138 of NIA

Source: Supreme Court  

Why in News? 

Recently, Justices Ahsanuddin Amanullah and K Vinod Chandran quashed a cheque bounce complaint filed on the 35th day, clarifying that the 30-day limitation under Section 142(b) of the Negotiable Instruments Act, 1881 (NI Act) is mandatory. It is held that delay can be condoned only through a formal application with valid reasons, and not by presumption or automatic condonation.  

• The Supreme Court held this in the matter of H.S. Oberoi Buildtech Pvt. Ltd & Ors. v. M/S MSN Woodtech (2025).

What was the Background of H.S. Oberoi Buildtech Pvt. Ltd & Ors. v. M/S MSN Woodtech (2025) Case? 

• The present case arose from a cheque bounce complaint filed under Section 138 of the Negotiable Instruments Act, 1881 against H.S. Oberoi Buildtech Pvt. Ltd and its directors H.S. Oberoi and Manveer Singh Oberoi by M/S MSN Woodtech. 
• The respondent M/S MSN Woodtech filed a complaint alleging dishonour of a negotiable instrument (cheque) under Section 138 of the Negotiable Instruments Act,1881. However, this complaint was filed five days beyond the statutory limitation period of 30 days prescribed under Section 142(b) of the Act. 
• The Trial Court issued summons to the appellants despite the admitted delay in filing the complaint. The Trial Court erroneously recorded in its order that the complaint was filed within the limitation period, which was factually incorrect. 
• The appellants challenged this order before the Delhi High Court through a criminal revision petition.  
• The High Court upheld the Trial Court's decision to issue summons, holding that the Trial Court had the power to condone the delay under Section 142(b) of the Act and that filing a formal application for condonation of delay was not a statutory mandate. 
• Aggrieved by the High Court's decision, the appellants approached the Supreme Court through a Special Leave Petition, which was converted into a Criminal Appeal. 
• The respondent's counsel argued that an application for condonation of delay had been prepared but was inadvertently not filed with the complaint, and that such application was still pending before the Trial Court. 

What were the Court’s Observations? 

• The Supreme Court made several significant observations regarding the mandatory nature of limitation periods under the Negotiable Instruments Act and the procedure for condonation of delay: 
• The Court observed that once a statute prescribes a mandatory time limit for filing a complaint, there cannot be any deviation from the same except when a proper application accompanying the complaint is filed seeking condonation and disclosing reasons for the delay. 
• The Court emphasized that it is obligatory on the part of the Court to take note of such filing beyond limitation and to consider the reasons disclosed independently before coming to a judicious conclusion that in the facts and circumstances of that case, condonation is justified. 
• The Supreme Court noted that from a purely legal point of view, where facts are admitted that the complaint was filed beyond the time prescribed under the statute, there cannot be an automatic or presumed condonation of delay. 
• The Court observed that the Trial Court had proceeded on an erroneous presumption by noting that the complaint was filed within the limitation period when it was admittedly filed five days beyond the prescribed time limit. 
• The Court held that even assuming the power under Section 142 of the Act exists for the Court to condone delay, the first requirement is that the Court must take note of the fact that there is a delay and thereafter examine whether the reasons furnished by the complainant are sufficient to condone such delay. 
• The Supreme Court observed that the High Court's opinion that filing of an application for condonation of delay is not a statutory mandate under Section 142(b) of the Act was erroneous in law. 
• The Court noted that the proper procedure had absolutely not been followed in the present case, as neither was there a formal application for condonation of delay filed with the complaint, nor did the Trial Court judicially examine the reasons for delay before taking cognizance. 
• The Supreme Court concluded that the order taking cognizance and issuing summons needed interference and could not be sustained in law. 

What is Section 138 and 142 of NI Act? 

Section 138 - Elements of the Offence: 

About: 

• Section 138 creates a statutory offence for dishonour of cheques due to insufficient funds or exceeding the arranged amount.  
• The essential elements that must be satisfied for constituting an offence under this section are: 
  • Primary Requirement: A cheque drawn by a person on his account with a banker for payment of money to another person must be returned unpaid by the bank due to insufficient funds or exceeding the arranged overdraft limit. 

Three Mandatory Conditions under the Proviso: 

• The cheque must be presented to the bank within six months from the date it was drawn or within its validity period, whichever is earlier. 
• The payee or holder in due course must issue a written demand notice to the drawer within thirty days of receiving information from the bank about the cheque being returned unpaid. 
• The drawer must fail to make payment of the cheque amount within fifteen days of receiving the demand notice. 
• Penalty Provision: Upon satisfaction of these conditions, the drawer commits an offence punishable with imprisonment up to two years, or fine up to twice the cheque amount, or both. 
• Scope Limitation: The debt or liability must be legally enforceable as clarified in the Explanation to the section. 

Section 142 - Procedural Requirements for Cognizance 

Section 142 prescribes the mandatory procedural framework for taking cognizance of offences under Section 138: 

• Complaint-Based Jurisdiction: Courts can only take cognizance upon a written complaint filed by the payee or holder in due course of the cheque. 
• Limitation Period: The complaint must be filed within one month of the cause of action arising under clause (c) of Section 138's proviso, which means within one month from the expiry of the fifteen-day notice period. 
• Condonation Provision: The proviso to Section 142(b) empowers courts to take cognizance of complaints filed beyond the prescribed one-month period, provided the complainant satisfies the court of sufficient cause for the delay. 
• Court Hierarchy: Only Metropolitan Magistrates or Judicial Magistrates of first class have jurisdiction to try such offences. 
• Territorial Jurisdiction: Section 142(2) specifies that the offence shall be tried only by courts within whose jurisdiction either the payee's bank branch (for collection through account) or the drawee bank branch (for direct presentation) is situated.