Holding

A post‑dated cheque is deemed to have been drawn on the date it bears; from that date the six‑month period under Section 138(a) is calculated, and the provisions of Section 138 apply once the instrument becomes payable on demand.

Summary

Anil Kumar Sawhney and Gulshan Rai, shareholders of a private company, settled a dispute by a deed of compromise wherein Sawhney would transfer his shares to Rai for Rs.10 lakh payable by eight post‑dated cheques. Several of those cheques, dated in 1991, were later returned unpaid with the endorsement "not arranged for no funds". Sawhney issued notices under Section 138 of the Negotiable Instruments Act and filed criminal complaints, but the Punjab and Haryana High Court quashed the proceedings, holding that post‑dated cheques are not "cheques" for the purposes of Section 138. The Supreme Court held that a post‑dated cheque remains a bill of exchange until the date printed on it, at which point it becomes a cheque payable on demand, and the six‑month limitation under Section 138(a) is to be counted from that date. Consequently, Section 138 applies to post‑dated cheques once they become payable on demand, and the High Court's order was set aside. The criminal complaints were ordered to proceed.

Issues considered

Whether a post‑dated cheque is deemed a "cheque" under Section 6 of the Negotiable Instruments Act for the purpose of invoking Section 138.
From which date the six‑month limitation period under Section 138(a) must be reckoned for a post‑dated cheque.
Whether the provisions of Section 138 are attracted by a post‑dated cheque that is presented after its date of maturity.

Legislation cited

Negotiable Instruments Act, 1881s. 138, s. 139, s. 140, s. 19, s. 5, s. 6

Subjects

post‑dated chequeNegotiable Instruments ActSection 138cheque dishonourcriminal liabilityshare settlementlimitation period

Judgment

A ANIL KUMAR SAWHNEY
v.
GULSHAN RAJ

OCTOBER 11, 1993

B [KULDIP SINGH AND YOGESHWAR DAYAL, JJ.]

Negotiable Instrnments Act, 1881 : Sections 5,6 and 19-Post-dated
cheque-Nature of--Only a Bill of Exchange till the date shown on its face-
Becomes a cheque only from that date.
c Sections 138(a), 139 and 140 as inserted by the Amending Act,
1988-Limitation period of six months for presenting the cheque for pay-
ment-To be reckoned from the date shown on the face of the cheque and
not from the date on which it was made.

D The appellant and respondent were share-holders of a private
limited company. The company had two groups of share-holders, one led
by the appellant and the other by the respondent. Disputes arose between
the two groups which led to the filing of a civil suit. Ultimately the parties
arrived at a settlement which was recorded in a deed of compromise.
E Appellant agreed to transfer all the shares of his group to Respondent for
a total consideration of Rs. 10 lakhs. The payment was to be made by way
"'.
of eight post-dated cheques.

The suit was disposed of in terms of the settlement. Some of the
cheques were encashed. Some cheques were returned by the banks with the
F endorsement "not arranged for no funds". The appellant issued notices
under S.138 of the Negotiable Instruments Act to the Respondent and since
payment was not forthcoming, he filed complaints before the Chief Judicial
Magistrate. Summons were issued to the Respondent for appearance in
the said proceedings. Respondent approached the High Court for quash·
G Ing the proceedings. A Single Judge of the High Court quashed the
proceedings· on the short ground that since the cheques were post-dated,
the provisions of S.138 of the Act were not attracted and as such no offence
was made out. Aggrieved by the High Court's order, the complainant
preferred the present appeals.

