Applicability of BNSS u/s 138 NI complaint and its effect

 

Applicability of BNSS u/s 138 NI complaint and its effect

 

Bhartiya Nyay Sanhita 1923 (BNS), Bhartiya Nyay Suraksha Sanhita 1923 1923(BNSS) and Bhartiya Sakshya Adhiniyam 1923 (BSA) has been notified on 01.07.2024 and as the aforesaid enactment has come into effect on that date. As regards [procedure what has not been specified clearly u/s 138-148 of Negotiable Instruments Act, Cr.PC was applicable. However, corresponding provisions of the aforesaid enactments shall now be applicable and the variance, if any is provided for in the new enactments the same shall also be applicable.

A recent judgment rendered by Delhi High Court in a matter captioned as Neeti Sharma vs Saranjit Singh CRL.M.C. 2202/2025 shall be worthy of reference. In fact, in a complaint preferred before ld Judicial magistrate, 1^st Class, captioned as Saranjit Singh vs. Neeti Sharma, the Petitioner was served with a notice, under section 223 of BNSS, thereby, giving opportunity of hearing in the aforenoted complaint.

                        CONTENTIONS OF PETITIONER

(1)     The trial court had misdirected itself by issuing notice to Petitioner as a Proposed Accused, without applying its judicial mind to the contents of the complaint by first examining the Complainant and its witnesses on oath or examining the affidavits of the Complainant.

(2)     The Impugned notice is pre-mature and contrary to the scheme of Section 223(1) of BNSS, which mandates that the complainant must first be examined, and judicial application of mind must precede the issuance of notice to any proposed accused. Bypassing this safeguard renders the process procedurally defective.

(3)  The complaint on the face of it lacks the necessary material "Impugned notice". Particulars and foundational facts to sustain even a prima facie case under Section 138 of the NI Act. The Trial Court ought to have dismissed the complaint at the threshold without proceeding to invoke Section 223(1).

(4)     The High Court of Kerala in Suby Antony v. Judicial First-Class Magistrate-III 2025 SCC OnLine Ker 532   and Others and High Court of Karnataka in Basanagouda R. Patil Vs Shivananda 2024 SCC OnLine Kar 96 has held that the summoning order has to contain reasons should be a speaking one. If it fails to demonstrate application of judicial mind or engagement with the procedural safeguards envisaged under Section 223, the summoning order shall be bad in law.

(5)   Reliance was also placed on the judgment of the Supreme Court on Sant Lal Gupta & Ors Vs Modern Co-operative Group Housing Society Limited & Ors (2010) 13 Supreme Court Cases 336.

The impugned order under challenge read as under:

 

"Fresh file received by way of assignment. It be checked and registered.

Ld. Counsel for the complainant has submitted that the date of filing in the present matter is 23.12.2024 and the present matter has been instituted after 01.07.2024 and the cognizance has to be taken as per BNSS 2023.

Section 223 of BNSS mandates that before taking cognizance of offence on a complaint, the accused shall be given an opportunity of being heard.

Accordingly, issue notice to the proposed accused on filing of PF returnable on 03.03.2025."

According to the petitioner, the above order as impugned fails the test of BNSS on the basis of the interpretation of Section 223 of BNSS, which, being a new provision, incorporates a procedural safeguard and the same was not found in the corresponding provision in Cr.PC. For further reference, Section 223 of BNSS may be reproduced for ready reference:

"223. Examination of complainant.

(1) A Magistrate having jurisdiction while taking cognizance of an offence on complaint shall examine upon oath, the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses, and also by the Magistrate:

Provided that no cognizance of an offence shall be taken by the Magistrate without giving the accused an opportunity of being heard:

Provided further that when the complaint is made in writing, the Magistrate need not examine the complainant and the witnesses-

(a) if a public servant acting or purporting to act in the discharge of his official duties or a Court has made the complaint; or

(b) if the Magistrate makes over the case for inquiry or trial to another Magistrate under section 212:

Provided also that if the Magistrate makes over the case to another Magistrate under section 212 after examining the complainant and the witnesses, the latter Magistrate need not re-examine them.

(2) A Magistrate shall not take cognizance on a complaint against a public servant for any offence alleged to have been committed in course of the discharge of his official functions or duties unless-

(a) such public servant is given an opportunity to make assertions as to the situation that led to the incident so alleged; and

(b) a report containing facts and circumstances of the incident from the officer superior to such public servant is received."

In contrast, the corresponding provision of Section 200 in the Code of Criminal Procedure 1973 may also need perusal. It does not stipulate or mandate for affording an opportunity of hearing to the accused, before taking cognizance.  In order to appreciate the distinction between Section 223 of BNSS and Section 200 of CrPC, the section 200 Cr.PC is reproduced below:

200. Examination of complainant.

A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses, and also by the Magistrate :

Provided that when the complaint is made in writing, the Magistrate need not examine the complainant and the witnesses -

(a) if a public servant acting or purporting to act in the discharge of his official duties or a Court has made the complaint; or

(b) if the Magistrate makes over the case for inquiry or trial to another Magistrate under section 192 :

Provided further that if the Magistrate makes over the case to another Magistrate under section 192 after examining the complainant and the witnesses, the latter Magistrate need not re-examine them."

If the aforesaid provisions of BNSS and Cr.PC is analysed, what clearly emerges is that under the Cr.PC, no right of pre-cognizance hearing was envisaged for the proposed accused, whereas in the BNSS Section 223 (1) clearly contains safeguard by way of the first proviso to Section 223(1) BNSS, which mandates that "no cognizance of an offence shall be taken by the Magistrate without giving the accused an opportunity of being heard."

The petitioner in Neeti Sharma (Supra) contended in the above backdrop that the ld Magistrate erred in issuing notice, without first examining the complainant and any witnesses present, on oath, as mandated under the main limb of Section 223(1) of BNSS and it was emphasised that such examination is a condition precedent and should precede the issuance of notice under the proviso.

the Full Bench of the Supreme Court in A.C Narayanan Vs State of Maharashtra & Anr, (2014) 11 Supreme Court Cases 790, after analysing the relevant provisions of NI Act and Section 200 CrPC, observed as under:

"29.  From a conjoint reading of Section 138, 142 and 145 of the NI Act as well as Section 200 of the Code, it is clear that it is open to the Magistrate to issue process on the basis of the contents of the complaint, documents in support thereof and the affidavit submitted by the complainant in support of the complaint. Once the complainant files an affidavit in support of the complaint before issuance of the process under Section 200 of the Code, it is thereafter open to the Magistrate, if he thinks fit, to call upon the complainant to remain present and to examine him as to the facts contained in the affidavit submitted by the complainant in support of his complaint. However, it is a matter of discretion and the Magistrate is not bound to call upon the complainant to remain present before the court and to examine him upon oath for taking decision whether or not to issue process on the complaint under Section 138 of the NI Act. For the purpose of issuing process under Section 200 of the Code, 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. It is only if and where the Magistrate, after considering the complaint under Section 138 of the NI Act, documents produced in support thereof and the verification in the form of affidavit of the complainant, is of the view that examination of the complainant or his witness(s) is required, the Magistrate may call upon the complainant to remain present before the court and examine the complainant and/or his witness upon oath for taking a decision whether or not to issue process on the complaint under Section 138 of the NI Act."

