265Cr.P.C.prescribing procedure for summary trials, shall apply to such trials and it shall be lawful for aMagistrate topass sentenceof imprisonment for a termnotexceedingoneyearandanamountoffineexceedingRs.5,000/-anditisfurtherprovidedthatinthecourseofasummarytrial,ifitappearstotheMagistratethatthenatureofthecaserequirespassingofthesentenceofimprisonmentexceedingoneyear,theMagistrate,afterhearingtheparties,recordanordertothateffectandthereafterrecallanywitnessandproceedtohearorrehearthecaseinthemanner provided in Criminal Procedure Code.

19. This Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663, laid down certainguidelines while interpreting Sections 138 and 147 of the Negotiable Instruments Act toencouragelitigantsinchequedishonourcasestooptforcompoundingduringearlystagesoflitigationtoeasechokingofcriminaljusticesystemforgradedschemeofimposingcostsonpartieswhoundulydelaycompoundingofoffence,andforcontrollingoffilingofcomplaintsinmultiplejurisdictionsrelatabletosametransaction,whichhavealsotobeborneinmindbytheMagistratewhiledealingwithcasesunderSection138oftheNegotiableInstrumentsAct.

20. Wenotice,consideringallthoseaspects,fewHighCourtsofthecountryhavelaiddowncertainproceduresforspeedydisposalofcasesunderSection138oftheNegotiableInstrumentsAct.Reference,inthisconnection,maybemadetothejudgmentsoftheBombayHighCourtinKSL


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andIndustriesLtd.v.MannalalKhandelwalandTheStateofMaharashtrathroughtheOfficeof theGovernmentPleader (2005)CriLJ 1201, Indo International Ltd. and another v. StateofMaharashtra andanother (2005) 44Civil CC (Bombay) andHarischandraBiyani v. StockHoldingCorporationofIndiaLtd.(2006)4MhLJ381,thejudgmentoftheCalcuttaHighCourtinMagmaLeasingLtd.v.StateofWestBengalandothers(2007)3CHN574andthejudgmentoftheDelhiHighCourtinRajeshAgarwalv.Stateandanother(2010)ILR6Delhi610.

21. ManyofthedirectionsgivenbythevariousHighCourts,inourview,areworthyofemulationbytheCriminalCourtsalloverthecountrydealingwithcasesunderSection138oftheNegotiableInstrumentsAct,forwhichthefollowingdirectionsarebeinggiven:-

DIRECTIONS:

1) MetropolitanMagistrate/JudicialMagistrate(MM/JM),onthedaywhenthecomplaintunder Section 138 of the Act is presented, shall scrutinize the complaint and, if thecomplaintisaccompaniedbytheaffidavit,andtheaffidavitandthedocuments,ifany,arefoundtobeinorder,takecognizanceanddirectissuanceofsummons.

2) MM/JM should adopt a pragmatic and realistic approach while issuing summons.Summons must be properly addressed and sent by post as well as by e-mail address got fromthecomplainant.Court,inappropriatecases,maytaketheassistanceofthepoliceorthenearbyCourttoservenoticetotheaccused.Fornoticeofappearance,ashortdatebefixed.Ifthesummonsisreceivedbackun-served,immediatefollowupactionbetaken.

3) Court may indicate in the summon that if the accused makes an application forcompoundingofoffencesatthefirsthearingofthecaseand,ifsuchanapplicationismade, Court may pass appropriate orders at the earliest.

4) Courtshoulddirecttheaccused,whenheappearstofurnishabailbond,toensurehisappearanceduringtrialandaskhimtotakenoticeunderSection251Cr.P.C.toenablehimtoenterhispleaofdefenceandfixthecasefordefenceevidence,unlessanapplicationismadebytheaccusedunderSection145(2)forre-callingawitnessforcross-examination.

(5) TheCourt concernedmust ensure that examination-in-chief, cross-examination and re-examinationofthecomplainantmustbeconductedwithinthreemonthsofassigningthecase.TheCourthasoptionofacceptingaffidavitsofthewitnesses,insteadofexaminingthem in Court.Witnesses to the complaint and accusedmust be available for cross-examinationasandwhenthereisdirectiontothiseffectbytheCourt.

22. We,therefore,directalltheCriminalCourtsinthecountrydealingwithSection138casestofollowtheabove-mentionedproceduresforspeedyandexpeditiousdisposalofcasesfallingunderSection138oftheNegotiableInstrumentsAct.

23. WritPetitionis,accordingly,disposedof,asabove...J.

qqq

msr leathers versus s. palaniappan and anr.

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MSR LEATHERS vERSUS S. pALANIAppAN ANd ANR(2013) 1 Supreme Court Cases 177


Before Hon’ble Mr. Justice R.M. Lodha, Hon’ble Mr. Justice T.S. Thakur, Hon’ble Mr. Justice Anil R. Dave

MSR Leathers ...Appellant Versus

S. Palaniappan & Anr. ...Respondents

CRIMINAL APPEAL NOS.261-264 OF 2002Decided on 26 September, 2012

Held, prosecution based upon second or successive dishonour of cheque is permissible so long as it satisfies all the requirements stipulated in proviso to S. 138. So long as cheque remains valid and unpaid there is a continuing obligation of drawer to make good the same.

JUDGMENT

T.S. THAKUR, J.

1. InSadanandanBhadranv.MadhavanSunilKumar(1998)6SCC514,thisCourtwasdealingwithacaseunderSection138oftheNegotiableInstrumentAct,1881(hereinafterreferredtoastheAct)inwhichthecomplainanthad,afterdishonourofachequeissuedinhisfavour,taken steps to serve upon the accused-drawer of the cheque a notice under clause (b) ofprovisotoSection138oftheAct.Nocomplaintwas,however,filedbythecomplainantdespitefailure of the accused to arrange the payment of the amount covered by the cheque. Instead, thecomplainant-payeeof thechequehadpresented thecheque for collectiononceagain,whichwasdishonouredasecondtimeforwantofsufficientfunds.Anothernoticewasservedonthedrawerofthechequetoarrangepaymentwithinfifteendaysofreceiptofsaidnotice.OnlyafterfailureofdrawertodosodidthepayeefileacomplaintagainsttheformerunderSection138oftheAct.

2. Afterenteringappearance,thedrawerfiledanapplicationseekingdischargeonthegroundthatthepayeecouldnotcreatemorethanonecauseofactioninrespectofasinglechequeandthecomplaintinquestionhavingbeenfiledonthebasisofthesecondpresentationandresultantsecondcauseofactionwasnotmaintainable.TheMagistrateacceptedthatcontentionrelyingupon a Division Bench decision of Kerala High Court in Kumaresan v. Ameerappa (1991) 1 Ker L.T.893anddismissedthecomplaint.TheorderpassedbytheMagistratewasthenquestionedbefore the High Court of Kerala who relying upon Kumaresans case (supra) upheld the order passedbytheMagistrate.ThematterwaseventuallybroughtuptothisCourtbyspecialleave.ThisCourtformulatedthefollowingquestionfordetermination:

WhetherpayeeorholderofchequecaninitiateproceedingofprosecutionunderSection138ofNegotiableInstrumentAct,1881forthesecondtimeifhehasnotinitiatedanyactiononearliercauseofaction?


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3. AnsweringthequestioninthenegativethisCourtheldthatacombinedreadingofSections138and142oftheActleftnoroomfordoubtthatcauseofactionunderSection142(b)canariseonlyonce.TheconclusionobservedbythecourtissupportednotonlybySections138and142butalsobythefactthatthedishonourofchequegivesrisetothecommissionofoffenceonly on the failure topaymoneywhen anotice is servedupon thedrawer in accordancewithclause(b)of theprovisotoSection138.TheCourt furtherheldthat if theconceptofsuccessivecausesofactionweretobeacceptedthesamewouldmakethelimitationunderSection142(b)otiose.TheCourtobserved:

7. BesidesthelanguageofSections138and142whichclearlypostulatesonlyonecauseofaction,thereareotherformidableimpedimentswhichnegatetheconceptofsuccessivecausesofaction.Oneofthemisthatfordishonourofonecheque,therecanbeonlyoneoffenceandsuchoffenceiscommittedbythedrawerimmediatelyonhisfailuretomakethepaymentwithinfifteendaysofthereceiptofthenoticeservedinaccordancewithclause(b)oftheprovisotoSection138.Thatnecessarilymeansthatforsimilarfailureafterserviceoffreshnoticeonsubsequentdishonour,thedrawercannotbeliableforanyoffencenorcanthefirstoffencebetreatedasnonestsoastogivethepayeearighttofileacomplainttreatingthesecondoffenceasthefirstone.Atthatstage,itwillnotbeaquestionofwaiveroftherightofthepayeetoprosecutethedrawerbutofabsolutionofthedrawerofanoffence,whichstandsalreadycommittedbyhimandwhichcannotbecommittedbyhimagain.

8. Theotherimpedimenttotheacceptanceoftheconceptofsuccessivecausesofactionisthatitwillmaketheperiodoflimitationunderclause(c)ofSection142otiose,for,a payeewho failed to file his complaintwithin onemonth and thereby forfeited hisright to prosecute the drawer, can circumvent the above limitative clause by filing acomplaintonthebasisofafreshpresentationofthechequeanditsdishonour.Sinceintheinterpretationofstatutes,thecourtalwayspresumesthatthelegislatureinsertedeverypartthereofforapurposeandthelegislativeintentionisthateverypartshouldhaveeffect,theaboveconclusioncannotbedrawnforthatwillmaketheprovisionforlimitingtheperiodofmakingthecomplaintnugatory.

4. TheCourtthentriedtoreconciletheapparentlyconflictingprovisionsoftheAct-oneenablingthepayee topresent the chequeand theothergivinghimopportunity tofilea complaintwithin one month and observed:

..Havinggivenouranxiousconsiderationtothisquestion,weareoftheopinionthattheabovetwoprovisionscanbeharmonised,withtheinterpretationthatoneachpresentationofthechequeanditsdishonour,afreshrightandnotcauseofactionaccruesinhisfavour.Hemay,therefore,withouttakingpre-emptoryactioninexerciseofhissuchrightunderclause(b)ofSection138,goonpresentingthechequesoastoenablehimtoexercisesuchrightatanypointoftimeduringthevalidityofthecheque.Butoncehegivesanoticeunderclause(b)ofSection138,he forfeitssuchright for incaseof failureof thedrawer topay themoneywithinthestipulatedtime,hewouldbeliableforoffenceandthecauseofactionforfilingthecomplaintwillarise.Needlesstosay,theperiodofonemonthforfilingthecomplaintwillbereckonedfromthedayimmediatelyfollowingthedayonwhichtheperiodoffifteendaysfromthedateofthereceiptofthenoticebythedrawerexpires.


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5. TheCourtaccordinglydismissedtheappealwhileaffirmingthedecisionof theKeralaHighCourtinKumaresanscase(supra),nomatterthesamehadbeeninthemeantimeoverruledbyadecisionoftheFullBenchofthatCourtinS.K.D.LakshmananFireworksIndustriesv.K.V.SivaramaKrishnan(1995)CriLJ1384(Ker).

6. WhenthepresentappealfirstcameupforhearingbeforeabenchcomprisingMarkandeyKatjuandB.SudershanReddy,JJ.,relianceonbehalfofrespondentswasplaceduponthedecisionof this Court in Sadanandan Bhadrans case (supra) to argue that the complaint in the instant casehadalsobeenfiledonthebasisoftheseconddishonourofachequeafterthepayeeofthechequehadissuedanoticetothedrawerunderclause(b)oftheprovisotoSection138oftheActbasedonanearlierdishonour.OntheratioofSadanandanBhadranscase(supra)sucha complaint was not maintainable, argued the respondents. The Court, however, expressed itsreservationaboutthecorrectnessoftheviewtakeninSadanandanBhadranscase(supra)especially in para 9 thereof and accordingly referred thematter to a largerBench. That isprecisely how the present appeal has come up for hearing before us. It is, therefore, evident thatthisCourthasrepeatedlyfollowedtheviewtakeninSadanandanBhadranscase(supra).But a careful reading of these decisions reveals that in these subsequent decisions there had beennoadditiontotheratiounderlyingtheconclusioninSadanandanBhadranscase(supra).

7. BeforeadvertingtothesubmissionsthatwereurgedattheBarwemaybrieflysummarisethefactsinthebackdropofwhichtheissuearisesforourdetermination.Fourchequesforatotalsumofrupeestenlakhswereissuedbytherespondent-companyon14thAugust,1996infavouroftheappellantwhichwerepresentedtothebankforcollectionon21stNovember,1996.Thechequesweredishonouredintermsofmemodated22ndNovember,1996forinsufficiencyoffunds.Anoticeunderclause(b)ofprovisotoSection138wasthenissuedbytheappellanttotherespondenton8thJanuary,1997demandingpaymentoftheamountcoveredbythecheques.Despitereceiptofthenoticebytherespondentthepaymentwasnotarranged.Theappellants case is that the respondent assured the appellant that the funds necessary for the encashment of the cheques shall be made available by the respondent, for which purpose thechequescouldbepresentedagaintothebankconcerned.Thechequeswereaccordinglypresentedforthesecondtimetothebankon21stJanuary,1997andweredishonouredforasecondtime intermsofamemodated22ndJanuary,1997onceagainonthegroundofinsufficiencyoffunds.Astatutorynoticeissuedbytheappellantunderclause(b)ofprovisotoSection138oftheActon28thJanuary,1997calledupontherespondent-drawerofthechequestoarrangepaymentoftheamountwithin15days.Despitereceiptofthesaidnoticeon3rdFebruary,1997,nopaymentwasarrangedwhichledtothefilingofComplaintCaseNo.1556-1557/1997bytheappellantbeforetheIIMetropolitanMagistrate,MadrasfortheoffencepunishableunderSection138readwithSection142oftheAct.TheMagistratetookcognizanceand issuedsummons to the respondents in responsewhereto the respondentsentered appearance and sought discharge primarily on the ground that the complaint had notbeenfiledwithin30daysoftheexpiryofthenoticebasedonthefirstdishonourofthecheque.Itwasalsoallegedthatthestatutorynoticewhichformedthebasisofthecomplainthadnotbeenservedupontheaccusedpersons.TheMagistrateuponconsiderationdismissedtheapplicationsfordischargewhichorderwasthenassailedbytherespondentsbeforetheHighCourtofMadrasinCriminalAppealNos.618,624,664,665/2000.


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8. The High Court has, by the order impugned in this appeal, allowed the revision and quashed theorderspassedbytheMagistraterelyinguponthedecisionofthisCourt inSadanandanBhadrans case (supra) according to which a complaint based on a second or successive dishonour of the cheque was not maintainable if no complaint based on an earlier dishonour, followedbythestatutorynoticeissuedonthebasisthereof,hadbeenfiled.

9. Section 138 of theNegotiable Instruments Act, 1881, constituting Chapter XVII of the Actwhich was introduced by Act 66 of 1988, inter alia, provides:

138. Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamount of money to another person from out of that account for the discharge, in whole orinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthe cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudice.toanyotherprovisionofthisAct,bepunishedwithimprisonmentforatermwhichmayextendtotwoyear,orwithfinewhichmayextendto twice the amount of the cheque, or with both

10. Proviso to Section 138, however, is all important and stipulates three distinct conditionsprecedent,whichmustbesatisfiedbeforethedishonourofachequecanconstituteanoffenceandbecomepunishable.Thefirstconditionisthatthechequeoughttohavebeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichit isdrawnorwithintheperiodofitsvalidity,whicheverisearlier.Thesecondconditionisthatthepayeeortheholderinduecourseofthecheque,asthecasemaybe,oughttomakeademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerofthecheque,withinthirtydaysof the receiptof informationbyhim fromthebank regarding the returnof thechequeasunpaid.Thethirdconditionisthatthedrawerofsuchachequeshouldhavefailedtomakepaymentofthesaidamountofmoneytothepayeeorasthecasemaybe,totheholderinduecourseofthechequewithinfifteendaysofthereceiptofthesaidnotice.ItisonlyuponthesatisfactionofallthethreeconditionsmentionedaboveandenumeratedundertheprovisotoSection138asclauses(a),(b)and(c)thereofthatanoffenceunderSection138canbesaidtohavebeencommittedbythepersonissuingthecheque.

11. Section142oftheNegotiableInstrumentsActgovernstakingofcognizanceoftheoffenceandstartswithanon-obstanteclause.ItprovidesthatnocourtshalltakecognizanceofanyoffencepunishableunderSection138exceptuponacomplaint,inwriting,madebythepayeeor,asthe case may be, by the holder in due course and such complaint is made within one month of thedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotoSection138.Intermsofsub-section(c)toSection142,nocourtinferiortothatofaMetropolitanMagistrateora JudicialMagistrateof thefirst class is competent to tryanyoffencepunishableunderSection138.

12. AcarefulreadingoftheaboveprovisionsmakesitmanifestthatacomplaintunderSection138canbefiledonlyaftercauseofactiontodosohasaccruedintermsofclause(c)ofprovisotoSection138which,asnoticedearlier,happensnosoonerthanwhenthedrawerofthechequefailstomakethepaymentofthechequeamounttothepayeeortheholderofthecheque


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within15daysofthereceiptofthenoticerequiredtobesentintermsofclause(b)ofprovisotoSection138oftheAct.

13. WhatisimportantisthatneitherSection138norSection142oranyotherprovisioncontainedintheActforbidstheholderorpayeeofthechequefrompresentingthechequeforencashmenton any number of occasions within a period of six months of its issue or within the period of itsvalidity,whicheverisearlier.ThatsuchpresentationwillbeperfectlylegalandjustifiedwasnotdisputedbeforeusevenattheBarbylearnedcounselappearingforthepartiesandrightlyso in lightof the judicialpronouncementson thatquestionwhichareallunanimous.EvenSadanandanBhadrans case (supra) the correctnesswhereofwe are examining, recognizedthat the holder or the payee of the cheque has the right to present the same any number oftimesforencashmentduringtheperiodofsixmonthsorduringtheperiodofitsvalidity,whichever is earlier.

14. PresentationofthechequeanddishonourthereofwithintheperiodofitsvalidityoraperiodofsixmonthsisjustoneofthethreerequirementsthatconstitutescauseofactionwithinthemeaningofSections138and142(b)oftheAct,anexpressionthatismorecommonlyusedincivil lawthan inpenal statutes.Foradishonour toculminate into thecommissionofanoffenceofwhichacourtmaytakecognizance,therearetwootherrequirements,namely,(a)serviceofanoticeuponthedrawerofthechequetomakepaymentoftheamountcoveredbythechequeand(b)failureofthedrawertomakeanysuchpaymentwithinthestipulatedperiodof15daysofthereceiptofsuchanotice.Itisonlywhenthesaidtwoconditionsaresuperadded to thedishonourof thecheque that theholder/payeeof thechequeacquirestherightto instituteproceedingsforprosecutionunderSection138oftheAct,whichrightremainslegallyenforceableforaperiodof30dayscountedfromthedateonwhichthecauseofactionaccruedtohim.Thereis,however,nothingintheprovisotoSection138orSection142forthatmatter,toobligetheholder/payeeofadishonouredchequetonecessarilyfileacomplaintevenwhenhehasacquiredanindefeasiblerighttodoso.Thefactthatanoffenceiscompleteneednotnecessarilyleadtolaunchofprosecutionespeciallywhentheoffenceisnotacognizableone.Itfollowsthatthecomplainantmay,evenwhenhehastheimmediaterighttoinstitutecriminalproceedingsagainstthedrawerofthecheque,eitherattherequestoftheholder/payeeofthechequeoronhisownvolition,refrainfrominstitutingtheproceedingsbasedonthecauseofactionthathasaccruedtohim.Suchadecisiontodeferprosecutionmaybeimpelledbyseveralconsiderationsbutmoreimportantlyitmaybeinducedbyanassurancewhich thedrawerextends to theholderof thecheque thatgiven sometime thepaymentcoveredbythechequeswouldbearranged,intheprocessrenderingatimeconsumingandgenerally expensive legal recourse unnecessary. It may also be induced by a belief that a freshpresentationofthechequemayresultinencashmentforavarietyofreasonsincludingthevicissitudesoftradeandbusinessdealingswherefinancialaccommodationgivenbythepartiestoeachotherisnotanunknownphenomenon.SufficeittosaythatthereisnothingintheprovisionsoftheActthatforbidstheholder/payeeofthechequetodemandbyserviceofafreshnoticeunderclause(b)ofprovisotoSection138oftheAct,theamountcoveredbythecheque,shouldtherebeasecondorasuccessivedishonourofthechequeonitspresentation.

15. SadanandanBhadranscase(supra)holdsthatwhileasecondorsuccessivepresentationofthechequeislegallypermissiblesolongassuchpresentationiswithintheperiodofsixmonthsor the validity of the cheque whichever is earlier, the second or subsequent dishonour of the


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chequewouldnotentitletheholder/payeetoissueastatutorynoticetothedrawernorwoulditentitlehimtoinstitutelegalproceedingsagainstthedrawerintheeventhefailstoarrangethepayment.Thedecisiongivesthreedistinctreasonswhythatshouldbeso.ThefirstandtheforemostofthesereasonsistheuseoftheexpressioncauseofactioninSection142(b)oftheActwhichaccordingtotheCourthasbeenusedinarestrictivesenseandmustthereforebeunderstoodtomeanthatcauseofactionunderSection142(b)canarisebutonce.Thesecondreasoncitedfortheviewtaken intheSadanandanBhadranscase(supra) isthatdishonourofachequewillleadtocommissionofonlyoneoffenceandthattheoffenceiscompletenosooner thedrawer fails tomakethepaymentof thechequeamountwithinaperiodof15daysofthereceiptofthenoticeserveduponhim.TheCourthasnotpressedintoservicethedoctrineofwaiveroftherighttoprosecutebutheldthatthefailureoftheholdertoinstituteproceedingswouldtantamounttoabsolutionofthedraweroftheoffencecommittedbyhim.Thethirdandtheonlyotherreason is thatsuccessivecausesofactionwillmilitateagainsttheprovisionsofSection142(b)andmakethesaidprovisionotiose.TheCourtinSadanandanBhadrans case (supra)held that the failureof thedrawer/payee tofile a complaintwithinonemonth resulted in forfeitureof the complainants right toprosecute thedrawer/payeewhichforfeiturecannotbecircumventedbyhimbypresentingthechequeafreshandinvitingadishonourtobefollowedbyafreshnoticeandadelayedcomplaintonthebasisthereof.

16. WithutmostrespecttotheJudgeswhodecidedSadanandanBhadranscase(supra)weregretour inability to fall in line with the above line of reasoning to hold that while a cheque is presented afresh the right to prosecute the drawer, if the cheque is dishonoured, is forfeited only because the previous dishonour had not resulted in immediate prosecution of theoffenderevenwhenanoticeunderclause(b)ofprovisotoSection138hadbeenserveduponthedrawer.Weareconsciousof the fact thatSadanandanBhadranscase (supra)hasbeenfollowedinseveralsubsequentdecisionsofthisCourtsuchasinSilImport,USAv.EximAidesSilkExporters,Bangalore,(1999)4SCC567,UniplasIndiaLtd.andOrs.v.State(Govt.ofNCTDelhi)andAnr.,(2001)6SCC8,DalmiaCement(Bharat)Ltd.v.GalaxyTraders&AgenciesLtd.andAnr.,(2001)6SCC463,PremChandVijayKumarv.YashpalSinghandAnr.,(2005)4SCC417,S.L.ConstructionsandAnr.v.AlapatiSrinivasaRaoandAnr.,(2009)1SCC500,TameshwarVaishnavv.RamvishalGupta,(2010)2SCC329.

17. AllthesedecisionshavewithoutdisturbingormakinganyadditiontotherationalebehindthedecisioninSadanandanBhadranscase(supra)followedtheconclusiondrawninthesame.We,therefore, propose to deal with the three dimensions that have been highlighted in that case whileholdingthatsuccessivecausesofactionarenotwithinthecomprehensionofSections138and142oftheAct.

18. Theexpressioncauseofactionismorecommonlyandeasilyunderstoodintherealmofcivillaws.TheexpressionisnotdefinedanywhereintheCodeofCivilProceduretowhichitgenerallybears relevance but has been universally understood to mean the bundle of facts which the plaintiffmustproveinordertoentitlehimtosucceedinthesuit.(SeeStateofMadrasv.C.P.AgenciesAIR1960SC1309;RajasthanHighCourtAdvocatesAssociationv.U.O.I.&Ors.AIR2001SC416andMohamedKhaleelKhanv.MahaboobAliMiaAIR1949PC78).

19. Section142oftheNegotiableInstrumentsActisperhapstheonlypenalprovisioninastatutewhichusestheexpressioncauseofactioninrelationtothecommissionofanoffenceortheinstitutionofacomplaintfortheprosecutionoftheoffender.AcarefulreadingofSections138


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and142,asnoticedabove,makesitabundantlyclearthatthecauseofactiontoinstituteacomplaintcomprisesthethreedifferentfactualprerequisitesfortheinstitutionofacomplaintto which we have already referred in the earlier part of this order. None of these prerequisites is in itself sufficient to constitutea complete causeof action for anoffenceunder Section138.Forinstanceifachequeisnotpresentedwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier,nocauseofactionwould accrue to the holder of the cheque even when the remaining two requirements, namely serviceofanoticeandfailureofthedrawertomakethepaymentofthechequeamountareestablishedonfacts.SoalsopresentationofthechequewithinthestipulatedperiodwithoutserviceofanoticeintermsofSection138proviso(b)wouldgivenocauseofactiontotheholdertoprosecutethedrawerjustasthefailureofthedrawertomakethepaymentdemandedonthebasisofanoticethatdoesnotsatisfytherequirementsofclause(b)ofprovisotoSection138wouldnotconstituteacompletecauseofaction.

20. TheexpressioncauseofactionappearinginSection142(b)oftheActcannotthereforebeunderstood to be limited to any given requirement out of the three requirements that are mandatory for launchingaprosecutionon thebasisofadishonouredcheque.Having saidthat,everytimeachequeispresentedinthemannerandwithinthetimestipulatedundertheprovisotoSection138followedbyanoticewithinthemeaningofclause(b)ofprovisotoSection138andthedrawerfailstomakethepaymentoftheamountwithinthestipulatedperiodoffifteendaysafterthedateofreceiptofsuchnotice,acauseofactionaccruestotheholderofthechequetoinstituteproceedingsforprosecutionofthedrawer.

21. Thereis,inourview,nothingeitherinSection138orSection142tocurtailthesaidrightofthepayee,leavealoneaforfeitureofthesaidrightfornobetterreasonthanthefailureoftheholderofthechequetoinstituteprosecutionagainstthedrawerwhenthecauseofactiontodosohadfirstarisen.SimplybecausetheprosecutionforanoffenceunderSection138mustonthelanguageofSection142beinstitutedwithinonemonthfromthedateofthefailureofthedrawertomakethepaymentdoesnotinourviewmilitateagainsttheaccrualofmultiplecausesofactiontotheholderofthechequeuponfailureofthedrawertomakethepaymentofthechequeamount.Intheabsenceofanyjuristicprincipleonwhichsuchfailuretoprosecuteonthebasisofthefirstdefaultinpaymentshouldresultinforfeiture,wefinditdifficulttoholdthatthepayeewouldlosehisrighttoinstitutesuchproceedingsonasubsequentdefaultthatsatisfiesallthethreerequirementsofSection138.

22. That brings us to the question whether an offence punishable under Section 138 can becommittedonlyonceasheldbythisCourtinSadanandanBhadranscase(supra).Theholderofachequeasseenearliercanpresentitbeforeabankanynumberoftimeswithintheperiodof six months or during the period of its validity, whichever is earlier. This right of the holder topresentthechequeforencashmentcarrieswithitacorrespondingobligationonthepartofthedrawertoensurethatthechequedrawnbyhimishonouredbythebankwhostandsinthe capacity of an agent of the drawer vis-a-vis the holder of the cheque. If the holder of the cheque has a right, as indeed is in the unanimous opinion expressed in the decisions on the subject,thereisnoreasonwhythecorrespondingobligationofthedrawershouldalsonotcontinueeverytimethechequeispresentedforencashmentifitsatisfiestherequirementsstipulated in that clause (a) to theproviso toSection138.There isnothing in thatprovisotoevenremotelysuggest thatclause (a)wouldhavenoapplicationtoachequepresented


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forthesecondtimeifthesamehasalreadybeendishonouredonce.Indeedifthelegislativeintentwastorestrictprosecutiononlytocasesarisingoutofthefirstdishonourofachequenothingpreventeditfromstipulatingsoinclause(a)itself.Intheabsenceofanysuchprovisiona dishonour whether based on a second or any successive presentation of a cheque forencashmentwouldbeadishonourwithinthemeaningofSection138andclause(a)toprovisothereof.Wehave,therefore,nomannerofdoubtthatsolongasthechequeremainsunpaiditisthecontinuingobligationofthedrawertomakegoodthesamebyeitherarrangingthefundsintheaccountonwhichthechequeisdrawnorliquidatingtheliabilityotherwise.Itistruethatadishonourofthechequecanbemadeabasisforprosecutionoftheoffenderbutonce,butthatisfarfromsayingthattheholderofthechequedoesnothavethediscretiontochooseoutofseveralsuchdefaults,onedefault,onwhichtolaunchsuchaprosecution.Theomissionorthefailureoftheholdertoinstituteprosecutiondoesnot,therefore,giveanyimmunitytothedrawersolongasthechequeisdishonouredwithinitsvalidityperiodandtheconditionsprecedentforprosecutionintermsoftheprovisotoSection138aresatisfied.

23. Coming then to the questionwhether there is anything in Section 142(b) to suggest thatprosecution based on subsequent or successive dishonour is impermissible,we need onlymentionthatthelimitationwhichSadanandanBhadranscase(supra)readsintothatprovisiondoesnotappeartoustoarise.Wesaysobecausewhileacomplaintbasedonadefaultandnoticetopaymustbefiledwithinaperiodofonemonthfromthedatethecauseofactionaccrues, which implies the date on which the period of 15 days granted to the drawer to arrange thepaymentexpires, there isnothing inSection142 to suggest thatexpiryofanysuchlimitationwouldabsolvehimofhiscriminalliabilityshouldthechequecontinuetogetdishonouredbythebankonsubsequentpresentations.Solongasthechequeisvalidandsolongasit isdishonoureduponpresentationtothebank,theholdersrighttoprosecutethedrawerforthedefaultcommittedbyhimremainsvalidandexercisable.Theargumentthattheholdertakesadvantagebynotfilingaprosecutionagainstthedrawerhasnotimpressedus.ByreasonofafreshpresentationofachequefollowedbyafreshnoticeintermsofSection138,proviso(b),thedrawergetsanextendedperiodtomakethepaymentandtherebybenefitsintermsoffurtheropportunitytopaytoavoidprosecution.Suchfreshopportunitycannothelpthedefaulteronanyjuristicprinciple,togetacompleteabsolutionfromprosecution.

24. Absolutionis,atanyrate,atheologicalconceptwhichimpliesanactofforgivingthesinnerofhissinsuponconfession.Theexpressionhasnodoubtbeenusedinsomejudicialpronouncements,butthesamestopshortofrecognizingabsolutionasajuristicconcept.Ithasalwaysbeenusedorunderstoodincommonparlancetoconveysettingfreefromguiltorreleasefromapenalty.TheuseoftheexpressionabsolutioninSadanandanBhadranscase(supra)atanyratecameatatimewhenprovisotoSection142(b)hadnotfoundaplaceonthestatutebook.Thatprovisowasaddedby theNegotiable Instruments (AmendmentandMiscellaneousProvisions)Act,2002 which read as under:

ProvidedthatthecognizanceofacomplaintmaybetakenbytheCourtaftertheprescribedperiod, if thecomplainantsatisfiestheCourt thathehadsufficientcause fornotmakingacomplaint within such period.

25. TheStatementofObjectsandReasonsappendedtotheAmendmentBill,2002suggeststhatthe introductionof thisprovisowas recommendedby theStandingCommitteeonFinanceandotherrepresentativessoastoprovidediscretiontotheCourttowaivetheperiodofone


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month,whichhasbeenprescribed for takingcognizanceofacaseunder theAct.ThiswassorecognisedjudiciallyalsobythisCourtinSubodhS.Salaskarv.JayprakashM.Shah&Anr.(2008)13SCC689wherethisCourtobserved:

11. The [Negotiable Instruments]Actwasamended in theyear2002wherebyadditionalpowershavebeenconferreduponthecourttotakecognizanceevenafterexpiryoftheperiodoflimitationbyconferringonitadiscretiontowaivetheperiodofonemonth.

xx xx xx xx

24. ..TheprovisionsoftheActbeingspecialinnature,intermsthereofthejurisdictionofthecourttotakecognizanceofanoffenceunderSection138oftheActwaslimitedtotheperiod of thirty days in terms of the proviso appended thereto. The Parliament only with aviewtoobviatetheaforementioneddifficultiesonthepartofthecomplainantinsertedprovisotoClause(b)ofSection142oftheActin2002.Itconfersajurisdictionuponthecourt to condone the delay...

26. Theproviso referred toabovenowpermits thepayee to instituteprosecutionproceedingsagainstadefaultingdrawerevenaftertheexpiryoftheperiodofonemonth.Ifafailureofthepayeetofileacomplaintwithinaperiodofonemonthfromthedateofexpiryoftheperiodof15daysallowedforthispurposewastoresultinabsolution,theprovisowouldnothavebeenadded to negate that consequence. The statute as it exists today, therefore, does not provide forabsolutionsimplybecausetheperiodof30dayshasexpiredorthepayeehasforsomeotherreasonsdeferredthefilingofthecomplaintagainstthedefaulter.

27. ItistritethattheobjectunderlyingSection138oftheActistopromoteandinculcatefaithintheefficacyofbankingsystemanditsoperations,givingcredibilitytoNegotiableInstrumentsinbusiness transactionsandtocreateanatmosphereof faithandreliancebydiscouragingpeople from dishonouring their commitments which are implicit when they pay their dues through cheques. The provision was intended to punish those unscrupulous persons who issuedchequesfordischargingtheirliabilitieswithoutreallyintendingtohonourthepromisethatgoeswiththedrawingupofsuchanegotiableinstrument.Itwasintendedtoenhancetheacceptabilityofchequesinsettlementofliabilitiesbymakingthedrawerliableforpenaltiesin case the cheque was dishonoured and to safeguard and prevent harassment of honest drawers.(SeeMosarafHossainKhanv.BhagheerathaEngg.Ltd.(2006)3SCC658,C.C.AlaviHajiv.PalapettyMuhammed&Anr.(2007)6SCC555andDamodarS.Prabhuv.SayedBabulalH. (2010)5SCC663).Having said that,wemustadd thatoneof thesalutaryprinciplesofinterpretationofstatutesistoadoptaninterpretationwhichpromotesandadvancestheobjectsoughttobeachievedbythelegislation,inpreferencetoaninterpretationwhichdefeatssuchobject.ThisCourthasinalonglineofdecisionsrecognizedpurposiveinterpretationasasoundprinciplefortheCourtstoadoptwhileinterpretingstatutoryprovisions.WemayonlyrefertothedecisionsofthisCourtinNewIndiaSugarMillsLtd.v.CommissionerofSalesTax,Bihar(AIR1963SC1207),wherethisCourtobserved:

It is a recognised rule of interpretation of statutes that expressions used therein shouldordinarilybeunderstoodinasenseinwhichtheybestharmonisewiththeobjectofthestatute,andwhicheffectuatetheobjectoftheLegislature.Ifanexpressionissusceptibleofanarrowortechnicalmeaning,aswellasapopularmeaning,theCourtwouldbejustifiedinassuming


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that theLegislatureusedtheexpression in thesensewhichwouldcarryout itsobjectandrejectthatwhichrenderstheexerciseofitspowerinvalid.

28. Referencemay also be made to the decision of this Court in Deputy Custodian, EvacueePropertyv.OfficialReceiver(AIR1965SC951),wherethisCourtobserved:

Therulesofgrammarmaysuggestthatwhenthesectionsaysthatthepropertyisevacueeproperty, it prima facie indicates that theproperty should bear that character at thetimewhen the opinion is formed. But Mr. Ganapathy Iyer for the appellants has strenuouslycontended that the construction of s. 7(1) should not be based solely or primarily on themechanicalapplicationoftherulesofgrammar.HeurgesthattheconstructionforwhichMr.Pathakcontentsandwhich,insubstance,hasbeenacceptedbytheHighCourt,wouldleadtoveryanomalousresults;andhisargumentsisthatitisopentotheCourttotakeintoaccounttheobviousaimandobjectofthestatutoryprovisionwhenattemptingthetaskofconstruingitswords.Ifitappearsthattheobviousaimandobjectofthestatutoryprovisionswouldbefrustratedbyacceptingtheliteralconstructionsuggestedbytherespondent,thenitmaybeopen to the Court to enquirewhether an alternative constructionwhichwould serve thepurposeofachievingtheaimandobjectoftheAct,isreasonablypossible.

29. The decision of this Court in Nathi Devi v. Radha Devi (2005) 2 SCC 271, reiterates the rule of purposiveconstructioninthefollowingwords:

Evenifthereexistssomeambiguityinthelanguageorthesameiscapableoftwointerpretations,itistritetheinterpretationwhichservestheobjectandpurportoftheActmustbegiveneffectto.Insuchacasethedoctrineofpurposiveconstructionshouldbeadopted.

30. TothesameeffectisthedecisionofthisCourtinS.P.Jainv.KrishanMohanGupta(1987)1SCC191, where this Court observed:

Weareoftheopinionthat lawshouldtakeapragmaticviewofthematterandrespondtothepurpose forwhich itwasmadeandalso take cognizanceof the current capabilitiesoftechnologyandlife-styleofthecommunity.ItiswellsettledthatthepurposeoflawprovidesagoodguidetotheinterpretationofthemeaningoftheAct.WeagreewiththeviewsofJusticeKrishnaIyerinBuschingSchmitzPrivateLtdscase(supra)thatlegislativefutilityistoberuledoutsolongasinterpretativepossibilitypermits.

31. Applying the above rule of interpretation and the provisions of Section 138, we have nohesitationinholdingthataprosecutionbasedonasecondorsuccessivedefaultinpaymentofthechequeamountshouldnotbeimpermissiblesimplybecausenoprosecutionbasedonthefirstdefaultwhichwasfollowedbyastatutorynoticeandafailuretopayhadnotbeenlaunched.IftheentirepurposeunderlyingSection138oftheNegotiableInstrumentsActisto compel the drawers to honour their commitments made in the course of their business or otheraffairs,thereisnoreasonwhyapersonwhohasissuedachequewhichisdishonouredandwhofailstomakepaymentdespitestatutorynoticeserveduponhimshouldbeimmunetoprosecutionsimplybecausetheholderofthechequehasnotrushedtothecourtwithacomplaint based on such default or simply because the drawer has made the holder defer prosecutionpromisingtomakearrangementsforfundsorforanyothersimilarreason.Thereisinouropinionnorealorqualitativedifferencebetweenacasewheredefaultiscommitted


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andprosecutionimmediatelylaunchedandanotherwheretheprosecutionisdeferredtillthechequepresentedagaingetsdishonouredforthesecondorsuccessivetime.

32. The controversy, in our opinion, can be seen from another angle also. If the decision inSadanandanBhadranscase(supra)iscorrect,thereisnooptionfortheholdertodeferinstitutionofjudicialproceedingsevenwhenhemayliketodosoforsosimpleandinnocuousareasonastoextendcertainaccommodationtothedrawertoarrangethepaymentoftheamount.Apartfromthefactthataninterpretationwhichcurtailstherightofthepartiestonegotiateapossiblesettlementwithoutprejudicetotherightofholdertoinstituteproceedingswithintheouterperiodoflimitationstipulatedbylawshouldbeavoidedweseenoreasonwhypartiesshould,byaprocessofinterpretation,beforcedtolaunchcomplaintswheretheycanormayliketodefersuchactionforgoodandvalidreasons.Afterall,neitherthecourtsnorthepartiesstandtogainbyinstitutionofproceedingswhichmaybecomeunnecessaryifchequeamountis paid by the drawer. The magistracy in this country is over-burdened by an avalanche of casesunderSection138ofNegotiableInstrumentsAct.IfthefirstdefaultitselfmustintermsofthedecisioninSadanandanBhadranscase(supra)resultinfilingofprosecution,avoidablelitigationwouldbecomeaninevitablebaneofthelegislationthatwasintendedonlytobringsolemnity tochequeswithout forcingparties to resort toproceedings in thecourtsof law.While there isnoempiricaldata tosuggest that theproblemsofoverburdenedmagistracyandjudicialsystematthedistrictlevelisentirelybecauseofthecompulsionsarisingoutofthedecisionsinSadanandanBhadranscase(supra),itisdifficulttosaythatthelawdeclaredinthatdecisionhasnotaddedtocourtcongestion.

