NI Act Landmark Judgment

GURENDERRANA
(
Advocat
e)
ADDI
TIONALSECRETARY
DCBA
Ch.
No- ,Dwar
kaCour
t,New Del
hi-
M: |
GURENDER RANA (Advocate) ADDITIONAL SECRETARY,DCBA
SUBJECT INDEX
SR. SUBJECTS PAGE NO.
1 OBJECT OF N.I. ACT 5
2 SCOPE 9
RECENT AMENDMENT IN ACT – HIGHLIGHTS -

3 10
JURISDICTION AND COMPENSATION
4 SPEEDY AND EXPEDITIOUS DISPOSAL OF SUCH CASES 22
5 VALID NOTICE 28
6 SECTION 148 OF N I ACT 34
7 COMPONENT OF OFFENCE 36
8 COMPLAINT 36
DRAWING OF A CHEQUE/ HOLDER IN DUE COURSE /

9 37
LIABILITY OF LEGAL HEIRS
10 PRESUMPTION 44
11 PRESUMPTION OF LIABILITY U/S. 139 46
CHEQUE NOT ISSUED FROM THE ACCOUNT OF THE

12 65
ACCUSED
13 PRESENTATION OF CHEQUE 68
14 RETURNING OF THE CHEQUE UNPAID 70
NO BAR FOR THE DRAWER OF A CHEQUE TO GIVE

15 AUTHORITY TO A THIRD PERSON TO FILL UP THE 72
CHEQUE SIGNED BY HIM
COMPLAINT CAN BE DROPPED AS OFFENCE U/S 138 IS
16 74
CIVIL WRONG
17 RIGHT OF ACCUSED TO CROSS EXAMINATION 79
DIGEST ON Sec. 138 N.I. ACT, 1881 Page 1 of 189

PRONOUNCEMENT OF THE JUDGMENT AND ORDER OF
18 80
CONVICTION ABSENCE OF THE ACCUSED
19 COMPOUNDING OF OFFENCE - COSTS 82
20 SECURITY CHEQUE- STOP PAYMENT CASES 84
21 CLOSURE OF ACCOUNT CASES 89
MERE DENIAL OF DEBT NOT SUFFICIENT TO ACQUIT

22 91
ACCUSED IN CHEQUE BOUNCING CASE
SECOND OR SUCCESSIVE DEFAULT IN PAYMENT OF

23 93
THE CHEQUE
24 TWO CONSECUTIVE NOTICES 96
25 OFFENCE BY COMPANY 98
PRACTICE AND PROCEDURE - MEDIATION IN

26 117
NEGOTIABLE INSTRUMENT ACT CASES
WITHDRAWAL OF COMPLAINT & NON-EXECUTION OF

27 122
NBW
BURDEN ON DRAWER/ADDRESSEE TO PROVE NON-

28 122
SERVICE OF NOTICE
29 DEATH OF COMPLAINANT UNDER NI ACT, 1881 122
30 CONDONATION OF DELAY 123
31 DE-NOVO TRIAL 125
32 SUBSTITUTION OF COMPLAINANT 126
33 FILLING THE PARTICULARS OF BLANK CHEQUE 127
34 NOTICE 129
WHETHER THE ACCUSED ON PUTTING UP APPEARANCE

35 135
CAN SEEK DISCHARGE FROM THE CASE?
WHETHER BOUNCING OF A CHEQUE ISSUED TOWARDS
36 A TIME BARRED DEBT ATTRACTS PENAL LIABILITY 132
UNDER SECTION 138?

WHETHER THE QUESTION OF HOLDING A MONEY
37 LENDER‘S LICENSE IS RELEVANT IN A COMPLAINT 139
FILED UNDER SECTION 138?
WHETHER SECTION 138 IS ATTRACTED WHEN A
38 CHEQUE IS ISSUED IN DISCHARGE OF LEGAL LIABILITY 139
OF ANOTHER?
WHETHER NON PRODUCTION OF ACCOUNT BOOKS BY
39 140
THE COMPLAINANT IS FATAL FOR HIS CASE?
WHETHER NOTICE BY FAX OR EMAIL OR SMS OR BY
40 COURIER PERMISSIBLE? WHAT IF RULE FOR COURIER 141
SERVICE IS NOT FRAMED?
41 FSL 141
42 CR.P.C. SEC. 256 146
43 TWO COMPLAINTS 150
44 CONDITIONAL SUSPENSION OF SENTENCE 150
45 ADVOCATE FEES IN PERCENTAGE CHQUE BOUNCE 150
46 RECOVERY OF FINE AND COMPENSATION 151
47 CR.P.C. SEC. 427 154
CHEQUE ISSUED PURSUANT TO THE ORDER OF THE

48 154
LOK ADALAT
49 AMENDMENT IN COMPLAINT 155
50 RIGHT OF ACCUSED TO PRODUCE EVIDENCE 156
51 MORE THAN ONE EXAMINATION U/S. 313, CR.P.C. 159
52 CALCULATING THE PERIOD OF ONE MONTH 161
53 LOST OF CHEQUE 162
ORDER OF MORATORIUM IS PASSED U/S INSOLVENCEY

54 164
AND BANKRUPTCY CODE 2016 AND N.I. ACT 138
55 SICK Co. U/S 22 OF SICA & U/S 138 OF N.I. ACT 167

56 MATERIAL ALTERATION IN CHEQUE 169
57 UNACCOUNTED MONEY 169
58 PRODUCTION OF THE ACCOUNT BOOKS/CASH BOOK 170
59 EVIDENCE ON AFFIDAVIT 171
60 ADDITION OF PARTY AND CR.P.C. SEC 319 173
61 PROOF OF BANKING DOCUMENT 174
62 MODEL NOTICE/ORDER/FS 177-189

1. OBJECT of N.I. ACT
1.1 Object & Purpose:
The object of this amendment Act is:,

1. To regulate the growing business, trade, commerce and Industrial
activities.
2. To promote greater vigilance in financial matters.
3. To safeguard the faith of creditors in drawer of cheque.
(Krishna vs. Dattatraya 2008(4) Mh.L.J.354 (Supreme Court)
1.2 Electronics Trade & Technology Development Corporation Ltd.,

Secunderabad v/s Indian Technologists & Engineers (Electronics) (P)
Ltd. and Another (1996) 2 SCC 739,
―Para 6 The object of bringing Section 138 on statute appears to be to

inculcate faith in the efficacy of banking operations and credibility in
transacting business on negotiable instruments. Despite civil
remedy, Section 138 intended to prevent dishonesty on the part of the
drawer of negotiable instrument to draw a cheque without sufficient funds
in his account maintained by him in a book and induce the payee or holder
in due course to act upon it. Section 138 draws presumption that one
commits the offence if he issues the cheque dishonestly. It is seen that once
the cheque has been drawn and issued to the payee and the payee has
presented the cheque and thereafter, if any instructions are issued to the
bank for non-payment and the cheque is returned to the payee with such an
endorsement, it amounts to dishonour of cheque and it comes within the
meaning of Section 138‖
1.3 Goa Plast (P) Ltd. v/s Chico Ursula D‘Souza (2004) 2 SCC 235,
―The object and the ingredients under the provisions, in particular, Sections
138 and 139 of the Act cannot be ignored. Proper and smooth functioning of
all business transactions, particularly, of cheques as instruments, primarily
depends upon the integrity and honesty of the parties. In our country, in a
large number of commercial transactions, it was noted that the cheques
were issued even merely as a device not only to stall but even to defraud the
creditors. The sanctity and credibility of issuance of cheques in commercial
transactions was eroded to a large extent. Undoubtedly, dishonour of a
cheque by the bank causes incalculable loss, injury and inconvenience to
the payee and the entire credibility of the business transactions within and
outside the country suffers a serious setback. Parliament, in order to restore
the credibility of cheques as a trustworthy substitute for cash payment
enacted the aforesaid provisions. The remedy available in a civil court is a
long,drawn matter and an unscrupulous drawer normally takes various
pleas to defeat the genuine claim of the payee.‖

1.4 Indra Kumar Patodia V/S Reliance Industries Limited (2012) 6 SCC
463
The Negotiable Instruments Act was amended by the Banking, Public
Financial Institutions and Negotiable Instruments Laws (Amendment) Act
1988 wherein new Chapter XVII was incorporated for penalties in case of
dishonour of cheques due to insufficiency of funds in the account of the
drawer of the cheque. These provisions were incorporated in order to
encourage the culture of use of cheques and enhancing the credibility of the
instrument. The insertion is aimed at early disposal of cases relating to
dishonour of cheques , enhancing punishment for offenders, introducing
electronic image of a truncated cheque and a cheque in the electronic form
as well as exempting an official nominees of director from prosecution under
the Act.
1.5 M/s. Dalmia Cement (Bharat) Ltd v/s M/s. Galaxy Traders &
Agencies Ltd. & Ors. 2001 6 SCC 463; Supreme Court of India
Para 3. The Act was enacted and Section 138 thereof incorporated with a
specified object of making a special provision by incorporating a strict
liability so far as the cheque, a negotiable instrument, is concerned. The law
relating to negotiable instrument is the law of commercial world legislated 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, including a cheque, the trade and
commerce activities, in the present day would, are likely to be adversely
affected as it is impracticable for the trading community to carry on with it
the bulk of the currency in force. The negotiable instruments are in fact the
instruments of credit being convertible on account of legality of being
negotiated and are easily passable from one hand to another.
To achieve the objectives of the Act, the legislature has, in its wisdom,
thought it proper to make such provisions in the Act for conferring such
privileges to the mercantile instruments contemplated under it and provide
special penalties and procedure in case the obligations under the
instruments are not discharged. The laws relating to the Act are, therefore,
required to be interpreted in the light of the objects intended to be achieved
by it despite there being deviations from the general law and the procedure
provided for the redressal of the grievances to the litigants. Efforts to defeat
the objectives of law by resorting to innovative measures and methods are to
be discouraged, lest it may affect the commercial and mercantile activities in
a smooth and healthy manner, ultimately affecting the economy of the
country.
Para 4. Section 138 of the Act makes a civil transaction to be an offence by
fiction of law. Where any cheque drawn by a person on an account

maintained by him with a banker for payment of any amount of money to
another person is returned by the bank unpaid either because of the
amount or money standing to the credit of that person being insufficient to
honour the cheque or that it exceeds the amount arranged to be paid from
that account, such person, subject to the other conditions, shall be deemed
to have committed an offence under the Section and be punished for a term
which may extend to one year or with fine which may extend to twice the
amount of cheque or with both. To make the dishonour of the cheque as an
offence, the aggrieved party is required to present the cheque to the bank
within a period of six months from the date on which it is drawn or within
the period of its validity, whichever is earlier and the payee or the holder in
due course of the cheque makes a demand for payment of the cheque
amount by giving a notice in writing to the drawer of the cheque within 15
days of the receipt of information by him from the bank regarding the return
of the cheque as unpaid and drawer of the such cheque fails to make the
payment of the amount within 15 days of the receipt of the said notice.
1.6 IMPORTANT INGREDIENTS OF S. 138
A mere presentation of delivery of cheque by the accused would not

amount to acceptance of any debt or liability. Complainant has to show that
cheque was issued for any existing debt or liability. Thus, if cheque is issued
by way of gift and it gets dishonored offence u/s. 138 of the will not be
attracted.
These provisions deal with procedure, trial, cognizance, defence and
punishment relating to offences of dishonour of cheques. Dishonour of a
cheque is by itself not an offence u/s 138 of Negotiable Instruments Act. To
come within the ambit of offence in such a case following elements have to
be fulfilled:
1. Drawing 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
notice.
The offence of dishonor of cheque has been made cognizable only on a

written complaint by the payee or holder in due course. Sections 138 to 147
of Negotiable Instruments Act as inserted by the Amendment Act 2002,
further lay down a kind of complete Code for trial of offences under the
Negotiable Instruments Act. Thus, if the provision of Negotiable Instruments
Act specially sections 138 to 147 are followed strictly by the Courts, a large
number of such cases will reach their final fate within a fair and reasonable

time. These provisions have been incorporated with a view to encourage the
culture of use of cheques and enhancing credibility of the Instrument.
1.7 VALIDITY OF CHEQUE

Anil Vasudev Rajgor V/s State Of Gujarat, 2017 (3) GLH 802
Negotiable Instruments Act 138 held, provisions of S. 138 of

Negotiable Instruments Act are enacted taking into consideration of
currency of cheques for a period of six months from the date of issue or the
reduced period of validity, whichever is earlier , therefore, this provision of
Negotiable Instruments Act contemplates cheque with lesser period of
validity than six months, which is general banking practise and stipulates
that cheque should be presented for encashment either within period
of six months or within period of validity of cheque, whichever is
earlier , hence cheque which is issued with reduced validity period has
to be presented for encashment within expiry of that period so as to
attract provisions of S. 138 of Negotiable Instruments Act , further,
cheque was presented by appellant for encashment after expiry of currency
of three months, provisions of S. 138 of Negotiable Instruments Act are not
attracted in this case in view of clause (a) of the proviso to S. 138 of the Act
– impugned proceedings quashed , applications allowed.
1.8 Nandeshwari Steel Ltd.Thro Mitesh Ashwinbhai Patel V/s State Of

Gujarat 2018 (1) DCR 181.
Held Cheques issued before determination of debt, before
adjudication of debt if cheques are obtained – complaint not
maintainable. Accused no. 1 as a director of the company willingly tendered
seven post dated cheques towards evasion of excise duty and wrong
availment of Cenvat Credit, complaint for dishonour of cheque ,contention of
applicant that the cheques were obtained by threat, pressure and duress are
without any basis and are palpably false, question as to legally enforceability
of debt , held, demand of payment towards evasion of excise duty without
adjudication in accordance with the provisions of Excise Act and Rules
framed there under, requirement of satisfaction of two conditions u/s 138 of
Act for the attraction of complaint u/s 138 of NI Act , cheque is required to
be issued to towards discharge wholly or in part or any debt or other liability
of the drawer to the payee without adjudicating upon evasion of excise duty
by the competent authority, cheques in question obtained by the
complainant, in the absence of any adjudication by a competent authority
under the provisions of the Act as regards the liability of the applicants to
pay the excise duty, it cannot be said that on the date when the cheques
were drawn there was an existing enforceable debt or liability, complaints
quashed,applications allowed.

2. SCOPE
Section 138 of Negotiable Instruments Act, reflects the anxiety of the
legislature to usher in a new healthy commercial morality through the
instrumentality of the penal law. Here is a classic example where, as part of
an attempt to evolve a healthy norm of commercial behavior, the principal of
social engineering through the instrumentality of penal law is put into
operation. What was, prior to the amendment of the Negotiable Instruments
Act in 1988 only a moral or civil wrong, has been transformed and exalted to
the position of a crime by a deft amendment of the Statute.
The essential requirements to attract section 138, Negotiable
Instruments Act are:
(a)The cheque for an amount is issued by the drawer to the payee /
complainant on a bank account maintained by him.
(b) The said cheque is issued for the discharge, in whole or in part of any
debt or other liability.
(c) The cheque is returned by the bank unpaid on account of insufficient
amount to honour the cheque or it exceeds the amount arranged to be paid
from that account by an agreement made with the bank.
(d)The cheque is presented within 6 or now (3) months from the date on
which it is drawn or within the period of its validity.
(e) 30 days demand notice is issued by the payee or the holder in due course
on receipt of information by him from the bank regarding the dishonour of
the cheque.
(f) The drawer of said cheque fails to make payment of the said amount
of the money to the payee or the holder on due course within 15 days of the
said notice.
(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)

3. RECENT AMENTMENT IN ACT – HIGHLIGHTS 2015
(w.e.f. 15-6-2015). & 2018
Amendment of section 142 In the principal Act, section 142 shall be

numbered as sub-section thereof and after sub-section (1) as so numbered,
the following sub-section shall be inserted, namely:,
(1) The offence under section 138 shall be inquired into and tried only by
a court within whose local jurisdiction the bank branch of the payee, where
the payee presents the cheque for payment, is situated.‖
3.1142 (A). , Validation for transfer of pending cases

‗‗142A. (1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974) or any judgment, decree, order or directions of
any court, all cases arising out of section 138 which were pending in any
court, whether filed before it, or transferredto it, before thecommencement of
the Negotiable Instruments (Amendment) Act, 2015, shall be transferred to
the court having jurisdiction under sub-section (2) of section 142 as if that
sub-section had been in force at all material times.
(2) Notwithstanding anything contained in sub-section (2) of section 142 or
sub-section (1), where the payee or the holder in due course, as the case
may be, has filed a complaint against the drawer of a cheque in the court
having jurisdiction under sub-section (2) of section 142 or the case has been
transferred to that court under sub-section (1), all subsequent complaints
arising out of section 138 against the same drawer shall be filed before the
same court irrespective of whether those cheques were presented for
payment within the territorial jurisdiction of that court.
(3) If, on the date of the commencement of the Negotiable Instruments
(Amendment) Act, 2015, more than one prosecution filed by the same
person against the same drawer of cheques is pending before different
courts, upon the said fact having been brought to the notice of the court,
such court shall transfer the case to the court having jurisdiction under
sub-section (2) of section 142 before which the first case was filed as if that
sub-section had been in force at all material times.‘
3.2 Mahendra Kumar Kedarnath Modi and Ors.Vs.State of Gujarat and

Ors. 2018(2)Crimes441(Guj.), 2018GLH(1)288
Para 38. Thus, although the cheques issued by the accused were collected
by the complainant at New Delhi and were presented for clearance with
the Corporation Bank at New Delhi, yet in my view, it could be said
that the cheques were presented through an account, i.e., the account
maintained by the complainant with the Bank of Baroda, Fertilizer
Nagar Branch, Vadodara. Without the account of the complainant

maintained with the Bank of Baroda, Fertilizer Nagar Branch, Vadodara, the
Corporation Bank could not have given credit if, ultimately, the cheques
would have been cleared. What is important is the account maintained
by the complainant with the Bank of Baroda, Fertilizer Nagar Branch at
Vadodara. The Corporation Bank has made itself very clear in the certificate
dated 07.09.2015 that the cheques were deposited and dishonored to the
account No. 02090500000002 at the Bank of Baroda, Fertilizer Nagar
Branch, Vadodara, Gujarat. Giving strict interpretation to the words
"through an account", as suggested by the learned counsel appearing for the
applicants will frustrate the very object, with which, section 142 of the N.I.
Act came to be amended. I find it extremely difficult to accept the argument
of Mr. Parikh that in the case on hand, the payee could not be said to have
used his account nor his Bank to deal with the cheques. If the cheques are
account payee, such cheques, for the purpose of clearance, are bound to be
"through an account". Of course, it is the argument of Mr. Parikh that a
situation like the one on hand would fall within the clause (b) to section
142(2) and presenting the cheques across the counter is not the only mode,
which wouldbring the case within the ambit of clause(b). However, I do not
find merit in such submission. It is also difficult for me to accept the
argument that the original account of the complainant with the Bank of
Baroda has nothing to do with the independent agreement and
understanding between the GSFC and the Corporation Bank. As noted
above, it is the original account of the complainant maintained with
the Bank of Baroda, which is important and without the said account,
the arrangement with the Corporation Bank can never come into play.
Para 39. My above noted interpretation of the words "through an account"
would sub serve the object of the amendment of section 142 of the N.I. Act
and insertion of new section 142(a) by amendment. Any other interpretation
would frustrate the object. The complainant company is a government
undertaking and its business is spread across the various parts of the
country. The Fast Collection Service provided by the Corporation Bank helps
the complainant to a considerable extent. The cheques received at the
different places in the country can be deposited at a convenient FCS Branch
of the Corporation Bank and the funds so collected are credited to the bank
account of the complainant.
Para 40. The effect of the rule of strict construction might almost be
summed up in the remark that where an equivocal word or ambiguous
sentence leaves a reasonable doubt of its meaning which the canons of
interpretation fail to solve, the benefit of the doubt should be given to the
subject and against the legislature which has failed to explain itself. But it
yields to the paramount rule that every statute is to be expounded according
to its expressed or manifest intention and that all cases within the mischief
aimed at are, if the language permit, to be held to fall within its remedial
influence.

3.3. Brijendra Enterprise and Ors.v/s State of Gujarat and Ors 2016(3)
GLH 143
Para24. Let me give an example to understand the jurisdiction

according to the amendment:
"(1) 'A' holds an account with the Navrangpura Branch, Ahmedabad, of 'XYZ'
Bank, issues a cheque payable at par in favour of 'B'. 'B' holds an account
with the M.S. University Road Branch, Vadodara, of the 'PQR' Bank,
deposits the said cheque at the Surat Branch of the 'PQR' Bank and the
cheque is dishonoured. The complaint will have to be filed before the Court
having the local jurisdiction where the M.S. University Road Branch,
Vadodara, of the 'PQR' Bank is situated.
(2) 'A' holds an account with the Navrangpura Branch, Ahmedabad, of 'XYZ'
Bank, issues a cheque payable at par in favour of 'B'. 'B' presents the said
cheque at the Vadodara Branch of the 'XYZ' Bank (but 'B' does not hold
account in any branch of the 'XYZ' Bank) and the cheque is dishonoured.
The complaint will have to be filed before the Court having the local
jurisdiction where the Navrangpura Branch, Ahmedabad, of the 'XYZ' Bank
is situated."
Para25. Therefore, to summarise, first, when the cheque is delivered for
collection through an account, the complaint is to be filed before the Court
where the branch of the bank is situated, where the payee or the holder in
due course maintains his account and, secondly, when the cheque is
presented for payment over the counter, the complaint is to be filed before
the Court where the drawer maintains his account.
Para26. Secondly, once a complaint for dishonour of the cheque is filed in
one particular Court at a particular place, then later on if there is any other
cheque of the same party (drawer) which has also dishonoured, then all
such subsequent complaints for dishonour of the cheques against the same
drawer will also have to be filed in the same Court (even if the person
presents them in some bank in some other city or area). This would ensure
that the drawer of the cheques is not harassed by filing multiple complaints
for dishonour at different places. It necessarily implies that even multiple
complaints for dishonour of cheques against the same party can be filed
only in one Court even though the cheques might have been presented in
different banks at different places.
3.4 Siddharth Exports V/s Kotak Mahindra Bank Ltd. High Court Of
Gujarat R/Special Criminal Application No. 2528 Of 2019 Date :
04/09/20192019 (0) AIJEL,HC 241156
Para2.2 The firm Sidharth Exports made a loan agreement bearing

No.152532177 dated 31.07.2016 with Kotak Mahindra Bank Ltd. with
personal finance, Delhi, Noida. The Kotak Mahindra Bank Ltd. financed the

petitioner firm a sum of Rs.25,00,000/( Rupees Twenty Five Lacs) vide its
letter dated 31.07.2016.
Para2.3 The petitioner firm had issued the security cheques for ECS
purpose but, said cheques according to the petitioner firm, have been
misused by the respondent intentionally presenting them for encashment at
Ahmedabad so as to create jurisdiction within the jurisdiction of
Ahmedabad.
Para14 It is quite apparent from the said provision that ordinarily, at two
places, jurisdiction would lie (1) when cheque is presented for collection
through an account, the branch where the payee or holder in due course,
maintains the account, is situated (2) when presented otherwise through an
account, the branch of bank where the drawer maintains the account. In
case of the corporates, banks jurisdiction would lie with the Court having
jurisdiction over the branch bank of drawer for the cheque having been
presented otherwise through an account.
Para15 In the case on hand, drawer's bank is at Noida and the head quarter
of Kotak Mahindra Bank is at Mumbai, it also has its branch in Noida and
yet, it has chosen to tender the cheque at the branch bank at Ahmedabad.
Para16 Complainant being the Bank, it naturally would have branches

almost in all parts of the country, but, what would be relevant for the
purpose of deciding the aspect of jurisdiction is whether the Bank ought to
have deposited the cheque at Ahmedabad and whether it had valid reason
for such deposits.
Para17 This Court notices that the entire transaction is at Noida, New Delhi.
The notice of dishonour of cheque also has been from Noida, New Delhi. The
Head Office of the Bank is at Mumbai. Ahmedabad branch does not come
into the picture at all so far as the customer is concerned. An attempt is
made by the learned counsel on raising of query by the Court that the loan
department is being handled at Ahmedabad. It is surprising as to how
Ahmedabad would have a jurisdiction because each branch would have a
loan department.
Para18.2 This Court fails to fathom this approach of secrecy on the part of
the bank, which chose not to reveal this vital aspect to the petitioner also,
although, relationship of the parties is governed by the terms of
contract/loan agreement. It is admitted by the learned Senior counsel Mr.
Pahwa when this Court raised a specific query as to whether anywhere, in
any document, reference is made of loan account being maintained at
Ahmedabad, that no such whisper is made. How in that case this internal

arrangement of the bank would lend jurisdiction to the Court at
Ahmedabad.
18.3 This is anathema to the citizen centric approach, much emphasized

upon in all service rendering institutes. This also brings to the fore yet
another unpalatable detail that all matters of dishonoured cheques are tried
at Ahmedabad, no matter where the loan transaction is made. All customers
of the bank are required to defend themselves at Ahmedabad due to
maintenance of loan account at Ahmedabad. There is no justifiable ground,
except the administrative convenience of banking authority or an attempt to
force compromise in cases of dishonoured cheques by maintaining the loan
account at Ahmedabad for the purpose of deposit of cheques…
It is one thing to maintain details of loan accounts centrally by the bank,

but, it is quite different to insist on such administrative modality to be used
for the purpose of ousting jurisdiction of the court, which otherwise would
get or to confer jurisdiction upon the Court, when in fact it did not exist.
Again, not to reveal this vital information to the loanee/customer, even while
issuing the mandatory notice before initiating proceedings under section
138 of the N.I. Act also need not be encouraged merely because the
customer is a voiceless majority largely.
Para20 It is not revealed as to whether there has been initiation of

proceedings under section 138 of the N.I.Act for some of the dishonoured
cheques, other than the cheque in question.. Admittedly, it is not done at
Ahmedabad. Section 142A also makes it very clear that if the prosecution is
going on between the same parties, the Court proceedings shall be
transferred. The remaining proceedings under section 138 of the Negotiable
Instruments Act shall not cause unnecessary harassment to the parties.
This Court cannot be oblivious to the decision of Dashrath Rupsinh

Rathod(supra) where the Apex Court came down heavily upon the Banks and
the financial institutions, which would file proceedings for dishonour of the
cheques at different places. Being conscious of the fact that in post
Dashrath Rupsinh Rathod decision, the amendment in 2015 has been brought
on the statute, that may not take away the requirement of all the matters to
be tagged together. Assuming that there is no other matter pending against
the petitioner, when the entire transaction is at Noida, New Delhi, with no
cause of action having arisen at Ahmedabad, for the purpose of jurisdiction
the amended provisions of section 142 and 142A if are kept in view, in the
opinion of this Court, Ahmedabad will have no jurisdiction with no cause of
action at all having arisen here.
However, on the issue of jurisdiction, the Court is of the firm opinion that
the matter shall need to be filed at Noida, New Delhi.

Para23 Let the original complainant be handed over the original complaint
for him to file it before the Court at Noida since the proceedings at
Ahmedabad will not lie.
3.5Gautam Industrial Corporation Pvt Ltd Thro' Naresh Annraj Bhansali

(Deceased) Vs State Of Gujarat, 05 Aug 2016, 2017 1 Glr 793
Section 142(2)(a), amended through the Negotiable Instruments
(Amendment) Second Ordinance, 2015, vests jurisdiction for initiating
proceedings for the offence under Section 138 of the Negotiable Instruments
Act, inter alia in the territorial jurisdiction of the Court, where the cheque is
delivered for collection (through an account of the branch of the bank where
the payee or holder in due course maintains an account)The conjoint
reading of the newly inserted provision of the N.I Act and the judgment of
the Supreme Court in Bridgestone India Private Limited it is vividly clear
that the newly inserted provisions of the N.I Act are applicable with
retrospective effect of 15.6.2015 and the decision of the Supreme Court in
the case of Dashrath Rupsingh Rathod is statutorily superseded.
3.6 Gulf Asphalt Private Limited Known as Aspam Petronergy Pvt. Ltd.
VS Dipesh Sinh Kishanchandra Rao, 08 May 2015 2016 2 DCR 228;
2015 0 Supreme(Guj) 260;
Complaint filed by proprietary concern through its proprietor During
pendency of trial entire running business of proprietary concern taken over
by a Private Ltd. Company with all its assets and liabilities , Subsequent
addition/Substitution of Accused , Permissibility of Held, Wrong number on
dishonor cheque is of no relevance for drawer to pay amount covered by
such cheque, have also been referred in Pt. Gorelal's case, evidence that this
Court has taken a consistent view that there is no provision for amendment
in the Code of Criminal Procedure and the amendment in the complaint
cannot be permitted, but in the case of Pt. Gorelal taking note of the
aforesaid cases, it has been held that application for correction of cheque
number can be allowed , in judicial administration precedents which
enunciate the rules of law from the foundation of the administration of
justice under our system, it has always been insisted that the decision of a
coordinate Bench must be followed, Court passed a correct order allowing
the application Exh.3 and permitting the applicant herein to be substituted
as a complainant in place of the original proprietary concern Application is
quashed.
3.7Bridgestone India Pvt.Ltd. Vs Inderpal Singh, 24 Nov 2015, 2016 2

Scc 75.
Held In view of section 142 (2)(a), inserted by Negotiable Instruments

(Amendment) Second Ordinance, 2015, the court at the place where the

payee maintains his account and where the cheque was intimated to have
been dishonored would have jurisdiction u/s 138.
Facts of the case:
A cheque No.1950, drawn on the Union Bank of India, Chandigarh, was
issued by Inderpal Singh to the appellant M/s Bridgestone India Pvt. Ltd.
The cheque was in the sum of Rs.26,958/,. The appellant M/s Bridgestone
India Pvt. Ltd. presented the above cheque at the IDBI Bank in Indore. The
appellant received intimation of its being dishonored on account of ―exceeds
arrangement‖ on 04.08.2006 at Indore. Proceedings were initiated by the
appellant in the Court of the Judicial Magistrate, First Class, Indore, under
Section 138 of the Negotiable Instruments Act, 1881. The accused-
respondentInderpal Singh, preferred an application before the Judicial
Magistrate, First Class contesting the territorial jurisdiction with respect to
the above cheque drawn on the Union Bank of India, Chandigarh. The
Judicial Magistrate, First Class, Indore held that he had the territorial
jurisdiction to adjudicate upon the controversy raised by the appellant M/s
Bridgestone India Pvt.Ltd. under Section 138 of the Negotiable Instruments
Act, 1881. The High Court accepted the prayer made by the accused-
respondent Inderpal Singh by holding, that the jurisdiction lay only before
the Court wherein the original drawee bank was located, namely, at
Chandigarh, wherefrom the accused-respondent had issued the concerned
cheque bearing No.1950, drawn on the Union Bank of India, Chandigarh.
3.8The Amendment 2018 incorporates Section 143A in the Negotiable

Instrument Act, 1881which provides for the Power to provide for
interim compensation to the complainant.
The insertion of new provisions in the NI Act aims at addressing the

issue of undue delay in finality of cheque dishonor cases. It is believed that
the amendment will strengthen the credibility of cheques and help trade and
commerce in general.
3.9NEGOTIABLE INSTRUMENTS (AMENDMENT) ACT, 2018
Preliminary,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:,
S.1 Short title and commencement
(1) This Act may be called the Negotiable Instruments (Amendment) Act,
2018.
(2) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
S.2 Insertion of new section 143A

In the Negotiable Instruments Act, 1881 (26 of 1881) (hereinafter
referred to as the principal Act), after section 143, the following section shall
be inserted, namely:,Power to direct interim compensation :143A.
(1) Notwithstanding anything contained in the Code of Criminal Procedure,
1973 (2 of 1974), the Court trying an offence under section 138 may order
the drawer of the cheque to pay interim compensation to the complainant,
(a) In a summary trial or a summons case, where he pleads not guilty to
the accusation made in the complaint; and
(b) In any other case, upon framing of charge.
(2) The interim compensation under sub-section (1) shall not exceed
twenty per cent. of the amount of the cheque.
(3) The interim compensation shall be paid within sixty days from the
date of the order under sub-section (1), or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the drawer of the cheque.
(4) If the drawer of the cheque is acquitted, the Court shall direct the
complainant to repay to the drawer the amount of interim compensation,
with interest at the bank rate as published by the Reserve Bank of India,
prevalent at the beginning of the relevant financial year, within sixty days
from the date of the order, or within such further period not exceeding thirty
days as may be directed by the Court on sufficient cause being shown by the
complainant.
(5) The interim compensation payable under this section may be
recovered as if it were a fine under section 421 of the Code of Criminal
Procedure, 1973 (2 of 1974).
(6) The amount of fine imposed under section 138 or the amount of
compensation awarded under section 357 of the Code of Criminal
Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or
recovered as interim compensation under this section."
S.3 INSERTION OF NEW SECTION 148
In the principal Act, after section 147, the following section shall be
inserted, namely:, Power of Appellate Court to order payment pending
appeal against conviction :
S.148 Power of Appellate Court to order payment pending appeal
against conviction
(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction
under section 138, the Appellate Court may order the appellant to deposit
such sum which shall be a minimum of twenty per cent. of the fine or
compensation awarded by the trial Court:

Provided that the amount payable under this sub-section shall be in
addition to any interim compensation paid by the appellant under section
143A.
(2) The amount referred to in sub-section (1) shall be deposited within
sixty days from the date of the order, or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the appellant.
(3) The Appellate Court may direct the release of the amount deposited
by the appellant to the complainant at any time during the pendency of the
appeal:
Provided that if the appellant is acquitted, the Court shall direct the
complainant to repay to the appellant the amount so released, with interest
at the bank rate as published by the Reserve Bank of India, prevalent at the
beginning of the relevant financial year, within sixty days from the date of
the order, or within such further period not exceeding thirty days as may be
directed by the Court on sufficient cause being shown by the complainant.
JUDGMENT OF INTERIM COMPENSATION
3.10 M/S Smart Options Services Vs State Of Gujarat On 26 June, 2019

Special Criminal Application No. 6791 Of 2019,
Court Cannot Struck-off The Defence On Account Of Non Payment Of
20% Of The Interim Compensation
1. Prima facie, it appears that the Court cannot struck-off the defence on
account of non-payment of 20% of the interim compensation amount at
the time of recording of plea.
2. Looking to the provisions contained under Section 143A of the Negotiable
Instruments Act, it cannot be applied to the pending cases as per the
decision of the Hon'ble Punjab and Haryana High Court at Chandigarh
rendered in the case of M/s.Ginni Garments and another V/s. M/s.Sethi
Garments passed in CRR No.9872,2018 (O&M) on 04.04.2019.
3. Apart from it, if any order is passed under Section 143A of the Negotiable
Instruments Act, in that event, the complainant can recover such
amount as provided under Section 421 of the Code of Criminal
Procedure. Therefore, present petition deserves consideration.
4. Meanwhile, the learned trial Judge is at liberty to proceed with hearing of
Criminal Case No.5381 of 2019 (Old No.218 of 2015 and C.C. No.1422 of
2016) without insisting payment of 20% of the amount of cheque in
question. Direct service today is permitted.

NATURE OF AMENDMEND IS PROSPECTIVE
3.11G. J. Raja VS Tejraj Surana, 30 Jul 20192019 0 AIR(SC) 3817;

2019 0 Supreme(SC) 811;
Section 143A of the Act was inserted in the statute book with effect
from 01.09.2018.
QUESTION: The question that arises therefore is whether Section 143A of
the Act is retrospective in operation and can be invoked in cases where the
offences punishable under Section 138 of the Act were committed much
prior to the introduction of Section 143A. We are concerned in the present
case only with the issue regarding applicability of said Section 143A to
offences under Section 138 of the Act, committed before the insertion of said
Section 143. ?
ANSWER:
(1) Applicability of Section 143A of Negotiable Instruments Act, 1881 must
be held to be prospective in nature and confined to cases where offences
were committed after introduction of Section 143A.
(2) Section 143A of Negotiable Instruments Act, 1881not only creates a new
disability or an obligation but also exposes the accused to coercive methods
of recovery of such interim compensation through machinery of State as if
interim compensation represented arrears of land revenue.
Para 22. In our view, the applicability of Section 143A of the Act must,
therefore, be held to be prospective in nature and confined to cases where
offences were committed after the introduction of Section 143A, in order to
force an accused to pay such interim compensation.
Para 24. In the ultimate analysis, we hold Section 143A to be prospective
in operation and that the provisions of said Section 143A can be
applied or invoked only in cases where the offence under Section 138
of the Act was committed after the introduction of said Section 143A
in the statute book. Consequently, the orders passed by the Trial Court as
well as the High Court are required to be set aside. The money deposited by
the Appellant, pursuant to the interim direction passed by this Court, shall
be returned to the Appellant along with interest accrued thereon within two
weeks from the date of this order.
NEED OF APPLICATION FOR COMPENSATION UNDER SECTION 143 A?

3.12 Jisha, W/o. Praveen V/s State of Kerala &Ors. –Crl. M C.No.3136
of 2019 Decided On : 25,06,2019, 2019 0 Supreme(Ker) 691 2019 5
KHC 729; 2019 4 KLT 558 HIGH COURT OF KERALA
The complainant has approached the court by filing a petition under Section
143A N.I. Act. But on a reading of the provision it is clear that for
invoking the power under the provision, an application need not be
filed by the complainant. The power can be exercised by the court in
seizing of the prosecution suo motu at the relevant time when a plea that
the accused is not guilty of the offence alleged against him is raised by him.

There is no need for the complainant to apply for getting the relief of the
nature as contemplated by the provision.
7. It is indicative on a reading of Section 143A which has been newly
introduced into the N.I Act that the Court trying an offence under
section 138 shall suomotu exercise the power. There is no need for an
application to be filed by the complainant in that regard. Likewise, the
section also does not provide for an opportunity, for the accused to be
heard. Nowhere under Section 143A N.I. Act, it is provided that prior to
passing of an order directing payment of interim compensation, the accused
needs to be granted an opportunity of being heard. Even though the word
'may' is in use in the provision, it will have the impact of 'shall' since
prosecutions launched under Section 142 cannot be identified as
scrupulous or unscrupulous ones at the preliminary stage when complaint
is filed. Interim compensation contemplated under Section 143A N.I. Act is
something meant to be imposed on all accused irrespective of the amount
involved in the prosecution filed under Section 142 N.I Act. Therefore, the
argument of the learned counsel that the objection filed by him to the
application under Section 143A N.I. Act was not considered by the court is
of not that much relevance.
Para 9. Going by Annexure A1 it is seen that it is an order of attachment
passed before judgment, in favour of the complainant, who was a plaintiff in
a suit pending before a civil court. Therefore, the order of attachment will
only act as security for realization of money when ultimately a decree is
passed against the defendant in the civil case. Only when a decree is passed
in favour of the plaintiff in the civil suit, the attachment order will be
enforceable. That has no relevance when the power under Section 143A is
invoked by the trial court in a case under Section 138 N.I. Act. Section 143A
is an independent and self contained provision. Therefore, the argument of
the learned counsel that the trial court ought not to have passed an order
under Section 143A, when an attachment order is obtained by the
complainant against the accused from a Civil Court will Oct 14 2020 Page 4
of 5 not sustain. Moreover, in case the prosecution under Section 142 N.I
Act turns unsuccessful, sub-section (4) of Section 143A N.I Act provides for
repayment of the interim compensation along with interest at the rate
specified therein. For the reasons that argument is also repelled.
10. Going by the order under challenge, it is noticed that the order has been
passed by the court invoking power under Section 143A N.I. Act. It has been
passed at a stage when the plea of the accused was recorded. In the case on
hand, the complainant has approached the court by filing a petition under
Section 143A N.I. Act. But on a reading of the provision it is clear that for
invoking the power under the provision, an application need not be filed by
the complainant. The power can be exercised by the court in seizing of the
prosecution suo motu at the relevant time when a plea that the accused is
not guilty of the offence alleged against him is raised by him. There is no
need for the complainant to apply for getting the relief of the nature as

contemplated by the provision. In the case on hand, it is evident from the
impugned order that an application was filed by the complainant under
Section 143A N.I. Act and the power was exercised by the Court at the right
point of time when the plea of the accused on guilt was recorded. Therefore,
the challenge of the order for the reason that the power under Section 143A
was invoked incorrectly by the court will not sustain. By the impugned order
the accused was directed to pay 20% of the cheque amount as interim
compensation within a period of 60 days from the date of the order. This
Court does not find anything unreasonable or illegal in the direction
imposed by the impugned order. In view the above discussion, the order
under challenge is liable to be confirmed.
3.13Jatin Chawla Vs.Rakesh Jindal Crm,M,7430,2020 Decided On :

19,02,2020 Punjab And Haryana High Court
Para 8. In the present case the cheque was dishonoured vide memo dated
09.08.2018 on which the respondentcomplainantserved legal notice dated
29.08.2018 and the offence under Section 138 of the N.I. Act wascommitted
after 01.09.2018 on nonpayment of the amount of the cheque within 15
days from receipt of theabove said legal notice. Since the offence was
committed after 01.09.2018, Section 148,A of the N.I Act isapplicable to the
case and the order passed by the learned Judicial Magistrate 1st Class,
Patiala does not sufferfrom any illegality so as to warrant interference in
exercise of jurisdiction under Section 482 of the Cr.P.C.

4. SPEEDY AND EXPEDITIOUS DISPOSAL OF SUCH CASES.
4.1 Saxchinsingh Rakeshsingh Chauhan v/s Tribhuvanbhai Bhailal

Vasava Criminal Appeal (Against Acquittal) No. 30 of 2018 Decided
On, 19 January 2018
"18. From the above discussion following aspects emerge:

i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of
proof is on accused in view presumption under Section 139 but the
standard of such proof is "preponderance of probabilities". The same has to
be normally tried summarily as per provisions of summary trial under the
Cr.P.C. but with such variation as may be appropriate to proceedings under
Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C., 1973
will apply and the Court can close the proceedings and discharge the
accused on satisfaction that the cheque amount with assessed costs and
interest is paid and if there is no reason to proceed with the punitive aspect.
ii) The object of the provision being primarily compensatory, punitive

element being mainly with the object of enforcing the compensatory element,
compounding at the initial stage has to be encouraged but is debarred at
later stage subject to appropriate compensation as may be found acceptable
to the parties or the Court.
iii) Though compounding requires consent of both parties, even in absence

of such consent, the Court, in the interests of justice, on being satisfied that
the complainant has been duly compensated, can in its discretion close the
proceedings and discharge the accused.
iv) Procedure for trial of cases under Chapter XVII of the Act has normally to
be summary. The discretion of the Magistrate under second proviso to
Section 143, to hold that it was undesirable to try the case summarily as
sentence of more than one year may have to be passed, is to be exercised
after considering the further fact that apart from the sentence of
imprisonment, the Court has jurisdiction under Section 357(3) Cr.P.C.,
1973 to award suitable compensation with default sentence under Section
64 IPC and with further powers of recovery under Section 431 Cr.P.C., 1973
With this approach, prison sentence of more than one year may be required
in all cases.
v) Since evidence of the complaint can be given on affidavit, subject to the

Court summoning the person giving affidavit and examining him and the
bank's slip being prima facie evidence of the dishonor of cheque, it is
unnecessary for the Magistrate to record any further preliminary evidence.
Such affidavit evidence can be read as evidence at all stages of trial or other

proceedings. The manner of examination of the person giving affidavit can
be as per Section 264 Cr.P.C., 1973 The scheme is to follow summary
procedure except where exercise of power under second proviso to Section
143 becomes necessary, where sentence of one year may have to be awarded
and compensation under Section 357(3) is considered inadequate, having
regard to the amount of the cheque, the financial capacity and the conduct
of the accused or any other circumstances.
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 Cr.P.C., 1973 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) Cr.P.C., 1973 with
sentence of less than one year will be adequate, having regard to the amount
of cheque, conduct of the accused and other circumstances.
20. In every complaint under Section 138 of the Act, it may be desirable that
the complainant gives his bank account number and if possible email ID of
the accused. If email ID is available with the Bank where the accused has an
account, such Bank, on being required, should furnish such email ID to the
payee of the cheque. In every summons, issued to the accused, it may be
indicated that if the accused deposits the specified amount, which should be
assessed by the Court having regard to the cheque amount and
interest/cost, by a specified date, the accused need appear unless required
and proceedings may be closed subject to any valid objection of the
complainant. If the accused complies with such summons and informs the
Court and the complainant by email, the Court can ascertain the objection,
if any, of the complainant and close the proceedings unless it becomes
necessary to proceed with the case. In such a situation, the accused's
presence can be required, unless the presence is otherwise exempted
subject to such conditions as may be considered appropriate. The accused,
who wants to contest the case, must be required to disclose specific defence
for such contest. It is open to the Court to ask specific questions to the
accused at that stage. In case the trial is to proceed, it will be open to the
Court to explore the possibility of settlement. It will also be open to the
Court to consider the provisions of plea bargaining. Subject to this, 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 be held up in proceedings for long unnecessarily."
15. In the said decision, the Apex Court mandates to adopt very pragmatic
approach to ensure the speedy disposal of all the matters under section 138

of the Negotiable Instruments Act and also expects the trial Court to issue
the summons at the outset-on due examination of material, to enable the
accused to pay the amount specified therein without further loss of time. Pro
forma summons is being given herein below, which can be used by the
Court by making necessary changes while issuing summon to the
respondent-accused by also specifying therein that if he is desirous of
paying the amount straightway in the bank account of the applicant he may
so do it, on intimation to the Court online of such payment on the official
email Id, to provided in the summons itself, and straightway thereafter, he
can be given a discharge by closing the case qua him. However, if the
compounding at the initial stage is feasible, even at a later stage, the
attempt should be made to ensure that the parties amicably arrive at a
conclusion and subject to the appropriate compensation, as found
acceptable to the parties, the matter can be put an end to. For the sake of
convenience in the present matter and so as to have uniformity in other
cases, before any change is made by way of amendment in the code, a
DRAFT SUMMONS is provided as under for the Court to make use of the
same:
4.2Modern Denim Limited Thro' Arun Triloknath Bhargava V/s State Of

Gujarat Criminal Misc.ApplicationNO. 9774 of 2014.,25/3/2015.
Para 23 DIRECTIONS:
1) Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when
the complaint under Section 138 of the Act is presented, shall scrutinize the
complaint and, if the complaint is accompanied by the affidavit, and the
affidavit and the documents, if any, are found to be in order, take
cognizance and direct issuance of summons.
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 from the complainant. Court, in appropriate cases,
may take the assistance of the police or the nearby Court to serve notice to
the accused. For notice of appearance, a short date be fixed. If the summons
is received back un-served, immediate follow up action be taken.
3) Court may indicate in the summon that if the accused makes an
application for compounding of offences at the first hearing of the case and,
if such an application is made, Court may pass appropriate orders at the
earliest.
4) Court should direct the accused, when he appears to furnish a bail bond,
to ensure his appearance during trial and ask him to take notice under
Section 251Cr.P.C. to enable him to enter his plea of defence and fix the
case for defence evidence, unless an application is made by the accused
under Section 145(2) for re-calling a witness for cross-examination.
5) The Court concerned must ensure that examination-in-chief, cross-
examination and re-examination of the complainant must be conducted
within three months of assigning the case. The Court has option of

accepting affidavits of the witnesses, instead of examining them in Court.
Witnesses to the complaint and accused must be available for cross-
examination as and when there is direction to this effect by the Court."
4.3 Indian Bank Association & Others v/s Union of India & OthersAIR
2014 SC 2528
In the across country Negotiable cases are huge pendency and they
constitute a large portion of the overall pending cases in courts. In order to
ensure the speedy and expeditious disposal of such cases, the Supreme
Court has in the Indian Bankers Association case directed all criminal
courts dealing with Section 138 cases to observe the following process:
1. The Metropolitan Magistrate/ Judicial Magistrate should scrutinize the
complaint and other accompanying documents (if any) on the day they
are filed. If the same are found to be in order, the Court should take
cognizance of the matter and direct issuance of summons to the
accused.
2. Summons to the accused must be properly addressed and sent by post
as well as by email using the address obtained from the complainant.
The Court may in appropriate cases take the assistance of the police or
the nearby Court to serve the notice. A short date should be fixed for
notice of appearance.
3. The summons may indicate that accused may make an application for
compounding of the case at the first hearing, in which case the court
may pass orders at the earliest.
4. The accused should be asked to furnish a bail bond to ensure his/ her
appearance during trial. The court will also ask the accused to take
notice under Section 251, Cr.P.C so as to enter his/her plea of defence
and will then fix the case for defence evidence, unless an application is
made by the accused under section 145(2) of the NI Act for recalling a
witness for cross examination.
5. The examination-in-chief, cross-examination and re-examination of the
complainant must be conducted within three months of assigning the
case. The court has the option of accepting affidavits of the witnesses,
instead of examining them in court.
4.4Rajesh Agarwal & Others v/s State & Another 2011 (2) CRIMES 711
Delhi High court
The summary trial procedure to be followed for offences u/s 138 N.I.
Act would thus be as under:
Step I :On the day complaint is presented, if the complaint is accompanied

by affidavit of complainant, the concerned MM shall scrutinize the complaint
& documents and if commission of offence is made out, take cognizance &
direct issuance of summons of accused, against whom case is made out.