The aforesaid principle as enunciated in A.C. Narayanan (Supra)  are predicated on the overriding effect of Section 145 of the NI Act, which reads:

"145. Evidence on affidavit.--

(1) Notwithstanding anything contained in the Code of Criminal Procedure, the evidence of the complainant may be given by him on affidavit and may, subject to all just exceptions be read in evidence in any enquiry, trial or other proceeding under the said Code.

(2) The Court may, if it thinks fit, and shall, on the application of the prosecution or the accused, summon and examine any person giving evidence on affidavit as to the facts contained therein."

The aforesaid provision expressly permits the complainant to tender evidence by way of affidavit and enables the Court to proceed on such material unless a request is made for summoning the witness for cross-examination. What is obvious, thus, is that the NI Act carves out a procedural departure from the general requirement under Section 200 CrPC (and now Section 223 BNSS), recognising the affidavit as a valid substitute for oral examination at the pre-cognizance stage.

The Delhi High Court in Neeti Sharma (Supra) has held as under:

“20. While Section 223 of the BNSS broadly retains the procedural framework of Section 200 of the CrPC with respect to the examination of the complainant and witnesses, it introduces a significant departure through the insertion of a proviso mandating that the proposed accused be afforded an opportunity of hearing before cognizance is taken. This proviso marks a substantive procedural safeguard that did not exist under the earlier regime. However, with regard to offences under Section 138 of the NI Act, the Supreme Court in A.C Narayanan Vs State of Maharashtra   has categorically held that the Magistrate may, in his discretion, proceed on the basis of the complaint, supporting documents, and an affidavit of the complainant, without necessarily examining the complainant or witnesses on oath prior to issuing process. Accordingly, in the Court's view, the procedure for such cases has not undergone any material change with the enactment of Section 223 of the BNSS. The requirement of examining the complainant and the witnesses upon oath, at the pre-cognizance stage remains directory and not mandatory in complaints under Section 138 of the NI Act”.

“21. Thus, in light of the aforenoted decision, it becomes clear that in respect of complaints under Section 138 of the NI Act, once, the complainant files an affidavit in support of the complaint, it is within the Magistrate's discretion to decide whether to examine the complainant or witnesses on oath. The Magistrate is not bound to do so and may rely solely on the complaint, supporting documents, and the affidavit to decide whether to issue process”.

The petition in Neeti Sharma (Supra) was thus dismissed.

It was also held that the judgment relied upon by the petitioner Basanagouda R. Patil (Supra)-  shall have no applicability as that pertain to Section 356(2) of the BNSS and does not deal with offences under the Negotiable Instruments Act. It was also held that the judgment of High Court of Kerala in Suby Antony (Supra)  are factually distinguishable and shall not apply to the controversy at hand.

Similarly, the Jammu & Kashmir High Court in a matter reported as Mohd Afzal Beigh vs Noor Hussain CRM (M) No.  374/2025, Crl M No. 742/2025 also having dealt with the similar issue, but in slightly different canvas. The petitioner in Mohd Afzal Beigh (Supra) was aggrieved, since, in pre-cognisance stage when notice was served on the respondent (proposed accused) and he opted not to appear, consequently non-bailable warrant was issued against the petitioner and they petitioner approached the High Court for seeking to setting aside of the said order, in was much as, the petitioner contended that there is no mechanism in law whereunder the ld Magistrate before taking cognisance under BNSS, can issue warrant. In this backdrop, it is held as under:

10. Section 223 BNSS provides for issuance of pre-cognizance notice to the accused and said provision was not available in the corresponding Section 200 of the repealed Code. Such requirement provided under Section 223 of the BNSS by way of proviso appear to be justice orientated as the same takes care of any legitimate defence of the accused to be appreciated by the Magistrate even at an earliest, while holding a preliminary inquiry and is not barred at all even in respect of complaints under N.I. Act as hereinabove discussed. However, the non-observance of the requirements, provided under Section 223 BNSS, regarding the examination on oath of the complainant/witnesses and the issuance of the pre-cognizance notice shall not render the proceedings invalid.

11. The satisfaction of the competent Court, as regards the maintainability of the complaint, in terms of the accrual of cause of action, is covered under the "inquiry phase," preceding the "taking of cognizance". A Magistrate while entertaining a complaint under Section 138 of the Negotiable Instruments Act is not barred to have the observance of the provisions providing for pre-cognizance notice.

12. So far as the case in hand is concerned, the learned Magistrate upon satisfying himself, regarding to record the service of pre-cognizance notice could have inferred, the forfeiture of the right of hearing by the accused at pre-cognizance stage of the complaint and proceeded ahead on the complaint in accordance with law. There was no need for the Magistrate to compel the appearance of the accused by issuance of a subsequent non- bailable warrant as the pre-cognizance hearing was meant for him which he acquiesced. The Magistrate is within its powers to compel the attendance of the accused after taking cognizance on the complaint and even under such circumstances, the normal approach of the Magistrates should be issuance of summon followed by a bailable warrant if needed and the issuance of the non-bailable warrants should be the last option.

Accordingly, the instant petition was disposed of and the impugned order dated 15.04.2025 regarding issuance of non-bailable warrant of arrest, was set aside, however, with the direction to the petitioner/accused to appear before the trial Magistrate on the date of hearing that falls next after the uploading of the order, for his participation in the proceedings. It was reiterated that if the Magistrate is yet to take cognizance on the complaint, the accused is still entitled to pre-cognizance hearing.

Section 142 of the Negotiable Instruments Act accord powers to a Judicial Magistrate to take cognizance of an offence punishable under Section 138 of the Act and it starts with "Non obstante" clause. A bare perusal of the provisions of Section 142 of the Act makes it abundantly clear that a Court of Judicial Magistrate 1st Class or a Metropolitan Magistrate, as the case may be, can take cognizance of an offence punishable under Section 138 of the Act only upon a complaint made in writing by the payee or as the case may be the holder in due course of the cheque. Of course, other requisites, such as a complaint has to be made within one month of the date on which the cause of action arises needs adherence as contained in the clause (b) of the proviso to Section138 of the Act. Clause (2) of the Section 142 of the Act lays down as to which Court is vested with the jurisdiction to inquire into and to try an offence under Section 138 of the Act.

Section 142 of Negotiable Instruments Act is reproduced herein for ready reference:

142. Cognizance of offences-

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973:-

(a) no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may 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:

Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138.

(2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction--

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation:- For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account."

On the basis of the discussion as above, it is clear that the "Non obstante" clause of Section 142 of the Act in the very beginning, clearly bars taking of the cognizance of an offence under Section 138 of the Act, except upon a complaint in writing made by the payee or as the case may be the holder in due course of the cheque. Thus, what is obvious is that taking of cognizance of an offence under Section 138 of the Act, otherwise than on a complaint in writing cannot be taken. The police report under Section 193 BNSS corresponding to Section 173 of the repealed Code of Criminal Procedure 1973 is only barred by the "Non obstante" clause and it is clearly not as per the scheme of section 138-142 of Negotiable Instruments Act. In other words, Section 142 of the Act does not mandate a payee of the cheque or the holder in due course of the same to approach the police concerned for lodging the FIR.