33. In theresult,weoverrule thedecision inSadanandanBhadranscase (supra)andhold thatprosecutionbasedupon secondor successivedishonour of the cheque is also permissiblesolongasthesamesatisfiestherequirementsstipulatedintheprovisotoSection138oftheNegotiable InstrumentsAct. The reference is answeredaccordingly. The appeals shall nowbelistedbeforetheregularBenchforhearinganddisposalinlightoftheobservationsmadeabove.

qqq


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ECON ANTRI LIMITEd vERSUS ROM INdUSTRIES LIMITEd & ANR (2014) 11 Supreme Court Cases 769

AIR 2013 SC 3283


Before Hon’ble Mr. Justice P Sathasivam, Hon’ble Mr. Justice Ranjana Prakash Desai, Hon’ble Mr. Justice Ranjan Gogoi

Econ Antri Limited ...Appellant Versus

Rom Industries Limited & Anr ...Respondents

CRIMINAL APPEAL NO.1079 OF 2006Decided on 26 August, 2013

Debt, Financial and Monetary Laws – Negotiable Instruments Act, 1881 – Ss. 142 and 138 – Dishonour of cheque – Period of limitation for filing complaint under S. 142(a) – Reckoning of – Held, period of limitation is to be calculated by excluding date on which cause of action arose.

JUDGMENT

(SMT.) RANJANA PRAKASH DESAI, J.

1. On13/10/2006,whilegrantingleaveinSpecialLeavePetition(Criminal)No.211of2005,thisCourt passed the following order:

Inourview,thejudgmentrelieduponbythecounselfortheappellantinthecaseofSakethIndia Ltd.&Ors. v. India Securities Ltd. (1999)3 SCC1 requires reconsideration.OrdersoftheHonbletheChiefJusticemaybeobtainedforplacingthismatterbeforealargerBench.Pursuant to the above order, this appeal is placed before us.

2. SincethereferralorderstatesthatthejudgmentofthisCourtinSakethIndiaLtd.&Ors.v.IndiaSecuritiesLtd.[1](Saketh)requiresreconsideration,wemustfirstrefertothesaidjudgment.Inthatcase,thisCourtidentifiedthequestionoflawinvolvedintheappealbeforeitasunder:

WhetherthecomplaintfiledunderSection138oftheNIActiswithinorbeyondtimeasitwascontendedthatitwasnotfiledwithinonemonthfromthedateonwhichthecauseofactionaroseunderclause(c)oftheprovisotoSection138oftheNIAct?Thesamequestionwasreframed in simpler language as under:

WhetherforcalculatingtheperiodofonemonthwhichisprescribedunderSection142(b),theperiodhastobereckonedbyexcludingthedateonwhichthecauseofactionarose?

econ antri limited versus rom industries limited and anr.

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3. ItispointedouttousthatthereisavariancebetweentheviewexpressedbythisCourtontheabovequestioninSakethandinSILImport,USAv.EximAidesSilkExporters,Bangalore[2].Wewillhavetothereforere-examineitforthepurposeofansweringthereference.Thebasicprovisionsoflawinvolvedinthisreferenceareproviso(c)toSection138andSection142(b)oftheNegotiableInstrumentsAct,1881(theNIAct).

4. FactsofSakethneedtobestatedtounderstandhowtheabovequestionoflawarose.But,beforeweturntothefacts,wemustquoteSection138andSection142oftheN.I.Act.WemustalsoquoteSection12(1)and(2)oftheLimitationAct,1963andSection9oftheGeneralClausesAct,1897,onwhichrelianceisplacedinSaketh.

Section138oftheN.I.Actreadsasunder:

138. Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamount of money to another person from out of that account for the discharge, in whole orinpart,ofanydebtorotherliability,isreturnedbythebankunpaid.eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthe cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudicetoanyotherprovisionofthisAct,bepunishedwithimprisonmentforatermwhichmaybeextendedtotwoyears,orwithfinewhichmayextend to twice the amount of the cheque, or with both:


(a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier;

(b) thepayeeortheholderinduecourseoftheCheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerofthecheque,withinthirtydaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

(c) thedrawerofsuchchequefailstomakethepaymentofthesaidamountofmoneyto the payee or, as the case may be, to the holder in due course of the cheque, withinfifteendaysof the receiptof thesaidnotice.Section142of theN.I.Actreads as under:

142. Cognizance of offences:Notwithstanding anything contained in the Codeof CriminalProcedure,1973(2of1974),-

(a) nocourtshalltakecognizanceofanyoffencepunishableundersection138exceptuponacomplaint,inwriting,madebythepayeeor,asthecasemaybe,theholderinduecourseofthecheque;

(b) suchcomplaintismadewithinonemonthofthedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotosection138;

[ProvidedthatthecognizanceofacomplaintmaybetakenbytheCourtaftertheprescribed period, if the complainant satisfies the Court that he had sufficientcausefornotmakingacomplaintwithinsuchperiod.]


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(c) nocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshalltryanyoffencepunishableundersection138.Sections12(1)and(2)oftheLimitationAct,1963readsasunder:12.Exclusionoftimeinlegalproceedings.- (1) In computing the period of limitation for any suit, appeal orapplication,thedayfromwhichsuchperiodistobereckoned,shallbeexcluded.

(2) Incomputingtheperiodoflimitationforanappealoranapplicationforleavetoappealorforrevisionorforreviewofajudgment,thedayonwhichthejudgmentcomplainedofwaspronouncedandthetimerequisiteforobtainingacopyofthedecree, sentence or order appealed from or sought to be revised or reviewed shall beexcluded.Section9oftheGeneralClausesAct,1897readsasunder:

9. Commencementandterminationoftime.-

(1) Inany[CentralAct]orRegulationmadeafterthecommencementofthisAct, itshallbesufficient,forthepurposeofexcludingthefirstinaseriesofdaysoranyotherperiodoftime,tousethewordfrom,and,forthepurposeofincludingthelastinaseriesofdaysoranyotherperiodoftime,tousethewordto.

(2) Thissectionappliesalsotoall[CentralActs]madeafterthethirddayofJanuary,1868,andtoallRegulationsmadeonorafterthefourteenthdayofJanuary,1887.

5. InSakethchequesdated15/3/1995and16/3/1995issuedbytheaccusedthereinbouncedwhenpresentedforencashment.Noticeswereservedontheaccusedon29/9/1995.Asperproviso(c)toSection138oftheNIAct,theaccusedwererequiredtomakethepaymentofthe said amountwithin15daysof the receiptof thenotice i.e. onorbefore14/10/1995.Theaccusedfailedtopaytheamount.Thecauseofaction,therefore,aroseon15/10/1995.AccordingtothecomplainantforcalculatingonemonthsperiodcontemplatedunderSection142(b), the date 15/10/1995 has to be excluded. The complaint filed on 15/11/1995was,therefore, within time. According to the accused, however, the date on which the causeofactionarose i.e.15/10/1995has tobe included in theperiodof limitationandthus thecomplaintwasbarredbytime.Theaccused,therefore,filedpetitionunderSection482oftheCodeofCriminalProcedure,1973(theCode)forquashingtheprocessissuedbythelearnedMagistrate. That petitionwas rejectedby theHighCourt.Hence, the accused approachedthisCourt.ThisCourtreferredtoitsjudgmentinHaruDasGuptav.StateofWestBengal.[3]whereinitwasheldthattheruleiswellestablishedthatwhereaparticulartimeisgivenfromacertaindatewithinwhichanactistobedone,thedayonthatdateistobeexcluded;theeffectofdefiningtheperiodfromsuchadayuntilsuchadaywithinwhichanactistobedoneistoexcludethefirstdayandtoincludethelastday.ReferringtoseveralEnglishdecisionsonthe point, this Court observed that the principle of excluding the day from which the period is tobereckonedisincorporatedinSection12(1)and(2)oftheLimitationAct,1963.ThisCourtobservedthatthisprincipleisalsoincorporatedinSection9oftheGeneralClausesAct,1897.ThisCourtfurtherobservedthatthereisnoreasonfornotadoptingtheruleenunciatedinHaru Das Gupta, which is consistently followed and which is adopted in the General Clauses ActandtheLimitationAct.ThisCourtwentontoobservethatordinarily incomputingthetime,theruleobservedistoexcludethefirstdayandtoincludethelast.Followingthesaidrule in the factsbefore it, thisCourtexcluded thedate15/10/1995onwhich thecauseofactionhadarisen for counting theperiodofonemonth. Sakethhasbeen followedby this


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CourtinJindalSteelandPowerLtd.&Anr.v.AshokaAlloySteelLtd.&Ors.[4]InSubodhS.Salaskarv.JayprakashM.Shah&Anr.,[5]thereisareferencetoJindalSteel&PowerLtd.

6. Wehaveheardlearnedcounselforthepartiesatsomelength.Wehavealsocarefullyperusedtheirwritten submissions.Ms. PrernaMehta, learned counsel for the appellant submittedthatSakethlaysdownthecorrectlaw.ShesubmittedthatasheldbythisCourtinSakethwhilecomputingtheperiodofonemonthasprovidedunderSection142(b)oftheN.I.Act,thefirstdayonwhichthecauseofactionhasarisenhastobeexcluded.Thesameprincipleisapplicableincomputingtheperiodof15daysunderSection138(c)oftheN.I.Act.Counselsubmittedthat Saketh has been followedby this Court in Jindal Steel and Power Ltd. and Subodh S.Salaskar.CounselalsoreliedonSection12(1)oftheLimitationAct,1961whichprovidesthatthefirst day onwhich causeof action arises is to be excluded. In this connection counselreliedonStateofHimachalPradesh&Anr.v.HimachalTechnoEngineers&Anr.,[6]whereitisheldthatSection12oftheLimitationActisapplicabletotheArbitrationandConciliationAct,1996(forshort,theArbitrationAct”),whichisastatuteprovidingforitsownperiodoflimitation.CounselsubmittedthattheN.I.ActisaspecialstatuteanditdoesnotexpresslybartheapplicabilityoftheLimitationAct.CounselsubmittedthatifthisCourtreachesaconclusionthattheprovisionsoftheLimitationActarenotapplicabletotheN.I.Act,itshouldholdthatSection9oftheGeneralClausesAct,1897coversthiscase.CounselsubmittedinTarunPrasadChatterjeev.DinanathSharma[7]Section12oftheLimitationActisheldtobeinparimateriawithSection9oftheGeneralClausesAct.CounselsubmittedthatinthesamejudgmentthisCourthasheldthatuseofwordsfromandwithindoesnotreflectanycontraryintentionandthefirstdayonwhichthecauseofactionariseshastobeexcluded.CounselsubmittedthatinthecircumstancesthisCourtshouldholdthatSakethlaysdowncorrectpropositionoflaw.

7. ShriSunilGupta,learnedseniorcounselfortherespondents,ontheotherhand,submittedthattheprovisionsoftheN.I.Actprovideforacriminaloffenceandpunishmentand,therefore,mustbestrictlyconstrued.Counselsubmittedthatitiswellsettledthatwhentwodifferentwordsareusedinthesameprovisionorstatute,theyconveydifferentmeaning.[TheMember,BoardofRevenuev.ArthurPaulBenthall[8],TheLabourCommissioner,MadhyaPradeshv.BurhanpurTaptiMillsLtd.andothers[9],B.R.Enterprisesetc.V.StateofU.P.&Ors.etc.[10],KailashNathAgarwalandors.v.PradeshiyaIndustrial&InvestmentCorporationofU.P.Ltd.andanother[11],DLFQutabEnclaveComplexEducationalCharitableTrustv.StateofHaryanaandothers[12]].CounselpointedoutthatSection138(a)providesaperiodof6monthsfromthedate on which the Cheque is drawn, as the period within which the Cheque is to be presented tothebank.Section138(b)providesthatthepayeemustmakeademandoftheamountduetohimwithin30daysofthereceiptof informationfromthebank.Section138(c)usesthewordswithin15daysofthereceiptofnotice.UsingtwodifferentwordsfromandofinthesameSectionatdifferentplacesclarifiestheintentionofthelegislaturetoconveydifferentmeanings by the said words. According to counsel, seen in this light, the word of occurring inSection138(c)andSection142(b)istobeinterpreteddifferentlyasagainstthewordfromoccurring inSection138(a).Thewordfrommaybetakenas implyingexclusionofthedateinquestionandmaywellbegovernedbytheGeneralClausesAct,1897.However,thewordofisdifferentandneedstobeinterpretedtoincludethestartingdayofthecommencementof theprescribedperiod. It isnotgovernedbySection9of theGeneralClausesAct,1897.Thus,forthepurposesofSection142(b),whichprescribesthatthecomplaint istobefiled


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within30daysofthedateonwhichthecauseofactionarises,thestartingdateonwhichthecauseofactionarisesshouldbeincludedforcomputingtheperiodof30days.CounselfurthersubmittedthatSection138(c)andSection142(b)prescribetheperiodwithinwhichcertainactsarerequiredtobedone.Section12(1)oftheLimitationActcannotberesortedtosoastoextendthatperiodevenbyoneday.Ifthestartingpointisexcluded,thatwillrenderthewordwithinofSection142(b)oftheN.I.Actotiose.Counselsubmittedthatthewordwithinhasbeenheldby thisCourt tomeanonorbefore. [Danial LatifiandAnotherv.U.O.I.[13]]Therefore,thecomplaintunderSection142(b)shouldbefiledonorbeforeorwithin,30daysofthedateonwhichthecauseofactionunderSection138(c)arises.Counselsubmittedthatthereisnojustificationtoexcludethe16thdayofthe15dayperiodunderSection138(c)orthefirstdayofthe30daysperiodunderSection142(b)ashasbeenwronglydecidedinSaketh.Thiswouldamounttoexclusionofthestartingdateoftheperiod.SuchexclusionhasbeenheldtobeagainstthelawinSILImportUSA.CounselfurthersubmittedthattheprovisionsoftheLimitationActarenotapplicabletotheN.I.ActasheldbythisCourtinSubodhS.Salaskar.CounselpointedoutthatbyAmendingAct55of2002,aprovisowasaddedtoSection142(b)oftheN.I.Act.Itbestowsdiscretionuponthecourttoacceptacomplaintaftertheperiodof30daysandtocondonethedelay.Thisamendmentsignifiesthatprior tothisamendmentthecourtshadnodiscretiontocondonethedelayorexcludetimebyresortingtoSection5oftheLimitationAct.ThestatementofobjectsandreasonsoftheAmendingAct55of2002confirmsthelegalpositionthattheN.I.Actbeingaspecialstatute,theLimitationActisnotapplicabletoit.CounselsubmittedthatthejudgmentofthisCourtontheArbitrationActisnotapplicabletothiscasebecauseSection43of theArbitrationActspecificallymakestheLimitationActapplicable toarbitrations.Counsel submitted that inviewof theabove, it isevidentthatSakethdoesnot laydownthecorrect law. It isSIL ImportUSAwhichcorrectlyanalyses the provisions of law and lays down the law. Counsel urged that the reference be answered in light of his submissions.

8. It is necessary to first refer to SIL Import USA on which heavy reliance is placed by therespondentsas it takesaviewcontrarytotheviewtaken inSaketh. InSIL ImportUSA,thecomplainant-CompanyscasewasthattheaccusedowedasumofUS$72,075(equivalenttomore than26 lakhsof rupees) to it towards the saleconsiderationof certainmaterials.The accused gave some post-dated Cheques in repayment thereof. Two of the said Cheques whenpresentedon3/5/1996forencashmentweredishonouredwiththeremarknosufficientfunds.Thecomplainantsentanoticetotheaccusedbyfaxon11/6/1996.Onthenextdayi.e.12/6/1996thecomplainantalsosentthesamenoticebyregisteredpostwhichwasservedontheaccusedon25/6/1996.On8/8/1996thecomplainantfiledacomplaintunderSection138oftheN.I.Act.Cognizanceoftheoffencewastakenandprocesswasissued.ProcesswasquashedbytheMagistrateonthegroundsurgedbytheaccused.ThecomplainantmovedtheHighCourt.TheHighCourtsetasidetheMagistratesorderandrestoredthecomplaint.Thatorder was challenged in this Court. The only point which was urged before this Court was that theMagistratecouldnothavetakencognizanceoftheoffenceaftertheexpiryof30daysfromthedateofcauseofaction.ThiscontentionwasupheldbythisCourt.ThisCourtheldthatthenoticeenvisaged inclause(b)oftheprovisotoSection138transmittedbyfaxwouldbe incompliancewiththelegalrequirement.Therewasnodisputeaboutthefactthatnoticesentbyfaxwasreceivedbythecomplainantonthesamedatei.e.11/6/1996.ThisCourtobservedthatasperclause(c)ofSection138,startingpointofperiodformakingpaymentisthedate


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ofreceiptofthenotice.Onceitstarts,theoffenceiscompletedonfailuretopaytheamountwithin15daystherefrom.Causeofactionwouldariseiftheoffenceiscommitted.Thus,itwasheldthatsincethefaxwasreceivedon11/6/1996,theperiodof15daysformakingpaymentexpiredon26/6/1996.Sinceamountwasnotpaid,offencewascommittedand, therefore,causeofactionarosefrom26/6/1996andtheperiodoflimitationforfilingcomplaintexpiredon26/7/1996i.e.thedateonwhichperiodofonemonthexpiredascontemplatedunderSection142(b).Thecomplaintfiledon8/8/1996was,therefore,beyondtheperiodoflimitation.TherelevantobservationsofthisCourtcouldbequotedhereunder:

19. TheHighCourtsviewisthatthesenderofthenoticemustknowthedatewhenitwasreceivedbythesendee,forotherwisehewouldnotbeinapositiontocounttheperiodinordertoascertainthedatewhencauseofactionhasarisen.Thefallacyoftheabovereasoningisthatiterasesthestartingdateoftheperiodof15daysenvisagedinclause(c).Asperthesaidclausethestartingdateisthedateofthereceiptofthesaidnotice.Onceitstarts,theoffenceiscompletedonthefailuretopaytheamountwithin15daystherefrom.Causeofactionwouldariseiftheoffenceiscommitted.

20. IfadifferentinterpretationisgiventheabsoluteinterdictincorporatedinSection142oftheActthatnocourtshalltakecognizanceofanyoffenceunlessthecomplaintismadewithinonemonthofthedateonwhichthecauseofactionarises,wouldbecomeotiose.

9. Undoubtedly,theviewtakeninSILImportUSArunscountertotheviewtakeninSaketh.WhatpersuadedthisCourtinSakethtotaketheviewthatincomputingtime,theruleistoexcludethefirstdayandincludethelastcanbeunderstoodifwehavealookattheEnglishcaseswhichhave been referred to in the passage quoted therein from Haru Das Gupta.

10. WemustfirstrefertoTheGoldsmithsCompanyv.TheWestMetropolitanRailwayCompany.[14]Inthatcase,underaspecialAct,arailwaycompanywasempoweredtotakelandscompulsorilyforthepurposeofitsundertaking,andthepowersofthecompanyforthispurposeweretoceaseaftertheexpirationof threeyears fromthepassingof theAct.TheAct receivedtheRoyalassenton9/8/1899.On9/8/1902therailwaycompanygavenoticetotheplaintiffstotreat for the purchase of lands belonging to them which were scheduled in the special Act. The questionwaswhetherthenoticewasservedontheplaintiffswithinthreeyears.ItwasheldthatthenoticewasservedwithintheprescribedtimebecausethedayofthepassingoftheActi.e.9/8/1899hadtobeexcluded.TherelevantobservationsoftheCourtmaybequotedasunder:

ThetrueprinciplethatgovernsthiscaseisthatindicatedinthereportofLesterv.Garland[15],whereSirWilliamGrantbrokeawayfromthelineofcasessupportingtheviewthattherewasageneralrulethatincaseswheretimeistorunfromthedoingofanactorthehappeningofaneventthefirstdayisalwaystobeincludedinthecomputationofthetime.TheviewexpressedbySirWilliamGrantwasrepeatedbyParkeB.inRussellv.Ledsam[16],andbyotherjudgesinsubsequentcases.Theruleisnowwellestablishedthatwhereaparticulartimeisgiven,froma certain date, within which an act is to be done, the day of the date is to be excluded.

11. ThesecondcasereferredtoisCartwrightv.MacCormack[17].Inthatcase,theplaintiffsmetwithanaccidentat5.45p.m.on17/12/1959.Hewasrunintobythedefendantdrivingamotorcar.Heissuedhiswritinthisactionclaimingdamagesforpersonalinjuries.Thedefendantinitiatedthird party proceedings against the respondent insurance company, alleging the companys


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liability to indemnify him under an instrument called a temporary cover note admittedlyissuedbytheinsurancecompanyon2/12/1959.Theinsurancecompanyinteraliacontendedthat the policy had expired before the accident happened. The insurance company succeeded onthispoint.Onappealtheinsurancecompanyreiteratedthatthecovernoteissuedbytheinsurancecompanycontainedtheexpressionfifteendaysfromthedateofcommencementofpolicy.Onthesamenotedateandtimewerenotedas2/12/1959and11.45a.m.Itwasarguedthatthefifteendaysstartedat11.45a.m.on2/12/1959andexpiredatthesametimeon 17/12/1959. The accident occurred at 5.45 p.m. on 17/12/1959 and, therefore, it wasnotcoveredbytheinsurancepolicy.TheCourtofAppealtreatedtheexpressionfifteendaysfromthecommencementofthepolicyasexcludingthefirstdateandthecovernotewasheldtocommenceatmidnightofthatdate. Itwasobservedthatthepolicyexpiredfifteendaysfrom2/12/1959andthesewordsontheordinaryrulesofconstructionexcludethefirstdateand begin at midnight on that day, therefore, the policy would cover the accident which had occurredat5.45p.m.on17/12/1959.

12. ThethirdcasereferredtoisMarrenv.DawsonBentley&Co.Ltd.[18].Inthatcaseon8/11/1954anaccidentoccurredwherebytheplaintiffwasinjuredinthecourseofhisemploymentwiththedefendants.On8/11/1957,heissuedawritclaimingdamagesfortheinjurieswhichhealleged were caused by the defendants negligence. The defendants pleaded, inter alia, that theplaintiffscauseofaction,ifany,accruedon8/11/1954andtheproceedingshadnotbeencommencedwithintheperiodofthreeyearsthereofcontrarytoSection2(1)oftheLimitationAct,1939.Itwasheldthatthedayoftheaccidentwastobeexcludedfromthecomputationoftheperiodwithinwhichtheactionshouldbebroughtand,therefore,thedefendantspleamust fail.Whilecomingtothisconclusionreliancewasplacedonpassages fromHalsburyslawsofEngland[19].Itisnecessarytoquotethosepassages:

207. Thegeneralruleincasesinwhichaperiodisfixedwithinwhichapersonmustactortakethe consequences is that the day of the act or event from which the period runs should not be counted against him. This rule is especially reasonable in the case in which that personisnotnecessarilycognisantoftheactorevent;andfurtherinsupportofitthereistheconsiderationthatincasetheperiodallowedwasonedayonly,theconsequenceofincludingthatdaywouldbetoreducetoafewhoursorminutesthetimewithinwhichthepersonaffectedshouldtakeaction.

208. In view of these considerations the general rule is that, as well in cases where thelimitationoftimeis imposedbytheactofapartyas inthosewhereit is imposedbystatute, thedayfromwhichthetimebeginstorun isexcluded;thus,whereaperiodisfixedwithinwhichacriminalprosecutionoracivilactionmaybecommenced, thedayonwhichtheoffenceiscommittedorthecauseofactionarisesisexcludedinthecomputation.ReliancewasalsoplacedinthisjudgmentonRadcliffev.Bartholomew[20].InthatcaseonJune30aninformationwaslaidagainsttheappellantthereininrespectofanactofcrueltyallegedtohavebeencommittedbyhimonMay30.Anobjectionwastakenonthegroundthatthecomplainthadnotbeenmadewithinonecalendarmonthafterthecauseofthecomplainthadarisen.Itwasheldthatthedayonwhichtheallegedoffencewascommittedwastobeexcludedfromthecomputationofthecalendarmonthwithinwhichthecomplaintwastobemade;thatthecomplaintwas,therefore,madeintime.


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13. The fourth case referred to is Stewart v. Chapman[21]. In that case, an information waspreferredbyapoliceconstablethatMr.Chapmanhadon11/1/1951drivenamotorcaralongaroadwithoutduecareandattentioncontrarytoSection12oftheRoadTrafficAct,1930.Athearing,apreliminaryobjectionwastakenthatthenoticeofintendedprosecutionhadnotbeenservedonthedefendantwithinfourteendaysofcommissionofoffenceinaccordancewithSection21oftheRoadTrafficAct,1930,inasmuchasalthoughtheallegedoffencewascommittedat7.15a.m.on11/1/1951, theprosecutordidnot send thenoticeof intendedprosecutionbyregisteredpost;until1.00p.m.on11/1/1951anditwasnotdeliveredtothedefendantuntil25/1/1951atabout8.00a.m.Thissubmissionwasrejectedobservingthatincalculatingtheperiodoffourteendayswithinwhichthenoticeofan intendedprosecutionmustbeservedunderSection21oftheRoadTrafficAct,1930,thedateofcommissionoftheoffenceistobeexcluded.

14. Inre.North.ExparteHasluck[22],theexecutioncreditorobtainedjudgmenton19/5/1893.Anorderwasmadeauthorizingsaleofthebankruptsgoods.ThepurchasemoneythereunderwaspaidtothesheriffonJuly18.ThesheriffretainedthemoneyforfourteendaysincompliancewithSection11oftheBankruptcyAct,1890.InAugust,thesolicitoroftheexecutioncreditorpaidover thesaidmoney to theexecutioncreditor.Applicationwasfiledby the trustee inbankruptcyforanordercallingupontheexecutioncreditorandhissolicitortopayovertothetrustee,theproceedsofanexecutionagainstthebankruptcygoodsonthegroundthatatthetimeofthesaletheyhadnoticeofprioractofbankruptcyonthepartofthebankrupt.UnderSection1oftheBankruptcyAct,1890,adebtorcommitsanactofbankruptcy ifexecutionagainsthimhasbeen leviedbyseizureofhisgoods,andthegoodshavebeenheldby thesherifffortwentyonedays.Thetimelimitoftwentyonedayswasanallowanceoftimetothe debtor within which to redeem if he can. It was under these circumstances it became necessarytoascertainwhethertherewas,infact,aholdingbythesherifffortwentyonedayspriortothesale.Iftherewas,thenneithertheexecutioncreditor,norhissolicitorcouldbeheardtosaythattheyhadnonoticeofsuchpossessionandtheactofbankruptcytherebyconstituted.VaughanWilliams,J.heldthatifthegoodswereseizedonJune27andsoldonJuly18,ifJune27isexcluded,therewasnoholdingbythesherifffor21daysandconsequentlytherewasnoactofbankruptcyandthereforeexecutioncreditorisnotboundtohandoverthemoneyonthegroundthathereceiveditwithnoticeofanactofbankruptcy.Onappealthesameviewwasreiterated.RigbyL.JreferredtoLesterv.Garland[23]whereSirW.Grantexpressed that if there were to be a general rule, it ought to be one of exclusion, as being more reasonablethanonetotheoppositeeffect.

15. WeshallnowturntoHaruDasGupta,wherethisCourthasfollowedthelawlaiddownintheabovejudgments.Inthatcase,thepetitionerthereinwasarrestedanddetainedon5/2/1971byorderofDistrictMagistratepassedonthatday.Theorderofconfirmationandcontinuation,which has to be passed within threemonths from the date of detention, was passed on5/5/1971.Thequestionfordecisionwasastowhentheperiodofthreemonthscanbesaidtohaveexpired.Itwascontendedbythepetitionerthattheperiodofthreemonthsexpiredonthemidnightof4/5/1971,andanyconfirmationandcontinuationofdetentionthereafterwouldnotbevalid.ThisCourtreferredtoseveralEnglishdecisionsonthepointapartfromtheabovedecisionsandrejectedthissubmissionholdingthatthedayofcommencementof


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detentionnamely5/2/1971hastobeexcluded.Relevantobservationsofthiscouldreadasunder:

Thesedecisions show that courtshavedrawnadistinctionbetweena termcreatedwithinwhich an act may be done and a time limited for the doing of an act. The rule is well-establishedthatwhereaparticulartimeisgivenfromacertaindatewithinwhichanact istobedone, thedayon thatdate is tobeexcluded. (SeeGoldsmithsCompanyv. theWestMetropolitanRailwayCompany).ThisrulewasfollowedinCartwrightv.Maccormackwheretheexpressionfifteendays from thedateof commencementof thepolicy ina covernoteissuedbyaninsurancecompanywasconstruedasexcludingthefirstdateandthecovernotetocommenceatmidnightofthatday,andalsoinMarrenv.DamsonBentley&Co.Ltd.acaseforcompensationforinjuriesreceivedinthecourseofemployment,whereforpurposesofcomputingtheperiodof limitationthedateoftheaccident,beingthedateofthecauseofaction,wasexcluded.(SeealsoStewartv.ChadmanandInreNorth,ExparteWasluck).Thus,asageneralruletheeffectofdefiningaperiodfromsuchadayuntilsuchadaywithinwhichanactistobedoneistoexcludethefirstdayandtoincludethelastday.[SeeHalsburysLawsofEngland,(3rdEdn.).Vol.37,pp.92and95.]Thereisnoreasonwhytheaforesaidruleofconstructionfollowedconsistentlyandforsolongshouldnotalsobeappliedhere.

16. WehaveextensivelyreferredtoSaketh.ThereasoningofthisCourtinSakethbasedontheaboveEnglishdecisionsanddecisionofthisCourtinHaruDasGuptawhichaptlylaydownandexplaintheprinciplethatwhereaparticulartimeisgivenfromacertaindatewithinwhichanact has to be done, the day of the date is to be excluded, commends itself to us as against the reasoningofthisCourtinSILImportUSAwherethereisnoreferencetothesaiddecisions.

17. ItwassubmittedthatinSakeththisCourthaserroneouslyplacedrelianceonSection12(1)and(2)oftheLimitationAct,1963.Section12(1)statesthatincomputingtheperiodoflimitationforanysuit,appealorapplication,thedayfromwhichsuchperiodistobereckoned,shallbeexcluded.InSection12(2)thesameprincipleisextendedtocomputingperiodoflimitationforanapplicationforleavetoappealorforrevisionorforreviewofajudgment.OurattentionwasdrawntoSubodhS.SalaskarwhereinthisCourthasheldthattheLimitationAct,1963isnotapplicabletotheN.I.Act.ItistruethatinSubodhS.Salaskar,thisCourthasheldthattheLimitationAct,1963isnotapplicabletotheN.I.Act.HowevereveniftheLimitationAct,1963 is heldnot applicable to theN.I.Act, the conclusion reached in Saketh could still bereachedwiththeaidofSection9oftheGeneralClausesAct,1897.Section9oftheGeneralClausesAct,1897statesthatinanyCentralActorRegulationmadeafterthecommencementoftheGeneralClausesAct,1897,itshallbesufficienttousethewordfromforthepurposeofexcludingthefirstinaseriesofdaysoranyotherperiodoftimeandtousethewordtoforthepurposeofincludingthelastinaseriesofdaysoranyotherperiodoftime.Sub-Section(2)ofSection9oftheGeneralClausesAct,1897statesthatthisSectionappliestoallCentralActsmadeafterthethirddayofJanuary,1868,andtoallRegulationsmadeonorafterthefourteenthdayofJanuary,1887.ThisSectionwould,therefore,beapplicabletotheN.I.Act.

18. Counsel,however, submitted thatusing twodifferentwords fromandof inSection138atdifferentplacesclarifiestheintentionofthelegislaturetoconveydifferentmeaningsbythesaidwords.HesubmittedthatthewordofoccurringinSections138(c)and142(b)oftheN.I.ActistobeinterpreteddifferentlyasagainstthewordfromoccurringinSection138(a)oftheN.I.Act.Thewordfrommaybetakenasimplyingexclusionofthedateinquestionandthat


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maywellbegovernedbytheGeneralClausesAct,1897.However,thewordofisdifferentandneedstobeinterpretedtoincludethestartingdayofthecommencementoftheprescribedperiod. It isnotgovernedbySection9oftheGeneralClausesAct1897.Thus,accordingtolearnedcounsel, forthepurposesofSection142(b),whichprescribesthatthecomplaint istobefiledwithin30daysofthedateonwhichthecauseofactionarises,thestartingdateonwhichthecauseofactionarisesshouldbeincludedforcomputingtheperiodof30days.

19. Wearenot impressedbyhissubmission. In thisconnection,wemayrefer toTarunPrasadChatterjee.Though,thiscaserelatestotheprovisionsoftheRepresentationofthePeopleAct,1951 (for short the RP Act, 1951), the principle laid down therein would have a bearing on the presentcase.WhatisimportanttobearinmindisthattheLimitationActisnotapplicabletoit.InthatcasetheshortquestioninvolvedwaswhetherincomputingtheperiodoflimitationasprovidedinSection81(1)oftheRPAct,1951,thedateofelectionofthereturnedcandidateshouldbeexcludedornot.Theappellantwasdeclaredelectedon28/11/1998.On12/1/1999,therespondentfiledanelectionpetitionunderSection81(1)oftheRPAct,1951challengingtheelectionoftheappellant.TheappellantfiledanapplicationunderOrderVIIRule11oftheCPCreadwithSection81oftheRPAct,1951prayingthattheelectionpetitionwasliabletobedismissedatthethresholdasnotmaintainableasthesamehadnotbeenfiledwithin45daysfromthedateofelectionofthereturnedcandidate.Whiledealingwiththisissue,thisCourtreferredtoSection67-AoftheRPAct,1951whichstatesthatforthepurposeoftheRPAct,1951thedateonwhichacandidateisdeclaredbythereturningofficerunderSection53orSection66tobeelectedshallbethedateofelectionofthecandidate.Asstatedearlier,theappellantwasdeclaredelectedasperthisprovisionbythereturningofficeron28/11/1998.Section81oftheRPAct,1951whichrelatestopresentationofpetitionreadsthus:

81. Presentationofpetitions.(1)Anelectionpetitioncallinginquestionanyelectionmaybepresentedononeormoreofthegroundsspecifiedinsub-section(1)ofSection100andSection101totheHighCourtbyanycandidateatsuchelectionoranyelectorwithinforty-fivedaysfrom,butnotearlierthanthedateofelectionofthereturnedcandidateor if there aremore than one returned candidate at the election and dates of theirelectionaredifferent,thelaterofthosetwodates.

Explanation.Inthissub-section,electormeansapersonwhowasentitledtovoteattheelectiontowhichtheelectionpetitionrelates,whetherhehasvotedatsuchelectionornot.

***(3)Everyelectionpetitionshallbeaccompaniedbyasmanycopiesthereofastherearerespondentsmentionedinthepetitionandeverysuchcopyshallbeattestedbythepetitionerunderhisownsignaturetobeatruecopyofthepetition.Beforeanalyzingthisprovision,thisCourtmadeitclearthatitwasanacceptedpositionthattheLimitationActhadnoapplicationto theRPAct,1951.ThisCourt thenreferredtosub-clause (1)ofSection9of theGeneralClausesAct,1897,whichstatesthatitshallbesufficientforthepurposeofexcludingthefirstinaseriesofdaysoranyotherperiodoftimetousethewordsfromandforthepurposeofincludinglast inaseriesofdaysoranyotherperiodoftimetousethewordto.ThisCourtobservedthatSection9givesstatutoryrecognitiontothewellestablishedprincipleapplicabletotheconstructionofstatutethatordinarilyincomputingtheperiodoftimeprescribed,theruleobservedistoexcludethefirstandincludethelastday.ThisCourtquotedtherelevantprovisionsofHalsburysLawsofEngland,37thEdn.,Vol.3,p.92.


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Wedeemitappropriatetoquotethesame.

DaysincludedorexcludedWhenaperiodoftimerunningfromagivendayoreventoanotherday or event is prescribed by law or fixed as contract, and the question arises whetherthe computation is to bemade inclusively or exclusively of the first-mentioned or of thelast-mentionedday, regardmustbehad to the context and to thepurposes forwhich thecomputationhastobemade.Wherethereisroomfordoubt,theenactmentorinstrumentoughttobesoconstruedastoeffectuateandnottodefeattheintentionofParliamentoroftheparties,asthecasemaybe.Expressionssuchasfromsuchadayoruntilsuchadayareequivocal,sincetheydonotmakeitclearwhethertheinclusionortheexclusionofthedaynamedmaybeintended.Asageneralrule,however,theeffectofdefiningaperiodinsuchamanneristoexcludethefirstdayandtoincludethelastday.ThefurtherobservationsmadebythisCourtarepertinentandneedtobequoted:

12. Section9saysthatinanyCentralActorregulationmadeafterthecommencementoftheGeneralClausesAct,1897,itshallbesufficientforthepurposeofexcludingthefirstinaseriesofdaysoranyotherperiodoftime,tousethewordfrom,and,forthepurposeofincludingthelastinaseriesofdaysoranyperiodoftime,tousethewordto.Theprinciple is that when a period is delimited by statute or rule, which has both a beginning andanendandthewordfromisusedindicatingthebeginning,theopeningdayistobe excluded and if the last day is to be included the word to is to be used. In order to excludethefirstdayoftheperiod,thecrucialthingtobenotediswhethertheperiodoflimitationisdelimitedbyaseriesofdaysorbyanyfixedperiod.Thisisintendedtoobviatethedifficultiesorinconveniencethatmaybecausedtosomeparties.Forinstance,ifapolicyofinsurancehastobegoodforonedayfrom1stJanuary,itmightbevalidonlyforafewhoursafteritsexecutionandthepartyorthebeneficiaryintheinsurancepolicywould not get reasonable time to lay claim, unless 1st January is excluded from theperiodofcomputation.ItwasarguedinthatcasethatthelanguageusedinSection81(1)thatwithinforty-fivedaysfrom,butnotearlierthanthedateofelectionofthereturnedcandidateexpressesadifferentintentionandSection9oftheGeneralClausesActhasnoapplication.Whilerejectingthissubmission,thisCourtobservedthat:

Wedonotfindanyforceinthiscontention.InordertoapplySection9,thefirstconditiontobefulfillediswhetheraprescribedperiodisfixedfromaparticularpoint.Whentheperiodismarkedbyterminusaquoandterminusadquem,thecanonofinterpretationenvisagedinSection9oftheGeneralClausesAct,1897requiretoexcludethefirstday.ThewordsfromandwithinusedinSection81(1)oftheRPAct,1951donotexpressanycontraryintention.ThisCourtconcludedthataconjointreadingofSection81(1)oftheRPAct,1951andSection9oftheGeneralClausesAct,1897leadstotheconclusionthatthefirstdayoftheperiodoflimitationisrequiredtobeexcludedfortheconvenienceoftheparties.ThisCourtobservedthatifthedeclarationoftheresultisdonelateinthenight,thecandidateorelectorwouldhardlygetanytimeforpresentationofelectionpetition.

Lawcomestotherescueofsuchpartiestogivefullforty-fivedaysperiodforfilingtheelectionpetition.Inthefactsbeforeitsincethedateofelectionofthereturnedcandidatewas28/11/1998,theelectionpetitionfiledon12/1/1999onexclusionofthefirstdayfromcomputingtheperiodoflimitation,washeldtobeintime.


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20. AstheLimitationActisheldtobenotapplicabletoN.I.Act,drawingparallelfromTarunPrasadChatterjeewheretheLimitationActwasheldnotapplicable,weareoftheopinionthatwiththeaidofSection9oftheGeneralClausesAct,1897itcanbesafelyconcludedinthepresentcasethatwhilecalculatingtheperiodofonemonthwhichisprescribedunderSection142(b)oftheN.I.Act,theperiodhastobereckonedbyexcludingthedateonwhichthecauseofactionarose.ItisnotpossibletoagreewiththecounselfortherespondentsthattheuseofthetwodifferentwordsfromandofinSection138atdifferentplacesindicatestheintentionofthelegislaturetoconveydifferentmeaningsbythesaidwords.