Step II :If the accused appears, the MM shall ask him to furnish bail bond to
ensure his appearance during trial and ask him to take notice u/s 251 Cr.
P.C. and enter his plea of defence and fix the case for defence evidence,
unless an application is made by an accused under section 145(2) of N.I. Act
for recalling a witness for cross examination on plea of defence.Step III :If
there is an application u/s 145(2) of N.I. Act for recalling a witness of
complainant, the court shall decide the same, otherwise, it shall proceed to
take defence evidence on record and allow cross examination of defence
witnesses by complainant.
Step IV :To hear arguments of both sides.
Step V : To pass order /Judgment.
4.5 Makwana Mangaldas Tulsidas V/S The State Of Gujarat And Anr.
Hon‘ble Supreme Court Of India Air 2020 Sc 2447
The Court stated in its order:"With ensuring the credibility of cheques, it is

equally important that cheques are not allowed to be misused giving cause
to frivolous litigation. The Reserve Bank of India may consider developing a
new proforma of cheques so as to include the purpose of payment, along
with other information mentioned above to facilitate adjudication of real
issues."
IMP POINT
1. Ensure Electronic Mechanism To Issue Process
2. New Cheque May Show The Purpose./Banks Should Provide Cheque
Details
"The Reserve Bank of India, being the regulatory body may also evolve
guidelines for banks to facilitate requisite information for the trial of these
cases and such other matters as may be required. A separate software,based
mechanism may be developed to track and ensure the service of process on
the accused in cases relating to an offence under Section 138 of N.I. Act.
The Reserve Bank of India, being the regulatory body may also evolve
guidelines for banks to facilitate requisite information for the trial of these
cases and such other matters as may be required. A separate software,based
mechanism may be developed to track and ensure the service of process on
the accused in cases relating to an offence under Section 138 of N.I. Act
3. Attach Property To Ensure Presence Of The Accused /Section 143A

Of The N I Act As Well As Fine Or Compensation To Be Recovered As
Per Section 421 Of The Crpc.
The Bench has also observed that a mechanism may be developed to

ensure the presence of the accused even by way of coercive measure, if
required, taking effect from Section 83 of Cr.P.C. which allows attachment of
property, including movable property. A similar coordinated effort may be

evolved to recover interim compensation under Section 143A of the N.I.
Act as well as fine or compensation to be recovered as per Section 421 of
Cr.P.C. The Bank may facilitate mechanism for transferring requisite funds
from the bank account of the accused to the account of the holder in due
course, as may be directed by the Court.
4. Pre-Litigation Settlement
The Bench also suggested that with the ever-growing institution of N.I.
cases, there is a need for developing a mechanism for pre-litigation
settlement in these cases. The Legal Services Authorities Act, 1987 provides
for a statutory mechanism for disposal of case by Lok Adalat at pre-litigation
stage under Sections 19 and 20 of the Act. Further, Section 21 of the Act,
recognises an award passed by Lok Adalats as a decree of a civil court and
gives it a finality.
"The effect of the above legal proposition is that an Award passed at

the pre-litigation stage or pre-cognizance stage shall have an effect of a civil
decree. The National Legal Services Authority, being the responsible
Authority in this regard, may evolve a scheme for settlement of dispute
relating to cheque bounce at pre-litigation i.e. before the filing of the private
complaint. This measure of prelitigation ADR process can go a long way in
settling the cases before they come to Court, thereby reducing docket
burden"
5. Need for exclusive courts for cheque cases.
The Bench observed that to work out a mechanism for expeditious

and just adjudication of cases relating to dishonour of cheques, fulfilling the
mandate of law and reduce high pendency, various duty-holders like Banks,
Police and Legal Services Authorities may be required to take measures and
prepare schemes."The High Courts, in addition to the above, may also
consider setting up of exclusive courts to deal with matters relating to
Section 138, especially in establishments where 8 the pendency is above a
standard figure. Special norms for assessment of the work of exclusive
courts may also be formulated giving additional weightage to disposal of a
case within the time-frame as per legal requirement""Thus, we find it
necessary to hear them for evolving a concerted, coordinated mechanism for
expeditious adjudication of these cases as per the legal mandate".The Court
has issued notice to the Union of India through Law Secretary, Registrar
General of all the High Courts, the Director-General of Police of all the
States and Union Territories, Member Secretary of the National Legal
Services Authority, Reserve Bank of India and Indian Bank Association,
Mumbai as the representatives of banking institutions.
6. Explore online disposal of cheque cases

5. VALID NOTICE
5.1 Shree Corporation V/s Anilbhai Puranbhai Bansal , Director For &
Behalf Of R/Special Criminal Application No. 3653 of 2012 Date :
23/03/2018 Hon‘ble Gujarat High Court/
Para 25. I am conscious of the fact that out of the total liability of Rs.
1,08,43,766/- the liability only to the extent Rs.12,40,000/-came to be
discharged. The amount of Rs.96,03,766/- still remained due and payable
by the writ applicants to the complainant. However, I am of the view that the
quantum of the amount would not be a relevant factor in the case at hand.
To put it in other words, whether a substantial amount was paid or a
meager amount was paid. A notice of demand which requires the drawer of
the cheque to make payment of the whole of the cheque amount, despite
receiving some amount against that very cheque, much before issue of
notice, cannot be said to be a legal and valid notice envisaged in Section
138(b) of Negotiable Instrument Act. The expression "amount of money‟
used in Section 138(b) of Negotiable Instrument Act, to my mind, in a case
of this nature would mean the amount actually payable by the drawer of the
cheque to the payee of the cheque. Of course, if the payee of the cheque
makes some demands on account of interest, compensation, incidental
expenses etc, that would not invalidate the notice so long as the principal
amount demanded by the payee of the cheque is correct and is clearly
identified in the notice. When the principal amount claimed in the notice of
demand is more than the principal amount actually payable to the payee of
the cheque and the notice also does not indicate the basis for demanding
the excess amount, such a notice cannot be said to be a legal and valid
notice envisaged in Section 138(b) of Negotiable Instrument Act. In such a
case, it is not open to the complainant to take the plea that the drawer of
the cheque could have escaped the liability by paying the actual amount due
from him to the payee of the cheque. In order to make the notice legal and
valid, it must necessarily specify the principal amount payable to the payee
of the cheque and the principal amount demanded from the drawer of the
cheque should not be more than the actual amount payable by him though
addition of some other demands in the notice by itself would not render
such a notice illegal or invalid. (see M/s. Alliance Infrastructure vs. Vinay
Mittal, Cri. M.C. No.2224 of 2009, decided on 18th January, 2018)
―Para 51.I would like to inform the learned Magistrates that before
issuing the order of process, they should take the pains of not only
reading the complaint, but should read the legal notice and verify
whether the same is in accordance with law or not. To put it in other
words, if the Magistrates find the demand in the notice to be absolutely
―ominous‖, then the order of process should not be issued. If the legal

notice as envisaged under the provisions of the N.I. Act is found to be
not in accordance with law, then the complaint should fail. The service
of a valid legal notice in a case under section 138 of the N.I. Act is
mandatory. Service of a valid notice, it is trite, is imperative in character for
maintaining a complaint. It creates a legal fiction. The operation of section
138 of the Act is limited by the proviso. When the proviso applies, the main
section would not. Unless a notice is served in conformity with the proviso
(b) appended to section 138 of the N.I. Act, the complaint would not be
maintainable. Therefore, I am putting a word of caution for the
Magistrates in this regard while dealing with the complaint under
section 138 of the N.I. Act.‖
I am of the view that the quantum of the amount would not be a

relevant factor in the case at hand. To put it in other words, whether a
substantial amount was paid or a meager amount was paid. A notice of
demand which requires the drawer of the cheque to make payment of
the whole of the cheque amount, despite receiving some amount
against that very cheque, much before issue of notice, cannot be said
to be a legal and valid notice envisaged in Section 138(b) of Negotiable
Instrument Act.
The expression "amount of money used in Section 138(b) of Negotiable

Instrument Act, to my mind, in a case of this nature would mean the
amount actually payable by the drawer of the cheque to the payee of the
cheque. Of course, if the payee of the cheque makes some demands on
account of interest, compensation, incidental expenses etc, that would not
invalidate the notice so long as the principal amount demanded by the
payee of the cheque is correct and is clearly identified in the notice.When
the principal amount claimed in the notice of demand is more than the
principal amount actually payable to the payee of the cheque and the
notice also does not indicate the basis for demanding the excess
amount, such a notice cannot be said to be a legal and valid notice
envisaged in Section 138(b) of Negotiable Instrument Act.
5.2M/s. Alliance Infrastructure vs. Vinay Mittal, Cri. M.C. No.2224 of

2009, decided on 18th January, 2018
In order to make the notice legal and valid, it must necessarily specify the
principal amount payable to the payee of the cheque and the principal
amount demanded from the drawer of the cheque should not be more than
the actual amount payable by him though addition of some other demands
in the notice by itself would not render such a notice illegal or invalid.

5.3M/s. Sarav Investment & Financial Consultants Pvt. Ltd. & Anr.V/s
Llyods Register of Shipping Indian Office Staff Provident Fund & Anr.
Supreme Court of india2007 14 SCC 753
16. Section 138 of the Act contains a penal provision. It is a special

statute. It creates a vicarious liability. Even the burden of proof to some
extent is on the accused. Having regard to the purport of the said provision
as also in view of the fact that it provides for a severe penalty, the provision
warrants a strict construction. Proviso appended to Section 138 contains a
non-obstante clause. It provides that nothing contained in the main
provision shall apply unless the requirements prescribed therein are
complied with. Service of notice is one of the statutory requirements for
initiation of a criminal proceeding. Such notice is required to be given within
30 days of the receipt of the information by the complainant from the bank
regarding the cheque as unpaid. Clause (c) provides that the holder of the
cheque must be given an opportunity to pay the amount in question within
15 days of the receipt of the said notice. Complaint Petition, thus, can be
filed for commission of an offence by a drawee of a cheque only 15 days after
service of the notice. What are the requirements of service of a notice is no
longer res-integra in view of the recent decision of this Court in C.C. Alavi
Haji Vs. Palapetty Muhammed & Anr. [JT 2007(7) SC 498].
18.The notice, was only required to be dispatched. Its contents were

required to be communicated. Communication to the appellant about the
fact of dishonouring of the cheques and calling upon him to pay the amount
within 15 days is imperative in character. It is not a case, where, actual
communication was not necessary. Service of notice is a part of cause of
action for lodging the complaint.
21. In Maxwells Interpretation of Statutes, the learned author has

emphasized that ―provisions relating to giving of notice often receive liberal
interpretation‖ (vide p. 99 of the 12th Ed.). The context envisaged in Section
138 of the act invites a liberal interpretation for the person who has the
statutory obligation to give notice because he is presumed to be the loser in
the transaction and it is for his interest the very provision is made by the
legislature. The words in clause (b) of the proviso to Section 138 of the Act
show that the payee has the statutory obligation to ―make a demand‖ by
giving notice. The thrust in the clause is one the need to ―make a demand‖.
It is only the mode for making such demand which the legislature has
prescribed. A payee can send the notice for doing his part for giving the
notice. Once it is dispatched his part is over and the next depends on what
the sendee does.‖
5.4Central Bank of India & Another vs. Saxons Farms & Others 1999(8)
SCC 221,

The Supreme Court observed that the object of the notice under
Section 138(b) of Negotiable Instrument Act is to give a chance to the drawer
of the cheque to rectify his omission and also to protect the honest drawer. If
the drawer of the cheque is asked to pay more than the principal amount
due from him and that amount is demanded as the principal sum payable
by him, it is not possible for an honest drawer of the cheque to meet such a
requirement.
5.5Suman Sethi vs. Ajay K. Churiwala, 2000 (2) SCC 380,
The Supreme Court held that where the notice also contains a claim
by way of cost, interest etc. and gives breakup of the claim of the cheque
amount, interest, damages etc., which are separately specified, the claim for
interest, cost etc. would be superfluous and these additional claims being
severable would not invalidate the notice. It was further held that if an
ominous demand is made in a notice as to what was due against a
dishonoured cheque, the notice might fail to meet the legal requirement and
may be regarded as bad.
5.6 WITHIN 15 DAYS FROM DATE OF RECEIPT OF NOTICE

M/s. Rahul Builders vs. M/s. Arihant Fertilizers; 2008 CLJ 452,
The Supreme Court observed that Section 138 of Negotiable
Instruments Act contemplates service of notice and payment of amount of
cheque within 15 days from date of receipt of notice. It does not speak of 15
days notice. The notice was held to be a valid notice although the accused
was asked to make payment only within 10 days instead of 15 days.
5.7 Suo Motu Writ Petition (Civil) No(S).3/2020 In Re : Cognizance For

Extension Of Limitation 10.07.2020 Supreme Court Of India
I.A. No. 48461/2020, Service of all notices, summons and exchange of

pleadings:,Service of notices, summons and exchange of
pleadings/documents, is a requirement of virtually every legal proceeding.
Service of notices, summons and pleadings etc. have not been possible
during the period of lockdown because this involves visits to post offices,
courier companies or physical delivery of notices, summons and pleadings.
We, therefore, consider it appropriate to direct that such services of all
the above may be effected by e,mail, FAX, commonly used instant
messaging services, such as WhatsApp, Telegram, Signal etc. However,
if a party intends to effect service by means of said instant messaging
services, we direct that in addition thereto, the party must also effect
service of the same document/documents by e,mail, simultaneously on
the same date.
5.8K.R.Indira vs. Dr.G.Adinarayana, 2003 (3) JCC(NI) 273,

A consolidated notice was sent in respect of four cheques. Two of
which were issued in the name of the husband and the two were in the
name of the wife. It was noted by the Supreme Court that the cheque
amounts were different from the alleged loan and the demand made was not
of the cheque amount but was of the loan amount. It was held that the
complainant was required to make demand for the amount recovered by the
cheque which was conspicuously absent in the notice and, therefore, the
notice was imperfect. The same would be the legal effect when a part-
payment against a cheque is made, after its issue. The amount covered by
the cheque would necessarily mean the principal amount due to the payee
after giving credit for the part-payment received by him and, therefore, if the
notice does not specifically demand that particular amount, it would not be
a valid notice and would not fasten criminal liability on account of its non-
compliance.
5.9SatyavanChaplot vs Rajendra on 16 December, 1997 Rajasthan High

Court Equivalent citations: 1998 (2) ALD Cri 868.
Held in para 7: if a period of less than 15 days is mentioned in the notice
as the period within which the payment of the amount of cheque is to be
made, the notice could not be invalid because the proviso given below under
Section 138 of the Act does not require the payee or the holder of the cheque
to mention any period in the notice. Having regard to the provisions
contained in Section 138 of the Act, I am of the opinion that the principle
that the proceedings are vitiated for non-compliance of the statutory
provision is not applicable to the notice issued under Clause (b) of the
proviso given below Section 138 of the Negotiable Instruments Act because
there is no violation of law if any particular period within which payment is
to be made is mentioned in the notice and such period is other than the less
or more than 15 days. Besides, no prejudice has been caused to the accused
petitioner by giving him a notice by which he was required to make the
payment of the amount of cheque within a period of seven days. Therefore,
the proceedings cannot be dropped nor they can be said to have been
vitiated on account of causing any prejudice to the accused-petitioner
5.10 M/S Melton India Pvt. Ltd. &Ors. vs M/S Ester Industries Ltd.
Delhi High Court on 28 July, 2010
The complainant demanded payment of the dishonoured cheque amount
from the petitioners within 30 days instead of 15 days, the notice sent by
the complainant would not become illegal.
5.11Hammanna S. Nayak vs. Vijay Kumar Kalani; Bombay High Court

2000 CLJ 4438,
It was held, that period of 21 days' mentioned in demand notice will not
make it illegal.

5.12 Suman Sethi v. Ajay K. Churiwal and another, 2000 (2) SCC 380,
It was held that the legislative intent as evident from Section 138 of the Act
is that if for the dishonoured cheque the demand is not met within 15 days
of the receipt of the notice the drawer is liable for conviction. If the cheque
amount is paid within the above period or before the complaint is filed, the
legal liability under Section 138 ceases to be operative and for the recovery
of other demands such as compensation, costs, interests etc. separate
proceedings would lie. If in a notice any other sum is indicated in addition to
the amount covered by the cheque, that does not invalidate the notice.‘
K.R. Indira v. Dr. G. Adinarayana [(2003) 8 SCC 300]
"...However, according to the respondent, the notice in question is not
separable in that way and that there was no specific demand made for
payment of the amount covered by the cheque. We have perused the
contents of the notice. Significantly, not only the cheque amounts were
different from the alleged loan amounts but the demand was made not of
the cheque amounts but only the loan amount as though it is a demand for
the loan amount and not the demand for payment of the cheque amount,
nor could it be said that it was a demand for payment of the cheque amount
and in addition thereto made further demands as well. What is necessary is
making of a demand for the amount covered by the bounced cheque which
is conspicuously absent in the notice issued in this case. The notice in
question is imperfect in this case not because it had any further or
additional claims as well but it did not specifically contain any demand for
the payment of the cheque amount, the non-compliance with such a
demand only being the incriminating circumstance which exposes the
drawer for being proceeded against under Section 138 of the Act.
5.13. Vijay Gopala Lohar vs Pandurang Ramchandra Ghorpade . 5 April,

2019 ,Criminal Appeal No(S). 607-608 /2019 (Arising Out Of Slp(Crl.)
No(S).8655-8656/2015) Supreme Court Of India.
There is no dispute regarding the proposition that the notice issued under
Section 138 of the NI Act has to be only for the cheque amount and not for
any other amount more than the cheque amount. In the judgments referred
to above the notice issued under Section 138 of the NI Act referred to loan
amounts which were much higher than the cheque amounts. Whereas, in
the instant case, the loan amount and the cheque amount is the same i.e.,
Rs.50,000/-.

6. SECTION 148 OF N.I. ACT
6.1Surinder Singh Deswal @ Col. S.S.Deswaland others

VsVirender Gandhi Decided on 29,5 2019 Supreme Court Of India
Criminal Appeal Nos.917944 OF 2019
Para, 9.Now so far as the submission on behalf of the appellants that even
considering the language used in Section 148 of the N.I. Act as amended,
the appellate Court ―may‖ order the appellant to deposit such sum which
shall be a minimum of 20% of the fine or compensation awarded by the trial
Court and the word used is not ―shall‖ and therefore the discretion is vested
with the first appellate court to direct the appellant – accused to deposit
such sum and the appellate court has construed it as mandatory, which
according to the learned Senior Advocate for the appellants would be
contrary to the provisions of Section 148 of the N.I. Act as amended is
concerned, considering the amended Section 148 of the N.I. Act as a whole
to be read with the Statement of Objects and Reasons of the amending
Section 148 of the N.I. Act, though it is true that in amended Section 148 of
the N.I. Act, the word used is ―may‖, it is generally to be construed as a
―rule‖ or ―shall‖ and not to direct to deposit by the appellate court is an
exception for which special reasons are to be assigned. Therefore amended
Section 148 of the N.I. Act confers power upon the Appellate Court to pass
an orderpending appeal to direct the Appellant Accused to deposit the sum
which shall not be less than 20% of the fine or compensation either on an
application filed by the original complainant or even on the application filed
by the Appellant Accused under Section 389 of the Cr.P.C. to suspend the
sentence. The aforesaid is required to be construed considering the fact that
as per the amended Section 148 of the N.I. Act, a minimum of 20% of the
fine or compensation awarded by the trial court is directed to be deposited
and that such amount is to be deposited within a period of 60 days from the
date of the order, or within such further period not exceeding 30 days as
may be directed by the appellate court for sufficient cause shown by the
appellant. Therefore, if amended Section 148 of the N.I. Act is purposively
interpreted in such a manner it would serve the Objects and Reasons of not
only amendment in Section 148 of the N.I. Act, but also Section 138 of the
N.I. Act. Negotiable Instruments Act has been amended from time to time so
as to provide, inter alia, speedy disposal of cases relating to the offence of
the dishonoured of cheques. So as to see that due to delay tactics by the
unscrupulous drawers of the dishonoured cheques due to easy filing of the
appeals and obtaining stay in theproceedings, an injustice was caused to
the payee of a dishonoured cheque who has to spend considerable time and
resources in the court proceedings to realise the value of the cheque and
having observed that such delay has compromised the sanctity of the
cheque transactions, the Parliament has thought it fit to amend Section 148
of the N.I. Act. Therefore, such a purposive interpretation would be in

furtherance of the Objects and Reasons of the amendment in Section 148 of
the N.I. Act and also Sec 138 of the N.I. Act.
Para,10. Now so far as the submission on behalf of the appellants, relying

upon Section 357(2) of the Cr.P.C. that once the appeal against the order of
conviction is preferred, fine is not recoverable pending appeal and therefore
such an order of deposit of 25% of the fine ought not to have been passed
and in support of the above reliance placed upon the decision of this Court
in the case of Dilip S. Dhanukar (supra) is concerned, the aforesaid has no
substance. The opening word of amended Section 148 of the N.I. Act is that
―notwithstanding anything contained in the Code of Criminal Procedure…..‖.
Therefore irrespective of the provisions of Section 357(2) of the Cr.P.C.,
pending appeal before the first appellate court, challenging the order of
conviction and sentence under Section 138 of the N.I. Act, the appellate
court is conferred with the power to direct the appellant to deposit such sum
pending appeal which shall be a minimum of 20% of the fine or
compensation awarded by the trial Court.

7. COMPONENT OF OFFENCE
Section 138 of the Act makes it an offence where may cheque drawn
by a person on any account maintained by him in a Bank for payment of
any amount to other person is returned unpaid by the Bank for insufficiency
of the deposit or for the amount payable exceeding such deposit.
The components of offence under this provision are
(a) Drawing of the cheque for some amount;
(b) Presentation of the cheque to the banker;
(c) Return of the cheque unpaid by the drawee bank;
(d) Giving of notice by the holder of the cheque or payee to drawer of the
cheque demanding payment of cheque amount;
(e) Failure of drawer to make payment within 15 days of receipt of such
notice. See Harman Electronics Pvt. Ltd.Vs. National Panasonic India
Ltd.(2009)1 SCC 720
8. COMPLAINT
8.1 Indra Kumar Patodia Vs. Reliance Industries Ltd.(2012) 13 SCC 1
Complaint without the signature of complainant is maintainable when

it is verified by the complainant and the process is issued by the Magistrate
after due verification.

9. DRAWING OF A CHEQUE/ HOLDER IN DUE COURSE /
LIABILITY OF LEGAL HEIRS
9.1 Ratilal Harmanbhai Patel Vs. State of Gujarat and Ors2016 0 CrLJ
4055; 2016 3 GLH 194; 2016 4 GLR 3419; 2016 0 Supreme(Guj) 338;
HIGH COURT OF GUJARAT
(A) Negotiable Instruments Act,1881,Sections 8, 9 and 138, 'Holder in due
course' is a bonafide transferee for value, Conjoint reading of Sections 8, 9
and 138 would include "holder in due course" as he alone would be entitled
to initiate the criminal proceedings under Section 138. Section 138
postulates that where any cheques were drawn by a person on account
maintained by him for payment of any amount of money to any other person
from out of his account for the discharge of his liability, is returned by the
Bank as the same is insufficient to honour the cheque, such person shall be
deemed to have committed the offence. Prima facie case made out against
the accused to put him to trial for the offence under section 138.
9.2 JyotindraMotibhai Thakkar Vs. State of Gujarat and Ors. Decided

On : 28,04,2017 High Court Of Gujarat 2017 3 GLH 453; 2017 4 GLR
3349
Code of Criminal Procedure, 1973, Section 482, Negotiable
Instruments Act, 1882Section138Three question arising: Whether the
wife by virtue of her status as a wife of the payee of the cheque can be
said to be "a holder in due course"? Whether she can be a competent
complainant to lodge complaint under Section 138 of the Negotiable
Instruments Act, 1882? Who can be said to be the "holder in due
course"?wife only ontheground of she being a wife or on the ground that
she was an heir of the husband toreceivemoney cannot be treated as "holder
in due course"locus standi for her cannot beconceivedin law to be one
entitled to file a complaint. If she is claiming any right over theamountof
cheque in capacity of heir, her remedy would be in civil law. A person in
ordertobecome a holder in due course within the meaning of Section 9 of the
Act must be inpossessionof a promissory note, bill of exchange or cheque, as
is in the present case; merebecoming possessor of the cheque etc., would
not suffice. Consideration isindispensableingredient for being clothed with
the legal capacity of "holder in due course"is that the person in possession of
the instrument must have been in the possession
forsomeconsideration.merely being an heir of payee, though may be in
possession ofinstrument,would not automatically make such heir or legatee
a 'holder in due course' claimedcapacity of heir or legatee or right to
inheritance by themselves would not attractorinvest the person in
possession of the instrument with the capacity as 'holder in
duecourse',held: death of the payee, heir of legatee thereof does not

step into the shoe of the deceased payee merely because he happens to
be an heir or a relative or a legatee.
9.3 J Chitranjan And Company Proprietor C D Shah Vs. State Of

Gujarat And Ors. Criminal Revision Application No. 231 Of 2009
Decided On : 13/10/2016 2017 Eglr_Hc 10006047
―8. from the rival contentions, following legal questions call for
determination for this Court:
(1) Meaning of the expression ―holder‖ as contemplated in
section 8 and section 139 of N.I. Act and whether the expression
comprehends the ―holder in due course‖ and the ―payee‖.
(2) Meaning of expression ―legally enforceable debt‖ or ―other liability‖ as
used in explanation to Section 138 of N.I. Act. Whether time barred debt is
legally enforceable debt
(3) Competence of power of attorney and/or substitute of the complainant to
depose before the court.
(4) Competence of minor to advance loan and prosecuting the accused for
dishonour of cheque issued for discharge of the overdue loan.
(5) What should be the contents of the notice, complaint, verification or
power of attorney deed?
(6) Maintainability of complaint by heir or successor in absence of
succession certificate.
(7) The effect of not posing incriminating circumstance relevant for
determination of the case under Section 313 of Cr. P.C. to the accused.
(Books of accounts)
(8) Whether there can be deposition of facts not stated in documents like
complaint, power of attorney deed etc.
(9) Whether secondary evidence under section 65(b) was permissible.‖
Held ―The intention of the maker of the cheque to constitute its
successor in title a holder would thus be clear by delivering the cheque to a
person on free volition or for lawful consideration. Thus, a mere delivery of
the cheque by lawful means or for lawful consideration would constitute a
person 'holder' of the cheque. The ―drawer‖ or ―holder‖ of a cheque may
either endorse the cheque further or the cheque may be discounted so as to
constitute the successor ―holder in due course‖. Thus, endorsement or
further negotiation in any other manner would be to invest the property in
the cheque in successor of the negotiator. It can thus be seen that the
transfer or negotiation of the cheque under the provisions of the N.I. Act
would be with a definite purpose of transferring the property in the cheque.
The property in the cheque so derived would necessarily mean a right to
realize the amount stated therein irrespective of a person being a 'payee' or
'holder' or 'holder in due course'.‖
Standard of proof in discharge of the burden in terms of section 139
of the Act being preponderance of a probability. Question regarding
competence of minor to advance loan and pursue the cause for dishonour of

cheque, Nothing is pointed out to warrant inference that no action would lie
under section 138 of the N.I. Act on a cheque issued for repaying the debt
incurred by minor and in view of the language used in section 138 of the N.I.
Act no such limitation can be read therein.
The debt in question was not legally enforceable as the same was
barred by limitation under Article19 of the Limitation Act. The witness
deposing the facts of the case was not, in fact, the witness with personal
knowledge about the facts and therefore his deposition was not entitled to
any legal weightage.
Question is with regard to affidavit of power of attorney or substitute
of the complainant to be witness of facts deposing before the court in
absence of personal knowledge on the subject with him. The legal position in
this regard is settled that in absence of personal knowledge with the power
of attorney or for that with any other witness, no deposition of such person
can be relied upon.
9.4 Mukundlal Mohanlal Gandhi VS State of Gujarat [2015] 0

Supreme(Guj) 1070
Held : Death of complainant during pendency, His son can be impleaded as

complainant , Accused can be convicted if son was able to prove that cheque
was issued by accused in discharge of legally recoverable debt
18. After considering the relevant provisions of the NI Act and the
relevant judgments on the point, this Court clarified the legal position
and answered the questions in the following manner :
"(i) Filing of complaint petition under Section 138 of NI Act through power of
attorney is perfectly legal and competent.
(ii) The Power of Attorney Holder can depose and verify on oath before the
Court in order to prove the contents of the complaint. However, the power of
attorney Holder must have witnessed the transaction as an agent of the
payee/Holder in due course or possess due knowledge regarding the said
transactions.
(iii) It is required by the complainant to make specific assertion as to the
knowledge of the power of attorney Holder in the said transaction explicitly
in the complaint and the power of attorney Holder who has no knowledge
regarding the transactions cannot be examined as a witness in the case.
(iv) In the light of section 145 of NI Act, it is open to the Magistrate to rely
upon the verification in the form of affidavit filed by the complainant in
support of the complaint under Section 138 of the NI Act and the Magistrate
is neither mandatorily obliged to call upon the complainant to remain
present before the Court, nor to examine the complainant or his witness
upon oath for taking the decision whether or not to issue process on the
complaint under Section 138 of the NI Act.

(v) The functions under the general power of attorney cannot be delegated to
another person without specific clause permitting the same in the power of
attorney. Nevertheless, the general power of attorney itself can be cancelled
and be given to another person."
9.5M. Abbas Haji VS T. N. Channakeshava, 19 Sep 2019 2019 0 AIR

(SC) 4617, 2019 9 SCC 606
Legal heirs of a person convicted and sentenced u/s 138, NI Act are neither
liable to pay the fine or to undergo imprisonment. Proceeding u/s 138, NI
Act is a quasi-criminal proceeding. Principles applicable to acquittal in other
criminal cases do not apply.
9.6Shankar Lal — Appellant Vs. Sanyogita Devi (Dead) — Respondent

Criminal Appeal No. 485 of 2002 Decided on : 28,10,2009 Supreme
Court Of India Division Bench
8. It was further held that "it is not necessary for the person suing on the
promissory note to rely only on an endorsement or such other mode as is
provided for in the Negotiable Instruments Act and the suit by a person on
whom the right devolves by operation of law cannot be defeated by absence
of the endorsement."
9. The law applicable in respect of a promissory note would be equally
applicable to a cheque as both of them are negotiable instruments within
the meaning of the provisions of the said Act. It is clear from the definition of
'holder in due course' that 'holder in due course' means any person who for
consideration became the possessor of a promissory note, bill of exchange or
cheque if payable to bearer. The deceased Dhairyasheel Rao Desmukh was
undoubtedly the holder in due course of the cheque. The respondent, being
the legal heir of the deceased, stepped into the shoes of her husband and
has become the holder of the cheque in due course. All the rights possessed
by the original holder of the cheque devolve upon the legal heirs by
operation of law. There is no provision in Negotiable Instruments Act
prohibiting the legal heirs to file the complaint under Section 138 of the Act.
The legal heirs of the holder in due course of the cheque are clearly entitled
to rely upon the instrument and there is no provision in the Act which
stands in the way of legal heirs initiating proper and appropriate
proceedings as they step into the shoes of the original holder in due course
of the cheque. 10. The High Court having considered the matter in the right
perspective came to the right conclusion that there is no provision under the
Act which precludes the legal heir of the holder in due course of the cheque
to file complaint under Section 138 of the Act. In our opinion that a heir of
the deceased holder in due course of the cheque can bring action on the
basis of the cheque to recover the amount due thereon to the deceased
holder by reason of the fact that he succeeds to the estate of the deceased
holder by inheritance i.e.; operational of law and if that be so there is no
reason as to why the legal heirs cannot file complaint under Section 138 of

the Act. There is, therefore, no reason on principle to hold that a complaint
filed by a legal heir of the original holder in due course of the cheque cannot
be taken cognizance by the court. In our considered view, neither the cause
of action nor the right conferred upon the holder in due course of the
cheque to proceed and file complaint under Section 142 of the Act for the
offence under Section 138 of the said Act comes to an end after the death of
the holder in due course of the cheque. The cause of action certainly
survives as the legal heirs step into the shoes of the holder of the cheque in
due course by operation of law and are entitled to prosecute and initiate the
proceedings under Section 142 of the Act.
9.7Sivakumar Vs. Natrajan (2009) 13 SCC 623.

The drawer in payment of a legal liability to discharge the existing
debt should have drawn cheque. Therefore any cheque given say by way of
gift would not come within the purview of the section. It should be a legally
enforceable debt; therefore time barred debt and moneylending activities are
beyond its scope. The words any debt or any other liability appearing in
section 138 make it very clear that it is not in respect of any particular debt
or liability The presumption which the Court will have to make in all such
cases is that there was some debt or liability once a cheque is issued. It will
be for the accused to prove the contrary. i.e., there is no debt or any other
liability. The Court shall statutorily make a presumption that the cheques
were issued for the liability indicated by the prosecution unless contrary is
to be proved.
9.8M/S. Sri Sai Mourya Estates &vs The State Of A.P., Rep., By Its on
13 April, 2018 Criminal Petition No.8862 OF 2011 Andhra Pradesh
High Court
The specific contention raised by the petitioners herein, who are the accused
in, is that admittedly the 2nd respondent is not a payee or a holder in due
course. The complaint is filed as a legal representative. The legal
representative of the payee is not a holder in due course, since the
subject instrument/cheque came into possession of the 2nd
respondent as a legal representative of the deceased and not by paying
consideration by him or an endorsement on the cheque in his favour by
the original payee. In this context, Section 75 of the Act contemplates
presentment or to agent, representative of deceased or assignee of insolvent,
which reads as follows:
Presentment or to agent, representative of deceased or assignee of

insolvent:, Presentment for acceptance or payment may be made to the duly
authorized agent of the drawee, maker or acceptor, as the case may be, or
where the drawee, maker or acceptor has died, to his legal representative,
or, where he has been declared an insolvent, to his assignee.

The above provision provides that if the maker of the cheque is dead,
payment can be demanded from the legal representatives of the drawer,
maker or acceptor. The heading of the Section is very clear and it shows
presentment of the negotiable instrument can be made by the representative
of the deceased also. Section 78 of the Act provides to whom payment
should be made. Per contra, Section 138 of the Act says that if the amount
is paid to the holder of the instrument, there should be sufficient discharge
of liability. The Holder as defined under Section 8 of the Act is as follows:
Holder: The Holder of a promissory note, bill of exchange or cheque means

any person entitled in his own name to the possession thereof and to receive
or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so
entitled at the time of such loss or destruction.
Section 53 of the Act contemplates a holder of a negotiable instrument who

derives title from a holder in due course have the rights thereon of that of a
holder in due course. Therefore, the holder deriving a title from the holder in
due course have all the rights of the holder in due course. Therefore, the
legal representative of a holder in due course have all the rights of the
holder in due course.
In the case on hand, the deceased mother of the 2nd respondent was the
holder in due course. Therefore, the 2nd respondent by virtue of being a
legal representative is a holder in due course and he got all the rights to
initiate proceedings under the provisions of Sections 138 and 142 of the Act
against the petitioners herein. Hence, there is no dispute on the proposition
that the legal representative can file/initiate proceedings for realizing the
amount.
Section 78 of the Act deals with to whom payment should be made and the
same is as follows:
To whom payment should be made:, Subject to the provisions of Section 82,

clause (c) payment of the amount due on a promissory note, bill of exchange
or cheque must, in order to discharge the maker or acceptor, be made to the
holder of the instrument.
From the above provision, it is clear that the 2nd respondent holds the
cheque after the death of his mother being the payee and as a legal heir
he is entitled to possess the same in his own name and in view
of Section 53 he is the holder in due course and can get a full
discharge. Thus, under Section 53 of the Act, a legal representative/heir of
the payee or holder in due course can maintain a complaint under Section
138 of the Act.

The other contention raised by the counsel for the petitioners that there may
be other legal representatives and therefore the complaint filed by one legal
heir i.e., the 2nd respondent is not maintainable. However, that is a matter
of evidence and the same can be cured. Apart from that it is not a matter to
be considered for quashing the complaint at the initial stage.
In the above circumstances, this Court is of the opinion that the complaint
is maintainable. The 2ndrespondent being the legal representative of his
deceased mother i.e., payee or holder in due course can file a
complaint under Section 138 read with Section 142 of the Act. As such,
this Court holds that there are no merits in the criminal petition and the
same is dismissed. Interim order, if any, stands vacated.
9.10Ms. Jai Bajrang Traders — Appellant Vs. Vishal Bansal 2018 (2018)
ACD 532 : (2018) 185 AIC 826 : (2018) 70 Orissa CriR 251 Orissa High
Court
Dishonour of such self,drawn cheque does not amount to penal offence
under section 138 of N.I.
Negotiable Instruments Act, 1881Section 138Criminal Procedure Code,
1978Section 378(4) Dishonour of chequeAppeal against acquittalO.P. faced
trial under section 138 N.I. ActSelf drawn cheque not issued in favour of
complainantProvisions of sections 118 and 139 of N.I. Act not applicable as
complainant neither a payee nor a holder in due courseDishonour of such
self-drawn cheque does not amount to penal offence under section 138 of
N.I. ActTrial Court properly assessed evidence self drawn cheque neither
issued nor endorsed in favour of complainantJudgment of trial Court not
illegal or there was perversity in sameLeave petition dismissed.

10. PRESUMPTION UNDER SECTION 118
10.1. Ramilaben Jasubhai Patel Vs. Rasiklal Chunilal Kothari 2015 (1)
GLR 597 High Court of Gujarat
N. I. Act Section – 118 & Evidence Act Section-73 Held that There is
no presumption, however, as to the execution of the instrument. The
presumption statutorily raised u/s 118 would come into operation only after
and provided that the factum of execution of the instrument is admitted or
established in accordance with rule of evidence in view of clear
dispute regarding execution of pro note by accused in w/s the burden rests
on the complainant to prove signature and contents of it.
10.2 Alokbhai Pravinchandra Desai Managing Partner Of M/S Yash

Chemicals Vs. Jayendrabhai Bhogilal Thakkar. 2017 (1) GLH 288
Negotiable Instruments Act, 1881 S. 138 Complainant has proved that
he has borrowed money from other persons to lend it to the accused. The
defence witness who is the accountant of the accused proves that the
accused had given cheques to complainant in his presence. No entry in
account books of accused becomes immaterial. Statutory presumption not
rebutted by the accused. Accused defence that cheque taken under threat is
having no substance. Conviction upheld.
10.3 Taramanidevi Purushottamdasji Mahota Vs. State Of Gujarat. 2014

(3) GLR 2611.
Negotiable Instruments Act, 1881 S. 118, 138, 139 Code of Criminal
Procedure, 1973 S.482 dishonour of cheque. Complainant alleged that
accused gave cheque of Rs. 2 crore and gave instructions to Bank to stop
payment criminal complaint filed after serving notice. plea to quash the
complaint considering contents of the cheque, it is not clear as to for
what purpose the cheque was given complainant in first notice stated that
the amount was due towards dissolution of HUF while in second notice it is
stated that the amount is due towards professional and personal services,
held, from facts of the case it appears that some signed blank cheques
would have been left with complainant no presumption u/s 138 of Act of
1881 could be made complaint quashed application allowed.
10.4Dashrath Rupsingh Rathod v/s State of Maharashtra, (2014) 9 SCC

129
Mens rea not required for offence under S. 138
The objective of Parliament was to strengthen the use of cheques, distinct
from other negotiable instruments, as mercantile tender and therefore it
became essential for Section 138 to be freed from the requirement of proving
mens rea [guilty state of mind]. This has been achieved by deeming the
commission of an offence dehors mens rea not only under Section 138 but

also by virtue of the succeeding two sections. Section 139 carves out the
presumption that the holder of a cheque has received it for the discharge of
any liability. Section 140 clarifies that it will not be available as a defence to
the drawer that he had no reason to believe, when he issued the cheque,
that it would be dishonoured,
10.5MallavarapuKasivisweswara Rao v/s ThadikondaRamulu Firm,

(2008) 7 SCC 655,
Para "17. Under Section 118(a) of the Negotiable Instruments Act, the court
is obliged to presume, until the contrary is proved, that the promissory note
was made for consideration. It is also a settled position that the initial
burden in this regard lies on the defendant to prove the non-existence of
consideration by bringing on record such facts and circumstances which
would lead the court to believe the non-existence of the consideration either
by direct evidence or by preponderance of probabilities showing that the
existence of consideration was improbable, doubtful or illegal.