Moreover, it is now explicit that since, the remedy for an offence under Section 138 of the Act is a complaint, as referred to under Section 142 of the Act, therefore, the observance of the requirements as mentioned under Section 223 BNSS regarding examination of the complainant/payee and the witnesses present on oath as also the issuance of the pre-cognizance notice introduced by the new legislation, is not at all barred, but may be desired in respect of a complaint filed under Section 138 of the Act. The affidavit statements of the complainant as well as of the witnesses may, therefore, suffice in respect of section 138 of Negotiable Instruments Act complaint.

                                        REMARK

The departure as regards provisions in BNSS, more particularly, in section 223 BNSS is that after satisfying itself about veracity of complaint and after examining the complainant and documents attached along with the complaint, if the court is prima facie satisfied that proposed accused may be served with the notice, the notice shall be sent in the pre-cognisance stage itself and the accused shall have  to be heard at that very stage itself and the formal cognisance is required to be taken, subsequent to appearance of proposed accused, if the case is made out. Therefore, the provisions in BNSS has clearly set the tone of trial in complaints under section 138 of NI Act and it is now mandatory that proposed accused be heard during pre-cognisance stage itself and cognisance could be taken only after, if the case is made out. Moreover, as a necessary corollary thereto, the accused, who may have been arraigned in a complain shall only be treated as proposed accused during pre-cognisance stage. This is a departure from the conventional law in summon case and the course of criminal trial is therefore altered, more so, in respect of complaints, such as  u/s 138 of Negotiable Instruments Act.

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                                Anil K Khaware               

Founder & Senior Associate

Socitylawandjustice.com

Section 138 NI Act: complaint without Arraying partnership firm-Maintainable?

 

Section 138 NI Act: complaint without Arraying partnership firm-Maintainable?

 

It is imperative in a complaint u/s 138 of Negotiable Instruments Act to array parties, against whom the cause of action in a complaint arises. In case, necessary party is not arrayed, the lapses may lead to anomaly and complaint is liable to be dismissed. For instance, if a complaint is raised against a company incorporated under the provisions of Companies Act, it is necessary to array a company in a complaint, as an accused, besides, Directors and Authorised signatory, failing which the complaint may not be maintainable. Now, the question arises, what will be a position, in case of a partnership, whether partnership firm shall have to be arrayed, in a complaint u/s 138 of NI Act besides, the partners or whether the complaint shall still, be maintainable, even after non- arraying of partnership firm, if the partners are made parties. The discussion is all the more necessary, in view of the fact that in case of complaint against the company and its directors, it is held necessary to make the company a party. Whether a corollary to that effect could be drawn in case of partnership firm or not has to be seen and the same shall be analysed in the perspective as per law laid down in this regard.  

A partnership firm is separate from other entities with limited liability, such as a company, in as much as the partners of a partnership firm are liable to be prosecuted individually sans the partnership firm, being arraigned as an accused, or being issued notice under Section 138 of the NI Act or as required under Section 141 of the NI Act, in the following manner:

(i) Firstly, unlike a company, which is a separate legal entity from its shareholders, a partnership is only a compendious name for its partners.

(ii) That the partners are jointly and severally liable for the profit and loss of the partnership firm and have unlimited liability whereas, in a company, its shareholders have limited liability, whereas in a partnership firm, the partners have unlimited liability.

(iii) Under Section 42 of the Partnership Act, 1932 (‘Partnership Act’ for short), subject to contract between the partners, a partnership firm gets dissolved on events specified in sub-sections (a) to (d) of Section 42.

(iv) A partnership firm cannot on its own create or enter into any contract and that either those partner(s) authorized by all the partners or all the partners of the firm, must execute the contract. Further, subject to the partnership agreement, a partnership firm is made party to a contract only at the time of execution in order to make all the partners and the firm jointly and severally liable to the contract.

(v) Though, Order XXX Rules 1 and 2 of the Code of Civil Procedure, 1908 (hereinafter “CPC”) allow for suing of partners in the name of the firm, it is only a convenient method for referring to the persons who constitute the firm at the time of the accruing of the cause of action and that a decree in favour of or against a firm, in the name of the firm, has the same effect as a decree in favour of or against all the partners.

(vi) Unlike a limited liability partnership or a company, an ordinary partnership is not a juristic person as such, and that the real legal entity is the partners themselves. That in an agreement involving a partnership firm, all partners in their individual capacity ought to additionally be part of such agreement as parties and execute it in their individual capacity. This is because a partnership firm has no separate legal existence of its own.

It may be worthwhile, in the context to refer to earlier Three (3) Judge Bench of Supreme Court in Aneeta Hada vs. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 (“Aneeta Hada”) , the core question was considered -whether, in view of Section 141 of the Act, a company could have been made liable for prosecution without being impleaded as an accused, and whether a director of a company could have been prosecuted for offences punishable under the provisions of the Act without the company being arraigned as an accused. It is in the aforesaid context that, after referring to several judgments of Supreme Court, it was observed by the Supreme Court that the commission of an offence by a company is an express condition precedent to attract the vicarious liability of others such as directors or employees of a company. Thus, the words “as well as the company” appearing in the Section make it absolutely clear that when the company could 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. This is because a company is a separate juristic person and thus, the imperative for arraigning the company as an accused for maintaining the prosecution under Section 141 of the Act. It was thus held that it is only when the company is held to be guilty of the offence, under Section 138 read with Section 141 of the Act that the other categories of offenders could also be proceeded against on the touchstone of the principle of vicarious liability as the same has been mandated by Section 141 of the Act itself.

Consequently, the earlier decision of the Supreme Court in Anil Hada vs. Indian Acrylic Ltd., (2000) 1 SCC 1 was held to be not the correct law, insofar as it stated therein that the director or any other officer of a company can be prosecuted without impleadment of the company.

In fact, in an earlier judgement G. Ramesh vs. Kanike Harish Kumar Ujwal, (2020) 17 SCC 239 (Two Judge Bench), it was noted from the complaint in the said case that the same contained a sufficient description of (i) nature of the partnership; (ii) the business which was being carried out; and (iii) role of each of the accused in the conduct of the business and specifically in relation to the transaction which took place with the complainant. In the averments, the accused had been referred to in the plural sense. The Supreme Court observed that Section 141 of NI Act uses the expression “company” so as to include a firm or association of a persons. That the first accused in the said case was a partnership firm of which the remaining two accused were the partners which fact had been missed by the High Court and therefore the appeal was allowed.

In terms of the explanation to Section 141, the expression “company” has been defined to mean any body corporate and to include a firm or other association of individuals. Sub-section (1) of Section 141 postulates that where an offence is committed under Section 138 by a company, the company as well as every person who, at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business shall be deemed to be guilty of the offence.

Recently, Supreme Court has settled the legal aspect in a matter captioned as Dhana Singh Vs Prabhu Vs Chandrashekhar & Anr arising out of Special Leave Petition (Criminal) No.5706 of 2024 and following paragraphs are worthy of a reference:.

