IMPORTANT POINT
Dishonour of cheque constitutes offence u/s 138. Cognizance can be taken only after cause of action accrues on non-payment of the amount even after notice.
Factors constituting cause of action do not constitute the ingredients of the offence under Section 138
Proviso to Section 138 simply postpones/defers institution of criminal proceedings.
Jurisdiction of the Court will be determined by reference to the place where the cheque is dishonoured.
The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138.

Headnote:Per Vikramjit Sen, J.
       (a) Negotiable Instruments Acts, 1881 – Section 138 – Territorial jurisdiction – Place of presentation of cheque – Would not confer or create territorial jurisdiction. (Para 4)
       (2001) 3 SCC 609; (2009) 1 SCC 720 – Relied upon
       (1999) 7 SCC 510; (2008) 13 SCC 77 – Distinguished
       (b) Administration of Justice – Precedence – Co-ordinate Bench judgment should be followed – Another coordinate Bench may add to it making it logically and dialectically compelling – Larger Bench decision – Mandatory to apply – If a Bench is unable to agree to ratio of another coordinate Bench, it is obliged to refer the matter to larger Bench. (Para 5)
       (c) Negotiable Instruments Acts, 1881 – Section 138 – Issuing of notice by complainant and receiving of notice by accused – Date of service of notice is what matters and date of issue of notice. (Para 5)
       (2009) 1 SCC 720 – Relied upon
       (d) Negotiable Instruments Acts, 1881 – Section 138 – There is distinction between commission of a crime and its prosecution. (Para 6)
       (e) Code of Civil Procedure, 1908 – Section 20, Explanation – Company having its office at the place of residence of defendant or the cause of action – Suit, lis or action must be filed at that place – Courts at that place alone would have jurisdiction. (Para 10)
       AIR 1992 SC 1514 : (1991) 4 SCC 270; (1994) 4 SCC 711; (1996) 3 SCC 443 – Relied upon
       (2013) 10 SCC 72; (2014) 2 SCC 255 – Referred
       (f) Interpretation of statutes – Parliamentary debates – Have limited application. (Para 13)
       (g) Negotiable Instruments Act, 1881 – Section 138 and 142, and sections 177, 178 and 179, Code of Criminal Procedure, 1973 – Cause of action – Extrapolation of civil law concepts such as "cause of action" onto criminal law – Cause of action in civil action may provide multiple choices – Not pertinent on criminal prosecution under section 178 CrPC – Offence within local jurisdiction of court trying the case imperative. (Para 14)
       8 Appeal Cases 354; (2000) 7 SCC 640 – Referred
       (h) Interpretation of statutes – Headings, captions or opening words of Sections – Normally not strictly or comprehensively determinative of the sweep of the actual Section itself – Nevertheless it presage its intendment. (Para 15)
       (1990) 1 SCC 400; (1999) 8 SCC 577 – Relied upon
       (i) Negotiable Instruments Act, 1881 – Section 138 r/w section 177 Code of Criminal Procedure, 1973 – Proviso to section 138 places conditions on the operation of the main provision – Unless the three enumerated in Proviso to section 138 conditions are fulfilled no prosecution can be conducted for the crime of dishonour of cheque – Section 142 also stating cause of action arises only if conditions under Proviso are fulfilled even though the conditions do not constitute part of the crime – Therefore return of cheque unpaid by drawee bank alone constitutes commission of offence – That would be the place of commission of offence under section 138 – Therefore the court under whose jurisdiction the drawee bank is located shall have jurisdiction – Sending notices from a place having no casual connection with transaction or presenting cheque at any of the banks where payee may have account – Not permissible. (Para 16, 17)
       (j) Negotiable Instruments Act, 1881 – Section 138 and section 420 Indian Penal Code – relief u/s 138 is in addition to contemplations in IPC – Payee, if duped or deluded by drawer of the cheque or suffered damage due to inducement – He can file FIR or complaint – Success in establishing inducement resulting in dishonour of cheque at his place of business etc. – Will save payee from travelling to the place of drawee bank – He can always chose to avail of remedy u/s 138 for recovery of his money. (Para 18)
