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Judgment
H.R. Shelat, J.—The petitioner, against whom a Criminal Case No. 4061 of 1997 is filed in the Court of the Judicial Magistrate (F. C.) at
Bhavnagar, relating to the offence punishable u/s 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ""the Act""), prays for
setting aside the common order dated June 15, 1998, passed rejecting his applications, exhibits 6, 8 and 10 for quashing of the complaint, and his
discharge, etc.
The question of vital importance that arises for consideration is, to which bank (paying or collecting), the cheque is to be presented within six
months or during its validity period for legal and valid initiation of criminal action u/s 138 of the Act ?
facts, necessary for disposal of this application, may, in brief, be stated. The petitioner and opponent No. 1, were having legal transactions.
When account was settled, Rs. 1,00,000 were found due to the opponent No. 1 from the petitioner. The petitioner therefore, in order to fulfil his
obligation to pay the amount, issued the cheque for Rs. 1,00,000 on January 24, 1997. The cheque was drawn on the branch of Veraval
Mercantile Co-operative Bank Ltd., Veraval, at Junagadh (for short, ""the paying bank""). The opponent No. 1 presented the cheque on July 24,
1997, at Bhavnagar Nagrik Sahakari Bank Ltd. at Bhavnagar (for short, ""the collecting bank""). On the same day, the collecting bank sent the
cheque to the paying bank, i.e., drawee at Junagadh. The cheque was received by the paying bank on July 28, 1997. The cheque was on the same
day returned on the ground that the account was closed. On receipt of the intimation that the cheque was dishonoured, the opponent No. 1 on
August 11, 1997, gave a notice to the petitioner calling upon him to make the payment. The payment, after the receipt of the notice, was not made.
The opponent No. 1, therefore, on September 10, 1997, filed the complaint in the court of the Chief Judicial Magistrate at Bhavnagar, which was
later on assigned to the Judicial Magistrate (F.C.) at Bhavnagar for hearing and disposal in accordance with law. As the complaint was registered,
summons against the petitioner was issued. After being served with the summons, the petitioner appeared before the court of the judicial
Magistrate (F.C.) at Bhavnagar on October 9, 1997. Studying the allegation against him, he filed an application exhibit 6 on October 7, 1997,
requesting the court to discharge him holding that the court was having no jurisdiction. On December 24, 1997, another application exhibit 8 was
also filed by the petitioner requesting the court to dismiss the complaint and discharge him as the cheque was not presented within six months, the
period of its validity. Lastly on January 21, 1998, the petitioner presented the third application, exhibit 10 requesting the court to discharge him u/s
245(2) of the Criminal Procedure Code because the cheque was presented after the expiry of the period of six months. The learned judicial
Magistrate at Bhavnagar heard all the three applications together and by a common order dated June 15, 1998, rejected all the three applications,
mainly on the ground that the question of want of jurisdiction and bar of limitation owing to validity period of six months could be decided after the
evidence was recorded in the case. Against that order, the present application is filed for the aforesaid relief.
On several grounds, the order of the learned Judicial Magistrate, is assailed, but at the time of submissions before me, the learned advocate
representing the petitioner tapered off his submissions confining to the only point relating to the presentment of a cheque. According to him, the
cheque is required to be presented at the paying bank (drawee) and not the collecting bank. In this case, the cheque dated January 24, 1997,
ought to have been presented at the paying bank, within the period of six months, instead the cheque was presented on July 24, 1997, at the
collecting bank. The said bank forwarded the cheque to the paying bank on the same day and the paying bank received the same on July, 17.