21. Inthisconnectionwemayalsousefully refertothe judgmentof theDivisionBenchof theBombayHighCourtinVasantlalRanchhoddasPatel&Ors.v.UnionofIndia&Ors.[24]whichis approved by this Court in GopaldasUdhavdas Ahuja and another v. Union of India andothers[25], though in different context. In that case the premises of the appellants weresearchedbytheofficersoftheEnforcementDirectorate.Severalpacketscontainingdiamondswereseized.Theappellantsmadeanapplication,forreturnofthediamonds,tothelearnedMagistrate,whichwasrejected.SimilarprayermadetotheSingleJudgeoftheBombayHighCourtwasalsorejected.AnappealwascarriedbytheappellantstotheDivisionBenchoftheBombayHighCourt.ItwaspointedoutthatunderSection124oftheCustomsAct,1962,noorderconfiscatinganygoodsorimposinganypenaltyonanypersonshallbemadeunlesstheownerofthegoodsorsuchpersonisgivenanoticeinwritingwiththepriorapprovaloftheofficerofcustomsnotbelowtherankofanAssistantCommissionerofPolice,informinghimofthegroundsonwhichitisproposedtoconfiscatethegoodsortoimposeapenalty.UnderSection110(1)oftheCustomsAct,1962aproperofficer,whohasreasontobelievethatanygoodsare liabletoconfiscationmayseizesuchgoods.Undersub-Section(2)ofSection110oftheCustomsAct,1962,whereanygoodsareseizedundersub-Section(1)andnonoticeinrespectthereofisgivenunderclause(a)ofSection124withinsixmonthsoftheseizureofthegoods,thegoodsshallbereturnedtothepersonfromwhosepossessiontheywereseized.UnderprovisotoSection110,sub-section(2),however,theCollectorcouldextendtheperiodofsixmonthsonsufficientcausebeingshown.ItwasarguedthattheCustomsOfficershadseizedthegoodswithinthemeaningofSection110oftheCustomsAct,1962on4/9/1964.The notice contemplated under Section 124(a)was given after 3/3/1965, that is after theperiodofsixmonthshadexpired.AsperSection110(2),noticecontemplatedunderSection124(a)oftheCustomsAct,1962hadtobegivenwithinsixmonthsoftheseizureofthegoods,and,therefore,noticeissuedaftertheexpiryofsixmonthswasbadin lawand,hence,theCollector of Customs was not competent to extend the period of six months under the proviso tosub-section(2)ofSection110ashehaddone.Therefore,noorderconfiscatingthegoodsorimposing penalty could have been made and the goods had to be returned to the appellants. ItwasarguedthatSection9oftheGeneralClausesAct,1897hasnoapplicationbecausethewordsfromandtofoundinSection9oftheGeneralClausesAct,1897arenotusedinsub-Section2ofSection110oftheCustomsAct,1962.ThissubmissionwasrejectedandSection9oftheGeneralClausesAct,1897washeldapplicable.SpeakingfortheBenchChainani,C.J.observed as under:

Theprincipleunderlyingsection9hasbeenappliedeveninthecasesofjudicialorderspassedbyCourts, even though in terms the section is not applicable, See. RamchandraGovind v.Laxman Savleram,AIR 1938Bom447,Dharamraj vAddl.DeputyCommr.,Akola,AIR 1957


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Bom154,Puranchandv.MohdDin.AIR1935Lah291,MarakandaSahuv.LalSadananda,AIR1952Orissa279,andLiquidatorUnionBank,Mal,v.PadmanabhaMenon, (1954)2MadLJ44.Thematerialwordsinsub-s.(2)ofsection110are“withinsixmonthsoftheseizureofthegoods”.Insuchprovisionstheword“of”hasbeenheldtobeequivalentto“from”:seeWillimsv.BurgessandWalcot,(1840)12AdandEl635.Inthatcasesection1oftherelevantstatuteenactedthatwarrantsofattorneyshallbefiled“withintwenty-onedaysaftertheexecution.Section2enactedthatunlesstheywere“filedasaforesaidwithinthesaidspaceoftwenty-onedays fromtheexecution,“theyandthe judgment thereonshallbevoidsubject to theconditionsspecifiedinthesection.Thewarrantofattorneywasexecutedon9thDecember,1839and itwasfiled,and judgmententereduponthe30thDecember. Itwasheldthat incomputingtheperiodof21daysthedayofexecutionmustbeexcluded,ReliancewasplacedonExparteFallon,(1793)5TermRep283inwhichthewordusedwas“of”andnot“from”.Itwasobservedthat“of”,“from”and“’after”reallymeantthesamethingandthatnodistinctioncouldbesuggestedfromthenatureofthetwoprovisions.InStroud’sJudicialDictionary,Vol.3,1953EditioninNote(5)undertheword“of”,ithasbeenobservedthat“of”issometimestheequivalentof“after”e.g.,intheexpression“within21daysoftheexecution”.Theprincipleunderlyingsection9oftheGeneralClausesActcannottherefore,beheldtobeinapplicable,merelybecausethewordusedinsub-section(2)ofsection110is“of”andnot“from”.

RelevantextractsfromHalsburyslawsofEngland[26]werequoted.Theyreadasunder:

Thegeneralruleincasesinwhichaperiodisfixedwithinwhichapersonmustactortaketheconsequences is that the day of the act or event from which the period runs should not be counted against him.

Thisgeneralruleappliesirrespectiveofwhetherthelimitationoftimeisimposedbytheactofapartyorbystatute;thus,whereaperiodisfixedwithinwhichacriminalprosecutionoracivilactionmaybecommenced,thedayonwhichtheoffenceiscommittedorthecauseofactionarisesisexcludedinthecomputation.Inthecircumstances,itwasheldthatthedayonwhichthegoodswereseizedhastobeexcludedincomputingtheperiodoflimitationcontemplatedundersub-section(2)ofSection110andthereforethenoticewasissuedwithintheperiodoflimitation.ItispertinenttonotethatunderSection110(2)oftheCustomsAct,noticehadtobegivenwithinsixmonthsoftheseizureofthegoods.Similarly,underSection142(b)oftheN.I.Act,thecomplainthastobemadewithinonemonthofthedateofwhichcauseofactionarose.TheviewtakeninVasantlalRanchhoddasPatelmeetswithourapproval.

22. Inviewoftheabove, it isnotpossibletoholdthatthewordofoccurring inSection138(c)and142(b)oftheN.I.ActistobeinterpreteddifferentlyasagainstthewordfromoccurringinSection138(a)oftheN.I.Act;andthatforthepurposesofSection142(b),whichprescribesthatthecomplaintistobefiledwithin30daysofthedateonwhichthecauseofactionarises,thestartingdayonwhich thecauseofactionarises shouldbe included forcomputing theperiodof30days.AsheldinExparteFallon[27]thewordsof,fromandaftermay,inagivencase,meanreallythesamething.AsstatedinStroudsJudicialDictionary,Vol.31953Edition,Note(5),thewordofissometimesequivalentofafter.

23. RelianceplacedonDanialLatifiistotallymisplaced.InthatcasetheCourtwasconcernedwithSection3(1)(a) of theMuslimWomen (ProtectionofRightsonDivorce)Act, 1986. Section3(1)(a)providesthatadivorcedwomanshallbeentitledtoareasonableandfairprovision


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and maintenance to be made and paid to her within the Iddat period by her former husband. ThisprovisionisentirelydifferentfromSection142(b)oftheN.I.Act,whichprovidesthatthecomplaintistobemadewithinwhichthecauseofactionarises.(emphasissupplied).

24. Wemay,atthisstage,notethatlearnedcounselfortheappellantreliedonStateofHimachalPradeshwhere,while considering thequestionof computationof threemonths limitationperiodandfurther30dayswithinwhichthechallengetotheawardistobefiled,asprovidedinSection34(3)andprovisotheretooftheArbitrationAct,thisCourtheldthathavingregardtoSection12(1)oftheLimitationAct,1963andSection9oftheGeneralClausesAct,1897,dayfromwhichsuchperiodistobereckonedistobeexcludedforcalculatinglimitation.ItwaspointedoutbycounselfortherespondentsthatSection43oftheArbitrationActmakestheLimitationAct,1963applicabletotheArbitrationActwhereasitisheldtobenotapplicabletotheN.I.Actand,therefore,thisjudgmentwouldnotbeapplicabletothepresentcase.WehavenotedthatinthiscaserelianceisnotmerelyplacedonSection12(1)oftheLimitationAct.Reliance isalsoplacedonSection9oftheGeneralClausesAct.However,since, intheinstantcasewehavereachedaconclusiononthebasisofSection9oftheGeneralClausesAct,1897andonthebasisofalonglineofEnglishdecisionsthatwhereaparticulartimeisgiven,from a certain date, within which an act is to be done, the day of the date is to be excluded, it is not necessary to discuss whether State of Himachal Pradesh is applicable to this case or not becauseSection12(1)oftheLimitationActisreliedupontherein.

25. Havingconsideredthequestionoflawinvolvedinthiscaseinproperperspective,inlightofrelevantjudgments,weareoftheopinionthatSakethlaysdownthecorrectpropositionoflaw.Weholdthatforthepurposeofcalculatingtheperiodofonemonth,whichisprescribedunderSection142(b)oftheN.I.Act,theperiodhastobereckonedbyexcludingthedateonwhichthecauseofactionarose.WeholdthatSILImportUSAdoesnotlaydownthecorrectlaw.NeedlesstosaythatanydecisionofthisCourtwhichtakesaviewcontrarytotheviewtakeninSakethbythisCourt,whichisconfirmedbyus,donotlaydownthecorrectlawonthequestioninvolvedinthisreference.Thereferenceisansweredaccordingly.

[1] (1999)3 SCC1

[2] (1999)4 SCC567

[3] (1972)1 SCC639

[4] (2006)9 SCC340

[5] (2008)13 SCC689

[6] (2010)12SCC210

[7] (2000)8 SCC649

[8] AIR1956 SC35

[9] AIR1964 SC1687

[10] (1999)9 SCC700

[11] (2003)4 SCC305


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[12] (2003)5SCC622

[13] (2001)7SCC740

[14] (1904)1K.B,atp. 1,5

[15] 15Ves.248;10R. R.68

[16] 14M.&W.574

[17] [1963]1AllE.R. 11

[18] (1961)2Q.B.135

[19] 2nded.,vol.32p. 142

[20] (1892)1Q.B.161

[21] (1951)2KB792

[22] (1895)2Q.B.264

[23] 15Ves.248

[24] AIR1967Bombay138

[25] (2004)7SCC33

[26] 3rdEdn.,vol.37p.95

[27] (1793)5TermRep 283

qqq

dayawati versus yogesh kumar gosain

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dAyAwATI vS yOGESH kUMAR GOSAIN2017 SCC Online Del 11032

Delhi High Court

Before Hon’ble The Acting Chief Justice and Hon’ble Ms. Justice Anu Malhotra

Dayawati ...Petitioner Through : Mr. Gautam Pal, Adv. for the complainant

Versus

Yogesh Kumar Gosain ...Respondent Through: Mr. Ajay Digpaul, Adv. for the respondent

Mr. J.P. Sengh, Sr. Adv., Ms. Veena Ralli alongwith Mr. Ravin Kapur and Mr. Siddharth Aggarwal, Advs. as Amici Curiae.

CRL.REF.No.1/2016Decided on 17 October, 2017

Reservedon:28thFebruary2017

Dateofdecision:17thOctober2017JUDGMENT

GITA MITTAL, ACTING CHIEF JUSTICE

1. The legal permissibility of referring a complaint cases under Section 138 of theNI Act foramicablesettlementthroughmediation;proceduretobefolloweduponsettlementandthelegalimplicationsofbreachofthemediationsettlementisthesubjectmatterofthisjudgment.Shri Bharat Chugh, as the concernedMetropolitanMagistrate (NI Act) - Central - 01/THC/Delhi,whenseizedofComplaintCaseNos.519662/2016and519664/2016(OldComplaintCaseNos.2429/2015and2430/2015)underSection138oftheNegotiableInstrumentsAct(“NIAct”hereafter)passedanorderdated13thJanuary,2016,thefollowingquestionsunderSection395oftheCodeofCriminalProcedure(“Cr.P.C”hereafter)tothiscourtforconsideration:

“1. Whatisthelegalityofreferralofacriminalcompoundablecase(suchasoneu/s138oftheNIAct)tomediation?

2. CantheMediationandConciliationRules,2004formulatedinexerciseofpowersundertheCPC,beimportedandappliedincriminalcases?Ifnot,howtofillthelegalvacuum?Isthereaneedforseparaterulesframedinthisregard(possiblyu/s477oftheCrPC)?

3. In cases where the dispute has already been referred to mediation - What is theprocedure tobe followedthereafter? Is thematter tobedisposedof taking theverymediatedsettlementagreementtobeevidenceofcompoundingofthecaseanddisposeofthecase,orthesameistobekeptpending,awaitingcompliancethereof(forexample,whenthepaymentsarespreadoveralongperiodoftime,asisusuallythecaseinsuchsettlementagreements)?


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4. IfthesettlementinMediationisnotcompliedwith- isthecourtrequiredtoproceedwiththecaseforatrialonmerits,orholdsuchasettlementagreementtobeexecutableasadecree?

5. IftheMediatedSettlementAgreement,byitself,istakentobetantamounttoadecree,then,how the same is tobeexecuted? Is the complainant tobe relegated tofileanapplicationforexecutioninacivilcourt?Ifyes,whatshouldbetheappropriateorderswithrespecttothecriminalcomplaintcaseathand.Whatwouldbetheeffectofsuchamediatedsettlementvis-a-visthecomplaintcase?”(Emphasisbyus)

ThereferencehasbeenregisteredasCrl.Ref.No.1/2016.

2. Giventheimportanceofthequestionsraisedincriminallaw,byanorderdated15thMarch,2016,wehadappointedMr.SiddharthAggarwal,Advocateasamicuscuriae in thematter.Onthe20thof July2016,havingregardtothenatureof theabove issueswhichhadbeencrystallizedbytheld.MetropolitanMagistrateandinviewoftheirextensiveexperienceonallaspectsofmediation,wehadalsoappointedMr.J.P.Sengh,Sr.AdvocateaswellasMs.VeenaRalli, Advocate (currentlyMember andOrganizing Secretary respectively of theOrganizingCommitteeofSamadhan-DelhiHighCourtMediationandConciliationCentre),bothseniorandexperiencedmediators,asamicicuriaeinthematter.

3. Court notice was also issued to the counsel for the parties in both CC Nos.2429/2015& 2430/2015,Dayawati v. Yogesh KumarGosain pending in the court of theMetropolitanMagistrateforappearancebeforeusandtheystandrepresentedthroughcounselbeforeus.

4. Writtensubmissionsstandfiledbylearnedamicicuriaetoassistthiscourt.WehavehadthebenefitofhearingMr.J.P.Sengh,SeniorAdvocate,Ms.VeenaRalli,AdvocateandMr.SiddharthAggarwal,AdvocateasamicicuriaeaswellasMr.GautamPal,ld.counselforthecomplainantandMr.AjayDigpaul,ld.counselfortherespondentinthecomplaintsunderSection138ofthe NI Act.

5. Wesetdownhereundertheheadingsunderwhichwehaveconsideredthematter:

I. Factualmatrix(paras6to16)

II. Alternatedisputeresolutionmechanismsstatutorilyrecognized(paras17to20)

III. Statutoryprovisions(paras21to31)

IV. ScopeofSection89oftheCodeofCivilProcedure,1908(paras32to41)

V. Statutorypowertorefermattersfordisputeresolutionandeffectofasettlement(paras42to49)

VI. Powerofcriminalcourtstorefercasestomediation(paras50to57)

VII. Processtobefollowedinreferenceofabovedisputesincriminallawtomediation(para58)

VIII. Dispute resolution encouraged in several cases by the Supreme Court in non-compoundable cases as well (paras 59 to 62)

IX. NatureofproceedingsunderSection138oftheNIAct(paras63to67)

X. PermissibilityofsettlementofoffenceunderSection138oftheNIAct(paras68to73)


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XI. MediationandConciliationRules,2004-notifiedtheDelhiHighCourt(paras74to77)

XII. ImpactofsettlementofdisputesinacomplaintunderSection138NegotiableInstrumentsActbyvirtueofLokAdalatundertheLegalServicesAuthoritiesAct,1987(paras78to80)

XIII. WhatistheproceduretobefollowedifinacomplaintcaseunderSection138oftheNIAct,asettlementisreachedinmediation?(paras81to107)

XIV. Breachofsuchsettlementacceptedbythecourt-consequences?(paras108to117)

XV. Referenceanswered(para118)

XVI. Result(paras119to121)Wenowproposetodiscusstheaboveissuesinseriatim:

I. Factual matrix

6. Beforedealingwiththequestionsraisedbeforeus,itisnecessarytobrieflynotesomeessentialfactsof the case. Theappellant Smt.Dayawati (“complainant”hereafter)filed a complaintunderSection138oftheNIAct,complainingthattherespondentShriYogeshKumarGosainherein (“respondent”hereafter)hada liabilityof“55,99,600/- towardsherason7thApril,2013asrecordedinaregularledgeraccountforsupplyoffire-fightinggoodsandequipmenttotherespondentondifferentdatesanddifferentquantities.Inpartdischargeofthisliability,therespondent was stated to have issued two account payee cheques in favour of the complainants of“11,00,000/-(ChequeNo.365406/-dated1stDecember,2014)and“16,00,000/-(ChequeNo.563707dated28thNovember,2014).Unfortunately,thesetwochequesweredishonouredbytherespondent’sbankonpresentationonaccountof“insufficiencyoffunds”.

7. Asaresult,thecomplainantwascompelledtoservealegalnoticeofdemandontherespondentwhich,whenwentunheeded,ledtothefilingoftwocomplaintcasesunderSection138oftheNIActbefore thePatialaHouseCourts,NewDelhibeingCCNos.89/1/15and266/1/15. Intheseproceedings,bothpartieshadexpressedtheintentiontoamicablysettletheirdisputes.Consequently, by a common order dated 1st April, 2015 recorded in both the complaint cases, thematterwas referred formediation to theDelhiHighCourtMediation andConciliationCentre.

8. Weextracthereundertheoperativepartoftheorderdated1stApril,2015whichreadsasfollows

“... Ld. Counsel for accused submits that accused is willing to explore the possibilities ofcompromise.Ld.Counselforcomplainantisalsointerested(sic)incompromisetalk.LetthematterbereferredtoMediationCell,HighCourtDelhi,Delhi.PartiesaredirectedtoappearbeforetheMediationCell,Hon’bleHighCourt,Delhion15.04.2015at2:30p.m.”

9. ItappearsthatafternegotiationsattheDelhiHighCourtMediationandConciliationCentre,theparties settled theirdisputesundera commonsettlementagreementdated14thMay,2015underwhichtheaccusedagreedtopayatotalsumof^55,54,600/-tothecomplainantas fullandfinalsettlementamount in installmentswithregardtowhichamutuallyagreedpaymentschedulewasdrawnup.Itwasundertakenthatthecomplainantwouldwithdrawthecomplaintcasesafterreceiptoftheentireamount.Intheagreementdrawnup,thepartiesagreedtocomplywiththetermsofthesettlementwhichwassignedbyboththepartiesalongwiththeirrespectivecounsels.Weextracttheessentialtermsofthesettlementhereunder:


| 138 |

“xxx xxx xxx

6. Thefollowingsettlementhasbeenarrivedatbetweenthepartieshereto:

a) That the secondparty shall paya total sumofRs.55,54,600/- to thefirstpartytowards full andfinal settlement of all the claimsof thefirst party against thesecond party.

b) Thaton25.06.2015,thesecondpartyshallpayRs.11,00,000/-tothefirstpartybywayofNEFT/RTGS/demanddraft.

c) Thaton25.10.2015,thesecondpartyshallpayRs.16,00,000/-tothefirstpartybywayofNEFT/RTGS/demanddraft.

d) ThebalancesumofRs.28,54,600/-shallbepaidbythesecondpartytothefirstpartywithin18monthsfrom25.11.2015bywayofNEFT/RTGS/demanddraftinequalmonthlyinstallmentsi.e.Rs.1,58,600/-

e) Thatthesecondpartyshallalsoprovide“C-Form(SalesTax,Mumbai)”tothefirstpartyagainstBillNos.R605dated27.02.2013andR607dated06.03.2013.

f) That the first party undertakes to withdraw the present CC Nos. 89/1/15 and266/1/15uponreceiptofentiresettlementamountfromthesecondparty.”

(Emphasisbyus)

10. Thissettlementagreementwasplacedbeforethecourton1stJune,2015whenthefollowingorder was recorded :

“FilereceivedbackfromtheMediationCentrewithreportofsettlement.Settlementagreementdated14.05.2015gonethrough.Atjointrequest,putupforcomplianceofabovesaidsettlementagreementandformakingoffirstinstallmenton30.06.2015” (Emphasisbyus)

11. Unfortunately, the accused/respondent herein failed to comply with the terms of thesettlement.Thoughvestedwiththeobligationthereundertopayasumof^11,00,000/-asthefirstinstallmenton25thJune,2015,hepaidonlyasumof^5,00,000/-tothecomplainantthroughRTGSwithoutgivingany justification.On the30th Juneof2015, theMetropolitanMagistrateconsequentlyrecordedthus:

“...Ld.Counselforcomplainantsubmitsthattheaccusedhasnotmadethepaymentoffirstinstallmentintermsofmediationsettlementdated14.05.2015.

Ld.CounselforcomplainantfurthersubmitsthataccusedwastopayfirstinstallmentofRs.11,00,000/-onorbefore the25.06.2015howeverhehaspaidonlyRs.5,00,000/- throughRTGS.Noreasonableexplanationforthenon-paymentof fullamountoffirst installment isgivenby theaccused.Further,noassurance isgivenby theaccused formakingof thedueinstallmentswithinthestipulatedtime.

Consideringthefactsofthecaseandsubmissionsonbehalfofboththeparties,itisapparentthat the accused is notwilling to complywith the terms and conditions of themediationsettlement.Hence,mediationsettlementfailed.

Letthematterbeproceededonmerit,putupon14.08.2015” (Emphasisbyus)


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12. Thereafter,twomoreopportunitiesweregivenbytheMetropolitanMagistrateon14thAugust,2015and21stAugust,2015totheaccusedtocomplywiththesettlement.Finally,inviewofthecontinuednon-compliance,thematterwaslistedforframingofnoticeon28thSeptember,2015 and trial on merits.

13. In themeantime, theNegotiable Instruments (Amendment)Ordinance,2015, received theassentofthePresidentofIndiaonthe26thofDecember,2016.Onaccountofpromulgationoftheordinance,Section142oftheNegotiableInstumentsAct,1881stoodamendedwithregard to jurisdictionofoffencesunderSection138of theenactmentand therefore thesecases stood transferred fromPatialaHouse Courts to TisHazari Courts atwhich stage themattercametobeplacedbeforetheld.referraljudge.

14. Atthisstage,anapplicationdated16thNovember,2015wasfiledbythecomplainantseekingenforcement of the settlement agreement dated 14thMay, 2015 placing reliance on thejudicial precedents reported at 2013 SCCOnLineDel 124HardeepBajaj v. ICICI; 2015 SCCOnLineDel 7309Manoj Chandak v.M/s Tour Lovers Tourism (India) Pvt Ltd and2015 SCCOnLineDel 9334M/sArun International v. StateofDelhi. The complainanturged that thesettlementagreementwasarrivedatafterlongnegotiationsandmeetings;thatitwasneverrepudiated by the accused nor challenged on grounds of it being vitiated for lack of freeconsentoranyothergroundandlastly,thattheaccusedhavingpaidpartofthefirstagreedinstallment,hasalsoacteduponthemediationsettlementandcannotbeallowedtowrigglefreeofhisobligationunderthesame.

15. Therespondent,ontheotherhand,arguedthatthesettlementagreementwasnotbindingcontending primarily, for the first time, that the settlement amount was exorbitant andonerouspointingoutthatthecomplaintswerefiledwithregardtotwochequeswhichwereforacumulativeamountof“27,00,000/-whilethesettlementamountwasof“55,54,600/-and this by itself was evidence that the agreement was unfair, arbitrary and not binding on the accused.Itwasfurtherurgedthatonreceiptofthecasefromthemediationcell,thestatementofthepartiesoughttohavebeenrecordedbeforethecourtwherebythepartieswouldhaveadoptedthemediationsettlementagreementsothatthesameboretheimprimaturofthecourt.Aspertherespondent,absenceofsuchstatementinthecasedenudedthesettlementagreementofitsbindingnatureandefficacy.

16. Theld.MetropolitanMagistratewasoftheviewthatthesequestionshadarisen,notjustinthiscase,butaplethoraofothercasesaswell.Consequently,theorderdated13thofJanuary2016waspassedmakingtheaforestatedreferenceunderSection395oftheCr.P.C.tothiscourt.Atthesametime,sofarasthecomplaintsunderSection138oftheNIActareconcerned,theld.MMadditionallydirectedthus:

“Inviewofthequestionoflawthathasaroseinthepresentcase,thedecisiononwhichisnecessaryforfurtherproceedingsandaproperadjudicationofthepresentcase-areferencehasbeenmadeu/s395oftheCrPCforconsiderationandguidanceoftheHon’bleHighCourtof Delhi.

TheofficeattachedtothiscourtisdirectedtosendthisReferenceOrdertotheLd.RegistrarGeneral, Hon’ble High Court of Delhi in appropriate manner and through proper channel.


| 140 |

Listthematternowon06.06.2016awaitingtheoutcomeofthereferenceandclarityonthelegalissue.”

II. Alternate dispute resolution mechanisms statutorily recognized

17. Letus,firstandforemost,brieflyexaminethegenesis,modesandmethodsofdisputeresolutionavailabletodisputants. It iscommonknowledgethatotherthanthetraditionaladversariallitigationbeforecourts,alternatedisputeresolutionmechanismsfoundasbeingincreasinglysuitedforvariousclassesofcases,standgivenstatutoryrecognitionandhavereceivedjudicialrecommendationaswell.

18. The legislature has increasingly awarded statutory recognition and provided for alternatedisputeresolutionmechanismstopartiesinseveralenactments,somecompletelydedicatedto thisprocess.These include lokadalats (Section19of theLegalServicesAuthoritiesAct,1987);arbitrationandconciliation(PartsI&IIIofArbitrationandConciliationAct,1996aswellasSection89(a)&(b)oftheCodeofCivilProcedure,1908incorporatedon1stofJuly2002);judicialsettlementandmediation(Section89(c)&(d)oftheCodeofCivilProcedure).

19. Some other statutes that recognize and prescribe alternate dispute resolution attemptsmandatorilyincludetheHinduMarriageAct(Section23),theFamilyCourtsAct,1984(Section9)and;theIndustrialDisputesAct,1947(Section10).

20. Wefindthatsofarascriminalproceedingsareconcerned,statutoryrecognitionstandsgiventosettlementsbetweencomplainants/victimsandaccusedpersonsunderSection320oftheCr.P.C which also provides the limits of permissibility and the procedure to be followed by the courtincompoundingofoffences.

III. Statutory provisions

21. Before examining the reference, we may for expediency extract the relevant provisions of the Negotiable InstrumentsAct,1881;theLegalServicesAuthorityAct,1987;theCodeofCivilProcedure,1908andtheCodeofCriminalProcedure,1973inoneplace.

22. TherelevantstatutoryprovisionsofNegotiableInstrumentsAct,1881readasfollows:

“138Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.--Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamountof money to another person from out of that account for the discharge, in whole or in part, ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthechequeorthatitexceeds the amount arranged to be paid from that account by an agreement made with that bank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudiceto any other provisions of this Act, be punished with imprisonment for a term which may be extendedtotwoyears,orwithfinewhichmayextendtotwicetheamountofthecheque,orwithboth:Providedthatnothingcontainedinthissectionshallapplyunless-¬(a)thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichit isdrawnorwithintheperiodofitsvalidity,whicheverisearlier;

(b) thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawer


| 141 |

of thecheque,within thirtydaysof thereceiptof informationbyhimfromthebankregardingthereturnofthechequeasunpaid;and


Explanation.-- For the purposes of this section, “debt or other liability” means a legallyenforceabledebtorotherliability.]”

xxx xxx xxx

143. PowerofCourttotrycasessummarily.-(1)NotwithstandinganythingcontainedintheCodeofCriminalProcedure,1973,alloffencesunder thisChapter shallbe triedbyaJudicialMagistrateofthefirstclassorbyaMetropolitanMagistrateandtheprovisionsofSections262to265(bothinclusive)ofthesaidCodeshall,asfarasmaybe,applytosuch trials:

Providedthatinthecaseofanyconvictioninasummarytrialunderthissection,itshallbelawfulfortheMagistratetopassasentenceofimprisonmentforatermnotexceedingoneyearandanamountoffineexceedingfivethousandrupees:

Provided further that when at the commencement of, or in the course of, a summary trial under this section, it appears to theMagistrate that thenatureof the case is such that asentence of imprisonment for a term exceeding one year may have to be passed or that it is, foranyotherreason,undesirabletotrythecasesummarily,theMagistrateshallafterhearingtheparties, recordanorder to thateffectandthereafter recallanywitnesswhomayhavebeen examined and proceed to hear or rehear the case in the manner provided by the said Code.

(2) Thetrialofacaseunderthissectionshall,sofaraspracticable,consistentlywiththeinterestsofjustice,becontinuedfromdaytodayuntilitsconclusion,unlesstheCourtfindstheadjournmentofthetrialbeyondthefollowingdaytobenecessaryforreasonstoberecordedinwriting.

(3) Every trial under this section shall be conducted as expeditiously as possible and anendeavourshallbemadetoconcludethetrialwithinsixmonthsfromthedateoffilingofthecomplaint.”

xxx xxx xxx

147. Offences to be compoundable.--Notwithstanding anything contained in the Code ofCriminalProcedure,1973(2of1974),everyoffencepunishableunderthisActshallbecompoundable.” (Emphasisbyus)

23. TheLegalServicesAuthoritiesAct,1987providesforconstitutionoflegalservicesauthoritiestoprovidefreeandcompetentlegalservicestotheweakersectionsofthesocietyaswellastoensurethatopportunities forsecuring justicearenotdeniedtoanycitizenbyreasonofeconomicorotherdisabilities,andalsopostulatesalternatedisputeresolutionmechanismaslokadalats.TherelevantstatutoryprovisionsofLegalServicesAuthoritiesAct,1987regardingdisputeresolutionarereproducedhereafter:


| 142 |

“19. OrganisationofLokAdalats.--

(1) EveryStateAuthorityorDistrictAuthorityor theSupremeCourt Legal ServicesCommitteeoreveryHighCourtLegalServicesCommitteeor,asthecasemaybe,Taluk Legal ServicesCommitteemayorganise LokAdalats at such intervals andplacesandforexercisingsuchjurisdictionandforsuchareasasitthinksfit.

xxx xxx xxx

(5) ALokAdalatshallhavejurisdictiontodetermineandtoarriveatacompromiseorsettlementbetweenthepartiestoadisputeinrespectof-¬

(i) anycasependingbefore;or

(ii) any matter which is falling within the jurisdiction of, and is not broughtbefore,anycourtforwhichtheLokAdalat isorganised:ProvidedthattheLokAdalatshallhavenojurisdictioninrespectofanycaseormatterrelatingtoanoffencenotcompoundableunderanylaw.

20. CognizanceofcasesbyLokAdalats.--

(1) Whereinanycasereferredtoinclause(i)ofsub-section(5)ofsection19

(i) (a) thepartiesthereofagree;or

(b) one of the parties thereof makes an application to the court, for referringthecasetotheLokAdalatforsettlementandifsuchcourtis primafaciesatisfiedthattherearechancesofsuchsettlement;or

(ii) the court is satisfied that the matter is an appropriate one to be takencognizanceofby theLokAdalat, thecourt shall refer thecase to theLokAdalat:

ProvidedthatnocaseshallbereferredtotheLokAdalatundersub-clause(b)ofclause(i)orclause(ii)bysuchcourtexceptaftergivingareasonableopportunityofbeingheardtotheparties.

(2) Notwithstandinganythingcontainedinanyotherlawforthetimebeinginforce,theAuthority or Committeeorganising the LokAdalat under sub-section (1) ofsection19may,onreceiptofanapplicationfromanyoneofthepartiestoanymatterreferredtoinclause(ii)ofsub-section(5)ofsection19thatsuchmatterneedstobedeterminedbyaLokAdalat,refersuchmattertotheLokAdalat,fordetermination:

ProvidedthatnomattershallbereferredtotheLokAdalatexceptaftergivingareasonable opportunity of being heard to the other party.

(3) Where any case is referred to a Lok Adalat under sub- section (1) or where areferencehasbeenmadetoitundersub-section(2),theLokAdalatshallproceedtodisposeofthecaseormatterandarriveatacompromiseorsettlementbetweentheparties.

(4) EveryLokAdalatshall,whiledetermininganyreferencebeforeitunderthisAct,actwithutmostexpeditiontoarriveatacompromiseorsettlementbetweenthe


| 143 |

partiesandshallbeguidedbytheprinciplesofjustice,equity,fairplayandotherlegal principles.

(5) WherenoawardismadebytheLokAdalatonthegroundthatnocompromiseorsettlementcouldbearrivedatbetweentheparties,therecordofthecaseshallbe returned by it to the court, from which the reference has been received under sub-section(1)fordisposalinaccordancewithlaw.

(6) Wherenoaward ismadebytheLokAdalatonthegroundthatnocompromiseorsettlementcouldbearrivedatbetweentheparties,inamatterreferredtoinsub¬section(2),thatLokAdalatshalladvisethepartiestoseekremedyinacourt.

(7) Wheretherecordofthecaseisreturnedundersub-section(5)tothecourt,suchcourt shall proceed to deal with such case from the stage which was reached beforesuchreferenceundersub-section(1).

21. AwardofLokAdalat.-

(1) Every award of the LokAdalat shall be deemed to be a decree of a civil courtor, as the case may be, an order of any other court and where a compromise or settlementhasbeenarrivedat,byaLokAdalatinacasereferredtoitundersub-section(1)ofsection20,thecourt-freepaidinsuchcaseshallberefundedinthemannerprovidedundertheCourtFeesAct,1870(7of1870).]”

(2) EveryawardmadebyaLokAdalatshallbefinalandbindingonallthepartiestothedispute,andnoappealshalllietoanycourtagainsttheaward.(Emphasisbyus)

24. LetusalsoexamineSection89oftheCodeofCivilProcedure,1908(“CPC”hereafter),relevantstatutoryprovisionswhereofalsoprescribealternatedisputeresolutionmechanisms,whichare as under:

“89. SettlementofdisputesoutsidetheCourt(1)Whereitappearstothecourtthatthereexistelementsofasettlementwhichmaybeacceptabletotheparties,thecourtshallformulatethetermsofsettlementandgivethemtothepartiesfortheirobservationsandafterreceivingtheobservationoftheparties,thecourtmayreformulatethetermsofapossiblesettlementandreferthesamefor-

(a) arbitration;

(b) conciliation

(c) judicialsettlementincludingsettlementthroughLokAdalat;or

(d) mediation.

(2) Whereadisputehadbeenreferred-

(a) forarbitrationor conciliation, theprovisionsof theArbitrationandConciliationAct, 1996 shall apply as if the proceedings for arbitration or conciliationwerereferredforsettlementundertheprovisionsofthatAct.

(b) toLokAdalat,thecourtshallreferthesametotheLokAdalatinaccordancewiththeprovisionsofsub-section(1)ofsection20oftheLegalServicesAuthorityAct,


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1987 and all other provisions of that Act shall apply in respect of the dispute so referredtotheLokAdalat;

(c) forjudicialsettlement,thecourtshallreferthesametoasuitableinstitutionorpersonandsuchinstitutionorpersonshallbedeemedtobeaLokAdalatandalltheprovisionsoftheLegalServicesAuthorityAct,1987shallapplyasifthedisputewerereferredtoaLokAdalatundertheprovisionsofthatAct;

(d) formediation,thecourtshalleffectacompromisebetweenthepartiesandshallfollowsuchprocedureasmaybeprescribed.” (Emphasissupplied)

25. Sofarasthecivilsuitsareconcerned,theLegislaturehasamendedtheCPCto incorporateRules1A,1Band1CinOrderXwhicharereproducedhereunder:

“1-A.Directionofthecourttooptforanyonemodeofalternativedisputeresolution.--Afterrecordingtheadmissionsanddenials,theCourtshalldirectthepartiestothesuittoopteithermodeofthesettlementoutsidetheCourtasspecifiedinsub-section(1)ofSection89.Ontheoptionoftheparties,thecourtshallfixthedateofappearancebeforesuchforumorauthorityasmaybeoptedbytheparties.

1-B. Appearancebeforetheconciliatoryforumorauthority.--WhereasuitisreferredunderRule1-A,thepartiesshallappearbeforesuchforumorauthorityforconciliationofthesuit.

1-C. Appearance before the Court consequent to the failure of efforts of conciliation.--WhereasuitisreferredunderRule1-Aandthepresidingofficerofconciliationforumorauthorityissatisfiedthatitwouldnotbeproperintheinterestofjusticetoproceedwiththematterfurther,then,itshallreferthematteragaintothecourtanddirectthepartiestoappearbeforetheCourtonthedatefixedbyit.” (Emphasisbyus)

26. WemayalsousefullyextracttheprovisionsofRule3ofOrderXXIIIoftheCPCwhichprovidethemannerinwhichacivilcourtwillproceeduponadjustmentofasuit,whollyorinpart,byan agreement or compromise. This provision reads thus :

“3. Compromiseofsuit.-Whereitisprovedtothesatisfactionofthecourtthatasuithasbeenadjustedwhollyorinpartbyanylawfulagreementorcompromiseinwritingandsignedby theparties,orwhere thedefendant satisfies theplaintiff in respectof thewholeoranypartofthesubjectmatterofthesuit,thecourtshallordersuchagreement,compromise or satisfaction to be recorded, and shall pass a decree in accordancetherewithsofarasitrelatestothepartiestothesuit,whetherornotthesubjectmatteroftheagreement,compromiseorsatisfactionisthesameasthesubjectmatterofthesuit: -

Provided that where it is alleged by one party and denied by the other than an adjustmentorsatisfactionhasbeenarrivedat,thecourtshalldecidethequestion;butnoadjournmentshallbegrantedforthepurposeofdecidingthequestion,unlessthecourt,forreasonstoberecorded,thinksfittograntsuchadjournment.”(Emphasisbyus)

27. At thispoint, it isalsonecessary toexamine fromtheCr.P.C., theprovisionsofSection29,whichprovidesthesentencewhichamagistratemaypass;Section320whichstipulatescaseswhichmaybecompoundedbythepartiesaswellasthosewhichmaybecompoundedwith


| 145 |

theleaveofthecourtorotherwise;Section357whichprovidesforawardofcompensationwhileawardingasentenceoffineorofwhichfineformsapart;Section421whichprovidesforthemannerinwhichafinemayberecoveredandSection431whichenablesacourttorecoverany money by virtue of an order made under the Cr.P.C.

28. Sections29and320oftheCr.P.C.,arerelevantforthepresentconsideration,readasfollows:

“29. SentenceswhichMagistratesmaypass(1)TheCourtofaChiefJudicialMagistratemaypass any sentence authorised by law except a sentence of death or of imprisonment for life or of imprisonment for a term exceeding seven years.

(2) TheCourtofaMagistrateofthefirstclassmaypassasentenceofimprisonmentforatermnotexceedingthreeyears,oroffinenotexceedingfivethousandrupees,orof both.

(3) TheCourtofaMagistrateofthesecondclassmaypassasentenceofimprisonmentforatermnotexceedingoneyear,oroffinenotexceedingonethousandrupees,or of both.

(4) TheCourtofaChiefMetropolitanMagistrateshallhavethepowersoftheCourtofaChiefJudicialMagistrateandthatofaMetropolitanMagistrate,thepowersoftheCourtofaMagistrateofthefirstclass.”