H Allowing the appeals, this Court
204
SHWHNEYv. G. RAI 205

HELD: 1. A "cheque" under Section 6 of the Negotiable Instruments A
Act is also a bill of exchange but it is drawn on a banker and is payable
on demand. It is thus obvious that a bill of exchange even though drawn
on a banker, if it is not payable on demand, it is not a cheque. A
"post-dated cheque" is only a bill of exchange when it is written or drawn;
it become a "cheque" when it is payable on demand. The post-dated cheque
is not payable till the date which is shown on the face of the said document.
B
It will only become cheque on the date shown on it and prior to that it
remains a bill of exchange under Section 5 of the Act. It is clear from
Section 19 that a "cheque" is an instrument which is payable on demand.
A post-dated cheque, which is not payable on demand till a particular date,
is not a cheque in the eyes of law till the date it becomes payable on C
demand. [212-F-H, 213-A]

2. When a post-dated cheque is written or drawn it is only a bill of
exchange and as such the provisions of Section 138(a) are not applicable
to the said instrument. The post-dated cheque becomes a cheque under the
Act on the date which is written on the said cheque and the six months D
period has to be reckoned for the purposes of Section 138(a) from the said
date. One of the main ingredients of the offence under Section 138 of the
Act is, the return or the cheque by the bank unpaid. Till the time, the
cheque is returned by the bank unpaid, no offence under Section 138 is
made out. A post-dated cheque cannot be presented before the bank and E
as such the question or its return would not arise. It is only when the
post-dated cheque becomes a "cheque", with effect from the date shown on
the face of the said cheque, the provisions of Section 138 come into play.
With effect from the date shown 'on the race or the said cheque it becomes
a "cheque" under the Act and the provisions or Section 138(a) would
squarely be attracted. (213-C-F] · F

3. In the instant case, the post-dated cheques were drawn in March
1990 but they became "cheques" in the year 1991 on the dates shown
therein. The period of six months, therefore, has to be reckoned from the
dates mentioned on the face of the cheques. (213-F·G] G
Babu Xavier v. Lalchand Munoth, 1990 TLNJ(Crl.) 121, approved.

Manoj K Seth v. Fernandez, 1991 2 KLT 65, overruled.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal H
206 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R.

A Nos. 640-42 of 1993.
From the Judgment and Order dated 21.1.1992 of the Punjab and
Haryana High Court in Crl. Misc. Nos. 8857-M, 8859-M and 8855-M of
1991.

B Kailash Vasdev for the Appellant.

Y.K. Jain and P.K. Jain (for Rajendra Narain and Co.) for the
Respondent.

The Judgment of the Court was delivered by
c . KULDIP SINGH, J. Leave granted.

Anil Kumar Sawhney filed three complaints before the Chief Judicial
Magistrate, Karnal alleging that Gulshan Rai, the accused therein, had
committed an offence under section 138 of the Negotiable Instruments
D (Amendment) Act, 1988 (for short the Act). The learned magistrate issued
summons in each of the three complaints to Gulshan Rai for his ap-
pearance in the said proceedings. Gulshan Rai challenged the orders of
the learned Chief Judicial Magistrate before the Punjab and Haryana High
Court by way of criminal miscellaneous petitions under section 482, Cr.P .C.
Learned single Judge of the High Court quashed the proceedings on the
E
short ground that the cheques in dispute being post-dated cheques, the
provisions of section 138 of the Act were not attracted and, as such, no
offence was made out on the admitted facts of the criminal complaints.
These appeals by way of special leave petitions are by Anil Kumar Sawhney
against the order of the High Court.
F
The appellant and the respondent were the share-holders of M/s. Sai
Beverages Private Limited, a private limited company having its registered
office at Karnal. The comp~y had two groups of share-holders, one led
by the appellant and the other by the respondent. 'Disputes between the
two groups of share-holders led to the filing of a civil suit at Karnal.
G Ultimately the parties arrived at a settlement which was recorded in a deed
of compromise dated March 5, 1990. The appellant agreed to transfer all
the shares standing in the names of his group- associates to the respon-
dent-Gulshan Rai for a total consideration of Rs.10 lacs. The payment was
to be made by way of eight post-dated cheques of different amounts. The
H suit was disposed of in terms of the settlement ~ntered into between the
.. SHWHNEYv. G~ RAJ [KULDIP SINGH, J.]

parties. Some of the cheques were encashed on presentation to the A
bankers. Two cheques dated February 15, 1991 for Rs.1 lac each, one
207

cheque dated April 15, 1991 for Rs. 1,50,000 and another cheque dated
May 15, 1991 for Rs. 1,50,000 were returned by the banks with the endor-
sement "not arranged for - no funds". The appellant thereafter issued
notices as contemplated under Section 138 of the Act and having failed to B
receive the payment; filed complaints before the Chief Judicial Magistrate
at Kamal.