When accordingly the cheque was presented to the paying bank on July 28, 1997, it is clear that the cheque was presented after the expiry of six
month period. The cheque had then become a stale cheque. When the cheque was, thus, presented to the paying bank, after the expiry of the six
month period, the complaint lodged relating to the offence punishable u/s 138 of the Act is, on that count, liable to be quashed, and the petitioner
deserves a clear discharge. In reply to such submission, Dagli, learned advocate for opponent No. 1 has submitted that the cheque, if presented at
the collecting bank, it would be a proper and valid presentation in the eye of law. It is not necessary that the cheque has to be presented within six
months at the paying bank. Looking to the nature of money transactions, the holder of the cheque can present the cheque at the bank with which
he is having the account, and that the collecting bank would then send the cheque to the paying bank for realisation of the amount. If the contention
of the petitioner is accepted, it would frustrate the realisation of the amount and the drawer of the cheque committing wrong would go sect free. If
the collecting bank, to which the cheque is presented within the period of validity, or six months whichever is earlier, delays in sending the cheque,
or even if there is no delay on its part, but delay on the part of the postal authority for one or another reason is caused in delivering the cheque to
the paying bank within time, the action to be taken. against the defaulting party, i.e., drawer of the cheque u/s 138 of the Act will be frustrated,
which can never be the intention of Parliament. The interpretation of section 138 must therefore be meaningful in promoting the object.
Interpretation favouring the wrongdoer will certainly defeat the object of section 138 of the Act, and that may grind down the faith of the
businessmen and others transacting through banks.
Better it would be, to refer to the relevant provision of the Act, before the rival contentions with regard to the presentment of the cheque is dealt
with :
Dishonour of cheque for insufficiency, etc., of funds in the of account. - 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 from out of that account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid, either because of 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 that bank, such person shall be
deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term
which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both :
Provided that nothing contained in this section shall apply unless, -
(a) the cheque has been presented to be 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;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by
giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of
the cheque as unpaid; and
(c) the drawer of such cheque fails to make the 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.
Explanation. - For the purposes of this section debt or other liability means a legally enforceable debt or other liability.
Cognisance of offences. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), -
(a) no court shall take cognisance of any offence punishable u/s 138 except upon a complaint, in writing made by the payee or, as the case ma be,
the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138;
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable u/s 138.
A perusal of both the sections makes it clear that if the cheque is issued for payment of money to another person so as to discharge his
obligation of clearing out the legal debt, the same has to be presented within a period of six months or within the period of its validity, whichever is
earlier at the bank on which it is drawn. If accordingly, the cheque is presented, and the same is dishonoured, owing to insufficiency of funds or that
it exceeds the amount arranged to be paid from that account by an agreement made with that bank, the payee or the holder in due course of the
cheque has to make a demand for payment giving a notice in writing within fifteen days of the receipt of the information from the bank regarding the
return of the cheque. If within fifteen days of the receipt of the notice, the drawer fails to make the payment of the cheque, a complaint within one
month thereof has to be filed. If accordingly, the cheque is not presented, or notice is not issued or the complaint is not filed, and any of the periods
specified in the sections is allowed to expire or be curtailed, and then the complaint is filed, the same cannot be entertained, it will be liable to be
quashed for non-fulfilment of one or the other requirement of the abovestated provision.
In the case on hand, the cheque was entrusted to the collecting bank, on the last day of the six month period and the paying bank received the
cheque on July 28, 1997, after the period of six months was over. The paying bank therefore refused to make the payment on the ground that the
cheque had become stale, and secondly the drawer of the cheque had closed the account. As held in the case of NEPC Micon Limited and Others
Vs. Magma Leasing Limited, , the meaning of the words ""account closed"" is that the cheque is returned as unpaid on the ground that the amount of
money standing to the credit of that account is insufficient to honour the cheque and that would also attract section 138. The crucial points raised
for my consideration are, where the cheque is required to be presented, whether at the collecting bank or at the paying bank and whether
presentment in this case is in consonance with section 138 of the Act. It is pertinent to note that in the earlier portion of section 138, the words ""a
