2025 (5) TMI 929 - HC - Indian Laws

Dishonour of cheque - Validity of issuance of pre-cognizance notice and non-bailable warrant of arrest - powers to a Judicial Magistrate to take cognizance of an offence punishable under Section 138 - Scope and applicability of Non obstante clause of Section 142 of the Act - HELD THAT - In view of the Section 142 of the Act every offence punishable under the Act shall be compoundable notwithstanding anything contained in the BNSS. The proviso to Section 147 of the Act provides for extension of time in filing the complaint beyond the period upon satisfaction of the Court by the complainant that he had sufficient cause for not making the complaint within the prescribed period. The maintainability of a complaint under Section 138 of the Act is to be addressed by a competent Court in the light of the relevant provisions of the said Section and of the Section 142 of the Act. A Magistrate hearing a complaint under Section 138 of the Act may under some circumstances need to have recourse to any applicable provisions of Chapter (xxi) of the BNSS relating to the trial of summons cases by the Magistrates for example Sections 279 280 of the Sanhita regarding non-appearance or death of a complainant and withdrawal of the complaint which is not barred. 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of pre-cognizance notice to the accused and said provision was not available in the corresponding Section 200 of the repealed Code.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. 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. 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 nonbailable 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 is disposed of by setting aside the impugned order dated 15.04.2025 regarding issuance of non-bailable warrant of arrest 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 this order for his participation in the proceedings. It is needless to mention that if the Magistrate is yet to take cognizance on the complaint the accused is still entitled to pre-cognizance hearing. The complaints under Sections 138 and 141 of the Negotiable Instruments Act need to be treated as priority sector litigation and tried expeditiously as per the mandate of the Act. The competent jurisdictional Courts are expected to make every endeavor that the cheque bounce cases are disposed of expeditiously in furtherance of which object Alternate Dispute Resolution Mechanism provided under the Legal Services Authorities Act needs to be tried for such cases through the modes of Lok Adalat and Mediation etc however without any element of unnecessary delay on that pretext.

Summary

The core legal questions considered by the Court include:

1. Whether the learned Magistrate erred in issuing a pre-cognizance notice and subsequently a non-bailable warrant of arrest in a complaint filed under Section 138 of the Negotiable Instruments Act, 1881 ("the Act"), contrary to the procedural requirements established under the Act and the Bharatiya Nagrik Suraksha Sanhita 2023 ("BNSS").

2. The scope and applicability of Section 142 of the Act, particularly the effect of its non-obstante clause on the procedure for taking cognizance of offences under Section 138.

3. Whether the procedural safeguards such as issuance of pre-cognizance notice and examination on oath of the complainant and witnesses under Section 223 BNSS apply to complaints under Section 138 of the Act.

4. The permissibility and procedural correctness of conducting summary trials under Section 143 of the Act and the extent to which trial procedure under BNSS applies.

5. The appropriateness of issuance of a non-bailable warrant as opposed to summons or bailable warrant in the context of complaints under Section 138 of the Act.

6. The broader legislative intent behind Chapter XVII of the Act concerning expeditious trial and resolution of cheque dishonour cases.

Issue-wise Detailed Analysis

1. Legality of Issuance of Pre-Cognizance Notice and Non-Bailable Warrant under Section 138 of the Act

The Court examined the procedural framework governing complaints under Section 138 of the Act, emphasizing Section 142 which begins with a non-obstante clause. This clause explicitly bars any court from taking cognizance of an offence under Section 138 except upon a written complaint by the payee or holder in due course, filed within one month of the cause of action arising. The Court noted that this provision excludes the possibility of cognizance based on police reports or FIRs, thus restricting initiation of proceedings to written complaints only.

However, the Court clarified that the non-obstante clause does not exclude the application of procedural safeguards under BNSS, specifically Section 223 which mandates issuance of a pre-cognizance notice and examination on oath of the complainant and witnesses. The Court held that these safeguards are not barred but are desirable and justice-oriented, ensuring the accused's legitimate defence is considered at the earliest stage.

In the instant case, the Magistrate issued a pre-cognizance notice and later a non-bailable warrant. The Court found that while issuance of the pre-cognizance notice was appropriate and within the procedural framework, issuance of a non-bailable warrant at the pre-cognizance stage was unwarranted. The Court reasoned that the pre-cognizance hearing itself was meant to afford the accused an opportunity to be heard, and the accused's failure to appear did not justify immediate issuance of a non-bailable warrant. Instead, summons or a bailable warrant would have been the correct procedural step, reserving non-bailable warrants as a last resort.

