The Section 138 NI Act Jinx : Critique Of 'Celestium' Judgment Allowing Complainants To File Appeal Under S.372 CrPC
Justice (Retired) PN Prakash
11 July 2025 11:51 AM IST
Complainants in cases under Section 138 of the Negotiable Instruments Act, 1881 are a jinxed lot. Although a quarter of a century has passed since its enactment, it passes comprehension as to how frequently the interpretation of its provisions swing like the proverbial pendulum taking with it the fate of thousands of litigants.
In the recent past, one can recall the decision of the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra[1], which altered the very basis of the territorial jurisdiction of Magistrates to entertain complaints under Section 138. This decision unsettled the default parameters under the Cr.P.C and caused chaos throughout the country so much so that Parliament had to step in by way of the Negotiable Instruments (Ordinance), 2015 to amend Section 142 of the N.I Act to restore some element of certainty. Of similar concern is the forum of appeal for a complainant against an order of acquittal in a case under Section 138. The recent decision of the Supreme Court in Celestium Financial has opened up some areas of concern which this article seeks to explore.
Generally speaking, in the context of appeals against acquittals, Section 417 of the Code of Criminal Procedure, 1898 conferred a remedy of appeal against acquittal only to the State. By the Code of Criminal Procedure (Amendment) Act, 1955 Section 417 was substituted and a right of appeal against an order of acquittal was conferred on a complainant in a complaint case after obtaining special leave from the High Court. Thus, at this stage of the evolution of the Code, a right of appeal was given to (a) the State (b) the complainant and (c) the accused in case of conviction.
In a case instituted upon a police report, the actual victim who suffered the consequences of crime had no remedy of appeal against any order and had to perforce file a revision under Section 397 Cr.P.C. This remedy, in the context of acquittals, suffered from a major handicap. The High Court or the Court of Sessions in revision could not convict an accused after setting aside an acquittal by virtue of the bar under Section 401(3) Cr.P.C. The only option was to remand and order a retrial leading to further delays.
It is in this background that the Law Commission, the Malimath Committee and the Madhava Menon Committee sought to remedy the disequilibrium by recommending the creation of a right of appeal to the only category of persons who did not hitherto enjoy such a remedy ie., the victim of a crime in a case instituted on a police report.
In response to the above recommendations, the Parliament enacted the Code of Criminal Procedure (Amendment) Act inserting, inter alia, a proviso to Section 372 of the Cr.P.C providing a victim the right to prefer an appeal against (a) an order of acquittal or (b) an order convicting the accused for a lesser offence and (c) against an order imposing inadequate compensation. Section 2 (wa) was also simultaneously introduced defining a victim to mean “a person who has suffered any loss or injury caused by reason of the act or omission for which the accused person has been charged, and the expression "victim" includes his or her guardian or legal heir.” A question immediately arose as to whether a complainant in a case instituted on a private complaint could also be a victim for the purposes of the proviso to Section 372.
One of the earliest cases is Tata Steel v Atma Tube Products Limited[2], where a Full Bench of the Punjab and Haryana High Court speaking through Hon'ble Mr. Justice Surya Kant (as he then was) exhaustively considered the issue and held that an appeal against acquittal would lie only to the High Court under Section 378 Cr.P.C. Several High Courts have taken the same view[3].
Shortly thereafter, a Full Bench of the Madras High Court in Ganapathy took a diametrically opposite view that a complainant under Section 138 is a victim under Section 2(wa) of the Cr.P.C., and that his right of appeal against an order of acquittal would lie exclusively to the Sessions Court under the proviso to Section 372. Pursuant to this, thousands of appeals were transferred from the Madras High Court to the Sessions Court for disposal. Then came the decision of the Supreme Court in Mallikarjun Kodagali (Dead) v. State of Karnataka[4]. In the said judgment, the majority (Madan B. Lokur and S. Abdul Nazeer, JJ) briefly touched upon the applicability of Section 372 to a complaint case. Lokur, J observes:
“76. As far as the question of the grant of special leave is concerned, once again, we need not be overwhelmed by submissions made at the Bar. The language of the proviso to Section 372 CrPC is quite clear, particularly when it is contrasted with the language of Section 378(4) CrPC. The text of this provision is quite clear and it is confined to an order of acquittal passed in a case instituted upon a complaint. The word “complaint” has been defined in Section 2(d) CrPC and refers to any allegation made orally or in writing to a Magistrate. This has nothing to do with the lodging or the registration of an FIR, and therefore it is not at all necessary to consider the effect of a victim being the complainant as far as the proviso to Section 372 CrPC is concerned.”
These observations make it clear that the scenario of a victim being a complainant is not contemplated in the scheme of the proviso to Section 372.