banker"", ""returned by the bank unpaid"", ""with that bank"" appear and then in proviso (a) to that section, the words ""to the bank"" appear. It may be
mentioned that for the sake of convenience, the words quoted are underlined in the section reproduced hereinabove. Earlier the article ""a"" and in
the latter part the article ""the"" are used in the provision. The same are indicative of the bank qua presentment of a cheque. The article ""a"" is called
the ""indefinite article"". It does not point to any definite or particular person, place or thing. The article ""the"" refers to some definite or particular
place, person or thing. If a particular person, place or thing is referred earlier using article ""a"" and subsequently the same place, person or thing is to
be referred to, the same would be referred to using the article ""the"". The article ""the"" subsequently appearing envisions the same place, person or
thing referred to earlier using the article ""a"". In the earlier portion of section 138 of the Act, the word ""banker"" is prefixed by the article ""a"" and
subsequently in proviso (a) to the said section, the word ""bank"" is prefixed by the article ""the"". The expression ""the bank"", therefore, unequivocally
and without any ambiguity or confusion indicates that the banker referred to earlier is envisaged in proviso (a) to section 138. Reading the whole
section, no other construction is possible or emerges. In order to know which bank is referred to, the opening words and later on the aforesaid
words ""the bank unpaid"" and ""with that bank"" are the good, definite and sure guide. In the opening portion of section 138, the cheque, drawer,
account with, suffixing abovequoted words ""a banker"" are mentioned. Thereafter there is a mention about payment, account, discharge, liability and
return of a cheque suffixing the abovequoted word ""by the bank"" unpaid, and a little later about agreement is mentioned suffixing the abovequoted
words with ""that bank"". All these words contemplate and indicate that the presentment of the cheque must be at the bank on which the cheque is
drawn, i.e., the drawee or paying bank. Subsequently, as mentioned hereinabove, the words ""the bank"" in proviso (a) to section 138 are used. Use
of the article ""the"" prefixing the Word ""bank"" in proviso (a) to section 138, therefore, with all certainty and indubitably indicates the ""bank"" referred
to in the earlier portion of section 138, viz., the drawee or paying bank on which the cheque is drawn. I also for my such view find support in the
decision of the Punjab and Haryana High Court rendered in the case of Om Parkash v. Gurcharan Singh [1998] 92 Comp Cas 398.
Further, I am of the view that section 138 of the Act, being the penal provision under which the defaulting party can be prosecuted, and if held
guilty can be punished has to be interpreted strictly so that no one can ingeniously or insidiously or guilefully or strategically be prosecuted. The
proviso (a) to section 138 mandates that the cheque has to be presented to the bank and, therefore, the meaning of ""presentation"" cannot be lost
sight of. The presentation must entail realisation of the amount or payment of the sum of the cheque. It is not a simple presentation, i.e., entrustment
or a ""tender"" bereft of payment, because section 138 of the Act gives rise to the penal action when on the cheque being presented, the same is not
found honourable for insufficient fund, or the amount of the cheque exceeds the amount to be paid from the account by an agreement made with
that bank, i.e., the paying bank. The cheque in view of this penal provision therefore must be presented within the period of its validity to the paying
bank, namely the bank on which the cheque is drawn because the collecting bank cannot on receipt of the cheque make the payment or dishonour
the cheque. It has to forward the cheque to the paying bank, collect the sum and then pay to the holder of the cheque or payee or onward transmit
the intimation received. The collecting bank is, therefore, the agent of the payee, and on his behalf it collects the money from the paying bank and
sending the cheque or receives intimation and informs the payee. In short, payment is made only when the cheque is received by the paying bank
within six months or within the period of its validity. The cheque amount is realised by the payee when the cheque reaches the paying bank within
six months or within the period of validity; and if the paying bank receives it after six months or after the period of validity expires, it does not pay,
holding that the cheque is a state cheque. The representation therefore entails realisation of the sum only when the cheque is received by the paying
bank. When accordingly presentation entails payment or realisation of the cheque amount, the words ""presented to the bank"" appearing in proviso
(a) to section 138 of the Act irresistibly conveys that the presentment of the cheque is to be made within six months or within the period of validity
at the paying bank and not at the collecting bank. If the cheque is received by the paying bank after the expiry of the aforesaid period for whatever
reason, the presentment of the cheque can be said to be late and dehors the law not fulfilling one of the requirements for initiation of criminal action.
The presentation to the collecting bank is therefore of no value. The fact of giving the cheque to the collecting bank can at best be termed
entrustment"" or ""tender"" for realisation of the sum presenting to the paying bank, and in no case it can be termed presentation.
