Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 142 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 204, 239, 252, 482 -- Cheque bounce case – Cognizance by Magistrate -- Summoning of acused – Interlocutory order – Discharge/ Recalling application – Remedy of -- Once the plea of the accused is recorded u/s 252 of the Code the procedure contemplated under Chapter XX (Cr.P.C.) has to be followed which is to take the trial to its logical conclusion -- Only remedy available to an aggrieved accused to challenge an order in an interlocutory stage is the extraordinary remedy u/s 482 of the Code and not by way of an application to recall the summons or to seek discharge which is not contemplated in the trial of a summons case.

(Para 16, 17)

A. Negotiable Instruments Act, 1881 (26 of 1881), Section 6, 8, 9, 17, 85A, 138 -- Pay Order – Holder in due course -- Dishonour of pay order – Maintainability of cheque bounce complaint -- Complainant-bank was well within its right to possess the cheque and to receive or recover the amount covered by the instrument -- High Court quashed the complaint on the ground that Pay order is not cheque -- Supreme Court dissented – Appeal allowed, impugned judgment, set aside -- Trial to proceed.

(Para 2, 18, 21)

B. Negotiable Instruments Act, 1881 (26 of 1881), Section 6, 85A, 131A – Draft – Pay order – Cheque -- Section 85A deals with drafts drawn by one branch of a bank on another branch of the same bank -- Such draft is a negotiable instrument -- Section 131A makes all the provisions for crossing of cheques applicable to the drafts also.

(Para 9, 10)

C. Negotiable Instruments Act, 1881 (26 of 1881), Section 8, 9, 50, 85A, 118(g) -- Pay order – Holder in due course – Endorsement – Presumption – High Court took the view that complainant was not a holder in due course in the absence of an endorsement made on the instrument in the manner prescribed under section 50 of the Act – Held, this ground was adopted by the High Court without regard to certain relevant provisions of the Act – Complainant-company is the holder of the instrument on its own right and could be a holder in due course also until the concerned party adduces evidence to rebut the presumption -- It is open to the respondents to rebut the presumption in the trial but till then the High Court could not say that the complainant is not a holder in due course..

(Para 20-23)

Negotiable Instruments Act, 1881 (26 of 1881), Section 118, 138, 139 – Cheque bounce complaint – Presumption – Rebuttal -- Provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary -- Rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the ’prudent man’.

(Para 19)

A. Negotiable Instruments Act, 1881 (26 of 1881), Section 1 -- Object and purpose of NI Act -- The negotiable instruments are, in fact, the instruments of credit being convertible on account of the legality of being negotiated and thus easily passable from one hand to another. The source of Indian law relating to such instruments is admittedly the English Common Law. The main object of the Act is to legalise the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. The purpose of the Act was to present an orderly and authoritative statement of the leading rules of law relating to the negotiable instruments. The Act intends to legalise the system under which claims upon mercantile instruments could be equated with ordinary goods passing from hand to hand. To achieve the objective of the Act, the Legislature in its wisdom thought it proper to make provision in the Act for conferring such privileges to the mercantile instruments contemplated under it and provide special procedure in case the obligation under the instrument was not discharged.

(Para 5)

B. Negotiable Instruments Act, 1881 (26 of 1881), Section 138 – Interpretation -- It has, always to be kept in mind that Section 138 of The Act creates an offence and the law relating to the penal provisions has to be interpreted strictly so that non-one can ingeniously or insidiously or guilefully or strategically be prosecuted.

(Para 5)

C. Negotiable Instruments Act, 1881 (26 of 1881), Section 5, 6 – Post dated cheque -- Bill of Exchange – Cheque -- When a post-dated cheque is written or drawn, it is only a bill of exchange -- Post-dated cheque become a cheque under the Act on the date which is written on the said cheque.

(Para 6)

D. Negotiable Instruments Act, 1881 (26 of 1881), Section 72, 138 -- Presentation of cheque -- Bank, where to present – Drawer Bank – Cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable -- Such presentation is necessarily to be made within six months at the bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee.

(Para 9)

A. Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 141 -- Cheque by Company -- Demand notice to Director of Company – Validity of – Demand notice to Director of Company, who signed the cheque -- High Court committed error in recording a finding that there was no notice to the drawer of the cheque, as required u/s 138 of the NI Act – Held, Impugned order of the High Court is liable to be quashed.

(Para 1, 7)

B. Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 141 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 482 -- Cheque by Company -- Offence by Company – Deposit of money in court – Quashing of proceedings – Permissibly of -- Once the offence is committed, any payment made subsequent thereto will not absolve the accused of the liability of criminal offence, though in the matter of awarding of sentence, it may have some effect on the Courts trying the offence -- But by no stretch of imagination, a criminal proceeding could be quashed on account of deposit of money in the Court.

(Para 8)

A. Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 142 – Cause of action -- Pre-mature filing of complaint – Cognizance by Magistrate -- "Taking cognizance of an offence" by the Court has to be distinguished from the filing of the complaint by the complainant -- Taking cognizance would mean the action taken by the Court for initiating judicial proceedings against the offender in respect of the offence regarding which the complaint is filed – Mere presentation of the complaint in the Court cannot be held to mean that its cognizance had been taken by the Magistrate -- If the complaint is found to be pre-mature, it can await maturity or be returned to the complainant for filing later and its mere presentation at an earlier date need not necessarily render the complaint liable to be dismissed or confer any right upon the accused to absolve himself from the criminal liability for the offence committed.

(Para 8-10)

B. Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 142 – Presentation of complaint – Cognizance by Magistrate -- Complaint was returned to the complainant/ appellant on the ground that the verification was not signed by the counsel, could not be termed to be an action of the Magistrate taking cognizance within the meaning of Section 142 of the Act.

(Para 11)

A. Negotiable Instruments Act, 1881 (26 of 1881), Section 138 – Cheque bounce case -- Demand notice for payment – Additional claim in demand notice -- Effect of – If in a notice any other sum is indicated in addition to the cheque amount the notice cannot be faulted.

(Para 10)

B. Negotiable Instruments Act, 1881 (26 of 1881), Section 138, 139 – Cheque bounce case – Presumption -- Additional claim in demand notice -- Presumption u/s 139 of NI Act would arise only in respect of the cheque amount -- Regarding other claims, a civil suit would be necessary.

(Para 10-13)