The Patna High Court quashed a cognizance order passed under Sections 420, 34 IPC and Section 138 of the Negotiable Instruments Act, holding that lodging an FIR for an offence punishable under Section 138 NI Act is impermissible under law. The Court emphasized that cognizance can be taken only upon a complaint compliant with Sections 138 and 142A, reaffirming the statutory scheme that reserves criminal prosecution to the drawer of the dishonoured cheque.
Background & Facts
The Dispute
The underlying transaction involved a loan of Rs. 4 lakh given by the informant (later identified as Lieutenant Colonel M.S. Ahmad) to the petitioner, Anjani Singh @ Tej Pratap Singh, to start a business. The petitioner issued two cheques of Rs. 2 lakh each against this loan. When the business failed, the informant demanded repayment. The petitioner failed to pay, and the two cheques were deposited with the bank, which returned them with the remark “Insufficient Fund”. The informant alleged cheating and criminal conspiracy, leading to the registration of an FIR and subsequent charge-sheet under Sections 420, 34 IPC and Section 138 NI Act.
Key Facts
- Loan amount: Rs. 4 lakh.
- Two cheques issued: each for Rs. 2 lakh.
- Cheques dishonoured by bank with note “Insufficient Fund”.
- FIR lodged for offences under Sections 420, 34 IPC and Section 138 NI Act.
- Charge-sheet filed by police based on investigation.
- Cognizance taken by the Additional Chief Judicial Magistrate XIII, Muzaffarpur (East) vide order dated 12.05.2015 in PS Case No. 422 of 2014 (Trial No. 1885 of 2018).
- Criminal Miscellaneous Petition No. 21715 of 2019 filed before the Patna High Court seeking quashing of the cognizance order.
- Judgment delivered on 21.09.2026.
Procedural History
- Year 2014: PS Case No. 422 registered at Muzaffarpur Town Police Station.
- 12.05.2015: Order of cognizance passed by the Additional Chief Judicial Magistrate XIII, Muzaffarpur (East).
- 2019: Criminal Miscellaneous No. 21715 of 2019 filed before the Patna High Court.
- 21.09.2026: Judgment delivered by Hon’ble Mr. Justice Chandra Shekhar Jha.
The Parties' Positions
For the Petitioner:
- The entire allegation centres on dishonour of the two cheques; lodging an FIR for an offence under Section 138 NI Act is not maintainable as the law requires a complaint after compliance with Section 142A.
- Reliance placed on N. Harihara Krishnan v. J. Thomas [(2018) 13 SCC 663] where the Supreme Court held that an FIR cannot be registered for such offence.
- Non-compliance with the procedural prerequisites of Section 142A (notice, demand and failure to pay within fifteen days) was highlighted.
For the Respondent/State:
- The Assistant Public Prosecutor, representing the opposite parties, could not dispute the legal position advanced by the petitioner.
- The State effectively conceded that the FIR was not maintainable under the NI Act, while reserving the right of the private complainant to pursue civil remedies for recovery of the loan amount.
Relief Sought
The petitioner sought quashing of the cognizance order dated 12.05.2015, with a clarification that the quashing does not preclude the opposite party from taking any other appropriate legal action for recovery of the Rs. 4 lakh loan, including civil suits.
The Legal Issue
The central question was whether lodging a First Information Report (FIR) for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 is permissible under the Code of Criminal Procedure, 1973, or whether the statutory mandate requires that cognizance be taken solely upon a complaint filed in accordance with the procedural prerequisites of Sections 138 and 142A of the NI Act.
Arguments Presented
For the Appellant/Petitioner
The petitioner argued that the entire prosecution rested on the dishonour of two cheques of Rs. 2 lakh each issued against a loan of Rs. 4 lakh. Since the offence under Section 138 NI Act can be constituted only after the three conditions precedent of the proviso to Section 138 are satisfied, an FIR - being a police-initiated proceeding - is not permissible under law. Counsel relied on N. Harihara Krishnan v. J. Thomas [(2018) 13 SCC 663] to assert that the Supreme Court has expressly barred the registration of an FIR for such offence and emphasized that cognizance can be taken only upon a complaint compliant with Sections 138 and 142A. It was further submitted that the investigating agency had not followed the mandatory notice and demand procedure under Section 142A, rendering the cognizance order illegal.