320. Compoundingofoffences.--(1)TheoffencespunishableunderthesectionsoftheIndianPenalCode(45of1860)specifiedinthefirsttwocolumnsoftheTablenextfollowingmaybecompoundedbythepersonsmentionedinthethirdcolumnofthatTable:-¬

xxx xxx xxx

(2) The offences punishable under the sections of the Indian Penal Code (45 of1860)specifiedinthefirsttwocolumnsoftheTablenextfollowingmay,withthepermissionoftheCourtbeforewhichanyprosecutionforsuchoffenceispending,becompoundedbythepersonsmentionedinthethirdcolumnofthatTable:--

xxx xxx xxx” (Emphasissupplied)

29. TheprovisionsofSections357,421,431oftheCr.P.C.whichenablethecourttodirectpaymentsof monetary amounts and enable recovery thereof, by the trial courts also may be extracted and read as follows :

“357.Ordertopaycompensation(1)WhenaCourtimposesasentenceoffineorasentence(includingasentenceofdeath)ofwhichfineformsapart,theCourtmay,whenpassingjudgment,orderthewholeoranypartofthefinerecoveredtobeapplied-

(a) indefrayingtheexpensesproperlyincurredintheprosecution;

(b) inthepaymenttoanypersonofcompensationforanylossorinjurycausedbytheoffence,whencompensationis,intheopinionoftheCourt,recoverablebysuchpersoninaCivilCourt;

(c) when any person is convicted of any offence for having caused the death ofanotherpersonorofhavingabettedthecommissionofsuchanoffence,inpayingcompensation to thepersonswhoare,under theFatalAccidentsAct,1855 (13


| 146 |

of 1855 ), entitled to recoverdamages from theperson sentenced for the lossresultingtothemfromsuchdeath;

(d) when any person is convicted of any offence which includes theft, criminalmisappropriation,criminalbreachoftrust,orcheating,orofhavingdishonestlyreceived or retained, or of having voluntarily assisted in disposing of, stolen property knowingorhavingreasontobelievethesametobestolen,incompensatinganybonafidepurchaserofsuchpropertyforthelossofthesameifsuchpropertyisrestoredtothepossessionofthepersonentitledthereto.(2)Ifthefineisimposedinacasewhichissubjecttoappeal,nosuchpaymentshallbemadebeforetheperiodallowedforpresentingtheappealhaselapsed,or,ifanappealbepresented,beforethedecisionoftheappeal.(3)WhenaCourtimposesasentence,ofwhichfinedoesnotformapart,theCourtmay,whenpassingjudgment,ordertheaccusedpersontopay,bywayofcompensation,suchamountasmaybespecifiedintheordertothepersonwhohassufferedanylossorinjurybyreasonoftheactforwhichtheaccusedpersonhasbeensosentenced.(4)Anorderunderthissectionmay also be made by an Appellate Court or by the High Court or Court of Session whenexercisingitspowersofrevision.(5)Atthetimeofawardingcompensationinanysubsequentcivilsuitrelatingtothesamematter,theCourtshalltakeintoaccountanysumpaidorrecoveredascompensationunderthissection.”

“421.Warrant for levyoffine (1)Whenanoffenderhasbeensentenced topayafine, theCourtpassingthesentencemaytakeactionfortherecoveryofthefineineitherorbothof the following ways, that is to say, it may-

(a) issueawarrantforthe levyoftheamountbyattachmentandsaleofanymovablepropertybelongingtotheoffender;

(b) issue a warrant to the Collector of the district, authorising him to realise the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter: Provided that, if the sentence directs thatindefaultofpaymentofthefine,theoffendershallbeimprisoned,andifsuchoffenderhasundergonethewholeofsuchimprisonmentindefault,no Court shall issue such warrant unless, for special reasons to be recorded inwriting,itconsidersitnecessarysotodo,orunlessithasmadeanorderforthepaymentofexpensesorcompensationoutofthefineundersection357.

(2) TheStateGovernmentmaymakerulesregulatingthemannerInwhichwarrantsunder clause (a) of sub- section (1) are to be executed, and for the summarydeterminationofanyclaimsmadebyanypersonotherthantheoffenderinrespectofanypropertyattachedinexecutionofsuchwarrant.

(3) WheretheCourtissuesawarranttotheCollectorunderclause(b)ofsub-section(1),theCollectorshallrealisetheamountinaccordancewiththelawrelatingtorecoveryofarrearsof landrevenue,as ifsuchwarrantwereacertificate issuedunder such law: Provided that no such warrant shall be executed by the arrest or detentioninprisonoftheoffender.”


| 147 |

“431.MoneyorderedtobepaidrecoverableasfineAnymoney(otherthanafine)payablebyvirtue of any order made under this Code, and the method of recovery of which is not otherwiseexpresslyprovidedfor,shallberecoverableasifitwereafine:

Providedthatsection421shall,initsapplicationtoanorderundersection359,byvirtueofthissection,beconstruedasifintheprovisotosub-section(1)ofsection421,afterthewordsandfigures”undersection357”,thewordsandfigures”oranorderforpaymentofcostsundersection359”hadbeeninserted.” (Emphasissupplied)

30. Given the questions referred to us,wemay also extract hereunder the extent of the rulemakingpoweroftheHighCourtunderSection477oftheCr.P.C.whichreadsthus:

“477.PowerofHighCourttomakerules-

(1) EveryHighCourtmay,withthepreviousapprovaloftheStateGovernment,makerules--

(a) astothepersonswhomaybepermittedtoactaspetition-writersintheCriminalCourtssubordinatetoit;

(b) regulatingtheissueoflicencestosuchpersons,theconductofbusinessbythem,and the scale of fees to be charged by them.

(c) providingapenaltyforacontraventionofanyoftherulessomadeanddeterminingtheauthoritybywhichsuchcontraventionmaybeinvestigatedandthepenaltiesimposed;

(d) anyothermatterwhichisrequiredtobe,maybe,prescribed.

(2) AllrulesmadeunderthissectionshallbepublishedintheOfficialGazette.”

(Emphasissupplied)

31. TheDelhiHighCourthason11thAugust,2005notifiedthe“MediationAndConciliationRules2004”toguidemediationinDelhi.Weextracthereundertherelevantextract,asamended,thereof:

“(TOBEPUBLISHEDINPARTIVOFDELHIGAZETTEEXTRAORDINARY)HIGHCOURTOFDELHI:NEWDELHINOTIFICATIONNo.171/Rules/DHCDated:11thAugust,2005InexerciseoftherulemakingpowerunderPartXoftheCodeofCivilProcedure,1908(5of1908)andclause(d)ofsub-section(2)ofSection89ofthesaidCodeandallotherpowersenablingitinthisbehalf,theHighCourtofDelhiherebymakesthefollowingrules:-

MEDIATIONANDCONCILIATIONRULES,2004Rule1:Title“TheRuleswillapplytoallmediationandconciliationconnectedwithanysuitorotherproceedingpending in theHighCourtofDelhiorinanycourtsubordinatetotheHighCourtofDelhi.Themediationinrespectofanysuit or proceeding pending before the High Court of Delhi or any other Court or Tribunal may bereferredtotheDelhiHighCourtMediationandConciliationCentreoranyotherMediationCentresetupbyLegalServicesAuthorities.UponsuchareferencebeingmadetoDelhiHighCourtMediationandConciliationCentre, the samewillbegovernedby theCharterof theDelhi High CourtMediation and Conciliation Centre and to those mediation proceedings,thepresentRuleswillapplymutatismutandi.”TheseRulesshallbecalledtheMediationandConciliationRules,2004.


| 148 |

Rule2:AppointmentofMediator/Conciliator

(a) Parties to a suit or other proceedingmay agree on the name of the solemediator/conciliatorformediatingbetweenthem....

xxx xxx xxx

Rule3:Panelofmediators/conciliators

xxx xxx xxx

(b) (i) The District & Sessions Judge shall, for the purpose of appointing themediator/conciliatortomediatebetweenthepartiesinthesuitsorproceedingsprepareapanelofthemediators/conciliatorswithinaperiodofthirtydaysofthecommencementoftheserulesandshallsubmitthesametotheHighCourtforapproval.OnapprovalofthesaidpanelbytheHighCourt,withorwithoutmodification,whichshallbedonewithinthirtydaysofthesubmissionofthepanelbytheDistrict&SessionsJudge,thesameshallbeputontheNoticeBoard.

xxx xxx xxx

Rule24:Settlementagreement

a) Whereanagreementisreachedbetweenthepartiesinregardtoalltheissuesinthesuitorproceedingorsomeoftheissues,thesameshallbereducedtowritingandsignedbythepartiesortheirconstitutedattorney.Ifanycounselhasrepresentedtheparties,theconciliator/mediatormayobtainhissignaturealsoonthesettlementagreement.

(b) Theagreementofthepartiessosignedshallbesubmittedtothemediator/conciliatorwhoshall,withacoveringlettersignedbyhim,forwardthesametotheCourtinwhichthe suit or proceeding is pending.

(c) Wherenoagreementisarrivedatbetweentheparties,beforethetimelimitstatedinRule18ofwhere,themediator/conciliatorisoftheviewthatnosettlementispossible,heshallreportthesametotheCourtinwriting.

Rule25:CourttofixadateforRecordingsettlementandpassingdecree

(a) Onreceiptofanysettlement,theCourtshallfixadateofhearingnormallywithinsevendaysbutinanycasenotbeyondaperiodoffourteendays.Onsuchdateofhearing,iftheCourtissatisfiedthatthepartieshavesettledtheirdispute(s),itshallpassadecreein accordance with terms thereof.

(b) Ifthesettlementdisposeofonlycertainissuesarisinginthesuitorproceeding,onthebasis of which any decree is passed as stated in Clause (a), the Court shall proceed further todecideremainingissues.” (Emphasissupplied)

IV. Scope of Section 89 of the Code of Civil Procedure, 1908

32. MediationasamodeofalternatedisputesettlementthusfindsstatutoryrecognitioninSection89 of the Code of Civil Procedure.

33. Valuable light isthrownonthe interpretationofSection89 inthe judicialpronouncementsrenderedbytheSupremeCourtofIndiain(2003)1SCC49,SalemAdvocateBarAssn.v.UnionofIndia(SalemBarI);(2005)6SCC344,SalemAdvocateBarAssn.v.UnionOfIndia(SalemBar


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II)and(2010)8SCC24,AfconsInfrastructureLtd.&Anr.v.CherianVarkeyConstructionsCo.Pvt.Ltd.

34. ExtensiveamendmentswereeffectedtotheCodeofCivilProcedurebytheLegislaturebyAct46of1999.Amongsttheprovisionsinserted,wasSection89whichprovidedforsettlementof disputes outside the court through use of alternate dispute redressal mechanisms. Several writpetitionscametobefiledbeforetheSupremeCourtofIndiachallengingtheamendmentseffectedtotheCodeofCivilProcedurebytheAmendmentAct46of1999andAmendmentAct22of2002.AmongstthesewasW.P.(C)No.496/2000titledSalemAdvocateBarAssn.v.UnionofIndia.Thiswritpetitioncametobedecided,alongwithconnectedwritpetitions,bywayofthejudgmentdated25thOctober,2002reportedat(2003)1SCC49,SalemAdvocateBarAssn.v.UnionofIndia(commonlyknownasSalemBarI).SofarastheamendmentsandinsertionofSection89oftheCodeofCivilProcedurewasconcerned,theSupremeCourtobservedthatSection89wasanewprovisionandeventhrougharbitrationorconciliationhadbeeninplaceasmodesofsettlingthedisputes,thishadnotreallyreducedtheburdenofthecourts.ThecourtwasoftheviewthatmodalitieshadtobeformulatedforthemannerinwhichSection89as well as other provisions which had been introduced by way of amendments, may have to beoperated.Forthispurpose,aCommitteewasconstitutedtoensurethattheamendmentsmadebecameeffectiveandresultedinquickerdispensationofjustice.

35. Thiswasfollowedbyalaterpronouncementinthesamecasereportedat(2005)6SCC344,SalemAdvocateBarAssn.v.UnionOfIndia(commonlyreferredtoasSalemBarII),wherebytheSupremeCourtfurtherclarifiedthepositionholdingasfollows:

“57. Adoubthasbeenexpressedinrelationtoclause(d)ofSection89(2)oftheCodeonthequestionastofinalisationofthetermsofthecompromise.Thequestioniswhetherthetermsofcompromisearetobefinalisedbyorbeforethemediatororbyorbeforethecourt.Itisevidentthatallthefouralternatives,namely,arbitration,conciliation,judicialsettlement including settlement through the LokAdalat andmediation aremeant tobe the action of persons or institutions outside the court and not before the court.Order10Rule1-Cspeaksofthe“ConciliationForum”referringbackthedisputetothecourt.Infact,thecourtisnotinvolvedintheactualmediation/conciliation.Clause(d)ofSection89(2)onlymeansthatwhenmediationsucceedsandpartiesagreetothetermsofsettlement,themediatorwillreporttothecourtandthecourt,aftergivingnoticeandhearingtotheparties,“effect”thecompromiseandpassadecreeinaccordancewiththetermsofsettlementacceptedbytheparties.Further,inthisview,thereisnoquestionofthecourtwhichrefersthemattertomediation/conciliationbeingdebarredfromhearingthematterwheresettlementisnotarrivedat.Thejudgewhomakesthereferenceonlyconsidersthelimitedquestionastowhethertherearereasonablegroundstoexpectthattherewillbeasettlement,andonthatgroundhecannotbetreatedtobedisqualifiedtotrythesuitafterwards,ifnosettlementisarrivedatbetweentheparties.

xxx xxx xxx

62. Whenthepartiescometoasettlementuponareferencemadebythecourtformediation,assuggestedbytheCommitteethattherehastobesomepublicrecordofthemannerinwhichthesuitisdisposedofand,therefore,thecourthastofirstrecordthesettlementand pass a decree in terms thereof and if necessary proceed to execute it in accordance


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with law. It cannot be accepted that such a procedure would be unnecessary. If the settlementisnotfiledinthecourtforthepurposeofpassingofadecree,therewillbenopublicrecordofthesettlement.Itis,however,adifferentmatterifthepartiesdonotwantthecourttorecordasettlementandpassadecreeandfeelthatthesettlementcanbe implemented even without a decree. In such eventuality, nothing prevents them in informingthecourtthatthesuitmaybedismissedasadisputehasbeensettledbetweenthepartiesoutsidethecourt.” (Emphasisbyus)

36. In(2010)8SCC24,AfconsInfrastructureLtd.&Anr.v.CherianVarkeyConstructionsCo.Pvt.Ltd., the SupremeCourtwas called upon to consider the scope of Section 89 of the CPC.CertainerrorsbythedraftsmanwerenotedinSection89oftheCPC. Inthis judgment,thecourtfurtherinterpretedthestatutetoimplementthespirit,objectandintendmentoftheprovisions.Wemayusefullyrefertopara25ofthejudgmentinthisregard,whichreadsasfollows:

“25. Inviewof theforegoing, ithastobeconcludedthatproper interpretationofSection89of theCode requires two changes fromaplain and literal readingof the section.Firstly,itisnotnecessaryforthecourt,beforereferringthepartiestoanADRprocesstoformulateorreformulatethetermsofapossiblesettlement.Itissufficientifthecourtmerelydescribesthenatureofdispute(inasentenceortwo)andmakesthereference.Secondly,thedefinitionsof“judicialsettlement”and“mediation”inclauses(c)and(d)ofSection89(2)shallhavetobeinterchangedtocorrectthedraftsman’serror.

Clauses(c)and(d)ofSection89(2)oftheCodewillreadasunderwhenthetwotermsare interchanged:

(c) for“mediation”,thecourtshallreferthesametoasuitableinstitutionorpersonand such institution or person shall be deemed to be a LokAdalat and all theprovisionsoftheLegalServicesAuthoritiesAct,1987(39of1987)shallapplyasifthedisputewerereferredtoaLokAdalatundertheprovisionsofthatAct;

(d) for“judicialsettlement”,thecourtshalleffectacompromisebetweenthepartiesand shall follow such procedure as may be prescribed.

Theabove changesmadeby interpretativeprocess shall remain in forcetill the legislaturecorrectsthemistakes,sothatSection89isnotrenderedmeaninglessandinfructuous.”

(Emphasissupplied)

37. WithregardtoanomaliesinSection89oftheCPC,theSupremeCourthasthusheldthatwherethecourthasreferredthemattertomediation, themediatorshallbedeemedtobeaLokAdalatundertheLegalServicesAct.ForcasescoveredunderSection89oftheCPC,itisthusabundantlyclearthatthemediatedsettlementandsettlementbefore“anotherJudge”,wouldhavethesameefficacyandbindingstatusasanawardoftheLokAdalatwhichisdeemedtobe a decree.

38. TheSupremeCourthasalso stipulated thatmediatedsettlementwouldhave tobeplacedbefore the courts concerned for recordingof the settlement anddisposal of the case.Weextracthereunderpara39ofAfconswhereinthisisdiscussed:


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“39. Wherethereferenceistoaneutralthirdparty(“mediation”asdefinedabove)onacourtreference,thoughitwillbedeemedtobereferencetoLokAdalat,asthecourtretainsitscontrolandjurisdictionoverthematter,themediationsettlementwillhavetobeplacedbeforethecourtforrecordingthesettlementanddisposal.WherethematterisreferredtoanotherJudgeandsettlementisarrivedatbeforehim,suchsettlementagreementwillalsohavetobeplacedbeforethecourtwhichreferredthematterandthatcourtwillmakeadecreeintermsofit.” (Emphasissupplied)

AsaresultofthepronouncementinAfcons,Section89oftheC.P.C.thusstandsmodifiedto the extent noted above.

39. So faras theprocedure tobeadoptedbyacourtupon referenceof thedisputes inacivilcase to an ADR mechanism is concerned, the same stands further considered in Afcons. The relevantportionofthejudgmentisreproducedasunder:

“43 WemaysummarisetheproceduretobeadoptedbyacourtunderSection89of theCode as under:

(a) When the pleadings are complete, before framing issues, the court shall fix apreliminary hearing for appearance of parties. The court should acquaint itselfwiththefactsofthecaseandthenatureofthedisputebetweentheparties.

(b) ThecourtshouldfirstconsiderwhetherthecasefallsunderanyofthecategoryofthecaseswhicharerequiredtobetriedbycourtsandnotfittobereferredtoanyADRprocesses. If itfindsthatthecasefallsunderanyexcludedcategory, itshouldrecordabrieforderreferringtothenatureofthecaseandwhyitisnotfitfor reference to ADR processes. It will then proceed with the framing of issues and trial.

(c) In other cases (that is, in cases which can be referred to ADR processes) the court shouldexplainthechoiceoffiveADRprocessestothepartiestoenablethemtoexercisetheiroption.

(d) Thecourtshouldfirstascertainwhetherthepartiesarewillingforarbitration.Thecourt should inform theparties thatarbitration is anadjudicatoryprocessbyachosenprivateforumandreferencetoarbitrationwillpermanentlytakethesuitoutsidetheambitofthecourt.Thepartiesshouldalsobeinformedthatthecostofarbitrationwillhavetobebornebythem.Onlyifbothpartiesagreeforarbitration,andalsoagreeuponthearbitrator,themattershouldbereferredtoarbitration.

(e) Ifthepartiesarenotagreeableforarbitration,thecourtshouldascertainwhetherthepartiesareagreeableforreferencetoconciliationwhichwillbegovernedbytheprovisionsoftheACAct.Ifallthepartiesagreeforreferencetoconciliationandagreeupontheconciliator(s),thecourtcanreferthemattertoconciliationinaccordancewithSection64oftheACAct.

(f) Ifthepartiesarenotagreeableforarbitrationandconciliation,whichislikelytohappeninmostofthecasesforwantofconsensus,thecourtshould,keepinginviewthepreferences/optionsofparties,referthemattertoanyoneoftheotherthreeADRprocesses:(a)LokAdalat;(b)mediationbyaneutralthird-partyfacilitatoror


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mediator;and(c)ajudicialsettlement,whereaJudgeassiststhepartiestoarriveatasettlement.

(g) Ifthecaseissimplewhichmaybecompletedinasinglesitting,orcasesrelatingtoamatterwherethelegalprinciplesareclearlysettledandthereisnopersonalanimositybetweentheparties(asinthecaseofmotoraccidentclaims),thecourtmayreferthemattertoLokAdalat.Incasewherethequestionsarecomplicatedorcaseswhichmayrequireseveral roundsofnegotiations, thecourtmayreferthemattertomediation.WherethefacilityofmediationisnotavailableorwherethepartiesoptfortheguidanceofaJudgetoarriveatasettlement,thecourtmayreferthemattertoanotherJudgeforattemptingsettlement.

(h) If the reference to the ADR process fails, on receipt of the report of the ADR forum,thecourtshallproceedwithhearingofthesuit.Ifthereisasettlement,thecourtshallexaminethesettlementandmakeadecreeintermsofit,keepingtheprinciplesofOrder23Rule3oftheCodeinmind.

(i) Ifthesettlementincludesdisputeswhicharenotthesubject-matterofthesuit,thecourtmaydirectthatthesamewillbegovernedbySection74oftheACAct(ifitisaconciliationsettlement)orSection21oftheLegalServicesAuthoritiesAct,1987(ifitisasettlementbyaLokAdalatorbymediationwhichisadeemedLokAdalat).Ifthesettlementisthroughmediationanditrelatesnotonlytodisputeswhicharethesubject-matterofthesuit,butalsootherdisputesinvolvingpersonsotherthanthepartiestothesuit,thecourtmayadopttheprincipleunderlyingOrder23Rule3oftheCode.Thiswillbenecessaryasmanysettlementagreementsdealwithnotonlythedisputeswhicharethesubject-matterofthesuitorproceedinginwhichthereferenceismade,butalsootherdisputeswhicharenotthesubject-matterofthe suit.

(j) Ifanytermofthesettlementisexfacieillegalorunenforceable,thecourtshoulddrawtheattentionofpartiestheretotoavoidfurtherlitigationsanddisputesaboutexecutability.” (Emphasisbyus)

40. Inpara44,theSupremeCourthasalsolaiddowncertainconsequentialaspectswhichhavetobeborneinmindwhilegivingeffecttoSection89oftheCode.Para44ofthejudgmentisreproduced as under :

“44. Thecourt shouldalsobear inmind the followingconsequentialaspects,whilegivingeffecttoSection89oftheCode:

(i) Ifthereferenceistoarbitrationorconciliation,thecourthastorecordthatthereference is by mutual consent. Nothing further need be stated in the order-sheet.

(ii) IfthereferenceistoanyotherADRprocess,thecourtshouldbrieflyrecordthathaving regard to thenatureofdispute, thecasedeserves tobereferredtoLokAdalat,ormediationorjudicialsettlement,asthecasemaybe.Thereisnoneedforanelaborateorderformakingthereference.

(iii) TherequirementinSection89(1)thatthecourtshouldformulateorreformulatethetermsofsettlementwouldonlymeanthatthecourthastobrieflyrefertothenature of dispute and decide upon the appropriate ADR process.


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(iv) IftheJudgeinchargeofthecaseassiststhepartiesandifsettlementnegotiationsfail,heshouldnotdealwiththeadjudicationofthematter,toavoidapprehensionsofbiasandprejudice.ItisthereforeadvisabletorefercasesproposedforjudicialsettlementtoanotherJudge.

(v) IfthecourtrefersthemattertoanADRprocess(otherthanarbitration),itshouldkeeptrackofthematterbyfixingahearingdatefortheADRreport.TheperiodallottedfortheADRprocesscannormallyvaryfromaweektotwomonths(whichmay be extended in exceptional cases, depending upon the availability of thealternative forum, the nature of case, etc.). Under no circumstances the courtshould allow the ADR process to become a tool in the hands of an unscrupulous litigantintentupondraggingontheproceedings.

(vi) Normally the court should not send the original record of the case when referring themattertoanADRforum.ItshouldmakeavailableonlycopiesofrelevantpaperstotheADRforum.(Forthispurpose,whenpleadingsarefiledthecourtmayinsistuponfilingofanextracopy).Howeverifthecaseisreferredtoacourtannexedmediationcentrewhichisundertheexclusivecontrolandsupervisionofajudicialofficer,theoriginalfilemaybemadeavailablewherevernecessary.”

(Emphasisbyus)

41. Inpara45,thecourthadclarifiedthatthesewereguidelinessubjecttosuchchangesastheconcernedcourtmaydeemfitwithreferencetothespecialcircumstancesofthecase.

Thereisthuscompleteclarityonthemannerinwhichacourtmustproceedwhenmakingareferencetomediation.

V. Statutory power to refer matters for dispute resolution and effect of a settlement

42. We have extracted above Section 19 of the Legal Services Act, 1987 providing for theorganization of Lok Adalats. The Lok Adalats have the jurisdiction under sub-section 5 ofSection19todetermineandtoarriveatacompromiseorsettlementbetweenthepartiestoadispute in respect of :

(i) any case pending before, or

(ii) anymatterwhichisfallingwithinthejurisdictionof,andisnotbroughtbefore,anycourtforwhichtheLokAdalatisorganized.

ProvidedthattheLokAdalatshallhavenojurisdictioninrespectofanycaseormatterrelatingtoanoffencenotcompoundableunderthelaw.

Thussofarascriminalcasesareconcerned,aLokAdalathasjurisdictionoveronlysuchcriminalmattersthatrelatetooffencescompoundablebylawi.e.underSection320oftheCr.P.C.orunder any special enactment.

It isalsotobenotedthatunderthisenactment, it isalsospecificallyprovidedthat“court”meansa“civil,criminalorrevenuecourt”.

43. SofarascognizanceofcasesbyLokAdalatsareconcerned,thesameistakeninaccordancewithSection20oftheenactment.Thismaybebyagreementbetweenthepartiesorupononepartymakinganapplication.Itcanalsobebywayofareferencebythecourt.


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44. ByvirtueofSection21oftheLegalServicesAct,anawardmadebytheLokAdalatsshallbefinalandbindingandnoappealshall lieinanycourtagainstit.Theawardisdeemedtobe“decreeofcivilcourt”or,asthecasemaybe,“anorderofanyothercourt”.

Thestatutetherefore,makesnodistinctionbetweenanawardinacivilorcriminalcase.

45. So far as the civil suitswhich are tried in accordancewith the provisions of Code of CivilProcedureareconcerned,themandateofSection89oftheC.P.C.enablesthecourttoreferthepartiesforsettlementofdisputesoutsidethecourtincludingforjudicialsettlementtoLokAdalatsandmediation.

46. OrderXoftheC.P.C.providesthemodalitiesforimplementingthemandateofSection89CPC.

47. AdditionallytheprovisionsoftheArbitrationandConciliationAct,1996enablereferenceofmatterswhere there is anarbitrationagreement, fordispute resolutionbyarbitrationandconciliation.

48. TheCodeofCriminalProcedure,1973andtheNegotiableInstrumentsAct,1881unfortunatelycontainnoprovisionsforreferenceofthemattersthereundertoalternatedisputeresolutionmechanisms.

49. AstheCodeofCivilProcedurewouldhavenoapplicationtocriminalproceedingstowhichtheCodeofCriminalProcedureapplies,Section89oftheC.P.C.cannotandwouldnot,interms,applytotheproceedingsunderSection138oftheNIAct.

VI. Power of criminal courts to refer cases to mediation

50. Wehavefoundthat,thoughtheCodeofCivilProcedurecontainsaspecificprovisioninSection89oftheC.P.C.enablingreferenceofmatterstoalternatedisputeredressal,however,sofarascriminal cases are concerned, it is amply clear that the Code of Criminal Procedure does not containanyexpressstatutoryprovisionenablingthecriminalcourttoreferthepartiestoaforumforalternatedisputeresolutionincludingmediation.Thesameisthepositionregardingcasesunder theNIAct.Therefore, thequestionwhichfirstbegsananswer iswhether thecriminalcourtcaninanymannerreferpartiesbeforeittodisputeresolutionbymediation.

51. Inpara18ofAfcons,theSupremeCourthasgivenillustrationsofcertaincategoriesofcasesthatwerenormallynotconsideredsuitableforalternatedisputeresolutionprocesses.Prosecutionforcriminaloffenceshasbeenmentionedasnotsuitable.Thejudgmentalsonotesthatthecategorization enumerated ismerely illustrative and not inflexible. As the legal validity ofmediationincriminalcompoundablecaseswasnotspecificallyinquestion,thereisthusnoauthoritativejudicialpronouncementprohibitingthesame.

52. Outofthealternatedisputeredressalmechanismsadoptedbythiscountry’slegalsystem,themediationmovementasareliablemechanism,hasgainedbothacceptabilityandpopularity.Inanarticletitled“Mediation:Constituents,ProcessandMerit”(http://gujarathighcourt.nic.in/mediation/sbs1.htm)authoredbyS.B.Sinha,J.(Retd.JudgeoftheSupremeCourtofIndia),ithasbeennotedthatunlikelitigationandarbitration,whichconsistsofformalevidentiaryhearingsandafinaladjudication,mediationwasasemi-formalnegotiationaimedatallowingparties to settle disputes, not only amicably but also economically and expeditiously by aprocessof self andparticipatorydetermination. It is noted thatmediationas amethodofdisputeresolutionwasnotauniqueornewconceptandthatithadinfactevolvedthrough


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longstandingtraditions,wasbeingusedbytribesandvillagesacrossourcountrylongbeforeit came to be statutorily recognized in the recent past. The roots ofmediationhave beentracedbacktotextssuchas“Kautilya’sArthashastra”aswellasthePanchayatiRajsystem.The references to Lord Krishna’s mediation between Kauravas and Pandavas during theMahabharataarelegendary.

53. Mediationundoubtedlyprovidesanefficient,effective,speedy,convenientandinexpensiveprocess to resolve disputes with dignity, mutuality, respect and civility where partiesparticipate inarrivingatanegotiatedsettlementratherthanbeingconfrontedwithathirdpartyadjudicationoftheirdisputes.Theveryfactthatitenableswarringpartiestositacrossthetableandnegotiate,even ifunsuccessful indisputeresolution,undergoingtheprocesscreatesanatmosphereofharmonyandpeaceinwhichpartieslearnto‘agreetodisagree’.

54. Theexaminationofthestatutoryregimeandthepracticegoverningmediationshowsthatthegenesisofthemediationmayrestonacourtreferralwherebythecourtrefersthepartiesinapendingcase,withtheirconsent,tomediation.However,theavailabilityofmediationasaplatformtonegotiateasettlementdoesnotrestonacourtreferral.Thepartiesareenabledtoapproachthemediationcentreorthemediatorevenwithoutthecourtorderinwhatisreferredtoas‘pre-litigationmediation’whichisreallyanefforttoresolvethedisputebeforefilingacasetoexplorethepossibilityofdisputeresolutionwithoutcourtintervention.Inasmuchaswearenotconcernedwiththeconsequencesofasettlementinapre-litigationmediationorthemannerofitsenforceability,wedonotproposetodwellonitinthisjudgment.

55. Mr. J.P. Sengh, Senior Advocatewould emphasize before us that it is the partieswho arereferredtothemediation,and,notthelisbeforethecourt. It iscontendedthatthepowertoreferpartiestomediationis irrespectiveofthenatureofthecasebeforethecourt,andthatitcouldbecivilorcriminal.Wefindthatinasmuchasitisthepartieswhoarereferredtomediation,thiswouldbethecorrectlegalposition.

56. WehaveextractedabovetheprovisionsofSection320oftheCr.P.C.Section320oftheCr.P.C.enumerates and draws a distinction between offences as compoundable, either betweenthepartiesorwiththeleaveofthecourt.Thisprovisionclearlypermitsandrecognizesthesettlementofspecifiedcriminaloffences.Settlementoftheissue(s)isinherentinthisprovisionenvisagingcompounding.Thesettlementcanobviouslybeonlybyavoluntaryprocessintersetheparties.Tofacilitatethisprocess,therecanbenopossibleexclusionofexternalthirdpartyassistancetotheparties,saythatofneutralmediatorsorconciliators.

57. Therefore, even though an express statutory provision enabling the criminal court to refer the complainant and accused persons to alternate dispute redressal mechanisms has not beenspecificallyprovidedbytheLegislature,however,theCr.P.C.doespermitandrecognizesettlementwithoutstipulatingorrestrictingtheprocessbywhichitmaybereached.Thereisthusnobartoutilizingthealternatedisputemechanismsincludingarbitration,mediation,conciliation(recognizedunderSection89ofCPC)forthepurposesofsettlingdisputeswhicharethesubjectmatterofoffencescoveredunderSection320oftheCr.P.C.

VII. Process to be followed in reference of above disputes in criminal law to mediation

58. Sowhatistheprocesstobefollowedindisputesundercriminallaw?Sofarascriminalmattersareconcerned,Section477oftheCr.P.C.enablestheHighCourttomakerulesregardingany


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othermatterwhichisrequiredtobeprescribed.TheMediationandConciliationRulesstandnotifiedbytheDelhiHighCourtinexerciseoftherulemakingpowerunderPartXoftheCodeofCivilProcedure,Section89(2)(d)oftheC.P.C.aswellas“allotherpowersenablingtheHighCourt”inthisbehalf.TheRulestherefore,clearlyprovideformediationnotonlyincivilsuits,but also to “proceeding pending in the High Court of Delhi or in any court subordinate to the HighCourtofDelhi”.So farasDelhi isconcerned, theseruleswouldapply tomediation inamatterreferredbythecourtconcernedwithacriminalcaseaswellasproceedingsunderSection138oftheNIAct.

VIII. Dispute resolution encouraged in several cases by the Supreme Court in non-compoundable cases as well

59. We note that there have been several instances when the Supreme Court has approvedexerciseofinherentpowersunderSection482oftheCr.P.C.bytheHighCourtforquashingcriminalcasesonaccountofcompromise/settlementeventhoughtheyarenotincludedinthelistofcompoundablecasesunderSection320oftheCr.P.C.In(2012)10SCC303,GianSinghv.StateofPunjab,itwasheldthatthiswasinexerciseofstatutorypoweroftheHighCourtunderSection482oftheCr.P.C.Therelevantextractofthejudgmentisreproducedasunder:

“61. ...Butthecriminalcaseshavingoverwhelminglyandpredominatinglycivilflavourstandon a different footing for the purposes of quashing, particularly the offences arisingfromcommercial,financial,mercantile,civil,partnershiporsuchliketransactionsortheoffencesarisingoutofmatrimonyrelatingtodowry,etc.orthefamilydisputeswherethewrongisbasicallyprivateorpersonalinnatureandthepartieshaveresolvedtheirentiredispute. In this category of cases, the High Court may quash the criminal proceedings if in itsview,becauseofthecompromisebetweentheoffenderandthevictim,thepossibilityofconvictionisremoteandbleakandcontinuationofthecriminalcasewouldputtheaccusedtogreatoppressionandprejudiceandextremeinjusticewouldbecausedtohimbynotquashingthecriminalcasedespitefullandcompletesettlementandcompromisewith the victim. In otherwords, the High Courtmust considerwhether it would beunfair or contrary to the interest of justice to continuewith the criminal proceedingor continuationof thecriminalproceedingwould tantamount toabuseofprocessoflawdespite settlementand compromisebetween thevictimand thewrongdoerandwhethertosecuretheendsofjustice,itisappropriatethatthecriminalcaseisputtoanendandiftheanswertotheabovequestion(s)isintheaffirmative,theHighCourtshallbewellwithinitsjurisdictiontoquashthecriminalproceeding.”(Emphasissupplied)

60. Inarecentpronouncementdated4thOctober,2017,reportedat2017SCCOnLineSC1189ParabatbhaiAahir@ParbatbhaiBhimsinhabhaiKarmurandOrsVsStateofGujaratandAnrathree-JudgebenchoftheSupremeCourtspeakingthroughD.Y.Chandrachud,J.citedwithapproval, inter alia, the judgment in Gian Singh reiterating that in exercise of its inherentjurisdictionunderSection482oftheCr.P.C,theHighCourtisempoweredtoquashFIRs/CriminalProceedingsemanatingfromnon-compoundableoffencesiftheendsofjusticeandthefactsofthecase,sowarrant.While,soapprovingtheSupremeCourt,laiddowntheexpositionofthelawintheformofexhaustiveguidelineswhichareextractedthus:


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‘(i) Section482preservestheinherentpowersoftheHighCourttopreventanabuseoftheprocessofanycourtortosecuretheendsofjustice.Theprovisiondoesnotconfernewpowers.ItonlyrecognisesandpreservespowerswhichinhereintheHighCourt;

(ii) TheinvocationofthejurisdictionoftheHighCourttoquashaFirstInformationReportoracriminalproceedingonthegroundthatasettlementhasbeenarrivedatbetweentheoffenderandthevictimisnotthesameastheinvocationofjurisdictionforthepurposeofcompoundinganoffence.Whilecompoundinganoffence,thepowerofthecourtisgovernedbytheprovisionsofSection320oftheCodeofCriminalProcedure,1973.ThepowertoquashunderSection482isattractedeveniftheoffenceisnon-compoundable.

(iii) In forming an opinion whether a criminal proceeding or complaint should be quashed in exerciseofitsjurisdictionunderSection482,theHighCourtmustevaluatewhethertheendsofjusticewouldjustifytheexerciseoftheinherentpower;

(iv) WhiletheinherentpoweroftheHighCourthasawideambitandplenitudeithastobeexercised;(i)tosecuretheendsofjusticeor(ii)topreventanabuseoftheprocessofanycourt;

(v) ThedecisionastowhetheracomplaintorFirstInformationReportshouldbequashedonthegroundthattheoffenderandvictimhavesettledthedispute,revolvesultimatelyonthefactsandcircumstancesofeachcaseandnoexhaustiveelaborationofprinciplescanbeformulated;

(vi) IntheexerciseofthepowerunderSection482andwhiledealingwithapleathatthedisputehasbeensettled,theHighCourtmusthavedueregardtothenatureandgravityof the offence. Heinous and serious offences involvingmental depravity or offencessuchasmurder,rapeanddacoitycannotappropriatelybequashedthoughthevictimorthefamilyofthevictimhavesettledthedispute.Suchoffencesare,trulyspeaking,notprivateinnaturebuthaveaseriousimpactuponsociety.Thedecisiontocontinuewith the trial in such cases is founded on the overriding element of public interest in punishingpersonsforseriousoffences;

(vii) As distinguished from serious offences, there may be criminal cases which have anoverwhelmingorpredominantelementofacivildispute.Theystandonadistinctfootinginsofarastheexerciseoftheinherentpowertoquashisconcerned;

(viii) Criminal cases involving offenceswhich arise from commercial, financial,mercantile,partnershiporsimilartransactionswithanessentiallycivilflavourmay inappropriatesituationsfallforquashingwherepartieshavesettledthedispute;

(ix) In such a case, the High Court may quash the criminal proceeding if in view of the compromisebetweenthedisputants,thepossibilityofaconvictionisremoteandthecontinuationofacriminalproceedingwouldcauseoppressionandprejudice;and

(x) There isyetanexceptiontotheprinciplesetout inpropositions (viii)and(ix)above.Economic offences involving thefinancial and economicwell-beingof the statehaveimplicationswhichliebeyondthedomainofameredisputebetweenprivatedisputants.TheHighCourtwouldbejustifiedindecliningtoquashwheretheoffenderisinvolvedinanactivityakintoafinancialoreconomicfraudormisdemeanour.Theconsequencesoftheactcomplainedofuponthefinancialoreconomicsystemwillweighinthebalance.’


