REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 913 OF 2009 [Arising out of SLP (Crl.) No. 8059 of 2007]

Raj Kumar Khurana …Appellant

Versus

State of (NCT of Delhi) and Anr. …Respondents

J U D G M E N T  

S.B. SINHA, J :   

1. Leave granted.

2. Whether return of a cheque by the bank on the ground that it  was  

reported lost by the drawer would attract the penal provisions contained in  

Section 138 of the Negotiable Instruments Act, 1881 (for short “the Act”) is  

the question involved in this appeal.  It arises out of a judgment and order  

dated 18.09.2007 passed by the High Court of Delhi in Criminal M.C. No.  

2890 of 2007.

3. The said question arises in the following factual matrix.

Appellant kept two blank cheques in his office along with some stamp  

papers.  They were said to have been stolen from his office.  Information as  

regards missing of the said cheques was also given to the bank.  He lodged a  

First Information Report with regard thereto, stating:

“...On  my  return  to  Digras,  I  found  that  the  cheques and the stamp worth Rs. 50 bearing only  my  signatures  had  been  stolen,  therefore,  to  prevent any misuse of my cheques, I sent a written  information  to  State  Bank,  Branch  Digras  and  subsequently  on  21-04-01  I  filed  a  complaint  in  Police Station Digras….”

The blank cheques were allegedly filled up on 24.06.2001.  They were  

presented before the bank but the same were returned dishonoured with the  

remarks “said cheque reported lost by the drawer”.

Respondent No. 2 thereafter upon issuance of notices in terms of the  

proviso appended to Section 138 of the Act filed a complaint petition in the  

Court of Chief Metropolitan Magistrate, Delhi, inter alia, alleging:

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“5. That the above said cheque in question was  presented  by  the  complainant  for  encashment  through its  bearers,  namely  State  Bank of  India,  Azadpur  Branch,  Delhi  –  33,  but  the  same  was  returned as dishonoured with the remarks “SAID  CHEQUE  REPORTED  LOST  BY  THE  DRAWER”.  This intimation was received by the  complainant  from the  bankers  on  27.7.2001  and  accordingly a notice dt. 3.8.2001 was sent to the  accused requesting the accused to make payment  of the above said cheque amount and on 17.8.2001  the  accused  sent  reply  through  his  Advocate  denying his liability falsely taking the plea that the  cheque  in  question  was  lost  as  stolen  by  the  complainant…

6. That  the accused has taken the above said  false pleas knowing it fully well that he does not  intend  to  make  payment  of  the  said  cheque  amount, and the complainant is thus compelled to  file this complaint.

7. That  the  issuance  of  the  cheque  by  the  accused and informing wrongly his  own bankers  about  the  loss/  theft  of  the  cheque,  with  no  intention to make payment thereof, rather showing  that right from the time he issued the cheque, he  had intention to cheat and defraud the complainant  by  making  false  representations  and  thus  the  accused  has  willfully  committed  an  offence  punishable  under  Sections  138  and  142  of  the  Negotiable Instruments Act read with Section 420  IPC and is liable to be punished accordingly.”

4. It is not in dispute that the Superintendent of Police, Digras has issued  

a  certificate  showing  that  FIR  No.  57  of  2003  arising  out  of  the  First  

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Information Report filed by the appellant before the Station House Officer,  

Digras had been closed.

It  is furthermore not in dispute that the appellant in the meanwhile  

filed a complaint petition under Section 380 read with Sections 34, 467, 468  

and 471 as also Sections 420 and 120B of the Indian Penal  Code in the  

Court  of  Judicial  Magistrate  First  Class  and  the  same  is  pending  

adjudication.   

Admittedly, the appellant had lodged a First Information Report under  

Sections 369, 495, 498, 420 and 34 of the Indian Penal Code with the Police  

Station Digras against the respondent No. 2 and his brother, wherein also a  

closer report has been submitted.

Appellant has filed another criminal complaint against the respondent  

No.  2  under  Section 409 of  the  Indian Penal  Code which has  also  been  

dismissed on the ground that the dispute is of civil nature.

5. Appellant  has  moreover  filed  a  suit  for  recovery  of  a  sum  of  

Rs.31,40,131.43 in the Court of Civil Judge, Sr. Division, Darwha, Madhya  

Pradesh  against  the  respondent  No.  2  and  his  brother.   Several  other  

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applications were filed by the appellant before the said court to which we  

need not advert to.   