For the Respondent/State
The Assistant Public Prosecutor, appearing for the opposite parties, did not contest the legal stance taken by the petitioner. The State acknowledged that lodging an FIR for an offence under Section 138 NI Act is not permissible under the statutory scheme. However, the State clarified that the quashing of the cognizance order would not prevent Lieutenant Colonel M.S. Ahmad from pursuing any other appropriate legal action, including civil suits, for recovery of the loan amount of Rs. 4 lakh.
The Court's Analysis
The Court commenced by noting that the impugned order took cognizance of an offence under Section 138 NI Act based solely on an FIR, without any complaint having been filed. It then turned to the statutory scheme. The Court reproduced paragraphs 18 and 19 of N. Harihara Krishnan v. J. Thomas [(2018) 13 SCC 663] to elucidate the prerequisites for cognizance under Section 138:
"18. Section 142 of the Act inter alia stipulates that no court shall take cognizance of any offence punishable under Section 138 unless a 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. ..."
"19. The proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that the cheque ought to have 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. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make 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. The third condition is that the drawer of such a cheque should have failed to make 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. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque."
The Court emphasized that Section 142 mandates a complaint as a condition precedent to cognizance, and the proviso to Section 138 lays down the three-step procedure that must be exhausted before criminal liability can attach. Since the present case proceeded by way of an FIR without any complaint, the essential procedural steps were bypassed. The Court further observed that Section 138 prescribes punishment only for the drawer of the cheque; the payee’s remedy against the bank for wrongful dishonour remains a civil claim. Consequently, allowing an FIR to found criminal prosecution would frustrate the legislative intent of confining criminal liability to the drawer while preserving civil remedies against the bank. Accordingly, the Court held that the impugned cognizance order dated 12.05.2015 is illegal and must be set aside.
The Verdict
The petitioner succeeded. The Court set aside the cognizance order dated 12.05.2015 passed by the Additional Chief Judicial Magistrate XIII, Muzaffarpur (East). It clarified that the quashing does not preclude Lieutenant Colonel M.S. Ahmad from pursuing any other appropriate legal action for recovery of the loan amount of Rs. 4 lakh, including civil suits against the drawer and the bank. No costs were awarded.
What This Means For Similar Cases
FIR Not Maintainable for Section 138 NI Act Offences
Practitioners must ensure that any criminal proceeding under Section 138 NI Act is initiated solely by a complaint satisfying the procedural prerequisites of Sections 138 and 142A. An FIR based on cheque dishonour is liable to be quashed, as the Patna High Court has now affirmed following N. Harihara Krishnan v. J. Thomas.
- Advise clients to first issue a statutory notice under Section 138(b) and await the fifteen-day period before contemplating criminal action.
- Monitor the presentation period (six months or validity) and the notice period (thirty days) to ensure compliance.
Strict Compliance with Procedural Preconditions Is Essential
The three conditions precedent under the proviso to Section 138 - presentation of the cheque within six months, notice within thirty days, and failure to pay within fifteen days - are mandatory. Non-compliance at any stage defeats the criminal liability under Section 138.
- Verify that the cheque was presented within its validity or six months.
- Confirm that a written demand was served within thirty days of receiving the bank’s return memo.
- Ascertain that the drawer failed to pay within fifteen days of such notice.
Civil Remedies Against Bank and Drawer Remain Available
While criminal liability is restricted to the drawer, the payee retains civil remedies. The payee may sue the drawer for recovery of the cheque amount and may also seek compensation from the bank for wrongful dishonour of the cheque.
- Consider filing a civil suit for recovery of the loan amount under appropriate contractual or equitable grounds.
- Explore a claim against the bank for deficiency in service if the cheque was wrongfully refused.