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61. Thejudicialprecedentin(2013)5SCC226,K.SrinivasRaov.D.A.DeepaisinthecontextofacomplaintfiledbytherespondentwifeunderSection498AoftheIndianPenalCode,againsttheappellanthusbandandhis familymembers, theoffenceunderSection498Aofthe IPCbeingnon-compoundable.Notingthatmediation,asamethodofalternativedisputeredressalhadgot legalrecognition,observationsregardingsettlementsofmatrimonialdisputesweremadeinparas39and46bytheSupremeCourttothecourtsdealingwithmatrimonialmatterswhich read thus :

“39. Quiteoften,thecauseofthemisunderstandinginamatrimonialdisputeistrivialandcanbesortedout.Mediationasamethodofalternativedisputeresolutionhasgotlegalrecognitionnow.Wehavereferredseveralmatrimonialdisputestomediationcentres.Ourexperienceshowsthatabout10%to15%ofmatrimonialdisputesgetsettledinthisCourtthroughvariousmediationcentres.We,therefore,feelthatattheearlieststagei.e.whenthedisputeistakenupbytheFamilyCourtorbythecourtoffirstinstanceforhearing,itmustbereferredtomediationcentres....

xxx xxx xxx

44. We, therefore, feel that though offence punishable under Section 498-A IPC is notcompoundable, inappropriatecases if thepartiesarewillingand if itappears to thecriminal court that thereexistelementsof settlement, it shoulddirect theparties toexplorethepossibilityofsettlementthroughmediation.Thisis,obviously,nottodilutethe rigour, efficacy and purport of Section 498-A IPC, but to locate caseswhere thematrimonial dispute canbe nipped in bud in an equitablemanner. The Judges,withtheirexpertise,mustensurethatthisexercisedoesnotleadtotheerringspouseusingmediationprocesstogetoutofclutchesofthelaw.Duringmediation,thepartiescaneither decide to part company on mutually agreed terms or they may decide to patch upandstaytogether.Ineithercaseforthesettlementtocomethrough,thecomplaintwill have to be quashed. In that event, they can approach the High Court and get the complaintquashed. If,however,theychoosenottosettle,theycanproceedwiththecomplaint.Inthisexercise,thereisnolosstoanyone.Ifthereissettlement,thepartieswillbesavedfromthetrialsandtribulationsofacriminalcaseandthatwillreducetheburden on the courtswhichwill be in the larger public interest.Obviously, theHighCourtwill quash thecomplaintonly if after consideringall circumstances itfinds thesettlementtobeequitableandgenuine.Suchacourse,inouropinion,willbebeneficialto those who genuinely want to accord a quietus to their matrimonial disputes.

xxx xxx xxx

46. We,therefore,issuedirections,whichthecourtsdealingwiththematrimonialmattersshall follow.

xxx xxx xxx

46.2.ThecriminalcourtsdealingwiththecomplaintunderSection498-AIPCshould,atanystageandparticularly,beforetheytakeupthecomplaintforhearing,referthepartiestomediationcentreiftheyfeelthatthereexistelementsofsettlementandboththepartiesarewilling.However,theyshouldtakecaretoseethatinthisexercise,rigour,purportandefficacyofSection498-AIPCisnotdiluted.Needlesstosaythatthediscretionto


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grantornottograntbailisnotinanywaycurtailedbythisdirection.Itwillbeforthecourtconcernedtoworkoutthemodalitiestakingintoconsiderationthefactsofeachcase.46.3.Allmediationcentresshallsetuppre-litigationdesks/clinics;givethemwidepublicityandmakeeffortstosettlematrimonialdisputesatpre-litigationstage.”

(Emphasissupplied)

62. Therefore,theSupremeCourthasrecognizedthepermissibilityoftheHighCourt’squashingthe criminal prosecutions in exercise of their inherent jurisdiction under Section 482 ofthe Cr.P.C. on a consideration of the subjectmatter of the cases. The Supreme Court hasacceptedcompromisesinnon-compoundableoffencesuponevaluationofthegenuineness,fairness,equityand interestsof justice incontinuingwiththecriminalproceedingsrelatingtonon-compoundableoffences,aftersettlementoftheentiredisputeespeciallyinoffencesarisingfrom“commercial,financial,civil,partnership”orsuchliketransactionsorrelatingtomatrimonial or family disputes which are private in nature.

IX. Nature of proceedings under Section 138 of the NI Act

63. Beforeproceedingwiththeexaminationofthequestionsunderreference,itisnecessarytoexaminethespirit,intendmentandobjectoftheincorporationofSection138oftheNIAct,thePreamblewhereofstates“Whereasitisexpedienttodefineandamendthelawrelatingtopromissorynotes,billsofexchangeandcheques”.Itistherefore,evidentthatSection138oftheNIActwasintroducedtoinculcatefaithintheefficacyofbankingoperationsandcredibilityintransactingbusinessofnegotiableinstruments(Ref.:(2003)3SCC232,GoaplastP.Ltd.V.ChicoUrsulaD’Souza&Anr.).

64. In(2011)4SCC593,KaushalyaDeviMassandv.RoopkishoreKhore,theSupremeCourtdrewthe following distinction between the traditional criminal offences and the offence underSection138oftheNIActobservingthus:

“11. Havingconsideredthesubmissionsmadeonbehalfoftheparties,weareoftheviewthatthegravityofacomplaintundertheNegotiableInstrumentsActcannotbeequatedwithanoffenceundertheprovisionsofthePenalCode,1860orothercriminaloffences.AnoffenceunderSection138oftheNegotiableInstrumentsAct,1881,isalmostinthenatureofacivilwrongwhichhasbeengivencriminalovertones.”(Emphasissupplied)

65. Wealsofinduseful theobservationsof theSupremeCourt in (2012)1SCC260,R.Vijayanv.Babywherein thecourtwasdeterminingan issue in respectofcompensationwhenfineis imposed as the sentence or it forms part of the sentence. In this pronouncement, the SupremeCourtnotedthatcasesarisingunderSection138oftheNIActarereally“civilcasesmasqueradingascriminalcases”.Thestatutoryobject ineffectappearstobebothpunitiveasalsocompensatoryandrestitutiveinregardtochequedishonouringcases.ThejudgmentnotesthatChapterXVIIoftheenactmentisauniqueexercisewhichbearsthedividinglinebetweencivilandcriminaljurisdictionsandthatitprovidesasingleforumtoenforceacivilandcriminal remedy.

66. Inthisregard,theobservationsoftheSupremeCourtin(2010)5SCC663,DamodarS.Prabhuv. Sayed Babalal H also shed valuable light, relevant extract whereof is as below :

“17. Inarecentlypublishedcommentary,thefollowingobservationshavebeenmadewithregardtotheoffencepunishableunderSection138oftheAct[citedfrom:ArunMohan,


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SomethoughtstowardslawreformsonthetopicofSection138,NegotiableInstrumentsAct--Tacklinganavalancheofcases(NewDelhi:UniversalLawPublishingCo.Pvt.Ltd.,2009)atp.5]:

“...Unlikethatforotherformsofcrime,thepunishmenthere(insofarasthecomplainantis concerned) is not ameans of seeking retribution, but ismore ameans to ensurepayment of money. The complainant’s interest lies primarily in recovering the money ratherthanseeingthedrawerofthechequeinjail.Thethreatofjailisonlyamodetoensurerecovery.Asagainsttheaccusedwhoiswillingtoundergoajailterm,thereislittleavailableasremedyfortheholderofthecheque.

If we were to examine the number of complaints filed which were ‘compromised’or ‘settled’before thefinal judgmentononesideand thecaseswhichproceeded tojudgmentandconvictionontheother,wewillfindthatthebulkwassettledandonlyaminisculenumbercontinued.”

18. It isquiteobvious thatwith respect to theoffenceofdishonourofcheques, it is thecompensatoryaspectof theremedywhichshouldbegivenpriorityoverthepunitiveaspect.ThereisalsosomesupportfortheapprehensionsraisedbythelearnedAttorneyGeneralthatamajorityofchequebouncecasesareindeedbeingcompromisedorsettledbywayofcompounding,albeitduringthelaterstagesoflitigationtherebycontributingtounduedelayinjusticedelivery.Theproblemhereiniswiththetendencyoflitigantstobelatedly choose compounding as ameans to resolve their dispute. Furthermore,thewrittensubmissionsfiledonbehalfofthelearnedAttorneyGeneralhavestressedonthefactthatunlikeSection320CrPC,Section147oftheNegotiableInstrumentsActprovides no explicit guidance as to what stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave ofthecourt.” (Emphasisbyus)

67. ItisquiteapparentthatproceedingsunderSection138oftheNIActhaveaspecialcharacter.Theyarisefromacivildisputerelatingtodishonouringtoachequebutmayresultinacriminalconsequence.

Eventhoughthestatuteispunitiveinnature,however,itsspirit,intendmentandobjectistoprovide compensation and ensure restitution aswellwhich aspectsmust receivedpriorityoverpunishment.TheproceedingsunderSection138oftheNIActaretherefore,distinctfromothercriminalcases.Itiswellsettledthattheyarereallyinthenatureofacivilwrongwhichhas been given criminal overtones.

X. Permissibility of settlement of offence under Section 138 of the NI Act

68. Sofarastheoffence/proceedingsunderSection138oftheNIActareconcerned,theLegislaturehasprovidedSection147whichspecificallystipulatesthat“everyoffencepunishableunderthisActshallbecompoundable”.ItisimportanttonotethatSection147ofthestatutecontainsanon-obstante provision and is applicable notwithstanding anything contained in the Code of CriminalProcedure.Therefore,irrespectiveofandapartfromtheoffencesstipulatedunderSection320oftheCr.P.C.,Section147oftheNIActmakestheoffenceunderSection138oftheNIActspecificallycompoundable.


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69. Theimpactofthenon-obstanteclauseinSection147oftheNIActhasbeenconsideredbytheHighCourtofGujaratinthejudgmentreportedat(2005)CriLJ431,RameshbhaiSomabhaiPatel v. Dineshbhai Achalanand Rathi wherein the court held thus:

“8. ThevictimoftheoffencecancompoundtheoffencenotwithstandinganythingcontainedinCr.P.C.1973. Inotherwords,thepartiescansettletheallegedcriminalwrongandconcludetheirdisputeunderadjudicationandrequesttheCourtwhereitispendingtopassappropriateorderviz:orderofacquittal.Undisputedly,thepetitioneraccusedhasapproachedthisCourtforscrutinyofthelegalityandvalidityoftheorderofconvictionandsentenceand,therefore,theoriginalcomplainantcanpositivelyappearbeforethisCourtandsaythathehascompoundedtheoffencewiththeaccusedandnowhehasnotto pursue the remedy, that he is not interested in proceeding with the complaint and to seethattheaccusedissenttotheprison.Theeffectofthesamewouldbepracticallyorsaysimilartoawithdrawalfromtheprosecutionwithorwithoutanyqualification.So,the original complainant if comes to the Court and says that he is withdrawing himself fromprosecutiononaccountofcompromiseandhehascompoundedthematter,thenobviouslytheconvictionandsentenceshallhavetobeannulled/setaside.Consideringthelanguageofthesection,eventhereisnoscopefortheCourttoconsiderwhethersuch a request should be accepted or not. No formal permission to compound the offenceisrequiredtobesoughtfor.

9. ConsideringthelanguageofSection147oftheN.I.Act,itisnotnecessarytoconsidertheschemeofSection320ofCrPC,buttoappreciatethequestionsposed,itcanstillbelookedintootherrelevantprovision.Section320ofCrPCdividescompoundableoffencesintwodifferentpartsbySub-section(1).andSub-section(2).Subsequentsubsectionsdealwithothercontingencies,qualificationsorembargoes.ButSection147oftheN.I.ActsaysthatoffenceshallbecompoundableanditdoesnotprovideforanyotherorfurtherqualificationorembargolikeSub-section(2)ofSection320ofCrPC.Thepartiescan compound the offence as if the offence is otherwise compoundable. Thus, theoffenceismadestraightawaycompoundablelikethecasedescribedunderSub-section(1)ofSection320ofCrPC.Subsection(9)ofSection320ofCrPChasnoroomtoplaybecauseofnonobstanteclauseinSection147oftheN.I.Act

10. ThedeclarationplacedbeforetheCourtandthepresenceoftheoriginalcomplainantrespondentNo.1todaybeforetheCourttakesmetoaconclusionthatthesayofthecomplainantshouldbeacceptedthathehaswithdrawnfromprosecutionbecausehehas compounded theoffenceoutof theCourt.Asper the settled legal position, theeffectofcompoundingoftheoffenceisthatofacquittal.” (Emphasisbyus)

70. On this aspect, valuable light is thrown on this issue also in the pronouncement of theSupreme Court in Damodar S. Prabhu’s case wherein the Supreme Court has laid down the guidelineswhileinterpretingSection138and147oftheNIActtoencouragelitigantsinchequedishonouringcasestooptforcompoundingduringearlystagesofthelitigationtoeasechokingofthecriminaljusticesystem.

Toencouragethis,agradedschemeofimposingcostsonpartieswhoundulydelaycompoundingoftheoffenceandforcontrollingfilingofthecomplaintsinmultiplejurisdictionsrelatableto


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sametransactionshasbeenproscribed.WeextracthereundertherelevantdirectionsoftheSupreme Court in this regard :

“21. ... In view of this submission, we direct that the following guidelines be followed:

THE GUIDELINES

(i) In the circumstances, it is proposed as follows:

(a) Thatdirectionscanbegiventhatthewritofsummonsbesuitablymodifiedmakingitcleartotheaccusedthathecouldmakeanapplicationforcompoundingoftheoffencesatthefirstorsecondhearingofthecaseandthatifsuchanapplicationismade, compounding may be allowed by the court without imposing any costs on the accused.

(b) Iftheaccuseddoesnotmakeanapplicationforcompoundingasaforesaid,thenifanapplicationforcompoundingismadebeforetheMagistrateatasubsequentstage,compoundingcanbeallowedsubjecttotheconditionthattheaccusedwillberequiredtopay10%ofthechequeamounttobedepositedasaconditionforcompoundingwith the Legal Services Authority, or such authority as the courtdeemsfit.

(c) Similarly, if theapplication forcompounding ismadebefore theSessionsCourtor a High Court in revision or appeal, such compounding may be allowed on the conditionthattheaccusedpays15%ofthechequeamountbywayofcosts.

(d) Finally,iftheapplicationforcompoundingismadebeforetheSupremeCourt,thefigurewouldincreaseto20%ofthechequeamount.” (Emphasissupplied)

71. Thecourthashowever,observedinthisjudgmentthatSection147oftheActdidnotcarryanyguidanceonhowthecourtwillproceedwiththecompoundingoftheoffenceundertheenactmentandthattheschemelegislativelycontemplatedunderSection320oftheCr.P.C.cannotbefollowedinthestrictsense.Itwastoovercomethehurdlebecauseofthelegislativevacuum that the graded scheme was provided to give some guidance and to save valuable timeofthecourts.

72. In this regard, reference may also usefully be made to the pronouncement of the Supreme Courtreportedat(2014)5SCC590,IndianBanksAssociation&Ors.v.UnionofIndiawhereinthe court observed thus :

“21. ThisCourtinDamodarS.Prabhuv.SayedBabalalH.[(2010)5SCC663:(2010)2SCC(Civ) 520 : (2010) 2 SCC (Cri) 1328] laid down certain guidelines while interpretingSections138and147oftheNegotiableInstrumentsActtoencouragelitigantsinchequedishonourcasestooptforcompoundingduringearlystagesoflitigationtoeasechokingofcriminaljusticesystem;forgradedschemeofimposingcostsonpartieswhoundulydelay compounding of offence; and for controlling of filing of complaints inmultiplejurisdictionsrelatabletosametransaction,whichhavealsotobeborneinmindbytheMagistratewhiledealingwithcasesunderSection138oftheNegotiable InstrumentsAct.” (Emphasisbyus)

73. Theabovefurtherreinforcesthepositionthatthereisnolegalprohibitionuponacourt,seizedof a complaintunderNIAct, to encouragedispute resolutionby recourse to thealternate


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dispute resolutionmethods includingmediation.Onthecontrary, theguidelines laiddownby the court in Damodar S. Prabhu unequivocally encourage settlement. Mediation, as amechanismfordisputeresolutionandarrivingatasettlementautomaticallygetsreinforcedsofarasacaseunderSection138oftheNIActisconcerned.

XI. Mediation and Conciliation Rules, 2004 - notified the Delhi High Court

74. MediationinDelhiisguidedbytheMediationandConciliationRules,2004.TheseRulessourcetherulemakingpowerto“PartXandClause(d)ofsub-section(2)ofSection89”oftheCodeofCivilProcedure,1908aswellas“allotherpowersenabling”theHighCourtofDelhitomakesuch Rules.

75. TheDelhiMediationandConciliationRules, 2004apply toallmediationsand conciliationsconnected with “any suit or other proceedings pending in the High Court of Delhi or in any othercourtsubordinatetotheHighCourtofDelhi”.Theserulesfurtherstatethatmediationin respect of any “suit or proceeding pending before the High Court or any other court or tribunal”maybereferredtotheDelhiHighCourtMediationandConciliationCentreoranyothermediationcentresetupbytheLegalServicesAuthoritiesAct,1987.

76. Inthisregard,wemayadverttoArticle227oftheConstitutionofIndiaaswellasSection477oftheCr.P.C.whichenablestheHighCourttomakesuchrules.

77. TheMediationandConciliationRules,2004standnotifiedbytheHighCourtofDelhiwhichwouldguidetheprocesstobefollowedeveninreferencestomediationarisingunderSection138oftheN.I.Act.

XII. Impact of settlement of disputes in a complaint under Section 138 Negotiable Instruments Act by virtue of Lok Adalat under the Legal Services Authorities Act, 1987

78. Giventhereferenceunderexamination,itistherefore,necessarytoexaminewhatwouldbetheimpactofasettlementofdisputesinacomplaintunderSection138oftheNIActbeforetheLokAdalatconstitutedundertheLegalServicesAuthoritiesAct,1987?ThisissuewasthesubjectmatterofconsiderationbeforetheSupremeCourtinthejudgmentreportedat(2012)2SCC51,K.GovindamKuttyMenonv.C.D.Shaji.TheKeralaHighCourthadtakenaviewthatwhenacriminalcaseissettledataLokAdalat,theawardpassedbyithastobetreatedonlyas an order of the criminal court and that it cannot be executed as a decree of the civil court. ThisfindingwasoverturnedbytheSupremeCourt.WeextracthereundertheobservationsoftheSupremeCourtinparas12,13and26:

“12. Unfortunately,thesaidargumentwasnotacceptabletotheHighCourt.Ontheotherhand, theHighCourthas concluded thatwhenacriminal case is referred to theLokAdalatand it issettledattheLokAdalat,theawardpassedhastobetreatedonlyasan order of that criminal court and it cannot be executed as a decree of the civil court. After saying so, the High Court finally concluded that “an award passed by the LokAdalat on reference of a criminal case by the criminal court as already concluded can only be construed as an order by the criminal court and it is not a decree passed by a civilcourt”andconfirmedtheorderofthePrincipalMunsifwhodeclinedtherequestofthepetitionerthereintoexecutetheawardpassedbytheLokAdalatonreferenceofacomplaint by the criminal court.


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13. Ongoing through theStatementofObjectsandReasons,definitionof “court”, “legalservice”aswellasSection21oftheAct,inadditiontothereasonsgivenhereunder,weareoftheviewthattheinterpretationadoptedbytheKeralaHighCourtintheimpugnedorder is erroneous.

xxx xxx xxx

26. Fromtheabovediscussion,thefollowingpropositionsemerge:

(1) In viewof theunambiguous languageof Section21of theAct, everyawardoftheLokAdalatshallbedeemedtobeadecreeofacivil courtandassuch it isexecutable by that court.

(2) TheActdoesnotmakeoutanysuchdistinctionbetweenthereferencemadebyacivil court and a criminal court.

(3) ThereisnorestrictiononthepoweroftheLokAdalattopassanawardbasedonthecompromisearrivedatbetweenthepartiesinrespectofcasesreferredtobyvariouscourts(bothcivilandcriminal),tribunals,FamilyCourt,RentControlCourt,ConsumerRedressalForum,MotorAccidentsClaimsTribunalandotherforumsofsimilar nature.

(4) EvenifamatterisreferredbyacriminalcourtunderSection138oftheNegotiableInstruments Act, 1881 and by virtue of the deeming provisions, the award passed bytheLokAdalatbasedonacompromisehastobetreatedasadecreecapableofexecutionbyacivilcourt.” (Emphasisbyus)

79. The judgmentof theSupremeCourt reportedat (2014)10SCC690MadhyaPradeshStateLegal Services Authority v. Prateek Jain in Civil Appeal No. 8614/2014 decided on 10 thSeptember,2014,alsobringsforththatevenwhencasesunderSection138oftheNIActweresettledbeforetheLokAdalat,theguidelinesinDamodarS.Prabhuaretobefollowed,withmodifications,ifany,quareductionofcostsifnecessary.Inpara23ofthejudgment,thecourtstatedthelegalpositionthus:

“23. Havingregardthereto,weareoftheopinionthatevenwhenacaseisdecidedintheLokAdalat, the requirement of following the Guidelines contained in Damodar S. Prabhu [Damodar S. Prabhu v. SayedBabalalH., (2010)5 SCC663 : (2010)2 SCC (Civ) 520 :(2010)2SCC(Cri)1328]shouldnormallynotbedispensedwith.However,ifthereisaspecial/specificreasontodeviatetherefrom,thecourtisnotremedilessasDamodarS.Prabhu[DamodarS.Prabhuv.SayedBabalalH.,(2010)5SCC663:(2010)2SCC(Civ)520:(2010)2SCC(Cri)1328]itselfhasgivendiscretiontothecourtconcernedtoreducethecostswithregardtospecificfactsandcircumstancesofthecase,whilerecordingreasonsinwritingaboutsuchvariance.Therefore, in thosematterswherethecasehas tobedecided/settledintheLokAdalat,ifthecourtfindsthatitisaresultofpositiveattitudeoftheparties,insuchappropriatecases,thecourtcanalwaysreducethecostsbyimposingminimalcostsorevenwaivethesame.Forthat,itwouldbefortheparties,particularlytheaccusedperson,tomakeoutaplausiblecaseforthewaiver/reductionofcostsandtoconvince thecourtconcernedabout thesame.This courseofaction,according tous,wouldstrikeabalancebetweenthetwocompetingbutequallyimportantinterests,namely,achievingtheobjectivesdelineatedinDamodarS.Prabhu[DamodarS.Prabhu


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v.SayedBabalalH.,(2010)5SCC663:(2010)2SCC(Civ)520:(2010)2SCC(Cri)1328]on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolutionofcasethroughtheLokAdalatsontheotherhand.”(Emphasisby us)

80. TheSupremeCourthasthusdeclaredthelegalpositionthattheLegalServicesAuthoritiesActdidnotmakeoutanydistinctionbetweenthereferencemadebyacivilcourtandacriminalcourt.

UponsettlementbeforetheLokAdalateveninacriminalcase,theawardoftheLokAdalathastobetreatedasadecreecapableofexecutionbyacivilcourt.TheguidelinescontainedinDamodarS.Prabhuarerequiredtobefollowedevenuponsuchsettlementsubjecttothediscretiontothecourtconcernedtoreduce/wavethecostswithregardtothespecificfactsand circumstances of the case.

XIII. What is the procedure to be followed if in a complaint case under Section 138 of the NI Act, a settlement is reached in mediation?

81. SowhatwouldbetheappropriateprocedureforrecordingasettlementreachedbythepartiesupontheirreferraltomediationduringthependencyofacomplaintunderSection138oftheNIAct?

82. Theabovediscussionwould show thatproceedingsunderSection138of theNIAct standcategorizedasquasi-civil.Inordertoprovidemeaningfulinterpretationandtodocompletejustice in suchproceedings, criminal courtsareknowntohaveoftenutilized theprinciplesin the Code of Civil Procedure in such cases. These include the summary proceedings for maintenanceunderSection125oftheCr.P.C.aswellastheproceedingsunderSection145ofthe Cr.P.C.

83. Inthisregard,referencemayusefullybemadetoajudgmentoftheHighCourtofMadhyaPradeshreportedatMANU/MP/1150/2012,Sunitabaiv.Narayan.Thecourt in this revisionpetition was considering a challenge to a trial court order rejecting an application foramendmentofpleadings inproceedingsunderSection125oftheCr.P.C.WhileconsideringthepermissibilityofamendmentofthepetitionunderSection125oftheCr.P.C.,thecourtheldthus :

“06. Aspersettledpreposition,theproceedingunderSection125oftheCr.P.C.istreatedtobeaquasi-civilproceedingandinsuchpremises,theprovisionsofOrder6Rule17oftheCPC or some other provision of such Code could not be applied strictly but whenever the specific provision in this regard is not available in the special enactment then inthatposition,Courtmayadopttheprincipal(sic:principle)laiddownbytheApexCourteitherinthecivilcaseorinthecriminalcase.Insuchpremises,ifthepresentmatterisexaminedinthelightofthedecisionoftheApexCourtinthematterofP.Venkateswarluv.Motor&GeneralTradersreportedinAIR1975SupremeCourt1409holdingthatthepartieshaverighttoamendthepleadingsonthebasisofthesubsequenteventwhichhascomeintoexistenceduringpendencyofthesuit,thentheaforesaidapplicationofamendmentdeservestobeallowedbyallowingthisrevision.”(Emphasisbyus)


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Thusthecourtpermittedapplicationoftheprincipleswhichbindacivilcourtregardingamendment of pleadings, to proceedings under Section 125of theCr.P.C. treated asquasicivilinnatureandpermitteditsamendment.

84. In a decision dated 3rd February, 2010 in Crl.R.C.No.780/2006 entitled Chinnappaiyan v.Chinnathayee,aSingleJudgeoftheMadrasHighCourtheldthat:

“...thoughapetitionunderSection125(1)oftheCodeismadebeforethecriminalcourt-asdefinedunderSection6oftheCodeessentially,therightthatisdecidedbythesaidCourtispurelycivilinnature.Therefore,undoubtedly,theordermadebytheMagistrateunderSection125(1)oftheCodeformaintenanceistheculminationofsuchacivilrightofanindividual.But,Section125(3)oftheCodeempowerstheCourttoimposeasentenceofimprisonment,in theeventof failure toobey suchordermadeunderSection125(1)of theCode.To thisextent,theproceedingiscriminalinnature.Toputitcomprehensively,aproceedinginitiatedunderSection125oftheCodeisquasi-civilandquasi-criminal.TheHon’bleSupremeCourthasheldsoinseveraljudgments.RegardingtheprocedureformakingclaimbeforetheCourtformaintenance,whatisfiledunderSection125(1)oftheCodeispureandsimpleapetitionandnotacomplaintasdefined inSection2(d)of theCode.Thiswouldagain indicate thata proceeding under Section 125 of the Code is treated as a quasi-civil and quasi criminalproceeding.” (Emphasisfurnished)

85. InthecontextofproceedingsunderSection145oftheCr.P.C.,in1963CriLJ491,MadansettyTirpataiahv.StatsS.I.P.Atmakur,theHighCourtofAndhraPradeshwasconsideringarevisionpetition challenging the order of the Sub-Divisional Magistrate whereby the petitioner’sapplicationfor interaliafilingadditionaldocumentswasrejected.Thecourtwastherefore,calledupontoruleonjurisdictionoftheSDMtopermitfilingofdocumentsatalatestage.Whileconsideringsuchquestion,thecourtalsoobservedonthenatureoftheproceedingsand held thus :

“6. Further,tomymind,proceedingsunderSection145oftheCrPCaremoreorlessofaquasi-civilnature.SothatonanalogyofCivilSuit,incasesunderthisSectionifwithinthetimefixedbytheMagistrate,thepartyisnotinapositiontofiledocumentsinhispossessionwhichsupporthisclaim,andheisabletosatisfytheCourtthatforsufficientandvalidreasonshecouldnotfilethesaiddocumentswithintheprescribedtime,itwouldbeopentotheMagistrateintheendsofjusticetoallowapartytofilethesaiddocuments.

7. It is no doubt true that there is no provision in the Criminal Procedure Code analogous toCivilProcedure,forfilingofdocumentsatalatestage,buthavingregardtothenatureoftheproceedingsintheendsofjusticesuchexerciseofdiscretioncannotentirelyberuled out.

xxx xxx xxx.” (Emphasisbyus)

86. Thus courts have had regard to the nature of proceedings, and, wherever found that criminal proceedings are really quasi-civil in nature, so far as matters of procedure is concerned,consistently expanded the limits of specific statutory prescription in order to do completejusticebetweentheparties,keeping inmindtheelementsofpublic interestaswellas thespirit,objectandintendmentofthelegislation.


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87. Inthepresentcase,otherthanthesettlementagreement,there isno judicialorderofanycourtthatbindstherespondenttohonourthesettlementarrivedatduringmediation.

88. It is reported that even if amediated settlement agreement is reached, generally criminalcomplaintsunderSection138oftheNIActarewithdrawn/compoundedbythecomplainantsonlyafterreceiptoftheentireamount(s)agreedaspartofthesettlement.Thecriminalcourtsthus necessarily have to keep the complaint pending, awaiting the implementation of thenegotiatedsettlement.

89. Thepresent referencemanifests that in the event of breachof the settlement, the courtshavetorecommenceproceedingsonmeritsandtheevidentiary/legalvalueofthemediatedsettlementremainsundetermined.ThishasenabledmanyaccusedtodivertthecomplainttomediationonlywiththeintenttoeffectivelydelaytheproceedingsunderSection138oftheNI Act.

90. Mr.SiddharthAggarwal,ld.amicuscuriaehasplacedcertainjudicialprecedentsonthisaspectbeforeus.In(2013)SCCOnLineDel124,HardeepBajajv.ICICIBankLtd.,thepetitionerhadenteredintoanamicablesettlementdated26thMay,2012forpaymenttotherespondentbankinmediationundertakenduringthependencyofthecomplaintunderSection138oftheNIActtomakepaymentofRs.9,08,800/-infullandfinalsettlementofthebankclaiminmonthlyinstallmentsofRs.1,50,000/-commencingfrom26thMay,2012,thelastofwhichwaspayableon26thOctober,2012.Withoutabidingwiththesettlement,thepetitionerapproachedtheld.MMformodifyingthesettlement.Theld.MMnoticedthatthepetitionerhadviolatedthesuccessiveundertakingsgivenbyhimanddismissedtheapplicationformodificationwithcosts.Thepetitionerapproachedthiscourtbywayofarevisionpetitionwhichwasdismissed. Inpara10ofthejudgment,theld.SingleJudgeofthiscourthasnotedthat“oncethesettlementreachedisacceptedbythecourtoranundertakingisgiven,itbecomesbindingontheparties”.

91. In(2015)SCCOnLineDel7309,ManojChandakv.TourLoversTourism(India)Pvt.Ltd.,therespondent failed to honour the mediated settlement dated 26th July, 2013 reached incomplaints under Section 138 of theNI Act, 1881. Instead, after threemonths, it filed anapplication for reconsideration of the settlement on the ground that the signatures of itsauthorizedrepresentativeswereforciblyobtainedandthathehadno instructionstoagreetothetermsofthesettlement.Thisapplicationwasallowedbythetrialcourtbytheorderdated25thApril,2014andthepartieswereagainreferredtomediation.Achallengewaslaidregardingthevoluntarinessofthemediatedsettlement.ThelearnedSingleJudgetherefore,held that “since questionof fact are being raised regarding voluntariness of themediatedsettlement,therefore,itwouldbeappropriatethatanopportunityisgrantedbytrialcourttorespondentstoleadevidencetoshowthatthemediatedsettlementwasnotavoluntaryone”.

92. Inyetanotherpronouncementreportedat(2015)SCCOnLineDel9334,M/sArunInternationalv. StateofDelhi&Anr., a settlement regarding the subjectmatterof the complaintunderSection138oftheNIActwasreachedbeforetheCourtannexedmediationcentreintheRohiniDistrict Courts which was placed before the magistrate in the pending proceedings. The court recordedthestatementoftherespondentno.2admittingtheclaimofthecomplainantandseekinganadjournmenttopaytheagreedamount.Twoyearsweresoughtbytherespondentno.2fromthethe25thNovember,2013beingthedateofmakingofthestatementbeforetheld.MetropolitanMagistrate.Videorderdated16thFebruary,2015,theld.Metropolitan


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Magistrate returned the complaints forwant of territorial jurisdiction, in viewof the ratioof the Supreme Court in the pronouncement of Dashrath Rupsingh Rathore v. State. The ld. SingleJudgeheldthattheorderdated16thFebruary,2015wasillegalandcontrarytolaw,inviewofthefactthatthematterstoodsettledbeforetheMediationCentreasalsothatthedecision in Dashrath Rupsingh Rathore was inapplicable, the complaint cases having gone to thestageofSection145(2)oftheCr.P.C.Inpara7,thelearnedSingleJudgehadobservedthat“itissettledlawandevenotherwisethesettlementofthemediationaswellisdeemedtobeadecreeandcannotbechallenged”.

Inviewoftheaboveenunciationofthelaw,thispositionisnotlegallycorrect.

93.Ourattention isalsodrawnto thepronouncementof the ld.Single Judgeof theKeralaHighCourt in the judgment reported at (2014) 3 KLJ 637, Sreelal v.MuraliMenon & Anr. ThepetitionerinthiscasewasthecomplainantinacomplaintunderSection138oftheNIAct.Onthedateforevidence,ontherequestoftheaccused,thematterwasreferredformediationwhereasettlementdated17thFebruary,2014wasreachedandsixmonthstimewasgivenforpayment.Inthesettlement,thepartieshadagreedthatindefault,thecomplainantwasallowed to proceed with the case and, if the amount was paid, then the complainant would havetowithdrawthecase.Whilethepetitioner/complainantwaswillingtowaittheagreedperiodforpayment,therespondentwasinsistingthatthemediatedagreementhadtheeffectofanaward;thatthepetitionerwasnotentitledtoproceedwiththecase;andthathisremedywastoexecutetheagreementasifitwasanawardundertheLegalServicesAct.Inparas12and13ofthejudgment,thecourthasexplainedthealternativedisputeresolutionprocessincasesunderSection138oftheNIActthus:

“12. Then, the question iswhat is to effect ofmediation agreement in a criminalmatter.Admittedly,ifthematterisreferredformediation,themediatorisnotactingneitherasAdalath nor as an Arbitrator or Conciliator to resolve the disputes by passing an award either under theprovisions of Legal ServicesAuthoritiesAct or under theprovisionsoftheArbitrationandConciliationAct.Evenif,thematterisreferredinacivilcaseformediationunderS.89oftheCodeofCivilProcedure,eventhen,themediator isnotpassinganyjudgment,butheisonlyfacilitatingthepartiestoarriveatthesettlementand help them to draw themediation agreement and after the agreement is signedbytheparties,andcountersignedbytheAdvocates,then,itwillbeforwardedtotheCourtwhichreferredthematterandthatCourtwillpassadecreeonthebasisoftheagreementapplyingtheprincipleunderO.23R.3ofCodeofCivilProcedureaccordingly.Till,thesealofthecourtisaffixedontheagreement,andadecreeispassedonthatbasisthatagreement,ithasnolegaleffectintheeyeoflaw.So,evenifamediationagreementreachesthecriminalcourt,agreeingtosettlethe issueoncertainterms,thecriminalcourtcannotrelyonthatagreementandpassacivildecree,relegatingthepartiestoget theamount realizedbyfilingexecutionpetitionbefore theCivil Court and it canonly on the basis of the evidence either convict or acquit the accused and if the case is compounded,ifitisacompoundableoffence,thenitcanrecordcompoundingandthatcompoundingwillhavetheeffectofanacquittalunderS.320(8)ofCodeofCriminalProcedure.

13. Further,thecounselfortherespondentreliedonthedecisionreportedinGovindankuttyMetionv.Shaji(2011(4)KLT857(SC))andarguedthatsincethematterisreferredfor


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mediationandthepartieshavesettledthedisputeinthemediation,thenitwillhavetheeffectofacivildecreeandthecomplainantcannotproceedwiththecriminalcaseandhe can only execute the award as though it is a civil decree. It is true that in the decision reliedonbythecounselfortherespondentnamely,GovindankuttyMenon’scase(supra),theHon’ble SupremeCourthasheld that if the caseunder S. 138of theNegotiableInstrumentsActisreferredtoAdalathbyacriminalcourtandifthematterissettledinthe Adalath, then by virtue of the deeming provision, an award passed by the Adalath basedonthecompromisehastobetreatedasadecreecapableofexecutionbyacivilcourt.Inthatcase,acaseunderS.138oftheNegotiableInstrumentsActwasreferredtoAdalathconstitutedundertheLegalServicesAuthoritiesActbyaCriminalCourtandintheAdalath,partieshaveagreedontermsandprovidedtimeforpaymentoftheamountand that compromise was recorded and accordingly an award was passed in the Adalath and thecriminal casewasclosed.When, thecomplainantfiledanexecutionpetitionbeforetheMunsiffsCourtforrealisationoftheamountandtheMunsiffdismissedtheexecutionpetitionon theground thatCriminalCourtcannotpassacivildecreeeveninAdalathwhichwasaffirmedbythiscourtbutwhenthatwaschallengedbeforetheHon’bleSupremeCourt,theHon’bleSupremeCourtreversedthefindingandheldthatbyvirtueofthedeemingprovisionunderS.21oftheLegalServicesAuthoritiesAct,even,incasesunderS.138oftheNegotiableInstrumentsActifacompromisewasacceptedandanawardhasbeenpassedintheAdalath,thenthatwillhavetheeffectofacivildecree and that can be executed through civil court as though it is a decree of a civil court.Thefactsaredifferentinthiscaseasalreadydiscussed,themediationcannotbetreatedatparwithLokAdalathasmediatorhasnopowertopassanyawardasprovidedundertheLegalServicesAuthoritiesAct.Sothedictumisnotapplicabletothefactsinthiscase.” (Emphasisbyus)

Inviewof theposition in legislation, thecourthaddeclaredthecorrect legalpositionthatmediationcannotbetreatedatparwiththeLokAdalatandthatthemediatorhasnopowertopassanawardasaLokAdalatwhich isdeemedtobeadecreeunder theLegalServiceAuthority Act, 1987.

94. Inpara14,theKeralaHighCourtconsideredthequestionastowhethersuchagreementcouldbetreatedasevidenceinacriminalmatter.Whileansweringthisquestion,itwasobservedbythecourtthatevenifthecomplainanthadagreedinthemediationtosettlethematterforalesseramountthantheamountmentionedinthecheque,itcouldnotbesaidthattheactualamountdueistheamountagreedinthemediation.Para14ofthejudgmentreadsasfollows:

“14. Then, the question iswhether the agreement entered into between the parties in amediationcanbetreatedasevidenceinacriminalmatter.Itmaybementionedhere,unless the agreement is accepted by the court and a decree is passed under S. 89 of the CodeofCriminalProcedurer/wO.23R.3ofCodeofCivilProcedure,thatwillhavenoeffect,unlessthathasbeenconvertedintoaconciliationagreementbasedonwhichanawardispassedbytheConciliatorundertheprovisionsoftheArbitrationandConciliationAct.Further,itisthecardinalprincipleinthemediationthatwhatevertranspiredinthemediationcannotbedisclosedevenbeforethecourtoflawandthatcannotbecalledupontobeproducedasevidenceaswellasitwillaffecttheconfidentialityofthethingstranspiredintheprocessofmediation.Sothepartywhodidnothonourthesettlement


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whichwaseffectedintheprocessofmediation,then,isnotentitledtousethesameasevidencebeforethecourtandagreementalsocannotbemarkedinevidenceasithasnolegaleffectunlessitisacceptedbythecourtandadecreeispassedunderS.89r/wO.23R.3oftheCodeofCivilProcedure.ThatcannotbepossibleinaCriminalCourt.Furtherevenifthepartyhadagreedtosettlethematterforalesseramountthantheamountmentionedinthechequeinthemediation,itcannotbesaidthat,thatwastheamountpayableasinthemediation,partiescanforgosomanythingsforthepurposeofachievingharmonybetweenthepartiesandrestoretheirrelationship.Sotheamountsarrivedinamediationalsocannotbeusedasevidenceforcomingtotheconclusionthattheamountmentionedinthechequeisnottherealamountdue,andthecomplainantisnotentitledtomaintaintheactiononthebasisofthatcheque.Thecourthastoallowthepartiestoadduceevidenceignoringthemediationagreementanddisposeofthecaseonthebasisofevidenceadducedbypartiesasitshouldnotbeputinevidenceinviewofthebarunderrules20,21and22oftheCivilProcedure(AlternativeDisputesResolution)Rules Kerala 2008which reads as follows:-¬Rule 20:-- Confidentiality, disclosure andinadmissibilityofinformation--

(1) Themediatorshallnotdiscloseconfidential informationconcerningthedisputereceivedfromanypartytotheproceedingsunlesspermittedinwritingbythesaidparty.

(2) Partiesshallmaintainconfidentiality in respectofevents that transpiredduringmediation and shall not rely onor introduce the said information in anyotherproceedings as to:

(a) viewsexpressedbyapartyinthecourseofthemediationproceedings;

(b) documentsobtainedduring themediationwhichwereexpressly requiredtobetreatedasconfidentialorothernotes,draftsorinformationgivenbypartiesormediators;

(c) Proposals made or views expressed by the mediator.

(d) Admissionmadebyapartyinthecourseofmediationproceedings.

(e) The fact that a party had or had not indicated willingness to accept a proposal.

(3) There shall be no stenographic or audio or video recording of the mediationproceedings.

Rule21:--Privacy-Mediationsessionsandmeetingsareprivate;onlytheconcernedpartiesortheircounselorauthorisedrepresentativescanattend.Otherpersonsmayattendonlywiththepermissionofthepartiesorwiththeconsentofthemediator.

Rule22:-- Immunity-Nomediatorshallbeheld liable foranythingbonafideoromittedtobedonebyhimduringthemediationproceedingsforcivilorcriminalactionnorshallhebesummonedbyanypartytothesuittoappearinacourtoflawtotestifyinregardtoinformationreceivedbyhimoractiontakenbyhimorinrespectofdraftsorrecordspreparedbyhimorshowntohimduringthemediationproceedings.”