For just and meaningful interpretation, other relevant provisions of the Act can be looked at. One cannot overlook section 72 of the Act. It
provides that subject to the provisions of section 84, a cheque must in order to charge the drawer be presented at the bank upon which it is drawn
before the relation between the drawer and his banker has been altered to the prejudice of the drawer. This provision contemplates different
contingencies and exigencies, one of which is the possibility of the closure of the account by the drawer of the cheque after the period of its
currency or negotiability expires. The provision therefore dictates that the presentment of the cheque must be at the bank on which it is drawn, for
presentment at any other bank or branch will be an entrustment or a tender. The presentment of cheque at the bank on which it is drawn may be
either in person or through the collecting bank. This provision is also a pointer to the consequences that follow on failure to present the cheque at
the appropriate or specific bank or branch. For the application of section 72, other conditions to fasten the drawer with liability must be satisfied,
but mention and discussion about the same being foreign to the issue in question, it is not necessary to make a mention thereof and discuss in detail.
A conjoint reading of both sections 138 and 72 make it abundantly clear that the cheque is required to be presented at the bank on which the same
is drawn if the drawer is to be held liable. Of course, civil liability may remain alive, but the criminal liability would not, if the presentment is not
made within six months or the period of validity at the bank on which the cheque is drawn. The word ""presentment"", therefore, serves no purpose
if the cheque is presented at any other bank or branch as it amounts to ""entrustment"" or ""tender"" and not ""presentment"". In view of such emerging
effect of the provisions of the Act, the cheque presented at the collecting bank is not the presentment of the cheque within the meaning of section
138.
The learned advocate representing the opponent No. 1 has drawn my attention to the three authorities for anxious consideration. All the three
authorities, being on different points, are not applicable. In Mallappa Sangappa Desai Vs. Laxmanappa Basappa Whoti, , the High Court of
Karnataka had to decide the issue whether the cheque can be presented again and again during the period of validity, if once the same is
dishonoured. In that connection, it is held that the payee, in order to give an opportunity to the drawer to make good the deficiency, can present
the cheque more than once for encashment and the notice should be issued within fifteen days of the receipt of the information about the return of
the cheque on the ground of ""insufficiency of fund"" notwithstanding the fact that the cheque might have been returned earlier also with similar
endorsement. The notice about the return of the cheque can be given on the first occasion or the payee may defer to giving the notice and grant one
or more than one opportunity to the drawer to make the payment by presenting the cheque again or in succession for the second or third or fourth
time and accordingly for further times, i.e., repeatedly but of course within the period of its validity and not beyond it, and then may even give
notice selecting the last return of the cheque in sequence or series, not rendering the notice contrary to section 138. The point about presentment of
a cheque at a particular bank being not the issue before the High Court of Karnataka, and the decision being also not on the same point, it cannot
be pressed into service by opponent No. 1. For the same reason, the decision rendered by the Andhra Pradesh High Court in Syed Rasool and
Sons v. Aildas and Co. [1992] Crl LJ 4048 (AP) : [1993] 78 Comp Cas 738 cannot help opponent No. 1. Before the Madras High Court, in K.
S. Subbaraman v. Iyyammal [1999] 2 Cri 11 (Mad) : [2000] 100 Comp Cas 177 the question was not to which bank the cheque should be
presented, but it was with regard to the question whether presentment was made within the period of six months. The cheque in that case was
issued on June 25, 1993, and was presented at the collecting bank on December 27, 1993. Rejecting the contention that the cheque was
presented two days late, it is held that on December 25, 1993 and December 26, 1993, the bank was closed owing to holidays and the next
working day was December 27, 1993. If accordingly, on the next working day when the bank reopens after holidays the cheque is presented, it
would amount to the presentment within its validity period, and the complaint if filed will be sustainable. What is therefore laid down is that if the
period of six months or the period of validity expires on the day or during the period the bank is closed owing to holidays or weekly off, the
presentment of the cheque if made on the next working day when the bank reopens, will be valid and effective presentation and not the
presentation barred by the period of limitation provided in section 138. Here, in this case, presentment at the paying bank is not delayed because
of the holidays in the bank or the cheque was not presented on the next working day after the bank reopened. When thus the point to be
determined, in this case, was a point foreign to the case before the Madras High Court the decision rendered in K. S. Subbaraman''s case [1999]