The Banking, Public Financial Institutions and Negotiable Instru- .
ments Laws (Amendment) Act, 1988 (the Amendment Act) came into
force with effect from April 1, 1989. The Amendment Act inserted a new C
Chapter XVII in the Act (enacting sections 138, 139, 140 and 142). The
Statement of Objects and Reasons given in the Amendment Act for
inserting new Chapter XVII in the Act are as under:

"(xi) to enhance the acceptability of cheques in settlement of
liabilities by making the drawer liable for penalties in case of D
bouncing of cheques due to insufficiency of funds in the accounts
or for the r:ason that it exceeds the arrangements made by the
drawer, with adequate safeguards to prevent harassment of honest
drawers,"
E
Sections 5, 6, 19, 138, 139 and 140 of the Act, to the relevant extent,
are reproduced hereunder:

'"Bill of Exchange' is an instrument in writing containing an un-
conditional order, signed by the maker, directing a certain person
to pay a certain sum of money only to, or to the order of, a certain F
person or to the bearer of the instrument.

xxxx xxxx xxxx

6. "Cheque" A 'cheque' is a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than G
on demand.

19. Instntments payable on demand - A promissory note or bill
or exchange, in which no time for payment is specified, and a
cheque, are payable on demand. H
208 SUPREME COURT REPORTS [1993] SUPP. 3 S.. C.R.

A 1.38. 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
B 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
c to have committed an offence and shall, without prejudice to any
other provision of this Act, be punished with imprisonment for a
term which may extend to one year, or with fine which may extent
to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply
D 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;

E (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 fifteen days of the receipt of information by him from the
bank regarding the return of the cheque as unpaid; and
F (c) the drawer of such cheque fails to make the 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.

G Explanation - For the purpose of this section, "debt or liability''
means a legally enforceable debt or other liability.

139. Presumption in favour of holder -

It shall be presumed, unless the contrary is proved, that the
H holder of a cheque received the cheque of the nature referred to
SHWHNEYv. G. RAI (KULDIP SINGH, J.) 209

in section 138 for the discharge, in whole or in part, or any debt A
or other liability.

140. Defence which may not be allowed i1t a1ty prosecutio1t u1tder
sectio1t 138 -

It shall not be a defence in a prosecution for an offence under B
section 138 that the drawer had no reason to believe when he
issued the cheque that the cheq'.le may be dishonoured on present-
ment for the reasons stated in that section." .~

The facts are more or less undisputed. Out of several cheques issued C
post-dated in March 1990 under the deed of compromise between the
parties, two of the cheques were dated February 15, 1991 one dated April
15, ·1991 and the fourth dated May 15, 1991. The dispute in the present
appeals is as to what is the date on which a cheque is stated to have been
drawn. In other words, what is the date from which the period of six months
as contemplated under Section 138(a) of the Act is to be reckoned. D

The main contention raised by the respondent before the High Court
was that the cheques in dispute were drawn in March, 1990 when those
cheques were written and made. The dates written on those cheques, which
were post-dated cheques, are not the dates when the cheques were drawn. E
According to the respondent, since the cheques were drawn in March, 1990
and those were presented before the bankers in the year 1991, the cheques
had been presented to the bank_ beyond the period of six months from the
date on which those were drawn and as such no offence was rtiade out

- under section 138(a) of the Act. Following the judgment of a learnged F
single Judge of the Madras High Court in Babu Xavier v. Lalcha1td Munoth
1990 TLNJ (Crl.) 121 the High Court quashed the criminal complaints
against the respondent.

The Madras High Court in Babu's case (supra) interpreted Section
138 of the Act in the following terms: G

"When proviso (a) to section 138 limits the applicability of the
provision to cheques presented within six months of the date of
drawal of the cheques, it has to be taken that it was the intention
of Parliament to exclude cheques post- dated or ante-dated beyond H
• J
210 SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R.
....,.-

A a period of six months from the ambit of the penal provision. The
use of the words in proviso (a) ... 'within a period of six months
from the date on which it is drawn' rather than 'within a period of
six months from the date the cheque bears' and the use of words
'or within the period of its validity, whichever is earlier rather than
B the words 'or within the period of its validity, whichever is later'
would make this intention explicit.