95. Itwasheldbythecourtthattheagreementarrivedat inthemediationcannotbeusedastheevidencetocontendthattheamountmentionedinthechequewasnottherealamount.


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In thesecircumstances, thepartyviolatingthemediationagreement,cannotusethesameasevidencebeforethecourtandthattheagreementhasnolegaleffectunless ithasbeen“acceptedbythecourtandadecreeispassedunderSection89r/wOrder23Rule3oftheCodeofCivilProcedure.”whichwasnotpossibleinacriminalcourt.

96. So farasmediation inDelhi is concerned, in the“MediationandConciliationRules,2004”,Rule20isconcernedwith“confidentiality,disclosureandinadmissibilityofinformation”,Rule21mandatesprivacyinthemediationsessionswhileRule22prescribesimmunityfromcivil/criminalproceedingstothemediatorforanythingdonebonafideoromittedtobedoneduringthemediationproceedings.

97. IncasesunderSection138oftheNIAct,judicialreinforcementofthissoundprincipleistobefoundintheencouragementbytheSupremeCourttosettlementsofthedisputesbetweenpartiesatearlystages.ThisisinkeepingwiththelegislativemandateofSection147,sothatthespirit,intendmentandobjectofthisstatutoryprovisioncanbeeffectivelyrealized.

98. WehavenotedabovethatSection147oftheNIActhasmadetheoffenceunderSection138oftheNIActcompoundable.ProceedingsunderSection138oftheNIActhavebeenconsideredas quasi civil by the courts. Therefore, in principle, the procedure which applies to recording a settlementincivilcasescouldguidetheproceduretobefollowedandbeappliedforrecordingasettlementbetweenthepartiestoacomplaintunderSection138oftheNIAct.

GuidanceonthisaspectisprovidedbytheprovisionsofOrderXXIIIRule3oftheCPCandthepracticefollowedbythecivilcourtsuponacompromisearrivedatbetweenthepartiestoasuit.

99. Sofarasthestatutoryprovisionisconcerned,OrderXXIIIRule3oftheCPCreadsasfollows:

“3. Compromiseofsuit.-Whereitisprovedtothesatisfactionofthecourtthatasuithasbeenadjustedwhollyorinpartbyanylawfulagreementorcompromiseinwritingandsignedby theparties,orwhere thedefendant satisfies theplaintiff in respectof thewholeoranypartofthesubjectmatterofthesuit,thecourtshallordersuchagreement,compromise or satisfaction to be recorded, and shall pass a decree in accordancetherewithsofarasitrelatestothepartiestothesuit,whetherornotthesubjectmatteroftheagreement,compromiseorsatisfactionisthesameasthesubjectmatterofthesuit: -

Providedthatwhereitisallegedbyonepartyanddeniedbytheotherthananadjustmentorsatisfactionhasbeenarrivedat,thecourtshalldecidethequestion;butnoadjournmentshallbegrantedforthepurposeofdecidingthequestion,unlessthecourt,forreasonstoberecorded,thinksfittograntsuchadjournment.” (Emphasisbyus)

100. The Code of Criminal Procedure as well as the NI Act have provided only for compounding of offences.Noprocedureregardingthemannerinwhichasettlementagreementrequiredtobeplaced or considered by the court has been provided.

101. Reference can usefully be made to certain pronouncements under the Code of Civil Procedure, wherein the Legislature has provided Rule 3 ofOrder XXIII,which specifically provides for“Compromiseofsuits”.TheLegislaturehasprescriptedthatifitis“provedtothesatisfactionof the court” thata suithasbeenadjustedwhollyor inpartbyany “lawful agreementorcompromise inwritingandsignedbytheparties”, thecourtshallordersuchagreementor


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compromise to be recorded and shall pass a decree in accordance thereof, so far as it relates tothepartiesinthesuit. It is importanttonotethatOrderXXIIIRule3oftheCPCpermitstheconsiderationoftheagreement,whetherornotthesubjectmatteroftheagreementorcompromiseisthesameasthesubjectmatterofthesuit.WhiletheCodeofCivilProcedurewouldhavenoapplicationto theproceedingswhichareguidedby theCriminalProcedureCode,however,giventhe legislativevacuum, thereappears tobenoreasonas towhytheprincipleswhichapplytoconsiderationofasettlementunderOrderXXIIIRule3oftheCPCcannotbeappliedforconsiderationofasettlementwhichisthesubjectmatterofconsiderationbyacourtunderSection320oftheCr.P.C.orSection147oftheNIAct.TheprinciplesofRule3orOrderXXIIIoftheC.P.C.,aslaidinjudicialpronouncements,canbesummarizedthus:

(i) Fora compromise tobeheld tobebinding, ithas tobe signedeitherby thepartiesorbytheircounselsorboth,failingwhichOrderXXIIIRule3oftheCPCwouldnotbeapplicable.(Ref. :(1988)1SCC270,GurpreetSinghv.ChaturBhujGoel;(2009)6SCC194,SnehGuptav.DeviSarup&Ors.)

(ii) OrderXXIIIRule3oftheCPCcastsanobligationonthecourttobesatisfiedthatthesettlementagreement is lawfulandis inwritingandsignedbythepartiesorbytheircounsels.(Ref.:(1978)2SCC179,SulemanNoormohamed&Ors.v.UmarbhaiJanubhai;(2006)1SCC148,AmteshwarAnandv.VirenderMohanSingh&Ors.).

(iii) An obligation is cast on the court under Order XXIII Rule 3 of the CPC to order theagreement to be recorded and pass a decree in accordance thereof.

(Ref.:(2006)1SCC148,AmteshwarAnandv.VirenderMohanSingh&Ors.(paras26and27)).

(iv) A consent decree is really a contract between the partieswith the seal of the courtsuperadded to it.

(Ref.:(1969)2SCC201,BaldevdasShivlal&Anr.v.FilmistanDistributors(India)P.Ltd.&Ors.;(2002)100DLT278,HindustanMotorsLtd.vAmritpalSinghNayar&Anr.;(2007)14SCC318,ParayyaAllayyaHittalamaniv.SriParayyaGurulingayyaPoojari&Ors.).

(v) A consent decree may operate as an estoppel as well.

[Ref.:AIR1956SC346,RajaSriSailendraNarayanBhanjaDeov.StateofOrissa;(2007)14SCC318,ParayyaAllayyaHittalamaniv.SriParayyaGurulingayyaPoojari&Ors.(para15)].

102. Thepracticefollowedbythecivilcourtbeforewhomthesettlementinwriting,dulysignedbytheparties,isplaced,istorecordthestatementsofpartiesconfirmingthatthesettlementwasenteredintovoluntarily,withoutanyforce,pressureorundueinfluence;thatitcontainedtheactualtermsofthesettlement;andundertakingsofthepartiestoremainboundbythetermsthereof.Uponbeing satisfied that the settlementwas voluntary and lawful, the civil courttakesitonrecordacceptingtheundertakingandpassingadecreeintermsthereof.

103. InthepronouncementoftheAllahabadHighCourtreportedatAIR1930All409:1929SCCOnLineAll140,Emperorv.JhangtooBarai&Anr.,thecourtwasconsideringwhethertherewasinfactacompositionoftheoffenceornot?Itwasobservedthatthebestpossibleevidencewasthatofthedocumentsignedbythepartieswhichwasinthehandwritingofthecomplainant


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himselfthatthecompositionwascorrect.Inpara6,itwasalsoobservedthatifallthepartieswerepresentincourt,itwasentirelyunnecessaryforanyverificationofsuchcomposition.Thecourtnotedthat“Thecomplainantwasliterate.Hesignedthedocumentinhisownwriting.It must presumed, unless it is proved to the contrary, that the complainant well understood theonesmallparagraph thatappeared in thedocument. Inanycase, theonlyverificationthatwasrequiredwasasimplequestiontothepartieswhethertheysignedthedocumentand whether they understood its contents. There can be no doubt that on that day there was a valid compositionwithin themeaning of section 345of the Codeof Criminal Procedurebeforethecourt.ItwasthereforethedutyoftheMagistrateuponthatday,andwithoutanyunnecessarydelay,tohavepronouncedanacquittal.Iamclearthatitisincompetentforanyperson,oncehavingenteredintoavalidcomposition,towithdrawfromit.”

104. Binding the parties to a settlement agreement entered into through a formal mediationprocessandbeingheldaccountableforhonouringthesameisreallyenforcingthelegislativemandate inenactingSections138and147of theNIAct i.e. toensureanexpeditioustimebound remedy for recovery of the cheque amounts. Breach of a lawful entered agreement wouldnotonly frustrate theparties to themediation,butwouldbeopposed to thespirit,intendmentandpurposeofSection138oftheNIActandwoulddefeattheendsofjustice.Thecourtscannotpermituseofmediationasatooltoabusejudicialprocess.

105. There is no legal prohibition upon a criminal court seized of such complaint, to whom amediatedsettlementisreported,fromadoptingtheaboveprocedure.Applicationoftheaboveenunciationoflawtoamediationarisingoutofacriminalcasemanifeststhatasettlementagreementwouldrequiretobeinwritingandsignedbythepartiesortheircounsels.Thesamehastobeplacedbeforethecourtwhichhastobesatisfiedthattheagreementwaslawfulandconsentofthepartieswasvoluntaryandnotobtainedbecauseofanyforce,pressureorundueinfluence.Therefore,thecourtwouldrecordthestatementofthepartiesortheirauthorizedagentsonoathaffirmingthesettlement,itsvoluntarinessandtheirundertakingtoabidebyitinthemannerfollowedbythecivilcourtwhenconsideringasettlementplacedbeforeitunderOrderXXIIIRule3oftheCPC.Thecourtwouldthereafterpassanappropriateorderacceptingtheagreement,incorporatingthetermsofthesettlementregardingpaymentunderSection147oftheNIActandtheundertakingsoftheparties.Thecourttakingonrecordthesettlementstandsempoweredtomaketheconsequentialandfurtherdirectiontotherespondenttopaythemoneyintermsofthemediatedsettlementandalsodirectthatthepartieswouldremainbound by the terms thereof.

106. Inhavingsoproceeded,thereisasatisfactionofthevoluntarinessandlegalityofthetermsofthesettlementofthecourtandacceptanceofthetermsthereofaswellasaspecificorderintermsthereof.Consequently,theamountpayableunderthesettlement,wouldbecomeanamount payable under an order of the criminal court.

107. So far as the disputes beyond the subjectmatter of the litigation is concerned, upon thesettlementreceivingimprimaturofthecourt,suchsettlementwouldremainbindinguponthepartiesandifsoordered,wouldbesubjecttotheordersofthecourt.

XIV. Breach of such settlement accepted by the court -consequences?

108. The instant reference has resulted because of the failure of the court to have recorded the settlementandundertakingsbindingtheaccusedpersoninthecomplaintunderSection138


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oftheNIActtoabidebythesettlementarrivedatduringmediation.Therecanbenomannerofdoubtthatonceasettlementisreportedtothecourtandmadethebasisofseekingthecourt’sindulgence,thepartiesoughtnottobeabletoresilefromsuchaposition.Sowhatistheremedyavailabletoacomplainant if therespondentcommitsbreachof themediationsettlementanddefaultsinmakingtheagreedpayments?

109. LetusexamineastowhetherthelegislaturehasprovidedanymechanismintheCr.P.C.forrecovery of monetary amounts.

110. WehaveextractedSection421oftheCr.P.C.abovewhichprovidesthemechanismtorecoverfines,byissuingawarrantforthelevyoftheamountbyattachmentandsaleofanymovablepropertybelongingtotheoffenderand/orbyissuingawarrantauthorizingtherealizationofamounts as arrears of land revenue from movable and immovable property of the defaulter.

111. In the event of either party resiling from the agreed upon settlementwhich has receivedtheimprimaturofthecourt,thepartyattemptingtobreachthesettlementandundertakingcannotbepermittedtoavoidmakingthepayment.Suchpartyalsoshouldnotbeallowedtoviolatesuchundertakinggiventotheoppositesideaswellasthecourt.

112. In(2009)6SCC652,Vijayanv.SadanandanK.&Anr.,itwasheldthatSection431readwithSection421of theCr.P.C. isapplicable to recoveryofcompensationorderedunderSection357(5).

113. Section431Cr.P.C.,alsoextractedabove,providesifanymoney,otherthanafine,ispayableby virtue of any order made under the Cr.P.C., the method of recovery whereof is not expressly providedfor,shallberecoverableintermsofSection421Cr.P.C.

114. Intheeventthatacriminalcourtpassesorderacceptingthemediatedsettlementbetweenthepartiesanddirectstheaccusedtomakepaymentintermsthereof,thesettlementamountbecomes payable under the order of the court. Such order having been passed in proceedings underSection138oftheNIAct,wouldbeanorderunderSection147oftheNIActandSection320oftheCr.P.C.

115. InproceedingswheresettlementispermittedunderSection320oftheCr.P.C.,itwouldbeanorder thereunder.

116. WhereproceedingsaredisposedonsettlementtermsbytheHighCourt,itwouldbeanorderpassedinexerciseofjurisdictionunderSection482oftheCr.P.C.Uponbreachofsuchorderandnon-paymentoftheagreedamounts,thesamemayberecoverableintermsofSection431readwithSection421Cr.P.C.

117. Inaddition,ifthepartyhastenderedanundertakingtoabidebythetermsoftheagreement,whichstandsacceptedby thecourt, in theeventofbreachof theundertaking,actionandconsequences under the Contempt of Courts Act could also follow.

XV. Reference answered

118. Inviewof theabove, the referencemadeby the ld.MetropolitanMagistrateby theorderdated13thJanuary,2016(extractedinpara1above)isansweredthus:

QuestionI:Whatisthelegalityofreferralofacriminalcompoundablecase(suchasonu/s138oftheNIAct)tomediation?


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It is legaltoreferacriminalcompoundablecaseasoneunderSection138oftheNIActtomediation.

QuestionII:CantheMediationandConciliationRules,2004formulatedinexerciseofpowersundertheCPC,beimportedandappliedincriminalcases?Ifnot,howtofillthelegalvacuum?Isthereaneedforseparaterulesframedinthisregard(possiblyu/s477oftheCrPC)?

TheDelhiMediationandConciliationRules,2004issuedinexerciseoftherulemakingpowerunderPart-10andClause(d)ofsub-section(ii)ofSection89aswellasallotherpowersenablingtheHighCourtofDelhitomakesuchrules,appliestomediationarisingoutofcivilaswellascriminal cases.

QuestionIII:Incaseswherethedisputehasalreadybeenreferredtomediation-Whatistheproceduretobefollowedthereafter?Isthemattertobedisposedoftakingtheverymediatedsettlementagreementtobeevidenceofcompoundingofthecaseanddisposeofthecase,orthesameistobekeptpending,awaitingcompliancethereof(forexample,whenthepaymentsarespreadoveralongperiodoftime,asisusuallythecaseinsuchsettlementagreements)?

Inthecontextofreferenceoftheparties,inacasearisingunderSection138oftheNIAct,tomediationisconcerned,thefollowingprocedureisrequiredtobefollowed:

III(i)WhentherespondentfirstentersappearanceinacomplaintunderSection138oftheNIAct,beforeproceedingfurtherwiththecase,theMagistratemayproceedtorecordadmissionanddenialofdocumentsinaccordancewithSection294oftheCr.P.C.,andifsatisfied,atanystagebeforethecomplaintistakenupforhearing,thereexistelementsofsettlement,themagistrateshallinquirefromthepartiesiftheyareopentoexploringpossibilityofanamicableresolutionofthedisputes.

III (ii) If the parties are so inclined, they should be informed by the court of the variousmechanismsavailable to thembywhich theycanarriveat such settlement includingoutofcourtsettlement;referraltoLokAdalatundertheLegalServicesAuthoritiesAct,1987;referraltothecourtannexedmediationcentre;aswellasconciliationundertheArbitrationandConciliationAct,1996.

III(iii)Oncethepartieshavechosentheappropriatemechanismwhichtheywouldbewillingtousetoresolvetheirdisputes,thecourtshouldreferthepartiestosuchforumwhilestipulatingtheprescribedtimeperiod,withinwhichthemattershouldbenegotiated(ideallyaperiodofsixweeks)andthenextdateofhearingwhenthecaseshouldbeagainplaced before the concerned court to enable it to monitor the progress and outcome of suchnegotiations.

III(iv)Intheeventthatthepartiesseekreferencetomediation,thecourtshouldlistthematterbeforetheconcernedmediationcentre/mediatoronafixeddatedirectingthepresenceoftheparties/authorizedrepresentativesbeforethemediatoronthesaiddate.

III(v)Ifreferredtomediation,thecourts,aswellasthemediators,shouldencouragepartiestoresolvetheiroveralldisputes,notconfinedtothecaseinwhichthereferenceismadeorthesubjectmatterofthecriminalcomplaintwhichrelatesonlytodishonouringofaparticularcheque.


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III(vi)Thepartiesshouldendeavourtointeract/discusstheirindividualresolutions/proposalswith each other as well and facilitate as many interactions necessary for efficientresolutionwithintheperiodgrantedbythecourt.Thepartiesshallbedirectedtoappearbeforethemediatorinatimeboundmannerkeepinginviewthetimeperiodfixedbythe magistrate.

III(vii)Intheeventthatallpartiesseekextensionoftimebeyondtheinitialsixweekperiod,themagistratemay,afterconsideringtheprogressofthemediationproceedings,intheinterestofjustice,grantextensionoftimetothepartiesforfacilitatingthesettlement.Forthepurposesofsuchextension,themagistratemaycallforaninterimreportfromthemediator,howeverkeeping inmindtheconfidentialityattachedto themediationprocess.Upon being satisfied that bona fide and sincere efforts for settlementwerebeingmade by the parties, themagistratemay fix a reasonable time period for theparties toappearbefore themediatorappointinganextdateofhearing fora reporton the progress in themediation. Such time periodwould depend on the facts andcircumstancesandisbestlefttothediscretionofthemagistratewhowouldappointthesamekeepinginviewthebestinterestofbothparties.

ContentsofthesettlementIII(viii)Ifasettlementisreachedduringthemediation,thesettlementagreementwhichisdrawn-upmustincorporate:

(a) aclearstipulationastotheamountwhichisagreedtobepaidbytheparty;

(b) aclearandsimplemechanism/methodofpaymentandthemannerandmodeofpayment;

(c) undertakingsofallpartiestoabideandbeboundbythetermsofthesettlementmustbecontainedintheagreementtoensurethatthepartiescomplywiththetermsagreedupon;

(d) aclearstipulation,ifagreedupon,ofthepenaltywhichwouldenuretothepartyifadefaultoftheagreedtermsiscommittedinadditiontotheconsequencesofthebreachofthetermsofthesettlement;

(e) an unequivocal declaration that both parties have executed the agreementafter understanding the terms of the settlement agreement as well as of theconsequencesofitsbreach;

(f) a stipulationregarding thevoluntarinessof thesettlementanddeclaration thattheexecutorsofthesettlementagreementwereexecutingandsigningthesamewithoutanykindofforce,pressureandundueinfluence.

III (ix)Themediatorshouldforwardacarefullyexecutedsettlementagreementdulysignedbybothpartiesalongwithhisreporttothecourtonthedatefixed,whenthepartiesortheirauthorizedrepresentativeswouldappearbeforethecourt.

ProceedingsbeforethecourtIII(x)ThemagistratewouldadoptaprocedureakintothatfollowedbythecivilcourtunderOrderXXIIIoftheC.P.C.III(xi)Themagistrateshouldrecordastatementonoathofthepartiesaffirmingthetermsofthesettlement;thatitwasenteredintovoluntarily,ofthefreewilloftheparties,afterfullyunderstandingthecontentsandimplicationsthereof,affirmingthecontentsoftheagreementplacedbefore


| 177 |

thecourt;confirmingtheirsignaturesthereon.Aclearundertakingtoabidebythetermsof thesettlementshouldalsoberecordedasamatterofabundantcaution. III (xii)Astatementtotheaboveeffectmaybeobtainedonaffidavit.However,themagistratemustrecordastatementofthepartiesprovingtheaffidavitandthesettlementagreementoncourt record.

III(xiii)Themagistrateshouldindependentlyapplyhisjudicialmindandsatisfyhimselfthatthesettlementagreement isgenuine,equitable, lawful,notopposedtopublicpolicy,voluntaryandthatthereisnolegalimpedimentinacceptingthesame.III(xiv)Pursuanttorecordingofthestatementoftheparties,themagistrateshouldspecificallyacceptthestatementofthepartiesaswellastheirundertakingsandholdthemboundbythetermsof thesettlement termsentered intobyandbetweenthem.Thisordershouldclearlystipulatethatintheeventofdefaultbyeitherparty,theamountagreedtobepaidinthesettlementagreementwillberecoverableintermsofSection431readwithSection421oftheCr.P.C.

III(xv)Uponreceivingarequestfromthecomplainant,thatonaccountofthecompromisevidethesettlementagreement,itiswithdrawinghimselffromprosecution,thematterhastobecompounded.SuchprayerofthecomplainanthastobeacceptedinkeepingwiththeschemeofSection147oftheNIAct.(Ref.:(2005)CriLJ431,RameshbhaiSomabhaiPatelv.DineshbhaiAchalanandRathi)Atthispoint,thetrialcourtshoulddischarge/acquittheaccused person, depending on the stage of the case. This procedure should be followed evenwhere thesettlement terms require implementationof the termsandpaymentoveraperiodoftime.

III(xvi)Intheeventthataftervariousroundsofmediation,thepartiesconcludethatthemattercannotbeamicablyresolvedorsettled,informationtothiseffectshouldbeplacedbeforethe magistrate who should proceed in that complaint on merits, as per the procedure prescribed by law.

III (xvii) The magistrate should ensure strict compliance with the guidelines and principles laiddownbytheSupremeCourtinthepronouncementreportedat(2010)5SCC663,DamodarS.Prabhuv.SayedBabalalHandsofarasthesettlementatthe laterstageis concerned in (2014) 10 SCC690MadhyaPradesh State Legal ServicesAuthority v.PrateekJain.

III(xvii)Wemayalsorefertoacriminalcasewhereinthereisanunderlyingcivildispute.Whilethepartiesmaynotbeeitherpermittedinlawtocompoundthecriminalcaseormaynotbe willing to compound the criminal case, they may be willing to explore the possibility ofanegotiatedsettlementof their civildisputes.There isno legalprohibition to thepartiesseekingmediationsofarastheunderlyingcivildisputeisconcerned.Incaseasettlementisreached,theprincipleslaiddownbyuswouldapplytosettlementofsuchunderlying civil disputes as well.

In case reference in a criminal case is restricted to only an underlying civil dispute and a settlement isreachedinmediation,thereferringcourtcouldrequirethemediatortoplacesuchsettlementinthecivillitigationbetweenthepartieswhichwouldproceedinthematterin accordance with prescribed procedure.


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Question IV : If the settlement inMediation is not complied with - is the court requiredtoproceedwith thecase fora trialonmerits,orhold sucha settlementagreement tobeexecutableasadecree?

Incasethemediationsettlementacceptedbythecourtasaboveisnotcompliedwith,thefollowing procedure is required to be followed :

IV (i) In theeventofdefaultornon-complianceorbreachof thesettlementagreementbytheaccusedperson,themagistratewouldpassanorderunderSection431readwithSection421oftheCr.P.C.torecovertheamountagreedtobepaidbytheaccusedinthesamemannerasafinewouldberecovered.

IV(ii)Additionally,forbreachoftheundertakinggiventothemagistrate/court,thecourtwouldtakeappropriateactionpermissibleinlawtoenforcecompliancewiththeundertakingaswellastheordersof thecourtbasedthereon, includingproceedingunderSection2(b)oftheContemptofCourtsAct,1971forviolationthereof.

QuestionV:IftheMediatedSettlementAgreement,byitself,istakentobetantamounttoadecree,then,howthesameistobeexecuted?Isthecomplainanttoberelegatedtofileanapplicationforexecutioninacivilcourt?Andifyes,whatshouldbetheappropriateorderswithrespecttothecriminalcomplaintcaseathand.Whatwouldbetheeffectofsuchamediatedsettlementvis-a-visthecomplaintcase?

V(i)Thesettlementreachedinmediationarisingoutofacriminalcasedoesnottantamountto a decree by a civil court and cannot be executed in a civil court.

However,asettlementinmediationarisingoutofreferralinacivilcasebyacivilcourt,canresultinadecreeuponcompliancewiththeprocedureunderOrderXXIIIoftheC.P.C.Thiscanneverbesoinamediationsettlementarisingoutofacriminalcase.

XVI. Result

119. Thepresentreference,underSection395(2)oftheCrPC,isansweredintheaboveterms.

120. We place on record our deep appreciation for the amici curiae: Mr. J.P. Sengh, SeniorAdvocate;Ms.VeenaRalli,AdvocateandMr.SiddharthAgarwal,Advocate,whohaverenderedindispensableandworthyassistancetous,inthismatter.

121. LettherecordofComplaintCaseNos.519662/2016and519664/2016beforthwithreturnedtothetrialcourt,whichshallproceedinthematter,inaccordancewithlaw.

qqq

n. parmeswaran unni versus g. kannan and anr.

| 179 |

N. pARAMESwARAN UNNI vERSUS G. kANNAN ANd ANOTHER(2017) 5 Supreme Court Cases 737 : 2017 SCC OnLine SC 293


Before Hon’ble Mr. Justice N.V. Ramana and Hon’ble Mr. Justice Prafulla C. Pant

N. Paraeswaran Unni ...Appellant Versus

G. Kannan and Another ...Respondents.

[Criminal Appeal No 455 of 2006]Decided on 1 March, 2017

If within limitation – Two consecutive notices sent by payee by registeres post to correct address of drawer of cheque: first one sent within limitation period of 15 days but same was returned with postal endorsement “intimation served, addressee ansent”, whereas second one sent after expiry of stipulated period of limitation. First notice would be deemed to have been duly effected by virtue of S.27 of General Clauses Act and S. 114 of Evidence Act – Though drawer entitled to rebut that presumption, but in absence of rebuttal, requirement of S. 138 proviso (b) would stand complied with – Subsequent notice should be treated only as remainder and would not affect validity of first notice – Provisions should be so interpreted in consonance with object which legislation sought to achieve that right of honest lender is not defeated.

JUDGMENT

N.V. Ramana, J.

1. Thisappealarisesoutofthejudgmentandorderdated06-10-2003passedbytheHighCourtofKeralaatErnakulaminCriminalRevisionPetitionNo.644of1995wherebytheHighCourtallowedthecriminalrevisionofthefirstrespondentbysettingasidetheconcurrentjudgmentsofTrialCourtandAppellateCourt,thatfirstrespondentcannotbeconvictedunderSection138oftheNegotiableInstrumentsAct,1881(inshort“N.I.Act”)astheprocedureprescribedunderthissectionwasnotsatisfiedintheinstantcase.

2. Brief facts leading to this criminal appeal, as per the prosecution case, are that the firstrespondent/accusedborrowedRs.64,000/-on13-10-1990fromtheappellant/complainant.Inlieuoftheborrowedamount,firstrespondentissuedtwochequesdated13-10-1990forRs.10,000/-andRs.25,000/-respectivelybothdrawnonStateBankofIndia,AlappuzhaBranch.Anothercheque forRs.29,000/-dated08-10-1990wasalsogiven to theappellantbyfirstrespondent,whichwasissuedbyoneKRajesh,DevelopmentOfficer,LICdrawnonStateBankofTravancore,VadaiCanalbranch,Alappuzha.

3. Appellantpresentedfirst-twochequesdated13-10-1990on04-04-1991tohisbank,StateBankofTravancore,Mainbranch,Alappuzha.Firstrespondent’sbankreturnedthesaidtwo


| 180 |

chequeson05-04-1991withanendorsement“Refertodrawer.”Appellantreceivedintimationmemodated05-04-1991fromhisbankon08-04-1991.

4. Appellantgotissuedalegalnoticeon12-04-1991tothefirstrespondent,whichwasreturnedwith postal endorsement “intimation served, addressee absent” on 20-04-1991. The samewasreceivedbytheappellant’sadvocateon25-04-1991.Appellantagainsentthelegalnoticeon04-05-1991.Thesecondnoticesenttofirstrespondent’saddresswasreturnedwithpostalendorsement“Refused,returnedtosender.”Thus,accordingtotheappellant,firstrespondentfailedtoreturntheborrowedamountRs.64,000/-forwhichstatutorynoticeunderproviso(b)ofSection138ofN.I.Actwasissuedtohimtomakegoodthedishonouredchequesduetoinsufficiencyoffundsinhisbankaccount.

5. On23.05.1991appellantlodgedaprivatecomplaintbeforetheJudicialFirstClassMagistrate-II,AlappuzhafortheallegedoffenceunderSection138oftheN.I.Act,whichwasnumberedasSummaryTrialNo.34/92.Afterafullfledgedtrialanduponappreciatingthedocumentaryevidence adduced on behalf of the parties, the Trial Court allowed the complaint as theappellantwassuccessfulinproving,thecasebeyondreasonabledoubtthatfirstrespondentcommittedanoffencepunishableunderSection138oftheN.I.Act.Accordingly,theTrialCourtby judgment dated 29- 07-1993 convicted and sentenced the first respondent to undergosimple imprisonment of three months.

6. Aggrievedbytheconvictionandsentence,firstrespondentpreferredCriminalAppealNo104of1993beforeAddl.SessionsJudgeatAlappuzha.TheLd.Judge,afterperusingtherecordsandonelaboratehearing,byitsjudgmentdated07-07-1995dismissedtheappealbyupholdingandconfirmingthejudgmentoftheTrialCourt.

7. Against the said order, respondent preferred Criminal Revision no 644 of 1995 before theHigh Court of Kerala. The only ground raised before the High Court was that the provisions ofSection138oftheN.I.ActcannotbeinvokedastheappellanthadnotcompliedwiththeconditionsinClause(b)oftheprovisotothesaidsection.Noticedemandingpaymentoftheamountarisingfromthetwodishonouredchequesinquestionwason04-05-1991,whereastheintimationregardingdishonourofthesaidchequeswasgivenbytheappellant’sbankon08-04-1991.Therefore,thenoticewasbeyond15days.Hence,insuchcircumstancesSection138oftheN.I.Actwasnotattractedandnooffencewasmadeout.

8. TheHighCourtbyitsjudgmentdated06-10-2003hadallowedtherevisionbyreversingtheconcurrentfindingsofthetwoCourtsbelowholdingthatthestatutorynoticewasbeyondtheprescribedlimitationperiodasmentionedunderSection138oftheN.I.Act.

9. Nowtheissuebeforeusiseventhoughthefirstnoticewasissuedbytheappellantwithintimetothecorrectaddressofthefirstrespondent,whethertheHighCourtwasrightinrejectingthecaseof theappellanthereinon theground that secondnoticewas issuedbeyond theperiodoflimitationi.e.15daysfromthedateofreceivingdishonourintimationfromthebankunderClause(b)oftheprovisotoSection138oftheN.I.Act.

10. Beforedelvingintotheissue,itwouldbeappropriatetoreproduceSection138oftheAct,asit then stood.

138. Dishonourofchequeforinsufficiency,etc.,offundsintheaccount:Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofany

n. parmeswaran unni versus g. kannan and anr.

| 181 |

amount of money to another person from out of that account for the discharge, in whole orinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthe cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudice.toanyotherprovisionofthisAct,bepunishedwithimprisonmentforatermwhichmayextendtotwoyears,orwithfinewhichmayextendto twice the amount of the cheque, or with both:


a) thechequehasbeen,presentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier;

b) thepayeeortheholderinduecourseofthechequeasthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganotice,inwriting,tothedrawerofthecheque,withinfifteendaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

c) thedrawerofsuchchequefailstomakethepaymentofthesaidamountofmoneyto the payee or, as the case may be, to the holder in due course of the cheque, withinfifteendaysofthereceiptofthesaidnotice.Explanation.-Forthepurposesofthissection,“debtorotherliability”meansalegallyenforceabledebtorotherliability.

11. AbarereadingofSection138oftheN.I.Act,indicatesthatthepurportofSection138istoprevent and punish the dishonest drawers of cheques who evade and avoid their liability. As explained in Clause (b) of the proviso, the payee or the holder of the cheque in due course is necessarilyrequiredtoserveawrittennoticeonthedrawerofthechequewithinfifteendaysfromthedateofintimationreceivedfromthebankaboutdishonour.

12. ItisexplicitlymadeclearunderClause(c)ofSection138ofN.I.Act,thatthisgivesanopportunitytoadrawerofthechequetomakepaymentwithinfifteendaysofreceiptofsuchnoticesentbythedrawee.It ismanifestthattheobjectofprovidingClause(c)istoavoidunnecessaryhardship.EvenifthedrawerhasfailedtomakepaymentwithinfifteendaysofreceiptofsuchnoticeasprovidedunderClause(c),thedrawershallbedeemedtohavecommittedanoffenceundertheActandthereafterthedraweewouldbecompetenttofilecomplaintagainstthedrawerbyfollowingtheprocedureprescribedunderSection142oftheAct.

13. It is clear fromSection27of theGeneralClausesAct,1897andSection114of the IndianEvidenceAct,1972,thatoncenoticeissentbyregisteredpostbycorrectlyaddressingtothedrawerofthecheque,theserviceofnoticeisdeemedtohavebeeneffected.Thenrequirementsunderproviso(b)ofSection138standscomplied,ifnoticeissentintheprescribedmanner.However,thedrawerisatlibertytorebutthispresumption.

14. It iswell settled that interpretationof a Statute should bebasedon theobjectwhich theintended legislationsought toachieve. “It isa recognized ruleof interpretationof statutesthat expressions used therein should ordinarily be understood in a sense in which they best harmonizewiththeobjectofthestatute,andwhicheffectuatetheobjectoftheLegislature.Ifanexpressionissusceptibleofanarrowortechnicalmeaning,aswellasapopularmeaning,


| 182 |

theCourtwouldbejustifiedinassumingthattheLegislatureusedtheexpressioninthesensewhich would carry out its object and reject that which renders the exercise of its powerinvalid”[1].

15. ThisCourt incatenaofcaseshasheld thatwhenanotice is sentby registeredpostand isreturnedwithpostalendorsement“refused”or“notavailableinthehouse”or“houselocked”or“shopclosed”or“addresseenotinstation”,dueservicehastobepresumed[2].Thoughinprocessof interpretationrightofanhonest lendercannotbedefeatedashashappened inthiscase.FromtheperusalofrelevantsectionsitisclearthatgenerallythereisnobarundertheN.I.Acttosendaremindernoticetothedrawerofthechequeandusuallysuchnoticecannotbeconstruedasanadmissionofnon-serviceofthefirstnoticebytheappellantashashappened in this case.

16. Moreover the first notice sent by appellant on 12-04-1991 was effective and notice wasdeemedtohavebeenservedonthefirstrespondent.Further,itisclearthatthesecondnoticehasnorelevanceatallinthiscaseathand.Secondnoticecouldbeconstruedasareminderof respondent’s obligation to discharge his liability. As the complaint,was filedwithin thestipulatedtimecontemplatedunderClause(b)ofSection142oftheN.I.Act,thereforeSection138 r/w142ofN.I.Act isattracted. In theviewof thematter,wesetaside the impugnedjudgmentoftheHighCourt.

17. However, during the course of hearing, learned counsel for first respondent, as agreedbyappellantherein,submittedthatfirst respondentwaswilling topayRs.2,00,000/- (Rupeestwolakhsonly)inlieuofsufferingsimpleimprisonmentofthreemonthsasimposedbytheTrialCourt,asconfirmedbythefirstAppellateCourt,andendorsedbythisCourt.

18. Inviewof theundertakinggivenby the learnedcounsel,wedirect thefirst respondent todepositthesaidamountofRs.2,00,000/-(Rupeestwolakhsonly)beforetheJudicialFirstClassMagistrate-IIatAlappuzhaonorbefore30.04.2017.OutofthesaidamountofRs.2,00,000/-(twolakhsonly)sodeposited,Rs.1,30,000/-(one lakhthirtythousand)shallbepaidtotheappellantascompensation.

19. In the event, first respondent fails to deposit the said amount of Rs.2,00,000/-within thestipulatedperiodasindicatedabove,theconvictionandsentenceofthreemonthsawardedbytheLd.TrialCourtandaffirmedbytheAppellateCourtshallstandrestoredandbailgrantedtothefirstrespondentshallstandcancelled.

20. The appeal is accordingly disposed of in the aforesaid terms.

[1] M/S New India Sugar Mills Ltd. v. Commissioner of Sales Tax, AIR 1963 SC 1207[2] Jagdish Singh v. Natthu Singh, (1992) 1 SCC 647; State of M.P. v. Hiralal, (1996) 7 SCC 523 and V. Raja Kumari v. P. Subbarama

Naidu, (2004) 8 SCC 774.

qqq

rameshchandra ambalal joshi versus state of gujarat and anr.

| 183 |

RAMESHCHANdRA AMBALAL JOSHI vERSUS STATE Of GUJARAT & ANR


Before Hon’ble Mr. Justice Chandramauli Kr. Prasad, Hon’ble Mr. Justice Jagdish Singh Khehar

Rameshchandra Ambalal Joshi ...Appellant Versus

State Of Gujarat & Anr ...Respondents

CRIMINAL APPEAL No. 434 OF 2014 (@ SPECIAL LEAVE PETITION(CRL.)No. 7595 of 2011)

Decided on 18 February, 2014

S. 138 proviso (a) – Period of limitation – Determination of – Principle that cheque should be presented within six months from date on which it is drawn – Six months’ period – Reckoning of – (i) Whether the six months’ period means 6 calendar months or exactly 180 days, and (ii) what is the date from which the six months’ period must commence and end. Limitation period under S. 138 proviso (a) means six calendar months as per British calendar [as per S. 3(35), General Clauses Act, 1897] and “month” does not mean just a period of 30 days as suggested by the accused, and the said period would commence from the day next when the cheque was drawn and will expire a day prior to the corresponding day of the corresponding month and in case no such day falls in the corresponding month, the said period would expire at the end of the last day of the immediately previous month [as per S. 9, General Clauses, Act, 1897].

JUDGMENT

CHANDRAMAULI KR. PRASAD, J.

Accordingtothecomplainant-respondentNo.2,theaccused-petitioner,RameshchandraAmbalalJoshiwashisfriend,whohadtakenaloanofRs.1,00,000/-(Rupeesonelaconly)fromthecomplainant.Thepetitionerissuedachequedated31stofDecember,2005towardsrepaymentoftheloan.Thechequepresentedforpaymentbythecomplainanton30thofJune,2006wasdishonouredonthegroundofinsufficiencyoffundsonthesameday.Aregisterednoticedated25thofJuly,2006wasthensentbythecomplainanttowhichthepetitionerreplied.ThecomplainantthenfiledCriminalCaseNo.2146of2006on5thofSeptember,2006allegingcommissionofoffenceunderSection138oftheNegotiableInstrumentsAct,1881(hereinafterreferredtoastheAct)intheCourtofJudicialMagistrate, First Class, Borsad,who took cognizanceof theoffence and issued summons to thepetitioner.


| 184 |

Anapplicationfordischargewasfiledbythepetitionerbeforethetrialcourtinteraliacontendingthat as a periodof sixmonthshad lapsedbetween thedateof drawl of the chequeon31st ofDecember,2005anditspresentationbythecomplainanton30thofJune,2006forpayment,thepetitionercannotbeprosecuted.Theprayerofthepetitionerwasrejectedbythetrialcourtonitsfindingthattheprovisionsofdischargewerenotapplicabletothepresentproceeding,theybeingin the nature of summons trial.