“9.7……. while a director is a separate persona in relation to a company, in the case of a partnership firm, the partner is not really a distinct legal persona. This is because a partnership firm is not really a legal entity separate and distinct as a company is from its directors but can have a legal persona only when the partnership firm is considered along with its partners. Thus, the partnership firm has no separate recognition either jurisprudentially or in law apart from its partners. Therefore, while a director of a company can be vicariously liable for an offence committed by a company, insofar as a partnership firm is concerned, when the offence is committed by such a firm, in substance, the offence is committed by the partners of the firm and not just the firm per se. Therefore, the partners of the firm are liable for the dishonour of a cheque, even though the cheque may have been issued in the name of the firm and the offence is committed by the firm. Therefore, in law and in jurisprudence, when a partnership firm is proceeded against, in substance, the partners are liable and the said liability is joint and several and is not vicarious. This is unlike a company which is liable by itself and since it is an artificial juristic entity, the persons in charge of the affairs of the company or who conduct its business only become vicariously liable for the offence committed by the company’.

It is further held in Dhana Singh (Supra) as under:

9.9 Therefore, even in the absence of partnership firm being named as an accused, if the partners of the partnership firm are proceeded against, they being jointly and severally liable along with the partnership firm as well as inter-se the partners of the firm, the complaint is still maintainable. The accused in such a case, would, in substance be, the partners of the partnership firm along with the firm itself. Since the  liability is joint and several, even in the absence of a partnership firm being proceeded against by the complainant by issuance of legal notice as mandated under Section 138 of the Act or being made an accused specifically in a complaint filed under Section 200 of CrPC, (equivalent to Section 223 of the BNSS), such a complaint is maintainable.

9.10 Thus, when it is a case of an offence committed by a company which is a body corporate stricto sensu, the vicarious liability on the categories of persons mentioned in sub-section (1) and sub-section (2) of Section 141 of the Act accordingly would be proceeded against and liable for the offence under Section 138 of the Act. In the case of a partnership firm on the other hand, when the offence has been proved against a partnership firm, the firm per se would not be liable, but liability would inevitably extend to the partners of the firm inasmuch as they would be personally, jointly and severally liable with the firm even when the offence is committed in the name of the partnership firm”.

According to the Supreme Court, thus, the partnership firm is only a compendious name for the partners of the firm, and therefore, any offence committed under Section 138 read with Section 141 of the Act would not make the partners of the firm jointly and severally liable with the firm. This is so, as had the intention of legislature been to the contrary, the Parliament would have provided so, by expressly stating that the firm, as well as the partners, would be liable separately for the offence under Section 138 of the Act. The perusal of section 141 of NI Act shall reflect that such an intention is not there so as to construe that the offence proved against the firm would amount to the partners of the firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless sub section (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved.

From the standpoint of above, it is necessary to bear in mind the principle of law that a partnership is a compendious expression to denote the partners who comprise of the firm. By the deeming fiction in Explanation (a) the expression company is defined to include a firm.” While holding that Section 141 is a deeming provision, it was also observed that a partnership is a compendious expression to denote the partners who comprise the firm which means that a firm without a reference to its partners has no juristic identity in law. By a deeming fiction, in Explanation (a) to Section 141, the expression “company” has been defined to include a firm. If the complainant had proceeded only against the partnership firm and not the partners it possibly could have been held that the partnership firm in the absence of its partners is not a complete juristic entity which can be recognised in law and therefore cannot be proceeded against. On the other hand, in the instant case the complainant has proceeded against the two partners. The complainant is aware of the fact that the cheque has been issued in the name of the partnership firm “Mouriya Coirs” and has been signed by one of the partners. The complainant has proceeded against the partners only without arraigning the partnership firm as an accused. It is necessary to reiterate that a partnership firm in the absence of its partners cannot at all be considered to be a juristic entity in law. On the other hand, the partners who form a partnership firm are personally liable in law along with the partnership firm. It is a case of joint and several liability and not vicarious liability as such. Therefore, if the complainant herein has proceeded only against the partners and not against the partnership firm, according to Supreme Court, it is not something which would go to the root of the matter so as to dismiss the complaint on that ground. Rather, opportunity could have been given to the complainant to implead the partnership firm also as an accused in the complaint even though, not even statutory demand notice was sent specifically in the name of the partnership.

Alternatively, notice to the partners/accused could have been construed as notice to the partnership firm also. It is so, for the reason that unlike a company which is a separate juristic entity from its directors thereof, a partnership firm comprises of its partners who are the persons directly liable on behalf of the partnership firm and by themselves. Thus, a partnership firm, in the absence of the partners being arraigned as accused, would not serve the purpose of the case and would be contrary to law. On the other hand, even in the absence of making a partnership firm an accused in the complaint, the partners being made the accused would be sufficient to make them liable inasmuch as the partnership firm without the partners is of no consequence and is not recognised in law. This is because, in the case of a partnership firm, the said juristic entity is always understood as a compendious term namely, the partnership firm along with its partners. Therefore, if an appellant-complainant had proceeded only against the partnership firm and not its partners, then possibly the respondents would could have been right in contending that the complaint was not maintainable, but, if partners are arrayed in a complaint, but the partnership firm is not, then situation is different. The complainant if not arraigned the firm, but has arraigned the partners of the firm, as accused and has also issued notice to them; therefore, the defect, if any, is not significant or incurable. Moreover, in case, the cheque was issued in the name of the firm and signed by one of the partners, for and on behalf of the other also, therefore, the liability is deemed to be on both the partners of the firm. In this backdrop, permission can easily be given to arraign the partnership firm as an accused having regard to the characteristics of a partnership firm.

The Supreme Court has thus categorically held that a complaint cannot be rejected or dismissed for the reason that the partnership firm was not arraigned as an accused in the complaint or that demand notice had not been issued to it under Section 138 of the Act. Moreover, the notice issued to the partners of the firm in the instant case shall be construed to be a notice issued to the partnership firm also viz., ‘Mouriya Coirs’. Still, permission was granted to arraign the partnership firm as an accused in the complaint. The fiction of law, nevertheless has categorically been ascertained by the Supreme Court that unlike, need of arraigning a company, as an accused in a complaint u/s 138 of Negotiable Instruments Act, there is no corresponding requirement of arraigning a partnership firm in a complaint and the reasons are elaborated in the aforesaid discussion of Supreme Court while adjudicating Dhana Singh Vs Prabhu Vs Chandrashekhar & Anr (Supra).

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                        Anil K Khaware

Founder & Senior Associate

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Section 219 Cr.P.C and section 138 OF NEGOTIABLE INSTRUMENTS Act: Interplay

 

                 

Section 219 Cr.P.C and section 138 OF NEGOTIABLE INSTRUMENTS Act: Interplay

Whether a complaint for more than three bounced cheques through a single legal demand notice maintainable?  