Post-dated cheques, though legal, are real anomalies in the
commercial world. They are payable on demand and negotiable
even between the dates of issue and the dates shown on them. The
·c holder of such a ·cheque, duly negotiated to him, even before the
date the cheque bears, is indeed a holder in due course under the
Act. Yet, when presented to the bank before the ostensible date,
the banker does not honour the cheque but returns them. The
unpaid banker who honour the cheque, without noticing the date
D the cheque bears, does so, at his risk, since he is bound to suffer
loss, if the drawer of the cheque countermands the cheque before
the date of cheque, by a stop payment order or he dies or becomes
insolvent before the above date. The position of a holder in due
course of such a cheque is just the same.
E
Yet the law is that a cheque otherwise valid does not become
invalid merely by reason of its being either post-dated or ante-
dated. When, therefore, a person receives a cheque, post-dated or
ante-dated beyond the period of six months, he should be deemed
F
to receive it with the knowledge that, .in the event of dishonour for
want of funds, section 138 of the Act would not help him. This --
obviously is the intention of Parliament.

It follows from the above discussion that a cheque is drawn on
the date when the drawer signs the cheque, complete in its form.
G On such an interpretation, cheques post-dated or ante-dated
beyond the period of six months from the date the cheques bear
would be out of the purview of section 138 of the Act."

IH
On behalf of the appellant a Division Bench judgment of the Kerala
High Court in Manoj K. Seth v. Fernandez. [1991) 2 KLT 651which took a. -
SHWHNEYv. G. RA1 [KULDIP stNGH, J.) 211

contrary view, was cited. The Kerala High Court did not agree with the A
judgment of the Madras High Court in Babu's case and interpreted section
138 of the Act in the following terms:

"Interpretation of S.138 of the Act to discover the liability arising
from dishonouring of a post-dated cheque has to be with due B
regard to the said character of post-dated cheque and the scope
of clause (a) of the proviso to s.138 cannot be considered in
isolation. The Statute has to be construed with reference to the
context and other clauses of Act to make it consistent with it. The
very object of the provision is to enhance the acceptability of
cheques by making the drawer liable for penalty in case the cheque C
bounces for the reasons mentioned in the said section. If a post-
dated cheque is considered to be drawn on the date of its delivery,
the drawer of such ~heque can defeat S.138 of the Act by showing
a date beyond six mOnths of its delivery. In the circumstance an
interpretation which Will bring about such a result cannot be D
adopted. The object of the section is to make drawer of the cheque
subject to penalty when the cheque bounces on the ground men-
tioned in the Section. The rigour of the Section itself reveals the
intention of the legislature. Enough safeguards are provided in the
Section itself to protect honest drawers. E

Offences under S.138 of the Act would be committed only when
a cheque drawn for payment of any debt or liability is returned
by the bank unpaid and drawer fails to make payment of the said
amount within 15 days of notice of dishonour. One of the elements p
to be satisfied is the cheque should have been returned unpaid. It
goes without saying such return of the cheque by the drawee could
only be on presentation; that is when he is capable of presenting
the same for encashment. In the case of post-dated cheque as
noted early, the same can be presented only on or after the date
of the cheque. The question as to when a post-dated cheque can G
be considered to have been drawn for the purpose of S.138 of the
Act cannot be dealt with independently of the right to present the
same. In relation to the drawer and drawee post-dated cheque
becomes operative only from the date of cheque when alone the
same is intended to be honoured. Post dated cheque for the H
212 su1: REME COURT REPORTS (1993) SUPP. 3 S.C.R.

A purpose of clause (a) of the provis9 to S.138 of the Act has to be
considered to have been drawn on the date it bears and in this
case, since the cheque was presented within six months of the date
of the cheque, it cannot be said that the condition in the said
proviso is not satisfied. •

B In view of the above, with respect, we are unable to agree with
the view taken in Babu Xavier's case (1990 TLNJ (Crl) 121)
referred to early."

