Very important point
“The Bank” as mentioned in Section 138 Proviso (a) of Negotiable Instruments Act, 1881 means the Bank of the drawer. Thus if cheque is not presented in time permitted before drawer’s Bank, the Criminal Court has no jurisdiction to issue process to the drawer of the cheque. Drawer can be held liable only for his civil liability.

Headnote:(i) Negotiable Instruments Act, 1881—Sections 2, 72 and 138—Dishonour of cheque when an offence—Cheque should be presented to the Bank within six months or any other period stated in cheque—What is meant by “The bank” as mentioned in clause (a) of the proviso to Section 138 of the N.I. Act?—Drawer’s Bank or any bank including collecting bank of the payee of the cheque (The former).
       Held : The payment of the cheque is contemplated by “the bank” meaning thereby where the person issuing the cheque has an account. “The” is the word used before nouns, with a specifying of particularising effect opposed to the indefinite or generalising force of “a” or “an”. It determines what particular thing is meant; that is, what particular thing we are to assume to be meant. “The” is always mentioned to denote particular thing or a person. “The” would, therefore, refer implicitly to a specified bank and not any bank. “The bank” referred to in clause (a) to the proviso to Section 138 of the Act would mean the drawee-bank on which the cheque is drawn and not all banks where the cheque is presented for collection including the bank of the payee, in whose favour the cheque is issued. (Para 9)
       The non-presentation of the cheque to the drawee-bank within the period specified in the Section would absolve the person issuing the cheque of his criminal liability under Section 138 of the Act, who shall otherwise may be liable to pay the cheque amount to the payee in a civil action initiated under the law. A combined reading of Sections 2, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable. Such presentation is necessarily to be made within six months at the bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee. (Para 10)
       P & H High and Gujarat High Court’s view approved and that of Madras High Court overruled.
       (ii) Negotiable Instruments Act, 1881—Section 138—Dishonour of cheque when an offence—Cheque to be presented to which bank for attracting criminal offence? (the drawer’s Bank)—Cheque not presented in time to drawer’s Bank—Effect of dishonour—No criminal liability but only civil liability.
       Held : As, admittedly, in this case the cheque was not presented before the drawer’s bank within the statutory period of six months, the criminal court had no jurisdiction to issue the process against the appellant. The impugned judgment of the High Court being contrary to law is thus not sustainable. The appeal is accordingly allowed and the impugned judgment is set aside. (Para 12)

Judgment

Sethi, J.—Leave granted.

2. (a) What is meant by, “the bank” as mentioned in Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act, 1881?

(b) Does such bank mean the bank of the drawer of the cheque or covers within its ambit any bank including the collecting bank of the Payee of the cheque?

(c) To which bank the cheque is to be presented for the purposes of attracting the penal provisions of Section 138 of the Act?

are the questions to be determined by this Court in this appeal.

3. Punjab and Haryana High Court in the case of Om Prakash v. Gurcharan Singh1 and Gujarat High Court in Arunbhai Nilkantharai Nanavati v. Jayaben Prahladbhai through Her Power of Attorney & Anr.2 have held that a cheque must be presented to the bank on which it is drawn within six months from the date of issue of the cheque. However, Madras High Court in A.B.K. Publications Ltd. & Ors. v. Tamil Nadu Newsprint & Papers Ltd.3 has taken the view that cheque can be presented either in the payee’s bank or in the drawer bank and the date of presentation in respective banks will be reckoned for calculating period of six months from the date it was drawn.

4. In the present case the High Court of Madhya Pradesh has endorsed the view of Madras High Court and disagreed with the views of Punjab and Haryana and Gujarat High Courts.

5. The admitted facts of the case are that the appellant issued Cheque No. 2477086 dated 21st July, 1997 for Rs. 10 lakhs drawn on the State Bank of Indore, Industrial Estate Branch, Indore in favour of the respondent. The respondent presented the cheque for payment on 26th September, 1997 which was returned unpaid. Again on 20th January, 1998, the respondent presented the cheque to its bank i.e. State Bank of India at Raipur. The cheque reached the drawer bank on 24th January, 1998, admittedly after six months from the date it became payable. The cheque was returned unpaid by the bank of the respondent on 3.2.1998. A notice as required under proviso (b) of Section 138 of the Negotiable Instruments Act was issued on 10.2.1998 which was received by the appellant on 16.2.1998. A criminal complaint under Section 138 of the Negotiable Instruments Act was filed in the Court of Judicial Magistrate, First Class, Raipur against the appellant in which notice was issued for appearing in the court on 23rd September, 1998. The appellant filed Criminal Revision No. 190 of 1998 in the Court of Sessions Judge, Raipur contending that as the cheque was presented for payment beyond the period of six months as prescribed under Proviso (a) to Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the Act”), no offence was made out, to be taken cognizance of. The revision was allowed by the Sessions Court on 3rd July, 1999. The respondent filed a further revision in the High Court which was allowed vide the order impugned holding, as noticed earlier, that the cheque can be presented within the six months before the drawer’s (payee’s) bank or its can be presented before the drawer as well as the payee’s bank.

6. Before adverting to the various provisions of law as applicable in the case, it has to be kept in mind that the law relating to Negotiable Instruments is the law of the commercial world which was enacted to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. In the absence of such instruments, the trade and commerce activities were likely to be adversely affected as it was not practicable for the trading community to carry on with it the bulk of the currency in force. The introduction of negotiable instruments owes its origin to the bartering system prevalent in the primitive society. The negotiable instruments are, in fact, the instruments of credit being convertible on account of the legality of being negotiated and thus easily

Click Here to Read the rest of this document

Cases Referred (2)