11. PRESUMPTION OF LIABILITY U/S. 139
11.1 Dhirubhai Rananbhai Bhanderi VS State of Gujarat, 03 Jul 2018

4.12 In the chronology of the events, the circumstances which have

emerged on record, it would be difficult, to hold that the post dated cheques,
which were said to have been given on the date on which, they were issued,
the liability or the debts existed or the amount had become legally
recoverable. Since, while deciding, whether the dishonored cheques issued
were for discharging the existing liability would fall under Section 138 of the
NI Act or not, the nature of transaction becomes quite relevant. Opponent
No.2 when returned the vehicles with a request that they were not in
working condition and it was too heavy a burden for them to incur for
starting the vehicles and made a request to the appellant to deduct a sum of
Rs. 10/, lakh and return the balance. It is understandable that as an owner
it cannot be an agreeable proposal for the appellant. However, the best
course would be available to the appellant would have been to get the same
adjudicated by a competent Court of law or by another mode or method.
Even the lodging of the private complaint before Visavadar Court was a step
towards a legal recourse, however, the subsequent developments of
executing the settlement agreement on 28.09.2016 at Visavadar Police
Station, places this entire transaction into a questionable act. It is also not
out of place to make a specific mention that two cheques, which were issued
subsequently, cannot be said for discharge of the debt or liability, which
existed on the date on which they were issued. Even if, one does not
consider the consistent stand of threat and coercion, as taken by opponent
No.2, when one of the parties had chosen to rescind from a contract, which
was not reduced into writing by way of any registered agreement, the same
had given rise to various disputed questions of law and facts, both.
Therefore, in such circumstances, it is not possible to hold that

dishonored cheques were issued to discharge any existing liability or debt to
attract the provisions of Section 138 of the NI Act.
4.13 The trial Court also, it can be noticed that, noted the fact that in
the notice of demand issued by the appellant and also in the complaint
made before the Court, there is no detail given of the total number of
persons, who had contracted with him. He, further, had agreed, in his cross-
examination, that this was a contract agreement with four persons and the
unregistered agreement of 2015 was with only opponent No.2. For some
strange reasons, Exhibit,17 produced before the trial Court does not have
reference of other three persons nor in his demand notice or the complaint
there is any mention of other three persons. The complaint also has been

filed only against opponent No.2. In the settlement agreement, which was
executed on 28.09.2016 also none of the three associates of opponent No.2
has been referred to. The trial Court, therefore, holds that this lapse on the
part of the appellant is delirious and it also proves the version of opponent
No.2, who succeeded in rebutting all the positive evidence so also the
presumption of legally enforceable debt in favour of the holder of the cheque.
Both the cheques, which are impugned in this matter are established to
have been issued, without existence of any debt. The post dated cheques
would be considered as a bill of exchange, as per the settled position of
law and not a cheque before the date mentioned on the said instrument
of demand. It would become payable only from the date mentioned on the
face of the document. By bill of exchange, it would mean that the document
would be stated to be unquestionable and would turn into cheque on the
date, it would be payable on demand. Thus, the post dated cheques
become cheque only on the date mentioned on the document and prior
to the said date, it would be only a bill of exchange. Therefore, the trial
Court has rightly held that at the time of issuance of those cheques by
opponent No.2, they were bill of exchange only and had not become the
cheques,since, there was no reference of any particular date. The trial Court
also held that in his examination-in-chief, opponent No.2 had clearly stated
that both the vehicles were taken away by the appellant and there is no
dispute with regard to the same in the cross-examination. It also has not
been disputed that both the vehicles till the date are in the ownership of the
appellant-original complainant, therefore also, with this disputed fact that
no change is made in the name of the ownership, no fault can be found with
the findings recorded and the conclusions arrived at by the trial Court that
the sale, itself, of the vehicles has not been established. Therefore,
there was no question of paying the remaining amount of
consideration.Either the ownership ought to have been changed or the
vehicles' possession ought to have been given to opponent No.2 and towards
the remaining part of consideration, there ought to have been issuance of
those two cheques. With none of these vital aspects having come on record,
the trial Court has committed no error, much less any illegality, warranting
interference at the hands of this Court.
11.2 Shashikant Naranbhai Rathod Versus State Of Gujarat, 10 Feb

2020, 2020 JX(Guj) 344
Code of Criminal Procedure, 1973 - S. 378(4) - Negotiable Instruments Act,

1881 - S. 138 - dishonour of cheque - appeal against acquittal -
improvement during cross-examination - grant of special leave to appeal -
transaction of Rs. 3 lakhs claimed in complaint - according to complainant,
cheque in dispute came to be issued by accused for that very transaction
only - however, through course of cross-examination, complainant admitted
that Rs. 3 lakhs were already paid but accused again borrowed Rs. 2 lakhs -

held, in view of his cross-examination, said facts are nothing but an
improvement - considering deposition of accused who entered the witness
box explaining the transaction, it is revealed that complainant appears to be
a loan shark and charging interest @10% p.m. and appears to have misused
pre-signed cheques obtained prior to advancing any amount - further,
complainant did not cross-examine accused who entered the witness box -
accused is supposed to rebut the presumption based on preponderance of
probability only - accused successfully rebutted the same by leading her
own evidence - therefore, complainant has failed to make out a case to grant
Special Leave to Appeal u/s. 378(4) of Cr.P.C. - no interference with order of
acquittal - application dismissed.
11.3Aps Forex Services Pvt. Ltd. Vs Shakti International Fashion

Linkers, 14 Feb 2020 2020 0 Air(Sc) 945; 2020 0 Supreme(Sc) 155;
N I Act 139 – Presumption, the accused has admitted the issuance of the
cheques and his signature on the cheque and that the cheque in question
was issued for the second time, after the earlier cheques were dishonoured
and that even according to the accused some amount was due and payable,
there is a presumption under Section 139 of the N.I. Act that there exists a
legally enforceable debt or liability. Of coursesuch presumption is rebuttable
in nature. However, to rebut the presumption the accused was required to
lead the evidence that full amount due and payable to the complainant has
been paid. In the present case, no such evidence has been led by the
accused. The story put forward by the accused that the cheques were given
by way of security is not believable in absence of further evidence to rebut
the presumption and more particularly the cheque in question was issued
for the second time, after the earlier cheques were dishonoured. Therefore,
both the courts below have materially erred in not properly appreciating and
considering the presumption in favour of the complainant that there exists
legally enforceable debt or liability as per Section 139 of the N.I. Act. It
appears that both, the Learned Trial Court as well as the High Court, have
committed error in shifting the burden upon the complainant to prove the
debt or liability, without appreciating the presumption under Section 139 of
N.I. Act. As observed above, Section 139 of the Act is an example of reverse
onus clause and therefore once the issuance of the cheque has been
admitted and even the signature on the cheque has been admitted, there is
always a presumption in favour of the complainant that there exists legally
enforceable debt or liability and thereafter it is for the accused to rebut such
presumption by leading evidence.
11.4T.P. Murugan (Dead) Thr. Lrs. V/s Bojan And PosaNandhi Rep. Thr.
Poa Holder, July 31, 2018. Criminal Appeal No(s). 950,951 OF 2018.
Para 9. The appellants have proved their case by over, whelming evidence to
establish that the two cheques were issued towards the discharge of an
existing liability and legally enforceable debt. The respondent having

admitted that the cheques and Pronote were signed by him, the
presumption under S.139 would operate. The respondent failed to rebut the
presumption by adducing any cogent or credible evidence. Hence, his
defence is rejected.
11.5Bir Singh vs. Mukesh Kumar reported as, (2019) 4 SCC 197,
Para"32. The proposition of law which emerges from the judgments referred
to above is that the onus to rebut the presumption under Section 139 that
the cheque has been issued in discharge of a debt or liability is on the
accused and the fact that the cheque might be post dated does not absolve
the drawer of a cheque of the penal consequences of Section 138 of the
Negotiable Instruments Act.
Para 33. A meaningful reading of the provisions of
the NegotiableInstrumentsActincluding, in particular, Sections 20, 87 and
139, makes it amply clear that a person who signs a cheque and makes it
over to the payee remains liable unless he adduces evidence to rebut the
presumption that the cheque had been issued for payment of a debt or in
discharge of a liability. It is immaterial that the cheque may have been filled
in by any person other than the drawer, if the cheque is duly signed by the
drawer. If the cheque is otherwise valid, the penal provisions of Section 138
would be attracted.
Para34. If a signed blank cheque is voluntarily presented to a payee,
towards some payment, the payee may filled up the amount and other
particulars. This in itself would not invalidate the cheque. The onus would
still be on the accused to prove that the cheque was not in discharge of a
debt or liability by adducing evidence.
35. It is not the case of the respondent-accused that he either signed the
cheque or parted with it under any threat or coercion. Nor is it the case of
the respondent, accused that the unfilled signed cheque had been stolen.
The existence of a fiduciary relationship between the payee of a cheque and
its drawer, would not disentitle the payee to the benefit of the presumption
under Section 139 of the Negotiable Instruments Act, in the absence of
evidence of exercise of undue influence or coercion. The second question is
also answered in the negative.
36. Even a blank cheque leaf, voluntarily signed and handed over by the
accused, which is towards some payment, would attract presumption under
Section 139 of the Negotiable Instruments Act, in the absence of any cogent
evidence to show that the cheque was not issued in discharge of a debt".
11.6Basalingappa Vs Mudibasappa, 09 Apr 2019, 2019 0 AIR(SC) 1983,

2019 0 Supreme(SC) 423.
Presumption u/s 139 is rebuttable on preponderance of probabilities.
Court cannot insist on a person to lead negative evidence.
22. Another judgment which needs to be looked into is Rangappa v/s Sri
Mohan (2010) 11 SCC 441.: (AIR 2010 SC 1898) A three,Judge Bench of this

Court had occasion to examine the presumption under Section 139 of the
1881 Act. This Court in the aforesaid case has held that in the event the
accused is able to raise a probable defence which creates doubt with regard
to the existence of a debt or liability, the presumption may fail. Following
was laid down in paras 26 and 27: (SCC pp. 453,54) : (at p. 1906,07, paras
14 of AIR)
"26. In light of these extracts, we are in agreement with the respondent

claimant that the presumption mandated by Section 139 of the Act does
indeed include the existence of a legally enforceable debt or liability. To that
extent, the impugned observations in Krishna Janardhan Bhat, may not be
correct. However, this does not in any way cast doubt on the correctness of
the decision in that case since it was based on the specific facts and
circumstances therein. As noted in the citations, this is of course in the
nature of a rebuttable presumption and it is open to the accused to raise a
defence wherein the existence of a legally enforceable debt or liability can be
contested. However, there can be no doubt that there is an initial
presumption which favours the complainant.
22. The above case was a case where this Court did not find the defence
raised by the accused probable. The only defence raised was that cheque
was stolen having been rejected by the trial court and no contrary opinion
having been expressed by the High Court, this Court reversed the judgment
of the High Court restoring the conviction. The respondent cannot take any
benefit of the said judgment, which was on its own facts.
Para 23.We having noticed the ratio laid down by this Court in above cases
on Sections 118(a) and 139, we now summaries the principles enumerated
by this Court in following manner:,
(i) Once the execution of cheque is admitted Section 139 of the act
mandates a presumption that the cheque was for the discharge of any debt
or other liability.
(ii) The presumption under Section 139 is a rebuttable presumption and
the onus is on the accused to raise the probable defence. The standard
of proof for rebutting the presumption is that of preponderance of
probabilities.
(iii) To rebut the presumption, it is open for the accused to rely on
evidence led by him or accused can also rely on the materials
submitted by the complainant in order to raise a probable defence.
Inference of preponderance of probabilities can be drawn not only from the
materials brought on record by the parties but also by reference to the
circumstances upon which they rely.
(iv) That it is not necessary for the accused to come in the witness box in
support of his defence, Section 139 imposed an evidentiary burden and
not a persuasive burden,

(v) It is not necessary for the accused to come in the witness box to support
his defence.
24. Applying the preposition of law as noted above, in facts of the present
case, it is clear that signature on cheque having been admitted, a
presumption shall be raised under Section 139 that cheque was issued in
discharge of debt or liability. The question to be looked into is as to whether
any probable defence was raised by the accused. In cross-examination of the
PW1, when the specific question was put that cheque was issued in relation
to loan of Rs.25,000/,taken by the accused, the PW1 said that he does not
remember. PW1 in his evidence admitted that he retired in 1997 on which
date he received monetary benefit of Rs. 8 lakhs, which was encashed by the
complainant. It was also brought in the evidence that in the year 2010, the
complainant entered into a sale agreement for which he paid an amount of
Rs.4,50,000/,to Balana Gouda towards sale consideration. Payment of
Rs.4,50,000/,being admitted in the year 2010 and further payment of loan
of Rs.50,000/,with regard to which complaint No.119 of 2012 was filed by
the complainant, copy of which complaint was also filed as Ex.D2, there was
burden on the complainant to prove his financial capacity. In the year
2010,2011, as per own case of the complainant, he made payment of Rs.18
lakhs. During his cross-examination, when financial capacity to pay Rs.6
lakhs to the accused was questioned, there was no satisfactory reply given
by the complainant. The evidence on record, thus, is a probable defence on
behalf of the accused, which shifted the burden on the complainant to prove
his financial capacity and other facts.
25. There was another evidence on the record, i.e., copy of plaint in O.S. No.
148 of 2011 filed by the complainant for recovery of loan of Rs. 7 lakhs given
to one Balana Gouda in December, 2009. Thus, there was evidence on
record to indicate that in December, 2009, he gave Rs.7 lakhs in sale
agreement, in 2010, he made payment of Rs.4,50,000/,towards sale
consideration and further he gave a loan of Rs.50,000/,for which complaint
was filed in 2012 and further loan of Rs.6 lakhs in November, 2011. Thus,
during the period from 2009 to November, 2011, amount of Rs.18 lakhs was
given by the complainant to different persons including the accused, which
put a heavy burden to prove the financial capacity when it was questioned
on behalf of the accused, the accused (sic) being a retired employee of State
Transport Corporation, who retired in 1997 and total retirement benefits,
which were encashed were Rs.8 lakhs only. The High Court observed that
though the complainant is retired employee, the accused did not even
suggest that pension is the only means for survival of the complainant.
Following observations were made in Paragraph 16 of the judgment of the
High Court:
"16. Though the complainant is retired employee, the accused did not even
suggest that pension is the only means for survival of the complainant.

Under these circumstances, the Trial Court's finding that the complainant
failed to discharge his initial burden of proof of lending capacity is perverse."
26. There is one more aspect of the matter which also needs to be noticed.
In the complaint filed by the complainant as well as in examination-in-chief
the complainant has not mentioned as to on which date, the loan of Rs.6
lakhs was given to the accused. It was during cross-examination, he gave
the date as November, 2011. Under Section 118(b), a presumption shall be
made as to date that every negotiable instrument was made or drawn on
such date. Admittedly, the cheque is dated 27.02.2012, there is not even a
suggestion by the complainant that a post dated cheque was given to him in
November, 2011 bearing dated 27.02.2012. Giving of a cheque on
27.02.2012, which was deposited on 01.03.2012 is not compatible with the
case of the complainant when we read the complaint submitted by the
complainant especially Para 1 of the complaint, which is extracted as below:
"1. The accused is a very good friend of the complainant. The accused
requested the Complainant a hand loan to meet out urgent and family
necessary a sum of Rs.6,00,000/, (Rupees Six Lakh) and on account of long
standing friendship and knowing the difficulties, which is being faced by the
accused the complainant agreed to lend hand loan to meet out the financial
difficulties of the accused and accordingly the Complainant lend hand loan
Rs.6,00,000/, (Rupees Six Lakh) dated 27.02.2012 in favour of the
Complainant stating that on its presentation it will be honored. But to the
surprise of the Complainant on presentation of the same for collection
through his Bank the Cheque was returned by the Bank with an
endorsement "Funds Insufficient" on 01,03 2012."
27. Thus, there is a contradiction in what was initially stated by the

complainant in the complaint and in his examination-in-chief regarding date
on which loan was given on one side and what was said in cross-
examination in other side, which has not been satisfactorily explained. The
High Court was unduly influenced by the fact that the accused did not reply
the notice denying the execution of cheque or legal liability. Even before the
trial court, appellant, accused has not denied his signature on the cheque.
28. We are of the view that when evidence was led before the Court to
indicate that apart from loan of Rs.6 lakhs given to the accused, within 02
years, amount of Rs.18 lakhs have been given out by the complainant and
his financial capacity being questioned, it was incumbent on the
complainant to have explained his financial capacity. Court cannot insist on
a person to lead negative evidence. The observation of the High Court that
trial court's finding that the complainant failed to prove his financial
capacity of lending money is perverse cannot be supported. We fail to see
that how the trial court's findings can be termed as perverse by the High
Court when it was based on consideration of the evidence, which was led on
behalf of the defence. This Court had occasion to consider the expression

"perverse" in GaminiBala Koteswara Rao and others v/s State of
Andhra Pradesh through Secretary, (2009) 10 SCC 636 : (AIR 2010 SC
589), this Court held that although High Court can reappraise the evidence
and conclusions drawn by the trial court but judgment of acquittal can be
interfered with only judgment is against the weight of evidence. In
Paragraph No.14 (Para 8 of AIR ) following has been held:,
"14. We have considered the arguments advanced and heard the matter at
great length. It is true, as contended by Mr Rao, that interference in an
appeal against an acquittal recorded by the trial court should be rare and in
exceptional circumstances. It is, however, well settled by now that it is open
to the High Court to reappraise the evidence and conclusions drawn by the
trial court but only in a case when the judgment of the trial court is stated
to be perverse. The word "perverse" in terms as understood in law has been
defined to mean "against the weight of evidence". We have to see accordingly
as to whether the judgment of the trial court which has been found perverse
by the High Court was in fact so."
29. High Court without discarding the evidence, which was led by defence,
could not have held that finding of trial court regarding financial capacity of
the complainant is perverse. We are, thus, satisfied that accused has raised
a probable defence and the findings of the trial court that complainant failed
to prove his financial capacity are based on evidence led by the defence. The
observations of the High Court that findings of the trial court are perverse
are unsustainable. We, thus, are of the view that judgment of the High
Court is unsustainable.
30. In result, the appeal is allowed and the judgment of the High Court is
set aside and that of the trial court is restored.
11.7Uttam Ram VS Devinder Singh Hudan, 17 Oct 2019, 2019 10 SCC

287;
(A) Negotiable Instruments Act, 1881 Section 138 read with Sections 118(a)
and 139 Criminal Procedure Code, 1973 Section 203 Dishonour of cheque
Dismissal of complaint Appeal by complainant Court dismissed complaint
for reason that cheque amount was more than amount alleged on due date
when cheque was presented – Dishonour of cheque carries statutory
presumption of consideration Holder of cheque in due course is required to
prove that cheque was issued by accused and that when same presented, it
was not honoured Since there is statutory presumption of consideration,
burden is on accused to rebut presumption that cheque was issued not for
any debt or other liability. Trial Court and High Court proceeded as if,
appellant is to prove a debt before civil court wherein, plaintiff is required to
prove his claim on the basis of evidence to be laid in support of his claim for
recovery of amount due. There is mandate of presumption of consideration
in terms of provisions of Act Onus shifts to accused on proof of issuance of

cheque to rebut presumption that cheque was issued not for discharge of
any debt or liability in terms of Section 138 of Act. (Paras 8, 18, 20 and 21)
(B) Negotiable Instruments Act, 1881 Section 138 read with Sections 118(a)
and 139 Criminal Procedure Code, 1973 Section 203 Dishonour of cheque
Dismissal of complaint Appeal by complainant Respondent has not rebutted
the presumption of consideration Respondent has not denied even in his
statement that cheque was not issued by him Cross examination of
witnesses produced by appellant also does not show that signatures on
cheque by him have not been disputed. Respondent has not appeared as a
witness to prove fact that cheque book was lost or that cheque was not
issued in discharge of any debt or liability. Respondent has not lodged any
FIR in respect of loss of cheque, even after notice of dishonour of cheque
was received by him. Once agent of respondent has admitted settlement of
due amount and in absence of any other evidence Trial Court or High Court
could not dismiss complaint only on account of discrepancies in
determination of amount due or oral evidence in amount due when written
document crystallizes amount due for which cheque was issued.
Presumption of consideration has not been rebutted by respondent even on
the basis of evidence laid by appellant. Difference in number of cartons
supplied or rate charged is not relevant when accounts were settled in
writing to rebut presumption of consideration of issuance of a cheque.
Conclusion drawn by Trial Court and High Court to acquit respondent is not
only illegal but being perverse is totally unsustainable in law. Order passed
by High Court set aside – Respondent is held guilty of dishonour of cheque
for offence under Section 138 of Act – Respondent shall pay fine twice of
amount of cheque and cost of litigation of Rs.1,00,000/, within three
months. (Paras 26, 27, 28, 29, 30, 33 and 34)
(C) Criminal Procedure Code, 1973 Section 313 Examination of accused

Statement of accused under Section 313 is not a substantive evidence of
defence of accused but only an opportunity to accused to explain
incriminating circumstances appearing in prosecution case of accused.
(Para 26(7) Findings recorded by the courts below are total misreading of
statutory provisions more so when respondent has not led any evidence to
rebut presumption of consideration. Cross-examination on prosecution
witness is not sufficient to rebut presumption of consideration. Mere
discrepancies in statement in respect of cartons, trays or packing material
or rate charged will not rebut statutory presumption. Approach of Trial
Court and that of High Court is perverse; irrational as well as suffers from
material illegality and irregularity, which cannot be sustained in complaint
filed under Section 138 of Act.
11.8Krishna Reddy VS Syed Hafeez (Died) Per Lr. Smt. Naseema

Begum, 30 Sep 2019 2019 0 AIR(SC) 5123

Offence alleged was that a cheque was given towards consideration for
purchase of a property – Neither any document was produced on record nor
there was any evidence that any conveyance was executed in favour of
appellant – Submission of appellant that there was no existing debt or
liability against which cheque was given had to be accepted – High Court
was in error in accepting appeal and upsetting view taken by Trial Court –
Decision of High Court set aside and judgment and order of acquittal passed
by Trial Court restored. (Paras 9 and 10)
11.9M/s. Kumar Exports Vs. M/s. Sharma Carpets (2009) 2 SCC 513 –
The use of phrase ―until the contrary is proved‖ in Section 118 and 139 of
the Act read with definition of ―may presume‖ and ―shall presume‖ as given
in section 4 of the Evidence Act makes it clear that the presumption raised
are rebuttable. Once the rebuttable evidence are adduced and accepted by
the court on the benchmark of preponderance of probability, the evidentiary
burden shifts back on the complainant.
11.10Krishna Rao Vs. Shankaragauda 2018 SCC Online SC 651

―This Court in Kumar Exports v/s Sharma Carpets, (2009) 2 SCC 513, had
considered the provisions of Negotiable Instruments Act as well Evidence
Act. Referring to Section 139, this Court laid down following in paragraphs
14, 15, 18 and 19:
―Para 14. Section 139 of the Act provides that it shall be presumed, unless
the contrary is proved, that the holder of a cheque received the cheque of
the nature referred to in Section 138 for the discharge, in whole or in part,
of any debt or other liability.
Para 15. Presumptions are devices by use of which the courts are
enabled and entitled to pronounce on an issue notwithstanding that there is
no evidence or insufficient evidence. Under the Evidence Act all
presumptions must come under one or the other class of the three classes
mentioned in the Act, namely, (1) ―may presume‖ (rebuttable), (2) ―shall
presume‖ (rebuttable), and (3) ―conclusive presumptions‖ (irrebuttable). The
term ―presumption‖ is used to designate an inference, affirmative or dis-
affirmative of the existence of a fact, conveniently called the ―presumed fact‖
drawn by a judicial tribunal, by a process of probable reasoning from some
matter of fact, either judicially noticed or admitted or established by legal
evidence to the satisfaction of the tribunal. Presumption literally means
―taking as true without examination or proof‖.
Para 18. Applying the definition of the word ―proved‖ in Section 3 of the
Evidence Act to the provisions of Sections 118 and 139 of the Act, it
becomes evident that in a trial under Section 138 of the Act a presumption
will have to be made that every negotiable instrument was made or drawn
for consideration and that it was executed for discharge of debt or liability
once the execution of negotiable instrument is either proved or admitted. As
soon as the complainant discharges the burden to prove that the

instrument, say a note, was executed by the accused, the rules of
presumptions under Sections 118 and 139 of the Act help him shift the
burden on the accused. The presumptions will live, exist and survive and
shall end only when the contrary is proved by the accused, that is, the
cheque was not issued for consideration and in discharge of any debt or
liability. A presumption is not in itself evidence, but only makes a prima
facie case for a party for whose benefit it exists.
Para 19. The use of the phrase ―until the contrary is proved‖ in Section
118 of the Act and use of the words ―unless the contrary is proved‖ in
Section 139 of the Act read with definitions of ―may presume‖ and ―shall
presume‖ as given in Section 4 of the Evidence Act, makes it at once clear
that presumptions to be raised under both the provisions are rebuttable.
When a presumption is rebuttable, it only points out that the party on
whom lies the duty 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, the purpose of the presumption
is over.‖
Para 20. This Court held that the accused may adduce evidence to rebut
the presumption, but mere denial regarding existence of debt shall not serve
any purpose. Following was held in paragraph
―Para 20. The accused may adduce direct evidence to prove that the note in
question was not supported by consideration and that there was no debt or
liability to be discharged by him. 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 of negative
evidence is neither possible nor contemplated. At the same time, it is clear
that bare denial of the passing of the consideration and existence of debt,
apparently would not serve the purpose of the accused. Something which is
probable has to be brought on record for getting the burden of proof shifted
to the complainant. To disprove the presumptions, the accused should bring
on record such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not exist or
their non-existence was so probable that a prudent man would under the
circumstances of the case, act upon the plea that they did not exist...‖
Para 18. From the above discussion following aspects emerge:
i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of
standard of such proof is "preponderance of probabilities". The same has to
Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will
apply and the Court can close the proceedings and discharge the accused on
satisfaction that the cheque amount with assessed costs and interest is paid
and if there is no reason to proceed with the punitive aspect.

element being mainly with the object of enforcing the compensatory element,
compounding at the initial stage has to be encouraged but is not debarred at
later stage subject to appropriate compensation as may be found acceptable
to the parties or the Court.
imprisonment, the Court has jurisdiction under Section 357(3) Cr.P.C. to
award suitable compensation with default sentence under Section 64 IPC
and with further powers of recovery under Section 431 Cr.P.C. With this
approach, prison sentence of more than one year may not be required in all
cases.
v) Since evidence of the complaint can be given on affidavit, subject to the
bank's slip being prima facie evidence of the dishonor of cheque, it is
be as per Section 264 Cr.P.C. The scheme is to follow summary procedure
except where exercise of power under second proviso to Section 143
becomes necessary, where sentence of one year may have to be awarded and
compensation under Section 357(3) is considered inadequate, having regard
to the amount of the cheque, the financial capacity and the conduct of the
accused or any other circumstances.
Para 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 Cr.P.C. 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) Cr.P.C. 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.
Para 20. In every complaint under Section 138 of the Act, it may be
desirable that the complainant gives his bank account number and if

possible e,mail ID of the accused. If e,mail ID is available with the Bank
where the accused has an account, such Bank, on being required, should
furnish such e,mail ID to the payee of the cheque. In every summons, issued
to the accused, it may be indicated that if the accused deposits the specified
amount, which should be assessed by the Court having regard to the cheque
amount and interest/cost, by a specified date, the accused need not appear
unless required and proceedings may be closed subject to any valid
objection of 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 the proceedings unless it becomes necessary to
proceed with the case. In such a situation, the accused's presence can be
required, unless the presence is otherwise exempted subject to such
conditions as may be considered appropriate. The accused, who wants to
contest the case, must be required to disclose specific defence for such
contest. It is open to the Court to ask specific questions to the accused at
that stage.
In case the trial is to proceed, it will be open to the Court to explore
the possibility of settlement. It will also be open to the Court to consider the
provisions of plea bargaining. Subject to this, the trial can be on day to day
basis and endeavor 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.
Para 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 may also consider
issuing any further updated directions for dealing with Section 138 cases in
the light of judgments of this Court. The appeals are disposed of. It will be
open to the appellants to move the Trial Court afresh for any further order
in the light of this judgment.
11.11Rahul Sudhakar Anantwar VS Shivkumar Kanhiyalal Shrivastav,
21 Oct 2019 2019 0 AIR(SC) 5520;
(1) Issuance of cheque carries presumption of liability to pay money.
(2) Dishonour of cheque – Amount awarded as compensation and cost
should not be on higher side.
Para 7. Admittedly, the parties had entered into an Agreement of Sale dated
28.02.2012. It is also an admitted fact that the respondent-complainant had
paid Rs. 2,50,000/, (Rupees Two Lakhs Fifty Thousand) as an
advance/earnest money to the appellant-accused as per the terms of the
Agreement. As pointed out by the High Court, the appellant-accused has not
disputed his signature on the said cheque presented for clearance.
Contention of the appellant that the cheque issued in the name of the Firm,
named, Synergy and Solution Incorporation was removed from his office

table is not convincing nor the same is supported by any evidence. As
pointed by the High Court in the statutory presumption under Section 139
of N.I. Act, the appellant-accused has not satisfactorily rebutted the
statutory presumption. In view of the above, we do not find any ground
warranting interference with the conviction of the appellant-accused under
Section 138 of N.I. Act.
11.12Laxmi Dyechem, M/s. Vs. State of Gujarat 2013 CRI. L. J. 3288

Supreme Court
Presumption under S. 139 Category of 'stop payment cheques' Would be a
category of cases which would be subject to rebuttal , Hence, it would be an
offence only if drawer of cheque fails to discharge burden of rebuttal. (Paras
27 , 28 , 29) Category of 'stop payment' instruction to bank as cheque in
question returned due to mismatching of signatures. Petitioner neither
raised nor proved to contrary that cheques were not for discharge of lawful
debt. Plea of rebuttal envisaged under S. 139 not attracted. (Para 30)
11.13Anss Rajashekar Vs Augustus Jeba Ananth, 18 Jan 2019. 2019 2

Scale 548; 2019 3 Supreme 177; 2019 0 Supreme(SC) 338;
Para10. Section 139 of the Act mandates that it shall be presumed, unless
the contrary is proved, that the holder of a cheque received it, in discharge,
in whole or in part, of a debt, or liability. The expression "unless the
contrary is proved" indicates that the presumption under Section 139 of the
Act is rebuttable. Terming this as an example of a "reverse onus clause" the
three Judge Bench of this Court in Rangappa (supra) held that in
determining whether the presumption has been rebutted, the test of
proportionality must guide the determination. The standard of proof for
rebuttal of the presumption under Section 139 of the Act is guided by a
preponderance of probabilities. This Court held thus:
"Para 28 In the absence of compelling justifications, reverse onus

clauses usually imposes an evidentiary burden and not a persuasive
burden. Keeping this in view, it is a settled position that when an accused
has to rebut the presumption under Section 139, the standard of proof for
doing so is that of 'preponderance of probabilities'. Therefore, if the accused
is able to raise a probable defence which creates doubts about the existence
of a legally enforceable debt or liability, the prosecution can fail. As clarified
in the citations, the accused can rely on the materials submitted by the
complainant in order to raise such a defence and it is conceivable that in
some cases the accused may not need to adduce evidence of his/her own."
11.14Rohitbhai Jivanlal Patel V/S State Of Gujarat Air 2019 Supreme

Court 1876 Supreme Court (From: Gujarat)

16. On the aspects relating to preponderance of probabilities, the accused
has to bring on record such facts and such circumstances which may lead
the Court to conclude either that the consideration did not exist or that its
non-existence was so probable that a prudent man would, under the
circumstances of the case, act upon the plea that the consideration did not
exist. This Court has, time and again, emphasized that though there may
not be sufficient negative evidence which could be brought on record by the
accused to discharge his burden, yet mere denial would not fulfill the
requirements of rebuttal as envisaged under Section 118 and 139 of the NI
Act. This court stated the principles in the case of Kumar Exports (AIR 2009
SC 1518, Para 11) (supra) as follows
"20. The accused in a trial under Section 138 of the Act has two options. He
can either show that consideration and debt did not exist or that under the
particular circumstances of the case the non-existence of consideration and
debt is so probable that a prudent man ought to suppose that no
consideration and debt existed. To rebut the statutory presumptions an
accused is not expected to prove his defence beyond reasonable doubt as is
expected of the complainant in a criminal trial. The accused may adduce
direct evidence to prove that the note in question was not supported by
consideration and that there was no debt or liability to be discharged by
him. 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 of negative evidence is neither possible
nor contemplated. At the same time, it is clear that bare denial of the
passing of the consideration and existence of debt, apparently would not
serve the purpose of the accused. Something which is probable has to be
brought on record for getting the burden of proof shifted to the complainant.
To disprove the presumptions, the accused should bring on record such
facts and circumstances, upon consideration of which, the court may either
believe that the consideration and debt did not exist or their non-existence
was so probable that a prudent man would under the circumstances of the
case, act upon the plea that they did not exist. Apart from adducing direct
evidence to prove that the note in question was not supported by
consideration or that he had not incurred any debt or liability, the accused
may also rely upon circumstantial evidence and if the circumstances so
relied upon are compelling, the burden may likewise shift again on to the
complainant. The accused may also rely upon presumptions of fact, for
instance, those mentioned in Section 114 of the Evidence Act to rebut the
presumptions arising under Sections 118 and 139.
21. The accused has also an option to prove the non-existence of

consideration and debt or liability either by letting in evidence or in some
clear and exceptional cases, from the case set out by the complainant, that
is, the averments in the complaint, the case set out in the statutory notice
and evidence adduced by the complainant during the trial. Once such

rebuttal evidence is adduced and accepted by the court, having regard to all
the circumstances of the case and the preponderance of probabilities, the
evidential burden shifts back to the complainant and, therefore, the
presumptions under Sections 118 and 139 of the Act will not again come to
the complainant's rescue."
17. In the case at hand, even after purportedly drawing the presumption
under Section 139 of the NI Act, the Trial Court proceeded to question the
want of evidence on the part of the complainant as regards the source of
funds for advancing loan to the accused and want of examination of relevant
witnesses who allegedly extended him money for advancing it to the
accused. This approach of the Trial Court had been at variance with the
principles of presumption in law. After such presumption, the onus shifted
to the accused and unless the accused had discharged the onus by bringing
on record such facts and circumstances as to show the preponderance of
probabilities tilting in his favour, any doubt on the complainant's case could
not have been raised for want of evidence regarding the source of funds for
advancing loan to the accused-appellant. The aspect relevant for
consideration had been as to whether the accused-appellant has brought on
record such facts/material/circumstances which could be of a reasonably
probable defence.
11.15Buday Miyan Vs. M.C. Venkatesh Criminal Appeal No.918 of

2010 Decided on : 25,01,2019 (2019) 1 NIJ 329 Karnataka High Court
Held: There is no hard and fast rule as to how and in what manner
accused has to establish particular defence taken up by him.
Negotiable Instruments Act, 1881 , Sections 138 and 139 Criminal
Procedure Code, 1973 Section 378 Dishonour of cheque, Appeal against
acquittal , There is no hard and fast rule as to how and in what manner
accused has to establish particular defence taken up by him in order to
rebut presumption under Section 139 of NI Act ,Accused has probabilised
his defence by proving the circumstances that notices have not been
served upon him, Complainant has not proved guilty of accused beyond all
reasonable doubts , No strong reasons to interfere with impugned judgment
of acquittal rendered by Trial Court , Appeal dismissed.
Para 11. The next important aspect raised is that the accused himself has
taken up the contention that the cheques were issued as security and he
has not taken any money in lieu of the said cheques nor there was any
existence of an earlier debt or liability. When once the defence has been
taken in that manner, it should be probabalised in the course of cross-
examination of the complainant or the accused by leading independent
evidence before the Court. There is no hard and fast rule as to how and in
what manner the accused has to establish this particular defence taken
up by him in order to rebut the presumption under section 139 of the
NI Act.

Para 12. Of course, section 139 of the NI Act raises a presumption in favour
of the complainant that unless it is rebutted the Court has to presume the
existence of a legally recoverable debt by the accused to the complainant. In
this particular case, though that presumption could be raised, the Court
has to look into whether the said presumption has been rebutted in the
course of cross examination with regard to the existence of any debt or
liability.
11.16 Alka Khandu Avhad ..Versus Amar Syamprasad Mishra & Anr. ..
date 8-4-2021 Criminal Appellate Jurisdiction Criminal Appeal No. 258
Of 2021
The Supreme Court observed that, even in case of a joint liability, in case of
individual persons, a person other than a person who has drawn the cheque
on an account maintained by him, cannot be prosecuted for the offence
under Section 138 of the Negotiable Instruments Act."A person might have
been jointly liable to pay the debt, but if such a person who might have been
liable to pay the debt jointly, cannot be prosecuted unless the bank account
is jointly maintained and that he was a signatory to the cheque.", even in
case of a joint liability, in case of individual persons, a person other than a
person who has drawn the cheque on an account maintained by him,
cannot be prosecuted for the offence under Section 138 of the Negotiable
Instruments Act. A person might have been jointly liable to pay the debt, but
if such a person who might have been liable to pay the debt jointly, cannot
be prosecuted unless the bank account is jointly maintained and that he
was a signatory to the cheque."
11.17 SUMETI VIJ VERSUS M/S PARAMOUNT TECH FAB INDUSTRIE

2021 JC(SC)2789 Judgment Date: 09-03-2021.
Primary burden was discharged by the complainant that the cheques

were issued by the appellant in lieu of the material supplied, and
documentary evidence duly exhibited was placed on record to substantiate
the claim, and it was for the appellant accused to discharge her burden to
rebut in defence as required under Section 139 of the Act.
Appellant has only recorded her statement under Section 313 of the
Code, and has not adduced any evidence to rebut the presumption that the
cheques were issued for consideration. Once the facts came on record
remained unrebutted and supported with the evidence on record with no
substantive evidence of defence of the appellant to explain the incriminating
circumstances appearing in the complaint against her, no error has been
committed by the High Court in the impugned judgment, and the appellant
has been rightly convicted for the offence punishable under Section 138 of
the Act and needs no interference of this Court. The burden of proof was on
the accused in view of presumption under Section 139 of the Act and the
standard of proof was of ?preponderance of probabilities?. It is well settled

that the proceedings under Section138 of the Act are quasi criminal in
nature , and the principles which apply to acquittal in other criminal cases
are not applicable in the cases instituted under the Act. Likewise, under
Section 139 of the Act , a presumption is raised that the holder of a cheque
received the cheque for the discharge, in whole or in part, of any debtor
other liability. To rebut this presumption, facts must be adduced by the
accused which on a preponderance of probability (not beyond reasonable
doubt as in the case of criminal offences), must then be proved.
11.18 M/s. Kalamani Tex & Anr Vs. P. Balasubramanian [Arising out of
Special Leave Petition (Crl.) No. 1876 of 2018] Criminal Appeal No. 123
of 2021 2021-JX-(SC)-0-70 Decided on : 10-02-2021
Once the accused had admitted his signatures on the cheque and the Deed,
the trial Court ought to have presumed that the cheque was issued as
consideration for a legally enforceable debt. The trial Court fell in error when
it called upon the Complainant to explain the circumstances under which
the accused were liable to pay. Such approach of the trial Court was directly
in the teeth of the established legal position, and amounts to a patent error
of law.
11.19 RAJESH KUMAR versus MEHROTRA IMPEX PVT. LTD. ICL 2020
(12) Del. 492,
Negotiable Instruments Act, 1881 – Section 138 – Dishonour of Cheques –
Unlike the prosecution, accused is not required to establish his defence
beyond all reasonable doubts. He is only required to create a hole in the
story of prosecution to get the benefit of acquittal. Accused can say that the
version brought forth by the complainant is inherently unbelievable and
therefore the prosecution cannot stand. Or the accused can give his version
of the story and say that on the basis of his version the story of the
complainant cannot be believed. Negotiable Instruments Act, 1881 Section
138 Dishonour of Cheques, the presumption of law, though rebuttable,
works in favour of the complainant. However, the presumption gets rebutted
if the defence raises a reasonable suspicion in the prosecution story by
raising a probable defence. In other words, provided the facts required to
form the basis of a presumption of law exist, no discretion is left with the
court but to draw the statutory presumption. However, this does not
preclude the person against whom the presumption is drawn from rebutting
it and proving the contrary.
UNDERTAKING BEFORE COURT AND PRESUMPTION
11.20 RAMDAS HANUMANT PALANKAR VERSUS N.D. VEMEKAR

AIR(BOM) 2009 0 722, LAWS(BOM) 2008 6 62 HIGH COURT OF
BOMBAY

A. The applicant-complainant has preferred this application for leave to file
an appeal against the judgment and order dated 20-1-2007 passed by the
learned 6th Judicial Magistrate, F. However, thereafter in his evidence, the
complainant has stated that he did not pay cash amount to the accused but
he handed over gold to the accused as a loan and for the repayment of the
said loan, accused issued the cheque.
B. The said admission of the complainant is completely contradictory to the
previous statement made by him where at paragraph 13 of cross
examination of complainant, he has categorically admitted that there was no
any cash transaction or loan transaction between accused and himself other
than present disputed transaction.
C. 2 lakhs from the complainant and hence, he was liable to pay the same
In relation to the said document, the complainant stated that he does not
understand Marathi language and hence, he is not aware about the contents
of the said document Hence, complaint came to be filed From the record, it
is seen that the cheque was not issued for any legally enforceable debt or
liability and therefore, giving of such an undertaking by the accused would
be of no help to the complainant
D. Looking to the evidence on record and the admissions given by the
complainant there is sufficient evidence to discharge the burden upon the
accused regarding presumption. The learned Magistrate after through the
evidence has observed, that the disputed chequr issued for a legally
enforceable liability.
Accused had given undertaking (Exhibit-30) to the trial Court that he will
make payment to the complainant. True that there is such an undertaking
on record but giving of such undertaking does not necessarily indicate that
the accused had taken a loan of Rs. lakhs from the complainant and hence,
he was liable to pay the same. There are various reasons to give such
undertaking before this Court and it does not necessarily indicate the guilt
of the person. The necessary ingredient under the Negotiable Instruments
Act, is that the cheque should be given in respect of any legally enforceable
debt or liability. From the record, it is seen that the cheque was not issued
for any legally enforceable debt or liability and therefore, giving of such an
undertaking by the accused would be of no help to the complainant. (Para 9)

12. CHEQUE NOT ISSUED FROM THE ACCOUNT OF THE
ACCUSED
12.1 Krishna Trading Company, Proprietorship Firm VS State of

Gujarat[2017] 2 GLH 87 / [2017] 0 Supreme(Guj) 37
Principal endowed son with Power of attorney Held: No vicarious

liability in NI Act – only the drawer of the cheque, who can be held
responsible for the dishonor – only the mandate holder, who has drawn
the cheque, can be held liable under Section 138 of the N.I. Act and not
the principal – maker of cheque is a person who orders payment and signs
the cheque – drawer of a cheque is the person who orders payment and
signs it. – only the 'drawer' of a cheque who can be held liable –
principal(appellant), in present case, not drawer, thus cannot be held liable
Power of Attorney Holder, who ordered payment and signed the
cheque, is primarily held liable to be proceeded against for the commission
of the offence under Section 138 of the N.I. Act, caused by the drawing and
issuing of the cheque, when there is no sufficient fund in the account.
Unlike Indian Penal Code, there is no enabling provisions akin to Sections
34 to 38, 107, 149, 120B etc. under the Negotiable Instruments Act so as to
rope in the person who caused the commission of the offence by sharing of
mind or abetting or conspiring to do an act that constitutes an offence.
According to the statutory mandate under Section 138 of the N.I. Act, a
person who has drawn and issued the cheque is liable to be proceeded
against for the offence under Section 138 of the N.I. Act.
12.2 Patel Nitaben Chetanbhai V/s State Of Gujarat, 2 017 JX(Guj) 259
Only Drawer Of Cheque Is Liable:,cheque in question was not signed by

the applicant, but it was signed by her husband , case of Mrs. Aparna A
Shah (Supra) relied upon , no liability of applicant – complaint qua applicant
quashed , application allowed.
12.3 Sejal Brijalbhai Shah Vs. State Of Gujarat And Other (2019) 2 Nij
5Gujarat High Court,R/Criminal MISC.Application No. 1427 of
2019Decided on : 27,02,2019
4.2 The insistence on the part of respondent No.2 that the petitioner-wife
was dealing intermittently or on regular basis with respondent No.2 in the
business would have no basis to prosecute her under section 138 of the NI
Act. Assuming that she would be helping her husband in the business that
ipso facto also would not be a ground to continue prosecution qua her.
section 138 of the NI Act clearly provides that where a cheque is drawn of an
account maintained by him with a banker for payment of any amount of
money in their personal capacity out of that account for the discharge, in

full or in part of any debt or liability, is returned by the Bank unpaid, which
is either due to insufficient funds or because the amount of money standing
to the credit of the account holder is insufficient or it exceeds the amount
arranged to be paid from that account by an agreement made with the bank,
such a person shall be deemed to have committed the offence and the
mandatory requirement also provides for issuance of notice to such a
person.
4.3 Admittedly, the present petitioner is not the person, who has issued the
cheque nor is it in discharge of any debt or liability of hers either in whole or
in part. She being neither the holder in due course nor the authorized
signatory nor being the joint account holder with her husband, as rightly
pointed out by learned Advocate, Ms.Pandya, the prosecution qua her is
unsustainable. The cheque, which had been dishonoured, also clearly
reflects the signature of Mr. B.B. Shah (Mr. Brijalkumar Bharatbhai Shah)
and as mentioned herein above, the averments in this petition further
vindicates that aspect. From the entire gamut of facts, it is quite clear that
the petitioner has
Neither any role to play nor has any legal liability for her to have issued the
said cheque and she, in fact, has not signed the said cheque. This
prosecution, therefore, must fail qua her.
12.4Hon‘ble Supreme Court in Jugesh Sehgal v/s Shamsher Singh Gogi,

(2009) 14 SCC 683
Para : 22 As already noted herein before, in Para 3 of the complaint,

there is a clear averment that the cheque in question was issued from an
account which was non-existent on the day it was issued or that the
account from where the cheque was issued ―pertained to someone else‖. As
per the complainant‘s own pleadings, the bank account from where the
cheque had been issued, was not held in the name of the appellant and
therefore, one of the requisite ingredients of Section 138 of the Act was not
satisfied.‖
The Court also noted that one of the essential ingredients of the
offence punishable under Section 138 of Negotiable Instruments Act is that
the cheque must have been drawn on an account maintained by the
accused. Since the cheque in the case before the Supreme Court was not
issued from the account maintained by the petitioner, it was held that one
essential ingredient of offence under Section 138 of Negotiable Instruments
Act was not present.‖
The matter was referred to a larger bench in the case of AneetaHada
Vs God father Tour and Travels Ltd (2008)13 SCC 703 to be ultimately
decided by the Hon‘ble Supreme Court of india in the following terms
―Arraigning of the Company as accused imperative (2012) 5 SCC 661.

12.5Aparna A. Shah Vs Sheth Developers Pvt Ltd and Anr(2013) 8 SCC
71
The Supreme Court held that in case of issuance of a cheque from joint
account, a joint account holder cannot be prosecuted unless the cheque has
been signed by each and every person who has a joint account holder.
The following was observed by the Supreme Court as contained in para

23: "We also hold that under Section 138 of the N.I. Act, in case of issuance
of cheque from joint accounts, a joint account holder cannot be
prosecuted unless the cheque has been signed by each and every
person who is a joint account holder. The said principle is an exception
to Section 141 of the N.I. Act which would have no application in the
case on hand. The proceedings filed under Section 138 cannot be used as
an arm twisting tactics to recover the amount allegedly due from the
appellant. It cannot be said that the complainant has no remedy against the
appellant but certainly not under Section 138. The culpability attached to
dishonour of a cheque can, in no case "except in case of Section 141 of the
N.I. Act" be extended to those on whose behalf the cheque is issued. This
Court reiterates that it is only the drawer of the cheque who can be made an
accused in any proceeding under Section 138 of the Act. Even the High
Court has specifically recorded the stand of the appellant that she was not
the signatory of the cheque but rejected the contention that the amount was
not due and payable by her solely on the ground that the trial is in progress.
It is to be noted that only after issuance of process, a person can approach
the High Court seeking quashing of the same on various grounds available
to him. Accordingly, the High Court was clearly wrong in holding that the
prayer of the appellant cannot even be considered. Further, the High Court
itself has directed the Magistrate to carry out the process of
admission/denial of documents. In such circumstances, it cannot be
concluded that the trial is in advanced stage
12.6N Harihara Krishna Vs J. Thomas reported in 2017 SCC Online SC

1017.
S. 138, 141 & 142 – Dishonour of cheque – offence by company – Issuance
of individual notices under S. 138 to them, held, not required as For
dishonor of cheque drawn by company, appellant issued notice u/s 138 to
accused 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 u/s. 138 – Such Directors who are in charge of and
responsible for affairs of company, would be aware of receipt of notice by
company u/s. 138(2015) 8 SC Cases 28 AIR 2015 SC 2091 Krishna
Texport and Capital markets limited Vs.Ila A. Agarwal and others.

13. PRESENTATION OF CHEQUE
The presentation of cheque should be within its validity period.

Generally a cheque is valid for six months, but there are cheques whose
validity period is restricted to three months etc. The question arises as to
which bank the cheque should reach within the validity period, is it the
payee to his bank presents that of drawer‘s bank or it is enough if the
cheque before six months. Common sense demands that the cheque should
reach the drawer bank within the period of validity as it is that bank that
either pays or rejects payment as per the situation existing on that day
Central Bank Of India and Another Vs. Saxon Farms and others (1999)8
SCC 221.
13.1 N. Parameswaran Unni Vs. G. Kannan and Another(2017) 2 Crimes

62 (SC)
The supreme court has held If within limitation, Two consecutive
notices sent by payee by registered 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 absent‖,
whereas second one sent after expiry of stipulated period of limitation Held,
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 reminder and would not affect validity of first to achieve that right of
honest lender is not defeated.
13.2 Sadanandan Bhadran vs. Madhavan Sunil Kuar [(1998) 6 SCC 514],
Supreme Court
Held that while the payee was free to present the cheque repeatedly
within its validity period, once notice had been issued and payments not
received within 15 days of the receipt of the notice, the payee has to avail
the very cause of action arising thereupon and file the complaint [Prem
Chand Vijay Kumar vs. Yashpal Singh &Anr. [(2005) 4 SCC 417].
Dishonour of the cheque on each re-presentation does not give rise to a
fresh cause of action. But the law was settled finally overruling all the
contrary views in terms of the judgment of (2013) 1 SCC 177 MSR
Leathers Vs. S. Planniappan and Another that so long the cheque remains
valid the prosecution based on subsequent presentation is permissible so
long as it satisfies all the requirements of section 138.
Re-presentation of cheque after dishonor – Limitation period for filing
complaint for dishonor 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 dishonor of cheque, which matures into complaint – Though

first legal notice was issued within two days of first dishonor of cheque,
second legal notice issued to drawer of cheque on 17,12,2008 pursuant to
dishonor of same cheque second time on 10,11,2008 i.e. beyond limitation
period of 30 days – Information as to second dishonor was received from
Bank on the same day itself (i.e. 10,11,2008)
13.3 MSR Leather, (2013) 1 SCC 177 (2014) 2 SC cases 424 AIR 2014
SC 660 Kamlesh Kumar. Vs. State of Bihar and another.
Held,although the complainant had right to present the said cheque
for encashment a second time after its dishonor, the legal notice pursuant to
second dishonor had to be issued within 30 days of the receipt of
information as to second dishonor 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.
13.4 Birendra Prasad Sah VS State of Bihar, 08 May 2019, 2019 2 ACR
1659; 2019 0 AIR(SC) 2496;
Negotiable Instruments Act, 1881 Sections 138 and 142 Dishonour of
cheques Complaint Limitation Issuance of successive notices is permissible
under provisions of Section 138 having regard to object of legislation Under
Section 142(1), complaint has to be instituted within one month of date on
which cause of action has arisen under clause (c) of proviso to Section 138.
However, cognizance of complaint may be taken by court after prescribed
period if complainant satisfies Court that he had sufficient cause for not
making a complaint within such period. Appellant had indicated sufficient
cause for seeking condonation of delay in institution of complaint. High
Court has merely adverted to presumption that first notice would be deemed
to have been served if it was dispatched in ordinary course. Even if that
presumption applies, sufficient cause was shown by appellant for condoning
delay in instituting complaint taking basis of complaint as issuance of first
legal notice – Impugned judgment of High Court is unsustainable – Order
passed by Single Judge set aside and complaint restored to file of trial court.
(Para 7, 11 and 12).

