ABSTRACT
This paper attempts to delineate
various aspects of Section 138 of the Negotiable Instruments Act. Section 138
is the principal section dealing with dishonor of cheques. It delves into the
history of its establishment, with the reason for its necessary enactment and
moves to explain the procedures and process as laid out by the statute as well
as the decision of the Hon’ble Delhi High Court in Rajesh Agarwal & Others v State & Another. Seeking to set
out clarity on the points of law on relevant territorial jurisdiction for
filing a complaint under Section 138 various decisions of the Courts are set
out, finally concluding with the latest development in law, The Negotiable
Instruments (Amendment) Ordinance, 2015.
various aspects of Section 138 of the Negotiable Instruments Act. Section 138
is the principal section dealing with dishonor of cheques. It delves into the
history of its establishment, with the reason for its necessary enactment and
moves to explain the procedures and process as laid out by the statute as well
as the decision of the Hon’ble Delhi High Court in Rajesh Agarwal & Others v State & Another. Seeking to set
out clarity on the points of law on relevant territorial jurisdiction for
filing a complaint under Section 138 various decisions of the Courts are set
out, finally concluding with the latest development in law, The Negotiable
Instruments (Amendment) Ordinance, 2015.
Authored
by:
by:
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Agrima Sharma
|
Student, Amity Law School
|
|
Jasmine Malik
|
Student, Symbiosis NOIDA
|
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Sumit Roy
|
Senior Associate, Alpha Partners
|
INTRODUCTION
The term “Negotiation” is a does not
necessarily imply anything more than the assertion that the paper possesses the
negotiable quality. Generally speaking, it applies to any written statement
given as security, usually for the payment of money, which may be transferred
by endorsement or delivery, vesting in the party to whom it is transferred a
legal title on which he can support a suit in his name. The term signifies that
the note or paper writing to which it is applied, possesses the requisites of
negotiability.
necessarily imply anything more than the assertion that the paper possesses the
negotiable quality. Generally speaking, it applies to any written statement
given as security, usually for the payment of money, which may be transferred
by endorsement or delivery, vesting in the party to whom it is transferred a
legal title on which he can support a suit in his name. The term signifies that
the note or paper writing to which it is applied, possesses the requisites of
negotiability.
A negotiable
instrument is one, therefore, which when transferred by delivery or by
endorsement and delivery, passes to the transferee a good title to payment
according to its tenor and irrespective of the title of the transferor,
provided he is bona fide holder for
value without notice of any defect attaching to the instrument or in the title
of the transferor; in other words, the principle nemo dat quod non habit does
not apply, It is the element of negotiability that make a contract founded upon
paper thus adopted for circulation different in many particulars from other
contracts known to law.[1]
instrument is one, therefore, which when transferred by delivery or by
endorsement and delivery, passes to the transferee a good title to payment
according to its tenor and irrespective of the title of the transferor,
provided he is bona fide holder for
value without notice of any defect attaching to the instrument or in the title
of the transferor; in other words, the principle nemo dat quod non habit does
not apply, It is the element of negotiability that make a contract founded upon
paper thus adopted for circulation different in many particulars from other
contracts known to law.[1]
The early origin of these instruments is a
matter of speculation among text writers. In primitive societies, the system of
bills of exchange could not, of course, have existed; for firstly, money which
it represents was not invented till long after, and secondly, the art of
writing was a thing unknown to them.
When the system of bartering became inconvenient, a common medium of exchange
and an instrument of an easily convertible character was found necessary, and
money came into use. It might have had its humble origin, but when once the
utility of money was found, it was never lost sight of.
matter of speculation among text writers. In primitive societies, the system of
bills of exchange could not, of course, have existed; for firstly, money which
it represents was not invented till long after, and secondly, the art of
writing was a thing unknown to them.
When the system of bartering became inconvenient, a common medium of exchange
and an instrument of an easily convertible character was found necessary, and
money came into use. It might have had its humble origin, but when once the
utility of money was found, it was never lost sight of.
In the case of Rangachari(N.) v Bharat Sanchar
Nigam Ltd. [2], the Apex Court pointed out that The
Law merchant treated negotiable instruments as instruments that oiled the
wheels of commerce and facilitated quick and prompt deals and transactions.