6. Appellant filed an application under Section 482 of the Code in the  

High Court of Delhi praying for quashing of the proceedings under Section  

138 of the Act on or about 6.09.2007 on the premise that the same was not  

maintainable.  By reason of the impugned judgment, the said application has  

been dismissed.

7. Mr. M.N. Krishnamani, learned senior counsel appearing on behalf of  

the appellant, would submit that the High Court committed a serious error in  

passing the impugned judgment insofar as it failed to take into consideration  

that the complaint petition even if given face value and taken to be correct in  

its entirety does not disclose an offence under Section 138 of the Act.

8. Mr. Gulshan Rai Nagpal, learned counsel appearing on behalf of the  

respondent No. 2, on the other hand, would contend that the appellant had  

lodged a false First Information Report with regard to the purported theft of  

the cheques which having been found to be not true and, thus, it is evident  

that he had resorted to various proceedings to pre-empt the drawee of the  

cheques to obtain lawful payments due from him.

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9. Section 138 of the Act 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  provisions  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 hi m 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  

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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.”

10. A bare perusal of the aforementioned provision would clearly go to  

show that by reason thereof a legal fiction has been created.  A legal fiction,  

as is well known, although is required to be given full effect, has its own  

limitations.  It cannot be taken recourse to for any purpose other than the one  

mentioned in the statute itself.   

In  State  of  A.P.  and Anr. v.  A.P.  Pensioners  Association and Ors.  

[(2005) 13 SCC 161], this Court held:

“…In other words, all the consequences ordinarily  flowing from a rule would be given effect to if the  rule otherwise does not limit the operation thereof.  If  the  rule  itself  provides  a  limitation  on  its  operation, the consequences flowing from the legal  fiction have to  be understood in the  light  of  the  limitations prescribed.  Thus,  it  is  not  possible to  construe the legal fiction as simply as suggested by  Mr. Lalit.”

11. Section 138 of the Act moreover provides for a penal provision.  A  

penal  provision  created  by  reason  of  a  legal  fiction  must  receive  strict  

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construction. [See R. Kalyani v. Janak C. Mehta and Ors. (2009) 1 SCC 516  

and DCM Financial Services Ltd. v. J.N. Sareen and Anr. (2008) 8 SCC 1].  

Such a penal provision, enacted in terms of the legal fiction drawn would be  

attracted when a cheque is returned by the bank unpaid.  Such non-payment  

may either be: (i) because of the amount of money standing to the credit of  

that  account  is  insufficient  to  honour  the  cheque,  or  (ii)  it  exceeds  the  

amount arranged to be paid from that account by an agreement made with  

that bank.   

Before a proceeding thereunder is initiated, all the legal requirements  

therefor must  be complied with.   The court  must be satisfied that all  the  

ingredients of commission of an offence under the said provision have been  

complied with.

The parameters for invoking the provisions of Section 138 of the Act,  

thus, being limited, we are of the opinion that refusal on the part of the bank  

to honour the cheque would not bring the matter within the mischief of the  

provisions of Section 138 of the Act.

12. The court while exercising its jurisdiction for taking cognizance of an  

offence  under  Section 138 of  the  Act  was  required  to  consider  only  the  

allegations  made  in  the  complaint  petition  and  the  evidence  of  the  

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complainant  and  his  witnesses,  if  any.   It  could  not  have  taken  into  

consideration the result of the complaint petition filed by the respondent No.  

2  or  the  closer  report  filed  by  the  Superintendent  of  Police  in  the  First  

Information Report lodged by the appellant against him.

13. Before us a contention has been raised that the appellant did not have  

sufficient funds in his bank account.  Such an allegation has not been made  

in the complaint petition.  In any event, it was for the bank only to say so, as  

the complainant is not supposed to have knowledge in regard to the amount  

available in the account of the appellant.   

14. Keeping in view the facts and circumstances of the case, we are of the  

opinion that the complaint petition does not disclose an offence punishable  

under Section 138 of the Act.

15. For  the  reasons  aforementioned,  the  impugned  judgment  being  

unsustainable is set aside.  The appeal is allowed.

………………………….J. [S.B. Sinha]

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..…………………………J.     [Dr. Mukundakam Sharma]

New Delhi; May 5, 2009

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