       (k) Negotiable Instruments Act, 1881 – Section 138 r/w section 177, CrPC – Jurisdiction of court – Place of delivery of notice or place of presentation of cheque – Not relevant – Payee cannot chose his place of initiating action – Territorial jurisdiction restricted to court having local jurisdiction where cheque was dishonoured by drawee bank. (Para 19)
       (l) Negotiable Instruments Act, 1881 – Section 138 and 145(2) – Cases filed in court not having jurisdiction – Shall continue in that court if recording of evidence commenced u/s 145(2) – Such cases deemed to be transferred by Supreme Court to that court from the court ordinarily having jurisdiction – All other complaints to be returned to be filed in court having jurisdiction – Such complaints filed/refilled within thirty days of return shall be deemed to have been filed within time. (Para 20)
       Per T.S. Thakur, J.
       (m) Negotiable Instruments Act, 1881 – Section 138 r/w 142 – Section 138 being a penal provision, must be construed strictly – Offence u/s 138 is complete on dishonour of cheque for insufficiency of funds etc. – However cognizance thereof cannot be taken unless conditions under the Proviso r/w section 142 are satisfied. (Para 10, 12)
       (2007) 6 SCC 555; (2009) 1 SCC 720 – Relied upon
       (n) Interpretation of statutes – Proviso – Proviso qualifies or creates an exception to what is contained in the enactment – It simply qualifies the generality of the main enactment. (Para 14, 25)
       AIR 1966 SC 12; (1976) 1 SCC 128; (1983) 4 SCC 353; (1991) 3 SCC 442; 1992 Supp (1) SCC 304; (1994) 5 SCC 672; (2000) 4 SCC 526; (2003) 11 SCC 632; (2009) 16 SCC 1 – Relied upon
       (o) Negotiable Instruments Act, 1881 – Section 138, Proviso and section 142 – The Proviso dies not stipulate ingredients of the offence – It simply defers prosecution of the offender till the conditions prescribed therein are satisfied. (Para 26, 27)
       (2009) 1 SCC 720 – Relied upon
       (1999) 7 SCC 510 – Distinguished
       (p) Negotiable Instruments Act, 1881 – Section 138 r/w section 220(1). 182 and 184, CrPC – Offence u/s 138 one out of several offences committed in a single transaction – Offender may be charged with and tried at one trial for every such offence – Any Court competent to enquire into or try any of the offences shall be competent – If offence u/s 138 is committed as part of single transaction with the offence of cheating and dishonestly inducing delivery of property then such offence may be tried either at the place where the inducement took place or where the cheque forming part of the same transaction was dishonoured or at the place where the property which the person cheated was dishonestly induced to deliver or at the place where the accused received such property. (Para 26, 27)
       (q) Negotiable Instruments Act, 1881 – Section 138 – Successive presentations of cheque, its dishonor and statutory notices – Constitute successive cause of action for successive failure of drawee to pay. (Para 30)
       (2013) 1 SCC 177 – Relied upon
       (r) Negotiable Instruments Act, 1881 – Section 138 – Ingredients of offence and conditions for launching prosecution – Two different things – Proviso to section 138 – Not ingredients of offence – Offence stands committed on dishonor of cheque – But cause of action for prosecution would arise only after the conditions precedent enumerated in the proviso are satisfied. (Para 30)
       (1998) 6 SCC 514 – Relied upon
       (2007) 1 KLT 287 – Cited with approval
       Facts of the case:
       These Appeals raise a legal nodus of substantial public importance pertaining to Court's territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881. These appeals also call for interpretation of section 138 of the Act.
       Finding of the Court:
       Under section 138, NI Act, 1881 territorial jurisdiction shall be restricted to court having local jurisdiction where cheque was dishonoured by drawee bank.