2 Cri 11 (Mad) : [2000] 100 Comp Cas 177 is not applicable to the case on hand.
Learned advocate representing opponent No. 1 at this stage faced with such situation contends what should then be done by the payee of the
cheque if the cheque is returned holding that it became a stale cheque or that the drawer of the cheque has closed the account. He, developing the
contention, submits that there may be a delay on the part of the collecting bank in sending the cheque to the paying bank though tendered within the
period of validity, or because of the delay on the part of the postal authority the cheque may reach the paying bank after the expiry of the period of
validity, or six months as the case may be, the holder of the cheque in that case would be helpless. The contention must fail. In that case initiation of
criminal action in view of non-fulfilment of the requirements of section 138 of the Act would certainly be barred; but it will be open to the payee to
initiate civil action filing a suit for the recovery of the cheque amount subject to the law of limitation. The civil court will certainly pass the decree if
the case alleged in the plaint is proved. The payee qua the recovery of the sum will not be helpless. It may however be stated that when the cheque
is required to be presented at the paying bank before it becomes a stale cheque, the holder of the cheque or the payee has to present the cheque
well in advance, considering the exigencies of contingencies or delay that is likely to occur on the part of the collecting bank or the postal
authorities. He cannot wait till the last day of the period of validity for presentment of the cheque, because proviso (a) to section 138 makes it
abundantly clear that if presentment of a cheque is not made within six months from the date on which the cheque is drawn or within the period of
its validity whichever is earlier, the cause to lodge the complaint does not subsist or live on, for in that case the offence Cannot be said to have
been constituted and the payee or holder of a cheque loses his right, if there be any, to initiate criminal action.
In this case, presentment of the cheque to the paying bank is, in view of the abovestated dates, not made within six months of the date of the
cheque. The presentment is late by four days. The cheque, therefore, became a stale cheque and the same therefore, bounced without honouring
the same. As the presentment is not in consonance with section 138 of the Act, and is late by four days, one of the essential requirements of
section 138 of the Act for initiating penal action is not satisfied. When that is so, the complaint lodged cannot be entertained, the same has to be
quashed, and the petitioner, who is the accused, in that case, is required to be discharged. The learned Judicial Magistrate lost sight of the above
stated law and fell into error in rejecting the applications exhibits 8 and 10 despite the fact that he was, in view of the decision dated January 21,
1998, of this court in Shaw Wallace and Co. v. State of Gujarat - Criminal Revision Application No. 452 of 1997, dated January 21, 1998,
having the jurisdiction, as the cheque was entrusted to the bank at Bhavnagar and he received the intimation at Bhavnagar, and right in rejecting the
application exhibit 6.
For the aforesaid reasons, the cheque is required to be presented at the paying bank, i.e., drawee within the period of six months or the period
of validity whichever is earlier for valid initiation of the criminal action, i.e., lodging of the complaint against the drawer. When this is the only
possible interpretation, it cannot be said that the faith of those dealing with others through the bank will be frustrated. It is also not open to contend
that the payee will be helpless. When in this case the cheque is not presented at the paying bank within six months, the application is required to be
allowed, and the complaint, being Criminal Case No. 4061 of 1997, being not tenable for want of non-subsistence of cause of action, is not only
required to be quashed, but the petitioner also deserves a discharge, allowing the applications exhibits Nos. 8 and 10. In the result the application
is partly allowed. The orders below exhibits Nos. 8 and 10 are hereby set aside. Both the applications are allowed, and the Criminal Case No.
4061 of 1997, pending on the file of Judicial Magistrate (F.C.) at Bhavnagar, is hereby quashed, and the petitioner is ordered to be discharged.
The final order below application exhibit 6 is maintained. Rule to the aforesaid extent is made absolute.