Acriminalrevisionapplicationagainsttheaforesaidorder,filedbythepetitionerbeforetheCourtofSessions,Anandwasrejectedbyanorderdated5thofMay,2009,whichthepetitionerassailedinapetitionfiledunderSection482oftheCodeofCriminalProcedurebeforetheHighCourt.TheHighCourtbyitsorderdated20thofAugust,2010rejectedtheapplicationofthepetitioner,observingas under:

7. Thoughthesubmissionhasbeenmadebythelearnedcounsel,Mr.Hakimraisingthecontentionwithregardtothelimitation,bareperusaloftheprovisionsofSection138oftheNegotiableInstrumentAct,wouldmakeitclearthatwhat lawprovides ispresentationwithinaperiodof sixmonths,meaning thereby, the Legislaturehas provided theperiodof sixmonths bywayof limitation. It isalsoclearthateachmonthmaynothavesamenumberofdaysand,therefore, wisely what has been provided in terms of months and not exact date or days, meaning thereby, 180 days. Therefore, cheque drawn on the last date of month of December wouldremainvalidforaperiodofsixmonthsandtheperiodofsixmonthswouldexpireafterthe lastdateof June i.e.30th June,2006.Therefore, in the factsandcircumstancesof thecase,asthechequehasalreadybeenpresentedon30thJune,2006,itcannotbesaidthatitisbarredbylimitation.Therefore,thesubmissionmadebythelearnedcounsel,Hakimcannotbereadilyaccepted.Itisagainstthisorderthatthepetitionerhaspreferredthisspecialleavepetition.

Leavegranted.

Mr.HuzefaAhmadi,learnedseniorcounseldrawsourattentiontoproviso(a)ofSection138oftheNegotiableInstrumentsActandcontendsthattoattractitsmischiefthechequeisrequiredtobepresentedintheBankwithinsixmonthsfromthedateofitsdrawl.Otherwise,Section138oftheActwouldnotapply.Section138oftheAct,whichisrelevantforourpurposereadsasfollows:

138. Dishonourofchequeforinsufficiency,etc.,offundsintheaccount.-Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamountofmoney to another person from out of that account for the discharge, in whole or in part, of anydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountis insufficienttohonourthechequeorthatitexceeds the amount arranged to be paid from that account by an agreement made with that bank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudiceto any other provisions of this Act, be punished with imprisonment for a term which may be extendedtotwoyears,orwithfinewhichmayextendtotwicetheamountofthecheque,orwith both:


a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whicheverisearlier;


| 185 |

xxx xxx xxx

WeareinagreementwithMr.Ahmadiand,infact,itisapparentfromaplainreadingofproviso(a)aforesaidthatSection138oftheActwouldapplyonlywhenthechequeispresentedtotheBankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithinperiodofitsvalidity, whichever is earlier.

Mr.Ahmadithenpointsoutthatthechequeisvalidfromthedateitisdrawnandhenceperiodofsixmonthshastobecalculatedfromthesaiddate.Onfacts,hepointsoutthatthechequewasdrawnon31stofDecember,2005andpresentedon30thofJune,2006,whichisbeyondtheperiodofsixmonths.Hesubmitsthatchequeisvalidfromthedateshowninitandthereforeforcalculationofsixmonths, the date on which the cheque is drawn has to be included. He has suggested the following twomodesofcalculation:

CALCULATION OF THE PERIOD OF 6 MONTHS AS PRESCRIBED UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881.

DATEOFDRAWL OFCHEQUE 31.12.2005

DATEOFPRESENTATIONOFCHEQUE 30.06.2006

|No.ofdaysintherelevant |Month-wisecalculation|

|months| |

|January31days |1stMonth|

| 31stDecemberto30thJanuary|

|February28days |2ndMonth|

| 30thJanuaryto27thFebruary|

|March31days |3rdMonth|

| 27thFebruaryto30thMarch|

|April30days |4thMonth|

| 30thMarchto29thApril|

|May31days |5thMonth|

| 29thAprilto30thMay|

|June30days |6thMonth|

| 30thMayto29thJune|

OR

|No.ofdaysintherelevant |Month-wisecalculation|

|months| |

|January31days |1stMonth|

| 31stDecemberto30thJanuary|

|February28days |2ndMonth|


| 186 |

| 31STJanuaryto27thFebruary|

|March31days |3rdMonth|

| 28thFebruaryto27thMarch|

|April30days |4thMonth|

| 28thMarchto27thApril|

|May31days |5thMonth|

| 28thAprilto27thMay|

|June30days |6thMonth|

| 28thMayto27thJune|

Toputtherecordstraight,themodessuggested,infact,donotreflecthissubmission.He,however,submits that whichever mode is adopted, the cheque was not presented within the period of six months. In support of the submission, he has placed reliance on a decision of the Kerala High Court inthecaseofK.V.MuhammedKunhivs.P.Janardhanan[1998CRL.L.J.4330]andourattentionhasbeendrawntothefollowingpassagefromthesaidjudgment:

3. ..AcomparativestudyofboththeSectionsintheActandtheGeneralClausesActsignificantlyindicatethattheperiodoflimitationhastobereckonedfromthedateonwhichthechequeorinstrumentwasdrawn.ThewordsfromandtoemployedinSection9oftheGeneralClausesAct are evidently clear that in cases where there is an ambiguity or suspicion with reference to thedateofcommencementofperiodoflimitationinanyActorspecialenactment,thewordsfromandtoemployedinSection9oftheGeneralClausesActcanbepressedintoservice.Butintheinstantcasebeforeme,Section138proviso(a)isinvolvedwhichissoclear(asextractedabove)thatthedateoflimitationwillcommenceonlyfromthedatefoundinthechequeortheinstrument.Mr.AhmadisubmitsthattheaforesaidviewhasbeenapprovedbythisCourtinthecaseofSivakumarvs.Natarajan(2009)13SCC623inthefollowingwords:

14. ..AcomparativestudyofboththeSectionsintheActandtheGeneralClausesActsignificantlyindicatethattheperiodoflimitationhastobereckonedfromthedateonwhichthechequeorinstrumentwasdrawn.ThewordsfromandtoemployedinSection9oftheGeneralClausesAct are evidently clear that in cases where there is an ambiguity or suspicion with reference to thedateofcommencementofperiodoflimitationinanyActorspecialenactment,thewordsfromandtoemployedinSection9oftheGeneralClausesActcanbepressedintoservice.

We are in agreement with the aforementioned view. It may look like a repetition of thejudgmentbutitsrelevancewouldbeapparentfromwhatwehaveobservedinthesubsequentparagraphsofthisjudgement.

Giventhegeneralimportanceofthequestioninvolved,wehadrequestedMr.V.Giri,learnedSeniorCounsel,toassistusasamicuscuriaeandheverygenerouslyagreedtodoso.WehavealsoheardMs.HemantikaWahi,learnedcounselappearingonbehalfoftherespondents.

Theycontendthattheperiodofsixmonthshadexpiredon30thofJune,2006i.e.thedateon which the cheque was presented, which is within six months from the date it was drawn. Theysubmitthatasageneralrule,incaseofanyambiguity,Section9oftheGeneralClausesAct,1897providesforexclusionofthefirstdayandinclusionofthelastdayforthepurpose


| 187 |

ofcalculatingcommencementorterminationoftime.Theysubmitthatthedateofissueofcheque,i.e.31stofDecember,2005istobeexcludedandthelastday,i.e.30thofJune,2006istobeincludedforthepurposeofcalculatingtheperiodofsixmonthsunderproviso(a)ofSection138oftheAct.Accordingtothelearnedcounsel,sincethelastdayofthesixmonthsperiodwas30thof June,2006and the chequewaspresentedon that very sameday, thecomplaintunderSection138oftheActisnottimebarred.

WehavegivenourmostanxiousconsiderationtothesubmissionsadvancedandwedonotfindanysubstanceinthesubmissionofMr.AhmadithatthechequewasnotpresentedtotheBankwithinaperiodofsixmonthsfromthedateonwhichitwasdrawnandthejudgmentsreliedongoagainsthiminsteadofsupportinghiscontention.

Thefirstquestionwhichcallsforouransweristhemeaningoftheexpressionmonth:whetheritwouldmeanonlyaperiodof30daysand,consequently,whethersixmonthswouldmeanaperiodof180days.ThewordmonthhasbeendefinedunderSection3(35)oftheGeneralClausesActtomeanamonthreckonedaccordingtotheBritishcalendar.ThereforewecannotignoreoreschewthewordBritishcalendarwhileconstruingmonthundertheAct.Accordingly,weareoftheopinionthattheperiodofsixmonthscannotbecalculatedon30daysinamonthbasis.Therefore,boththemodesofcalculationsuggestedbyMr.Ahmadidonotdeserveacceptanceandarerejectedaccordingly.

The next questionwhich calls for our answer is the date fromwhich sixmonths period wouldcommence. Incaseofambiguitywithreferencetothedateofcommencement,Section9of theGeneral Clauses Act can be pressed into service and the same reads as follows:

9. Commencementandterminationoftime.-(1)InanyCentralActorRegulationmadeafterthecommencementof thisAct, itshallbesufficient, for thepurposeofexcludingthefirst inaseriesofdaysor anyotherperiodoftime, touse theword from,and, for thepurposeofincludingthelastinaseriesofdaysoranyotherperiodoftime,tousethewordto.

From the judgment of this Court in the case of Sivakaumar(supra) and as quoted in theprecedingparagraphofthisjudgment,itisevidentthatthisCourtrecordeditsagreementtoa limited extent that in cases where there is an ambiguity or suspicion with reference to the dateofcommencementofperiodof limitationSection9oftheGeneralClausesActcanbepressedintoservice.WewouldhastentoaddthatthisCourtinSivakumar(supra)didnotgivenodtothefollowingpropositionenunciatedbytheKeralaHighCourtinK.V.MuhammedKunhi(supra).

3. But in the instant casebeforeme,Section138proviso (a) is involvedwhich is so clear (asextractedabove)thatthedateoflimitationwillcommenceonlyfromthedatefoundinthechequeortheinstrument.InthecaseofK.V.MuhammedKunhi(supra)thechequewasdated17.11.1994andthatwaspresentedon17.5.1995,andinthisbackgroundtheCourtobservedas follows:

5. .WhenonthefootingofthedayscoveredbytheBritishcalendarmonththeperiodoflimitationinthecaseonhandiscalculated,thechequeoughttohavebeenpresentedintheBankforcollectiononorbefore16-5-1995.Butinthiscase,aspointedoutabovethechequehadbeenpresentedforcollectiononlyon17-5-1995,whichisclearlybarredbylimitation.Inthiscase,six months period expired a day prior to the corresponding month. In the case in hand, no


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such day falls in the corresponding month and therefore the last day would be last date of the immediate previous month.

Mr.Ahmadi appeals to us that ifwe take the view that the chequewas presented to the Bankbeforetheexpiryofsixmonths,itwouldbeintheteethofthejudgmentofthisCourtinthecaseofSivakumar(supra)andthereforethemattershallberequiredtobereferredtoalargerBench.Fromwhatwehaveobservedabove,wehavenottakenaviewdifferentthanwhathasbeenheldinSivakumar(supra)andthereforewedonotfindanynecessitytoreferthecasetoalargerBench.

Proviso(a)toSection138oftheActusestheexpressionsixmonthsfromthedateonwhichit isdrawn.Oncethewordfromisusedforthepurposeofcommencementoftime,inviewofSection9of the General Clauses Act, the day on which the cheque is drawn has to be excluded.

This Court, relying on several English decisions, dealtwith the issue of computationof time forthepurposeoflimitationextensivelyinHaruDasGuptav.StateofWestBengal,(1972)1SCC639wherein Paragraph 5 states as follows:

5. Thesedecisions show that courtshavedrawnadistinctionbetweena termcreatedwithinwhichanactmaybedoneandatimelimitedforthedoingofanact.Theruleiswellestablishedthatwhereaparticulartimeisgivenfromacertaindatewithinwhichanactistobedone,thedayonthatdateistobeexcluded,(seeGoldsmithsCompanyv.TheWestMetropolitanRailwayCo.(1904KB1at5).ThisrulewasfollowedinCartwrightv.Maccormack(1963)1AllE.R.11,wheretheexpressionfifteendaysfromthedateofcommencementofthepolicyinacovernoteissuedbyaninsurancecompanywasconstruedasexcludingthefirstdateandthecovernotetocommenceatmidnightofthatday,andalsoinMarrenv.DawsonBentleyandCo.Ltd.,(1961)2QB135,acaseforcompensationforinjuriesreceivedinthecourseofemployment,whereforpurposesofcomputingtheperiodoflimitationthedateoftheaccident,beingthedateofthecauseofaction,wasexcluded.(SeealsoStewartv.Chadman[1951]2KB792andInreNorth,ExparteWasluck[1895]2QB264.)Thus,asageneralruletheeffectofdefiningaperiodfromsuchadayuntilsuchadaywithinwhichanactistobedoneistoexcludethefirstdayandtoincludethelastday.[SeeHalsburysLawsofEngland(3rded.)Vol.37,pp.92and95.]Thereisnoreasonwhytheaforesaidruleofconstructionfollowedconsistentlyandforsolongshould not also be applied here. (underlining ours) This decision was quoted with approval in SakethIndiaLtd.v.IndiaSecuritiesLtd.,(1999)3SCC1inthefollowingwords:

7. The aforesaid principle of excluding the day from which the period is to be reckoned isincorporated inSection12(1)and (2)of theLimitationAct,1963.Section12(1) specificallyprovidesthatincomputingtheperiodoflimitationforanysuit,appealorapplication,thedayfromwhichsuchperiodistobereckoned,shallbeexcluded.Similarprovisionismadeinsub-section(2)forappeal,revisionorreview.ThesameprincipleisalsoincorporatedinSection9 of the General Clauses Act, 1897 which, inter alia, provides that in any Central Act made afterthecommencementoftheGeneralClausesAct,itshallbesufficient,forthepurposeofexcludingthefirstinaseriesofdaysoranyotherperiodoftime,tousethewordfromandforthepurposeofincludingthelastinaseriesofdaysoranyotherperiodoftime,tousethewordto.

8. Hence,thereisnoreasonfornotadoptingtheruleenunciatedintheaforesaidcasewhichisconsistentlyfollowedandwhichisadoptedintheGeneralClausesActandtheLimitationActThecorrectnessofthisjudgmentcameupforconsiderationbeforeathree-JudgeBenchofthis


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CourtinEconAntriLtd.vs.RomIndustriesLtd.&Anr.,AIR2013SC3283whichapprovedthereasoningofthisCourtgiveninSaketh(supra)andHaruDasGupta(supra)andheldasunder:

16. WehaveextensivelyreferredtoSaketh.ThereasoningofthisCourtinSakethbasedontheaboveEnglishdecisionsanddecisionofthisCourtinHaruDasGuptawhichaptlylaydownandexplaintheprinciplethatwhereaparticulartimeisgivenfromacertaindatewithinwhichanact has to be done, the day of the date is to be excluded, commends itself to us as against the reasoningofthisCourtinSILImportUSAwherethereisnoreferencetothesaiddecisions.

xxx xxx xxx

22. Inviewoftheabove, it isnotpossibletoholdthatthewordofoccurringinSection138(a)and142(b)oftheN.I.ActistobeinterpreteddifferentlyasagainstthewordfromoccurringinSection138(a)oftheN.I.Act;andthatforthepurposesofSection142(b),whichprescribesthatthecomplaintistobefiledwithin30daysofthedateonwhichthecauseofactionarises,thestartingdayonwhich thecauseofactionarises shouldbe included forcomputing theperiodof30days.AsheldinExparteFallon(1793)5TermRep283thewordsof,fromandaftermay,inagivencase,meanreallythesamething.AsstatedinStroudsJudicialDictionary,Vol.31953Edition,Note(5),thewordofissometimesequivalentofafter.Atthisstage,wewouldalsoliketorefertoHalsburysLawofEngland,Vol.37,3rdEdn.,Paragraph143atPages83-84whichprovidesforcalculationofacalendarmonth:

143. Calendarmonthrunningfromarbitrarydate.Whentheperiodprescribedisacalendarmonthrunning from any arbitrary date the period expires with the day in the succeeding month immediately preceding the day corresponding to the date upon which the period starts;save that, if the period starts at the end of a calendar month which contains more days than the next succeedingmonth, the period expires at the end of the lattermonth. Drawing aconclusionfromtheabovementionedauthorities,weareoftheopinionthattheuseofwordfrominSection138(a)requiresexclusionofthefirstdayonwhichthechequewasdrawnandinclusion of the last day within which such act needs to be done. In other words, six months would expire one day prior to the date in the corresponding month and in case no such day falls, the last day of the immediate previous month. Hence, for all purposes, the date on which thechequewasdrawn,i.e.,31.12.2005willbeexcludedandtheperiodofsixmonthswillbereckonedfromthenextdayi.e.from1.1.2006;meaningtherebythataccordingtotheBritishcalendar,theperiodofsixmonthswillexpireattheendofthe30thdayofJune,2006.Sincethechequewaspresentedon30.6.2006,weareoftheviewthatitwaspresentedwithintheperiod prescribed.

Viewedfromanyangle,theprosecutionisnottimebarredandtherefore,cannotbescuttledatthisstageonthisground.Asthematterispendingsincelong,thelearnedMagistrateinseisinofthetrialshallmakeendeavourtoconcludeitwithinsixmonthsfromthedatetheappellantnextappearsinthecase.WedirecttheappellanttoappearbeforethetrialJudgeon3rdofMarch,2014andnonoticeistobeissuedtohimforhisappearance.

Intheresult,wedonotfindanymeritintheappealanditisdismissedaccordingly.

qqq


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kIRSHNA TExpORT & CApITAL MARkETS LIMITEd vERSUS ILA A. AGRAwAL & ORS


Before Hon’ble Mr. Justice Pinaki Chandra Ghose and Hon’ble Mr. Justice Uday U. Lalit

Kirshna Texport & Capital Markets Limited Versus

Ila A. Agrawal & Ors

CRIMINAL APPEAL NO.1220 of 2009Decided on 6 May, 2015

Ss. 138, 141 and 142 – Dishonour of cheque – Offence by company – Issuance of individual notices under S. 138 to them, held, not required as – For dishonour of cheque drawn by Company, appellant issued notice under S. 138 accused to Company, but no individual notices were given to its Directors – Held, S. 138 does not admit of any necessity or scope for reading into it, requirement that Directors of company in question must also be issued individual notices under S. 138 – Such Directors who are in charge of and responsible for affairs of company, would be aware of receipt of notice by company under S. 138.

JUDGMENT

Uday Umesh Lalit, J.

1. ThisappealbySpecialLeaveisdirectedagainsttheorderdated6.5.2008passedbytheHighCourtofJudicatureatBombayrejectingCriminalApplicationNo.2174of2007preferredbythe appellant for leave to appeal.

2. On14.09.1996anoticeunderSection138oftheNegotiableInstrumentsAct,1881(hereinafterreferred toas theAct)was issuedonbehalfof theappellant toM/S IndoFrenchBioTechEnterprisesLtd(theCompanyforshort).ThenoticestatedthatachequebearingNo.364776dated8.9.1996drawnbytheCompanyonDenaBank,NewMarineLines,Mumbaiinfavouroftheappellantwasreturnedon10.9.1996withendorsementfundsinsufficient.Thenoticethereforecalledupontheaddresseetomakethepaymentofthechequeamountwithin15daysofthereceiptofsuchnotice.Noreplywassenttotheaforesaidnoticedated14.9.1996.

3. The appellant thereafter filed Complaint CaseNo. 243/S/1996 before the Additional ChiefMetropolitanMagistrate,5thCourtatDadar,MumbaiagainsttheCompany,Mr.K.J.Bodiwala,the Chairman and Managing Director of the Company and 11 other directors includingrespondents 1 and 2. In so far as the directors are concerned, it was averred that they were in-chargeofthebusinessoftheCompanyanditsdaytodayaffairsandwereliable.Duringthependencyofsaidcomplaintcase,theprocessissuedagainstAccusedNos.3to5,7,9to13wasrecalledandduetothedeathofMr.Bodiwalatheproceedingsasagainsthimalsoabated,

kirshna texport and capital markets limited versus ila a. agrawal and anr.

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whichlefttheCompanyandthepresentrespondents1and2namelyMs.IlaA.AgrawalandMr.PrafullaRanadive,AccusedNos.6and8respectivelyinthearrayofaccused.

4. Itwas submittedby the appellant that separate notices to the directorswere additionallyissuedbutatthestageofevidenceitturnedoutthatsuchindividualnoticestothedirectorswerewith respect to dishonour of a different cheque. The facts as found thereforewerethat no individual noticeswere given to thedirectors. TheMetropolitanMagistratebyhisjudgment andorderdated30.4.2007 convicted theCompanybut acquitted respondents 1and2oftheoffencepunishableunderSection138oftheAct.RelyingonthejudgmentoftheDivisionBenchofMadrasHighCourtinB.Raman&Ors.Vs.M/s.ShasunChemicalsandDrugsLtd.reportedin2006Cril.L.J.Page4552,itwasobservedthatstatutorynoticeunderSection138oftheActwasrequiredtobeissuedtoeveryDirectorandfornon-complianceofsuchmandatory requirement respondents 1 and 2 could not be proceeded against. .

5. TheappellantbeingaggrievedfiledCriminalApplicationNo.2174of2007intheHighCourtseekingleavetopreferappealagainstthejudgmentacquittingrespondents1and2. ItwassubmittedthatitwasnotnecessarytoserveindividualnoticeuponthedirectorsanditwassufficientifthenoticewasservedontheCompany.ReliancewasplacedonthedecisionofaSingleJudgeoftheCalcuttaHighCourtinthecaseofGirishChandraPandeyVs.KanhaiyalalChandakandOrs.reportedin1999ALLMR(CRI)JOURNAL3,whereinitwasheldthatifthepartnershipfirmfailedtogivetheamountwithinthestipulatedtimeafterreceiptofnotice,each partner need not be servedwith a separate notice individually. So also reliancewasplacedonthedecisionofaSingleJudgeofDelhiHighCourtinthecaseofJainAssociatesandOrs.Vs.DeepakChawdhary&Co.reportedin80(1999)DLT654,whereinitwaslaiddownthatSection141oftheActdoesnotrequirethateachandeverypartnerofthefirmisrequiredtobeissuednotice.

SimilarviewwastakenbyHighCourtofAndhraPradesh inK.PannirSelvanvs.MMTCandanotherreportedin(2000)Cr.L.J.1002andbyDelhiHighCourtinRanjitTiwarivs.NarenderNayyarreportedin191(2012)DLT318.

6. TheHighCourt,relyingonthejudgmentoftheDivisionBenchofMadrasHighCourtB.Raman&Ors.(supra)observedthatitwasmandatorytohaveissuedseparatenoticestothedirectors.The High Court concluded thus:-

IfthelegalfictioniscreatedbySection141tomakedirectorswhoareresponsiblefordaytodayaffairsoftheCompany,punishableunderSection138,thenitisnecessarythattheygetanopportunitytorectify,themistakeorclarifymattersafterserviceofnotice.Sobeforemakingthecomplaintagainstthedirectors,noticenecessarilymustbeservedonthem.InmyopinionwithoutserviceofnoticetoaccusedNos.6&8,vicariousliabilityoftheoffenceunderSection138cannotbefixeduponthem.

7. AtthisstagethedecisionoftheDivisionBenchofMadrasHighCourtinB.Raman&others(Supra)mayalsobereferredto.Para2ofsaiddecisionsetsoutthatthematterwasreferredtotheDivisionBenchasaresultofdivergentviewstakenbySingleJudgesoftheCourt.Paras25 and 26 of the decision are as under:-

25. UnderSection141(1),thepersonsinchargeofandresponsibletotheCompanyshallbedeemedtohavecommittedtheoffence.Undersubsection(2),eventhepersons,whoare


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not stated to be in charge of and responsible to the Company, can be prosecuted, if it is allegedandprovedthattheoffencehasbeencommittedwiththeconsentorconnivanceof,orisattributableto,anyneglectonthepartofanyofthosepersonsprosecuted.So,theseSectionswouldprovidethatwhenthereareDirectors,whoareresponsible fortheconductofthebusinessoftheCompany,andwhenthereareotherofficers,withwhoseconsenttheoffencehasbeencommitted,thecomplainantshallmakeavermentstothesaideffect. Inthatcontext,thecomplainanthastostarttheprocessofgettingbackthechequeamountfromthosepersons,whorepresenttheCompany,inordertoavoidthefilingoftheComplaintagainstthem.Inthesaidprocess,hehastonecessarilymakeademandfromthosepersons,whoarepartandparcelofthedrawer.Onlywhentheprocessfails,thecauseofaction,asenvisagedinSection138,wouldariseagainstthem,toenablethecomplainanttoapproachtheCourt,withinthestipulatedtime.So,thestartingoftheprocessis,theserviceofnoticeonthepersons,whorepresenttheCompany, the drawer of the cheque.

26. Theobjectofthenoticeistogiveachancetothedrawerofthechequetorectifyhisomissionandalsotoprotectanhonestdrawer.ServiceofnoticeofdemandinClause(b)oftheprovisotoSection138isaconditionprecedentforfilingacomplaintunderSection138.BysendinganoticetotheCompanyaswellasthepersonsinchargeofandresponsibleforetheconductofthebusinessofthecompany,hecanmakeademand,asking them topay the amount. Somemay reply that they arenot in chargeof andresponsible for the conduct of the business of the Company. Some may reply that they arenotconnectedwiththeCompany inanywayandsomemayrectifytheomission,bymakingeffortstopaytheamounttothepayee,inthenameoftheCompany,inthatevent,thecomplainantmayeitherdroptheactionoffilingtheComplainantor,intheevent of non- payment of the cheque amount, he may choose the persons, who are reallyresponsibleforethecommissionofoffenceand,then,initiateprosecutionagainstthem.

8. ItwassubmittedbyMr.AjitAnekar,learnedAdvocatefortheappellantthatSection138doesnotcontemplateissuanceofseparatenoticestothedirectorsandthatnosuchrequirementought toberead intosaidSection.Mr.ShreePrakashSinhaandMr.AshokBhatia, learnedAdvocatesappearingforrespondentsrelieduponthedecisionoftheDivisionBenchofMadrasHighCourtinB.Raman&others(Supra).ItwassubmittedthatthoughtheissuewhethersuchseparatenoticesaremandatorilyrequiredtobegiventotheDirectorshadnotsquarelyarisen,paras10&11ofthedecisionofthisCourtinN.K.WahivShekharSingh[1]didspeakofsuchnotices.Wequotesaidparas10&11:-10. InordertobringapplicationofSection138thecomplaint must show:

1. ThatChequewasissued;

2. Thesamewaspresented;

3. Itwasdishonoredonpresentation;

4. Anoticeintermsoftheprovisionswasservedonthepersonsoughttobemadeliable;

5. Despiteserviceofnotice,neitheranypaymentwasmadenorotherobligations,ifany,werecompliedwithwithinfifteendaysfromthedateofreceiptofthenotice.


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11. Section141oftheActintermspostulatesconstructiveliabilityoftheDirectorsofthecompany or other persons responsible for its conduct or the business of the company.

9. Thequestion,therefore,iswhethernoticeunderSection138oftheActismandatorilyrequiredtobesenttothedirectorsofaCompanybeforeacomplaintcouldbefiledagainstsuchdirectorsalong with the Company. At the outset we must consider whether the decision of this Court in N.K.Wahi(supra)hadconsideredandconcludedthatitisobligatorytoissueseparatenoticestotheDirectorsinadditiontotheCompany,beforeinitiatinganyproceedingsagainstthem.Wehaveperusedthedecisionandfindthatnosuchissuehadarisenforconsiderationinthatcase.We,therefore,proceedtoconsiderthequestion.Beforewedealwiththematter,Sections138and141oftheActmaybequoted:-138.Dishonourofchequeforinsufficiency,etc.,offundsintheaccountsWhereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamountofmoneytoanotherpersonfromoutofthataccountforthedischarge,inwholeorinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonour the cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshallwithoutprejudicetoanyotherprovisionsofthisAct,bepunishedwithimprisonmentforatermwhichmayextendtotwoyear,orwithfinewhichmayextendtotwicetheamountof the cheque, or with both:


(a) Thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateon which it is drawn or within the period of its validity, whichever is earlier.

(b) Thepayeeor theholder induce course of the cheque, as the casemaybe,makes ademandforthepaymentofthesaidamountofmoneybygivinganotice,inwriting,tothedrawer,ofthecheque,withinthirtydaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequesasunpaid,and

(c) Thedrawerof suchcheque fails tomake thepaymentof the saidamountofmoneyto the payee or, as the case may be, to the holder in due course of the cheque, within fifteendaysofthereceiptofthesaidnotice.

Explanation:Forthepurposeofthissection,debtorotherliabilitymeansalegallyenforceabledebt or other liability.

141.Offencesbycompanies-(1)Ifthepersoncommittinganoffenceundersection138isaCompany,everypersonwho,atthetimetheoffencewascommitted,wasinchargeof,and was responsible to the Company for the conduct of the business of the Company, as wellastheCompany,shallbedeemedtobeguiltyoftheoffenceandshallbeliabletobeproceededagainstandproceededagainstandpunishedaccordingly;

Providedthatnothingcontainedinthissub-sectionshallrenderanypersonliabletopunishmentifheprovesthattheoffencewascommittedwithouthisknowledge,orthathehadexercisedallduediligencetopreventthecommissionofsuchoffence.

Provided further that where a person is nominated as a Director of a Company by virtue of his holdinganyofficeoremploymentintheCentralGovernmentorStateGovernmentorafinancial


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corporationownedorcontrolledbytheCentralGovernmentortheStateGovernment,asthecasemaybe,heshallnotbeliableforprosecutionunderthisChapter.

(2) Notwithstandinganythingcontainedinsub-section(1),whereanyoffenceunderthisActhasbeencommittedbyaCompanyanditisprovedthattheoffencehasbeencommittedwith the consentor connivanceof,or is attribute to, anyneglecton thepartof, anydirector,Manager, secretary,orotherofficeof theCompany, suchdirector,manager,secretaryorotherofficershallalsobedeemedtobeguiltyofthatoffenceandshallbeliabletobeproceededagainstandpunishedaccordingly.Explanation:Forthepurposeofthissection.

(a) Companymeansanybodycorporateandincludesafirmorotherassociationofindividuals;and

(b) Director,inrelatingtoafirm,meansapartnerinthefirm.TheexpressiondrawerusedinSection138hastobeunderstoodinthelightofthedefinitioninSection7oftheActwhichistothefollowingeffect:-

..Themakerofabillofexchangeorchequeiscalledthedrawer;thepersontherebydirectedto pay is called the drawee.

10. SincetheHighCourthasreadintoSection138oftheActtherequirementthatseparatenoticesought to be given to the directors, without which they cannot be made vicariously liable, the principles concerning interpretative functionof theCourtmaybeadverted to. InKanai LalSurv.ParamnidhiSadhukhan[2]itwasobserved,InsupportofhisargumentMr.ChatterjeehasnaturallyreliedontheobservationsmadebyBaronsoftheExchequerinHeydonscase.Indeedtheseobservationshavebeensofrequentlycitedwithapprovalbycourtsadministeringprovisionsofwelfareenactmentsthattheyhavenowattainedthestatusofaclassiconthesubjectandtheirvaliditycannotbechallenged.However, inapplyingtheseobservationstotheprovisionsofanystatute,itmustalwaysbeborneinmindthatthefirstandprimaryruleofconstructionisthattheintentionoftheLegislaturemustbefoundinthewordsusedbytheLegislatureitself.Ifthewordsusedarecapableofoneconstructiononlythenitwouldnotbeopentothecourtstoadoptanyotherhypotheticalconstructiononthegroundthatsuchhypothetical construction ismoreconsistentwith theallegedobjectandpolicyof theAct.The words used in the material provisions of the statute must be interpreted in their plain grammaticalmeaninganditisonlywhensuchwordsarecapableoftwoconstructionsthatthequestionofgivingeffecttothepolicyorobjectoftheActcan legitimatelyarise.Whenthematerialwordsarecapableoftwoconstructions,oneofwhichislikelytodefeatorimpairthepolicyoftheActwhilsttheotherconstructionis likelytoassisttheachievementofthesaidpolicy, thenthecourtswouldprefertoadoptthe latterconstruction. It isonly insuchcases that it becomes relevant to consider the mischief and defect which the, Act purports to remedy and correct.

11. InNasiruddin andothers v. SitaRamAgarwal[3] this Court stated the law in the followingterms:

37. Thecourtsjurisdictiontointerpretastatutecanbeinvokedwhenthesameisambiguous.Itiswellknownthatinagivencasethecourtcanironoutthefabricbutitcannotchangethetextureofthefabric. Itcannotenlargethescopeof legislationor intentionwhen


| 195 |

the language of the provision is plain and unambiguous. It cannot add or subtract words to a statute or read something into it which is not there. It cannot rewrite or recast legislation. It isalsonecessary todetermine that thereexistsapresumptionthat thelegislaturehasnotusedanysuperfluouswords.Itiswellsettledthattherealintentionofthelegislationmustbegatheredfromthelanguageused...

12. InNathiDeviv.RadhaDeviGupta[4]aConstitutionBenchofthisCourtwascalledupontoconsider, inter alia, whether the expression, where the landlord is a widow and the premises let out by her, or by her husband, are required by her for her own residence appearing in Section14-DoftheDelhiRentControlActwouldincludeeverywidowsoastoentitlehertoobtainimmediatepossessionofthepremisesownedbyher.Whileholdingthatthebenefitunder Section 14-D is available only to awidow,where premises are let out by her or byherhusband, thisCourt repelled the contention thatawidowwhohadacquired tenantedpremisesbysaleortransfercouldalsoinvoketheprovisionsofSection14-D.Duringthecourseof its decision this Court observed:

The interpretative function of the court is to discover the true legislative intent. It is tritethatininterpretingastatutethecourtmust,ifthewordsareclear,plain,unambiguousandreasonably susceptible to only onemeaning, give to thewords thatmeaning, irrespectiveof the consequences. Those words must be expounded in their natural and ordinary sense. Whenthelanguageisplainandunambiguousandadmitsofonlyonemeaning,noquestionofconstructionofstatutearises,fortheActspeaksforitself.Courtsarenotconcernedwiththepolicyinvolvedorthattheresultsareinjuriousorotherwise,whichmayfollowfromgivingeffecttothelanguageused. Ifthewordsusedarecapableofoneconstructiononlythenitwouldnotbeopentothecourtstoadoptanyotherhypotheticalconstructiononthegroundthat such construction ismore consistentwith theallegedobject andpolicyof theAct. Inconsideringwhether there isambiguity, thecourtmust lookat thestatuteasawholeandconsidertheappropriatenessofthemeaning ina[pic]particularcontextavoidingabsurdityandinconsistenciesorunreasonablenesswhichmayrenderthestatuteunconstitutional.

13. Withtheseprinciplesinmind,wenowconsidertheprovisionsinquestion.AccordingtoSection138,whereanychequedrawnbyapersononanaccountmaintainedbyhimisreturnedbytheBankunpaidforreasonsmentionedinsaidSectionsuchpersonshallbedeemedtohavecommittedanoffence.TheprovisototheSectionstipulatesthreeconditionsonthesatisfactionofwhichtheoffenceissaidtobecompleted.Theprovisointeraliaobligesthepayeetomakeademandforthepaymentofsaidamountofmoneybygivinganoticeinwritingtothedrawerofthechequeandifthedrawerofthechequefailstomakethepaymentofthesaidamountwithin15daysofthereceiptofsaidnotice,thestagesstipulatedintheprovisostandfulfilled.ThenoticeunderSection138isrequiredtobegiventothedrawerofthechequesoastogivethedrawer anopportunity tomake thepayment andescape thepenal consequences.NootherpersoniscontemplatedbySection138asbeingentitledtobeissuedsuchnotice.Theplain languageofSection138isveryclearand leavesnoroomforanydoubtorambiguity.ThereisnothinginSection138whichmayevenremotelysuggestissuanceofnoticetoanyoneother than the drawer.

14. Section141statesthatifthepersoncommittinganoffenceunderSection138isaCompany,every director of such Company who was in charge of and responsible to that Company for conductof itsbusinessshallalsobedeemedtobeguilty.Thereasonforcreatingvicarious


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liabilityisplainlythatajuristicentityi.e.aCompanywouldberunbylivingpersonswhoareinchargeof itsaffairsandwhoguide theactionsof thatCompanyand that if such juristicentityisguilty,thosewhoweresoresponsibleforitsaffairsandwhoguidedactionsofsuchjuristicentitymustbeheldresponsibleandoughttobeproceededagainst.Section141againdoes not lay down any requirement that in such eventuality the directors must individually beissuedseparatenoticesunderSection138.Thepersonswhoare inchargeoftheaffairsof the Company and running its affairsmust naturally be aware of the notice of demandunderSection138oftheActissuedtosuchCompany.It ispreciselyforthisreasonthatnonotice is additionally contemplated to be given to such directors. The opportunity to thedrawerCompanyisconsideredgoodenoughforthosewhoareinchargeoftheaffairsofsuchCompany.Ifitistheircasethattheoffencewascommittedwithouttheirknowledgeorthattheyhadexercisedduediligencetopreventsuchcommission,itwouldbeamatterofdefencetobeconsideredattheappropriatestageinthetrialandcertainlynotatthestageofnoticeunderSection138.

15. Iftherequirementthatsuchindividualnoticestothedirectorsmustadditionallybegivenisreadintotheconcernedprovisions,itwillnotonlybeagainsttheplainmeaningandconstructionoftheprovisionbutwillmaketheremedyunderSection138whollycumbersome.Inagivencasetheordinary lapseornegligenceonpartoftheCompanycouldeasilyberectifiedandamendscouldbemadeuponreceiptofanoticeunderSection138bytheCompany.Itwouldbeunnecessaryatthatpointtoissuenoticestoallthedirectors,whosenamesthepayeemaynotevenbeawareofatthatstage.UnderSecondprovisotoSection138,thenoticeofdemandhastobemadewithin30daysofthedishonourofchequeandthethirdprovisogives15daystimetothedrawertomakethepaymentoftheamountandescapethepenalconsequences.Underclause(a)ofSection142,thecomplaintmustbefiledwithinonemonthofthedateonwhichthecauseofactionarisesunderthethirdprovisotoSection138.Thusacomplaintcanbefiledwithintheaggregateperiodofseventyfivedaysfromthedishonour,bywhichtimeacomplainantcangatherrequisiteinformationasregardsnamesandotherdetailsastowhowereinchargeofandhowtheywereresponsiblefortheaffairsoftheCompany.But ifweaccept the logic that has weighed with the High Court in the present case, such period gets reducedto30daysonly.Furthermore,unlikeprovisotoclause(b)ofSection142oftheAct,suchperiodisnon-extendable.Thesummaryremedycreatedforthebenefitofadraweeofadishonouredchequewillthusberenderedcompletelycumbersomeandcapableofgettingfrustrated.

16. Inourview,Section138oftheActdoesnotadmitofanynecessityorscopeforreadingintoittherequirementthatthedirectorsoftheCompanyinquestionmustalsobeissuedindividualnoticesunderSection138oftheAct.SuchdirectorswhoareinchargeofaffairsoftheCompanyandresponsiblefortheaffairsoftheCompanywouldbeawareofthereceiptofnoticebytheCompanyunderSection138.ThereforeneitheronliteralconstructionnoronthetouchstoneofpurposiveconstructionsuchrequirementcouldoroughttobereadintoSection138oftheAct. Consequently this appeal must succeed. The order passed by the High Court is set aside. SincethematterwasatthestageofconsideringapplicationforleavetoappealandthemeritsofthematterwerenotconsideredbytheHighCourt,weremitthemattertotheHighCourtforfreshconsiderationwhichmaybedecidedasearlyaspossible.Concludingso,wemustrecordthatthedecisionoftheDivisionBenchoftheMadrasHighCourtinB.Raman&Ors.Vs.M/s.


| 197 |

ShasunChemicalsandDrugsLtd.(supra)wasincorrectanditstandsoverruled.Theappealisallowed in these terms.

[1] (2007)9 SCC 481[2] (1958) SCR 360[3] (2003) 2 SCC 577[4] (2003) 2 SCC 577

qqq


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kAMLESH kUMAR vERSUS STATE Of BIHAR & ANR(2014) 2 Supreme Court Cases 424


Before Hon’ble Mr. Justice K.S. Radhakrishnan, Hon’ble Mr. Justice A.K. Sikri

Kamlesh Kumar ..Appellant Versus

State of Bihar & Anr. .Respondents

CRIMINAL APPEAL NO. 2083/2013 (arising out of SLP(Criminal) No. 10056 of 2012)

Decided on 11 December, 2013

Re-presentation of cheque after dishonour – Limitation period for filing complaint for dishonour of cheque upon re-presentation of cheque – Date from which to be reckoned – Legal notice to drawer must be issued within 30 days of that dishonour of cheque, which matures into complaint – Though first legal notice was cheque on 17-12-2008 pursuant to dishonour of cheque, second legal notice issued to drawer of beyond limitation period of 30 days – Information as to second time on 10-11-2008 i.e. Bank on the same day itself (i.e. 10-11-2008) –Held, although the complainant had right to present the said cheque for encashment a second time after its dishonour, the legal notice pursuant to second dishonour had to be issued within 30 days of the receipt of information as to second dishonour from Bank, which was not done – Hence, complaint filed on basis of notice dt. 17-12-2008 was not maintainable in view of non-compliance with all the three conditions laid down in S. 138 NI Act as explained in MSR Leathers, (2013) 1 SCC 177.