14.RETURNING OF THE CHEQUE UNPAID
Lot of controversy had arisen on the issue. What reasons are relevant
to hold the drawer of the cheque criminally responsible for bouncing of a
cheque. The case laws on the subject have now made the position clear. It is
not what the bank says in its return memo that is relevant but the actual
position as on the date when the cheque reaches the drawer bank whether
there were enough funds in the drawer account to honour the cheque. The
following judgments bring out the correct legal position:
14.1 NEPC Ltd. Vs. Magma Leasing Ltd. 1999 (4) SCC 253 – Relying
upon Modi Cement Ltd. 1998 (3) SCC 249
Held that cheque returned by mentioning account closed is also an
offence u/s. 138 N.I. Act. Despite being penal provision it has been
interpreted purposefully in furtherance to effectiveness and workability of
the enactment. Account closed, stop payment are species of the genus in
sufficient fund.
14.2MMTC Co. Vs. Medchil pharmaceuticals 2002 (1) SCC 234

Any reason for dishonour is an offence. S. 138 of the NI Act Marginal
Note stating ―Dishonour of cheque for insufficiency etc. of funds in
accounts‖ addition of word ―etc.‖ cannot be considered to be an accident.
14.3 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 of
signature will also attract offence u/s 138 N.I. Act. Subject to rebuttal
evidence of defence against presumption u/s. 139 N.I. Act. It was held that
the reasons 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‖
14.4 Sil Import U.S.A. Vs. Exim Aides Silk Exporters and 2004 Cri.L.J.
2636
Period of one month for filing complaint from date immediately
following the date on which period of 15 days from date of receipt of notice
by drawee expired and The day when cause of action arises would excluded
and last day included, on being holiday then the next coming day will be
counted.
Notice envisaged under S. 138, Proviso (b) to be given by payee to the
drawer of the cheque which has been dishonoured can be sent by Fax. The
duty cast on the payee on receipt of information regarding the return of the
cheque unpaid is mentioned in cl. (b) of S. 138. Within 15 days he has to

make a demand for payment. The mode of making such demand is also
prescribed in the clause, that it should be "by giving notice in writing to the
drawer of the cheque". Nowhere it is said that such notice must be sent by
registered post or that it should be dispatched through a messenger. Chap.
XVII of the Act, containing Ss. 138 to 142, was inserted in the Act as per
Banking Public Financial Institution and Negotiable Instruments Laws
(Amendment) Act, 1988.
Technological advancement take Facsimile, Internet, E,mail etc.
were on swift progress even before the Bill for the Amendment Act was
discussed by the Parliament. When the legislature contemplated that
notice in writing should be given to the drawer of the cheque, the
legislature must be presumed to have been aware of the modern
devices and equipment already in vogue and also in store for future. If
the Court were to interpret the words "giving notice in writing" in the
section as restricted to the customary mode of sending notice through
postal service or even by personal delivery, the interpretative process
would fail to cope up with the change of time. So if the notice
envisaged in cl. (b) of the proviso to S. 138 was transmitted by Fax it
would be compliance with the legal requirement. (Paras 12 , 13 , 14 ,
17)
14.5 Shiv Shakti Cooperative Housing Society vs. Swaraj Developer,

AIR 2003 SC 2434
Acquittal of accused on basis of law then in force proper can't be set
aside when complainant has not stated a satisfactory reason for condoning
delay.
14.6 M/s Mandvi Cooperative Bank Ltd. Vs. Nimesh B. Thakore, JT

2010 (1) SC 259.
Accused has an absolute right to have the complainant and any of his
witness summoned for cross examination, but cannot ask for examination-
in-chief again. There is no provision in law to permit the accused to file
affidavit in evidence.
Para 32The case of the complainant in a complaint under Section 138 of the
Act would be based largely on documentary evidence. The accused, on the
other hand, in a large number of cases, may not lead any evidence at all and
let the prosecution stand or fall on its own evidence. In case the defence
does lead any evidence, the nature of its evidence may not be necessarily
documentary; in all likelihood the defence would lead other kinds of
evidences to rebut the presumption that the issuance of the cheque was not
in the discharge of any debt or liability. This is the basic difference between
the nature of the complainant's evidence and the evidence of the accused in
a case of dishonoured cheque. It is, therefore, wrong to equate the defence
evidence with the complainant's evidence and to extend the same option to
the accused as well.

15.NO BAR FOR THE DRAWER OF A CHEQUE TO GIVE
AUTHORITY TO A THIRD PERSON TO FILL UP THE CHEQUE
SIGNED BY HIM
15.1 S. Gopal v/s D. Balachandran [MANU/TN/0119/2008/ II (2008) BC

614,] held as follows Para's:,
Para 7 :This Court in Rajendran vs. Usharani 2001 LW (Crl.) 319 has
observed that no law prescribes that in case of any negotiable instrument,
the entire body of the instrument shall be written only by the marker or
drawer of the instrument. Once the execution is admitted, it shall be taken
that the cheque was issued by the accused in favour of the complainant
towards the discharge of the liability even in a case where the cheque was
filled up by some other person.
Para 8: It is to be noted that there is no reference to Section 20 of the
Negotiable Instruments Act in the aforesaid authority. A general proposition
has been made to the effect that there is a presumption, in case a signed
cheque is delivered to the payee, that the cheque so issued by the drawer in
favour of the payee is only towards the discharge of his subsisting liability.
Para 9. The aforesaid authority does not run counter to the provision under
Section 20 of the Negotiable Instruments Act. As rightly observed therein,
there is no law which prescribes that a cheque shall be filled up by the
drawer himself. If such proposition is accepted, no unlettered person, who
knows only to sign his name, can ever be a drawer of a cheque. Further, a
person who is physically incapacitated to fill up the cheque cannot also
draw a cheque and negotiate it. Of course, as far as the other negotiable
instruments viz., pro,notes and bills of exchange, there is a clear mandate
under Section 20 of the Negotiable Instruments Act to the effect that such
an instrument can be negotiated by the maker thereof by simply signing and
delivering the same to the holder in due course giving thereby ample
authority to the latter to fill up the content of the instrument as intended by
the maker thereof.
Para 10 Even in case of a cheque, as there is no clear provision in the
Negotiable Instruments Act, in the light of the above discussion, the court
finds that if a drawer of a cheque gives authority to the payee or holder in
due course or a stranger for that matter to fill up the cheque signed by him,
such an instrument also is valid in the eye of law. There is no bar for the
drawer of a cheque to give authority to a third person to fill up the cheque
signed by him for the purpose of age negotiating the same
15.2 Sanjay Vs Rajeev (2007(2) MPHT 182) and Satyendra Upadhyaya

vs. Omprakash Rathore @ Japan Singh (2010 MPLJ online 1)
&Bhadauria Tiles vs. Ramkumar Sing Kushwah (2011 MPLJ online 1), &
Sunita Dubey Vs Hukum Singh Ahirwar( 2015(1) MPLJ 574)

In the aforesaid judgments, it is held that on the ground that accused
has admitted the signature on the cheque, therefore, in view of provisions of
Section 20 of the Negotiable Instruments Act, the prayer to send the cheque
for the opinion of the handwriting expert cannot be given. Even the other
part of the cheque has been wrongly filled by the other persons, the person
concerned who has issued the cheque is liable to honour the cheque,
therefore no useful purpose will be served by sending the cheque for the
opinion of the handwriting expert.

16. COMPLAINT CAN BE DROPPED AS OFFENCE U/S 138 IS CIVIL
WRONG
16.1 M/S. Meters and Instruments Private Limited &Anr. Vs. Kanchan
Mehta (Criminal Appeal No. 1732 Of 2017)
Hon'ble Supreme Court Section , 138 NI Act matters are primarily
Civil wrong, can be dropped w/o Complainant‘s consent The Hon'ble
Supreme Court has clarified that an accused in a case under Section 138 of
Negotiable Instruments Act can be discharged even without the consent of
the complainant, if the Court is satisfied that the complainant has been duly
compensated.
It is also held that the normal role of criminal law that composition of
offence is possible only with the consent of complainant/victim is not
applicable for cases under Sec.138 of NI Act.
This is because the offence under Section 138 is ‗primarily a civil
wrong‘. Therefore, the power under Section 258 of the Code of Criminal
Procedure to stop trial and discharge the accused is available to the
Magistrate even though the summary trial under Chapter XXI of Cr.P.C.
The Hon'ble Supreme Court in the judgment has passed following
directions:
―i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of
standard of such proof is ―preponderance of probabilities‖. The same has to
Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will
apply and the Court can close the proceedings and discharge the accused on
satisfaction that the cheque amount with assessed costs and interest is paid
and if there is no reason to proceed with the punitive aspect.
element being mainly with the object of enforcing the compensatory
element, compounding at the initial stage has to be encouraged but is not
debarred at later stage subject to appropriate compensation as may be
found acceptable to the parties or the Court.
imprisonment, the Court has jurisdiction under Section 357(3) Cr.P.C. to

award suitable compensation with default sentence under Section 64 IPC
and with further powers of recovery under Section 431 Cr.P.C. With this
approach, prison sentence of more than one year may not be required in all
cases.
v/s) Since evidence of the complaint can be given on affidavit, subject to the
bank‘s slip being prima facie evidence of the dishonor of cheque, it is
be as per Section 264 Cr.P.C. The scheme is to follow summary procedure
except where exercise of power under second proviso to Section 143
becomes necessary, where sentence of one year may have to be awarded and
compensation under Section 357(3) is considered inadequate, having regard
to the amount of the cheque, the financial capacity and the conduct of the
accused or any other circumstances.‖
CR.P.C U/S. 482
16.2 Sumit Bhasin . Versus State Of Nct Of Delhi & Anr. Crl. M.C.
296/2021 & Crl.M.A. 1529/2021 Date 10.03.2021 High Court Of Delhi
At New Delhi..
10. Now coming to the legal position in this case and taking into
consideration the various provisions of Cr.P.C. which have been discussed
in various judgments time and again demonstrate that the Negotiable
Instruments Act, provides sufficient opportunity to a person who issues the
cheque. Once a cheque is issued by a person, it must be honored and if it is
not honoured, the person is given an opportunity to pay the cheque amount
by issuance of a notice and if he still does not pay, he is bound to face the
criminal trial and consequences. It is seen in many cases that the
petitioners with malafide intentions and to prolong the litigation raise false
and frivolous pleas and in some cases, the petitioners do have genuine
defence, but instead of following due procedure of law, as provided under
the N.I. Act and the Cr.P.C, and further, by misreading of the provisions,
such parties consider that the only option available to them is to approach
the High Court and on this, the High Court is made to step into the shoes of
the Metropolitan Magistrate and examine their defence first and exonerate
them. The High Court cannot usurp the powers of the Metropolitan
Magistrate and entertain a plea of an accused, as to why he should not be
tried under Section 138 of the N.I. Act. This plea, as to why he should not be
tried under Section 138 of the N.I. Act is to be raised by the accused before
the Court of the Metropolitan Magistrate under Section 251 of the Cr.P.C. &
under Section 263(g) of the Cr.P.C. Along with this plea, he can file
necessary documents and also make an application, if he is so advised,
under Section 145(2) of the N.I. Act to recall the complainant to cross
examine him on his plea of defense. However, only after disclosing his plea

of defence, he can make an application that the case should not be tried
summarily but as a summons trial case.
11. An offence under Section 138 of the N.I. Act is technical in nature and
defences, which an accused can take, are inbuilt; for instance, the cheque
was given without consideration, the accused was not a Director at that
time, accused was a sleeping partner or a sleeping Director, cheque was
given as a security ctc, etc., the onus of proving these defences is on the
accused alone, in view of Section 106 of the Indian Evidence Act, 1872.
Since the mandate of the legislature is the trial of such cases in a summary
manner, the evidence already given by the complainant by way of affidavit is
sufficient proof of the offence and this evidence is not required to be given
again in terms of section 145(1) of the N.I. Act and has to be read during the
trial. The witnesses i.e. the complainant or other witnesses can be recalled
only when the accused makes such an application and this application must
disclose the reason why the accused wants to recall the witnesses and on
what point the witnesses are to be cross examined.
12. The offence under Section 138 of the N.I. Act is an offence in the
personal nature of the complainant and since it is within the special
knowledge of the accused as to why he is not to face trial under section 138
N.I. Act, he alone has to take the plea of defense and the burden cannot be
shifted to complainant. There is no presumption that even if an accused
fails to bring out his defense, he is still to be considered innocent. If an
accused has a defense against dishonor of the cheque in question, it is he
alone who knows the defense and responsibility of spelling out this defense
to the Court and then proving this defense is on the accused. Once the
complainant has brought forward his case by giving his affidavit about the
issuance of cheque, dishonor of cheque, issuance of demand notice etc., he
can be cross-examined only if the accused makes an application to the
Court as to, on what point he wants to cross examine the witness (es) and
then only the Court shall recall the witness by recording reasons thereto,
13. Sections 143 and 145 of the N.I. Act were enacted by the Parliament
with the aim of expediting trial in such cases. The provisions of summary
trial enable the respondent to lead defense evidence by way of affidavits and
documents. Thus, an accused who considers that he has a tenable defense
and the case against him was not maintainable, he can enter his plea on the
very first day of his appearance and file an affidavit in his defense evidence
and if he is so advised, he can also file an application for recalling any of the
witnesses for cross examination on the defense taken by him.
14. In view of the procedure prescribed under the Cr.P.C, if the accused
appears after service of summons, the learned Metropolitan Magistrate shall
ask him to furnish bail bond to ensure his appearance during trial and ask
him to take notice under Section 251 Cr.PC and enter his plea of defence
and fix the case for defence evidence, unless an application is made under
Section 145(2) of N.I. Act for recalling a witness for cross-examination on by
an accused of defence. If there is an application u/s 145(2) of N.I. Act for

recalling a witness of complainant, the court shall decide the same,
otherwise, it shall proceed to take defence evidence on record and allow
cross examination of defence witnesses by complainant. Once the
summoning orders in all these cases have been issued, it is now the
obligation of the accused to take notice under Section 251 of Cr.P.C., if not
already taken, and enter his/her plea of defence before the concerned
Metropolitan Magistrate's Court and make an application, if they want to
recall any witness. If they intend to prove their defence without recalling any
complainant witness or any other witnesses, they should do so before the
Court of Metropolitan Magistrate.
15. In the instant case the respondent no. 2/complainant in paragraph (3)
and subsequent paragraphs of his complaint under Section 138 of N.I. Act
has made specific averments that while Accused Nos. 2 and 3 are directors
of the company. He has specifically averred that accused persons were
personally known to him through common acquaintances and shared a
cordial relationship which was the premise, on the basis of which the
complainant invested heavily in the funds of the company. The plea raised
by the Ld. Counsel for the petitioner that Sumit Bhasin never participated in
any negotiations with the complainant cannot be considered at this
preliminary stage since such defense can only be considered during the
stage of trial.
16. The prosecution under section 138 of the Act can be launched for
vicarious liability against any person, who at the time of commission of
offence was in charge and responsible for the conduct of the business of the
accused company. Merely because the petitioner did not sign the cheques in
question, is not decisive for launching prosecution against him. The plea of
the petitioner that the offences were committed without his knowledge
cannot be considered at this stage considering the fact that the Complainant
has specifically averred that negotiations had taken place with him along
with other co-accused persons and they were prima facie aware about the
whole series of transaction. After all, it was not small amount that was being
invested and it was because of the parties being acquainted with each other
that the whole transaction materialized.
18. Now, coming to the jurisdiction, suffice it to say that the Court, in
exercise of its jurisdiction under Section 482 Cr.P.C. cannot go into the
truth or otherwise of the allegations made in the complaint or delve into the
disputed question of facts. The issues involving facts raised by the petitioner
by way of defence can be canvassed only by way of evidence before the Trial
Court and the same will have to be adjudicated on merits of the case and
not by way of invoking jurisdiction under Section 482 Cr.P.C. at this stage.
19. Upon analyzing the provisions of the N.I. Act, it is clear that Section 138
of the Act spells out the ingredients of the offence as well as the conditions
required to be fulfilled before initiating the prosecution.

20. These ingredients and conditions are to be satisfied mainly on the basis
of documentary evidence, keeping in mind the presumptions under Sections
118 and 139 of the N.I. Act and Section 27 of the General Clauses Act, 1897
as well as the provisions of Section 146 of the Act.
23. In the instant case, all these issues mentioned hereinabove involves
disputed question of facts and law and cannot be decided unless and until
the parties go to trial and lead their respective evidence. Though invariably
the initial phase of a litigation under Section 138 of the N.I. Act depends on
how well the pleadings or the allegations are laid down or articulated, by the
complaint, in the ultimate analysis it is the trial that alone can bring out the
truth so as to arrive at a just and fair decision for the parties concerned.

17. RIGHT OF ACCUSED TO CROSS EXAMINATION
17.1 M/S. Sukhdata Chits Pvt. Ltd. And Others Vs. Shri Rajender Prasad
Gupta 2012) 4 Crimes 149 : Criminal M.C. No. 3089 Of 2011 Decided On :
11,01,2012
Para 12. With the legislative intent being not only of summary trial, but of
swifter and expeditious disposal ofdishonoured cheques cases, particularly
Section 139 of the Act as also Section 118 of the Evidence Act
providingpresumption in favour of the complainant that issue of cheque was
towards the debt or liability and Section 145providing that the evidence could
be led by the complainant by way of the affidavit, the petitioner/accused
couldnot be said to have unlimited and unbridled right of subjecting the
complainant to the usual and routine type ofcross examination. If that was so,
that would apparently be not only against the scheme and object of
theprovisions of summary trial, but would be contrary to the provisions of
Section 139, 143 and 145 of the Act.
Para 13.Thus it can be said that the phraseology "as to the facts contained
therein" in Section 145(2) of the Act cannotbe read to mean that the
complainant can be subjected to be cross-examination of everything that he has
statedon affidavit. If sub section (2) of Section 145 is interpreted to mean that
in every case where the accused appliesto the court to summon the
complainant or his witness who has given evidence on affidavit under sub
section (1)and the court is obliged to summon him to tender oral examination-
in-chief or to allow him to be subjected tocross examination as in summons or
warrant trial cases, then the object of inserting such provision would
bedefeated. The Sub-section (2) of Section 145 cannot be interpreted in a
manner that would render Sub-section (1)thereof or Section 139 & Section 143
redundant.
Para 14. From the above discussion, it can be said that there cannot be any
hard and fast rule as to what part ofevidence tendered by way of affidavit could
be eligible for cross examination. It was to be decided by theMagistrate
depending upon the facts and circumstances of each case and also keeping in
mind the scheme andobjective of the Act, particularly Section 139, 143, 145 of
the Act as also Section 106 of the Evidence Act.
Para 15. The affidavits of evidence which have been filed in these cases are not
only as regard to the averments of thecomplaint, but contained detailed facts
attributing liability tothe petitioners/accused. Some of those facts wouldnot be
required to be proved because of Section 139 of the Act as also Section 106 of
the Evidence Act. It would also be unjust to say that in all cases, the cross
examination would only be confined to the defences of the
petitioners/accused. The petitioners would be entitled to cross
examination of complainant as is done in the summary trial case, but at
the same time, they could not be precluded from putting certain questions
which would otherwise be relevant and essential for the just decision of
the case. Limiting the right of the petitioners to crossexamine only with regard
to Para 4 and 6 of complainant's application may cause prejudice to the
petitioners.

18. NO ILLEGALITY IN PRONOUNCEMENT OF THE JUDGMENT
AND ORDER OF CONVICTION AND SENTENCE IN THE ABSENCE
OF THE ACCUSED
18.1. Sharad Jethalal Savla Vs. State Of Gujarat And Ors.,Cri. Misc.
Application No : 19862 of 2015 Decided on : 14/11/2016 2017
eGLR_HC 10006044
―Para 15 Having heard the learned counsel appearing for the parties and
having considered the materials on record, the following questions fall for
my consideration:
(I) Whether on account of the absence of the applicant accused herein on the
date of the pronouncement of the judgment, the judgment would become
invalid in view of the provisions of Section 353 of the Code of Criminal
Procedure, 1973
(II) Whether the trial Court was justified in issuing a non, bailable warrant of
arrest of the applicant accused herein having noticed that the accused was
not present at the time of the pronouncement of the judgment and order of
conviction and sentence
(III) Whether the non-bailable warrant issued by the trial Court for the arrest
of the applicant accused herein could be said to be for the purpose of
execution of the sentence of imprisonment, as provided under Section 418 of
the Cr.P.C.
(IV) Whether the trialCourt was justified in rejecting the application filed
under Section 389(3) of the Code or declining to pass an appropriate order
on such application for the purpose of suspension of the substantive
order of sentence to enable the applicant accused herein to file an appeal
before the Sessions Court on the ground of his absence before the Court" To
put it in other words,whether the insistence on the part of the trial Court
for the personal presence of the accused for the purpose of passing
appropriate order on the application filed under Section 389(3) of the Cr.P.C.
by the advocate could be said to be justified in law
(V) Whether the Sessions Court was justified in refusing to register the
appeal filed by the applicant accused herein through his advocate
challenging the judgment and order of conviction and sentence on the
ground that the accused had not surrendered before the trial Court and the
trial Court had not passed any order under Section 389(3) of the Code
suspending the substantive order of sentence passed by the trial Court to
enable the accused to prefer an appeal before the appellate Court
(VI) Whether the Sessions Court was justified in insisting for the personal
presence of the applicant accused herein for the purpose of the registration
of the appeal‖
'Be you ever so high, but the law is above you', is the signature theme
of rule of law that loudly and silently (as well) echoes in the Indian
Constitutional context. Of course, the law makers and law enforcers must

willingly assist the Court in angling the convict avoiding and dodging the law
makers, the law enforcers and the law interpreters (Judges and Courts). No
illegality as regards the pronouncement of the judgment and order of
conviction and sentence in the absence of the applicant accused.
The judgment that the learned Magistrate may pronounce in the absence of
the accused by itself will not vitiate the judgment. Sub section (7) of Section
353 of the Cr.P.C. clearly lays down that no judgment delivered by any
criminal court shall be deemed to be invalid by reason only of the absence of
any party.
The trial Court committed no error in issuing a non-bailable warrant
of arrest having noticed that the accused was not present at the time of
pronouncement of the judgment and order of conviction and sentence in
view of the provisions of Section 418 (2) of the Cr.P.C. Under Sub Section (2)
of Section 418 of the Cr.P.C. when the accused sentenced to imprisonment
is not present in the Court, the Court has to issue a warrant of his arrest
and the sentence shall commence on the date of his arrest.
In the absence of the convict accused, the learned advocate appearing
for him cannot prefer an application under Section 389(3) of the Code for
suspension of the sentence to enable the convict accused to prefer an appeal
before the Sessions Court.

19. COMPOUNDING OF OFFENCE – COSTS
19.1 Damodar S. Prabhu Vs. Sayed Babalal 2010 CRI. L. J. 2860 SUPREME
COURT ( Full Bench ) Criminal Appeal No. 963 (arising out of S.L.P. (Cri.)
No. 6369 with 6370 ,6372 of 2007), D/3 ,5 ,2010.
Negotiable Instruments Act S.138, S.147, Tendency of parties togo for
compounding at late stage of proceedings.Putting unnecessary strain on
judicial system, Absence of guidance in S.147. Supreme Court directed courts
to impose graded costs on litigants to encourage them to go for early
compounding. The tendency of litigants to adopt compounding as a last resort
to compound offence of dishonour of cheque is putting unnecessary strain on
judicial system and contributing to increase in number of pending cases.
Moreover, the free and easy compounding of offences at any stage, however
belated, gives an incentive to the drawer of the cheque to delay the settling of
cases for years.
An application for compounding made after several years not only results
in the system being burdened but the complainant is also deprived of effective
justice. Section 147 which permits compounding does not carry any guidance
on how to proceed with the compounding of offences under the Act. The
Scheme contemplated under S. 320 of the Cr. P.C. cannot be followed in the
strict sense. In view of legislative vacuum Supreme Court directed Courts to
follow a graded system of levying costs on parties so as to encourage them to go
in for early compounding.
The Supreme Court framed following guidelines
(a) Directions can be given that the Writ of Summons be suitably modified
making it clear to the accused that he could make an application 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.
(b) 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.
(c) Similarly, if the application for compounding is made before the Sessions
Court or a High Court in revision or appeal, such compounding may be allowed
on the condition that the accused pays 15% of the cheque amount by way of
costs.
(d) Finally, if the application for compounding is made before the Supreme
Court, the figure would increase to 20% of the cheque amount. (Para 15)
The Court made it clear that even though the imposition of costs by the
competent Court is a matter of discretion, the scale of costs has been suggested
in the interest of uniformity. The competent Court can of course reduce the
costs with regard to the specific facts and circumstances of a case, while
recording reasons in writing for such variance. (Paras 15 , 17)

(B) Negotiable Instruments ActChequesissued in one transaction Filing of
multiple complaints ,Causes tremendous harassment and prejudice to drawers
of cheque ,Supreme Court made it mandatory to complainant to file along with
complaint sworn affidavit that no other complaint has been filed in other Court
in respect of same transaction High Court directed to levy heavy costs on
complainant resorting to practice of filing multiple complaints Directions,
however, given prospective effect. (Para 16)
19.2 Madhya Pradesh State Legal Services Authority V/s Prateek Jain And
Anr Decided on 10 September, 2014 CIVIL APPEAL NO. 8614 OF 2014
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 waive the same. Damodar S. Prabhu case – Legal Aid and
ADR.
Question: Whether These Guidelines Are To Be Given A Go By When A Case

Is Decided/ Settled In The Lok Adalat?
Answer :Our answer is that it may not be necessarily so and a proper balance
can be struck taking care of both the situations. we are of the opinion that even
when a case is decided in Lok Adalat, the requirement of following the
guidelines contained in Damodar S. Prabhu (supra) should normally not be
dispensed with. However, if there is a special/specific reason to deviate
therefrom, the Court is not remediless as Damodar S. Prabhu (supra) itself has
given discretion to the concerned Court to reduce the costs with regard to
specific facts and circumstances of the case, while recording reasons in writing
about such variance. Therefore, in those matters where the case has to be
decided/ settled in the Lok Adalat, if the Court finds that it is a result of
positive attitude of the parties, in such appropriate cases, the Court can always
reduce the costs by imposing minimal costs or even waive the same. For that, it
would be for the parties, particularly the accused person, to make out a
plausible case for the waiver/reduction of costs and to convince the concerned
Court about the same. This course of action, according to us, would strike a
balance between the two competing but equally important interests, namely,
achieving the objectives delineated in Damodar S. Prabhu (supra) on the one
hand and the public interest which is sought to be achieved by encouraging
settlements/resolution of case through Lok Adalats.

20. SECURITY CHEQUE &STOP PAYMENT CASES
20.1Prabhudayal Devandas Khatri vs State Of Gujarat

R/CR.A/1650/2017, 11 May, 2018
Para 9.9 It is quite apparent from the evidence that has emerged on record
that respondent, accused has succeeded in bringing on record that the
cheques were already lying with the complainant-appellant. Those cheques
were given to him towards security. The appellant is often lending money to
the family members of the accused and others. It is also further revealed
that huge amount of interest is being charged by him and that too, in
advance towards the security of his sum, he not only takes the writing, but
also, the blank cheques, which are taken by way of security. It is also
further getting vindicated by the fact that the first cheque issued by the
accused was having number 537515, which was prior in point of time,
whereas, the subsequent cheque was having number 537509 which had
been given on 17.03.2015 for a sum of Rs.3/, lakh. It is quite unlikely that
person receives a cheque, at any later point of time, which would be cheque
being chronologically prior number. It would normally not happen, if, a
person uses cheque book on a regular basis. The cheque given first is
53715 and later on, the cheque issue was 535709. No explanation
comes forth for this. Again, without entering into this it can be held that
the decision of the Apex Court in 'INDUS AIRWAYS PRIVATE LIMITED VS.
MAGNUM AVIATION PRIVATE LIMITED' (Supra) would have applicability
mutatis mutandis to the facts of the instant case. The appellant appears to
have used the cheques, which he had taken in advance from the
respondent-accused.
Para 9.12 with the preponderance and probabilities, respondent-accused, in

the opinion of this Court, has succeeded in dislodging the proof which had
been given. When it is clearly established that these cheuqes were given
much before the liability actually arose, even without closing the right of the
appellant of taking appropriate actions for his outstanding dues, it can be
said that any legally enforceable debt or liability, the appellant has failed to
establish. In other words, it can also be said that respondent has succeeded
in dislodging the proof, since, the presumption is rebuttable and he could
rebut the same under the law.
20.2 Dhirubhai Rananbhai Bhanderi Vs State Of Gujarat Criminal

Appeal No. 832 Of 2018 Decided On 03.07.2018
No offence, upon considering transaction, if cheque is given for
security purpose
Para 4.9 Whether, the cheque was for discharge of any existing debt or
liability would depend on the nature of the transaction. Section 138 of the

NI Act would attracted only if, on the date on which the cheque was issued,
the liability or debt existed or the amount had become legally recoverable.
Interpreting the words ‗Security‘, as given in the agreement between
the parties, the Apex Court held that the cheque issued to repay the
installment of loan, once the loan was disbursed and the installment was
due, the dishonour of cheque would give rise to criminal liability under
Section 138 of the NI Act.
Para 4.10 The vital question, therefore, would arise is as to whether, on the
date on which the cheque was issued in the instant case, the liability
or the debt existed or the amount had become legally recoverable.
Since, admittedly, both the cheques given were post dated cheques, given
towards the security, as otherwise, as per the settlement agreement on sale
of both the vehicles, respondent No.2 shall be remitted the amount of
remaining sale consideration to the appellant.
4.12 In the chronology of the events, the circumstances which have
emerged on record, it would be difficult, to hold that the post dated cheques,
which were said to have been given on the date on which, they were issued,
the liability or the debts existed or the amount had become legally
recoverable. Since, while deciding, whether the dishonored cheques issued
were for discharging the existing liability would fall under Section 138 of the
NI Act or not, the nature of transaction becomes quite relevant. Opponent
No.2 when returned the vehicles with a request that they were not in
working condition and it was too heavy a burden for them to incur for
starting the vehicles and made a request to the appellant to deduct a sum of
Rs. 10/, lakh and return the balance. It is understandable that as an owner
it cannot be an agreeable proposal for the appellant. However, the best
course would be available to the appellant would have been to get the same
adjudicated by a competent Court of law or by another mode or method.
Even the lodging of the private complaint before Visavadar Court was
a step towards a legal recourse, however, the subsequent developments of
executing the settlement agreement on 28.09.2016 at Visavadar Police
Station, places this entire transaction into a questionable act. It is also not
out of place to make a specific mention that two cheques, which were issued
subsequently cannot be said for discharge of the debt or liability, which
existed on the date on which they were issued. Even if, one does not
consider the consistent stand of threat and coercion, as taken by opponent
No.2, when one of the parties had chosen to rescind from a contract, which
was not reduced into writing by way of any registered agreement, the same
had given rise to various disputed questions of law and facts, both.
Therefore, in such circumstances, it is not possible to hold that
dishonored cheques were issued to discharge any existing liability or
debt to attract the provisions of Section 138 of the NI Act.
It also has not been disputed that both the vehicles till the date are in
the ownership of the appellant-original complainant, therefore also, with
this disputed fact that no change is made in the name of the ownership, no

fault can be found with the findings recorded and the conclusions arrived at
by the trial Court that the sale, itself, of the vehicles has not been
established. Therefore, there was no question of paying the remaining
amount of consideration.Either the ownership ought to have been changed
or the vehicles' possession ought to have been given to opponent No.2 and
towards the remaining part of consideration, there ought to have been
issuance of those two cheques. With none of these vital aspects having come
on record, the trial Court has committed no error, much less any illegality,
warranting interference at the hands of this Court.
20.3Sampelly Satyanarayana Rao v/s Indian Renewable Energy

Development Agency Ltd., , 2016 SCC OnLine SC 954, decided on
19.09.2016]
it was held that the dishonour of cheque for discharge of existing liability is
covered by Section 138 of the Act. The Court further explained that the
question whether a post-dated cheque is for ―discharge of debt or liability‖
depends on the nature of the transaction. If on the date of the cheque
liability or debt exists or the amount has become legally recoverable, the
Section is attracted and not otherwise.
As per the facts of the case, the loan agreement in question recorded
that post-dated cheques towards payment of installment of loan (principal
and interest) were given by way of security. The clause of the Agreement that
came up for consideration was ―The loan together with the interest, interest
tax, liquidated damages, commitment fee, upfront fee prima on repayment
or on redemption, costs, expenses and other monies shall be secured by
deposit of Post-dated cheques towards repayment of installments of
principal of loan amount in accordance with agreed repayment schedule and
installments of interest payable thereon.‖
Interpreting the word ―security‖ is used in the said clause, the Court
held that the said expression refers to the cheques being towards repayment
of installments. The repayment becomes due under the agreement, the
moment the loan is advanced and the installment falls due. Once the loan
was disbursed and installments have fallen due on the date of the cheque as
per the agreement, dishonour of such cheques would fall under Section 138
of the Act.
20.4Hon‘ble Supreme Court vide its order dated 29.07.2015 rendered

in Apparel Export Promotion Council &Anr v/s M/s Collage Culture
&Ors, passed in Criminal Appeal No. 1678/2012 (Coram: V/S Gopala
Gowda & A.K. Goel, JJ.). Posthumously, in the case of Credential Leasing &
Credits Ltd. v/s Shruti Investments &Anr, the Hon‘ble High Court of Delhi
observed that, even a security cheque could form the basis of a complaint
under. In the case of, M/s Collage Culture &Ors v/s Apparel Export
Promotion Council &Anr, the Hon‘ble Single Judge Bench of the High Court
of Delhi categorically observed as follows:

A post-dated cheque may be issued under two (2) circumstances: (1) It
may be issued for a debt in presenti, payable in future; and, (2) It may be
issued for a debt which may become payable in future upon the occurrence
of a contingent event;
A post-dated cheque issued for a debt in presenti, payable in future is
not in the nature of a ―security cheque‖; however, a post-dated cheque
issued for a debt which may become payable in future upon the occurrence
of a contingent event is in the nature of a ―security cheque‖; and, The word
―due‖ means ―outstanding at the relevant date‖. The debt has to be in
existence as a crystallized demand analogous to a liquidated demand which
may or may not come into existence; coming into existence being contingent
upon the happening of an event.
A post-dated cheque for a debt due but payment postponed to future
date would attract Section 138 of the N.I. Act; however, a cheque issued not
against an existing debt due but rather by way of a ‗security‘ would not
attract Section 138 of the N.I. Act, for it has not been issued for a debt
which has come into existence.
STOP PAYMENT CASES

20.5 Nirav Bipinbhai Patel Vs. State Of Gujarat.2016,X(Guj),0,422,
Code of Criminal Procedure, 1973 S. 482 Negotiable Instruments Act,
1881 S. 138Constitution of India Art. 226 quashing of complaint applicant
lost five cheques and intimated to his banker to make stop payment in
respect of lost cheques applicant also intimated to the concern police station
about lost cheques subsequently respondent issued notice to the applicant
in respect of dishonour of cheque, reply to the statutory notice given by the
applicant wherein he denied the facts of any advance taken from
complainant, denial of meeting with the complainant by the applicant. Held,
cheques in question dishonestly and in collusion with other person came in
possession of the complainant. Instruction of stop payment issued by the
banker produced on record no legally enforceable debt against the applicant
fit case to exercise jurisdiction u/s 482 of Code complaint quashed,
application allowed.
20.6Modi Cements Ltd Vs.Kuchil Kumar Nandi AIR 1998 SUPREME

COURT 1057 (1998) 3 SCC 249)
In this case, Hon'ble Full bench of the Hon'ble Apex court held that
merely because the drawer issues a notice to the drawee or to the Bank for
stoppage of the payment, it will not preclude an action u/s 138 by the
drawee or the holder of a cheque in due course. Thus defence under the
strict interpretation of ―insufficiency of funds‖ is diluted to this extent.
20.7M.T.C. Ltd. and Anr. Vs. Medchl Chemicals and Pharma (P) Ltd. and
Anr AIR 2002 SUPREME COURT 182.

In this case the Hon'ble Supreme Court held that section 138 gets
attracted, even if the drawer has given instruction for ―stop payment‖. It is
further held that the court has to presume that the cheque has been issued
for a debt or a liability (Sec139) and onus lies on the drawer to rebut this
presumption. Complaint cannot be quashed merely on the ground that
complaint has not been signed by authorized person on behalf of the
company. This technical defect can be cured later with the permission of the
court
20.8Goaplast (P) Ltd Vs. Chico Ursual D‘Souza and Anr. AIR 2003
SUPREME COURT 2035
In this case, a postdated cheque has been issued and drawer has
issued stop payment instruction to bank before the date mentioned on the
cheque. Lower courts have taken a view that postdated cheque becomes a
cheque on the date mentioned on the cheque and therefore Section 138 does
not apply to this case.
Hon'ble Supreme Court set aside the judgment of lower court and held
that the purpose of postdated cheques is to accommodate a drawer of
cheque and he should not be allowed to abuse the accommodation given to
him by the creditor. If allowed, it would render Section 138, a dead letter.

21.CLOSURE OF ACCOUNT CASES
21.1 Gopalchand Hotchand vs. Vagwani Gurmukhdas Bhagwandas

2015 JX(Guj) 0 931,
Complainant and accused were neighbours. Transaction of advance between
the parties at the time of repayment of debt, accused gave cheque to the
complainant towards discharge of his liability signature of the accused on
the cheque identified by the Bank Manager bank account of the accused
was closed at the time of dishonour of cheque. No substance in the
contention of respondent that the S. 138 of NI Act not attracted in case
where the bank account of the accused is closed object and purpose of the
Section 138 of NI Act is to enhance the credibility of instrument and to
induce faith in the efficiency in banking operation ratio laid down in the
case of Urban Co-operative Credit Society (Supra) not applied.
SERVICE OF NOTICE RPAD produced on record by the complainant
side burden upon the accused who claims that the notice has not been
served by leading necessary evidence discharging the burden letter or the
notice served by RPAD would lead to the presumption about the service no
fetters on the powers of the Appellate Court to scrutinize the evidence
acquittal set aside appeal allowed.
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?
The answer to this Question is in the negative for the following reasons
given in the above ruling.
Section 2(d) of the Code defines ―complaint‖. According to this
definition, complaint means any allegation made orally or in writing to a
Magistrate with a view to taking his action against a person who has
committed an offence. Commission of an offence is a sine qua non for filing
a complaint and for taking cognizance of such offence. Bare reading of the
provision contained in clause (c) of the proviso makes it clear that no
complaint can be filed for an offence under Section 138 of the NI Act unless
the period of 15 days has elapsed. Any complaint filed before the expiry of
15 days from the date on which the notice has been served on the
drawer/accused is no complaint at all in the eye of the law.
It is not the question of prematurity of the complaint where it is filed
before the expiry of 15 days from the date on which notice has been served
on him, it is no complaint at all under law.
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.

Complaint filed before the expiry of 15 days from the date on
which notice has been served on drawer/accused cannot be said to disclose
the cause of action in terms of clause (c) of the proviso to Section 138 and
upon such complaint which does not disclose the cause of action the court
is not competent to take cognizance. Therefore, a court is barred in law from
taking cognizance of such complaint.
We have no doubt that all the five essential features of Section 138 of
the NI Act, as noted in the judgment of this Court in Kusum Ingots &
Alloys Ltd. v/s Pennar Peterson Securities Ltd., (2000) 2 SCC 745 and
which we have approved, must be satisfied for a complaint to be filed under
Section 138. If the period prescribed in clause (c) of the proviso to Section
138 has not expired, there is no commission of an offence nor accrual of
cause of action for filing of complaint under Section 138 of the NI Act.
The view taken by the Court in Narsingh Das Tapadia [Narsingh Das
Tapadia v/s Goverdhan Das Partani, (2000) 7 SCC 183 : 2000 SCC (Cri)
1326] and so also the judgments of various High Courts following Narsingh
Das Tapadia [Narsingh Das Tapadia v/s Goverdhan Das Partani, that if
the complaint under Section 138 is filed before the expiry of 15 days from
the date on which notice has been served on the drawer/accused the same
is premature and if on the date of taking cognizance a period of 15 days
from the date of service of notice on the drawer/accused has expired, such
complaint was legally maintainable and, hence, the same is overruled.
Rather, the view taken by the Court in Sarav Investment & Financial
Consultancy [Sarav Investment & Financial Consultancy (P) Ltd. v/s
Llyods Register of Shipping Indian Office Staff Provident Fund, (2007)
14 SCC 753 : (2009) 1 SCC (Cri) 935] wherein this Court held that service
of notice in terms of Section 138 proviso (b) of the NI Act was a part of the
cause of action for lodging the complaint and communication to the accused
about the fact of dishonoring of the cheque and calling upon to pay the
amount within 15 days was imperative in character, commends itself to us.
21.2NEPC Micon Ltd. Vs. Magma Leasing Ltd. AIR 1999 SC 1952
In this case, the drawer of the cheque closed the account in the Bank
before presentation of the cheque by the payee. When the cheque was
presented, it was returned by the Bank with the remark ―account closed‖.
Hon'ble Supreme Court observed that the expression ―the amount of money
standing to the credit of that account is insufficient to honour the cheque‖ is
a genus of which the expression ―that account being closed‖ is specie. It is
further held that return of a cheque on account of account being closed
would be similar to a situation where the cheque is returned on account of
insufficiency of funds in the account of the drawer of the cheque and an
offence is committed.

22. MERE DENIAL OF DEBT NOT SUFFICIENT TO ACQUIT
ACCUSED IN CHEQUE BOUNCING CASE
22.1 Kishan Rao v/sShankargouda(Criminal Appeal No. 802 of 2018)
2018 SCC Online SC 651
Held that a mere denial of the existence of debt by the accused is not
sufficient to acquit the accused and that under Section 139 of the Negotiable
Instruments Act, there is a presumption that the accused had issued the
cheque for the discharge of some debt or liability and if the accused leads on
evidence for his defense rebutting this presumption, then he can be
convicted.
In the instant case, the accused had issued a cheque of Rs.
2,00,000/, to the complainant which when the latter presented to the bank
was returned dishonored as ―insufficient funds‖. The complainant gave a
notice to the accused u/s 138 of the Negotiable Instruments Act to which
the accused replied that the cheque in possession of the complainant was
stolen by him. The complainant accordingly filed the case and led oral as
well as documentary evidence but the accused did not lead any evidence
and the Trial Court convicted the accused on the basis of the presumption
u/s 139 of the N.I. Act.
The accused went in appeal where the appellate court upheld the
judgment of the Magistrate and thereafter when in revision to the High
Court. The High Court reversed the conviction of the accused in the revision
and acquitted the accused on the ground that the ―accused has been
successful in creating doubt in the mind of the court with regard to the
existence of debt or liability‖.
The complainant preferred a Special Leave Petition in the Supreme
Court challenging the order of the High Court.
The Supreme Court held that
―12. …The High Court in exercise of its revisional jurisdiction shall not
interfere with the order of the Magistrate unless it is perverse or wholly
unreasonable or there is non,consideration of any relevant material, the
order cannot be set aside.‖
―15. The High Court has not returned any finding that order of conviction
based on evidence on record suffers from any perversity or based on no
material or there is other valid ground for exercise of revisional jurisdiction.
There is no valid basis for the High Court to hold that the accused has been
successful in creating doubt in the mind of the Court with regard to the
existence of the debt or liability. The appellant has proved the issuance of
cheque which contained signatures of the accused on the presentation of
the cheque, the cheque was returned with endorsement ―insufficient funds‖.
Bank Official was produced as one of the witnesses who proved that the
cheque was not returned on the ground that it did not contain signatures of
the accused rather it was returned due to insufficient funds. We are of the

view that the judgment of the High Court is liable to be set aside on this
ground alone.
Further the Supreme Court observed that,
―22. No evidence was led by the accused. The defence taken in the reply to
the notice that cheque was stolen having been rejected by the two courts
below, we do not see any basis for the High court coming to the conclusion
that the accused has been successful in creating doubt in the mind of the
Court with regard to the existence of the debt or liability. How the
presumption under Section 139 can be rebutted on the evidence of PW.1,
himself has not been explained by the High court.
23. In view of the aforesaid discussion, we are of the view that the High
Court committed error in setting aside the order of conviction in exercise of
revisional jurisdiction. No sufficient ground has been mentioned by the High
Court in its judgment to enable it to exercise its revisional jurisdiction for
setting aside the conviction.‖

23. SECOND OR SUCCESSIVE DEFAULT IN PAYMENT OF THE
CHEQUE
23.1 MSR Leathers v/s S. Palaniappan And Anr (2013) 1 Supreme Court
Cases 177
Head Note : 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
We have no hesitation in holding that a prosecution based on a
second or successive default in payment of the cheque amount should not
be impermissible simply because no prosecution based on the first default
which was followed by a statutory notice and a failure to pay had not been
launched. If the entire purpose underlying Section 138 of the Negotiable
Instruments Act is to compel the drawers to honour their commitments
made in the course of their business or other affairs, there is no reason why
a person who has issued a cheque which is dishonoured and who fails to
make payment despite statutory notice served upon him should be immune
to prosecution simply because the holder of the cheque has not rushed to
the court with a complaint based on such default or simply because the
drawer has made the holder defer prosecution promising to make
arrangements for funds or for any other similar reason. There is in our
opinion no real or qualitative difference between a case where default is
committed and prosecution immediately launched and another where the
prosecution is deferred till the cheque presented again gets dishonoured for
the second or successive time.
Para 32. The controversy, in our opinion, can be seen from another angle
also. If the decision in SadanandanBhadrans case (supra) is correct, there is
no option for the holder to defer institution of judicial proceedings even
when he may like to do so for so simple and innocuous a reason as to
extend certain accommodation to the drawer to arrange the payment of the
amount. Apart from the fact that an interpretation which curtails the right
of the parties to negotiate a possible settlement without prejudice to the
right of holder to institute proceedings within the outer period of limitation
stipulated by law should be avoided we see no reason why parties should, by
a process of interpretation, be forced to launch complaints where they can
or may like to defer such action for good and valid reasons. After all, neither
the courts nor the parties stand to gain by institution of proceedings which
may become unnecessary if cheque amount is paid by the drawer. The
magistracy in this country is over-burdened by an avalanche of cases under
Section 138 of Negotiable Instruments Act. If the first default itself must in
terms of the decision in SadanandanBhadrans case (supra) result in filing of
prosecution, avoidable litigation would become an inevitable bane of the

legislation that was intended only to bring solemnity to cheques without
forcing parties to resort to proceedings in the courts of law.
While there is no empirical data to suggest that the problems of
overburdened magistracy and judicial system at the district level is entirely
because of the compulsions arising out of the decisions in
SadanandanBhadrans case (supra), it is difficult to say that the law declared
in that decision has not added to court congestion.
Para 33. In the result, we overrule the decision in SadanandanBhadrans
case (supra) and hold that prosecution based upon second or successive
dishonour of the cheque is also permissible so long as the same satisfies the
requirements stipulated in the proviso to Section 138 of the Negotiable
Instruments Act. The reference is answered accordingly. The appeals shall
now be listed before the regular Bench for hearing and disposal in light of
the observations made above.
23.2 Econ Antri Limited Appellant V/s Rom Industries Limited &Anr
Respondents (2014) 11 Supreme Court Cases 769 AIR 2013 SC 3283
PERIOD OF LIMITATION FOR FILING COMPLAINT UNDER S. 142(A)
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.
Para 24while considering the question of computation of three months
limitation period and further 30 days within which the challenge to the
award is to be filed, as provided in Section 34(3) and proviso thereto of the
Arbitration Act, this Court held that having regard to Section 12(1) of the
Limitation Act, 1963 and Section 9 of the General Clauses Act, 1897, day
from which such period is to be reckoned is to be excluded for calculating
limitation. It was pointed out by counsel for the respondents that Section 43
of the Arbitration Act makes the Limitation Act, 1963 applicable to the
Arbitration Act whereas it is held to be not applicable to the N.I. Act and,
therefore, this judgment would not be applicable to the present case. We
have noted that in this case reliance is not merely placed on Section 12(1) of
the Limitation Act. Reliance is also placed on Section 9 of the General
Clauses Act. However, since, in the instant case we have reached a
conclusion on the basis of Section 9 of the General Clauses Act, 1897 and
on the basis of a long line of English decisions that where a particular time
is given, 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 because Section 12(1) of
the Limitation Act is relied upon therein.
Para 25 we are of the opinion that Saketh lays down the correct
proposition of law. We hold that for the purpose of calculating the period of
one month, which is prescribed under Section 142(b) of the N.I. Act, the

period has to be reckoned by excluding the date on which the cause of
action arose. We hold that SIL Import USA does not lay down the correct
law. Needless to say that any decision of this Court which takes a view
contrary to the view taken in Saketh by this Court, which is confirmed by
us, do not lay down the correct law on the question involved in this
reference. The reference is answered accordingly.

