In N. Harihara Krishnan v. J.
Thomas [N. Harihara Krishnan v. J. Thomas,
(2018) 13 SCC 663 adverting to the ingredients of Section 138 of the Negotiable
Instruments Act, the Hon’ble Apex Court observed as follows:
“Obviously such complaints must contain
the factual allegations constituting each of the ingredients of the offence
under Section 138. Those ingredients are: (1) that a person drew a
cheque on an account maintained by him with the banker; (2) that such a
cheque when presented to the bank is returned by the bank unpaid; (3)
that such a cheque was presented to the bank within a period of six months from
the date it was drawn or within the period of its validity whichever is
earlier; (4) that the payee demanded in writing from the drawer of the
cheque the payment of the amount of money due under the cheque to payee; and (5)
such a notice of payment is made within a period of 30 days from the date of
the receipt of the information by the payee from the bank regarding the return
of the cheque as unpaid.”
The provisions of Section 141
postulate that if the person committing an offence under Section 138 is a
company, every person, who at the time when the offence was committed was in
charge of or was responsible to the company for the conduct of the business of
the company as well as the company, shall be deemed to be guilty of the offence
and shall be liable to be proceeded against and punished.
In the absence of the company
being arraigned as an accused, a complaint against the appellant was therefore
not maintainable. The appellant had signed the cheque as a Director of the
company and for and on its behalf. Moreover, in the absence of a notice of
demand being served on the company and without compliance with the proviso to
Section 138, the High Court was in error in holding that the company could now
be arraigned as an accused. Himanshu
v. B. Shivamurthy, (2019) 3
of Section 138 of the Negotiable Instruments Act is to infuse credibility to
negotiable instruments including cheques and to encourage and promote the use
of negotiable instruments including cheques in financial transactions. The
penal provision of Section 138 of the Negotiable Instruments Act is intended to
be a deterrent to callous issuance of negotiable instruments such as cheques
without serious intention to honour the promise implicit in the issuance of the
Having regard to the object of Section
138 of the Negotiable Instruments Act, a prosecution based on a second or
successive default in payment of the cheque amount is not impermissible simply
because no statutory notice had been issued after the first default and no
proceeding for prosecution had been initiated. As held in MSR Leathers v. S.
Palaniappan, (2013) 1 SCC 177, there is 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 time or successive times. Bir Singh v. Mukesh Kumar,
(2019) 4 SCC 197.
scheme of the prosecution in punishing under Section 138 of the Negotiable
Instruments Act is different from the scheme
of Cr.P.C. Section 138 creates an offence and prescribes punishment. No
procedure for the investigation of the offence is contemplated. The prosecution
is initiated on the basis of a written complaint made by the payee of a cheque.
Obviously such complaints must contain the factual allegations constituting
each of the ingredients of the offence under Section 138. Those ingredients are
(1) that a person drew a cheque on an account maintained by him with the banker;
(2) that such a cheque when presented to the bank is returned by the bank
unpaid; (3) that such a cheque was presented to the bank within a period of six
months from the date it was drawn or within the period of it validity whichever
is earlier; (4) that the payee demanded in writing from the drawer of the cheque,
the payment of the amount of money due under the cheque to payee; and (5) such
a notice of payment is made within a period of 30 days from the date of receipt
of the information by the payee from the bank regarding the return of the cheque
as unpaid. It is obvious from the scheme of Section 138 of the Act, that each
one of the ingredients flows from a document which evidences the existence of
such an ingredient. The only other ingredient which is required to be proved to
establish the commission of an offence under section 138 is that inspite of the
demand notice referred to above, the drawer of the cheque failed to make the
payment within a period of 15 days from the date of the receipt of the demand.
A fact which the complainant can only assert but not prove, the burden would
essentially be on the drawer of the cheque to prove that he had in fact made
the payment pursuant to the demand. N.
Harihara Krishnan v. J. Thomas,
2017 (101) ACC 690.
the case of Suman Sethi v. Ajay K. Churiwal, (2000) 2 SCC 8, it was
held as under:
“It is a well settled principle of law
that the notice has to be read as a whole. In the notice, demand has to be made
for the “said amount”, i.e. the cheque amount. If no such demand is made, the notice
no doubt would fall short of its legal requirement. Where in addition to the “said
amount” there is also a claim by way of interest, cost etc. whether the notice
is bad would depend on the language of the notice. If in a notice while giving the
break-up of the claim, the cheque amount, interest, damages etc. are separately
specified, other such claims for interest, cost etc. would be superfluous and
these, additional claims would be severable and will not invalidate the notice.
If, however, in the notice an omnibus demand is made without specifying what
was due under the dishonoured cheque, the notice might well fail to meet the
legal requirement and may be regarded as bad.”
case of Suman Sethi v. Ajay K. Churiwal, (2000) 2 SCC 8, the
Hon’ble Supreme Court has also referred to its judgment in the case of Central Bank of India v. Saxons Farms, 1999 (39) ACC 891 (SC) and
held that the object of the notice is to give a chance to the drawer of the cheque
to rectify his omission. Though in the notice demand for compensation,
interest, cost etc. is also made, the drawer will be absolved from his
liability under Section 138 if he makes the payment of the amount covered by the
cheque of which he aware within 15 days from the date of receipt of the notice
or before the complaint is filed. Hari
Mohan Agrawal v. State of U.P.,
2017 (101) ACC 843.
Proviso to Section 138 is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonor of a cheque can constitute and offence and become punishable. The first condition is that the cheque ought to have been presented 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. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of such a cheque should have failed to make payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque. Virendra Kumar Gupta v. State of U.P., 2016 (96) ACC 729.
In MMTC Ltd. v. Medchl Chemicals and Pharma (P) Ltd., (2002) 1 SCC 234, it was held as under:
“Even when the cheque is dishonoured by reason of stop-payment instructions by virtue of Section 139 of the Negotiable Instruments Act, the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the “stop-payment” instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. A court cannot quash the complaint on this ground.” Pulsive Technologies Private Limited v. State of Gujarat, (2014) 13 SCC 18.
(1)An offence under Section 138 of the Negotiable Instrument Act is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.
(2)Cognizance of any such offence is however forbidden under section 142 of the Negotiable Instrument Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.
(3)The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if —
(a)the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue.
(b)If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonor of the cheque, and
(c)If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.
(4)The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.
(5)The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant.
(6)Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.
(7)The general rule stipulated under Section 177 CrPC applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the court within whose jurisdiction the dishonor takes place except in situations where the offence of dichonour of the cheque punishable under Section 138 is committed alongwith other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof. Dashrath Rupsingh Rathod v. State of Maharashtra, 2014 (86) ACC 882.