2. Interpretation and Application of Section 142 of the Negotiable Instruments Act

The Court reproduced Section 142 in extenso and analyzed its provisions. The non-obstante clause was interpreted as a legislative intent to streamline the initiation of proceedings under Section 138 by limiting cognizance to written complaints by the payee or holder in due course, filed within a prescribed time frame.

The Court emphasized that Section 142 also delineates the jurisdiction of courts competent to try such offences, restricting it to Judicial Magistrates of the first class or Metropolitan Magistrates. The Court further noted that the Act's provisions do not preclude the Magistrate from applying procedural safeguards under BNSS to ensure fairness.

Thus, the Court held that the Magistrate must satisfy himself that the conditions precedent to filing the complaint, including the limitation period and cause of action, are met before taking cognizance. This inquiry phase precedes formal cognizance and may involve issuance of pre-cognizance notice and examination of witnesses.

3. Applicability of Procedural Safeguards under BNSS Section 223 to Complaints under Section 138

The Court observed that Section 223 BNSS, which mandates issuance of pre-cognizance notice and examination on oath, was not available under the corresponding provisions of the repealed Code of Criminal Procedure. The new procedural requirement was described as justice-oriented, allowing early appreciation of any legitimate defence of the accused.

The Court held that these procedural safeguards are not barred by the provisions of the Act and may be applied to complaints under Section 138. However, non-observance of these requirements would not render the proceedings invalid. They are desirable but not mandatory to the extent of vitiating the complaint.

4. Trial Procedure under Section 143 of the Act and Interaction with BNSS

Section 143 of the Act mandates summary trials for offences under Chapter XVII, applying provisions of Sections 262 to 265 of BNSS (corresponding to the repealed Code). The Court highlighted the provisos allowing the Magistrate to convert a summary trial into a regular trial if the sentence may exceed one year or for other reasons, after hearing parties and recalling witnesses.

The Court interpreted this to mean that a Magistrate has the discretion at the outset to proceed with trial as a summons case under BNSS rather than commence summary trial. The choice of procedure is within the court's powers, and the summons trial procedure is often more convenient and desired.

5. Appropriateness of Issuance of Non-Bailable Warrants

The Court stressed that the issuance of a non-bailable warrant should be a measure of last resort. After taking cognizance and issuance of summons, if the accused fails to appear, the Magistrate may issue a bailable warrant and only thereafter a non-bailable warrant if necessary.

In the present case, the Court found that the Magistrate erred in issuing a non-bailable warrant at the pre-cognizance stage, as the accused had the right to be heard at that stage. The Court set aside the non-bailable warrant and directed the accused to appear before the trial Magistrate for participation in the proceedings.

6. Legislative Intent and Expeditious Trial of Cheque Bounce Cases

The Court underscored the legislative purpose behind Chapter XVII of the Act, which is to facilitate smooth business transactions and curb fraudulent issuance of cheques. Dishonour of cheques causes significant loss and undermines commercial credibility.

The Court emphasized that offences under Section 138 are civil wrongs made compoundable to promote speedy resolution. The Act mandates expeditious trial and encourages the use of Alternate Dispute Resolution mechanisms such as Lok Adalats and Mediation, provided they do not cause undue delay.

Significant Holdings

"The non-obstante clause of Section 142 of the Negotiable Instruments Act bars taking cognizance of an offence under Section 138 except upon a written complaint by the payee or holder in due course, thereby excluding police reports or FIRs as a basis for cognizance."

"The procedural safeguards under Section 223 BNSS, including issuance of pre-cognizance notice and examination on oath of complainant and witnesses, are not barred by the Negotiable Instruments Act and are desirable to ensure early appreciation of the accused's legitimate defence."

"Issuance of a non-bailable warrant at the pre-cognizance stage in a complaint under Section 138 of the Act is unwarranted; summons or bailable warrant should precede such extreme measures."

"A Magistrate has the discretion to choose to proceed with trial under the summons case procedure rather than commence a summary trial under Section 143 of the Act, provided the reasons are recorded."

"The offence under Section 138 is a civil wrong made compoundable and requires expeditious trial to safeguard the interests of business transactions and prevent misuse of cheque instruments."

"Non-observance of procedural requirements under Section 223 BNSS shall not invalidate the complaint but their observance is encouraged as a justice-oriented measure."

In conclusion, the Court set aside the impugned order issuing the non-bailable warrant, directed the accused to appear for the next hearing, and reaffirmed the procedural framework for complaints under Section 138 of the Negotiable Instruments Act, emphasizing adherence to procedural safeguards and expeditious disposal of cheque bounce cases.