24. TWO CONSECUTIVE NOTICES
24.1 N. Para MeswaranUnni V/s G. Kannan and Another (2017) 5

Supreme Court Cases 737 : 2017 SCC OnLine SC 293 Decided on 1
March, 2017
If within limitation, Two consecutive notices sent by payee by
registered 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 absent‖, 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.
24.2 VaniAgro Enterprises v/s State of Gujarat Criminal appeal no

5687,590/2010 order date 5/9/2019
Whether in a case where more than one cheques are dishonoured and one
common notice under Section 138 of the Negotiable Instruments Act, 1881
is issued, can it be said that it will constitute only one offence and/or there
would be only one cause of action?
(7) IN the present case, four different cheques came to be dishonoured,
however, one common notice 20/04/1999 was issued for dishonour of
cheques and thereafter under different criminal cases, complaints have been
filed by the original complaint under Section 138 of the Negotiable
Instruments Act, 1881. In view of the fact that only one common notice was
issued for dishonour of different cheques it is sought to be contented on
behalf of the respective common petitioners-original accused that it can be
said that there is only one cause of action and, therefore, all the complaints
are required to be consolidated.
(10) NOW so far as the decision of the Bombay High Court in the case of
RAJENDRA B. CHOUDHARI (Supra) relied upon by the learned advocate
appearing on behalf of the respective petitioners-original accused is
concerned, apart from the fact that in view of binding decision of the
Division Bench of this Court referred to hereinabove, the said decision
would not be of any assistance to the respective petitioners-original accused,
even otherwise, considering the controversy/dispute raised in the said
decision, the said decision would not be of any assistance to the petitioners-
original accused. Before the Bombay High Court, in the said decision, the
accused came to be convicted for the offences under Section 138 of the
Negotiable Instruments Act, 1881 for four criminal cases tried separately

and the learned Magistrate imposed separate sentence of imprisonment and
fine in each of the cases and being aggrieved and dissatisfied with the same,
the accused approached the Bombay High Court for a direction that all the
sentences shall run concurrently and submitted that considering Section
219 of the Code of Criminal Procedure, the learned trial Court committed an
error in not combining and/or in holding single trial and, therefore, on the
facts the said decision would not be of any assistance to the petitioners.
Considering the facts of the cases on hand and the decision of the Division
Bench of this Court in the case of KERSHI PIROZSHA BHAGVAGAR
(Supra), more particularly paragraph 22, the prayer of the respective
petitioners for consolidation of all the four cases and for joint one trial and
to record only one common evidence cannot be accepted on the ground that
there will be only one cause of action. Dishonour of cheques constitutes
different offences and different cause of action. Merely because common
notice was issued, it cannot be said that there is only one cause of action.
Each dishonour of cheque has different cause of action for different
individual offences. Under the circumstances, it cannot be said that both
the Courts below have committed any error in rejecting the prayer of the
respective petitioners-original accused to consolidate all the criminal cases
and to try it by one trial and recording common evidence.

25.OFFENCE BY COMPANY/PARTNERSHIP FIRM/HUF
25.1 Swarn Mukeshbhai Gupta V/s Parth Mukeshbhai Patel,2017

JX(Guj) 264
Joining Of Company Is A Must :,Negotiable Instruments Act, 1881 , S.

138, 141 , quashing of complaint , dishonour of cheque , complaint u/s 138
of NI Act , vicarious liability , non joining of company as an accused ,
complainant filed an application u/s 319 of Code for joining a company as
an accused in the complaint , case of Oanali Ismailji Sadikot relied on,
cheque was issued on behalf of company where applicant arraigned as an
accused in her capacity as the authorized and responsible officer of the
company , complainant not maintainable in absence of joining of company
as an accused , object of insertion of S. 319 of the Code was to provide for a
more comprehensive provision, with considerable improvement in the old S.
351, for proceeding against other persons appearing to be guilty, although
he is not an accused, when the complaint has the initial defect in its
sustainability, the defect cannot be cured by amending the proceedings,
criminal proceedings in both cases quashed , applications allowed.
25.2Kirshna Texport & Capital Markets Limited V/sIla A. Agrawal &Ors

(2015) 8 Supreme Court Cases 28
Offence By Company Issuance Of Individual Notices Under S. 138 To
Them, Held, Not Required As
Ss. 138, 141 and 142 – Dishonour of cheque – Offence by
companyIssuance 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.
25.3 Gulf Asphalt Pvt.Ltd V/S Dipesh Sinh Kishanchandra Rao. 2015
CrLJ 3954
If a Complainant has been converted from Sole proprietor to Company
whether prosecution can be continued ?
Negotiable Instruments Act, 1881 , S. 138 , Constitution of India , Art. 227 ,

dishonour of cheque, substitution of complainant – proprietary concern
through its proprietor filed complaint , application before Trial Court to
substitute itself as a complainant in the place of the original proprietary
concern , Trial Court permitted the private limited company to be

substituted as the original complainant for the purpose of proceeding
further with the complaint, whether permitting a private limited company to
be substituted as the complainant in place of proprietary concern amounts
to an amendment in complaint , held, there is no provision in the Criminal
Procedure Code, which empowers a Court to permit an amendment of the
complaint at a later stage , however, the substitution of the complainant at a
later stage in certain contingencies would not amount to seeking an
amendment in the complaint , when the complaint was lodged in the year
2010 by the proprietary concern, the same was maintainable as the
proprietary concern was the "payee" of the cheque , at a later stage for the
purpose of business convenience, if the entire business of the proprietary
concern with all its rights and liabilities were taken over by a private limited
company, then such private limited company can seek substitution as a
complainant in the complaint so that the private limited company can
pursue the complaint further in accordance with law , present case is not
one in which the amendment was prayed for in the pleadings of the
complaint , if it had been so, then Revisional Court would have been
justified in saying that there cannot be any amendment in the pleadings of
the complaint after the complaint isfiled and cognizance is taken by Court ,
the Endeavour must be to do justice and not to take advantage of
technicalities , Trial Court passed a correct order allowing the application
and permitting the applicant to be substituted as a complainant in place of
the original proprietary concern, impugned order quashed and set aside ,
application allowed.
Whether complaint only against the partner without joining the

partnership firm is maintainable ?
25.4 Ankit Pradipbhai Kapadia V/s State Of Gujarat2016 (1)

Crimes(HC) 812
Negotiable Instruments Act, 1881 , S. 138, 141 , Code of Criminal

Procedure, 1973 , S. 482 , dishonour of cheque , quashing of complaint ,
whether the complaint is maintainable in the absence of the partnership
firm being a legal entity , held, relying on the case of U.P. Pollution Control
Board v/s M/s. Modi Distillery, for maintaining the prosecution u/S. 141 of
the Act, arraigning of a company as accused is imperative , other categories
of offenders can only be brought in the dragnet on the touchstone of
vicarious liability as the same has been stipulated in the provision itself ,
further relying on case of Raghubhai Lakshminarayan v/s M/s Fine Tube,
accused No. 1 was not Company within meaning of S. 141 of Negotiable
Instruments Act, question of anemployee being preceded against in terms
thereof would not arise , respondent was aware of difference between a
'partnership firm' and a 'business concern' , thus in the absence of the
partnership firm being a juristic person or a legal entity, applicant, in his

capacity as one of the partners, cannot be proceeded for the offence alleged,
by virtue of S. 141 of the Negotiable Instruments Act , impugned
proceedings quashed , application allowed.
25.5 Shah Rajendrabhai Jayantilal VS D. Pranjivandas & Sons Prop.

Dhirajlal Pranjivandas Popat, 31 Jan 2017 2017 2 GLH 328; 2017 0
Supreme (Guj) 301 Gujarat High Court
Negotiable Instruments Act, 1881 – Section 138, 141 – Present application is
filed for quashing of Criminal case pending before Chief Judicial Magistrate
and also for stay of further proceedings in the case – The case of
complainant is that the cheque drawn by accused in favour of complainant
came to be dishonoured and present case is filed – Accused submitted that a
H.U.F. is a legal entity and without impleading it as a legal entity or a
juridical person as one of the accused in the complaint, the member/'Karta'
of the H.U.F. alone cannot be prosecuted – Complainant contends a H.U.F.
is not a firm nor an association of persons – Observed that H.U.F. is not
like a corporation or a limited concern and it cannot be said that it has
a legal entity quite distinct and separate from its members – Section
141, Explanation (1) indicates that the expression ―Company‖ shall mean a
body corporate and includes a firm or other association of individuals –
―other association of individuals‖ cannot be understood to refer even to
informal understandings between individuals – H.U.F. will not constitute
an ―association of individuals‖ and karta or any other member can be
roped/prosecuted under Section 141, NI Act.
25.6 Ravindrabhai Manibhai Patel V/s Priyasha Money Lending

Co.Thru,uday Shivprasad Dave, 2 016 JX(Guj) 383
Director no proof form 32 shows no iota of evidence as accused being

director, accused only shareholder complaint quashed
Code of Criminal Procedure, 1973 , S. 482 , Negotiable Instruments Act,

1881 , S. 138 , quashing of complaint , dishonour of cheque ,
petitioner/accused is a one of the Directors of the company – vicarious
liability , form No. 32 issued by the Registrar of the companies indicated
that applicant was not a Director of the company at any point of time , no
evidence as to say that the applicant was a Director of the accused company
, applicant was merely a share holder of the accused company , complaint
qua applicant quashed , application allowed.
25.7 Murjibhai Vishram Varsani V/s Adam Alimamad Kumbhar,2 017

(1) BankCas 716
PARTNERSHIP FIRM – FIRM MUST BE PARTY held, in the absence of the

legal entity not being arraigned as an accused, a partner or the authorised

signatory cannot be prosecuted for the offence u/s. 138 of the Negotiable
Instruments Act , for maintaining the prosecution against the director u/s.
141 of theNegotiable Instruments Act, arraigning of a company as an
accused is imperative , it is applicable in case of a partnership firm also –
partners are liable and sued in their vicarious liability , complaint itself is
not maintainable as the partnership firm as a legal entity has not been
arraigned as an accused , criminal proceedings quashed – application
allowed.
25.8 Joginder Singh Juneja V/s State Of Gujarat, 2 017 JX(Guj) 268
Nature of averments for inflicting liability of directors u/s 141

1881 , S. 138, 141 , complaint of dishonour of cheque , cheque in question
was signed by the accused No. 4 and 12 , accused No. 4 in the complaint is
the Managing Director and CEO of the Company and accused No. 12 is
authorized signatory , applicant is one of the independent directors of the
accused No. 1 company – whether responsible for the dishonour of the
cheque issued by the original accused No. 4 and 12 on behalf of the
company , vicarious liability of directors , held, for making Directors liable
for the offences committed by the company u/s. 141 of the Act, there must
be specific averments against Directors, showing as to how and in what
manner the Directors were responsible for the conduct of the business of the
company – a person may be a director and belongs to the group of persons
making the policy followed by the company, but yet may not be in charge of
the business of the company; that a person may be a Manager who is in
charge of the business but may not be in overall charge of the business; and
that a person may be an officer who may be in charge of only some part of
the business , so far as the companies are concerned if any offence is
committed by it then every person who is a Director or employee of the
company is not liable , only such person would be held liable if at the time
when offence is committed he was in charge and was responsible to the
company for the conduct of the business of the company as well as the
company , merely being a Director of the company will not make him liable ,
criminal proceedings so far as the two independent directors are concerned
quashed – application allowed.

1881 , S. 138, 141 , complaint of dishonour of cheque – quashing of
criminal proceedings , applicants were serving as Directors of accused no. 1
company , vicarious liability – audit committee report , responsibility of
Directors , specific averments in the complaint that applicants were
responsible for the conduct of the business of the company , role and
functions of the members of the audit committee noted , remuneration was

also being paid to the applicants – every person who at the time of offence
was committed is in charge of and responsible to the company shall be
deemed to be guilty of the offence u/s 138 of NI Act , if basic averments in
the complaint supported by evidence then the burden shift upon the
accused to establish that he had nothing to do with the day to day affairs of
the company – liberty given to the applicants to raise their defence during
trial as to they were not responsible for the day today affairs of the company
– no interference , applications dismissed.
25.9Satish Menon Vs. State Of Gujarat And Other. 2017 Gri L. J. 2076.
High Court Of Gujarat.
Negotiable Instruments Act ( 26 of 1881), Ss. 138, 141 Criminal P. C. (2 of
1974), Ss. 482, 227, Dishonour of Cheque ,Offence by Company , Quashing
of proceedings, Issuance of cheque towards discharging liability by company
,Accused one of Directors ,Plea that he had already resigned from Company
Tendering of resignation, question of fact To be decided by trial court by
leading evidence , Accused cannot be discharged at preliminary stage.
25.10Nikhil P. Gandhi Vs. State of Gujarat and Ors. 2016 4 Crimes

(HC) 413 GUJARAT HIGH COURT Criminal Misc. Application (For
Quashing & Set Aside Fir/Order) No.968 of 2014 with Criminal Misc.
Application Nos.1067, 1754 and 1756 of 2014 Decided on 15.6.2016
(A) Negotiable Instruments Act, 1881—Sections 138 and 141 read
with Sections 5, 6 and 20—Dishonour of cheque—Offence by company, A
signed blank cheque leaf was given to complainant—It is possible for drawer
of a cheque to give a blank cheque signed by him to payee and consent
either impliedly or expressly to said cheque being filled up at a subsequent
point in time and present the same for payment by drawee. (Para 50)
(B) Negotiable Instruments Act, 1881—Section 138—Dishonour of cheque—
By reason of Section 138 of N.I. Act, a legal fiction had been created—A legal
fiction, although is required to be given full effect, yet has its own
limitations. It cannot be taken recourse to for any purpose other than one
mentioned in statute itself. Section 138 provides for a penal provision-A
penal provision created by reason of a legal fiction must receive strict
construction. Such a penal provision, enacted in terms of legal fiction
drawn, would be attracted when a cheque is returned by bank unpaid—
Before a proceeding there under is initiated, all legal requirements therefore
must be complied with—Court must be satisfied that all ingredients of
commission of an offence under said provision have been complied
with. (Para 92)
(C) Negotiable Instruments Act, 1881—Section 138—Dishonour of cheque.
Whenever a blank cheque or postdated cheque is issued, a trust is reposed
that cheque will be filled in or used according to understanding
or agreement between parties—If there is a prima facie reason to believe
that said trust is not honoured, then continuation of prosecution

under Section 138 of N.I. Act would be abuse of process of law—it is
in interest of justice that parties in such cases are left to civil remedy. (Para
93)
(D) Negotiable Instruments Act, 1881—Sections 138 and 141—Dishonour of
cheque—Offence by company—An authorized signatory is very much liable
to be prosecuted along with company for the offence under Section 138 of
N.I. Act—However, it would all depend on facts of each case—Presently,
account on which cheque was drawn was not closed upon instructions
issued by drawer but same was upon instructions of new management—
Much before statutory notice was issued i.e. almost eight years
before issue of statutory notice, drawer of cheque had ceased himself to
be Managing Director of company—There could be many circumstances
under which a Director of a company who drew cheque, may have to
quit office Sometimes company itself would relieve Director—In case in
hand, entire management would change and a new management may
take over affairs of company—Accused had not drawn cheque in
question in his personal capacity but in his capacity as a Managing Director
of company—Applicant held no position whatsoever of company when
cause of action in fact accrued against company—There is no cogent
material on record to fasten any vicarious liability so far as other accused
are concerned who are Non-executive Directors including Office
Bearers concerned with Accounts Department of company—Order of
issuance of process under Section 138 of N.I. Act quashed. (Paras 55, 68,
70, 74, 81, 91 and 94)
25.11Ritesh Garodia Vs. State Of Gujarat &Ors. ( 2016 (4) Glr 2994 )
Negotiable Instruments Act, 1881—Sections 138 and 141
Criminal Procedure Code, 1973—Section 482—Dishonour of cheque,
Issuance of summons—Offence by company—Every person at the time of
commission of offence was In charge and was responsible to company for
conduct of business shall be deemed to be guilty of offence and liable to be
proceeded—Issuance of summons is a serious step against person
concerned and it requires proper application of mind before issuance of it—
Applicant is merely a brother of Director of accused–company—He is not a
signatory to cheques in question, Complaint qua present applicant quashed.
25.12Vijay Himatlal Modi Vs. State Of Gujarat (2019) Acd 593Criminal

Miscellaneous Application No. 8999 of 2014Decided on : 24,01,2019
Para 9. The precedent relied upon by the learned advocate Shri. Dewal,
learned advocate for respondent No. 2, if looked from closed angle, it is not
deciding the issue, which Shri. Dewal proposes to argue. In fact it permits,
more particularly, in paragraph 11 to furnish some concrete or
uncontrovertable material, which could be accepted to conclude that the
averments made as regards their involvement as the Director in day-to-day

business or they being responsible for conduct of the business of the
Company without which they cannot be prosecuted, and therefore, based on
an order passed by Securities and Exchange Board of India the statutory
authority under the statute in respect of the very same Company holding in
respect of the very same Director that he is not responsible for the day-to-
day affairs of the Company, the applicant could not have been prosecuted
under Section 138 of the Act for an offence committed by the Company.
25.13PremjibhaiLakhabhai Chauhan Vs. State Of Gujarat (2019) 3 DCR

206Gujarat High Court
OFFENCE BY SOCIETY
Para 7. Explanation to the section clearly defines "company" means anybody
corporate and includes a firm or other association of individuals; and
further also explains that the ―director", in relation to a firm, means a
partner in the firm. The aforesaid explanation clearly indicates that the
definition of company is not exhaustively defines by the statue but definition
of inclusive which includes any association of individuals which result into
the artificial person. Indisputably Shri Jalpari Co-operative Housing Society
Limited is flowing from Gujarat Co-operative Society Act, 1961 which is
essentially the artificial person and came to be found and constituted by
association of persons. In view of the aforesaid legal and factual position,
learned trial Court has rightly dismissed the complaint. In view of the settled
law laid down by the Hon'ble Apex Court and consequently therefore no case
is made out for granting any leave to appeal against the aforesaid judgment
and order of acquittal.
25.14Kiritbhai Patel Vs. State Of Gujarat. 2016,JX(Guj),0,61.

Code of Criminal Procedure, 1973, S. 482, Negotiable Instruments
Act, 1881 S. 138, 141, dishonour of cheque, complaint against partners of
the partnership firm-quashing of complaint. it is clear that the complainant
himself has stated in the complaint that both the accused are partners of
partnership firm, however, partnership firm is not joined as an accused by
the complainant in the impugned complaint held, when respondent no. 2
original complainant has not joined the partnership firm as an accused in
the impugned complaint, this Court can exercise the powers u/s. 482 of the
Cr.P.C. for quashing and setting aside the impugned complaint , complaint
quashed and set aside qua the present applicant only , application allowed.
25.15Ratishbhai D. Ramani Vs. State Of Gujarat And Anr.

2015 (1) GLR 848
Held, complaint not maintainable without joining partnership firm as
accused. Complaint quashed under Sec. 482 of Cr.P.C. Complaint for
dishonour of cheque filled by an Unregistered Partnership Firm is
maintainable.

25.16RuturajAyurvedic GruhUdhyog (Through Res.No.2) Vs. Navnitlal
And Company Through Devang Manojbhai Gandhi.
2017 (2) GLH 312
Negotiable Instruments Act, 1881 S. 138 Indian Partnership Act,
1932 S. 69 (2) Dishonour of cheque, complaint by an unregistered
partnership firm ,maintainability , A careful reading of Section 69 (2) of the
Partnership Act shows that an unregistered partnership firm is barred from
filing a civil suit and there is no bar as such to file a complaint for enforcing
criminal liability on the part of the person who has issued the cheque Even,
when the cheque is issued by a partner of an unregistered firm for
legally recoverable debt or otherwise or if such a cheque is
dishonoured when it was presented for encashment, it attracts
criminal liability Complaint for dishonour of cheque filled by an
unregistered partnership firm is maintainable.
25.17 Nijanand Pipes, Fittings Pvt. Ltd. VS State Of Gujarat.[2019] 2

GLR 1523 / [2019] 0 Supreme(Guj) 212
Held, Cheque in question is issued under the signature of the accused no.7
on behalf of the Company – Complaint reveals except accused no.1 & 7, it is
not alleged against rest of the accused that applicants-accused were
responsible for the day to day affairs of the business of the accused no.1
company – Essential requirement of Section 141 of Act and has to be made
in complaint – Criminal proceedings against applicants except accused No. 1
& 7 quashed – Petition allowed Complaint reveals except accused no.1 & 7,
it is not alleged against rest of the accused that applicants-accused were
responsible for the day to day affairs of the business of the accused no.1
company – Essential requirement of Section 141 of Act and has to be made
in complaint – Criminal proceedings against applicants except accused No. 1
& 7 quashed.
25.18Urmilaben Pareshbhai Kothiya V/s Hdfc Bank Ltd, 2 018 JX(Guj)

272
Retirement from firm disputed question of fact complaint cannot be

quashed in absence of evidence being lead by parties :,complaint filed
u/s 138 and 141 of NI Act – liability of the partner of partnership firm ,
applicant accused was one of the partners of the partnership firm , loan
borrowed on behalf of the firm , contention of applicant that he was not the
partner at the time of issuance of cheque and he had retired as partner
much before the commission of offence , no publication of retirement from
the firm , held, whether on the date of the commission of the alleged offence,
applicant was a partner of the firm or not, being a disputed question of fact,
the same cannot be gone into by this Court in the present proceedings in
quashing petition , that has to be established in trial , case of Rallis India
Ltd (Supra) relied on , once the vicarious liability of a partner of the firm is

specifically made out by appropriate averments in the complaint, then High
Court should not discharge the accused of their vicarious liability for the
offences u/s. 138 and 141 of N.I. Act at the threshold on the ground that
they had retired from the partnership firm , not a fit case to exercise
jurisdiction u/s 482 of the Code , application dismissed.
25.19 Chimanbhai Bachubha Kabariya VS HDFC Bank Ltd.[2018] 4 GLR

2807 / [2018] 0 Supreme(Guj) 1043
3. A bare perusal of sub-section (3) of Section 32 makes it clear that

notwithstanding the retirement of a partner from a firm, he/she and the
partners continue to be liable as partners to third parties for any act
done by them which would have been an act of the firm if done before
the retirement, until public notice is given of the retirement. In the
present case, admittedly, there is no publication of the retirement in the
Official Gazette and no public notice in at least one vernacular newspaper
circulating in the district where the firm to which it relates has its place or
principal place of business has been given in the manner as prescribed in
Section 72 of The Indian Partnership Act, 1932 (reproduced above) relating
to retirement of the petitioners as partners of M/s Radheshyam Cottex and
as such the petitioners cannot be said to have legally retired from the
partnership firm M/s Radheshyam Cottex as per the provisions of The
Indian Partnership Act, 1932. In other words, since admittedly, there is no
publication of retirement in the Official Gazette and further since no public
notice in at least one vernacular newspaper circulating in the district where
the firm to which it relates has its place or principal place of business has
been published, as contemplated under Suction 32 read with Section 72 of
The Indian Partnership Act, 1932 either by the applicant or by any partner
of the reconstituted firm, the petitioners still continues to be partners of M/s
Radheshyam Cottex and are liable to be prosecuted under Section 138 read
with Section 141 of The Negotiable Instruments Act, 1881. As such, the
petitioners' submission that they have retired from M/s Radheshyam Cottex
is thoroughly mis-conceived and not tenable at law. It would be pertinent to
mention here that it is an undisputed position that at the time of availing
loan from the respondent No.1 Bank and issuance of the subject cheques (3
Nos.) to it, the petitioners were partners of M/s Radheshyam Cottex and in
fact the petitioners had also signed the subject loan agreement as partners
of M/s Radheshyam Cottex as well as in their individual capacity as a
borrower/guarantor. In view of the above, the petitioners are liable to
discharge the liabilities of M/s Radheshyam Cottex to the respondent No.1
Bank and as such the impugned cheques (3 Nos.) issued in discharge of the
said liability would be covered under the definition of "legally enforceable
debt" and the applicant would be liable for dishonour of the said cheques in
question.

8. Thus, the case of the complainant is that the issue whether on the date of
the commission of the alleged offence, the applicant was a partner of the
firm or not, being a disputed question of fact, the same cannot be gone into
by this Court in the present proceedings. The principal argument of the
learned counsel appearing for the complainant is that assuming for the
moment that the applicant-accused had retired as a partner from the
partnership firm, whether such retirement could be said to be in accordance
with law, and if such retirement could not be said to be in accordance with
law, then even if the applicant has ceased to be the partner, the applicant
would not get absolved from her liability under section 138 read with section
141 of the Act. In such circumstances, referred to above, the learned
counsel prays that there being no merit in this application, the same be
rejected.
25.20 ChimanbhaiBachubhaKabariya VS HDFC Bank Ltd.[2018] 4 GLR

2807 / [2018] 0 Supreme(Guj) 1043
Basic averment that vis-à-vis a Director who has not signed the cheque, that
such a Director is in charge of and responsible for the day to day conduct of
the management has to be made. As per facts of the case offence of dishonor
of cheque was committed by partnership firm but applicant contending that
he has been retired before issuance of this cheque – court while declining to
quash proceedings held that retirement of applicant is a question of fact
which has to be established.
25.21 Gunmala sales Pvt. Ltd. Vs. Navkar Promoters Pvt. Ltd., (2015) 1
SCC 103
Para 30. When a petition is filed for quashing the process, in a given case,
on an overall reading of the complaint, the High Court may find that the
basic averment is sufficient, that it makes out a case against the Director,
that there is nothing to suggest that the substratum of the allegation against
the Director is destroyed rendering the basic averment insufficient and that
since offence is made out against him, his further role can be brought out in
the trial. In another case, the High Court may quash the complaint despite
the basic averment. It may come across some unimpeachable evidence or
acceptable circumstances which may in its opinion lead to a conclusion that
the Director could never have been in charge of and responsible for the
conduct of the business of the company at the relevant time and therefore
making him stand the trial would be an abuse of process of court as no
offence is made out against him.
Para 31. When in view of the basic averment process is issued the complaint
must proceed against the Directors. But, if any Director wants the process
to be quashed by filing a petition under Section 482 of the Code on the
ground that only a bald averment is made in the complaint and that he is
really not concerned with the issuance of the cheque, he must in order to
persuade the High Court to quash the process either furnish some sterling

incontrovertible material or acceptable circumstances to substantiate his
contention. He must make out a case that making him stand the trial would
be an abuse of process of court. He cannot get the complaint quashed
merely on the ground that apart from the basic averment no particulars are
given in the complaint about his role, because ordinarily the basic averment
would be sufficient to send him to trial and it could be argued that his
further role could be brought out in the trial. Quashing of a complaint is a
serious matter. Complaint cannot be quashed for the asking. For quashing
of a complaint it must be shown that no offence is made out at all against
the Director." (Emphasis supplied)
The Supreme Court observed that since a specific averment was made
in the complaint that the Directors were in charge of the day to day
management, the complaint could not have been quashed.
25.22SMS Pharmaceuticals vs. Neeta Bhalla, 2005 (53) ACC 503 (SC)
Sec. 138, 141It is necessary to specifically aver in complaint u/s. 141
that at the time of offence, accused was in-charge of and responsible for the
conduct of business of the company. Mere being a director of the
companycannot be deemed to be in-charge of and responsible for the
company for conduct of it‘s business. Even a non, Director can be liable u/s.
141.
Section 141 of the Act can be summarized thus:
(i) If the accused is the Managing Director or a Joint Managing Director, it is
not necessary to make an averment in the complaint that he is in charge of,
and is responsible to the company, for the conduct of the business of the
company. It is sufficient if an averment is made that the accused was the
Managing Director or Joint Managing Director at the relevant time. This is
because the prefix "Managing" to the word "Director" makes it clear that they
were in charge of and are responsible to the company, for the conduct of the
business of the company.
(ii) In the case of a Director or an officer of the company who signed the
cheque on behalf of the company, there is no need to make a specific
averment that he was in charge of and was responsible to the company, for
the conduct of the business of the company or make any specific allegation
about consent, connivance or negligence. The very fact that the dishonoured
cheque was signed by him on behalf of the company, would give rise to
responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager [as defined in section
2(24) of the Companies Act] or a person referred to in clause (e) and (f) of
Section 5 of the Companies Act, an averment in the complaint that he was
in charge of, and was responsible to the company, for the conduct of the
business of the company is necessary to bring the case under Section 14(1)
of the Act. No further averment would be necessary in the complaint, though
some particulars will be desirable. They can also be made liable under
Section 141(2) by making necessary averments relating to consent and

connivance or negligence, in the complaint, to bring the matter under that
sub-section.
(iv) Other officers of a company cannot be made liable under Sub-section (1)
of Section 141. Other Officers of a company can be made liable only under
Sub-section (2) of Section 141, by averring in the complaint their position
and duties in the company and their role in regard to the issue and
dishonour of the cheque, disclosing consent, connivance or negligence.
25.23Pre-conditions for fastening liability on Director for offence u/s

138 :
1. Tamil Nadu News Print & Papers Ltd. Vs. D. Karunakar, (2016) 6
SCC 78.
2. Sabitha Ramamurthy vs. RBSC, AIR 2006 SC 3086 , 2007 Cr.L.J.
2442 (SC)
3. Paresh P. Rajda vs. State of Maharashtra, 2008 (61) ACC 996
(SC).8
It is necessary for complainant to aver in the complaint and also in
the sworn statements u/s. 200 Cr.P.C. that the director was in-charge of the
affairs of the company and responsible for the day to day business of the
company, otherwise director cannot be held liable. It is so because in case
such an averment of the complainant is ultimately found false or malafide,
court may direct registration of case against the complainant for malicious
prosecution.
25.24(i) Mainuddin Abdul Sattar Shaikh Vs. Vijay D. Salvi, (2015) 9 SCC
622.
(ii) National Small Industries Corporation Limited Vs. Harmeet Singh
Paintal, (2010) 3 SCC 330 (para 39).
To hold Director liable, not necessary to make specific averment in the
complaint that he was in-charge of the affairs of the company :
If the accused was Managing Director or a Joint Managing Director of the
company then it is not necessary to make specific averment in the complaint
to that effect as by virtue of his position he is liable to be proceeded for the
offence u/s 138 of the N I Act.
Section 141 of NI Act outlines conditions in cases of offences by companies.

The following points are important: Every person at the time the offence was
committed, was in charge of, and was responsible for the conduct of the
business of the company is liable to be prosecuted. In other words,
directors, secretary and officers of the company may be liable.
The company is also liable to be prosecuted. If a person proves that
the offence was committed without his knowledge or he exercised all due
diligence to prevent the commission of such offence, he will escape
prosecution. A person nominated as a Director of a company by virtue of his
holding any office or employment in the Central or State Government or a

financial corporation owned or controlled by the Central Government or the
State Government enjoys exemption from prosecution.
The following paragraph from the judgment of Supreme Court in the matter
of N. Rangachari vs. Bharat Sanchar Nigam Ltd. (MANU/SC/7316/2007
dated 19.04.2007) explains the law relating to persons who are deemed to
be liable under section 138. Section 141 of the Act creates liability on every
person who was in charge of and responsible for the affairs of the company
at the time of issue of the cheque. It is the responsibility of the accused (and
not of the complainant) to prove that:
(a) The offence of cheque bouncing was committed by the company without
his / her knowledge, or
(b) He / she exercised due diligence to prevent the bouncing of the cheque.
Section 141 of the Act creates a vicarious liability. In criminal law, the
general rule is against vicarious liability. Hence, section 141 of the Act is
exceptional. It makes a person criminally liable for someone else‘s actions.
Often directors of an accused company take defense that the cheque related
to a division/project of the company where they had no involvement or the
cheque was issued by a Director without due authorization from the Board
of Directors of the company. The Supreme Court has ruled (N. Rangachary,
supra) that a holder of cheque cannot be expected to be aware of such
matters which relate to ―arrangements within the company in regard to its
management, daily routine, etc.‖
As per the judgment of the Supreme Court, Directors of a company
are prima facie in the position of being ―in charge of affairs‖.
Hence, if you are holder of a bounced cheque issued by a company, it
will be reasonable to name all directors (excluding independent directors) of
the company as accused (in addition to the company) in the complaint
under section 138. If you do not know the names of the directors of the
company, please ask a Company Secretary to conduct a search on the
website of Ministry of Company Affairs.
It is important to clarify that as per the decision of the Honourable
Supreme Court in Kirshna Texport and Capital Markets Ltd. vs. Ila A.
Agrawal and Ors. (MANU/SC/0562/2015 decided on 6 th May 2015) it is
no longer required to issue notices to directors of a company. The notice
needs to be issued only to the company whose cheque has bounced.
Subsequently, after determining the names of the persons who are in charge
of, and are responsible for the conduct of the business of the company, all
such persons can be included as accused in the complaint. In other words,
a director will be made an accused even though he/she has not received any
notice.
25.25Standard Chartered Bank Vs. State of Maharashtra and Others

Etc. AIR 2016 SUPREME COURT 175

(a) Negotiable Instruments Act, 1881 Section 138 and 141 In case of a
Company, a constructive liability is created on the persons responsible for
the conduct of the business of the company However, vicarious liability of
other persons will not only arise if the Company is not prosecuted. (Para 12)
(b) Negotiable Instruments Act, 1881 Section 138 and 141 r/w sections 203
and 204, Code of Criminal Procedure, 1973 Complaint must contain
material to enable the Magistrate to make up mind for issuing process. Only
direct involvement of an officer of a Company would make such officer liable
under section 141(2) Liabilities arises on account of conduct, act or
omission by an officer and not merely on account of his holding office or
position in a company. The accused being in charge of, and responsible for
the conduct of business of the company must be specifically averred in the
complaint u/s 141The specific averment may be direct or indirect. (Para 15,
17, 18)
(c) Code of Criminal procedure, 1973 Section 482 r/w section 141,
Negotiable Instruments Act, 1881 Complaint prosecuting the Company –
Specifically attributing liability of Chairman, Managing Director and while
time Directors asserting that they were responsible for day to day business
of the Company – Complaint making out case against respondent Nos. 2 and
3, wholetime Director and Executive Director– Meeting the test laid down in
(2015) 1 SCC 103. (Para 33, 34)
25.26Pooja Ravinder Devidasani Vs. State of Maharashtra 2015 CRI. L.

J. 1165
Vicarious liability Appellant was neither Director of accused company
Nor in charge of or involved in day to day affairs of company at time of
commission of alleged offence, No evidence on record to show that there is
any act committed by appellantNo reasonable inference can be drawn that
appellant could be vicariously held liable for offence she was
charged ,Appellant resigned from Board of Directors much before issuance
of cheques ,Continuation of proceedings against appellant under S. 138
and S. 141 being abuse of process of law, liable to be quashed.
25.27National Small Industries Corporation Limited Vs. Harmeet

Singh Paintal and another (2010) 3 SCC 330 Section – 141 – Offences
by Company – Vicarious liability.
―Para 39. From the above discussion, the following principles emerge:
(i) The primary responsibility is on the complainant to make specific
averments as are required under the law in the complaint so as to make the
accused vicariously liable. For fastening the criminal liability, there
is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The
criminal liability can be fastened only on those who, at the
time of the commission of the offence, were in charge of and were
responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company
registered or incorporated under the Companies Act, 1956 only if the
requisite statements, which are required to be averred in the
complaint/petition, are made so as to make accused therein vicariously
liable for offence committed by company along with averments in the
petition containing that accused were in charge of and responsible for the
business of the company and by virtue of their position they are liable to be
proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved
and not inferred.
(v) If accused is Managing Director or Joint Managing Director then it is not
necessary to make specific averment in the complaint and by virtue of their
position they are liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company who
signed the cheques on behalf of the company then also it is not necessary
to make specific averment in complaint.
(vii) The person sought to be made liable should be in charge
of and responsible for the conduct of the business of the company at the
relevant time. This has to be averred as a fact as there is no deemed liability
of a Director in such cases.‖
25.28Everest Advertising Pvt.Ltd. Vs State, Govt. of NCT of Delhi

&Ors.) 2007(2) Apex Court Judgments 191 (S.C.) : 2007(2) Civil Court
Cases 708 (S.C.) : 2007(2) Criminal Court Cases 791 (S.C.)
Dishonour of cheque,Company , Chairman or Director , Pleading , There
must be an averment that the person who is vicariously liable for
commission of the offence of the Company both was in charge of and was
responsible for the conduct of the business of the Company , Such
requirement must be read conjointly and not disjunctively.
Dishonour of cheque, Company, Directors, Pleading, As a result of fall
out of nonpayment negotiations were held between parties wherein
Respondent Nos.2 and 3 took part, Held, there is no doubt that ingredients
of S.141 of the Act stand satisfied.
25.29K.Srikanth Singh Vs M/s North East Securities Ltd. &Ors.)

2007(3) Apex Court Judgments 024 (S.C.) : 2007(3) Civil Court Cases
525 (S.C.) : 2007(3) Criminal Court Cases 850 (S.C.)
Dishonour of cheque, Company, Director, Vicarious liability, Director
who negotiated for obtaining financial assistance on behalf of the Company
cannot be held vicariously liable. It does not give rise to an inference that he
was responsible for day-to-day affairs of the company,vicarious liability on
the part of a person must be pleaded and proved,It cannot be a subject
matter of mere inference.
It must be pleaded that accused was responsible to the Company for
the conduct of the business of the Company.

25.30Ramrajsingh v/s State of M.P. and Anr AIR 2009 SC (Supp) 1726
SUPREME COURT (From : 2003 (1) Jab LJ 227 (M.P.)) Criminal Appeal
No. 1103 of 2003, D/, 15 , 4 , 2009
Negotiable Instruments Act (26 of 1881), S.138, S.141 , Dishonour of
cheque, Liability of directors of company , No evidence that appellant
director of company was in charge and responsible for conduct of business
of company,No notice given to him , No specific role attributed to him
in complaint petition, Conviction of appellant cannot be maintained
25.31A. R. Radha Krishna v/s Dasari Deepthi and Ors. AIR 2019
SUPREME COURT 2518 (From: 2018 ACD 433 (Hyd))(Three Bench
Judgment)
Criminal P.C. (2 of 1974), S.482 , Negotiable Instruments Act (26 of 1881),
S.138, S.141 , Quashing of criminal proceedings , Dishonour of cheque ,
Complaint containing specific averments that, respondents, Directors of
accused company were running company together by actively participating
in day-to-day affairs, being from same family ,Complaint also stating that
all accused in active connivance issued cheques in favour of
complainant and later instructed for stop payment , No material on
record to show that allowing proceedings to continue would be an
abuse of process of Court, Quashing of proceedings by High Court, illegal.
25.32Himanshu Vs. B. Shivamurthy And Another Criminal Appeal No.

1465 of 2009 Decided on : 17,01,2019 (2019) 9 SCJ 27 : (2019) 153
SCL 71 SUPREME COURT OF INDIA
A Defective Complaint Cannot Be Allowed To Stand.
In absence of company being arraigned as an accused, complaint against

appellant was not maintainable , Appellant had signed cheque as a Director
of company and for and on its behalf – In absence of notice of demand being
served on company and without compliance with proviso to Section 138,
High Court was in error in holding that company could now be arraigned as
accused , High Court was in error in rejecting petition under Section 482 of
Cr.P.C. , Judgment of High Court set aside and complaint quashed.
25.33Apex Court in AneetaHada Vs. Godfather Travels and Tours

Private Limited (2012) 5 SCC 661.
―58. Applying the doctrine of strict construction, we are of the considered
opinion that commission of offence by the company is an express condition
precedent to attract the vicarious liability of others. Thus, the words ―as well
as the company‖ appearing in the section make it absolutely unmistakably
clear that when the company can be prosecuted, then only the persons
mentioned in the other categories could be vicariously liable for the offence
subject to the averments in the petition and proof thereof. One cannot be

oblivious of the fact that the company is a juristic person and it has its own
respectability. If a finding is recorded against it, it would create a concavity
in its reputation. There can be situations when the corporate reputation is
affected when a Director is indicted.
59. In view of our aforesaid analysis, we arrive at the irresistible conclusion
that for maintaining the prosecution under Section 141 of the Act,
arraigning of a company as an accused is imperative. The other categories of
offenders can only be brought in the dragnet on the touchstone of vicarious
liability as the same has been stipulated in the provision itself. We say so on
the basis of the ratio laid down in State of Madras v/s C.V/S Parekh (1970)
3 SCC 491, which is a three,Judge Bench decision. Thus, the view
expressed in Sheoratan Agarwal v/s State of M.P. does not correctly lay
down the law and, accordingly, is hereby overruled. The decision in Anil
Hada v/s Indian Acrylic Ltd, (2000) 1 SCC 1 is overruled with the qualifier
as stated in paragraph 51. The decision in U.P. Pollution Control Board v/s
Modi Distillery, (1987) 3 SCC 684 has to be treated to be restricted to its
own facts as has been explained by us hereinabove.‖ (Emphasis supplied)
25.34Devendra Kumar Garg VS State of U. P. , 19 Feb 2020

2020 0 Supreme(All) 281;
Para 8. From perusal of the contents of the notice and complaint, it is
evident that the notice as well as the complaint was filed against the
applicant in his individual capacity. Company was not arrayed as a
party neither in the notice nor in the complaint. Hon'ble Apex Court in
the case of AneetaHada (supra) has held that for maintaining the
prosecution under Section 141 of the Act, arraigning of a company as an
accused is imperative.
25.35Harshendra Kumar D. …. Appellant V/s RebatilataKoley Etc.

….Respondents SC. Criminal Appeal No. 360,377 OF 2011 (Arising out
of SLP (Criminal) Nos. 3008,3025 of 2008)
Director Not Responsible For Cheques Issued After His Resignation
21. In our judgment, the above observations cannot be read to mean that in
a criminal case where trial is yet to take place and the matter is at the stage
of issuance of summons or taking cognizance, materials relied upon by the
accused which are in the nature of public documents or the materials which
are beyond suspicion or doubt, in no circumstance, can be looked into by
the High Court in exercise of its jurisdiction under Section 482 or for that
matter in exercise of revisional jurisdiction under Section 397 of the Code. It
is fairly settled now that while exercising inherent jurisdiction under Section
482 or revisional jurisdiction under Section 397 of the Code in a case where
complaint is sought to be quashed, it is not proper for the High Court to
consider the defence of the accused or embark upon an enquiry in respect of
merits of the accusations. However, in an appropriate case, if on the face of

the documents – which are beyond suspicion or doubt – placed by accused,
the accusations against him cannot stand, it would be travesty of justice if
accused is relegated to trial and he is asked to prove his defence before the
trial court. In such a matter, for promotion of justice or to prevent injustice
or abuse of process, the High Court may look into the materials which have
significant bearing on the matter at prima facie stage.
22. Criminal prosecution is a serious matter; it affects the liberty of a

person. No greater damage can be done to the reputation of a person than
dragging him in a criminal case. In our opinion, the High Court fell into
grave error in not taking into consideration the uncontroverted documents
relating to appellant‘s resignation from the post of Director of the Company.
Had these documents been considered by the High Court, it would have
been apparent that the appellant has resigned much before the cheques
were issued by the Company. As noticed above, the appellant resigned from
the post of Director on March 2, 2004. The dishonoured cheques were
issued by the Company on April 30, 2004, i.e., much after the appellant had
resigned from the post of Director of the Company. The acceptance of
appellant‘s resignation is duly reflected in the resolution dated March 2,
2004. Then in the prescribed form (Form No. 32), the Company informed to
the Registrar of Companies on March 4, 2004 about appellant‘s resignation.
It is not even the case of the complainants that the dishonored cheques were
issued by the appellant. These facts leave no manner of doubt that on the
date the offence was committed by the Company, the appellant was not the
Director; he had nothing to do with the affairs of the Company. In this view
of the matter, if the criminal complaints are allowed to proceed against the
appellant, it would result in gross injustice to the appellant and tantamount
to an abuse of process of the court.
25.36Milind Shripad Chandurkar VS Kalim M. Khan [2011] 2 SCC(Cri)

208
Locus standi of complainant to maintain appeal against order of acquittal-A

person can maintain a complaint provided he is either a "payee" or "holder
in due course" of chequeAppellant/complainant could not produce any
document to show that he was proprietor of firm-Mere statement in
affidavit in this regard, is not sufficient to meet requirement of/aw.
25.37Shankar Finance and Investments v/s State of Andhra Pradesh

and Ors. (2008) 8 SCC 536,
Held that where the "payee" is a proprietary concern the complaint

can be filed (i) by the proprietor of the proprietary concern describing
himself as the sole proprietor of the "payee"; (ii) the proprietary concern
describing itself as the sole proprietary concern represented by its
proprietor; and

(iii) the proprietor or the proprietary concern represented by the Attorney
Holder under the power of attorney executed by the sole proprietor.
However, it shall not be permissible for an Attorney Holder to file the

complaint in his own name as if he was the complainant. He can initiate
criminal proceedings on behalf of the principal. In a case of this nature,
where the "payee" is a company or a sole proprietary concern, such issue
cannot be adjudicated upon taking any guidance from Section 142 of the Act
1881 but the case shall be governed by the general law i.e. the Companies
Act 1956 or by civil law where an individual carries on business in the name
or style other than his own name. In such a situation, he can sue in his own
name and not in trading name, though others can sue him in the trading
name. So far as Section 142 is concerned, a complaint shall be maintainable
in the name of the "payee", proprietary concern itself or in the name of the
proprietor of the said concern.
25.38Janki Vashdeo Bhojwani v/s Indusind Bank Ltd. (2005) 2 SCC

217,
Held that the general principles of company law or civil law would
apply for maintaining the complaint under Section 138 of the Act 1881
25.39Beacon Industries, Bangalore V/s Anupam Ghosh Decided On :

09,08,03 2004 1 DCR 457; Karnataka High Court
Therefore, in view of the above decisions of the Supreme Court as well
as of the other High Courts, the contention of the respondent that filing of a
criminal complaint by a partner of an unregistered firm is hit by section 69
(2) of the Partnership Act cannot be accepted. The said section has no
application to the criminal cases. Under these circumstances it could be
said that Section 69 (2) of the Partnership Act is applicable only where the
civil rights are invoked and not in criminal cases. Non-registration of the
firm has no legal bearing on the criminal case. Hence, the finding recorded
by the Trial Court is totally incorrect and illegal and the same is liable to be
set aside.

26. PRACTICE AND PROCEDURE - MEDIATION IN NEGOTIABLE
INSTRUMENT ACT CASES
26.1 Dayawati vs Yogesh Kumar Gosain 2017 SCC Online Del 11032
CRL.REF.No.1/2016 Decided on 17 October, 2017
The legal permissibility of referring a complaint cases under Section
138 of the NI Act for amicable settlement through mediation; procedure to
be followed upon settlement and the legal implications of breach of the
mediation settlement is the subject matter of this judgment. Shri Bharat
Chugh, as the concerned Metropolitan Magistrate (NI Act), Central –
01/THC/ Delhi, when seized of Complaint Case Nos.519662/2016 and
519664/2016 (Old Complaint Case Nos.2429/2015 and 2430/2015) under
Section 138 of the Negotiable Instruments Act (―NI Act‖ hereafter) passed an
order dated 13th January, 2016, the following questions under Section
395 of the Code of Criminal Procedure (―Cr.P.C‖ hereafter) to this court
for consideration:
QUESTIONS UNDER SECTION 395 OF THE CODE OF CRIMINAL
PROCEDURE
―1. What is the legality of referral of a criminal compoundable case (such
as one u/s 138 of the NI Act) to mediation?
Answer: It is legal to refer a criminal compoundable case as one under
Section 138 of the NI Act to mediation.
2. Can the Mediation and Conciliation Rules, 2004 formulated in
exercise of powers under the CPC, be imported and applied in criminal
cases? If not, how to fill the legal vacuum? Is there a need for separate rules
framed in this regard (possibly u/s 477 of the CrPC)?
Answer:The Delhi Mediation and Conciliation Rules, 2004 issued in exercise
of the rule making power under Part,10 and Clause (d) of sub-section (ii) of
Section 89 as well as all other powers enabling the High Court of Delhi to
make such rules, applies to mediation arising out of civil as well as criminal
cases.
3. In cases where the dispute has already been referred to mediation , What
is the procedure to be followed thereafter? Is the matter to be disposed of
taking the very mediated settlement agreement to be evidence of
compounding of the case and dispose of the case, or the same is to be kept
pending, awaiting compliance thereof (for example, when the payments are
spread over a long period of time, as is usually the case in such settlement
agreements)?
In the context of reference of the parties, in a case arising under Section 138
of the NI Act, to mediation is concerned, the following procedure is required
to be followed:
III (i)When the respondent first enters appearance in a complaint under
Section 138 of the NI Act, before proceeding further with the case, the
Magistrate may proceed to record admission and denial of documents in

accordance with Section 294 of the Cr.P.C., and if satisfied, at any stage
before the complaint is taken up for hearing, there exist elements of
settlement, the magistrate shall inquire from the parties if they are open to
exploring possibility of an amicable resolution of the disputes.
III (ii) If the parties are so inclined, they should be informed by the court of
the various mechanisms available to them by which they can arrive at such
settlement including out of court settlement; referral to Lok Adalat under
the Legal Services Authorities Act, 1987; referral to the court annexed
mediation center; as well as conciliation under the Arbitration and
Conciliation Act, 1996.
III (iii) Once the parties have chosen the appropriate mechanism which they
would be willing to use to resolve their disputes, the court should refer the
parties to such forum while stipulating the prescribed time period, within
which the matter should be negotiated (ideally a period of six weeks) and the
next date of hearing when the case should be again placed before the
concerned court to enable it to monitor the progress and outcome of such
negotiations.
III (IV) in the event that the parties seek reference to mediation, the court
should list the matter before the concerned mediation center/mediator on a
fixed date directing the presence of the parties/authorized representatives
before the mediator on the said date.
III (v) If referred to mediation, the courts, as well as the mediators, should
encourage parties to resolve their overall disputes, not confined to the case
in which the reference is made or the subject matter of the criminal
complaint which relates only to dishonoring of a particular cheque.
III (vi) The parties should endeavor to interact/discuss their individual
resolutions/proposals with each other as well and facilitate as many
interactions necessary for efficient resolution within the period granted by
the court. The parties shall be directed to appear before the mediator in a
time bound manner keeping in view the time period fixed by the magistrate.
III (vii) In the event that all parties seek extension of time beyond the initial
six week period, the magistrate may, after considering the progress of the
mediation proceedings, in the interest of justice, grant extension of time to
the parties for facilitating the settlement.
For the purposes of such extension, the magistrate may call for an
interim report from the mediator, however keeping in mind the
confidentiality attached to the mediation process. Upon being satisfied that
bona fide and sincere efforts for settlement were being made by the parties,
the magistrate may fix a reasonable time period for the parties to appear
before the mediator appointing a next date of hearing for a report on the
progress in the mediation. Such time period would depend on the facts and
circumstances and is best left to the discretion of the magistrate who would
appoint the same keeping in view the best interest of both parties.

