Criminal Appeal No. 2287 of 2009, Criminal Appeal No. 1593 of 2014 (Arising out of S.L.P. (Crl.) No. 2077 of 2009), Criminal Appeal No. 1594 of 2014 (Arising out of S.L.P. (Crl.) No. 2112 of 2009), Criminal Appeal No. 1595 of 2014 (Arising out of S.L.P. (Crl.) No. 2117 of 2009), Criminal Appeal Nos. 1596-1600 of 2014 (Arising out of S.L.P. (Crl.... Case: Dashrath Rupsingh Rathod Vs State of Maharashtra. Supreme Court (India)

Case NumberCriminal Appeal No. 2287 of 2009, Criminal Appeal No. 1593 of 2014 (Arising out of S.L.P. (Crl.) No. 2077 of 2009), Criminal Appeal No. 1594 of 2014 (Arising out of S.L.P. (Crl.) No. 2112 of 2009), Criminal Appeal No. 1595 of 2014 (Arising out of S.L.P. (Crl.) No. 2117 of 2009), Criminal Appeal Nos. 1596-1600 of 2014 (Arising out of S.L.P. (Crl...
JudgesT.S. Thakur, Vikramajit Sen and C. Nagappan, JJ.
IssueNegotiable Instruments Act, 1881 - Sections 3, 3(1), 72, 138, 139, 140, 141, 142, 145(2), 420; Prevention of Corruption Act, 1988 - Section 19; Environmental Protection Act, 1986 - Section 19; Central Sales Tax Act, 1956 - Section 11; Income Tax Act - Section 279; Code of Criminal Procedure, 1973 (CrPC) - Sections 2, 132, 177, 178, 179, 180, 18...
Judgement DateAugust 01, 2014
CourtSupreme Court (India)

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, 'Code of Criminal Procedure') 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 from a situs which bears no connection with the Accused or with any facet of the transaction between the parties, leave aside the place where the dishonour of the cheque has taken place. This is also the position as regards the presentation of the cheque, dishonour of which is then pleaded as the territorial platform of the Complaint Under Section 138 of the NI Act. Harman, in fact, duly heeds the absurd and stressful situation, fast becoming common-place where several cheques signed by the same drawer are presented for encashment and requisite notices of demand are also despatched from different places. It appears to us that justifiably so at that time, the conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder, whereas with the passage of two decades the manipulative abuse of territorial jurisdiction has become a recurring and piquant factor. The liberal approach preferred in Bhaskaran now calls for a stricter interpretation of the statute, precisely because of its misemployment so far as choice of place of suing is concerned. These are the circumstances which have propelled us to minutely consider the decisions rendered by two-Judge Benches of this Court.

4. It is noteworthy that the interpretation to be imparted to Section 138 of the NI Act also arose before a three-Judge Bench in Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609 close on the heels of Bhaskaran. So far as the factual matrix is concerned, the dishonoured cheque had been presented for encashment by the Complainant/holder in his bank within the statutory period of six months but by the time it reached the drawer's bank the aforementioned period of limitation had expired. The question before the Court was whether the bank within the postulation of Section 138 read with Sections 3 and 72 of the NI Act was the drawee bank or the collecting bank and this Court held that it was the former. It was observed that "non-presentation of the cheque to the drawee bank within the period specified in the Section would absolve the person issuing the cheque of his criminal liability Under Section 138 of the NI Act, who otherwise may be liable to pay the cheque amount to the payee in a civil action initiated under the law. A combined reading of Sections 3, 72 and 138 of the NI Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable." Clearly, and in our considered opinion rightly, the Section had been rendered 'accused-centric'. This decision clarifies that the place where a complainant may present the cheque for encashment would not confer or create territorial jurisdiction, and in this respect runs counter to the essence of Bhaskaran which paradoxically, in our opinion, makes actions of the Complainant an integral nay nuclear constituent of the crime itself.

5. The principle of precedence should promptly and precisely be paraphrased. A co-ordinate Bench is bound to follow the previously published view; it is certainly competent to add to the precedent to make it logically and dialectically compelling. However, once a decision of a larger Bench has been delivered it is that decision which mandatorily has to be applied; whereas a Co-ordinate Bench, in the event that it finds itself unable to agree with an existing ratio, is competent to recommend the precedent for reconsideration by referring the case to the Chief Justice for constitution of a larger Bench. Indubitably, there are a number of decisions by two-Judge Benches on Section 138 of the NI Act, the majority of which apply Bhaskaran without noting or distinguishing on facts Ishar Alloy. In our opinion, it is imperative for the Court to diligently distill and then apply the ratio of a decision; and the view of a larger Bench ought not to be disregarded. Inasmuch as the three-Judge Bench in Ishar Alloy has categorically stated that for criminal liability to be attracted, the subject cheque has to be presented to the bank on which it is drawn within the prescribed period, Bhaskaran has been significantly whittled down if not overruled. Bhaskaran has also been drastically diluted by Harman inasmuch as it has given primacy to the service of a notice on the Accused instead of its mere issuance by the Complainant.

6. In Prem Chand Vijay Kumar v. Yashpal Singh (2005) 4 SCC 417, another two-Judge Bench held that upon a notice Under Section 138 of the NI Act being issued, a subsequent presentation of a cheque and its dishonour would not create another 'cause of action' which could set the Section 138 machinery in motion. In that view, if the period of limitation had run out, a fresh notice of demand was bereft of any legal efficacy. SIL Import, USA v. Exim Aides Silk Exporters (1999) 4 SCC 567 was applied in which the determination was that since the requisite notice had been despatched by FAX on 26.6.1996 the limitation for filing the Section 138 Complaint expired on 26.7.1996. What is interesting is the observation that "four constituents of Section 138 are required to be proved to successfully prosecute the drawer of an offence Under Section 138 of the NI Act" (emphasis supplied). It is also noteworthy that instead of the five Bhaskaran concomitants, only four have been spelt out in the subsequent judgment in Prem Chand. The commission of a crime was distinguished from its prosecution which, in our considered opinion, is the correct interpretation of the law. In other words, the four or five concomitants of the Section have to be in existence for the initiation as well as the successful prosecution of the offence, which offence however comes into existence as soon as subject cheque is dishonoured by the drawee bank. Another two-Judge Bench in Shamshad Begum v. B. Mohammed (2008) 13 SCC 77 speaking through Pasayat J this time around applied Bhaskaran and...

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