In 2019, when I was a member of the Bench of the Madras High Court, two matters came up before me raising the issue as to whether the remedy under Section 372 was available in the light of the above observations made by Lokur, J in Kodagali's case. Doubting the correctness of Ganapathy, I referred these cases to the Hon'ble Chief Justice with a request to constitute a Bench of appropriate strength to reconsider the said decision. On reference, a Full Bench speaking through Hon'ble Mr. Justice M.M Sundresh (as he then was) with whom Justice N Anand Venkatesh concurred, followed the decision of the three-judge bench in Damodar S. Prabhu v. Sayed Babalal, (2010) 5 SCC 663, and declared its earlier decision in Ganapathy to be per incuriam. It was held that an appeal against an order of acquittal under Section 138, would lie only before the High Court under Section 378(4) after seeking special leave. Thousands of cases which were earlier transferred to the Sessions Courts were ordered to be re-transferred to the High Court.
Just as the dust settled on the controversy, we have the recent decision of the Supreme Court in Celestium Financial v. A. Gnanasekaran, 22025 LiveLaw (SC) 666, which has taken the view that an appeal under the proviso to Section 372 was maintainable at the instance of a complaint against an order of acquittal under Section 138. A close reading of the decision shows that the Supreme Court has proceeded on the basis that the remedy under the proviso to Section 372 was in addition to the remedy under Section 378(4) and that the complainant had the option to elect either of the two. This is evident from the following observations made in the judgment:
“7.8 In the case of an offence alleged against an accused under Section 138 of the Act, we are of the view that the complainant is indeed the victim owing to the alleged dishonour of a cheque. In the circumstances, the complainant can proceed as per the proviso to Section 372 of the CrPC and he may exercise such an option and he need not then elect to proceed under Section 378 of the CrPC.
7.11……. Thus, if a victim who is a complainant, proceeds under Section 378, the necessity of seeking special leave to appeal would arise but if a victim whether he is a complainant or not, files an appeal in terms of proviso to Section 372, then the mandate of seeking special leave to appeal would not arise.
9. In the circumstances, we find that Section 138 of the Act being in the nature of a penal provision by a deeming fiction against an accused who is said to have committed an offence under the said provision, if acquitted, can be proceeded against by a victim of the said offence, namely, the person who is entitled to the proceeds of a cheque which has been dishonoured, in terms of the proviso to Section 372 of the CrPC, as a victim. As already noted, a victim of an offence could also be a complainant. In such a case, an appeal can be preferred either under the proviso to Section 372 or under Section 378 by such a victim.”
It should be pointed out that the doctrine of election can apply only when a litigant has two different/inconsistent remedies[5]. However, as in Section 397/401 Cr.P.C, the legislature may make an exception by vesting concurrent remedies. In the context of Section 138, the forum of appeal under the proviso to Section 372 is the Sessions Court, whereas the forum of appeal under Section 378(4) is the High Court. Thus, the complainant would have to choose not between two remedies but from two forums to exercise one appellate remedy.
The second aspect is that in paragraph 5.10 of the decision in Celstrium, the Court has endorsed the opinion of Madan B Lokur, J in Mallikarjun Kodagali (supra). However, as seen from paragraph 76 of Kodagali, extracted supra, Lokur, J himself had ruled out the application of the proviso to Section 372 to complaint cases holding that “it was not at all necessary to consider the effect of a victim being a complainant” in the context of Section 372. If that is so, the entire discussion of a victim being a complainant in paragraphs 7.7 to 7.11 of Celstium, which by a bench of two judges, appear to be running counter to paragraph 76 of Kodagali, which is a decision of a 3-judge bench.
Lastly, it should be mentioned that in paragraph 20 of the judgment of a three-judge bench in Damodar S. Prabhu v. Sayed Babalal (supra), the following observations have been made:
“It may be noted here that Section 143 of the Act makes an offence under Section 138 triable by a Judicial Magistrate First Class (JMFC). After trial, the progression of further legal proceedings would depend on whether there has been a conviction or an acquittal.
• ……………..
• In the case of acquittal by the JMFC, the complainant could appeal to the High Court under Section 378(4) of the CrPC, and thereafter for special leave to appeal to the Supreme Court under Article 136. In such an instance, therefore, there will be three levels of proceedings.”
This decision was rendered after the coming into force of the Code of Criminal Procedure, (Amendment) Act, 2009, and several High Courts have followed it to hold that an appeal against acquittal in a 138 NI Act case lies only to the High Court. If the complainant elects to pursue the remedy under the proviso to Section 372, a further remedy of revision would be available to a complainant under Section 397 Cr.P.C before the High Court. This leads to four tiers of litigation in a case arising out of an acquittal which is obviously not envisaged under the three-tier scheme contemplated in Damodar Prabhu.
This will now give rise to another judicial dilemma in the High Courts as to whether Damodar Prabhu and Kodagali, which are three-judge bench decisions, must be followed in preference to Celestium Financial, which is by a bench of two judges. The confusion has already commenced as one learned single judge of the Madras High Court, purporting to follow Celestium Financial, has declared the remedy of a complainant under Section 378(4) to be extinguished on and from 07.07.2025. This curious result was achieved by declaring Celestium Financial to have prospective effect, a power hitherto vested only with the Supreme Court, on and from 07.07.2025 although the decision was rendered on 08.04.2025. It is, therefore, hoped that before another judicial storm arises the decision in Celestium Financial (supra) is clarified at the earliest.
Author is a Former Judge of the Madras High Court. Views Are Personal.