CONTENTS OF THE SETTLEMENT III
(viii) If a settlement is reached during the mediation, the settlement
agreement which is drawn-up must incorporate:
(a) A clear stipulation as to the amount which is agreed to be paid by the
party;
(b) A clear and simple mechanism/method of payment and the manner and
mode of payment;
(c) Undertakings of all parties to abide and be bound by the terms of the
settlement must be contained in the agreement to ensure that the parties
comply with the terms agreed upon;
(d) A clear stipulation, if agreed upon, of the penalty which would ensure to
the party if a default of the agreed terms is committed in addition to the
consequences of the breach of the terms of the settlement;
(e) An unequivocal declaration that both parties have executed the
agreement after understanding the terms of the settlement agreement as
well as of the consequences of its breach;
(f)a stipulation regarding the voluntariness of the settlement and declaration
that the executors of the settlement agreement were executing and signing
the same without any kind of force, pressure and undue influence.
III (ix) the mediator should forward a carefully executed settlement
agreement duly signed by both parties along with his report to the court on
the date fixed, when the parties or their authorized representatives would
appear before the court.
PROCEEDINGS BEFORE THE COURT.

III (x) The magistrate would adopt a procedure akin to that followed by the
civil court under Order XXIII of the C.P.C. III
(xi) The magistrate should record a statement on oath of the parties
affirming the terms of the settlement; that it was entered into voluntarily, of
the free will of the parties, after fully understanding the contents and
implications thereof, affirming the contents of the agreement placed before
the court; confirming their signatures thereon. A clear undertaking to abide
by the terms of the settlement should also be recorded as a matter of
abundant caution.
III (xii) a statement to the above effect may be obtained on affidavit.
However, the magistrate must record a statement of the parties proving the
affidavit and the settlement agreement on court record.
III (xiii) the magistrate should independently apply his judicial mind and
satisfy himself that the settlement agreement is genuine, equitable, lawful,
not opposed to public policy, voluntary and that there is no legal
impediment in accepting the same.
III (xiv) Pursuant to recording of the statement of the parties, the magistrate
should specifically accept the statement of the parties as well as their
undertakings and hold them bound by the terms of the settlement terms
entered into by and between them. This order should clearly stipulate that

in the event of default by either party, the amount agreed to be paid in the
settlement agreement will be recoverable in terms of Section 431 read with
Section 421 of the Cr.P.C.
III (xv) upon receiving a request from the complainant, that on account of
the compromise vide the settlement agreement, it is withdrawing himself
from prosecution, and the matter has to be compounded. Such prayer of the
complainant has to be accepted in keeping with the scheme of Section 147
of the NI Act.
At this point, the trial court should discharge/acquit the accused
person, depending on the stage of the case. This procedure should be
followed even where the settlement terms require implementation of the
terms and payment over a period of time.
III (xvi) In the event that after various rounds of mediation, the parties
conclude that the matter cannot be amicably resolved or settled, information
to this effect should be placed before the 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 laid down by the Supreme Court in the pronouncement
reported at (2010) 5 SCC 663, Damodar S. Prabhu v/s Sayed Babalal H and
so far as the settlement at the later stage is concerned in (2014) 10 SCC 690
Madhya Pradesh State Legal Services Authority v/s Prateek Jain.
III (xviii) we may also refer to a criminal case wherein there is an underlying
civil dispute. While the parties may not be either permitted in law to
compound the criminal case or may not be willing to compound the criminal
case, they may be willing to explore the possibility of a negotiated settlement
of their civil disputes. There is no legal prohibition to the parties seeking
mediation so far as the underlying civil dispute is concerned. In case a
settlement is reached, the principles laid down by us would apply to
settlement of such underlying civil disputes as well.
In case reference in a criminal case is restricted to only an underlying
civil dispute and a settlement is reached in mediation, the referring court
could require the mediator to place such settlement in the civil litigation
between the parties which would proceed in the matter in accordance with
prescribed procedure.
4. If the settlement in Mediation is not complied with , is the court
required to proceed with the case for a trial on merits, or hold such a
settlement agreement to be executable as a decree?
Answer: In case the mediation settlement accepted by the court as above is
not complied with, the following procedure is required to be followed:
IV (i) In the event of default or non-compliance or breach of the settlement
agreement by the accused person, the magistrate would pass an order under
Section 431 read with Section 421 of the Cr.P.C. to recover the amount
agreed to be paid by the accused in the same manner as a fine would be
recovered.

IV (ii) Additionally, for breach of the undertaking given to the
magistrate/court, the court would take appropriate action permissible in
law to enforce compliance with the undertaking as well as the orders of the
court based thereon, including proceeding under Section 2(b) of the
Contempt of Courts Act, 1971 for violation thereof.
5. If the Mediated Settlement Agreement, by itself, is taken to be
tantamount to a decree, then, how the same is to be executed? Is the
complainant to be relegated to file an application for execution in a civil
court? If yes, what should be the appropriate orders with respect to the
criminal complaint case at hand? What would be the effect of such a
mediated settlement vis-a-vis the complaint case?‖ (Emphasis by us)
Answer: The settlement reached in mediation arising out of a criminal case
does not tantamount to a decree by a civil court and cannot be executed in a
civil court.
However, a settlement in mediation arising out of referral in a civil
case by a civil court, can result in a decree upon compliance with the
procedure under Order XXIII of the C.P.C. This can never be so in a
mediation settlement arising out of a criminal case.

27. WITHDRAWAL OF COMPLAINT & NON-EXECUTION OF NBW
27.1 Birju Thomas vs. State of Kerala, 2001 Cr.L.J. 790 (Kerala)
Sec. 256 Cr.P.C. applies in respect of withdrawal of complaint
involving an offence u/s. 138 of the N.I. Act. If NBW was already issued
against the accused and thereafter withdrawal of the complaint is prayed by
the complainant, the Magistrate should not insist appearance of accused
and NBW should not be executed. Complaint in such cases should be
ordered to be withdrawn.
28. BURDEN ON DRAWER/ADDRESSEE TO PROVE NON,SERVICE

OF NOTICE
Sec. 138, proviso (b), (c) r/w Sec. 142—Notice through regd. post.
presumption of service in case of report on envelope to the effect, refusal,
unclaimed, not available, premises locked, party not at station, arrival not
known, court may presume receipt of notice by the drawee Drawer may
prove at trial by evidence that the endorsement was not correct.
1.V/S Raja Kumari vs. P. Subbarama Naidu, (2004) 8 SCC 774
2. Prem Chand Vijai Kumar vs. Yashpal Singh, (2005) 4 SCC 417
3. Sadanandan Bhadran vs. Madhavan Sunil Kumar, (1998) 6 SCC 514
4. K. Bhaskaran vs. Sankaran Vaidhyan Balan, (1999) 7 SCC 510
5. Dalmia Cement (Bharat) Ltd. vs. Galaxy Traders, (2001) 6 SCC 463.
29. DEATH OF COMPLAINANT UNDER NI ACT, 1881

29.1 Jimmy Jahangir Madan vs. Bolly Cariyappa Hindley (Dead), 2005
(51) ACC 23 (SC)
Complainant died during complaint‘s pendency under N.I. Act,
application to continue prosecution can be made by a person who has a
right to continue the prosecution including L.Rs. by themselves or through
pleader But Holder of Power of Attorney cannot be permitted to continue
prosecution.
29.2 (i) Vinita S. Rao Vs. M/s Essen Corporate Services Pvt. Ltd., AIR
2015 SC 882 (ii) A.C. Narayanan Vs. State of Maharashtra, 2013 (83)
ACC 583 (SC)(Three,Judge Bench).
Power of Attorney holder or LR can file complaint u/s 138 :
29.3 A.C. Narayanan Vs State of Maharashtra, 2013 (83) ACC 583

(SC)(Three,Judge Bench).
General power of Attorney holder cannot delegate his functions to
another person unless so specified in the power of attorney: General power
of Attorney holder cannot delegate his functions to another person unless so
specified in the power of attorney.

30. CONDONATION OF DELAY,
HEARING OF ACCUSED BEFORE CONDONING DELAY
30.1Sunil KanubhaiGoswami Vs. State Of Gujarat And Anr. 2017 (1)

GLR 370
(A) Negotiable Instruments Act, 1881 (26 of 1881) Sec. 138 & 142
Limitation, Condonation of delay. Complaint filed seven days beyond
limitation period/30 days from arising of cause of action. Held, in absence of
explanation for delay the Court cannot condone delay. Complaint time
barred Orders by the Courts below confirmed. Therefore, there is delay of 7
days in filing such complaint. Though proviso to Sec. 142 empowers the
Court to condone such delay, it is clear that the cognizance of the
complaint may be taken by the Court after the prescribed period as
aforesaid only if the complainant satisfies the Court that he
had sufficient cause for not filing the complaint within such period.
Therefore, it is mandatory for the complainant to plead and prove that there
was sufficient cause for not filing the complaint within prescribed period.
(Para 6).
30.2 Sunil Kanubhai Goswami Vs State Of Gujarat [2017] 1 GLR 370.

Powers To Condone Delay In Filing A Complaint Cannot Be Exercised In
Absence Of Any Pleading And/Or Request To Condone Delay.
Para 6. Therefore, if we recollect the factual details which are described

herein above, now it becomes clear that the cause-of-action to file the
complaint arose to the present complainant on 13th July, 2015 i.e. after
15th day from the date of service of statutory notice upon the accused which
is 27th June, 2015 and therefore, complaint is to be filed within 30 days
from 13th July, 2015 i.e. on or before 12th August, 2015. It is undisputed
fact that the complaint is filed after 12th August, 2015 i.e. on 19th August,
2015 and therefore there is delay of 7 days in filing such complaint. Though
proviso to Section 142 empowers the Court to condone such delay, it is clear
that the cognizance of the complaint may be taken by the Court after the
prescribed period as aforesaid only if the complainant satisfies the Court
that he had sufficient cause for not filing the complaint within such period.
Therefore, it is mandatory for the complainant to plead and prove that there
was sufficient cause for not filing the complaint within prescribed period.
Para 7. Unfortunately, in the present case, if we peruse the complaint which
is produced at Annexure-B there is neither disclosure that there is some
delay in filing such complaint and therefore there is no explanation or
reason to consider that there is sufficient cause for not filing the complaint
within the prescribed period so as to enable the Court to take cognizance.
Therefore, in absence of pleading and proof regarding sufficient cause,
the Court cannot be convinced that there was sufficient cause.

30.3 Umiya Pipe Private Limited vs. State of Gujarat, reported in 2008
(3) GLH 628
Hon‘ble high court Held, that powers to condone delay in filing a
complaint cannot be exercised in absence of any pleading and/or request to
condone delay and thereby complaint was quashed being time barred.
30.4K.S. Joseph Vs. Philips Carbon Black Ltd. & Anr.2016 0 AIR(SC)
2149SUPREME COURT OF INDIA
Held, Taking cognizance without condoning the delay of 62 days in
filing the complaint was not proper.
Delay of 62 days in filingcomplaint – Taking cognizance without
issuing notice to condone the delay – Appellantreplying to notice of
complainant on 20.02.2006 – Complaint filed on 24.05.2006–Delay not
condoned before issuance of summons– Further, accused shown to be
residing at a placebeyond The Magistrate‘s jurisdiction requiring an enquiry
or investigation u/s 202, Cr PC –Question of law whether such requirement
of enquiry or investigation is attracted even foroffences under the Act left
open. (Para 6, 10)
30.5P.K. Choudhury v/s Commander, 48 BRTF (GREF) [(2008) 13 SCC

229]
Condoning delay in filing complaint beyond the period of limitation,
natural justice warrants notice to the accused so as to grant him an
opportunity to show that the delay should not be condoned.

31. DE-NOVO TRIAL
31.1 J. V/S Baharuni and Anr. etc. V/s State of Gujarat and Anr etc.
(2014) 10 SCC 494
The Hon'ble Supreme Court Held in Para 43 the procedure prescribed
for cases under Section 138 of the Act was flexible and applicability of
Section 326 (3) of the Cr. P. C. in not acting on the evidence already
recorded in a summary trial did not strictly apply to the scheme of Section
143 of the Act.
31.2UshmabenDineshbhaiGohel Vs. State Of Gujarat. 2015 GLR 3 2572,

Code of Criminal Procedure, 1973 S. 326(3), 482 Negotiable
Instruments Act, 1881 S. 138 private complaint , whether evidence
recorded in summary case by a predecessor Court, can be used for
contradiction before the successor Court learned Judge held that
whenever the successor Court orders a de-novo trial, statements of the
complainant recorded by the predecessor Court cannot be used for
contradicting the complainant or his witnesses, if any challenged held,
whenever successor Court orders a de-novo trial, statements of
witnesses recorded by predecessor can be used for contradicting those
witnesses their previous statements do not become inadmissible or non-
existent on account of the de-novo trial permitting the defence
tocontradictthe witnesses with their previous statements in the deposition
recorded by the predecessor Judge would not amount to relying on the
evidence by the successor Judge recorded by the predecessor Judge
impugned order quashed and set aside application allowed.
31.3 YOGESHWAR OIL INDUSTRIES Vs. POL WORLD PVT. LTD. 2014
(1) GLR 623
(A) Negotiable Instruments Act, 1881 (26 of 1881) Secs. 138 & 143
Held, where trial of case proceeded as summons case mere non
recording of reasons for conducting trial as summons case and not as
summary case would not entitle accused to seek 'de-novo' trial Order by trial
Court set aside.
31.4 Nitin Sevantilal Shah v/s Manubhai Manjibhai Panchal and others,
AIR 2011 SC 3076
1. In summary proceedings, the successor Judge or Magistrate has no
authority to proceed with trial from the stage at which his predecessor
has left the same because in summary trial only the substance of the
evidence of the witnesses has to be recorded. The Court does not
record the entire statements of the witnesses and, therefore, the
Judge or Magistrate, who recorded such substance of evidence is

alone in a position to appreciate such evidence led before him and not
the successor Judge or Magistrate.
2. Section 326 of the Cr.P.C. is an exception to the Rule where successor
Magistrate can act on the evidence recorded by his predecessor either
in whole or in part.
3. Sub-section (3) of section 326 of the Cr.P.C. does not apply to
summary trials.
4. These are not the cases of irregularity, but of want of competence in
wake of section 326 of the Cr.P.C.
31.5 RamjibhaiHaribhai Chaudhari v/s State of Gujarat and another,

[2013 (1) GLH 300]
Successor has no Authority
1. In the summary trial, the successor Judge or Magistrate has no
authority to adjudicate upon the trial proceedings from where his
predecessor has left.
2. Such proceedings are to be tried de-novo.
3. [RamjibhaiHaribhai Chaudhari v/s State of Gujarat and another,
2013 (1) GLH 300, wherein the decision in the case of
NitinbhaiSevantilal Shah (supra) is followed.]
4. The Court discussed the procedure of deviating from the proceedings
of summary trial considering the proviso to section 143 of the NI Act.
32. SUBSTITUTION OF COMPLAINANT
32.1 Gulf Asphalt Pvt. Ltd. Vs. D. S. K. Rao 2015 CRI. L. J. 3954
Special Criminal Application (Quashing) No. 5562 of 2014, D/8/ 5
/2015.
Negotiable Instruments Act (26 of 1881) , S.138 , S.142(a) Criminal
P.C. (2 of 1974), S.200, DISHONOUR OF CHEQUE –
Substitutionofcomplainant – Permissibility – Substitutionof complainant at a
later stage in certain contingencies would not amount to seeking
an amendment in complaint. Complaint under S. 138 of Act of 1881 was
lodged by proprietary concern throughits proprietor. During pendency
oftrial, business of proprietary concern was taken over by private limited
company Order permitting said company to be substituted as a complainant
in place of original proprietary concern, is proper. (Paras 21, 31, 41 )

33. FILLING THE PARTICULARS OF BLANK CHEQUE
33.1Hitenbhai Parekh, Proprietor, Parekh Enterprises Vs. State Of

Gujarat And Anr. 2010 (5) Glr 4136 Criminal Appeal No. 1189 Of 2009.
Decided On : 6/10/2009
(B) Negotiable Instruments Act, 1881 (26 of 1881) Sec. 20, 87 & 139
Blank cheque bearing signature of drawer delivered to payee. In such cases,
―there is an implied authority of the person receiving such cheque to
complete it by filing the blanks‖. Amount so filled in would be the amount
intended to be paid by the drawer. Held further, onus of proving legally
enforceable debts has to be discharged by the complainant.
33.2NilkumarAmarchand Vs. Ashish B. Zode and Ors.

2016 0 Supreme (Guj) 1194 Decided On : 08,07,2016
The trial Court shall carry out proper verification before issuing
summons in a criminal case under Section 138 of Negotiable Instruments
Act – In terms of Section 200 of the Cr.P.C., the Court should take
care to see that the complainant makes a statement on oath as
to how the offence has been committed and as to how the accused
persons are responsible therefore.
For fastening the criminal liability, there is no presumption that every
Director knows about the transaction. Section 141 does not make all the
Directors liable for the offence. The criminal liability can be fastened only on
those who, at the time of the commission of the offence, were in charge of
and were responsible for the conduct of the business. It is necessary to
specifically aver in the complaint under section 141 that at the time the
offence was committed, the person accused was in charge of and
responsible for the conduct of the business of the company. Such an
averment is an essential requirement of section 141 and has to be made in
the complaint.
33.3 Modern Denim Limited Through Arun Triloknath Bhargava

And Ors. Vs. State Of Gujarat And Anr. 2015 (2) GLR 1584
(A) Criminal Procedure Code, 1973 (2 of 1974) Sec. 482 -
Negotiable Instruments Act, 1881 (26 of 1881) Sec. 138 & 141 Complaint
against non-signatory Directors of company Held, when there are
averments in complaint that said Directors were in-charge of day
to day business of company and were responsible for conduct of business
of company, issue of process against them proper Further, when there are
specific averments as aforesaid it is for Directors to furnish concrete
material to show that said averments not acceptable.
33.4 Dr. Rajan Sanatkumar Joshi Vs Rajnikant Govindlal Shah &Anr.)

2007(3) Criminal Court Cases 577 (Gujarat)

Dishonour of cheque, Court to carry out proper verification before issuing
process, Verifications required are :
(1) Verification of a complaint on oath which should be in a proper manner
i.e. all the facts necessary to constitute the offence must be borne out from
the verification;
(2) If Company then person representing the Company should be duly
authorized
(3) Complete postal addresses of complainant and accused;
(4) Statement of the complainant that all the accused persons named in the
complaint are Directors/Partners and that they are liable under the Act and
to verify the status of accused and the extent of involvement in the
commission of offence;
(5) That the accused is the signatory to the instrument in question;
(6) Fact of issuance of statutory notice and Court should insist for some
formal proof in the form of acknowledgement receipt etc.;
(7) Whether the concerned Firm/Company, Society/Institution,
Partner/Director or Proprietor are joined as parties or not;
(8) Whether the complaint has been filed within the period of limitation as
prescribed under S.138 of the Act;
(9) Whether there are any specific allegations against each accused or not.
Dishonour of cheque, Director, Resigned before issuance of cheque in
question, No averment in complaint as to how and in what manner
petitioner was responsible for conduct of business of company or otherwise
responsible to it in regard to its functioning , Complaint against petitioner
quashed.
33.5Anil Gupta Vs. Star India Pvt. Ltd. 2014 CRI. L. J. 3884 SUPREME
COURT
(a) Negotiable instruments act (26 of 1881), S.138, dishonour of
cheque, dishonour of cheque,drawer of cheque alone falls within ambit of s.
138, whether human being or a body corporate or even a firm. (Para 10)
(b) negotiable instruments act (26 of 1881) , s.141 , s.138 dishonour of
cheque, offences by company dishonour of cheque, proceeding initiated
against company and its managing director managing director of company
cannot be prosecuted alone complaint against company already quashed
order of high court that proceeding against appellant , managing director
can be continued even in absence of company liable to be set aside.
33.6 Mainuddin Abdul Sattar Shaikh Vs. Vijay D. Salvi Air 2015
Supreme Court 2579 Criminal Appeal No. 1472 Of 2009, D/ 6 ,7,2015.
(a) Negotiable instruments act (26 of 1881), S.138 dishonour of cheque,
dishonour of cheque liability cheque drawn by respondent in his personal
capacity and not by company of which he is managing director company is
not liable even if it is for discharging dues of company
respondent being drawer of cheque is alone liable for offence under s. 138.

33.7 Sanjay Chaturvedi Vs State) 2007(2) Civil Court Cases 392 (Delhi) :
2007(2) Criminal Court Cases 044 (Delhi)
Dishonour of cheque, Summoning order , Accused appeared through
counsel and moved an application for exemption from his personal
appearance, Application dismissed and non bailable warrants issued and
also issued process u/s 82/83 Cr.P.C. , Order set aside , Issue of non
bailable warrants and issue of process u/ss 82/83 Cr.P.C. is not required
when accused is represented through his counsel and it is not a case where
he is absconding and evading the court process.

34.NOTICE
34.1 Chandulal Keshavlal Modi v/s Vijaysinh Ratansinh Chavda, 2019

ACD 105 : 2019(1) GLR 811 : 2019(198) AIC 880
No evidence to that after return of notice complainant ever tried to
ascertain address of accused , In absence of effective service of
statutory notice, complaint not maintainable.
Para 9. This Court has minutely gone through ratio came to be propounded
by the Apex Court in the above referred two decisions as well as this Court
and other High Courts. Indisputably, the facts in the present case and the
facts before the Apex Court as well as other High Courts are quite different.
In the present case, the first endorsement "not known" is not equivalent to
"refuse" or "unclaimed". Similarly, the second attempt clearly indicates that
the person has vacated and left the house and was not residing by itself is
clearly indicating that the notice is not served upon the respondent accused.
The aforesaid factual scenario is clearly pleaded in the complaint itself by
the complainant and that has been stated on oath. Even, in the cross
examination also, the complainant had admitted the said fact. In this view of
the matter, for want of effective service of statutory notice, the complaint is
not maintainable.
34.2C.C.Alavi Haji Vs Palapetty Muhammed &Anr.) 2007(5) Laws (SC)

100
Notice, Claim as to non receipt of , Drawer can still make the payment of
cheque amount within 15 days of the receipt of summons and can absolve
himself of prosecution u/s 138 of the Act , If drawer does not make payment
of cheque amount within 15 days of the receipt of summons then plea of
proper service of notice is not available to him.
Notice, Absence of pleading that notice was sent at the correct address
of the drawer by registered post acknowledgement due, However, returned
envelope annexed to complaint and thus it formed part of the complaint,
Returned enveloped showed that it was sent by registered post
acknowledgement due to the correct address with endorsement that 'the
addressee was abroad', Held, requirement of S.138 of the Act is sufficiently
complied with.
34.3M/s. Sarav Investment & Financial Consultants Pvt. Ltd. &Anr. Vs

Llyods Register of Shipping Indian Office Staff Provident Fund &Anr. )
2007(4) Criminal Court Cases 527 (S.C.)
Dishonour of cheque, Service of notice by hand delivery , Refusal ,
Presumption of service cannot be raised as the same is not effected in terms
of the statute.

34.4 M/s.Rahul Builders Vs M/s.Arihant Fertilizers & Chemical &Anr.
2007(3) Apex Court Judgments 554 (S.C.) : 2007(4) Criminal Court
Cases 990 (S.C.)
Whether the complaint is tenable if the demand in the notice is vague
or omnibus ?
Dishonour of cheque, Notice, Cheque issued for part payment of
outstanding bills , Cheque dishonoured , By issuing notice demand made of
payment of pending bills and not cheque amount,Held, notice is not valid.
34.5 N. Paraeswaran Unni Vs. G. Kannan Criminal Appeal No. 455 of

2006 Decided on : 01,03,201, (2017) 5 SCC 737 : (2017) 2 SCC(Cri) 668
: (2017) 141 SCL 1 SUPREME COURT OF INDIA
Presumption of service of statutory notice—When a notice is sent by
registered post and is returned with postal endorsement ―refused‖ or ―not
available in house‖ or ―house locked‖ or ―shop closed‖ or ―addressee not in
station‖, due service has to be presumed—Generally, there is no bar under
N.I. Act to send a reminder notice to drawer of cheque and usually such
notice cannot be construed as an admission of non-service of rest notice by
appellant—Impugned judgment of High Court set aside.
34.6 ICICI Bank Ltd. Vs Prafull Chandra 2007(3) Civil Court Cases 532
(Delhi) : 2007(3) Criminal Court Cases 731 (Delhi)
Dishonour of cheque,Notice , Undelivered letter or A.D. not received
back, Allowance of period of service of notice which at least should be a
week is admissible in this regard , Period to file complaint is thus extended
to a further period of a week.
34.7 M Nagappa, S/O Karibasappa, V/S Mohamad Aslam Savanur,

Criminal Appeal No.838 Of 2011 , Date 1-03- 2021 High Court Of
Karnataka
When a sender has dispatched the notice through registered post with
correct address written on it, Section 27 of General Clauses Act could be
profitably imported and in such a situation service of notice deemed to have
been effected on the sender unless he proves that it was really not serve.
Section 138 NI Act - No Requirement To Serve Notice Under Certificate Of
Posting; Service Through Registered Post Proper.

35. WHETHER THE ACCUSED ON PUTTING UP APPEARANCE CAN
SEEK DISCHARGE FROM THE CASE ?
The summoning order passed by the court on appraisal of the preliminary

evidence adduced by the complainant is an interlocutory one. As observed
by the Hon‘ble Supreme Court in Adalat Prasad v/s Rooplal Jindal
2004(4) RCR (Criminal) 01. , the only remedy available to an aggrieved
accused to challenge an interlocutory order is under section 482 of CrPC
and not by way of an application to seek discharge. Furthermore, the offence
under section 138 of the Negotiable Instruments Act is punishable with
imprisonment upto two years and therefore is to be tried as a summons
case. The procedure for trial of summons cases is covered by Chapter XX of
the Code which does not contemplate a stage of discharge like section 239
and 245 dealing with warrant cases. So as held by the Allahabad High Court
in Sanjeev Rai v/s State of U.P .2005(2) RCR (Criminal) 361. After
referring, the decision of the Hon‘ble Apex Court in Subramaniam
Sethuram v/s State of Maharashtra 2004(4) RCR (Criminal) 349, it is not
open to the accused to seek discharge in a summons case and as such the
summoning order cannot be recalled or revised in any manner.
36. WHETHER BOUNCING OF A CHEQUE ISSUED TOWARDS

TIME BARRED DEBT ATTRACTS PENAL LIABILITY UNDER
SECTION 138?
36.1 Sureshbhai Narsinhbhai Parsana VS State of Gujarat [2017] 0

Supreme(Guj) 794
17.2 Thus, the above discussion would answer even the argument in
relation to section 25(3) of the Indian Contract Act apart from the argument
in relation to enforceability of the debt and maintainability of the complaint
under section 138 of the N.I. Act.
I am of the view that the issue as regards the cheque being time
barred should be gone into by the Trial Court and the same should be
decided on the basis of the evidence that may be led by the parties. The law
is very clear that if the cheque is found to be time barred, the complaint
under section 138 of the N.I. Act shall fail. This aspect shall be borne in
mind by the Trial Court while appreciating the evidence on record.
36.2KeshavlalPrabhudas Patel (Since Deceased) VS

AshokbhaiBachubhaiMaganbhai Patel, 13 Sep 2019, 2019 3 GLH 728;
Held, Nature of evidence emerging out from the mouth of the complainant
himself, he has not come with definite case and consequently, the
complainant could not prove that the aforesaid cheque was for legally

enforceable debt as envisaged under Section 138 of the Negotiable
Instruments Act. If the case of the complainant may be believed to be true
that he had lent the amount to the accused in the year 1995, then the
cheque issued in the year 2003 is barred by period of limitation and no
longer remained for legally enforceable debt. Consequently, no criminal
liability could be fastened upon the respondent – Appeal dismissed (Paras 8
and 9)
36.3 J. Chitranjan& Co. Proprietor C.D. Shah Vs. State of Gujarat &Anr.
2016(3) Cr.L.R. (Guj.) 952; decided on 13/10/2016,2017 eGLR_HC
10006047
N.I.Act Sec 138,For a time barred debt proceedings under Section 138 are
not maintainable. Section 138 is attracted only if the cheque is issued for
the discharge of a legally enforceable debt or other liability. In this case,
admittedly, the cheque in question was issued in discharge of a time barred
debt. It cannot be said that a time barred debt is a legally enforceable debt.
Section 25(3) of the Indian Contract Act apart from the argument in relation
to enforceability of the debt and maintainability of the complaint under
section 138 of the N.I. Act.
36.4 Apex Court in National Insurance Company Limited v/s Seema

Malhotra andothers, 2001 (2) ALD 68 (SC) : (2001) 3 SCC 151,
Held that the drawer of the cheque promises to the person in whose favour
the cheque is drawn or to whom a cheque is endorsed, that the cheque on
presentation would yield the amount in cash. When a cheque is drawn to
pay wholly or in part, a debt which is not enforceable only by reason of bar
of limitation, the cheque amounts to a promise governed by the sub-
section(3) of Section 25 of the Contract Act. Such promise which is an
agreement becomes exception to the general rule that an agreement without
consideration is void. It further held that though on the date of making such
promise by issuing a cheque, the debt which is promised to be paid may be
already time barred, in view of sub-section (3)of Section 25 of the Contract
Act, the promise/ agreement is valid and, therefore, the same is enforceable.
36.5 S. Natarajan Vs. Sama Dharman (2014) 9 Scale 3 Supreme Court Of

IndiaDivision Bench
Whetherissuance of cheque itself is a promise to pay time barred debt and
referred to Sections 4 and 6 of the NIAct, For the purpose of invoking
Section 138 read with Section 142 of the NI Act, the cheque inquestion must
be issued in respect of legally enforceable debt or other liability, Court
observed that thepresumption mandated by Section 139 of the NI Act
includes a presumption that there exists a legallyenforceable debt or
liability. It is of course in the nature of rebuttable presumption and it is
open to theaccused to raise a defence wherein the existence of a legally
enforceable debt or liability can becontested. The Court further observed

that Section 139 of the NI Act is an example of a reverse onusclause
that has been included in furtherance of the legislative objective of
improving the credibility ofnegotiable instruments. This Court clarified
that the reverse onus clauses usually impose an evidentiaryburden and
not a persuasive burden.The Court, then, explained the manner in which
this statutorypresumption can be rebutted. Thus, in cheque bouncing
cases, the initial presumption incorporated inSection 139 of the NI Act
favours the complainant and the accused can rebut the said
presumption anddischarge the reverse onus by adducing evidence, The
High Court could not have quashed theproceedings on the ground that at
the time of issuance of cheque, the debt had become time barred andthe
complaint was not maintainable.
36.6A. V/S Murthy Vs. B. S. Nagabasavanna, (2002) 2 SCC 642)

where the accused had alleged that the cheque issued by him in favour of
the complainant in respect of sumadvanced to the accused by the
complainant four years ago was dishonoured by the bank for the
reasons"account closed". The Magistrate had issued summons to the
accused. The Sessions Court quashed theproceedings on the ground that
the alleged debt was barred by limitation at the time of issuance of cheque
and,therefore, there was no legally enforceable debt or liability against the
accused under the Explanation to Section138 of the NI Act and, therefore,
the complaint was not maintainable. While dealing with the challenge to
thisorder, this Court observed that u/s 118 of the NI Act, there is a
presumption that until the contrary is proved, everynegotiable instrument
was drawn for consideration. This Court further observed that Section 139
of the NI Actspecifically notes that it shall be presumed unless the contrary
is proved, that the holder of a cheque received thecheque of the nature
referred to in Section 138 of the NI Act for discharge, in whole or in part, of
any debt or otherliability. This Court further observed that under Sub-
section (3) of Section 25 of the Contract Act, a promise, madein writing and
signed by the person to be charged therewith, or by his agent generally or
specially authorized inthat behalf, to pay wholly or in part a debt of which
the creditor might have enforced payment but for the law for the limitation
of suits, is a valid contract. Referring to the facts before it, this Court
observed that the complainanttherein had submitted his balance sheet,
prepared for every year subsequent to the loan advanced by thecomplainant
and had shown the amount as deposits from friends. This Court noticed
that the relevant balancesheet is also produced in the Court. This Court
observed that if the amount borrowed by the accused therein isshown in the
balance sheet, it may amount to acknowledgement and the creditor might
have a fresh period oflimitation from the date on which the
acknowledgement was made. After highlighting further facts of the case,this
Court held that at this stage of proceedings, to say that the cheque drawn
by the accused was in respect of adebt or liability, which was not legally

enforceable, was clearly illegal and erroneous. In the circumstances,
thisCourt set aside the order passed by the High Court upholding the
Sessions Court's order quashing the entireproceedings on the ground that
the debt or liability is barred by limitation and, hence, the complaint was
notmaintainable. It is, therefore, clear that the contention urged by the
Appellant herein can be examined only duringtrial since it involves
examination of facts.
36.7Sri Kapaleeswar Temple Mysore vs. T. Tirunavukarase, (1975)AIR

Madras 167
when a debtor entered into fresh obligation with thecreditor in a time barred
debt, to pay the liability it satisfies the condition of Section 25 (3) of
Contract Actand will amount a fresh contract and it is an enforceable by the
law. That though a debt might havebegan time barred on the debt, a debtor
entered into fresh obligation with the creditor to pay the liability,the said
obligation, if it satisfies the conditions laid down in Section 25 (3) of the
Indian Contract act, willamount to fresh contract in the eye of law and can
certainly be made the basis of an action forrecovering the amount promised
and acknowledged there in by the debtor. While the Section 18 ofLimitation
Act deals with an acknowledgment meant by an debtor within the period of
limitation thecontractual obligation which a debtor enters into under the
terms of Section 25 (3) has no referencewhatsoever to the acknowledged
debt within the time or not. In that sense the provision of Section 25 (3)is far
wider in scope than the acknowledgment contemplated in Section 18 of
Limitation Act. Thecontract entered into under Section 25 (3) is an
independent and enforceable contract and has noreference to be debt under
the contract being a live one in the sense that it had not became
barredunder the law of limitation.
36.8AmulyaPatowari Vs. Amarendra Choudhury, (2013) 5 GauLT 201

Para 23 And 24it has been categorically held that law permit aperson to
make a promise in writing and signed by him to pay wholly or in part a debt
which his creditormight have enforced payment and when such promise is
made it becomes an agreement, which beingvalid in law turns to an
enforceable contract. It was held that when a debtor, whose debt or
liabilitybecame time barred, promises in writing and signs the same, an
enforceable contract is created and insuch case the promisor can be forced
to make good his promise.
36.9Ottis Infrastructure – Appellant Vs. State Of Assam And Another –

Respondents 2019 0 Supreme(Gau) 380; High Court Of Gauhati
Para 24. As a corollary of the discussion and the legal proposition laid in the
aforesaid decisions it indicatesthat panel provisions under Section 138 of
N.I. Act would not be attracted if the cheque in question isissued against the

debt which is not legally enforceable. A sharp distinction lies between the
Section 18of the Limitation Act and Section 25(3) of the Contract Act. Under
Section 18 of the Limitation Act unlessvalid acknowledgement within the
period of time the liability ceased to exist whereas under Section 25(3)of the
Contract Act such liability can be acknowledged and extended by the debtor
by his own wisdom ifhe promises to pay such debt in writing after the
limitation period and it partakes the character ofenforceable debt. Now in
the instant case admittedly the accused/petitioner entered into
threeagreements in writing with a promise to pay the debt even after the
period of limitation which has madehim liable to pay the debt that has been
issued by way of cheque. As has been held in A. V/S Murthy inthis case also
it can be held that in view of Section 118 and 139 of N.I. Act and Section
25(3) of theContract Act and in presence of documentary evidence which
might amount to acknowledgment revivingthe period of limitation, the
present case is not the one where the cheque was drawn in respect of a
debtor liability which is completely barred from being enforced under the
law. The liability incurred to theaccused/petitioner subsists and cannot be
denied, after acknowledging the debt as has been indicatedabove.
36.8Manjit Kaur vs. Vanita, 2010(3) RCR (Criminal) 574.

In the said case, a cheque issued in the year 2003 in respect of the loan
advanced in 1999, was held not be legally enforceable.
It was held as under:,
"9. Adverting to the facts of the instant case, the cheque was issued on
28.6.2003. On reckoning, it worksout that the loan was advanced
somewhere in June, 1999. A meticulous perusal of the evidence on
recordwould reveal that the appellant has not produced any document or
other evidence revealing that theaccused-respondent had acknowledged the
debt within three years from the date of loan. Thus, by the time,the cheque
was issued, the debt became barred by limitation because no
acknowledgment was obtainedbefore the expiry of three years from the date
of loan. Section 18 of the Limitation Act, 1963 deals with thetheory
underlying the doctrineof acknowledgment. The true principle underlying an
acknowledgment isthat it merely renews the liability and gives the creditor
or claimant a fresh period of limitation according tothe nature of the liability
which exists at the time of the acknowledgment. An acknowledgment cannot
beregarded as evidentiary of the debt but an acknowledgment that a person
owes money to another, aspecified person is good evidence of his owing
money to another. The dishonoured cheque Ex.PI cannot be
treated as acknowledgment under Section 18 of the Limitation Act, since the
acknowledgment should bebefore the period of limitation is over and that it
should be in writing. Thus, it cannot be said that the appellant has been
able to prove that Ex. PI was in relation to a legally enforceable debt or
liability in law asthe same was admittedly issued after more than three
years of the advancement of the alleged amount asloan. So, if the matter is

viewed in the background of the observations rendered in re: Ashwani
Satish Bhat(Mrs.) (supra), it turns out that the accused-respondent had
issued the cheque in 2003 when the debt hadalready become time barred.
The acknowledgment of the alleged amount in 2003 was not
validacknowledgment under Section 18 of the Limitation Act and
consequently, it was not a legally enforceabledebt."
36.9Rajesh Devi Vs. Satbir (2020) 1 Lawherald 585 Punjab And Haryana
High Court
6. Even if it is taken that the respondent had, vide agreement dated
24.05.2006, agreed to make the payment ofthe installments of the loan,
then also the cheque issued by the respondent on 30.06.2013 would not
make thesame as legally recoverable debt, particularly when such debt
becomes time barred. There is noacknowledgement on behalf of the
respondent from the period 2006 till 2013 regarding the payment of
thealleged debt.
36.10Sumesh Chadha Vs. Yogesh Jain (2020) 1 Lawherald 530 Punjab

And Haryana High Court
Para 9. On the same analogy, it is held that the cheque issued in 2018 in
respect of the loan advanced in the year 2011,cannot be said to be a
valid acknowledgment and thus, the complaint filed in respect of the
dishonour of the saidcheque is not maintainable. As a consequence, the
summoning order passed in the said complaint cannot besustained.
36.11A.Yesubabu v/s D.Appala Swamy and another, 2003 2 ALD(Cri)

707 (AP)
The Courtalso held that "Even assuming for a moment that the accused
gave the cheque in the year 1990 ie., on 02.04.1990acknowledging the
previous debt, even that acknowledgment of debt is also time barred on
the facts of the casein as much as the cheque in question was issued three
years later ie., on 25.08.1994. Therefore, the complainantcannot legally
enforce the liability under Ex.P1 and Ex.P2 receipts.
36.12Vellanki Venkata Krishna Rao Vs. State Of Telangana Criminal

Petition No. 12344 Of 2017 Decided On : 09,12,2019
11. In the instant case, a perusal of the material on record would show that
on 08.06.2012 the 2nd respondenthad transferred the loan amount of Rs.
10,00,000/, through RTGS from his bank account to the bank account ofthe
petitioner/accused. On 05.11.2013, the petitioner/ accused had
acknowledged the receipt of the said amountby executing hand loan
agreement and also promissory notes. The cheques were issued on

08.04.2017. By thetime the cheques were issued, the debt appears to
have been barred by limitation because no acknowledgementis alleged
to have been obtained by the 2nd respondent from the
petitioner/accused before expiry of three yearsfrom the date of
execution of the hand loan agreement. Thus, it is crystal clear that the
debt was not legallyenforceable at the time of issuance of the cheque as per
the explanation of Section 138 of the NegotiableInstruments Act, 1881.
36.13 Pragati Credit Co,operative Society Ltd. Vs. Suresh Shamrao
Gode 2017 ALL MR (Cri) 3081.
HC: Dishonour of Cheque issued for a time barred debt, is offence under
law. Cheque issued towards time barred debt, Acquittal of accused on
ground that claim of complainant was barred by limitation, Improper,
Cheque issued for discharge of time barred debt constitutes a fresh promise
by virtue of S.25(3) of Contract Act, And in case of dishonour of such
cheque, complaint u/S.138 N.I. Act would be maintainable, Matter
remanded back to trial court.
36.14 (Zaheeda Kazi Vs Mrs. Sharina Ashraff Khan) 2007(3) Civil Court
Cases 163 (Bombay) : 2007(3) Criminal Court Cases 069 (Bombay) :
2007(4) Criminal Court Cases 733 (Bombay)
Negotiable Instruments Act, 1881, S.138 , Dishonour of cheque , Cheque

issued towards time barred debt , Accused cannot be convicted u/s 138 of
the Act.
36.15 Hon'ble Delhi High Court in Prajan Kumar Jain vs. Ravi Malhotra
2010 (2) DCR 104
wherein it has been observed that the cheque issued in lieu of time
barred debt does not come within the perview of section 138 NI Act.

37. WHETHER THE QUESTION OF HOLDING A MONEY LENDER‘S
LICENSE IS RELEVANT IN A COMPLAINT FILED UNDER SECTION
138?
In cases where cheque has been issued in discharge of loan liability, a

defence often resorted to by the accused is that the complainant does not
hold a valid money lenders license. This line of defence is not tenable in as
much as it does not negate the liability of the drawer under section 138.
37.1S. Parameshwarappa v/s S.Choodappa 2007(2) CCC 763

(Karnataka).
It has been held that prosecution under section 138 of the Act is not affected
by the provisions of the Money Lenders Act and the question as to whether
the complainant is having a money lenders license is not relevant in a
complaint filed under this section. Even otherwise also, as per settled law a
man does not become a money lender within the meaning of section 2(a) of
the aforesaid Act, by reason of occasional loans to relations, friends or
acquaintances, nor does a man become a money lender merely because he
may upon one or several isolated occasions lend money to a stranger. There
must be a business of money lending, and the word ‗business‘ imports the
notion of repetition and continuity.
38.WHETHER SECTION 138 IS ATTRACTED WHEN A CHEQUE IS

ISSUED IN DISCHARGE OF LEGAL LIABILITY OF ANOTHER?
I.C.S.D. Ltd. v/s Beena Shabeer 2002(4) RCR (Criminal) 74.,

by saying that a cheque can be drawn by one person towards a legally
enforceable debt or liability of another person and it is not necessary under
Section 138 of the Act that the cheque must have been drawn by the person
for his own debt or liability. The Court reasoned that the language, has been
rather specific as regards the intent of the legislature. The commencement of
the Section stands with the words "Where any cheque". The above note d
three words are of extreme significance, in particular, by reason of the use of
the word "any" , the first three words suggest that in fact for whatever
reason if a cheque is drawn on an account maintained by him with a banker
in favour of another person for the discharge of any debt or other liability,
the highlighted words if read with the first three words at the
commencement of Section 138, leave no manner of doubt that for whatever
reason it may be, the liability under this provision cannot be avoided in the
event the same stands returned by the banker unpaid. The legislature has
been careful enough to record not only discharge in whole or in part of any
debt but the same includes other liability as well. The language of the

Statute depicts the intent of the law,makers to the effect that wherever there
is a default on the part of one in favour of another and in the event a cheque
is issued in discharge of any debt or other liability there cannot be any
restriction or embargo in the matter of application of the provisions of
Section 138 of the Act. 'Any cheque' and 'other liability' are the two key
expressions which stands as clarifying the legislative intent so as to bring
the factual context within the ambit of the provisions of the Statute. Any
contra interpretation would defeat the intent of the legislature.
39. WHETHER NON-PRODUCTION OF ACCOUNT BOOKS BY THE

COMPLAINANT IS FATAL FOR HIS CASE?
The law on this point was laid down in M.S. Narayana Menon @ Mani
v/s State of Kerala 2006(3) RCR (Criminal) 504. Where there are
business dealings between accused and complainant and it is contended
that accused issued cheque to make payment of outstanding dues but the
account books are not produced by complainant, there an adverse inference
is required to be drawn as complainant did not produce account books
which he was required to maintenance under statutory rules Contention of
accused that he had issued cheque by way security was believed in this
case. Further while discussing section 118 (a), it was reiterated that Court
shall presume a negotiable instrument to before consideration unless and
until after considering the matter before it, it either believes that the
consideration does not exist or considers the non ,existence of the
consideration so probable that a prudent man ought, under the
circumstances of the particular case, to act upon the supposition that the
consideration does not exist. For rebutting such presumption, what is
needed is to raise a probable defence. Even for the said purpose, the
evidence adduced on behalf of the complainant could be relied upon. It is
not necessary for the accused to disprove the existence of consideration by
way of direct evidence. Standard of proof evidently is per-preponderance of
probabilities. For rebuttal of presumption arising under Section 139 of
Negotiable Instruments Act the onus on an accused is not as heavy as that
of the prosecution. It may be compared with a defendant in a civil
proceeding. Presumption can be rebutted by adducing evidence and the
burden of proof is on the person who wants to rebut the presumption. Acc
used can discharge the onus placed on him even from the materials brought
on records by the complainant himself. Evidently in law he is entitled to do
so.