One aspect that often creates ambiguity in the minds of litigants as regards complaints filed u/s 138 of Negotiable Instruments Act( In short NI Act”), as to how many cheques could be the subject matter of a single complaint and/or of a single demand notice u/s 138 of Negotiable Instruments Act and whether, there is a limit of cheques forming part of a single complaint under the NI Act. The ambiguity stems from the provisions of section 219 of Cr.PC (Corresponding to section 242 of BNSS). The general understanding is that only three (3) dishonoured cheques, only, could form part of a single complaint u/s 138 of Negotiable Instruments Act, as per the principles of Section 219 of Cr.PC (Section 242 of BNSS). Therefore, before proceeding further, the contents of section 219 of Cr.PC which is materially similar to section 242 of BNSS may be reproduced herein:

219. Three offences of same kind within year may be charged together-

(1)  When a person is accused of more offences than one of the same kind, committed within the space of twelve months from the first to the last of such offences, whether in respect of the same person or not, he may be charged with, and tried at one trial for, any number of them not exceeding three.

(2) Offences are of the same kind when they are punishable with the same amount of punishment under the same section of the Indian Penal Code or of any special or local law.

Provided that, for the purpose of this section, an offence punishable under Section 379 of the Indian Penal Code shall be deemed to be an offence of the same kind as an offence punishable under section 380 of the said Code, and that an offence punishable under any section of the said code, or of any special or local law, shall be deemed to be an offence of the same kind as an attempt to commit such offence, when such an attempt is an offence.”  

Moreover, if section 220 of Cr.PC is perused, it clearly postulates that if series of acts are connected together to form the same transaction, the same may be subject of one trial only.

Section 220 of Cr.PC is reproduced herein for ready reference:

220. Trial for more than one offence-

(1) If one series of acts so connected together as to form the same transaction, more offences than one are committed by the same person, he may be charged with, and tried at one trial for, every such offence.

(2) When a person is charged with one or more offences of criminal breach of trust or dishonest misappropriation of property as provided in sub-section (2) of section 212 or in sub0section (1) of 219, is accused of committing , for the purpose of facilitating or concealing the commission of that offence or those offences, one or more offences of falsification of accounts, he may be charged with, and tried at one trial for, every such offences.

(3) If the acts alleged constitutes an offence falling, within two mor more separate definitions of any law in force for the time being by which offences are defined or punished, the person accused of them may be charged with, and tried at one trial, for each of such offences.

(4) If several acts, of which one or more than one would by itself or themselves constitutes an offence, constitute when combined a different offence, the person accused of them may be charged with, and tried at one trial for the offence constituted by such acts when combined, and for any offence constituted by any one, or more, of such acts.

(5) Nothing contained in this section shall affect section 71 of the Indian penal Code.

Taking into consideration case laws the Delhi High Court, recently in a matter captioned as Pawan Dhanpatrai Malhotra Vs Mahender Khari Crl.M.C. 4074/2024 has set right the ambiguity, if any. 

                               

Reliance by the petitioner/Accused

(i) The Supreme Court in Vani Agro Enterprises Vs State of Gujarat & Anr, (2021) 16 SCC 132

(ii) Delhi High Court in Gaurav Mittal Vs State of NCT of Delhi 2023 SCC OnLine Del 1528,

In the aforesaid judgments it is held that mere issuance of a single/common notice by the complainant cannot suffice for not following the mandate of Section 219 of the Cr.P.C.. It was submitted that as the cheques were of different dates, therefore, not more than three cheques can be consolidated into one complaint.

 

Reliance by the Respondent

Delhi High Court:

(i)  Sharma Contracts (India) Pvt Ltd Vs State & Anr 2012 SCC OnLine Del 310;

(ii) Unique Infoways Pvt. Ltd. & Ors. v. M/s MPS Telecom Private Limited, 2019:DHC:1661;

Karnataka High Court

(iii) A Adinarayana Reddy v. S. Vijayalakshmi & Anr.; Karnataka High Court in Criminal Petition bearing No. 5909 of 2023 and 

GUJARAT HIGH COURT

(iv) U Turn Vs State of Gujarat, 2024 SCC OnLine Guj 1427

 

The aforesaid reliance was placed to buttress that the offence is completed only when notice under proviso 'b' to Section 138 of the NI Act is given by the holder of the cheque to the drawer, and the drawer thereafter fails to make the payment within a period of 15 days of the receipt of the notice. It was submitted that it has been consistently held that where a single notice has been served on the drawer, it would be considered as a single offence and not multiple offences and, therefore, the rigours of Section 219 of the Cr.P.C. will not be attracted.

Section 138 of the NI Act provides for the penalty in case of dishonour of cheque for insufficiency of funds in the account of the drawer of the cheque. It reads as under:

"138. Dishonour of cheque for insufficiency, etc. of funds in the 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 provision of this Act, be punished with imprisonment for [a term which may be extended to two years], 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 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;

(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 thirty 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 of other liability" means a legally enforceable debt or other liability."

 

What therefore follows is that on dishonour of the cheque, the payee or holder in due course of the cheque has to make a demand for the payment of the cheque amount 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. In terms of Section 142 (1)(b) of the NI Act, the complaint for an offence under Section 138 of the NI Act can be filed only upon the cause of action arising under clause (c) of the proviso to Section 138 of the NI Act, that is, where the drawer of the cheque fails to make the payment of the amount of the cheque to the payee or the holder in due course of the cheque, within fifteen days of the receipt of the notice in terms of Proviso (b) to Section 138 of the NI Act.

The Delhi High Court, while delving in the aforesaid aspect in Pawan Dharampal (Supra) had referred to and relied upon, a judgment reported as Ambica Plastopack Pvt Ltd & Anr Vs State & Anr, 2013 SCC OnLine Del 4416, the Delhi High Court has reiterated therein that the cause of action for filing a complaint under Section138 of the NI Act is the service of notice under Section 138 of the NI Act and not the dishonour of cheques. Therefore, Section 219 of the Cr.P.C. shall not apply where one notice for dishonour of cheques is issued.

In Unique Infoways Pvt Ltd  (supra), the Delhi High Court has observed that there being Six (6) cheques and as all the six cheques, which were the subject matter of the complaint therein, had been given in relation to the same transactions, therefore, Section 219 of the Cr.P.C would not be an impediment to the summoning of the accused in a single complaint.

In Adinarayana Reddy (supra), the Karnataka High Court had considered the issue, if a single complaint could be maintainable for multiple cheques (more than 3) issued by the accused for the same cause of action. It was held that as the cheques are issued for the same cause of action and a common notice was served on the accused, a single complaint for dishonour of multiple cheques was maintainable.

in U-Turn (supra), the Gujarat High Court had rejected the petition of accused, after pacing reliance on the judgment of Karnataka High Court in Adinarayana Reddy  (Supra).

Delhi High Court in Pawan Dhanpatrai Malhotra (Supra) after placing reliance on the aforesaid judgments has observed that Vani Agro Enterprises (Supra) was a case where the complainant had filed four complaints and was seeking consolidation of the same and the Supreme Court had observed that there is no provision in the Cr.PC providing for consolidation of cases. It was further held in Pawan Dharampal (Supra) that Gaurav Mittal (Supra) cannot be a binding precedent, being only an interim order.