JUDGMENT

A.K.SIKRI,J.

1. Leavegranted.

2. Theappellanthereinisfacingtrial inthecomplaintfiledbyrespondentNo.2underSection138oftheNegotiableInstrumentsAct(N.I.Actforshort).Accordingtotheappellant,criminalcomplaint is not maintainable and no such proceedings could be launched against him. He, therefore,approachedtheHighCourtofJudicatureatPatnaintheformofapetitionunderSection482oftheCr.P.C.forquashingoftheorderdated28.10.2009wherebytheCourtofMagistratehadtakencognizanceofthecomplaintfiledbytherespondentNo.2issuedsummonstotheappellant.Thispetition,however,hasbeendismissedbytheHighCourtvideimpugnedjudgmentdated1.11.2012.ThesolitaryreasongivenbytheHighCourtwhiledismissingthepetitionisthattrialhasalreadycommencedandtwowitnesseshavealreadybeenexaminedanddischarged.Hence,atthisstageitwouldnotbepropertointerferewiththetrial.Variouscontentionswhichwereraisedbytheappellantquestioningtheverymaintainabilityofthe

kamlesh kumar versus state of bihar and anr.

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complaintunder Section138of theN.I. Act arenot gone intoby theHighCourtwith theobservationsthatthosecontentionswouldbeavailabletotheappellantbeforethetrialcourt,subjecttotherebuttalofrespondentNo.2.

3. Mr. Mishra, learned senior counsel appearing for the appellant submitted that even onadmittedfactsthecomplaintwasuntenableasitwasclearlytimebarredandnotfiledwithinthestipulatedperiodprescribedinlawandthereforetheHighCourtcouldnothavescuttledtheissueraisedbytheappellantbymerelyrelegatingtheappellanttothetrialcourtwhentheissuecouldbedecidedontheadmittedfactsonrecords.He,further,submittedthattheappellanthadapproachedtheHighCourtwithoutlossofanytimeandifduringthependencyof the petition filed by the appellant under Section 482, Cr.P.C., two witnesses had beenexaminedinthemeantime,thatfactorcouldnothaveweighedagainsttheappellant.

4. Inordertounderstandthecontroversy,wemaygivebasicfactswhichareundisputed.

5. ThecomplaintunderSection138oftheN.I.ActisfiledbyrespondentNo.2onthebasisofchequebearingNo.003285drawnonBankofIndia,MahuaBranchwheretheappellantholdsBankAccountbearingNo.23371.ThischequewasforasumofRs.3,45,000/-.Thecomplainanthadpresentedthischequeon25.10.2008whichwasreturneddishonouredbytheBank.Thedefence on merits set up by the appellant is that he is a doctor by profession who is having hisprivatepractice.Hefoundthatcertaincheques,somesignedandsomeunsigned,weremissingfromhisclinicinDecember2006inrespecttowhichhehadevengiveninformationtotheSub-DivisionalOfficer,Mahua,on30thDecember2006.ChequeNo.003285wasalsooneofthosestolencheques.Wehavestatedthisdefenceoftheappellantjustforrecordandarenotgoingintothisexplanationoftheappellantorinfluencedbyit.Weonlytendtoexamineastowhetheronadmittedevents,complaintisnotmaintainable.

6. Thechequeinquestionwaspresentedon25.10.2008.Afteritwasdishonoured,complainantissuednoticedated27.10.2008totheappellant.Theappellantdidnotaccedetothedemandcontainedinthesaidnotice.EventhecomplainantchosenottofileanycomplaintunderSection138oftheN.I.Actatthattime.Instead,hepresentedsameverychequeagainforencashmentthroughhisbankeron10.11.2008.Itbouncedthistimeaswellbecauseofinsufficientfunds.Another legal notice dated 17.12.2008was sent to the appellant. As this legal notice alsodidnotinvokeanypositiveresponsefromtheappellant,thistimethecomplainantfiledthecomplaint dated 7.01.2009. The summary of the aforesaid events, accordingly, is as under:-

| Date |Events |

| 25.10.2008 |Cheque presented |

| 27.10.2008 |LegalNotice |

| 10.11.2008 |2ndpresentation |

| 17.12.2008 |LegalNotice |

| 07.01.2009 |Complaintfiled |

7. Onthebasisoftheaforesaidfacts,thesubmissionofMr.MishrawasthatthecomplaintwasnotfiledwithinthelimitationprescribedunderSection138readwithSection142oftheN.I.Act.Toappreciatethiscontention,wefirststatetheaforesaidprovisionwhichreadsasunder:


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138. Dishonourofchequefor insufficiency,etc.offunds intheaccount.-Whereanychequedrawnbyapersononanaccountmaintainedbyhimwithabankerforpaymentofanyamount of money to another person from out of that account for the discharge, in whole orinpart,ofanydebtorotherliability,isreturnedbythebankunpaid,eitherbecauseoftheamountofmoneystandingtothecreditofthataccountisinsufficienttohonourthe cheque or that it exceeds the amount arranged to be paid from that account by an agreementmadewiththatbank,suchpersonshallbedeemedtohavecommittedanoffenceandshall,withoutprejudicetoanyotherprovisionofthisAct,bepunishedwithimprisonmentforatermwhichmaybeextendedtotwoyears,orwithfinewhichmayextend to twice the amount of the cheque, or with both:


(a) thechequehasbeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofitsvalidity,whoeverisearlier;

(b) thepayeeortheholderinduecourseofthecheque,asthecasemaybe,makesademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerofthecheque,[withinthirtydays]ofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid;and

(c) the drawyer of such cheque fails tomake the payment of the said amount ofmoney to the payee or, as the case may be, to the holder in due course of the cheque,withinfifteendaysofthereceiptofthesaidnotice.

142. Cognizanceofoffences.-Notwithstandinganythingcontained in theCodeofCriminalProcedure,1973(2of1974)-

(a) nocourtshalltakecognizanceofanyoffencepunishableundersection138exceptuponacomplaint,inwriting,madebythepayeeor,asthecasemaybe.Theholderinduecourseofthecheque;

(b) suchcomplaintismadewithinonemonthofthedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotoSection138:

[ProvidedthatthecognizanceofacomplaintmaybetakenbytheCourtaftertheprescribed period, if the complainant satisfies the Court that he had sufficientcausefornotmakingacomplaintwithinsuchperiod.]

(c) nocourtinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateofthefirstclassshalltryanyoffencepunishableundersection138.]

8. Inthepresentcase,thecomplainanthadnotfiledthecomplaintonthedishonorofthechequeinthefirst instance,butpresentedthesaidchequeagainforencashment.Thisrightofthecomplainantinpresentingthesameverychequeforthesecondtimeisavailabletohimundertheaforesaidprovision.ThisaspectisalreadyauthoritativelydeterminedbythisCourtinMSRLeathersvs.S.Palaniappan&Anr.(2013)1SCC177.SpecificquestionwhichwasformulatedforconsiderationbytheCourtandreferredtothreeJudgeBenchinthatcase,thefollowingquestionfordeterminationwasasunder:

WhetherthepayeeorholderofachequecaninitiateprosecutionforanoffenceunderSection138oftheNegotiableInstrumentsAct,1881foritsdishonorforthesecondtime,ifhehadnot


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initiatedanyactionontheearliercauseofaction?ThisquestionwasansweredbythethreeJudgeBenchintheaforesaidmatterinthefollowingmanner:

WhatisimportantisthatneitherSection138norSection142oranyotherprovisioncontainedintheActforbidstheholderorpayeeofthechequefrompresentingthechequeforencashmenton any number of occasions within a period of six months of its issue or within the period of its validity,whicheverisearlier.ThatsuchpresentationwillbeperfectlylegalandjustifiedwasnotdisputedbeforeusevenattheBarbythelearnedcounselappearingforthepartiesandrightlysointhelightofthejudicialpronouncementsonthatquestionwhichareallunanimous.EvenSadanandancase,thecorrectnesswhereofweareexamining,recognizedthattheholderorthepayeeofthechequehastherighttopresentthesameanynumberoftimesforencashmentduring the period of six months or during the period of its validity, whichever is earlier.

9. Tothisextent,therecannotbeanyquarrelandtheactofthecomplainantinpresentingthechequeagaincannotbequestionedbytheappellant.However,wefindthatwhenthechequewaspresentedsecondtimeon10.11.2008andwasreturnedunpaid,legalnoticefordemandwasissuedonlyon17.12.2008whichwasnotwithin30daysofthereceiptoftheinformationbyhimfromtheBankregardingthereturnofthechequeasunpaid.Non-issuanceofnoticewithinthelimitationprescribedhasrenderedthecomplaintasnotmaintainable.

10. InMSRLeathers(supra),thisCourtanalyzedtheprovisionsofSections138and142oftheN.I.Act in the following manner:

TheprovisotoSection138,however,isallimportantandstipulatesthreedistinctconditionsprecedent,whichmustbesatisfiedbeforethedishonorofachequecanconstituteanoffenceandbecomepunishable.Thefirstconditionisthatthechequeoughttohavebeenpresentedtothebankwithinaperiodofsixmonthsfromthedateonwhichitisdrawnorwithintheperiodofofitsvalidity,whicheverisearlier.Thesecondconditionisthatthepayeeortheholderinduecourseofthecheque,asthecasemaybe,oughttomakeademandforthepaymentofthesaidamountofmoneybygivinganoticeinwriting,tothedrawerofthecheque,withinthirtydaysofthereceiptofinformationbyhimfromthebankregardingthereturnofthechequeasunpaid.Thethirdconditionisthatthedrawerofsuchachequeshouldhavefailedtomakepayment of the said amount of money to the payee or as the case may, to the holder in due courseofthechequewithinfifteendaysofthereceiptofthesaidnotice.ItisonlyuponthesatisfactionofallthethreeconditionsmentionedaboveandenumeratedundertheprovisotoSection138asclauses(a),(b)and(c)thereofthatanoffenceunderSection138canbesaidtohavebeencommittedbythepersonissuingthecheque.

Section142oftheNegotiableInstrumentsActgovernstakingofcognizanceoftheoffenceandstartswithanonobstanteclause.ItprovidesthatnocourtshalltakecognizanceofanyoffencepunishableunderSection138exceptuponacomplaint,inwriting,madebythepayeeor,asthe case may be, by the holder in due course and such complaint is made within one month of thedateonwhichthecauseofactionarisesunderclause(c)oftheprovisotoSection138.Intermsofclause(c)toSection142,nocountinferiortothatofaMetropolitanMagistrateoraJudicialMagistrateoftheFirstClassiscompetenttotryanyoffencepunishableunderSection138.

AcarefulreadingoftheaboveprovisionsmakesitmanifestthatacomplaintunderSection138canbefiledonlyaftercauseofactiontodosohasaccruedintermsofclause(c)ofthe


| 202 |

provisotoSection138which,asnoticedearlier,happensnosoonerthanwhenthedrawerofthechequefailstomakethepaymentofthechequeamounttothepayeeortheholderofthechequewithin15daysofthereceiptofthenoticerequiredtobesentintermsofclause(b)oftheprovisotoSection138oftheAct.

ThepresentationofthechequeanddishonorthereofwithintheperiodofitsvalidityoraperiodofsixmonthsisjustoneofthethreerequirementsthatconstitutescauseofactionwithinthemeaningofSections138and142(b)oftheAct,anexpressionthatismorecommonlyusedin civil law than in penal statutes. For a dishonor to culminate into the commission of anoffenceofwhichacourtmaytakecognizance,therearetwootherrequirements,namely,(a)serviceofanoticeuponthedrawerofthechequetomakepaymentoftheamountcoveredbythecheque,and(b)failureofthedrawertomakeanysuchpaymentwithinthestipulatedperiod of 15 days of the receipt of such a notice. It is onlywhen the said two conditionsaresuperaddedtothedishonorofthechequethattheholder/payeeofthechequeacquirestherightto instituteproceedingsforprosecutionunderSection138oftheAct,whichrightremainslegallyenforceableforaperiodof30dayscountedfromthedateonwhichthecauseofactionaccruedtohim.Therefore,thereis,nothingintheprovisotoSection138orSection142forthatmatter,toobligetheholder/payeeofadishonouredchequetonecessarilyfileacomplaintevenwhenhehasacquiredanindefeasiblerighttodoso.Thefactthatanoffenceiscompleteneednotnecessarilyleadtolaunchofprosecutionespeciallywhentheoffenceisnotacognizableone.Itfollowsthatthecomplainantmay,evenwhenhehastheimmediaterighttoinstitutecriminalproceedingsagainstthedrawerofthecheque,eitherattherequestoftheholder/payeeofthechequeoronhisownvolition,refrainfrominstitutingtheproceedingsbasedonthecauseofactionthathasaccruedtohim.Suchadecisiontodeferprosecutionmaybeimpelledbyseveralconsiderationsbutmoreimportantlyitmaybeinducedbyanassurancewhich thedrawerextends to theholderof thecheque thatgiven sometime thepaymentcoveredbythechequeswouldbearranged,intheprocessrenderingatime-consumingandgenerally expensive legal recourse unnecessary. It may also be induced by a belief that a fresh presentationofthechequemayresult inencashmentforavarietyofreasonsincludingthevicissitudesoftradeandbusinessdealingswherefinancialaccommodationgivenbythepartiestoeachotherisnotanunknownphenomenon.SufficeittosaythatthereisnothingintheprovisionsoftheActthatforbidstheholder/payeeofthechequetodemandbyserviceofafreshnoticeunderclause(b)oftheprovisotoSection138oftheAct,theamountcoveredbythecheque,shouldtherebeasecondorasuccessivedishonorofthechequeonitspresentation.

11. Itisthusclearthatperiodoflimitationisnottobecountedfromthedatewhenthechequeinquestionwaspresentedinthefirstinstanceon25.10.2008orthelegalnoticewasissuedon27.10.2008,inasmuchasthechequewaspresentedagainon10.11.2008.Forthepurposesoflimitation,insofaraslegalnoticeisconcerned,itistobeservedwithin30daysofthereceiptofinformationbythedrawyeefromthebankregardingthereturnofthechequeasunpaid.Therefore,afterthechequeisreturnedunpaid,noticehastobeissuedwithin30daysofthereceiptofinformationinthisbehalf.Thatistheperiodoflimitationprovidedforissuanceoflegalnoticecallinguponthedrawerofthechequetomakethepayment.Afterthesendingofthisnotice15daystimeistobegiventothenoticee,fromthedateofreceiptofthesaidnoticetomakethepayment,ifthatisalreadynotdone.Ifnoticeefailstomakethepayment,theoffencecanbesaidtohavebeencommittedandinthateventcauseofactionforfilingthe


| 203 |

complaintwouldaccruetothecomplainantandheisgivenonemonthtimefromthedateofcauseofactiontofilethecomplaint.

12. Applying theaforesaidprinciples, in thepresentcase,wefind thatchequewaspresented,secondtime,on10.11.2008.Thecomplainant,however,sentthelegalnoticeon17.12.2008i.e.muchaftertheexpiryofthe30days.Itisclearfromthecomplaintfiledbythecomplainanthimself that he had gone to the bank for encashment the cheque on 10.11.2008 but thechequewasnothonoureddue to theunavailabilityof thebalance in theaccount.13.Thecrucialquestionisastoonwhichdatethecomplainantreceivedtheinformationaboutthedishonour of the cheque. As per the appellant the complainant received the informationabout the dishonour of the cheque on 10.11.2008. However, the respondent has disputed the same.However,wewouldliketoaddthatatthetimeofargumentstheaforesaidsubmissionoftheappellantwasnotrefuted.Afterthejudgmentwasreserved,thecomplainanthasfiledtheaffidavitallegingthereinthathereceivedthebankmemoofthebouncingofchequeon17.11.2008andthereforelegalnoticesenton17.12.2008iswithintheperiod30daysfromthedateofinformation.Normally,wewouldhavecalleduponthepartiestoprovetheirrespectiveversions before the trial court by leading their evidence. However, in the present case, as rightly pointed out by the learned senior counsel for the appellant, the complainant has accepted in thecomplaintitselfthathehadgonetothebankforencashmentofchequeon10.11.2008and the chequewas not honoureddue to insufficient of funds, thereby admitting that hecametoknowaboutthedishonorofthechequeon10.11.2008itself.Itisforthisreasonthatappellanthasfiledreplyaffidavitstatingthatthisisanafterthoughtpleaasnomaterialhasbeenfiledbeforethecourtbelowtoshowthatthebankhadissuedmemoaboutthereturnofchequewhichwasreceivedbythecomplainanton17.11.2008.Thespecificavermentmadeinthe complaint in this behalf is as under:

Subsequently the complainant again went to encash the cheque given by the accused on 10.11.2008 which again bounced due to unavailability of balance in the accused account. It is, thus, clear from the aforesaid averment made by the complainant himself that he had gone tothebankforencashingthechequeon10.11.2008andfoundthatbecauseofunavailabilityofsufficientbalanceintheaccount,thechequewasbounced.Therefore,itbecomesobviousthathehad come toknowabout the sameon10.11.2008 itself. In viewof this admissioninthecomplaintabouttheinformationhavingbeenreceivedbythecomplainantaboutthebouncing of the cheque on 10.11.2008 itself, no further enquiry is needed on this aspect.

14. It is, thus,apparentthathereceivedthe informationaboutthedishonorofthechequeon10.11.2008 itself.However,hedidnotsendthe legalnoticewithin30daystherefrom.We,thus,findthatthecomplaintfiledbyhimwasnotmaintainableasitwasfiledwithoutsatisfyingallthethreeconditionslaiddowninSection138oftheN.I.Actasexplainedinpara12ofthejudgmentinthecaseofMSRLeathers,extractedabove.

15. Wehave,thus,nohesitationinallowingthisappealandsettingasidetheimpugnedorderoftheHighCourt.Asaconsequence,petitionfiledbythepetitionerunderSection482,Cr.P.C.isalso allowed and the complaint of the complainant is dismissed.

qqq


| 204 |

JAGdISH SINGH vERSUS NATTHU SINGH(1992) 1 Supreme Court Cases 647


Before Hon’ble Mr. Justice M.N. Venkatachaliah and Hon’ble Mr. Justice S.C. Agrawal

Jagdish Singh ...Petitioner Versus

Natthu Singh ...RepondentDecided on 25 November, 1991

Specific Relief Act, 1963 – S. 21(2), (4) and (5) – Suit for specific performance of contract of purchase of land – Compensation – Can be awarded where contract becomes incapable of specific performance without any fault of the plaintiff – For this amendment of plaint must be sought for conversion of the suit for specific performance into one for damages for breach of contract.

JUDGMENT

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4916 of From the Judgment and Order dated5.4.1991oftheAllahabadHighCourtinSecondAppealNo.3395of1978.ManojSwarupandMs.LalitaKohlifortheAppellants.

B.S.NagarforGoodwillIndeevarfortheRespondent.TheJudgmentoftheCourtwasdeliveredbyVENKATACHALIAH,J.Specialleave‘isgrantedandtheappealtaken-upforfinalhearinganddisposedofbythisjudgment.WehaveheardSriManojSwamp,learnedcounselfortheAppellantandShriGoodwill Indeevar for the Respondent.

2. AppellantwasDefendantinasuitforspecificperformance.HeseeksspecialleavetoappealtothisCourtfromthejudgmentandorderdated5.4.1991oftheHighCourtofAllahabadinSecondAppealNo.3395of1978decreeing,inreversalofthedecreesofdismissalenteredbythetwocourtsbelow,specificperformanceofanagreementforsaleofland..

3. On3.7.1973Respondent-NatthuSinghsoldPlotNo.195measuring5bighasand18biswasandPlotNo.196measuring9bighasand8biswasofGulistapurVillage,ParganaDadritotheappellantforaconsiderationofRs.15,000.Ontheveryday,i.e.,3.7.1973,anotheragreementwas entered into between the partieswhereunder Appellant agreed to reconvey the saidpropertiestotheRespondentagainstpaymentofRs.15,000/withintwoyears.

On 2.6.1975, well within the period of two years stipulated for the performance of theagreement to re-sell, Respondent instituted the suit for specific performance alleging thatdespiteofferofperformanceandtenderingtheprice,Appellant,withthedishonestintentionofappropriatingthepropertiestohimselfrefusedreconveyance.TheAppellantcontestedthesuit principally on the ground that Respondent was never ready and willing to perform the contract and that Respondent himself was in breach.

jagdish singh versus natthu singh

| 205 |

4. Thetrialcourt framedthenecessaryandrelevant issuesstemmingfromthepleadingsandonitsownappreciationoftheevidenceonrecordcametofindagainsttheRespondentthathewas ready andwilling to perform the contract; and that the agreement, being one ofreconveyance,timewasofitsessence.Thesuitwasaccordinglydismissed.Respondent’sfirstappealbeforethelearnedIIndAdditionalDistrictJudge,Bulandshaharwasalsounsuccessful.

5. However, in Respondent’s second appeal, theHighCourt reversed thefindings of the twocourtsbelowandallowing theappealheld thatRespondent-Plaintiffwas readyandwillingto perform the contract; that the Appellantwas the party in breach; and that, therefore,Respondentwasentitledtoadecree.Thisdecreeisassailedinthisappeal.

6. SriManojSwarupappearinginsupportoftheappealurgedtwocontentions;thefirstisthattheHighCourtwas inerror inembarkinguponare-appraisalof theevidence inasecond-appeal todistrubconcurrentfindingsof fact thatRespondentwas-notwillingandreadytoperform the con¬tract. The second contention is that contract itself became incapable ofspecificperformanceinviewofthefactthatduringthependencyofsecondappealtheStatehadinitiatedproceedingsforcompulsoryacquisitionofthesuit-propertiesandthesubject-matterofthesuititselfceasedtobeavailable.Counselsaysthepowertogivecompensationasanalternativetospecificperformancedidnotextendtoacaseinwhichthereliefofspecificperformance had itself become impossible.

7. Onthefirstquestion,astothereadinessoftheRespondenttoperformhisobligations,theHighCourtnoticedthaton30thJanuary,1974evenbeforeinstitutionofthesuitRespondentandhisbrotherhadsoldanotherpropertybelongingtothemforapriceofRs.30,000andthatRespondent had the necessary wherewithal to perform his part of the bargain. The High Court held:

“...Thus,theplaintiffadmittedlyhadreceivedRs.15,000/-on30.1.1974andsoonthereafterthefirstnoticewasissuedtothedefendantaskinghimtoindicateadateforexecutingthesaledeed and also expressing his readiness and willingness. There is no evidence on the record thatbetween30.1.1974andthedateofsuitorthereaftertheplaintiffhadpartedwiththismoney.”

TheHighCourtalsonoticedthatthetwonoticesdated23.3.1974and6.5.1975respectivelyissued by the Respondent to the Appellant before the suit contained the averments that he wasreadyandwillingtoperformthecontract.Thenoticeswere,nodoubt,notactuallyservedontheappellantastheyhadcomebackunservedupontheallegedrefusalbytheappellanttoacceptthem.TheHighCourtreliedupontheavermentsinthenoticeswhichcouldbetreatedas a part to the plaint having been referred to and relied upon therein.

8. Inouropinion,theHighCourtwasrightinitsview.ThenoticesmustbepresumedtohavebeenservedascontemplatedbySection27oftheGeneral.ClausesAct.Astothejurisdictionof the High Court to reappreciate evidence in a second appeal it is to be observed that where thefindingsbytheCourtoffactsisvitiatedbynon-considerationofrelevantevidenceorbyanessentiallyerroneousapproachtothematter,theHighCourtisnotprecludedfromrecordingproperfindings.Wefindnosubstanceinthefirstcontention.

9. Thesecondcontentionis,however,notwithoutitsinterestingaspects.Duringthependencyofthesecondappeal,thepropertieswereacquiredbytheStateforapublicpurpose.Thisis


| 206 |

notdisputed. ItwouldappearthatacompensationofRs.4 lakhsor thereaboutshasbeendetermined.Thatsum,alongwiththegeneroussolatiumandtheratesofinterestprovidedby the statute would now be a much larger amount. Before the High Court, Appellant sought torelyuponthedecisionofthisCourtinPiareyLalv.HoriLal,[1977]2S.C.R.915.Thatwasacasewhereinproceedingsofconsolidationthesubject-matterofanagreementtosellwasallottedtoapersonotherthanthevendor,thereliefofspecificperformancewasheldnottosurvive.TheHighCourtrightlyheldthatpronouncementwasdistinguishableandinapplicabletothepresentcontroversy.Astothereliefavailabletoaplaintiffwherethesubjectmatterwasacquiredduringthependencyofasuitforspecific-performancetheHighCourtsaid:

“...Thelearnedcounselfortherespondenthasvehementlyurgedthatafterthelandhasbeenacquireditscorpushasceasedtoexistandnodecreeforspecificperformancecannowbegranted.Inmyopinionwiththeacquisitionof)thelandplaintiffsrightsdonotgetextinguishedin totality. The appellate court always suitably mould the relief which the circumstances of the case may require or permit. The power in this regard is ample and wide enough...

However,inthepresentcasethepropertyhasnotbeentotallylost.Whathappensinthecaseoftheacquisitionisthatforthepropertycompensationpayableinlieuthereofissubstituted...”

TheHighCourtissuedtheseconsequentialdirections:

“If thedecree for specificperformanceof contract inquestion is found incapableofbeingexecuteddue to acquisitionof subject land, thedecree shall stand suitably substitutedbya decree for realisation of compensation payable in lieu thereof asmay be or have beendetermined under the relevant Act and the plaintiff shall have a right to recover suchcompensationtogetherwithsolatiumandinterestduethereon.Theplaintiffshallhavearightto recover it from the defendant if the defendant has already realised these amounts and in thatevent’;thedefendantshallbefurtherliabletopayinterestattherateoftwelvepercentfromthedateofrealisationbyhimtothedateofpaymentontheentireamountrealisedinrespectofthedisputedland.”

Weare afraid the approachof theHighCourt is perhaps somewhat anover-simplificationofanotherwisedifficultareaof lawastothenatureof reliefavailabletoaplaintiffwherethecontractbecomesimpossibleofspecificperformanceandwherethereisnoalternativeprayer forcompensation in lieuorsubstitutionofspecificperformance.While thesolutionthathascommendeditselftotheHighCourtmightappearessentiallyjustorequitable,thereare certainproblemsbothofprocedureandof substance in theadministrationof the lawofspecificreliefparticularlyintheareaofawardofanalternativereliefinlieuorsubstituteof specificperformance that requireand compel consideration,especially in viewof somepronouncements of the High Courts which have not perceived with precision, the nice distinctionsbetweenthisbranchofthelawasadministeredinEnglandandinIndia.

10. Section21oftheSpecificReliefAct,1963correspondingtoSection19of1877Actenablestheplaintiffinasuitforspecificperformancealsotoclaimcompensationforitsbreacheitherinadditiontoorinsubstitutionof,suchperformance.Sub-sections(2),(4)and(5)ofSection21are material and they provide:

“(2). If,inanysuchsuit,theCourtdecidesthatspecificperformanceoughtnottobegranted,butthatthereisacontractbetweenthepartieswhichhasbeenbrokenbythedefendant,


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andthattheplaintiffisentitledtocompensationforthatbreach,itshallawardhissuchcompensationaccordingly.

(3) [Omittedasunnecessary.]

(4) Indeterminingtheamountofanycompensationawardedunderthissection,theCourtshallbeguidedbytheprinciplesspecifiedinSection73oftheIndianContractAct,1872,9 of 1872.

(5) Nocompensationshallbeawardedunderthissectionunlesstheplaintiffhasclaimedsuchcompensationinhisplaint:

Providedthatwheretheplaintiffhasnotclaimedanysuchcompensationintheplaint,theCourt shall, at any stage of the proceeding, allow him to amend the plaint on such terms as maybejust,forincludingaclaimforsuchcompensation.Explanation-ThecircumstancethatthecontracthasbecomeincapableofspecificperformancedoesnotprecludetheCourtfromexercisingthejurisdictionconferredbythissection.” (emphasisadded)

So far as the proviso to sub-section (5) is concerned, two positions must be kept clearlydistinguished.Iftheamendmentrelatestothereliefofcompensationinlieuoforinadditiontospecificperformancewheretheplaintiffhasnotabandonedhisreliefofspecific-performancethe court will allow the amendment at any stage of the proceeding. That is a claim for compensationfailingunderSecion21oftheSpecificReliefAct,1963andtheamendmentisoneundertheprovisotosub-section(5).Butdifferentandlessliberalstandardsapplyifwhatissoughtbytheamend¬mentistheConversionofasuitforspecificperformanceintoonefordamagesforbreachofcontractinwhichcaseSection73oftheContractActisinvoked.Thisamendment isunder thedisciplineofRule17Order6,C.P.C.The fact thatsub-section (4),inturn,invokesSection73oftheIndianContractActfortheprinciplesofquantificationandassessmentofcompensationdoesnotobliteratethisdistinction.

TheprovisionsofSection21seemtoresolvecertaindivergenciesof judicialopinion in theHighCourtson someaspectsof the jurisdiction to awardof compensation. Subsection (5)seekstosetatrestthedivergenceofjudicialopinionbetweenHighCourtswhetheraspecificclaimintheplaintisnecessarytograntthecompensation.InEnglandLordCairn’s(ChanceryAmendment)Act,1858soughttoconferjurisdictionupontheEquityCourtstoawarddamagesinsubstitutionorinadditiontospecificperformance.ThisbecamenecessaryinviewoftheearlierdichotomyinthejurisdictionbetweencommonlawandEquityCourts inthematterof choice of the nature of remedies for breach. In common law the remedy for breach of a contract was damages. The Equity Court innovated the remedy of specific performancebecause the remedyofdamageswas found tobean inadequate remedy. LordCairn’sAct,1858conferredjurisdictionupontheEquityCourtstoawarddamagesalsosothatboththereliefscouldbeadministeredbyonecourt.Section2oftheActprovided:

“Inall cases inwhichtheCourtofChanceryhas jurisdictiontoentertainanapplication forspecificperformanceofanycovenant,contractoragreementitshallbelawfulforthesameCourt if it shall thinkfit to awarddamages to theparty injured either in addition toor insubstitutionforsuchspecificperformanceandsuchdamagesmaybeassessedastheCourtshalldirect.”


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ThisisthehistoricalbackgroundtotheprovisionsofSection21oftheSpecificReliefAct,1963anditspredecessorinSection19ofthe1877Act.

11. InMohamadAbdulJabbar&Othersv.Lalmia&Others.A.I.R(34)1947Nagpur254specificperformanceofanagreementofsaledated16thJanuary,1934,wassoughtbytheinstitutionofa suiton15th January,1937.During thependencyof the suit,on20thApril, 1937, theprovincial Government started land acquisition proceedings respecting the subject-matterof the suit and the same was acquired. The High Court upheld the dismissal of the suit for specific performance and referred an amendment for award of damages. On the obviousimpermissibilityofspecificperformancetheNagpurHighCourtsaid:

“Weaccordinglyconcludethatspecificperformanceisnowimpossibleandwecannotdecreeitfor“equitylikenaturedoesnothinginvain.”Wecannotholdtheplaintiffs-appellantsentitledtothecompensationmoneyintowhichthepropertywasconvertedbecausetheyhadnorightorinterestinthatproperty....”RefusingtheamendmentforthereliefforpaymentofmoneytheHighCourtheld:“WewouldnotallowamendmentalsobecauseonthefactsfoundbythetrialCourt(withwhichweseenoreason,whatever,todiffer)wewouldhaverefusedspecificperformance, and the claim for damageson this accountwould also havebeennegativedbecausedamagescouldhavebeenawardedonly ifspecificperformancecouldrightlyhavebeenclaimed.Theappeal,therefore,failsandisdismissedwithcosts.”

llmo Support for these conclusions was sought from the oft quoted, but perhaps a littlemisunderstood,caseofArdeshirH.Mamav.FloraSassoonA.I.R.1928PrivyCouncil208.Thepassage in Sassoon’s case relied upon by the Nagpur High Court is this:

“InaseriesofdecisionsitwasconsistentlyheldthatjustasitspowertogivedamagesadditionalwastobeexercisedinasuitinwhichtheCourthadgrantedspecificperformance,sothepowertogivedamagesasanalternativetospecificperformancedidnotextendtoacaseinwhichtheplaintiffhaddebarredhimselffromclaimingthatformofrelief,nortoacaseinwhichthatrelief had become impossible.

Thecaseof52Bombay597fellwithinthefirstcategoryofcasesdescribedaboveunderthealternativereliefofdamages.Thiscasefailswithinthesecondpartwherethereliefofspecificperformancehasbecomeimpossible.” (emphasissupplied)

ThesecondpartoftheobservationoftheNagpurHighCourt,withgreatrespecttothelearnedJudgesproceedsonafallacyresultingfromthenon-perceptionofthespecificdepartureintheIndianlaw.InLordCairn’sAct.1858damagescouldnotbeawardedwhenthecontracthad,forwhatever reason,become incapableof specificperformance.Butunder the Indian lawtheexplanationmakesaspecificdepartureandthe jurisdictiontoawarddamagesremainsunaffectedbythefactthatwithoutanyfaultoftheplaintiff,thecontractbecomesincapableofspecificperformance.Indeed,Sassoon’scaseisnotsusceptibleoftheimportattributedtoitbytheNagpurHighCourt.Sassoon’scaseitselfindicatedthedeparturemadeinIndianLawbytheExplanationinSection19ofthe1877Act,whichisthesameastheExplanationtoSection21ofthe1963Act.TheJudicialCommittee,nodoubt,saidthatSection19ofthe1877Act“embodiesthesameprincipleasLordCairn’sActanddoesnot,anymorethandidtheEnglishStatuteenablethecourtinaspecificperformancesuittoaward‘compensationforitsbreach’whereatthehearingtheplaintiffdebarredhimselfbyhisownactionfromaskingforaspecificdecree”’,ButwhatwasoverlookedwasthisobservationofLordBlanesburgh,“exceptasthe


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caseprovidedforintheexplanationus10whichthereis introducedanexpressdivergencefromLordCairn’sActasexpandedinEngland” (emphasissupplied)

IndeedthefollowingillustrationoftheExplanationappendedtoSection19ofSpecificReliefAct,1877makesthepositionclear”“OftheExplanation-A,apurchaser,suesB,hisvendor,forspecificperformanceofacontractforthesaleofapatent.Beforethehearingofthesuitthepatentexpires.TheCourtmayawardAcompensationforthenon--performanceofthecontract,andmay,ifnecessary,amendtheplaintforthatpurposeWhentheplaintiffbyhisoptionhasmadespecificperformance impossible, Section21doesnotentitlehim to seekdamages.Thatposition iscommontobothSection2ofLordCairn’sAct,1858andSection21oftheSpecificReliefAct,1963.ButinIndianLawwherethecontract,fornofaultoftheplaintiff,becomesimpossibleofper¬formancesection21enablesawardofcompensationinlieuandsubstitutionofspecificperformance.We,therefore,holdthatthesecondcontentionofSriManojSwarupisnotsubstantialeither.

12. LearnedcounselwerenotspecificonthepointwhethertheRespondenthadactuallyaskedforcompensationinlieuofspecificperformance.Wemayassumethatitwasnotsospecificallysought. In order that formality in this behalf be completed, we permit the amendment here andnowsothatcompletejusticeisdone.

13. ThemeasureofthecompensationisbythestandardsofSection73oftheIndianContract.HereagaintheEnglishRuleinBainv.Fothergill,(1874)L.R.7HouseofLords158thatthepurchaser,on breach of the ,contract, cannot recover, for the loss of his bargain is not applicable. In Pollock&MullaonContract(10thEdn.)thelawonthematterissetoutthus:

“Where,therefore,apurchaseroflandclaimsdamagesforthelossofhisbargain,thequestionto be decided is whether the damages alleged to have been caused to him ‘naturally arose in theUsualcourseofthingsfromsuchbreach’;andinanordinarycaseitwouldbedifficulttoholdotherwise.”[p.663]LearnedAuthorsadoptthefollowingobservationofFarranC.J. inNagardasv.Ahmedkhan,(1895)21Bom.175:

“TheLegislaturehasnotprescribedadifferentmeasureofdamagesinthecaseofcontractsdealingwithlandfromthatlaiddowninthecaseofcontractsrelatingtocommodities”

Inthepresentcasethereisnodifficultyinassessingthequantumofthecompensation.Thatisascertainablewithreferencetothedeterminationofthemarketvalueinthelandacquisitionproceedings.Thecompensationawardedmaysafelybetakentobethemeasureofdamagessubject,ofcourse,tothedeductiontherefromofmoneyvalueoftheservices,timeandenergyexpended by the appellant in pursuing the claims of compensation and the expenditureincurredbyhiminthelitigationculminatingintheaward.

14. WeaccordinglyconfirmthefindingoftheHighCourtthatRespondentwaswillingandreadytoperformthecontractandthatitwastheAppellantwhowasinbreach.However,insubstitutionof thedecreeforspecificperformance,wemakeadecreeforcompensation,equivalenttotheamountofthe landacquisitioncompensationawardedforthesuit landstogetherwithsolatiumandaccruedinterest,lessasumofRs.1,50,000(onelakhfiftythousandonly)which,byaroughandreadyestimate,wequantifyastheamounttobepaidtotheappellantinrespectofhisservices,timeandmoneyexpendedinpursuingthelegal-claimsforcompensation.


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15. Wemay here notice one other submission of SriManoj Swarup. He found fault with theoperativepartofthejudgmentoftheHighCourt,Which,accordingtoSriManojSwarup,hadnotevenprovidedforthepaymenttotheappellantofRs.15,000thestipulatedconsiderationforreconveyance.There is thisapparentomission intheoperativepartoftheHighCourt’sjudgment.Butthisisonlyatechnicality.Theoperativepartgrantingreliefshouldbereadwiththerelevantprayersintheplaintitself.ButthatisnotofanypracticalsignificancehereinasmuchaswehavealsotakenthisamountofRs.15,000intoaccountinsomewhatgenerouslyquantifyingthelitigation-expensesatRs.1,50,000aspayabletotheappellantoutofthesumsawardedfortheacquisition.Therefore,thereisnoneedforRespondenttopaythesumofRs.15,000additionally.

16. In the result therewillbeadecreeawarding10 theRespondentcompensation in lieuandsubstitutionofoneforspecificperformancewhichbutfortheacquisitionRespondentwouldhavebeenentitledtothequantumandthemeasureofthecompensationbeingtakeentireamount of compensation determined for take acquisition of the suit. properties to gatherwithallthesolatium,accruedinterestandallotherpaymentsunderthelawauthorisingtheacquisition, lessasumofRs.1,50,000(Rupeesonelakhfiftythousandonly)whichshallgoto the Appellant towards his services, time and amounts spent in pursuing the claims forcompensationaswellastheconsiderationstipulatedforreconveyance

The sum of Rs.1,50,000 is allowed to be.. paid to the Appellant on his assurance that he has notreceivedanypartofthecompensationearlier. IfanyamounthasbeenreceivedbytheAppellantoutofcompensationawardedfortheacquisition,suchsumsshallgoinreductionofthesumofRs.1,50,000,thedifferencebeingforthebenefitofandbepaidtotheRespondentadditionally.

ThisordershallbesufficientauthorityforthelandacquistionauthoritiesortheCourtswhereverthemattermaybependingfortheapportionmentandpaymentofthecompensationfortheacquisitionof thesuitpropertybetweentheAppellantandtheRespondent in themannerindicatedabove.Thesedirectionsshall,ofcourse,notaffectorprejudicetheclaimofotherclaimants,ifany,whoseclaimsaretobedeterminedinthesaidlandacquistionproceedings,the assumption implicit in this apportionment being. that there are no other claimants inthelandacquisitionproceedings.Ifsuchapportionmentandwithdrawalisnotpossible,thedecreeintermsofthisjudgmentshallbeworkedoutinexecutionproceedings.Thedecreeunderappealismodifiedaccordingly.Nocosts.

qqq

JUDICIAL ACADEMY JHARKHANDNear Dhurwa Dam, Dhurwa, Ranchi-834004Phone : 0651-2902833, 2902831, 2902834,

Fax : 0651-2902834, 2902831Email Id : [email protected]

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