40. NOTICE BY WHATAPP / FAX OR EMAIL OR SMS OR BY
COURIER PERMISSIBLE?
40.1 SUO MOTO WRIT PETITION (C) NO. 3/2020 IN RE COGNIZANCE

FOR EXTENSION OF LIMITATION 10,07,2020
Service of notices, summons and exchange of pleadings/documents, is a
requirement of virtually every legal proceeding. Service of notices, summons
and pleadings etc. have not been possible during the period of lockdown
because this involves visits to post offices, courier companies or physical
delivery of notices, summons and pleadings. We, therefore, consider it
appropriate to direct that such services of all the above may be effected by e-
mail, FAX, commonly used instant messaging services, such as WhatsApp,
Telegram, Signal etc. However, if a party intends to effect service by means
of said instant messaging services, we direct that in addition thereto, the
party must also effect service of the same document/documents by e-mail,
simultaneously on the same date.
41.FSL
41.1 Rakeshbhai Ambalal Patel V/s State of Gujarat &Anr. 2017 3 GLR
2466; 2016 0 Supreme(Guj) 2173; HIGH COURT OF GUJARAT
A) Right of the accused in getting opinion of the hand writing expert, when
he denies his hand writing in the cheque is a valuable right and in a normal
case it cannot be denied by the Court, except the Court finds it fit and
opines that just to delay the proceedings the accused is trying hard.
b)―Fair trial‖ includes fair and proper opportunities allowed by law to prove
her innocence. Adducing evidence in support of the defence is a valuable
right. Denial of that right means denial of fair trial. It is essential that rules
of procedure designed to ensure justice should be scrupulously followed,
and the courts should be jealous in seeing that there is no breach of them.
c)As to inquiry under Section 243 of Cr.P.C., refer to para 12
41.2 Madhubhai Gandabhai Patel Vs. Joitaram Jividas Patel And

Another (2005) 3 Gujlh 535.
Para 9. In view of the above, the order passed by the Ld. Magistrate and its
confirmation thereof by the Ld. Sessions Judge shall stand modified to the
effect that after proper evidence is led by the accused that the cheques
handed over to the complainant were signed as blank cheques without there
being date, name and the amount, the accused may pray to the trial court
for examination of hand writing expert as the case may be and if such an
application is made at that stage the matter may be considered in
accordance with law by the Ld. Magistrate and at that stage the contentions

of both sides shall remain open. It is clarified that if there is no evidence
led as observed earlier on behalf of the accused that the cheques were
handed over blank, the option for referring the cheques to handwriting
expert may not be available to the accused.
Para 10. The present order passed by the Ld. Magistrate as well as the Ld.
Sessions Judge shall not be treated as foreclosing the right of the accused
for all times to come to refer the cheque to the handwriting expert and/or for
examination of the handwriting expert.
41.3Kalyani Baskar Vs. M.S.Sampornam 2006(9) Supreme 823 [2007] 2

SCC 258
Where accused in a cheque bouncing case prayed to Magistrate to
send cheque in question for examination by handwriting expert to ascertain
genuineness of signatures, as a fair trial request should have been allowed
in exercise of power u/s 243(2) Cr.P.C.
Held : Section 243 (2) is clear that a Magistrate holding an inquiry under
the Cr.P.C. in respect of an offence triable by him does not exceed his
powers under Section 243(2) if, in the interest of justice, he directs to send
the document for enabling the same to be compared by a handwriting expert
because even in adopting this course, the purpose is to enable the
Magistrate to compare the disputed signature or writing with the admitted
writing or signature of the accused and to reach his own conclusion with the
assistance of the expert. The appellant is entitled to rebut the case of the
respondent and if the document viz. the cheque on which the respondent
has relied upon for initiating criminal proceedings against the appellant
would furnish good material for rebutting that case, the Magistrate having
declined to send the document for the examination and opinion of the
handwriting expert has deprived the appellant of an opportunity of rebutting
it. The appellant cannot be convicted without an opportunity being given to
her to present her evidence and if it is denied to her, there is no fair trial.
Fair trial includes fair and proper opportunities allowed by law to prove her
innocence. Adducing evidence in support of the defence is a valuable right.
Denial of that right means denial of fair trial. It is essential that rules of
procedure designed to ensure justice should be scrupulously followed, and
courts should be jealous in seeing that there is no breach of them. We have
not been able to appreciate the view of the learned Judge of the High Court
that the petitioner has filed application under Section 243 Cr.P.C. without
naming any person as witness or anything to be summoned, which are to be
sent for handwriting expert for examination. As noticed above, Section
243(2) Cr.P.C. refers to a stage when the prosecution closes its evidence
after examining the witnesses and the accused has entered upon his
defence. The appellant in this case requests for sending the cheque, in
question, for the opinion of the handwriting expert after the respondent has
closed her evidence, the Magistrate should have granted such a request

unless he thinks that the object of the appellant is vexation or delaying the
criminal proceedings. In the circumstances, the order of the High Court
impugned in this appeal upholding the order of the Magistrate is erroneous
and not sustainable. (Para 12)
41.4C.T. Kuriakose Vs.Joseph (2018) Acd 250 : (2018) 1 Klt 356

Kerala High Court
As of now there are no scientific and technical facilities available in
India to scientifically determine age of handwritings and signatures in a
cheque, Determination of such an issue may certainly be relevant for
determining controversies in trials, But since such scientific facilities are
lacking, no useful purpose would be sub served by directing Trial Court to
subject the cheque for expert analysis as prayed for by petitioner, Petition
dismissed.
41.5Niranjan Vs. Swapnil Nitin Pagare 2019(5) MHLJ 789 Bom
Whether Magistrate can allow application for seeking opinion of

handwriting expert in cheque dishonour case at belated stage?
A perusal of the impugned order shows that the learned Magistrate
has rejected the application on the following grounds:
a) During the entire cross-examination of the respondent on behalf of

the petitioner there was not a single suggestion put, regarding handwriting
in the contents of the cheques;
b) There was no cross-examination even in the form of suggestion to

show that the ink in which the contents are filled and that of the signatures
on those cheques was different;
c) The petitioner during his cross-examination admitted to have

received the statutory notice (Exhibit,16) but had not replied it when he
could have raised such a dispute by sending a reply;
d) The defence was tried to be built at a belated stage and was an

afterthought.
As can be seen the grounds put,forth by the learned Magistrate are

duly corroborated by the fact situation and there is no dispute about
correctness of availability of these grounds. In my considered opinion, these
are indeed unassailable grounds which cumulatively demonstrate as to how
filing of the application (Exhibit,75) at that stage was clearly an afterthought
and the petitioner had not raised such defence at an appropriate stage.

8. Coupled with the above grounds, it is equally important to note that
there is one more reason which justifies the observations and the
conclusions of the learned Magistrate. As is pointed out by the learned
advocate for the respondent, even in his examination under Section 313 of
the Cr.P.C. the petitioner had not come out with any such concrete defence
which would have justified his request which he had made by the
application (Exhibit,75). He has given evasive replies and have denied all the
facts simplicitor except by saying that he had given blank cheques to the
respondent and that the case was false. He could have but has not at all
stated that he had issued blank signed cheques which the respondent has
misused.
9. In the cases of Nandkumar and Bandeppa (Supra) the accused

therein had taken the defence at earlier point of time, unlike the petitioner
who has applied at a belated stage which demonstrates same obvious motive
to protract the trial. His case is rather covered by the instances in Prakash
Sevantilal Vora and Simratmal Hiralal Gandhi (supra).
10. Taking into account all these aspects, I find no apparent illegality
committed by the learned Magistrate while passing the impugned order. The
grounds referred to herein-above clearly justify the conclusion reached by
him.
Shri. Prakash Sevantilal Vora Vs. State Of Maharashtra & Anr. Criminal
Application No.2987 of 2010, 2011 ALL MR (Cri) 713.
No dispute as to signature on cheques , Material alterations in the form

of eraser, overwriting or corrections absent.
Complaint of accused that complainant had filled in details of the
cheques, No reply given to statutory notice alleging that contents were not
filled up by complainant ,Held, application was made only to protract the
trial and was liable to be dismissed. If an application is made for sending
the document to the Handwriting Expert particularly in a complaint which is
filed under section 138, the Magistrate has to consider the said application
and taking into consideration the facts of each case decide as to whether it
is a fit case for sending the said document to the Handwriting Expert.
Proceedings under section 138 are of a summary nature and the Act itself
contemplates that the said trial should be over within a period of six
months. There is a tendency on the part of the accused to protract the trial
as much as possible. On the one hand, it is true that accused has a right to
rebut the presumption which is raised under sections 118 and 139 of the
Negotiable Instruments Act and, for that purpose, a fair opportunity has to
be given to him. On the other hand, it is the duty of the Magistrate to ensure
that by filing frivolous application, accused does not protract the trial. So far
as the State of Maharashtra is concerned and particularly in the City of
Mumbai there are about 6 lakhs cases pending in the Courts of Magistrates

for the offences punishable under section 138 of the Negotiable Instruments
Act and the Handwriting Experts which are available in the City of Mumbai
are very few. It is a common knowledge therefore that, at times, it takes
couple of years for Handwriting Expert to give his opinion. Under these
circumstances, therefore, the learned Magistrate has to consider whether
the application filed by the accused needs to be granted or not, taking
into consideration the genuineness of the application and also after
taking into consideration individual facts of the case. Merely because
the accused has a right of being given fair opportunity, it cannot be
said that in each and every case, whenever applications are filed for
sending the document to Handwriting Expert, the same should be
allowed.Ref. to. [Para 16]
In the present case, however, the learned Magistrate was justified in
rejecting the application filed by the accused. There is no dispute regarding
the signature on the said cheques. The complainant has denied the
suggestion that he had filled in the details of the cheques. Under these
circumstances, therefore, the learned Magistrate was justified in coming to
the conclusion that it was not necessary to send the cheques to the
Handwriting Expert since there were no material alterations in the form of
eraser or over writings or corrections. If it is a defence of the accused that
blank cheque was given as a security, whether any authority was given to
the complainant to fill in the contents will have to be decided after evidence
is led by both parties and, for that purpose, it is not necessary to send it to
the Handwriting Expert. Secondly, this application has been filed at a
belated stage. No reply was given to the statutory notice alleging that
contents were not filled up by the accused. The contention of the learned
Counsel for the applicant that only after suggestions made by the accused
were denied by the complainant, it became necessary to file an application
for sending the cheques to Handwriting Expert, cannot be accepted. It is
clear from the facts and circumstances of the case that the application is
only made to protract the trial [Para 17].

42. CR.P.C.Sec. 256
42.1.Ankur Gopalbhai Patel V/s Chisti Vasimudin Khurshidbhai 2018

(4) GLR 3049
Dismiss For Default Of Complaint Under Section 256 Of CRPC

Code of Criminal Procedure, 1973 , S. 256,Held, plain reading of S.
256 of Cr.P.C. indicates that Magistrate is empowered to pass an order of
acquittal on non-appearance or death of the complainant, ingredients of S.
256(1) are:
(i) that summons must have been issued on a complaint.
(ii) Magistrate should be of the opinion that for some reasons, it is not
proper to adjourn the hearing of the case to some other date.
(iii) the date on which the order u/S. 256(1) can be passed is the day
appointed for appearance of the accused or any day subsequent thereto to
which the hearing of the case has been adjourned , word "acquit" in S.
256(1) is of immense significance, thus, from the perusal of S. 256 Cr.P.C. it
is clear that if the summons has been issued to the accused on a complaint
or on any subsequent date fixed for appearance of the accused or on any
subsequent day, if the complainant does not appear, Magistrate has to
acquit the accused unless he thinks it proper to adjourn the hearing of the
case to some other day. Code of Criminal Procedure, 1973 , S. 256, 378 ,
acquittal of accused, remedy available for the complainant , provisions of S.
256(1) mandate the Magistrate to acquit the accused unless for some
reasons he thinks it proper to adjourn the hearing of the case , once there is
an acquittal of the accused, although not on merits, but on a technical
ground like dismissal of the complaint for non appearance of the
complainant, yet the only remedy available for the complainant would be to
seek leave to appeal u/S. 378 of Cr.P.C. , therefore, a distinction has to be
drawn in regard to the complaints dismissed prior to the summoning of an
accused and those dismissed subsequent to the summoning of the accused,
if complaint is dismissed prior to the summoning of an accused the order
may be challenged by way of filing a revision, but once S. 256 comes into
play the dismissal of a complaint has the effect of acquittal of accused and
only an appeal can be filed u/S. 378 of the Code to challenge his acquittal.
Code of Criminal Procedure, 1973, S. 378, 401,whether such an

appeal could have been filed before Sessions Court u/s. 372 of Cr.P.C.
or before High Court with the leave u/s. 378(3) of Cr.P.C. , held, appeal
could have been filed before this Court after seeking leave, as provided
u/S. 378(3) of Cr.P.C. Held, power under Art. 227 of the Constitution is
intended to be used sparingly and only in appropriate cases for the purpose
of keeping the subordinate Courts or Tribunals within the bounds of their
authority and not for correcting mere errors – power under Article 227 of the

Constitution is wider than the one conferred on the High Court by Art. 226
in the sense that the power of superintendence is not subject to those
technicalities of procedure or traditional fetters which are to be found in the
certiorari jurisdiction, exercise of jurisdiction under Art. 227 is limited and
restrictive in nature, it can be exercised in the circumstances where the
orders passed were for want of jurisdiction, error of law, perverse findings
and gross violation of natural justice , although the impugned order could
be termed as without jurisdiction, yet the High Court may refuse to disturb
the same, as substantive justice is done by the Court, Revisional Court has
assigned cogent reasons arrived for conclusion that the complaint could not
have been dismissed for want of non,prosecution , application dismissed.
42.2ManojbhaiJasmatbhaiRamoliya VS State of Gujarat, 30 Jan 2020,

Apex Court reported in AIR 1998 SC 596 dealing in case of Associated
Cement Co. Ltd. Vs. Keshavanand wherein scope and purpose of insertion of
Section 256 in the Code is discussed, which reads as under:
―17. What was the purpose of including a provision like S. 247 in the Code
(or S.256 in the new Code). It affords some deterrence against dilatory
tactics on the part of a complainant who set the law in motion through his
complaint. An accused who is per force to attend the Court on all posting
days can be put much harassment by a complainant if he does not turn up
to the Court on occasions when his presence is necessary. The Section,
therefore, affords a protection to an accused against such tactics of the
complainant. But that does not mean if the complainant is absent, Court
has a duty to acquit the accused in invitum.
18. Reading the Section in its entirety would reveal that two constraints are
imposed on the Court for exercising the power under the Section. First is, if
the Court thinks that in a situation it is proper to adjourn the hearing then
the Magistrate shall not acquit the accused. Second is, when the Magistrate
considers that personal attendance of the complainant is not necessary on
that day the Magistrate has the power to dispense with his attendance and
proceed with the case. When the Court notices that the complainant is
absent on a particular day the Court must consider whether personal
attendance of the complainant is essential on that day for the progress of
the case and also whether the situation does not justify the case being
adjourned to another date due to any other reason. If the situation does not
justify the case being adjourned the Court is free to dismiss the complaint
and acquit the accused. But if the presence of the complainant on that day
was quite unnecessary then resorting to the steps of axing down the
complainant may not be a proper exercise of the power envisaged in the
section. The discretion must, therefore, be exercised judicially and fairly
without impairing the cause of administration of criminal justice.‖

42.3 BAL KRISHAN RAWAT — Appellant Vs. PYARE LAL NEPTA —
Respondent Cr. Appeal No. 5 of 2009 Decided on : 11,01,2018 (2018)
ACD 397 (2018) 4 RCR(Criminal) 296
Complaint dismissed in default for non,presence and non prosecution
when case was listed for recording of defence evidence—When Magistrate, in
a summons case, dismisses complaint and acquits accused due to absence
of complainant on the date of hearing, it becomes final and it cannot be
restored—Keeping in view effect of dismissal in default, Magistrate is
supposed to exercise his discretion with care and caution clearly mentioning
in the order that there was no reason for him to think it proper to adjourn
hearing of case to some other day.
42.4 Associated Cement Co. Ltd. v/s Keshvanand, (1998) 1 Supreme

Court Cases 687,
The object and scope of Section 256 Cr.P.C, 1973 has held that,
though, the Section affords protectionto an accused against dilatory tactics
on the part of the complainant, but, at the same time, it does not mean
thatif the complainant is absent, the Court has duty to acquit the accused
in indium. It has further been held in thesaid judgment that the discretion
under Section 256 Cr.P.C, 1973must be exercised judicially and fairly
withoutimpairing the cause of administration of criminal justice.
42.5 Mohd. Azeem v/s A. Venkatesh and another, (2002) 7Supreme

Court Cases 726,
Held that has considered dismissal of the complaint on account of one
singular default inappearance on the part of the complainant as a very strict
and unjust attitude resulting in failure of justice.
42.6 S. Anand v/s Vasumathi Chandrasekar, (2008) 4 Supreme Court

Cases 67,
wherein the complaint under section 138 of the NI Act was dismissed by the
trial Court exercising the powerunder Section 256 Cr.P.C , 1973on failure of
the complainant or her power of attorney or the lawyer appointed byher to
appear in Court on the date of hearing fixed for examination of witnesses on
behalf of the defence, the Apex Court has considered as to whether
provisions of Section 256 Cr.P.C, 1973 providing for disposal of acomplaint
in default, could have been resorted to in the facts of the case as the
witnesses on behalf of the
Complainant have already been examined and it has been held that in such
a situation, particularly, when theaccused had been examined under
Section 313 Cr.P.C, 1973 the Court was required to pass a judgment on
meritin the matter.

42.7 Bal Krishan Rawat Vs. Pyare Lal Nepta (2018) LatestHlj(Hp) 516 :
(2018) 1 Nij 128 : (2018) 4 Rcr(Criminal) 296 Himachal Pradesh High
Court
20. In view of the ratio of law laid down by the apex Court and other
judgments of the High Courts, including thisCourt, I am of the opinion that
the learned Magistrate was not justified in dismissing the complaint in
default forsingle absence of the complainant coupled with failure of his
counsel to attend the date. From the stage ofcomplaint, it is evident that
presence of complainant, on that day, was unnecessary as the case was at
finalstage. The Magistrate instead of dismissing the complaint in default
should have adjudicated upon the complaint on merit and for that purpose,
he might have adjourned the case for a future date.
21. In the impugned order, there is no finding of the Magistrate that the
complainant was not pursuing thecomplaint honestly and diligently. There
is no reference of previous history, if any, with regard to conduct of
thecomplainant causing unnecessary delay on account of adjournments
sought by him or for want of his presence.
There is only reference of his absence on the date since morning
till post lunch session. Therefore, acquittal ofthe accused without
adjudicating the case on merits, due to non,appearance of the
complainant on the date ofdefence evidence, who was siPIncerely
pursuing his remedy, is improper. In normal circumstance, no
complainantwill be disinterested in pursuing his complaint without any
reason, particularly, when it is at final stage of trialinvolving stake of Rs. 20
lakhs. It was a fit case for the Magistrate to exercise his discretion to
adjourn the casefor a subsequent date.

43. TWO COMPLAINTS
43.1Shri Pareshbhai Amrutlal Patel Vs State Of Gujarat, 28 Feb 2020

,2020 0 Supreme(SC) 199;
When two complaints are filed, subject matter of which is the same, it is
desirable that the same court hears both complaints to avoid contradictory
judgments.
44. CONDITIONAL SUSPENSION OF SENTENCE
44.1 Surinder Singh Deswal@ Col. S. S. Deswal VS Virender Gandhi, 08

Jan 2020, 2020 0 AIR(SC) 415; 2020 1 Crimes(SC) 118;
In case of conditional suspension of sentence non compliance of the
condition has adverse effect on the continuance of suspension of sentence.
44.2 Rahul Sudhakar Anantwar VS ShivkumarKanhiyalalShrivastav, 21

Oct 2019, 2019 0 AIR(SC) 5520;
(1) Issuance of cheque carries presumption of liability to pay money.
(2) Dishonour of cheque – Amount awarded as compensation and cost
should not be on higher side.
45. ADVOCATE FEES IN PERCENTAGE CHQUE BOUNCE
45.1B. Sunitha Vs. State Of Telengana (2018) 1 SCC 638
Held, Claim Based On Percentage Of Subject Matter In Litigation

Cannot Be Basis Of A Complaint Under Section 138 Of Act.
Para 18. Thus, mere issuance of cheque by the client may not debar him
from contesting the liability. If liability is disputed, the advocate has to
independently prove the contract. Claim based on percentage of subject
matter in litigation cannot be the basis of a complaint under Section 138 of
the Act.
Para 19. In view of the above, the claim of the respondent advocate being
against public policy and being an act of professional misconduct,
proceedings in the complaint filed by him have to be held to be abuse of the
process of law and have to be quashed.

46. RECOVERY OF FINE AND COMPENSATION
46.1 R. Vijayan v/sBaby Supreme Court (2012) 1 SCC 260

Held, wherein the court was determining an issue in respect of
compensation when fine is imposed as the sentence or it forms part of the
sentence. In this pronouncement, the Supreme Court noted that cases
arising under Section 138 of the NI Act are really ―civil cases masquerading
as criminal cases‖. The statutory object in effect appears to be both punitive
as also compensatory and restitutive in regard to cheque dishonouring
cases. The judgment notes that Chapter XVII of the enactment is a unique
exercise which bears the dividing line between civil and criminal
jurisdictions and that it provides a single forum to enforce a civil and
criminal remedy
46.2Kumaran Vs. State Of Kerala (2017) 7 SCC 471 Supreme Court Of

India
Dishonour of cheque—When compensation is ordered as payable for
uncommitted under Section 138 of Negotiable Instruments Act and in
default thereof, jail sentence is prescribed and undergone, compensation is
still recoverable—Court may, when passing judgment, ordered accused to
pay by way of compensation such amount as may be specified in the order
to person who has suffered loss or injury by reason of act for which accused
person has been sentenced— Undergoing of imprisonment awarded in
default of payment of fine does not operate as a discharge or satisfaction of
fine
Para 31. The provisions of Sections 357(3) and 431 CrPC, when read
with Section 64 IPC, empower the court, while making an order for
payment of compensation, to also include a default sentence in case of
non-payment of the same."
26. This statement of the law was reiterated in R. Mohan v/s A.K. Vijaya
Kumar, (2012) 8 SCC 721 (see paras 26 to 29). 27. These two judgments
make it clear that the deeming fiction of Section 431 Cr.P.C. extends not
only to Section 421, but also to Section 64 of the Indian Penal Code. This
being the case, Section 70 IPC, which is the last in the group of Sections
dealing with sentence of imprisonment for non-payment of fine must also be
included as applying directly to compensation under Section 357(3) as well.
The position in law now becomes clear. The deeming provision in Section
431 will apply to Section 421(1) as well, despite the fact that the last part of
the proviso to Section 421(1) makes a reference only to an order for payment
of expenses or compensation out of a fine, which would necessarily refer
only to Section 357(1) and not 357(3). Despite this being so, so long
ascompensation has been directed to be paid, albeit under Section 357(3),
Section 431, Section 70 IPC and Section 421(1) proviso would make it clear
that by a legal fiction, even though a default sentence has been suffered, yet,

compensation would be recoverable in the manner provided under Section
421(1). This would, however, be without the necessity for recording any
special reasons. This is because Section 421(1) proviso contains the
disjunctive "or" following the recommendation of the Law Commission, that
the proviso to old Section 386(1) should not be a bar to the issue of a
warrant for levy of fine, even when a sentence of imprisonment for default
has been fully undergone. The last part inserted into the proviso to Section
421(1) as a result of this recommendation of the Law Commission is a
category by itself which applies to compensation payable out of a fine under
Section 357(1) and, by applying the fiction contained in Section 431, to
compensation payable under Section 357(3).
46.3Ashok Leyland Limited v/s State of Tamil Nadu, (2004) 3 SCC 1 at

para 32,76.
Thus it is clear that the object of the legal fiction created by Section
431 is to extend for the purpose of recovery of compensation until such
recovery is completed, and this would necessarily take us not only to Section
421 of the Cr.P.C. but also to Section 70 of the Penal Code, a companion
criminal statute, as has been held above.
46.4K.C. AUGUSTINE Vs. P.N. RAJASEKHARAN Criminal Rev/s Pet.

No. 680 Of 2013, Decided On : 09,06,2017 (2017) ACD 828 (2018) 1
DCR 127 KERALA HIGH COURT
Criminal Procedure Code, 1973 (CrPC) , Section 4(2) Negotiable Instruments

Act, 1881 (NI) , Section 138 Negotiable Instruments Act, 1881 Section 138
— Dishonour of cheque — The offence of dishonour of cheques under
Section 138 of the N.I.Act is essentially a civil wrong, which has been given
criminal overtones by the Parliamentary intervention through the
amendment of the N.I. Act and that the gravity of such a complaint cannot
be equated with an offence under IPC and, instead of jail sentence,
imposition of fine payable as compensation was found sufficient to meet the
ends of justice. Negotiable Instruments Act, 1881 Section 138 Dishonour of
cheque Compensatory aspect of the remedy which should be given utmost
priority over the punitive aspects. Negotiable Instruments Act, 1881 Section
138 Dishonour of cheque Trial of offenceIt is settled position that in view of
the provisions contained in Section 4(2) of the Cr.P.C. 1973, the provisions
of that Code would apply even for regulating the inquiries and trials of
offences under special statutes like the N.I. Act, so long as there are no
specific provisions in the special enactment covering the situation at hand.
46.5Suganthi Suresh KumarVsJagdeeshan [2002 (2) SCC 420]

The Hon'ble Apex Court held that Court can impose a sentenceof
imprisonmenton the accused in default of payment of compensation ordered
u/s 357 (3) of the Code.

46.6R. Mohan Vs A.K. Vijaya Kumar [2012 Cri.L.J. 3953]
18. The idea behind directing the accused to pay compensation to the
complainant is to give him immediate relief so as to alleviate his grievance.
In terms of Section 357(3) compensation is awarded for the loss or injury
suffered by the person due to the act of the accused for which he is
sentenced. If merely an order, directing compensation, is passed, it would be
totally ineffective. It could be an order without any deterrence or
apprehension of immediate adverse consequences in case of its non,
observance. The whole purpose of giving relief to the complainant
under Section 357(3) of the Code would be frustrated if he is driven to take
recourse to Section 421 of the Code. Order under Section 357 (3) must have
potentiality to secure its observance. Deterrence can only be infused into the
order by providing for a default sentence. If Section 421 of the Code puts
compensation ordered to be paid by the court on par with fine so far as
mode of recovery is concerned, then there is no reason why the court cannot
impose a sentence in default of payment of compensation as it can be done
in case of default in payment of fine under Section 64 of the IPC. It is
obvious that in view of this, in Vijayan, this court stated that the above
mentioned provisions enabled the court to impose a sentence in default of
payment of compensation and rejected the submission that the recourse can
only be had to Section 421 of the Code for enforcing the order of
compensation. Pertinently, it was made clear that observations made by this
Court in Hari Singh are as important today as they were when they were
made. The conclusion, therefore, is that the order to pay compensation may
be enforced by awarding sentence in default.
19. In view of the above, we find no illegality in the order passed by the
learned Magistrate and confirmed by the Sessions Court in awarding
sentence in default of payment of compensation. The High Court was in
error in setting aside the sentence imposed in default of payment of
compensation.

47.CR.P.C. Sec. 427
47.1Shyam Pal Vs. Dayawati Besoya (2017) 1 Scc(Cri) 264 Supreme
Court Of India Decided on : 28,10,2016
Criminal Procedure Code, 1973 (CrPC) , Section 427 Negotiable Instruments
Act, 1881 (NI) , Section 138 Negotiable Instruments Act, 1881—Section
138—Criminal Procedure Code, 1973—Section 427— Dishonour of
cheques—Running of substantive sentences—There is overwhelming
identicalness in features of both cases permitting two transactions though
undertaken at different points of time, to be deemed as a singular
transaction or two segments of one transaction—Direction for concurrent
running of sentence would be limited to substantive sentence alone—Such
concession cannot be extended to transactions which are distinctly different,
separate and independent of each other and amongst others where parties
are not the same—Appellant is entitled to benefit of discretion contained in
Section 427 of Cr.P.C
47.2Rajpal v/s Om Prakash and Anr. AIR 2018 SC (Supp) 1377
Supreme Court
Criminal P.C. (2 of 1974), S.427, Negotiable Instruments Act (26 of 1881),
S.138 , Concurrent running of sentences , Offence of dishonour of cheque
,Accused convicted for dishonour of 2 different cheques – As conviction is
not arising out of single transaction , Relief of concurrent running of
sentences cannot be granted.
48. CHEQUE ISSUED PURSUANT TO THE ORDER OF THE LOK

ADALAT
48.1 Arun Kumar VS Anita Mishra, 18 Oct 2019, 2019 0 AIR(SC) 5745;
2019 0 Supreme(SC) 1418;
Para 12. The cheque issued pursuant to the order of the Lok Adalat, was
also dishonoured. This clearly gave rise to afresh cause of action under
Section 138 of the Negotiable Instruments Act.
13. InK.N. Govindan Kutty Menon vs. CD. Shaji reported in, (2012) 2
SCC 51 cited by the appellant complainant, this Court held:
"11. In the case on hand, the question posed for consideration before the
High Court was that "when a criminal case referred to by the Magistrate to a
Lok Adalat is settled by the parties and an award is passed recording the
settlement, can it be considered as a decree of a civil court and thus
executable by that court?" After highlighting the relevant provisions, namely,
Section 21 of the Act, it was contended before the High Court that every
award passed by the Lok Adalat has to be deemed to be a decree of a civil
court and as such, executable by that court.23. In the case on hand, the
courts below erred in holding that only if the matter was one which was
referred by a civil court it could be a decree and if the matter was referred by
a criminal court it will only be an order of the criminal court and not a
decree under Section 21 of the Act. The Act does not make out any such

distinction between the reference made by a civil court and a criminal court.
There is no restriction on the power of Lok Adalat to pass an award based
on the compromise arrived at between the parties".
14. Every award of the Lok Adalat is, as held in K.N. Govindan Kutty
Menon vs. CD. Shaji (supra), deemed to be decree of a civil court and
executable as a legally enforceable debt. The dishonour of the cheque
gave rise to a cause of action under Section 138 of the Negotiable
Instruments Act. The impugned judgment and order is misconceived.
49. AMENDMENT IN COMPLAINT

49.1M/s. Kumar Rubber Industries Kapurthala v/sSohan Lal 2003 2
DCR 71; Criminal Misc. No. 11506,M of 1998 Decided on 14.9.2001
Punjab and Haryana High court
Para 50. Therefore, we find that not only the complaint is defective, but also
there is total non application of mind by the learned Magistrate also. This is
not a mere technical defect or a mere mis,description of the parties which
could be allowed to be amended. The cheques are the very basis of
foundation of the complaint. So, when the very foundation has not been
properly laid by giving the correct numbers of the cheques, the complaint
itself becomes not maintainable. Such a defect which goes to the root of the
matter, cannot be allowed to be amended and the complainant cannot be
allowed to supplement the complaint by giving the numbers of fresh cheques
as the basis of the complaint. The complaint cannot thus be made to suit
the evidence introduced. Therefore, in my view, the complaint has to fail and
to be quashed on that account.
49.2Vinayagam v/s Subhash Chandran, 2000 (3) R.C.R. (Criminal) 4
Madras High Court
Held in considered the question whether the Magistrate has the power
to return a complaint to the complaint for removing certain defects and for
representing the same. The Division Bench held that the Magistrate and no
power to do so and that the complaint has to suffer for the defects in the
complaint.
49.3K. Subramanian v/s Kamakshi Extractions, 1999 (3) R.C.R.
(Criminal) 253
It will be of no help to the complainant, because it was held therein
that if the factual foundation for the offence has been laid in the complaint,
the Court should not hasten to quash the criminal proceedings merely on
the premise that one or two ingredients have not been stated with details.
Because, in the present case, the very factual foundation of the case of the
complainant is defective, and this defect goes to the root of the matter
affecting the very maintainability of the complaint, the complaint cannot be
sustained, and the complainant or supplement the complaint to rectify such
a defect.

50.THE RIGHT OF THE ACCUSED TO PRODUCE EVIDENCE OF
HIS CHOICE IS A PART OF FAIR TRIAL
50.1 Abdul Rauf Abdul Rashid Shaikh Vs Shaikh Nuruddin Sarfuddin,

12 Dec 2017 2018 1 GLH 617; 2017 0 Supreme(Guj) 1811;
12. The right of the accused to adduce evidence of his choice is a part of fair
trial. Whether it be sessions trial, trial of a summons case, warrant case or
summary trial, that right is there when it comes to the stage of adducing
defence evidence. It is a right of the accused, at the appropriate time, to be
called upon to enter his defence. So far as the sessions trials are concerned,
there is Section 233 of the Cr.P.C. and in trial of warrant cases, there is
Section 243 of the Code of Criminal Procedure. In a case triable as
summons case, if the Magistrate does not convict the accused under
Sections 252 or 253 of the Cr.P.C., he has to hear the prosecution and take
all such evidence as may be produced in support of the prosecution. He has
also to hear the accused and take all such evidence as he produces in his
defence. Section 254(2) of the Cr.P.C. provides that the Magistrate may, on
the application of the prosecution or the accused, issue a summons to any
witness directing him to attend or to produce any document or other thing.
The discretion is certainly vested with the Magistrate to consider whether
the witnesses cited by the accused should all be examined. In a case where
the Magistrate finds that the witness schedule has been filed with the sole
purpose of delaying the proceeding or that no meaningful purpose would be
served by the examination of the witnesses, it is open to him to decline the
request for summoning the witnesses.
13. Section 254 of the Cr.P.C. reads as under:
―254. Procedure when not convicted. , (1) If the Magistrate does not
convict the accused under section 252 or section 253, the Magistrate shall
proceed to hear the prosecution and take all such evidence as may be
produced in support of the prosecution, and also to hear the accused and
take all such evidence as he produces in his defence.
(2) The Magistrate may, if he thinks fit, on the application of the

prosecution or the accused, issue a summons to any witness directing him
to attend or to produce any document or other thing.
(3) A Magistrate may, before summoning any witness on such

application require that the reasonable expenses of the witness incurred in
attending for the purposes of the trial be deposited in Court.‖
14. The power under Section 254(2) conferred on the Magistrate is of
wider amplitude than that of the Sessions Judge or Magistrate in a similar

situation while tying a sessions case or a warrant case. Section 233(3)
relates to a situation where the Accused in a sessions case wants to adduce
defence evidence or to produce any document or thing. Subsection (3)
enables the Judge to issue process. Of course, it is with a rider. The
Sessions Judge can refuse to issue process if he finds that the witness list is
filed for the purpose of vexation or delay or defeating the ends of justice.
Section 243(2) provides that in a case tried as a warrant case the Magistrate
can reject the application filed by the Accused for issuing process for
compelling the attendance of any witness or the production of any document
or thing, if he finds that the application is made for the purpose of vexation
or delay or for defeating the ends of justice. Under Sections 233(2) and
243(2) the power of the Sessions Judge and Magistrate to refuse issuance of
process is circumscribed by the three factors mentioned specifically viz.
vexation, delay or defeating the ends of justice. Thus, in cases not coming
under any of the above categories the Sessions Judge or the Magistrate in a
trial of warrant cases will have to issue process to the defence witnesses. So
far as Section 254(2) is concerned there is no such limitation. Thus, it can
be seen from a reading of Sections 233(2), 243(2) and 254(2) that the
Magistrate's discretion as to allowing or refusing an application either by the
prosecution or by the accused for issuing the summons to any witness
directing him to attend or to produce any document before the Court is
wider so far as the trial of summary cases is concerned. But that does not
mean that the Magistrate can act arbitrarily, whimsically or capriciously. It
has to be considered on the facts and circumstances of each case. It may
not be possible to enumerate in what circumstances the Magistrate can
issue process for examining the defence witnesses and in what
circumstances he should not do it. The Magistrate will have to assess the
overall situation in any case particularly bearing in mind the onus of proof.
In other words, the Court should not scuttle the defence evidence on flimsy
grounds. If the Magistrate finds that the witnesses cited have nothing
relevant to testify before the Court or if he finds that the witnesses are
merely cited with the ulterior motive to dodge the proceedings, he can refuse
to act.
15. The right of the accused to have his witnesses examined or to have
documents produced on his side cannot be denied. The general rule is that
an opportunity should be afforded to the accused to adduce his evidence.
But he cannot have unfettered liberty to prolong the proceedings by
adopting delaying tactics. It is always open to the Magistrate to put a stop to
it. But in a case where the burden is on the accused, as in this case, the
attempt of the accused to establish his innocence by defence evidence
should not be thwarted. The applicant is facing prosecution for the offence
punishable under Section 138 of the Negotiable Instruments Act. Section
139 of the N.I. Act provides for presumption in favour of the holder. Section
139 of the N.I. Act reads as under:,

―139.XXX…
Defence of misuse of cheque by complainant. Rejection of application to
call for expert opinion, in light of presumption raised u/Ss. 20 and 139 of
Act of 1881 is improper. Opportunity must be granted to accused for
adducing evidence.‖
16. The plain reading of Section 139 of the N.I. Act referred to above would
indicate that there is a legal presumption that the cheque was issued for
discharging the antecedent liability and that presumption can be rebutted
only by the person, who draws the cheque.
17. The aforesaid presumption is in favour of the holder of cheque. After all,
a presumption is only for casting the burden of proof as to who should
adduce evidence in a case. The presumption available under Section 139
can be rebutted by the accused by adducing evidence. So, the burden of
proof is on the accused and the evidence available on record will have to be
appreciated by bearing in mind the fact regarding the burden of proof.
18. In such circumstances, the Court should permit the accused to lead
appropriate evidence for the purpose of deciding that burden. This one
important aspect should be kept in mind by the Trial Court while
conducting a criminal case for the offence of dishonour of cheque
punishable under Section 138 of the N.I. Act.

51.MORE THAN ONEEXAMINATION U/S. 313, CR.P.C.
51.1RajanDwivedi Vs. CBI; 2008 Cri.L.J.; 1440 (1447) DEL

If examination of the accused under section 313 has taken place, the court
can call the accused to answer incriminating circumstances again. There is
no implied prohibition on calling upon the accused to again answer
questions. However, power to call the accused to answer questions more
than once, after conclusion of the prosecution evidence should not be used
in a routine or mechanical manner.
22. Section 313 consists of two parts. The first confers a discretion ("may")
to the Court to question the accused at "any stage" of an inquiry or trial
without previously warning him. Under Section 313(1)(b) the Court is
required to question him generally on the case after the witnesses for the
prosecution have been examined and before he is called for his defense. The
second part is mandatory and imposes upon the Court a duty to examine
the accused at the close of the prosecution case, to give him an opportunity
to explain any incriminating circumstances appearing against him in the
evidence and to state, whatever he wishes to, in his defense. He is not
bound to answer the questions. Under Sub-section (4) the answers given by
the accused may be taken into consideration in the inquiry or trial. His
statement is material upon which the Court may act, and which may prove
his innocence. Under Sub-section (2) no oath is administered to him. The
reason is that when he is examined under the provision, he is not a witness.
51.2 Keya Mukherjee VS Magma Leasing Limited, [2008] 8 SCC 447
IMPORTANT POINT :The word ―shall‖ in clause (b) to Section 313(1) of

the Code is to be interpreted as obligatory on the court and it should be
complied with when it is for the benefit of the accused.
25. We think that a pragmatic and humanistic approach is warranted in

regard to such special exigencies. The word ―shall‖ in clause (b) to Section
313(1) of the Code is to be interpreted as obligatory on the court and it
should be complied with when it is for the benefit of the accused. But if it
works to his great prejudice and disadvantage the court should, in
appropriate cases, e.g., if the accused satisfies the court that he is unable to
reach the venue of the court, except by bearing huge expenditure or that he
is unable to travel the long journey due to physical incapacity or some such
other hardship, relieve him of such hardship and at the same time adopt a
measure to comply with the requirements in Section 313 of the Code in a
substantial manner. How could this be achieved?

26. If the accused (who is already exempted from personally appearing in
the court) makes an application to the court praying that he may be allowed
to answer the questions without making his physical presence in court on
account of justifying exigency the court can pass appropriate orders
thereon, provided such application is accompanied by an affidavit sworn to
by the accused himself containing the following matters : (a) A narration of
facts to satisfy the court of his real difficulties to be physically present in
court for giving such answers. (b) An assurance that no prejudice would be
caused to him, in any manner, by dispensing with his personal presence
during such questioning. (c) An undertaking that he would not raise any
grievance on that score at any stage of the case.
27. If the court is satisfied of the genuineness of the statements made by the
accused in the said application and affidavit it is open to the court to supply
the questionnaire to his advocate (containing the questions which the court
might put to him under Section 313 of the Code) and fix the time within
which the same has to be returned duly answered by the accused together
with a properly authenticated affidavit that those answers were given by the
accused himself. He should affix his signature on all the sheets of the
answered questionnaire. However, if he does not wish to give any answer to
any of the questions he is free to indicate that fact at the appropriate place
in the questionnaire (as a matter of precaution the court may keep
photocopy or carbon copy of the questionnaire before it is supplied to the
accused for an answer). If the accused fails to return the questionnaire duly
answered as aforesaid within the time or extended time granted by the
court, he shall forfeit his right to seek personal exemption from court during
such questioning. The Court has also to ensure that the imaginative
response of the counsel is intended to be availed to be a substitute for
taking statement of accused.
28. In our opinion, if the above course is adopted in exceptional exigency it

would not violate the legislative intent envisaged in Section 313 of the Code.

52. CALCULATING THE PERIOD OF ONE MONTH & LIMITATION
52.1Econ Antri Ltd. V/s Rom Industries Ltd. & Another Supreme Court
of India 2014 11 SCC 769; 2013 0 Supreme(SC) 783; (Three Bench
Judgment).
Law Laid Down : For the purpose of calculating the period of one
months under Section 142(b) of NI Act the period of limitation has to
be reckoned by excluding the date on which cause of action arose.
Negotiable Instruments Act, 1881 (Central Act 26 of 1881) — Sections 138(c)

and 142(b) Limitation Act, 1963 (Central Act 36 of 1963) — Section 12(1)
and (2) General Clause Act, 1897 (Central Act No. 10 of 1897) Section 9
Cognizance of offence under NI Act — Period of limitation Reckoning of
Whether while calculating the period of one month which is prescribed has
to be reckoned by excluding the date on which the cause of actionarose —
Finding of — Court having considered the question of Law involved in the
case and in the light of relevant Judgments held that for the purpose of
calculating the period of one month which is prescribed under Section
142(b) of NI Act the period of limitation has to be reckoned by excluding the
date on which the cause of action arose.
Held : Having considered the question of law involved in this case in
proper perspective, in light of relevant judgments, we are of the opinion that
Saketh lays down the correct proposition of law. We hold that for the
purpose of calculating the period of one month, which is prescribed under
Section 142(b) of the N.I. Act, the period has to be reckoned by excluding the
date on which the cause of action arose. Court hold that SIL Import USA
does not lay down the correct law. Needless to say that any decision of this
Court which takes a view contrary to the view taken in Saketh by this Court,
which is confirmed by us, do not lay down the correct law on the question
involved in this reference[Para 25].
52.2 RE: Cognizance For Extension Of Limitation Suo Motu Writ

Petition (Civil) No.3 of 2020 2021-JX-(SC)-0-159, LL 2021 SC 144
Decided on : 08-03-2021.
In computing the period of limitation for any suit, appeal, application or

proceeding, the period from 15.03.2020 till 14.03.2021 shall stand
excluded. Consequently, the balance period of limitation remaining as on
15.03.2020, if any, shall become available with effect from 15.03.2021. 2. In
cases where the limitation would have expired during the period between
15.03.2020 till 14.03.2021, notwithstanding the actual balance period of
limitation remaining, all persons shall have a limitation period of 90 days

from 15.03.2021. In the event the actual balance period of limitation
remaining, with effect from 15.03.2021, is greater than 90 days, that longer
period shall apply. 3. The period from 15.03.2020 till 14.03.2021 shall also
stand excluded in computing the periods prescribed under Sections 23 (4)
and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the
Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the
Negotiable Instruments Act, 1881 and any other laws, which prescribe
period(s) of limitation for instituting proceedings, outer limits (within which
the court or tribunal can condone delay) and termination of proceedings.

53. LOST OF CHEQUE
53.1Raj Kumar Khurana VS State of (NCT of Delhi)[2009] 0 Supreme(SC)

926 / [2009] 6 UJ 2588 / [2009] 3 WLN 77 SC
"5. That the above said cheque in question was presented by the
complainant for encashment through its bearers, namely State Bank of
India, Azadpur Branch, Delhi 33, but the same was returned as
dishonoured with the remarks "SAID CHEQUE REPORTED LOST BY THE
DRAWER". This intimation was received by the complainant from the
bankers on 27.7.2001 and accordingly a notice dt. 3.8.2001 was sent to the
accused requesting the accused to make payment of the above said cheque
amount and on 17.8.2001 the accused sent reply through his Advocate
denying his liability falsely taking the plea that the cheque in question was
lost as stolen by the complainant.
6. That the accused has taken the above said false pleas knowing it fully
well that he does not intend to make payment of the said cheque amount,
and the complainant is thus compelled to file this complaint.Before a
proceeding thereunder is initiated, all the legal requirements therefore must
be complied with. The court must be satisfied that all the ingredients of
commission of an offence under the said provision have been complied with.
The parameters for invoking the provisions of Section 138 of the Act, thus,
being limited, we are of the opinion that refusal on the part of the bank to
honour the cheque would not bring the matter within the mischief of the
provisions of Section 138 of the Act.
Legal fiction created in a statute is required to be given full effect, but it
cannot be taken recourse to for any other purpose than the one mentioned
in the statute itself. A penal provision created by legal fiction must be
construed strictly. Section 138 of the NI Act, 1881 would apply if either the
amount of money standing to the credit of that account being insufficient to
honour the cheque, or, the amount of cheque it exceeds the amount
arranged to be paid from that account by an agreement made with that
bank. Court taking cognizance u/s 138 is entitled to consider the allegations
in the complaint and the evidence of the complainant and his witnesses
only, nothing else.