Significantly, the Delhi High Court, in Pawan Dhanpatrai Malhotra (Supra) has held as under:

“20. I must however, also take note of the Constitution Bench judgment of the Supreme Court in Expeditious Trial of Cases Under Section 138 of NI Act, 1881, In re, (2021) 16 SCC 116, wherein, the Supreme Court, while upholding the course adopted by the Supreme Court in Vani Agro Enterprises (supra), recommended that a provision be made in the NI Act to the effect that a person can be tried in one trial for offences of the same kind under Section 138 of the NI Act in the space of 12 months, notwithstanding the restriction in Section 219 of the Cr.P.C. However, it did not consider the case, where post the dishonour of more than three cheques, a single notice of demand is sent by the payee or the holder in due course of the cheque to the drawer of the cheque. On the other hand, it further held that there is no ambiguity in Section 220 of the Cr.P.C. in accordance with which several cheques issued as part of the same transaction can be the subject matter of one trial”.

As the respondent in Pawan Dharampal Malhotra (Supra) had alleged that the cheques in question were given pursuant to a single transaction and a common notice was served on the petitioner on the dishonour of these cheques. Therefore, applying the above precedents, it was held that no fault can be found in a single complaint filed by the respondent on the dishonour of the cheques.

On the basis of the aforesaid judicial precedents, it is now established that so long as, more than three cheques issued leads to or constitutes a single cause of action and formed part of a common legal notice u/s 138 of Negotiable Instruments Act, the single complaint, against all such cheques forming part of a legal notice, shall be perfectly maintainable. Thus, merely, because, the cheques in question are more than three (3) in number, Section 219 of Cr.PC shall not invalidate the complaint. As a matter of fact, the judgments/precedents as set out above, clearly reflects that there is no impediments in preferring a single complaint regarding dishonour of more than Three (3) cheques, if the same forms part of a common notice u/s 138 OF Negotiable Instruments Act. It is more so, as the cause of action, being bundle of facts, leading to a final cause of action, shall emerge, in complaint u/s 138 NI Act, only, when the legal notice is received by the prospective accused and despite expiry of Fifteen (15) days thereof, the demand notice is not complied with and it is only at that stage that the cause of action finally could arise and hence no embargo could be cast in preferring a compliant u/s 138 of Negotiable Instruments Act, so long as more than Three (3) cheques are part of a single legal demand notice u/s 138 of Negotiable Instruments Act leading to a composite and final cause of action.

                                      ------

Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

 

 

 

 

 

 

SECTION 148 of Negotiable Instruments ACT- waiver of pre-deposit IN APPEAL

 

SECTION 148 of Negotiable Instruments ACT- waiver of pre-deposit IN APPEAL

The Supreme Court in a matter reported as INSC 1046 ( Criminal Appeal No. 5491/2024 arising out of SLP (Crl) 8072/2024 and captioned as  Muskan Enterprises & Anr Vs The State of Punjab & Anr have comprehensively dealt with the provisions of the section 148 of Negotiable Instruments Act (In short “NI Act”) and mandate of the section, besides, permissibility of pre-deposit waiver in appeal filed by the convicted accused, and situation, if could be considered for such purposes.

Before proceeding further, the Section 148 of Negotiable Instruments Act may be perused for ready reference:

“148. Power of Appellate Court to order payment pending appeal against conviction.—

(1)   Notwithstanding anything contained in 8 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 143-A.

(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.”

                             LEGAL PERSPECTIVE

What is significant is that the legislature has used both the verbs ‘may’ and shall’ in sub-section (1) of Section 148, Negotiable Instruments Act, but, in different contexts. As we read and understand the sub-section, what we find is that the verb ‘may’, implies discretion; and, if intended to have its natural meaning, it would refer to the discretion left to the Appellate Court to determine as to whether such court should order any deposit to be made by the appellant or not pending hearing of the appeal against the conviction and sentence recorded by the trial court. What Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Ltd. and Ors (2023) 10SC 446. lays down is that deposit may not be ordered if the Appellate Court finds a case to be exceptional not calling for a deposit and the reasons for not ordering a deposit are recorded in the order. On the contrary, the verb ‘shall’ used in the same sentence and distanced from the verb ‘may’ by 8 (eight) words, typically implies an obligation or duty that is referrable to the quantum of deposit, that is, the deposit, in any case, must not be less than 20% of the fine or compensation awarded by the trial court. What follows is that once the Appellate Court is satisfied that a deposit is indeed called for, in an appropriate case, such court’s power is in no way fettered to call upon the appellant to deposit more than 20% of the awarded compensation, but in no case can it be less than 20%. Interestingly, while the proviso to 11 sub-section (1) and sub-section (2) of Section 148 use ‘shall’ in the relevant context, sub-section (3) again reverts to ‘may’ and its proviso to ‘shall’. User of the verbs ‘may’ and ‘shall’ in different contexts in the same section is clearly suggestive of the legislative intent to mean what it said.

The Supreme Court, while veering around the fact that appellate court implicitly have discretion in waiving “mandatory pre deposit” since, there may arise a case before the Appellate Court, when such court may prima facie form an opinion, even in the course of perusing the impugned order and thus could reasonably ascertain as to what would be the appropriate quantum of fine or compensation for a pre-deposit. There may be a situation that, appellate court may find order of conviction and sentencing of accused by trial Court, completely erroneous and that in probability in due course, the order recording conviction and sentencing could be set aside and thus, appellate court may reasonably come to an opinion that ordering a pre-deposit could be unnecessarily burdensome for the appellant. If such a firm opinion is formed on the basis of bare perusal of impugned order and appeal paper book and it may further occur that the order was passed and sentence recorded after bypassing the mandatory procedural requirements of the N.I. Act, then, in such  situation, saddling the appellant with pre-deposit may inflict irretrievable injury to the appellant may be severely prejudicial to the appellant and hence, it could not be fathomed that the appellate court shall be vested with no discretion. Therefore, when the conviction order and sentencing is found vitiated prima facie, or the vital evidence , though, was palpable, but ignored and still further if the trial court has completely mis-appreciated the evidence, the saddling of necessity of pre-deposit may inflict incalculable injury to the appellant. Yet another dimension could be that the compensation awarded by the trial court could be far excessive and even outrageous, so as to shake judicial conscience, and thus, in such a situation it cannot be comprehended that appellate court shall have no discretion as regards waiving pre-deposit. As a court of appeal the appellate court has to render complete justice and truncating of the power of appellate court cannot be the object of the section relating to pre-deposit. The situation as depicted above , according to the Supreme Court is only illustrative and may be taken as indicative only. The use of the word “may” and “shall” in the recitation of the words in section 148 also indicates that discretion is vested in the appellate court as regards waiver of requirement of pre-deposit and extent of pre-deposit. In the above backdrop and in case situation as depicted above is noticed, it would amount to a travesty of justice, if exercise of discretion, which is provided for by the legislature and in the situation calling for its invocation, is not permitted to be exercised by the Appellate Court. The judicial interpretation of ‘may’ being read as ‘shall’ in sub-section (1) of Section 148 cannot therefore be comprehended. If the aggrieved appellant is forced to make a deposit of minimum 20% of the fine or compensation awarded by the trial court, even when probable contrary opinion of the Appellate Court shall be contrary to the letter and spirit of the section 148 of NI Act. It may turn out as t ironical, if the conviction and sentence is found to be perverse even on the basis of cursory perusal of order of conviction and sentencing, thus, if it is assumed that despite overwhelming situation in favour of the appellate, the appellate court shall, still be denuded with discretion of waiving pre-deposit, it cannot be so understood, as even the bare perusal of section 148 of NI Act in entirety does not suggest so. No doubt, in ordinary course, the discretion of the Appellate Court should lean towards requiring a deposit, depending upon the facts and circumstance in every individual case, but in a situation when the judgment of trial court and order of sentencing is found to be perverse, the order of waiving of pre-deposit and discretion in this regard has to be exercised.  As a matter of fact, it is implicit from the bare recitation of section 148 of NI Act that discretion is vested in the appellate court, since,  the legislature has used ‘shall’ instead of ‘may’ in sub-section (1) and if the sub- section, read as a whole, it reveals that ‘may’ has been used twice and ‘shall’ thrice, it must be presumed that the legislature was well and truly aware of the words used which form the skin of the language. It is the duty of the Court to cull out the intention of legislature in Reading and understanding the words used by the legislature not only in the literal sense, but also in effect. It is the duty cast on the courts to avoid a situation leading to manifest absurdity. Therefore, holistic reading of section 148 of the NI Act, itself implies that discretion as regards pre-deposit or its waiver is available to the appellate court.