The Punjab and Haryana High Court in the impugned judgment
C followed the Madras High Court view and did not agree with the Division
Bench of the Kerala High Court.

We do not agree with the reasoning and the conclusions reached by
the Madras High court which have been followed by the learned single
Judge of the Punjab and Haryana High Court in the impugned judgment.
D .Both the High Courts fell into patent error in holding that the provisions
of Section 138 of the Act are not applicable to the post-dated cheques. The
interpretation placed by the High Courts on Section 138 of the Act is not
only contrary to the plain language of the various provisions of the Act but
is also contrary to the Objects and Reasons of the Amendment Act. The
E said interpretation, if accepted, would defeat the very purpose of inserting
Chapter XVII in the Act.

Sections 5 and 6 of the Act define "Bill of Exchange" and "Cheque".
A "Bill of Exchange" is a negotiable instrument in writing containing an
F instruction to a third party to pay a stated sum of money at a designated
future date or on demand. A "cheque" on the other hand is a bill of exchange
drawn on a bank by the holder of an account payable on demand. Thus a
"cheque" under Section 6 of the Act is also a bill of exchange but it is

G
drawn on a banker and is payable on demand. It is thus obvious that a bill ·
of exchange even through drawn on a banker, if it is not payable on
demand, it is not a cheque. A "post-dated cheque" is only a bill of exchange
when it is written or drawn, it becomes a "cheque" when it is payable on
-
demand. The post-dated cheque is not payable till the date which is shown
on the face of the said document. It will only become cheque on the date
shown on it and prior to that it remains a bill of exchange under Section
H 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable
SHWHNEY1·. G. RA! [KULDfP SINGH,J.] 213

bul il will nol become a "cheque" Lill Lhe dale when il becomes "payable on A
demand".

IL is clear from Section 19 Lhal a "cheque" is an inslrumenl which is
payable on demand. A post-dated cheque, which is not payable on demand
till a particular date, is not a cheque in the eyes of law till the date it
B
becomes payable on demand.

An offence to be made out under the substantive provlSlons of
Section 138 of the Act it is mandatory that the cheque is 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. It is the cheque-drawn C
which has to be presented to the bank within the periods specified therein.
When a post-dated cheque is written or drawn it is only a bill of exchange
and as such the provisions of Section 138(a) are not applicable to the said
instrument. The post-dated cheque becomes a cheque under the Act of the
date which is written on the said cheque and the six months period has to D
be reckoned for the purposes of Section 138(a) from the said date. One of
the main ingredients of the offence under Section 138 of the Act is, the
return of the cheque by the bank unpaid. Till the time the cheque is
returned by the bank unpaid, no offence under Section 138 is made out. A
post-dated cheque cannot be presented before the bank and as <:;uch the E
question of its return would not arise. It is only when the post-dated cheque
becomes a "cheque", with effect from the date shown on the face of the
said cheque, the provisions of Section 138 come into play. The net result
is that a post-dated cheque remains a bill of exchange till the date written
on it. With effect from the date shown on the face of the said cheque it
becomes a "cheque" under the Act and the provisions of Section 138(a) F
would squarely be attracted. In the present case the post-dated cheques
were drawn in March 1990 but they became "cheques" in the year 1991 on
the dates shown therein. The period of six months, therefore, has to be
reckoned from the dates mentioned on the face of the cheques.
G
Even otherwise we agree with the reasoning adopted by the Division
Bench of the Kerala High Court. Section 138 has to be construed with
reference to the context. If the object of bringing Section 138 of the Act
on the statute has to be fulfilled then the only interpretation which can be
given to clause (a) of proviso to Section 138 of the Act is that a post-dated H
214 SUPREME COURT REPORTS (1993] SUPP. 3 S.C.R.

A cheque shall be deemed to have been drawn on the date it bears.

We, allow the appeals and set aside the impugned judgment of the
High Court dated January 21, 1992. The learned Chief Judicial Magistrate
Kamal shall now proceed with the complaints pending before him· in
accordance with law.

G.N. Appeals allowed

,•