54.ORDER OF MORATORIUM IS PASSED U/S INSOLVENCEY AND
BANKRUPTCY CODE 2016 AND N.I. ACT 138
54.1 P. Mohanraj and Others Vs. M/S. Shah Brothers Ispat Private
Limited Civil Appeal No. 10355 of 2018 2021-JX-(SC)-0-128 Decided on
: 01-03-2021
ISSUE:
Whether the order of moratorium will cover a criminal proceeding

under Section 138 of the Act?
BRIEF FACTS:
Shah Brothers Ispat Pvt. Ltd. (―the Appellant‖) herein has filed Company
Petition No. 507/IB/2017 before the Hon‘ble National Company Law
Tribunal, Chennai Bench (―NCLT‖) against M/s. Diamond Engineering
Chennai Pvt. Ltd. (―Corporate Debtor‖) for a debt of Rs. 24, 80, 33, 430
(Rupees twenty four crore eighty lakh thirty three thousand four hundred
thirty). In view of the nonpayment of debt by P. Mohanraj (―the
Respondents‖), the Hon‘ble NCLT vide its order dated June 6, 2017 admitted
the Company Petition and appointed the Interim Resolution Professional.
Moratorium was also declared and Corporate Insolvency Resolution Process
(―CIRP‖) was initiated against the Corporate Debtor. Before the
commencement of the CIRP, the Appellant had filed CC No. 552/SS/2017
before the Learned Metropolitan Magistrate, 59th Court, Kurla, Mumbai.
After the commencement of the CIRP, the Appellant filed CC No. 690/ SS/
2017.
In MA/102/IB/2018 in CP/507/IB/2017 filed by the Respondents, the
Hon‘ble NCLT by its order dated May 24, 2018 has held that the Appellant
had filed proceedings against Corporate Debtor inspite of the order of
moratorium dated June 6, 2017. Further, the Appellant was directed to
withdraw the aforesaid complaints forthwith, failing which appropriate order
would be passed for violation of the moratorium.
The order dated May 24, 2018 was assailed by the Appellant before
the Hon‘ble NCLAT. The Hon‘ble NCLAT after referring to the aforesaid facts
and Section 14 of the IBC has held in para 6 “… Section 138 is a penal
provision, which empowers the Court of competent jurisdiction to pass order of
imprisonment or fine, which cannot be held to be proceeding or any judgment
or decree of money claim. Imposition of fine cannot held to be a money claim
or recovery against the Corporate Debtor nor order of imprisonment, if passed
by the court of competent jurisdiction on the Directors, they cannot come

within the purview of Section 14. Infact no criminal proceeding is covered
under Section 14 of I&B Code…”.
In conclusion, disagreeing with the Bombay High Court and the Calcutta
High Court judgments in Tayal Cotton Pvt. Ltd. v. State of Maharashtra,
2018 SCC OnLine Bom 2069 : (2019) 1 Mah LJ 312 and M/s MBL
Infrastructure Ltd. v. Manik Chand Somani, CRR 3456/2018 (Calcutta High
Court; decided on 16.04.2019), respectively, we hold that a Section
138/141 proceeding against a corporate debtor is covered by Section
14(1)(a) of the IBC. Para 79)
CONCLUSION
1. A Section 138/141 proceeding against a corporate debtor is covered by

Section 14(1) (a) of the IBC.
2. Negotiable Instruments Act, 1881 - Section 138 - Dishonour of Cheque -
Civil proceeding is not necessarily a proceeding which begins with the filing
of a suit and culminates in execution of a decree.
3. It would include a revenue proceeding as well as a writ petition filed
under Article 226 of the Constitution, if the reliefs therein are to enforce
rights of a civil nature.
4. Criminal proceedings are stated to be proceedings in which the larger
interest of the State is concerned. Given these tests, it is clear that a Section
138 proceeding can be said to be a "civil sheep" in a "criminal wolf's"
clothing, as it is the interest of the victim that is sought to be protected, the
larger interest of the State being subsumed in the victim alone moving a
court in cheque bouncing cases.
54.2 Central Bank of India Vs. Elmot Engineering Co. Pvt. Ltd. &Ors.,
1993 MH.L.J. 671,
The issue raised for consideration was, 'whether the leave of the Company
Court under Section 446(1) of the Companies Act was essential to continue
to prosecute the suit filed to realize mortgaged debt and other securities
created by the Company?' In the light of the same, it was held that, as the
object of Section 446(1) is to see that the assets of the Company are brought
under the control of the winding,up court to avoid, wherever possible,
expensive litigation and to see that all matters in dispute, which are capable
of being expeditiously disposed of by the winding,up court, are taken up by
that court. Accordingly, it was held that Section 446 of the Companies Act,
which is wide enough and is not restricted to any category of suits or any
class of plaintiffs, to cover all suits and other legal proceedings, whoever
may be the plaintiff. Thus, it is clear that in the said decision, the
proceedings were of a civil nature and against the assets of the Company

and, therefore, it was held that the provisions of Section 446 of the Act will
be applicable. This decision, thus, can be distinguishable, where the issue is
in respect of the specific criminal proceedings filed under Section 138 of N.I.
Act imposing criminal and penal liability on the Directors of the Company
for dishonour of the cheque and not dealing with the assets of the Company.
54.3 M/S Indorama Synthetics (I) Ltd vs State Of Maharashtra And

Anr2016 (4) Mh.L.J 249 , 6 May, 2016
33. Accordingly, it was held that the proceedings under Section 138 of N.I.
Act cannot be stayed for want of leave of the Company Court under Section
446(1) of the Companies Act.
Note : New introduced in Section 32A (1) of the IBC
The Central Government introduced the Insolvency and Bankruptcy Code

(Amendment) Act, 2020 with effect from 28thDecember 2019 to absolve the
Corporate Debtor of the Liability with respect to an offence committed prior
to initiation of Corporate Insolvency Resolution process. The Act also states
that, the Prosecution in respect of such offences will not be carried forward,
once a resolution plan has been approved by the NCLT provided, such
resolution plan proposes change in control of the corporate debtor to a
person who was already not a promoter or a director or a person against
whom a investigation report has already been filed.
1. Power Grid Corporation Of India vs Jyoti Structures Ltd. 2017 SCC

Online Delhi 12189 11 December, 2017 Overruled
2. Mr. Ajay Kumar Bishnoi Former Managing Director M/S Tecpro

Systems Ltd Vs M/S Tap Engineering 2020 Ibclaw.In 14 Hc Madras
High Court Overruled

55. SICK Co. U/S 22 OF SICA & U/S 138 OF N.I. ACT
55.1 Servalakshmi Paper Limited And Others Vs. State Of Gujarat And
Others (2020) 1 GLR 493Gujarat High Court
Para 12. In the present case, there are various notices issued to the
petitioners by the respondents on 22.09.2015 for the cheques, which were
returned on 09.09.2015, on 27.11.2015 for the cheques, which were
returned on19.11.2015, on 28.10.2015 for the cheques, which were
returned on 07.10.2015, on 14.03.2016 for the cheques, which were
returned on 25.02.2016 and on 10.05.2016 for the cheques, which were
returned on 16.04.2016. The petitioners have placed reliance on the order
dated 13.08.2015 passed under Section 22 of the SICA. The ApexCourt in
the case of Kusum Ignots (supra) has held that "section 22 of SICA does not
create any legal impedimentfor instituting and proceeding with a criminal
case on the allegations of an offence under section 138 of the N.I.Act against
a company or its Directors. The section as we read it only creates an
embargo against disposal ofassets of the company for recovery of its
debts.".Thus, the provisions of Section 138 of the NI Act are penal in
nature and hence, the proceedings under Section 22 of the SICA cannot
be stretched to such proceedings. The question of law and fact that
whether the order dated 13.08.2015 will rescue the petitioner from the
rigours of section 138 of NI Act can only be examined during the trial
proceedings.
55.2Rajesh MenaV/s State of Haryana and ors. 2019 ACD 940 : 2020(1)
DCR 705 : 2020(3) R.C.R.(Criminal) 888 Punjab And Haryana High
Court
"Account Blocked" as a result of the order passed by NCLT , Offence

under Section 138 not made out , Proceedings quashed.
A. Negotiable Instruments Act, 1881 Sections 141 and 138 Criminal
Procedure Code, 1973, Section 482 , Dishonour of cheques,"Account
Blocked" ,Accused a corporate debtor facing proceedings before Company
Tribunal , Control and management of corporate debtor vested with Interim
Resolution Professional by order of Tribunal , Prior to the effective dates the
said account was blocked, which cannot at all be attributed to the account
holder, as it was a result of the order passed by NCLT, New Delhi ,
Therefore, by virtue of the said order, the authority and control of the
account holder over the account ceased to exist , Offence under Section 138
not made out , Proceedings quashed. [Paras 7 and 22]
B. Account maintained by account holder, Necessary ingredient would be
complete , Expression "account maintained by him" must necessarily
include that the said account is not only alive and operative, but the

account holder is capable of executing command to govern the financial
transactions which include the clearance of cheques etc.
55.3Ceasefire Industries Ltd. , Petitioner V/s State &Ors. –

Respondents 2017(2) MadWN (Cri) 71 Delhi High Court Crl.L.P. 51 & 52
of 2017. D/d. 1.5.2017.
4. It appears a number of defences were raised by the respondents in
resisting the prosecution for offences under Section 138 N.I. Act in the above
mentioned criminal complaint cases, but what has clinched the issue in
their favour is essentially the fact that cheques were returned unpaid on
account of the account in question having been frozen. 5. It is noted that in
the demand notice after the cheques had been returned, the complainant
itself described the reasons for such return as "account freezed". This is
what was reiterated by complainant's witness V/SN. Raju in his affidavit
submitted with the complaint. When he was examined on fresh affidavit at
the trial he reiterated the reason now referring to the remarks in the return
memos the same being "account blocked". The learned Metropolitan
Magistrate accepted the said fact as good reason to dismiss the complaints.
6. In the opinion of this court, the view taken by the Metropolitan Magistrate
in the two complaint cases cannot be faulted. The provision contained in
Section 138 of the N.I. Act makes it clear that it is not every return of a
cheque unpaid which leads to prosecution of an offence under the said
provision of law. For such purposes, the cheque must have been returned
"unpaid" either because the amount of money standing to the credit of that
account is insufficient to honour the cheque or that it exceeds the amount
arranged to be paid from that account by an agreement made with the bank.
7. The bank which returned the cheques unpaid had made it clear that the
accounts had been blocked. It is clear that the complainant itself was aware
that the accounts had been frozen in terms of directions by some statutory
authority. In these circumstances, the reasons for return of the cheques
unpaid being not what is envisaged in Section 138 of the N.I. Act, these
petitions are devoid of merit and, therefore, dismissed.

56.MATERIAL ALTERATION IN CHEQUE
56.1M/s. Goyal Enterprises v/s State and Anr Acquittal Appeal No. 31
of 2008 Decided on 16.12.2011 2012 3 Crimes(HC) 567;Jharkhand
High Court
Section 87 of the N.I. Act is a mandatory provision and in this view of
the matter, the chequeswhich were materially altered before production in
the Court and without any evidence to the effectthat how the said
alterations in the cheques were made, were absolutely void and the
accusedcould not have been found guilty of the offence under Section 138 of
the N.I. Act on the basis ofthe said void cheques.
57. UNACCOUNTED MONEY

57.1Asst. Director of Inspection Investigation v/s Kum. A.B.Shanth
[(2002) 6 SCC 259 : AIR 2002 SC 2188]
While upholding the constitutional validity of Sec.269 SS observed
thus:,―The object of introducing S. 269 is to ensure that a tax payer is not
allowed to give false explanation for his unaccounted money, or if he has
given some false entries in his accounts, he shall not escape by giving false
explanation for the same. During search and seizure unaccounted money is
unearthed and the tax payer would usually give the explanation that he had
borrowed or received deposits from his relatives or friends sand it is easy for
the so,called lender also to manipulate his records later to suit the plea of
the tax,payer. The main object of S. 269,SS was to curb this menace.
7. In the light of the observations of the Apex Court, it cannot but be
said that Sec. 269,SS only provided for the mode of acceptance payment or
repayment in certain cases so as to counteract evasion of tax. Sec. 269,SS
does not declare all transactions of loan, by cash in excess of Rs. 20,000/,
as invalid, illegal or null and void, while as observed by the Apex Court, the
main object of introducing the provision was to curb and unearth black
money. To construe Sec.269,SS as a competent enactment declaring as
illegal and unenforceable all transactions of loan, by cash, beyond Rs.
20,000/,, in my opinion, cannot be countenanced.
57.2Krishna P. Morajkar v/s Joe Ferrao&Anr Criminal Appeal No.6 of

2012 Decided on 19.7.2013 2014 1 Bankmann 228; Bombay High Court
Para 31. Before I conclude, with all humility at my command, it has to be

noted that even after noticing the object of enacting Section 138 of
Negotiable Instruments Act, namely to enhance the acceptability of cheques,
Courts have been accepting virtually any argument advanced to nullify me
liability created, like ignoring or misreading presumption under Section 139
of the Act, misreading provisions of Sections 269 SS and 27 ID of the
Income Tax Act, unmindful of the consequence that unscrupulous

individuals go on signing cheques irresponsibly. When a person signs a
cheque and delivers it, even if it is a blank cheque or a post dated cheque,
presumptions under Section 118(b) and 139 of the Negotiable Instruments
Act would have to be raised and would have to be rebutted by the aced,
albeit by raising a probability. Unless the Courts start discouraging flimsy
defences, acceptability of cheques would not increase. The problem of
unaccounted money would be reduced if transactions take place by
cheques. Even a cash advanceWhenrepaid by cheque gels accounted.
Making it unrecoverable,would only push the persons toextrajudicial
methods of recovery. The Courts would thus not only be defeating the object
of theprovisionbut also indirectly be party to increase lawlessness. This, in
my humble view, cannot beallowedby Courts.
57.3 ShrimatiRagini Gupta V/s Piyush Dutt Sharma 2019(3) DCR 358
A. Negotiable Instruments Act, 1881 Sections 138 and 139 Dishonour
of cheque , Loan of Rs. 10,00,000/,, Source of income, Non,filing of income
tax return , Mere non,filing of Income Tax Return would not automatically
dislodge the source of income of the complainant ,Non-payment of Income
Tax is a matter between the revenue and theassessee , However, non filing of
Income Tax Return by itself does not mean that complainant had no source
of income, No adverse inference can be drawn in that regard only because of
absence of Income Tax Return.[Para 13]
B. Negotiable Instruments Act, 1881 Sections 138 and 139 Dishonour of
cheque , Whether there was any legally recoverable debt\liability , Where
accused failed to satisfactorily explain circumstances under which cheque
was issued by accused or misused by complainant, then it can be safely
inferred/presumed that cheque was issued in discharge of legally
recoverable debt/liability.[Para 13]
58. PRODUCTION OF THE ACCOUNT BOOKS/CASH BOOK
58.1 D. K. Chandel V/s M/S Wockhardt Ltd. &Anr Criminal Appeal

No(S). 132 Of 2020 (Arising Out Of Slp (Crl.)No.1621 Of 2018)
20,1,2020 Supreme Court Of India
Para (8)as held by the Trial Court as well as by the High Court that the
cheque was issued towards the amount due and payable by the appellant
for purchase of pesticides. As rightlyobserved by the High Court production
of the account books/cashbook may be relevant in the civil court; but may
not be so in the criminal case filed under Section 138 of the N.I.Act. Thisis
because of the presumption raised in favour of the holder of the cheque. In
view of the concurrent findings recorded by the Trial Court as well as by the
High Court we do not see any ground warranting interference with the
conviction of the appellant under Section 138 of the N.I.Act.

59. EVIDENCE ON AFFIDAVIT
59.1 RakeshbhaiMaganbhaiBarot Vs State Of Gujarat On 29 January,

2019,GLR (4) 2719
It is clear that having regard to the Scheme of the Cr.P.C., the legislature in
its wisdom has left it open to the accused to exercise the option of examining
himself as a witness for an offence punishable under Section 138 of the NI
Act, in deliberately omitting any reference to the evidence of the accused by
way of affidavit. For it would run against a first principle in criminal law
namely, that an accused shall not be called as a witness except on his own
request in writing. The evidence on behalf of the accused would include that
of the accused, subject to Section 315 Cr.P.C. If the evidence of the
witnesses could be by way of affidavit in terms of Section 145 NI Act, the
evidence of the accused could also be way of affidavit.
A closer scrutiny of Section 145 would indicate that the same is intended to
ensure that the trial is concluded as expeditiously as possible. The said
provision does not in any manner affect the right of the accused to cross
examine the complainant and his witnesses. The said provision enables even
the defence evidence to be led by affidavits. Thus, the said provision is
purely procedural in nature. In this behalf, the Apex court has in Shreenath
v/s Rajesh, AIR 1998 SC 1827, has held that in interpreting any procedural
law, where more than one interpretation is possible, the one which curtails
the procedure without eluding the justice, is to be adopted. The procedural
law is always subservient to and is in aid to justice. (See: KSL Industries v/s
Khandelwal, 2006(1) Mh.LJ (Cri) 86).
Note :The Apex Court in Mandvi Cooperative Bank Limited, (supra), has
not examined the matter in the above perspective.
59.2M/S. Mandvi Co,Op Bank Ltd vs Nimesh B. Thakore on 11 January,

2010 , 2010(1)SCALE188; (2010)3SCC83
Para 32. On a bare reading of section 143 it is clear that the legislature
provided for the complainant to give his evidence on affidavit and did not
provide for the accused to similarly do so. But the High Court thought that
not mentioning the accused along with the complainant in sub-section (1)
of section 145 was merely an omission by the legislature that it could fill up
without difficulty. Even though the legislature in their wisdom did not deem
it proper to incorporate the word àccused' with the word `complainant'
in section 145(1), it did not mean that the Magistrate could not allow the
accused to give his evidence on affidavit by applying the same analogy
unless there was a just and reasonable ground to refuse such permission.
There are two errors apparent in the reasoning of the High Court. First, if
the legislature in their wisdom did not think "it proper to incorporate a
word àccused' with the word `complainant' in section 145(1)", it was not
open to the High Court to fill up the self perceived blank. Secondly, the High

Court was in error in drawing an analogy between the evidences of the
complainant and the accused in a case of dishonoured cheque. The case of
the complainant in a complaint under section 138 of the Act would be based
largely on documentary evidence. The accused, on the other hand, in a large
number of cases, may not lead any evidence at all and let the prosecution
stand or fall on its own evidence. In case the defence does lead any evidence,
the nature of its evidence may not be necessarily documentary; in all
likelihood the defence would lead other kinds of evidences to rebut the
presumption that the issuance of the cheque was not in the discharge of any
debt or liability. This is the basic difference between the nature of the
complainant's evidence and the evidence of the accused in a case of
dishonoured cheque. It is, therefore, wrong to equate the defence evidence
with the complainant's evidence and to extend the same option to the
accused as well.
59.3 Afzal Pasha v/s Mohamed Ameerjan (Criminal Petition No.1684 of

2016, decided on 9th August 2016). Karnataka High Court :
"Para 2. The petition is filed by the accused, against whom a complaint is
filed before the court below alleging an offence punishable under Section
138 of the Negotiable Instruments Act, 1881 (Hereinafter referred to as the
NI Act, for brevity). The petitioner is contesting the case. At the stage when
the case was set down for the evidence of the accused, he is said to have
filed an application under Section 145(2) of the NI Act, seeking permission of
the court to filed an affidavit in lieu of oral evidence. The trial court having
rejected the application on the ground that the same is not permissible, the
present petition is filed.
Para 3. The learned counsel for the petitioner places reliance on the
language of Section 145 of the NI Act to contend that the trial courthas not
taken into consideration the intent of the provision, which has been
interpreted by the Apex Court in the case of Indian Bank Association v/s
Union of India, (2014) 5 SCC 590.

60.ADDITION OF PARTY AND CR P C 319
60.1OANALI ISMAILJI SADIKOT Vs. STATE OF GUJARAT AND ANR.

2016 (3) GLR 1991
Held, in absence of partnership firm being arraigned as accused
prosecution against partners not maintainable. As commission of offence by
partnership firm is an express condition precedent to attract vicarious
liability of partners.
(B) Negotiable Instruments Act, 1881 (26 of 1881) Sec. 138, 141 & 142
Criminal Procedure Code, 1973 (2 of 1974) Sec. 319,Infirmity in complaint
of partnership firm not being arraigned as accused. Held, same cannot be
cured by subsequent seeking of impleadment of partnership firm. Further,
Sec. 319 of Cr.P.C. has no application in such case. Order by Chief Judicial
Magistrate confirmed.
60.2Khizer Impex Pvt. Ltd.Vs.State of Gujarat MANU/GJ/0572/2020

HIGH COURT OF GUJARAT AT R/Special Criminal Application Nos. 764
and 769 of 2020 Decided On: 17.02.2020
7. (vi) Lastly, learned Senior Counsel relied on the decision of Sarabjit Singh
(supra)wherein Hon'ble Apex Court maintained the order of Metropolitan
Magistrate summoning of the company accused additionally under Section
319 of CriminalProcedure Code. In the said case the company was accused
but it was not summoned and therefore pending proceeding and with
reference to liberty earlier granted by the Metropolitan Magistrate there to
filed fresh application touch effect to be filed at the appropriate stage, the
complainant made application under Section 319 of Criminal Procedure
Code seeking summoning of the company as the accused additionally which
was allowed. In nutshell in the said case the company was already
co,accused in the original complaint but it was not summoned and on such
factual premisesHon'ble Apex Court maintained the orderof Metropolitan
Magistrate. It is not suchcase here.
Para 8. Looking to the overall facts andcircumstances of each case cited at
bar learned Senior Counsel Mr. S.V/S Raju invarious cases of Hon'ble Apex
Court orother High Courts, theamendment of thenature sought for in
present petitions,cannot be permitted and therefore thisCourt is not inclined
to entertain presentpetitions, as no infirmity or illegality isnoticed in the
impugned orders.

61. PROOF OF BANKING DOCUMENT
61.1 Surendrapal Singh Chawla VS State of Gujarat, 14 Jul 2009

2009 2 GLH 654
There exists a system of core banking and on,line banking system by which
it is very easy to verify on the day of presentation of cheque issued from any
corner of the country as to whether there was any sufficient fund in the
account of the drawer of a cheque or not. Said version is proved through the
deposition of the Bank Officer wherein he has specifically stated that as per
on,line banking system, the cheque in original is not required to be sent to
the concerned branch from where it was issued because of the core banking
and development of computer network system.
In view of the above, non,examination of the Officer who dealt with the
cheque or non,production of counterfoil of pay,in,slip showing deposit of
cheque does not mean that cheque was not presented with the bank nor
does it create any doubt in the mind of the Court about the version given by
the complainant. [Para 9]
61.2Dilipkumar Nalinkant Gandhi VS State of Gujarat, 2015 3 GCD

2384
22.3 In the facts of the present case, the documents at Exhibits 95, 96 and
97 have been produced by Shri Rakeshbhai Babulal Choksi, Assistant
Accountant, who has been examined as witness pursuant to the summons
issued by the court to the bank calling upon the person concerned to appear
and testify before the court. Though the said witness did not have any
personal knowledge about the cheque return memo etc., he had been
working in the bank for a period of twenty years and has identified the
signatures of the concerned officers on the documents. Under section 4 of
the Banker's Books Evidence Act, a certified copy of any entry in a
banker's book shall in all legal proceedings be received as prima facie
evidence of existence of such entry, and shall be admitted as evidence
of the matters, transactions and accounts therein recorded in every
case where, and to the same extent as, the original entry itself is now
by law admissible, but not further or otherwise. Thus, in view of the said
provision, the certified copy of the entries made in the banker's books shall
be received as evidence of existence of such entry. Under section 67 of the
Evidence Act, if a document is alleged to be signed or to have been written
wholly or in part by any person, the signature or the handwriting of so much
of the document as is alleged to be in that person's handwriting must be
proved to be in his handwriting. Section 45 of the Evidence Act inter alia
lays down that when the court has to form an opinion as to the identity of
handwriting, the opinion upon that point of persons specially skilled in
questions as to identity of handwritings are relevant facts. Section 47 of the
Evidence Act, bears the heading "Opinion as to handwriting, when relevant"

and lays down that when the court has to form an opinion as to the person
by whom any document was written or signed, the opinion of any person
acquainted with the handwriting of the person by whom it is supposed to be
written or signed that it was or was not written or signed by that person, is a
relevant fact. The Explanation to section 47 says that a person is said to be
acquainted with the handwriting of another person when he has seen that
person write, or when he has received documents purporting to be written
by that person in answer to documents written by himself or under his
authority and addressed to that person, or when, in the ordinary course of
business, documents purporting to be written by that person have been
habitually submitted to him. Therefore, in view of section 67 of the Evidence
Act, the signature or handwriting of a person must be proved and sections
45 and 47 provide for the mode of such proof. In view of section 47 of the
Evidence Act, a person to whom documents purporting to be written by that
person are submitted in the ordinary course of business, can be said to be
acquainted with his handwriting or signature and can prove the same.
Adverting to the facts of the present case, witness Shri Rakeshbhai Babulal
Choksi, is an Assistant Accountant with the bank and has been working for
twenty years with the bank. The persons whose signatures he has identified
are also stated to be working in the bank for a period of fifteen to twenty
years. The said witness is, therefore, in the ordinary course of his business
required to deal with documents bearing their signatures and is acquainted
with their handwriting and signatures. He is, therefore, competent to prove
their handwriting and signature in view of section 47 of the Evidence Act.
The said documents have come from proper custody, namely, from the
officer of the bank. Under the circumstances, there is no reason to disbelieve
the testimony of the said witness or the documentary evidence which has
been brought on record for the purpose of establishing that the cheque upon
presentation had been returned.
61.3 R. Subramanian VS ICICI Bank Ltd, 2019 2 BC 442; 2019 2 CTC 1
Para 8. On a careful consideration of the materials available on record, the

submissions made by the petitioner appearing in person and the learned
Senior Counsel appearing for the respondent No.1, it could be seen that
though the petitioner contended that the respondent No.1 did not produce
the certificate along with Ex.A58 statement of accounts, contrary to his
contention, he himself has produced the certificate at Page 179 of the typed
set of papers. The said certificate has been issued under section 4 of the
Bankers' Books Evidence Act, 1891. The petitioner contended that though
the certificate was produced by the respondent No.1, which is at page 179 of
the typed set of papers filed by him, the respondent No.1 has not enclosed
such certificate for all the statement of accounts. On a reading of the
certificate, it is clear that the certificate has been issued in respect of Ex.A-
58 statement of accounts produced by the respondent No.1/Bank. The

statement of accounts as well as the certificate bears the signature of the
authorized signatory of the respondent No.1/Bank. Therefore, when the
respondent No.1 has marked the statement of accounts along with the
certificate under section 4 of the Bankers' Books Evidence Act, there is
no necessity for producing the certificate for each and every page of
the statement of accounts.
Para 16. In the case on hand, as already stated, the Bank has produced the
statement of accounts in support of their claim along with a certificate as
per Section 4 of the Bankers' Books Evidence Act, 1891, which was not
objected or disputed by the petitioner at the time of marking the said
document as Ex.A-58. In such circumstances, we are of the considered view
that in the interest of justice, even the production of certificate by the
respondent No.1 can be relaxed. Thus, in our opinion, the ratio laid down by
the Apex Court in the judgment reported in 2018 (2) SCC 801 [cited supra],
applies to the present case.
61.4 Vijay Singh Rana VS ICICI Bank Ltd. 2018 0 Supreme (Del) 2070;
Para 11. The Appellate Tribunal rightly observed that the Tribunal had erred
in not appreciating the proviso to Section 4 of the Bankers‘ Books Evidence
Act, 1891 ('Act' for short), which stipulates that a certified copy of any entry
in a banker‘s books shall in all legal proceedings be received as prima facie
evidence of the existence of such entry, and shall be admitted as evidence of
the matters, transactions and accounts therein recorded in every case
where, and to the same extent as, the original entry itself is now by law
admissible, but not further or otherwise. Under this Section, the copy of
accounts certified in accordance with Section 2(8) of the Act is prima
facie evidence and does not require proof by production of cheques and
vouchers etc. relating to each entry. Such a copy must be received as
prima facie evidence not only of existence of such entries but also for
the matters, transactions and accounts therein recorded.

62. MODEL NOTICE/ORDER/FS
MODEL/ DRAFT ORDER FOR GIVING EXHIBIT TO DOCUMENTS
Criminal Case No.______

Order below Exh.____
1. By way of this application, the complainant prayed to give exhibit to

the documents produced vide mark __ to mark ___ and referred into the
affidavit filed in lieu of chief-examination under Section 145 of the NI Act.
2. Learned advocate appearing for complainant mainly argued to the

substance that the documents which are sought to exhibited are the
documents produced at the time of filing the complaint and are referred in
the chief-examination. He further argued that the cheque dishonoured is
original, the notice and acknowledgement duly received thereof are also
office copy and original and are referred in the chief-examination and
therefore, these documents are duly proved. As far as bank slip memo and
other related documents are concerned, he argued that as per Section 146
of the NI Act fact of this documents are not required to be doubted.
3. Learned advocate appearing for the complainant, having argued about

submitted to allow this application and to grant exhibits to the documents.
4. Per contra, learned advocate for accused vehemently objected the

present application by arguing that the document cannot simply be proved
by referring them in affidavit. He further argued that Evidence Act lay down
certain procedure to be followed for proving the document. He further
argued that in present case complainant has failed to adhere this procedural
requirement and therefore, it cannot be said that the documents asked for
giving exhibits are proved documents.
5. Learned advocate for the accused also argued to the extent that the
some of the documents are photo copy and they are in nature of secondary
evidence cannot be admitted into the evidence unless the legal procedure for
proving the secondary evidence is followed which lack in the present case.
Ultimately learned advocate for the accused argued to dismiss this
application.
6. Heard learned advocate for both the sides. I pay anxious consideration
to argument advanced by learned advocate for both sides.
7. On going through documents which are sought to be exhibited, it

perused that, from amongst, first is original leaf of the cheque dishonoured

by the Bank. Second in line is office copy of the notice served to the accused
coupled with acknowledgement and/ or window receipt issued by Post
Department. These documents being original and primary nature needs no
further proof for being admitted into the evidence. Important is that the
accused has not denied existence of these documents. Even, for
acknowledgement and window receipt issued by the Post Department, for as
much, office copy of the notice presumption under Section 27 of the General
Clause Act applies. Qua bank slip/ memo, Section 146 of the NI Act speak
that facts stated in the memo is believe to be in existence. This privilege
available to bank slip memo does not required any further proof.
8. In view of the above, the documents which are prayed for giving
exhibits in this application deserve consideration. The ratio laid down in
case of Bipin Shantilal Panchal vs State Of Gujarat And Anr, AIR 2001
SC 1158 as well as in case of Dayamathi Bai vs. K.M. Shafi, AIR 2004
SC 4082, also helps present complainant. In that circumstance document
stated supra are required to be exhibited. Thus I pass following order.
ORDER
 Present application is allowed.
 Document produced vide mark ___ to Mark __ is hereby ordered to
give exhibit in seriatim.
 Needless to say that exhibiting afore stated document does not
absolve complainant for proving it in accordance with provision of
law.
Order signed and pronounced in open court today.
Date:
Place: (JUDGE NAME)
DESIGNATION
JUDGE CODE GJ0000

MODEL/ DRAFT ORDER BELOW AN APPLICATION UNDER SECTION
143A OF THE NI ACT

Order Below Exh.____
1. Heard learned advocate to either side.
2. This court has recorded plea of the accused vide exhibit ___ after order
to try present trial as summons trial. In plea the accused pleaded not guilty
and claimed to be tried. Accused has denied the case and the allegations
levelled by complainant against him.
3. If we briefly observe the facts of the case, it seems that a cheque said
to have been issued by the accused in favour of the complainant got
dishonoured after 1st September, 2018. The complainant, in sequel of
dishonoured of the cheque issued notice and completed other formalities
being requirement of filing the complaint. The accused replied the notice/
did not replied the notice.
3.1 This court has taken cognizance of the offence under Section
138 of the NI Act as the complaint filed by the complainant found in
order. The process issued to the accused for said offence, has been
served and accused appeared in person as well as through his learned
advocate. Accused was asked that whether he wants to enter into the
settlement with complainant qua the dispute. (Following mandate in a
case of M/s. Meters and Instruments Private Limited & Anr.Versus
Kanchan Mehta, (2018) 1 SCC 560). Accused denied thus the case
was kept for recording plea. As mentioned earlier in this order the plea
of the accused was recorded vide Exh.____.
4. Learned advocate appearing for accused has vehemently argued

against the present application. He would argue that in a present case
accused has very sound defence. He further submitted that in absence of
cogent evidence, complainant cannot seek for compensation under Section
143A of the NI Act he also argued that every criminal trial has to be decided
on touchstone of principle of beyond reasonable doubt whereas in the
present case trial is yet to begin. In that circumstances he argued that no
order for compensation can be passed merely on the basis of certain
documents which are to be proved by the complainant.
5. Learned advocate for the accused also argued that law makers have
used word ―may‖ in Section 143A of the NI Act which rest discretion upon
the court whether to pass order or not. He further argued that in other
words nature of Section 143A of the NI Act is directory and therefore the

complainant cannot press for granting the interim compensation without
proving his case. In line of this argument he submitted to reject this
application.
6. The argument advance by learned advocate for the accused left this
court to decide two important questions, viz. 1, whether the provision under
Section 143A of the NI Act is directory or mandatory? 2. Whether accused
has any locus standi to object application under Section 143A of the NI act,
in other word, whether the say of the accused can be considered while
deciding the application under Section 143A of the NI Act?
7. Having heard learned advocates for both sides. Perusing section 143A
of the NI Act in background of statement and object of brining the statute to
law book, whereby law makers thought it fit to empower the court trying the
cases under NI Act, to grant interim compensation even without holding
accused guilty. This idea behind the bringing the legislation clearly denotes
it as mandatory. Alongside Section 143A, legislatures have also brought to
statute book section 148 under very same statement and object. The Hon‘ble
Supreme Court in case of Surinder Singh Deswal @ Col. S.S. Deswal and
Others Vs. Virender Gandhi, (2020) 2 SCC 514, had occasion to interpret
nature of section 148. Hon‘ble Apex Court in paragraph 8.1 hold that:
“8.1. Having observed and found that because of the delay tactics
of unscrupulous drawers of dishonoured cheques due to easy filing
of appeals and obtaining stay on proceedings, the object and
purpose of the enactment of Section 138 of the N.I. Act was being
frustrated, the Parliament has thought it fit to amend Section 148
of the N.I. Act, by which the first appellate Court, in an appeal
challenging the order of conviction Under Section 138 of the N.I.
Act, is conferred with the power to direct the convicted Accused -
Appellant to deposit such sum which shall be a minimum of 20% of
the fine or compensation awarded by the trial Court. By the
amendment in Section 148 of the N.I. Act, it cannot be said that
any vested right of appeal of the Accused - Appellant has been
taken away and/or affected. Therefore, submission on behalf of
the Appellants that amendment in Section 148 of the N.I. Act shall
not be made applicable retrospectively and more particularly with
respect to cases/complaints filed prior to 1.9.2018 shall not be
applicable has no substance and cannot be accepted, as by
amendment in Section 148 of the N.I. Act, no substantive right of
appeal has been taken away and/or affected. Therefore the
decisions of this Court in the cases of Garikapatti Veeraya (supra)
and Videocon International Limited (supra), relied upon by the
learned senior Counsel appearing on behalf of the Appellants shall
not be applicable to the facts of the case on hand. Therefore,

considering the Statement of Objects and Reasons of the
amendment in Section 148 of the N.I. Act stated hereinabove, on
purposive interpretation of Section 148 of the N.I. Act as amended,
we are of the opinion that Section 148 of the N.I. Act as amended,
shall be applicable in respect of the appeals against the order of
conviction and sentence for the offence Under Section 138 of the
N.I. Act, even in a case where the criminal complaints for the
offence Under Section 138 of the N.I. Act were filed prior to
amendment Act No. 20/2018 i.e., prior to 01.09.2018. If such a
purposive interpretation is not adopted, in that case, the object and
purpose of amendment in Section 148 of the N.I. Act would be
frustrated. Therefore, as such, no error has been committed by the
learned first appellate court directing the Appellants to deposit 25%
of the amount of fine/compensation as imposed by the learned
trial Court considering Section 148 of the N.I. Act, as amended.”
8. The answer of the first question is clear from the aforenoted ratio. The
nature of Section 143A is mandatory.
9. Next question is above that whether the accused has any say in the
application for interim compensation. Normally when some monetary
liability is to be fasten upon the accused he must be given opportunity of
hearing which in present case is given also. But looking to mandatory
section 143A, and since accused has already denied case of the prosecution
by pleading not guilty, he would not say any other except saying that the
false case is filed, he has not executed cheque or cheque was blank but filled
by complainant etc. As noted earlier, this provision amplifies that interim
compensation can be granted without holding accused guilty and as in built
mechanism under sub section 4 of Section 143A is provided for recovery of
amount of interim compensation in case of acquittal, would clearly depict
that while passing order under Section 143A accused need not to be heard
but for limited purpose. Section 143A empowers the court to impose interim
compensation upto 20% of the cheque amount. So their discretion lies with
the court and for that limited purpose accused can be given opportunity of
hearing.
10. Switch back to present case, it seems that the prior to lodging of the
complaint accused remain mute, he did not encashed opportunity to reply
statutory demand notice. Accused first time raise his voice and questions
legality of the case after he pleaded not guilty. One must not forget section
139 of the NI Act. According to Section 139 presumption runs in favour of
the holder or complainant as the case may be even before commencement of
trial. This presumption includes that the cheque in question is issued for
the discharge for any debt or other liability either whole or in part. This
presumption is itself sufficient to notify and quantify that the accused owes

liability to deposit the compensation to the tune of 20% of the cheque in
dispute.
11. Resultantly I pass the following order.
ORDER
 I allow this application and passed order against the accused

Mr._____________________ to deposit 20% of the cheque amount as
interim compensation within 60 days from today.
Date: (JUDGE NAME)

Place: DESIGNATION
JUDGE CODE GJ0000

MODEL/DRAFT ORDER FOR SUO MOTO PASSING ORDER FOR
INTERIM COMPENSATION
Order Below Exh. 1
1. Indeed, complainant has not filed any application and moved the
Court for passing order of interim compensation under Section 143A of the
NI Act but in view of the judgment deliver by Hon‘ble Punjab and Haryana
High Court in case of Anita Devi vs. Poonam Singh delivered in CRR
No.2343 OF 2019 dated 16.10.2019, which speaks that accused has no say
and cannot stand at the time of deciding the application for interim
compensation under Section 143A of the NI Act, as well as in case of Jisha
W/o Praveen vs. State of Kerala, 2019 4 KLT 558, Hon‘ble Kerala High
Court, held in para 7 that ―it is indicative on the reading of Section
143A which has newly introduce into the NI Act, the Court trying an
offence under Section 138 shall Suo Moto exercise the power. There is
no need for an application to be filed by complainant in this regards.
Likewise the section does not provide for an opportunity for the
accused to be heard‖. This Court decides to pass Suo Moto order.
2. Admittedly cause of action in the present case arise after 01.09.2018,
precisely same after insertion of section 143A. Plea of the accused is
recorded vide Exh._____ whereby accused pleaded not guilty and claimed to
be tried.
3. Considering the legislative mandate stated in Section 143A of the NI
Act and interpreted by the Hon‘ble Supreme Court for Section 148 which is
brought to statue book together and having paramateria of both the section
the ratio laid down in case of Surinder Singh Deswal @ Col. S.S. Deswal
and Others Vs. Virender Gandhi, (2020) 2 SCC 514, had occasion to
interpret nature of section 148. Hon‘ble Apex Court in paragraph 8.1 hold
that:
―8.1. Having observed and found that because of the delay tactics
of unscrupulous drawers of dishonoured cheques due to easy
filing of appeals and obtaining stay on proceedings, the object
and purpose of the enactment of Section 138 of the N.I. Act was
being frustrated, the Parliament has thought it fit to amend
Section 148 of the N.I. Act, by which the first appellate Court, in
an appeal challenging the order of conviction Under Section 138
of the N.I. Act, is conferred with the power to direct the convicted
Accused - Appellant to deposit such sum which shall be a
minimum of 20% of the fine or compensation awarded by the trial
Court. By the amendment in Section 148 of the N.I. Act, it cannot
be said that any vested right of appeal of the Accused - Appellant

has been taken away and/or affected. Therefore, submission on
behalf of the Appellants that amendment in Section 148 of the
N.I. Act shall not be made applicable retrospectively and more
particularly with respect to cases/complaints filed prior to
1.9.2018 shall not be applicable has no substance and cannot be
accepted, as by amendment in Section 148 of the N.I. Act, no
substantive right of appeal has been taken away and/or affected.
Therefore the decisions of this Court in the cases of Garikapatti
Veeraya (supra) and Videocon International Limited (supra),
relied upon by the learned senior Counsel appearing on behalf of
the Appellants shall not be applicable to the facts of the case on
hand. Therefore, considering the Statement of Objects and
Reasons of the amendment in Section 148 of the N.I. Act stated
hereinabove, on purposive interpretation of Section 148 of the
N.I. Act as amended, we are of the opinion that Section 148 of the
N.I. Act as amended, shall be applicable in respect of the appeals
against the order of conviction and sentence for the offence Under
Section 138 of the N.I. Act, even in a case where the criminal
complaints for the offence Under Section 138 of the N.I. Act were
filed prior to amendment Act No. 20/2018 i.e., prior to
01.09.2018. If such a purposive interpretation is not adopted, in
that case, the object and purpose of amendment in Section 148 of
the N.I. Act would be frustrated. Therefore, as such, no error has
been committed by the learned first appellate court directing the
Appellants to deposit 25% of the amount of fine/compensation as
imposed by the learned trial Court considering Section 148 of the
N.I. Act, as amended.‖
4. Considering the mandatory nature of Section 143A and in absence of

any other material on record to deny the case of prosecution viz-a-viz,
availability of presumption under section 139 prompt this Court to pass
following order.
ORDER
 Accused Mr. XYZ is hereby directed to deposit 20% of the cheque

amount within 60 days from today.
Date: (JUDGE NAME)

Place: DESIGNATION
JUDGE CODE GJ0000

MODEL/ DRAFT ORDER FOR TAKING BAIL AND BOND DURING TRIAL
Order below Exh.1
1. In Modern Denim Limited Thro Arun Triloknath Bhargava vs.

State of Gujarat, 2015 (3)GLH 668, the Hon‘ble Gujarat High Court issued
slew of directions for immediate disposal of case under Section 138 of the NI
Act. Also permit the court trying the case under NI ACT to obtain bail bond
of the accused for his appearance. Relevant para is below:
“4. Court should direct the accused, when he appears to furnish a

bail bond, to ensure his appearance during trial and ask him to take
notice under Section 251 Cr.P.C. to enable him to enter his plea of
defence and fix the case for defence evidence, unless an application
is made by the accused under Section 145(2) for re-calling a witness
for cross-examination.”
2. Following the fiat and considering the aspect of smooth and early trial
and to ensure the presence of the accused throughout the trial I deem it fit
to take bail and bond of the accused and thus I pass the following order.
ORDER
 Accused Mr. ___________________ hereby ordered to execute personal

bond of Rs.______________ with local surety of like amount before the
next date of trial.
 Accused is directed submits his permanent residential and

commercial/professional/occupational address, landline and mobile
number if any for as much email address.
Date: (JUDGE NAME)

Place: DESIGNATION
JUDGE CODE GJ0000

MODEL DRAFT ORDER FOR CONDUCTING TRIAL SUMMONS TRIAL
Order below Exh.1
1. Perusing the fact that the cheque amount in the present case is large
and huge and complainant has already filed affidavit in support of his
complainant which is no less than an affidavit in chief as per section 145 of
the NI Act and taking note of intricacies and the disputed question involved
in the present case, i deem it fit to conduct trial of the case as a summons
trial. One may not forget that section 139 of the NI Act caste heavy burden
of the accused to disprove existence of debt and/or cheque etc., therefore
accused may required to enter into details cross examination of the
complainant and his witness if any. Must it be noted that the complaint has
already filed full-fledged affidavit in lieu of chief examination. In these
circumstances, I order to conduct the trial of the present case as summons
trial.
Date: (JUDGE NAME)

Place: DESIGNATION
JUDGE CODE GJ0000

MODEL DRAFT FOR FURTHER STATEMENT OF ACCUSED U/S 313
નોંધ: નીચે જણાલેરા વલારો ભાત્ર એક ઉદાશયણ રૂ઩ે યજુ કયલાભાાં
આલેર છે . તભોએ વલારો તભાયી વભક્ષ વોગાંદનાભાાં ઩ય વયત઩ાવ રૂ઩ે
યજુ કયલાભાાં આલેર પય

ુ ાલા ઉ઩યથી તૈમાય કયલાના યશેળે.
પોજદાયી કામયયીતી વાંહશતાની કરભ 313 (1) (ક) અન્લમે આયો઩ીન ાંુ આંક –
નીચે નનલેદન...
પોજદાયી કેવ નાંફય/ /
વલાર: આ કાભેના પહયમાદી ____________ એ આંક ,____ થી આ
કામદાની કરભ 145 (1) અન્લમે વોગાંદનાભાાં ઩ય વયત઩ાવ રૂ઩ે
પયુ ાલો યજુ કયે ર છે તેભાાં તેઓએ જણાલેર છે કે તભો આયો઩ી
પયીમાદીના ઘયે નભત્રતાના નાતે આલતા જતાાં શોલાથી તભોને વાયી
યીતે ઓ઱ખે છે આ અંગે તભોએ શ ાંુ કશેવ ાંુ છે ?
જલાફ:
વલાર: નલળે઴ભાાં પયીમાદીએ તેઓના પયુ ાલાભાાં જણાલેર છે કે તભો
આયો઩ી પયીમાદીના ઘયે આલેરા અને જણાલેર કે , તાત્કારીક શાથ
ઉછીના રૂ._________/,ની જરૂય છે . તો ઉછીના આ઩ો અને તે
રેણી યકભ ઩ેટે તભોએ ચેક રખી આ઩ેર. આ અંગે તભો એ શ ાંુ
કશેવ ાંુ છે ?
જલાફ:
વલાર: નલળે઴ભાાં પયીમાદીએ તેઓના પયુ ાલાભાાં જણાલેર છે કે તભો
આયો઩ીએ એલો નલશ્વાવ આ઩ેર કે તભો ચેક ફેન્ક ભાાં બયળો તો
નાણાાં ભ઱ી જળે તેભ કશી _________ ફેન્કનો ચેક પયીમાદી રૂફરૂ
નલગતો બયી, વશી કયી તા.________ ના યોજનો ચેક નાં. ________
આ઩ેર, આ અંગે તભોએ શ ાંુ કશેવ ાંુ છે ?

GURENDERRANA(
Advoc
ate
)
ADDL.SECRETARY
M: |
Ch.
no- ,Dwar
kaCour
t,New Del
hi

NI Act Landmark Judgment

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GURENDERRANA

SR. SUBJECTS PAGE NO.

1 OBJECT OF N.I. ACT 5

RECENT AMENDMENT IN ACT – HIGHLIGHTS -

4 SPEEDY AND EXPEDITIOUS DISPOSAL OF SUCH CASES 22

6 SECTION 148 OF N I ACT 34

DRAWING OF A CHEQUE/ HOLDER IN DUE COURSE /

11 PRESUMPTION OF LIABILITY U/S. 139 46

CHEQUE NOT ISSUED FROM THE ACCOUNT OF THE

14 RETURNING OF THE CHEQUE UNPAID 70

NO BAR FOR THE DRAWER OF A CHEQUE TO GIVE

17 RIGHT OF ACCUSED TO CROSS EXAMINATION 79

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 1 of 189

19 COMPOUNDING OF OFFENCE - COSTS 82

20 SECURITY CHEQUE- STOP PAYMENT CASES 84

21 CLOSURE OF ACCOUNT CASES 89

MERE DENIAL OF DEBT NOT SUFFICIENT TO ACQUIT

SECOND OR SUCCESSIVE DEFAULT IN PAYMENT OF

24 TWO CONSECUTIVE NOTICES 96

PRACTICE AND PROCEDURE - MEDIATION IN

WITHDRAWAL OF COMPLAINT & NON-EXECUTION OF

BURDEN ON DRAWER/ADDRESSEE TO PROVE NON-

29 DEATH OF COMPLAINANT UNDER NI ACT, 1881 122

30 CONDONATION OF DELAY 123

31 DE-NOVO TRIAL 125

32 SUBSTITUTION OF COMPLAINANT 126

33 FILLING THE PARTICULARS OF BLANK CHEQUE 127

WHETHER THE ACCUSED ON PUTTING UP APPEARANCE

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 2 of 189

42 CR.P.C. SEC. 256 146

43 TWO COMPLAINTS 150

44 CONDITIONAL SUSPENSION OF SENTENCE 150

45 ADVOCATE FEES IN PERCENTAGE CHQUE BOUNCE 150

46 RECOVERY OF FINE AND COMPENSATION 151

47 CR.P.C. SEC. 427 154

CHEQUE ISSUED PURSUANT TO THE ORDER OF THE

49 AMENDMENT IN COMPLAINT 155

50 RIGHT OF ACCUSED TO PRODUCE EVIDENCE 156

51 MORE THAN ONE EXAMINATION U/S. 313, CR.P.C. 159

52 CALCULATING THE PERIOD OF ONE MONTH 161

53 LOST OF CHEQUE 162

ORDER OF MORATORIUM IS PASSED U/S INSOLVENCEY

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 3 of 189

57 UNACCOUNTED MONEY 169

58 PRODUCTION OF THE ACCOUNT BOOKS/CASH BOOK 170

59 EVIDENCE ON AFFIDAVIT 171

60 ADDITION OF PARTY AND CR.P.C. SEC 319 173

61 PROOF OF BANKING DOCUMENT 174

62 MODEL NOTICE/ORDER/FS 177-189

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 4 of 189

The object of this amendment Act is:,

1.2 Electronics Trade & Technology Development Corporation Ltd.,

―Para 6 The object of bringing Section 138 on statute appears to be to

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 5 of 189

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 6 of 189

1.6 IMPORTANT INGREDIENTS OF S. 138

A mere presentation of delivery of cheque by the accused would not

The offence of dishonor of cheque has been made cognizable only on a

DIGEST ON Sec. 138 N.I. ACT, 1881 Page 7 of 189

1.7 VALIDITY OF CHEQUE