The interpretation of statute depends on the bare text and the context – relegating the one against other shall defeat the purpose. It is to be understood that the text represents the texture and the context imparts and the interpretation shall have to be contextual. No doubt, the legislative intent shall have to be firstly seen with the prism of legislature and the way it is provided for, but, the duty is cat on the Court to look into the enactment as a whole and in pith and substance and each section, each clause, each phrase and each word has to be understood in the context of what it means and how it is designed to fit into the scheme of the entire enactment, hence, purposive interpretation is squarely in the domain of courts. How, the words are to be interpreted and manner of interpreting a statute could be discerned from the decision of Supreme Court in Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd AIR 1987 SC1023. What Jamboo Bhandari (supra) lays down is that deposit may not be ordered if the Appellate Court finds a case to be exceptional not calling for a deposit and the reasons for not ordering a deposit are recorded in the order.

                             FACTUAL MATRIX

In Muskan Enterprises (Supra), Shorn of unnecessary details, conviction for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 had been recorded against the appellants by the Judicial Magistrate, 1st Class, and resultantly, the proprietor of the first appellant was sentenced to 2 years’ rigorous imprisonment and in addition thereto, under Section 357(3), Cr. PC. they were directed to pay compensation of Rs.74,00,000/- (double the cheque amount) to the complainant who was given the liberty to recover the same from the appellants.

In appeal before the ld Sessions Court, the ld Sessions Court had suspended the sentence of appellant till disposal of the appeal and was granted bail. The appellant was directed to deposit 20% of the compensation amount awarded by the trial magistrate within a period of sixty days in the court below, being of the view that such a deposit (of 20%) was imperative. The complainant was given liberty to withdraw the deposit subject to furnishing an undertaking that the same would be returned, if the appellants succeeded in the appeal.

Imposition of such condition by the Sessions Court for deposit of 20% of the compensation awarded by the trial magistrate was questioned by the appellants before the High Court in a petition filed under Section 482 of Cr. PC. It is relevant to point out that at that time Surinder Singh Deswal @ Col. S. S. Deswal vs Virender Gandhi 2019 (11) SCC 341 was governing the field on interpretation of Section 148 of the N.I. Act. The said decision held the condition for deposit in terms of Section 148, Negotiable Instruments Act as mandatory. In the face of this, the petitioner had to withdraw the petition from the High Court and accordingly, an order was passed to the effect that the petition stands dismissed as withdrawn.

The relevant paragraph of judgment rendered in Surinder Singh Deswal (Supra) is as under :-

“Now so far as the submission on behalf of the appellants that even considering the language used in Section 148 of the NI 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 NI Act as amended is concerned, considering the amended Section 148 of the NI Act as a whole to be read with the Statement of Objects and Reasons of the amending Section 148 of the NI Act, though it is true that in the amended Section 148 of the NI 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 NI Act confers power upon the appellate court to pass an order pending 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 CrPC to suspend the sentence. The aforesaid is required to be construed considering the fact that as per the amended Section 148 of the NI 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 NI Act is purposively interpreted in such a manner it would serve the Objects and Reasons of not only amendment in Section 148 of the NI Act, but also Section 138 of the NI Act. The 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 dishonour 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 the proceedings, 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, Parliament has thought it fit to amend Section 148 of the NI Act. Therefore, such a purposive interpretation would be in furtherance of the Objects and Reasons of the amendment in Section 148 of the NI Act and also Section 138 of the NI Act.”

However, subsequently, the decision of another judgment by coordinate bench of Supreme Court, reported as Jamboo Bhandari (Supra) was pronounced and upon consideration of the law laid down in Surinder Singh Deswal (supra), the bench in Jamboo Bhandari (supra) proceeded to hold as follows: -

“6. What is held by this Court is that a purposive interpretation should be made of Section 148 of the NI Act. Hence, normally, Appellate Court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the Appellate Court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded.

7. Therefore, when Appellate Court considers the prayer under Section 389 of the Cr. P.C. of an accused who has been convicted for offence under Section 138 of the N.I. Act, it is always open for the Appellate Court to consider whether it is an exceptional case which warrants grant of suspension of sentence without imposing the condition of deposit of 20% of the fine/compensation amount. As stated earlier, if the Appellate Court comes to the conclusion that it is an exceptional case, the reasons for coming to the said conclusion must be recorded.”

The Second petition u/s 482 Cr.PC was therefore filed by the petitioner/appellant before the High Court in view of Jamboo Bhandari (Supra), but the high court did not entertain that being the subsequent petition. The appellant was before the Supreme Court inter alia on the issue that in the case of the appellant waiver of pre-deposit while entertaining appeal against the conviction and sentence ought to have been granted, but not granted by the Courts below.  

That it may be noted that the decisions in Surinder Singh Deswal (supra) and Jamboo Bhandari (supra) have been rendered by coordinate bench of Supreme Court with equal strength. The legal position is also clear that if a cleavage of opinion is discernible as herein owing to Jamboo Bhandari (supra), seeking to explain the law by reading a limited discretion that an Appellate Court has been conferred with by sub-section (1) of Section 148 of NI Act. The decision of the latter bench is to be considered as law. Though, in case of conflict of opinion, larger bench ought to be constituted for arriving at a conclusion.