Judgement Key Points

Certainly. Here's a summary of the key legal principles and findings from the provided judgment:

Dishonour of a cheque under Section 138 of the Negotiable Instruments Act constitutes an offence. The offence is deemed to be committed when the cheque is returned unpaid by the bank (!) (!) .
The offence is complete at the point of dishonour, but the prosecution can only be initiated after certain conditions are fulfilled, including the issuance and receipt of a demand notice, and failure to pay within the stipulated period (!) (!) (!) .
The cause of action for initiating prosecution under Section 138 arises only after the specified conditions—such as the dishonour of the cheque, demand notice, and failure to pay—are satisfied (!) .
The place where the cheque is dishonoured (i.e., where the bank returns the cheque unpaid) is the appropriate jurisdiction for filing a complaint or initiating prosecution (!) (!) .
The provisions of the Criminal Procedure Code regarding territorial jurisdiction (Section 177) apply to cases under Section 138, emphasizing that the trial should ordinarily be conducted in the court within whose local jurisdiction the offence was committed (!) (!) (!) (!) (!) .
The interpretation of the proviso to Section 138 is crucial; it does not constitute part of the ingredients of the offence but instead imposes conditions that must be satisfied for the prosecution to proceed (!) (!) (!) .
The offence under Section 138 is distinct from other criminal offences and is primarily concerned with the dishonour of the cheque itself. The offence is deemed to have occurred at the place where the cheque is dishonoured (!) .
The law discourages the use of jurisdictional choices based solely on the issuance of notices or presentation of the cheque at different places, as such acts should not confer or create jurisdiction arbitrarily (!) (!) .
The law aims to prevent harassment and inconvenience to the accused by restricting the trial to the location where the cheque was dishonoured, rather than where notices were issued or where the cheque was presented (!) .
In cases involving multiple acts in a single transaction, the trial can be conducted in any of the local areas where those acts took place, but the primary jurisdiction remains where the dishonour occurs (!) .
The interpretation of statutory provisions, especially the proviso, should be harmonized with the overall legislative intent, avoiding an expansive or overly restrictive application that could lead to injustice or harassment (!) (!) .
The law emphasizes that criminal proceedings should be initiated in courts with proper territorial jurisdiction, based on the place of the offence’s occurrence, not on unilateral acts of the complainant that do not have a direct connection to the place of dishonour (!) .
The decision underscores the importance of a strict and precise interpretation of the law to ensure fair trials and prevent misuse of jurisdictional provisions for harassment or strategic advantages (!) .

Please let me know if you require a more detailed analysis or assistance with specific legal questions related to this judgment.

JUDGMENT :

VIKRAMAJIT SEN, J.

1. Leave granted in Special Leave Petitions. These Appeals raise a legal nodus of substantial public importance pertaining to Court's territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881 (for short, 'the NI Act'). This is amply adumbrated by the Orders dated 3.11.2009 in I.A.No.1 in CC 15974/2009 of the three-Judge Bench presided over by the then Hon'ble the Chief Justice of India, Hon'ble Mr. Justice V.S. Sirpurkar and Hon'ble Mr. Justice P. Sathasivam which SLP is also concerned with the interpretation of Section 138 of the NI Act, and wherein the Bench after issuing notice on the petition directed that it be posted before the three-Judge Bench.

PRECEDENTS

2. The earliest and the most often quoted decision of this Court relevant to the present conundrum is K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 wherein a two-Judge Bench has, inter alia, interpreted Section 138 of the NI Act to indicate that, "the offence under Section 138 can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence:

(1) Drawing of the cheque,

(2) Presentation of the cheque to the bank,

(3) Returning the cheque unpaid by the drawee bank,

(4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,

(5) Failure of the drawer to make payment within 15 days of the receipt of the notice."

The provisions of Sections 177 to 179 of the Code of Criminal Procedure, 1973 (for short, 'CrPC') have also been dealt with in detail. Furthermore, Bhaskaran in terms draws a distinction between 'giving of notice' and 'receiving of notice'. This is for the reason that clause (b) of proviso to Section 138 of the NI Act postulates a demand being made by the payee or the holder in due course of the dishonoured cheque by giving a notice in writing to the drawer thereof. While doing so, the question of the receipt of the notice has also been cogitated upon.

3. The issuance and the receipt of the notice is significant because in a subsequent judgment of a Coordinate Bench, namely, Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1 SCC 720 emphasis has been laid on the receipt of the notice, inter alia, holding that the cause of action cannot arise by any act of omission or commission on the part of the 'accused', which on a holistic reading has to be read as 'complainant'. It appears that Harman transacted business out of Chandigarh only, where the Complainant also maintained an office, although its Head Office was in Delhi. Harman issued the cheque to the Complainant at Chandigarh; Harman had its bank account in Chandigarh alone. It is unclear where the Complainant presented the cheque for encashment but it issued the Section 138 notice from Delhi. In those circumstances, this Court had observed that the only question for consideration was "whether sending of notice from Delhi itself would give rise to a cause of action for taking cognizance under the NI Act." It then went on to opine that the proviso to this Section "imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken." We respectfully agree with this statement of law and underscore that in criminal jurisprudence there is a discernibly demarcated difference between the commission of an offence and its cognizance leading to prosecution. The Harman approach is significant and sounds a discordant note to the Bhaskaran ratio. Harman also highlights the reality that Section 138 of the NI Act is being rampantly misused so far as territorial jurisdiction for trial of the Complaint is concerned. With the passage of time equities have therefore transferred from one end of the pendulum to the other. It is now not uncommon for the Courts to encounter the issuance of a notice in compliance with clause (b) of the proviso to Section 138 of the NI Act fro

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2014 Supreme(SC) 553

Cases Referred (28)