The supreme Court in Muskan Enterprises (Supra) has held that a reference to a larger bench would have been appropriate in view of the divergent views expressed in the said decisions, yet the later view expressed in Jamboo Bhandari (supra); was followed by the Supreme Court while assigning reasons:

“Law is well-settled that user of the verbs ‘may’ and ‘shall’ in a statute is not a sure index for determining whether such statute is mandatory or directory in character. The legislative intent has to be gathered looking into other provisions of the enactment, which can throw light to guide one towards a proper determination. Although the legislature is often found to use ‘may’, ‘shall’ or ‘must’ interchangeably, ordinarily ‘may’, having an element of discretion, is directory whereas ‘shall’ and ‘must’ are used in the sense of a mandatory provision. Also, while the general impression is that ‘may’ and ‘shall’ are intended to have their natural meaning, it is the duty of the court to gather the real intention of the legislature by carefully analysing the entire statute, the section and the phrase/expression under consideration. A provision appearing to be directory in form could be mandatory in substance. The substance, rather than the form, being relevant, ultimately it is a matter of construction of the statute in question that is decisive”.

In Muskan Enterprises (Supra) therefore, the impugned order of the High Court was set aside and the matter was remitted to the Sessions Court to re-examine the issue of ordering deposit and for passing necessary order. Whether sufficient ground is made out by the appellants to persuade the Sessions Court not to order any deposit is left entirely to its discretion and satisfaction.

Kerala High Court

The Kerala High Court in Baiju vs. State of Kerala 2023 SCC OnLine Ker 10204, while dealing with Section 148 of the NI Act and similar circumstances involved has also held as under:-

“7. In the above Section, it is clearly stated that 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. There are two limbs in Section 148(1) of the Negotiable Instruments Act. First, the appellate court has to decide, whether to order the appellant to deposit the fine or compensation awarded by the trial court. The second limb is that, once it is decided to order deposit of fine or compensation, a minimum of twenty percent of the fine or compensation is to be ordered to deposited. Therefore, the duty of the appellate court is firstly to decide whether such a deposit is to be ordered. As observed by the Apex court in Jamboo Bhandari's case (supra), when an accused applies under S. 389 of the CrPC for suspension of sentence, he normally applies for grant of relief of suspension of sentence without any condition. Therefore, when a blanket order is sought by the appellants, the Court has to consider whether the case falls within the exception or not. The appellate court while suspending a sentence cannot pass a blanket order in all cases to deposit 20% of the fine or compensation without assigning any reason. Moreover, once the court has decided to order deposit as per Section 148(1) of the Negotiable Instruments Act, the amount of deposit ordered by the Court can be varied from the minimum 20% of the fine or compensation to a higher percent of the fine or compensation. That also shows that a speaking order is necessary. Even if the court is imposing 20% of the fine or compensation as a condition for suspending the sentence, in the light of the principle laid down by the Apex Court”.

                             

Delhi High Court

In Anuj Ahuja Vs Sumitra Mittal CRL.M.C. 1327/2025 , the Delhi High Court taking note of Jamboo Bhandari (Supra) has held as under: 

“19. In view of the aforesaid, such an order asking an appellant (like the petitioner herein) to deposit 20% of the fine or compensation awarded by the learned MM in a complaint under Section 138 of the NI Act, passed by the appellate Court (like the learned ASJ herein) while dealing with an appeal under Section 148 of the NI Act, has to reflect due application of mind as it ought not to be passed mechanically. Prima facie, therefore, in the considered opinion of this Court for exercising the discretion and relaxation in exceptional cases, as and when the need so arises, the appellate Court (like the learned ASJ herein) has to bear in mind various surrounding circumstances like those relating to the nature of transaction(s) involved; the relationship(s) inter-se the parties involved; the quantum of amount involved; the financial capacity of the parties; is the condition of deposit of 20% imposed upon the an appellant (like the petitioner herein) going to hamper the right of appeal of such an appellant, particularly, since the appellant (like the petitioner herein) is going to be called upon to deposit 20% of the fine or compensation awarded by the learned MM at the very initial stage itself, without the appellate Court (like the learned ASJ herein) proceeding to hear the appeal on merits involved, amongst other factors”.        

 

Allahabad High Court

In Anil Mittal vs State of UP & Anr Neutral Citation No. - 2024:AHC:128997. It is held as under:

“7. From the plain reading of Section 148 (1)  of the N.I. Act, the deposit of 20 percent of the amount of fine/compensation as awarded by the trial court, appears to be discretionary in nature However, such discretion ought to be exercised by the Appellate Court in exceptional circumstances. Ordinary, no appeal could be entertained without the said deposit and proviso to sub-section (1) of Section 148 of the N.I. Act also provides that if any amount under Section 143 (A) of the N.I. Act was deposited by the accused/appellant, the amount which is required to be deposited under Sectio0n 148 (1) of the N.I. Act, is in addition to the same and shall not be adjusted against the amount already paid during the trial”.

RETROSPECTIVE APPLICATION OF SECTION 148

Yet another dimension of appeal under section 148 of Negotiable Instruments Act is that the provision of the appeal and mandatory pre-deposit shall be retrospective in operation and thus it implies that the complaint relating to pre-amendment i.e pre 2018 shall also entails that the amended section 148 of Negotiable Instruments Act shall apply in case, the complaint was pending before the amendment.

                                      CONCLUSION

On the basis of the aforesaid discussion, the prescription of section 148 of Negotiable Instruments Act, as emerges is that while staying operation of judgment of sentencing and/or conviction, the appellate court may call upon the appellant to deposit 20% of the awarded amount by the Magistrate, by way of fine and/or compensation as a norm, unless, the appellant is able to show exceptional circumstances entitling him/her to claim waiver of pre-deposit inter alia on the premises that the impugned order which is appealed against is so perverse that the same is liable to be set aside and mandatory procedure as per law is completely ignored by the trial court and/or such exceptional grounds that may be available to the appellant. As elaborated above, the Section 148 of the Negotiable Instruments Act has been inserted in the statute book by way of amendment in 2018 and the same is aimed to accord some interim payment to the successful complainant. Moreover, even if the complainant in the course of proceedings before the Magistrate is already granted 20% amount as interim compensation, the same shall not be factored in the pre-deposit in the appellate court and 20% in addition thereto, as a pre-deposit shall have to be paid. The amount of pre-deposit so made can be withdrawn by the complainant subject to furnishing security that in the event of appellant succeeding in appeal, the amount of pre-deposit so received shall be liable to be returned to the appellant with due interest thereon as may be ordered. The stipulations as regards pre-deposit to the extent of 20% of the awarded amount by way of compensation or fine imposed by the Magistrate is therefore deemed to be a mandate of law.  In fact, the Supreme Court had ruled in favour of pre-deposit in appeal in a matter reported as Surinder Singh Deswal (Supra), however, subsequently, in Jamboo Bhandari (Supra), the Supreme Court has veered around the view that pre-deposit in appeal u/s 138 of Negotiable Instruments Act is not mandatory and in case prima facie, exceptional circumstances in favour of the appellant/ convict existed and if the order in  impugned order in appeal is perverse, then, the requirement of pre-deposit may be waived by the appellate court. Therefore, after Jamboo Bhandari (Supra) case, the clarity has emerged in this regard and to reiterate that pre-deposit in appeal is the mandate of law, unless, exceptional circumstances warranting its waiver is shown to have existed, in that event, the appellate court can exercise discretion in favour of the waiver of pre-deposit.

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                             Anil K Khaware

Founder & Senior Associate

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