This continues to be in the position as now recognized by legislation, though possibly
a change is taking place with the advent of credit cards, debit cards and so
on. It was said that negotiable instruments are merely instruments of credit,
readily convertible into money and easily passable from one hand to another.
With expanding commerce, growing demand for money could not be met by mere
supply of coins and the instrument of credit took function of money which they
represented aad thus became by degrees, articles of traffic. A man dared not
dishonor his own acceptance of bill of exchange, lest his credit be shaken in
the commercial world.
Nigam Ltd. [2], the Apex Court pointed out that The
Law merchant treated negotiable instruments as instruments that oiled the
wheels of commerce and facilitated quick and prompt deals and transactions.
This continues to be in the position as now recognized by legislation, though possibly
a change is taking place with the advent of credit cards, debit cards and so
on. It was said that negotiable instruments are merely instruments of credit,
readily convertible into money and easily passable from one hand to another.
With expanding commerce, growing demand for money could not be met by mere
supply of coins and the instrument of credit took function of money which they
represented aad thus became by degrees, articles of traffic. A man dared not
dishonor his own acceptance of bill of exchange, lest his credit be shaken in
the commercial world.
HISTORY
AND EVOLUTION OF THE ACT IN PURSUANCE WITH SECTION 138, NEGOTIABLE INSTRUMENTS
ACT, 1881
AND EVOLUTION OF THE ACT IN PURSUANCE WITH SECTION 138, NEGOTIABLE INSTRUMENTS
ACT, 1881
Negotiable Instruments have been used in
commercial world for a long period of time as one of the convenient modes of
transferring money. Development in banking sector and with the opening of new
branches, cheque became one of the favourite Negotiable Instrument.
commercial world for a long period of time as one of the convenient modes of
transferring money. Development in banking sector and with the opening of new
branches, cheque became one of the favourite Negotiable Instrument.
A cheque is an acknowledged bill of exchange
that is readily accepted in lieu of payment of money and it is negotiable.
However, by the fall of moral standards, even these Negotiable Instruments like
cheques issued, started losing their credibility by not being honoured on
presentment. It was found that an action in the civil court for collection of
the proceeds of negotiable instrument like a cheque tarried, thus defeating the
very purpose of recognizing a negotiable instrument as a speedy vehicle of
commerce.[3]
that is readily accepted in lieu of payment of money and it is negotiable.
However, by the fall of moral standards, even these Negotiable Instruments like
cheques issued, started losing their credibility by not being honoured on
presentment. It was found that an action in the civil court for collection of
the proceeds of negotiable instrument like a cheque tarried, thus defeating the
very purpose of recognizing a negotiable instrument as a speedy vehicle of
commerce.[3]
Consequently, the Section 4 of the Banking,
Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act,
1988, inserted Chapter XVII in the Negotiable Instruments Act, 1881
(hereinafter the “NI
Act”). The statement of object and reasons attached to the Bill
explaining the provisions of the added chapter read as follows:
Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act,
1988, inserted Chapter XVII in the Negotiable Instruments Act, 1881
(hereinafter the “NI
Act”). The statement of object and reasons attached to the Bill
explaining the provisions of the added chapter read as follows:
“This
clause [clause (4) of The Bill] inserts a new Chapter XVII in the Negotiable
Instruments Act, 1881. The provisions contained in the new chapter provide that
where a cheque drawn by a person for the discharge of any liability is returned
by the bank unpaid for the insufficiency of funds standing to the credit of the
account on which he cheque was drawn or for the reason that it exceeds the
arrangements made by the drawer of the cheque with the bankers for that
account, the drawer of the cheque shall be deemed to have committed an offence.
In that case, the drawer without prejudice to the other provisions of the said
Act, shall be punishable with imprisonment for a term which may extend to one
year, or with fine which may extend to twice the amount of the cheque, or with
both.
clause [clause (4) of The Bill] inserts a new Chapter XVII in the Negotiable
Instruments Act, 1881. The provisions contained in the new chapter provide that
where a cheque drawn by a person for the discharge of any liability is returned
by the bank unpaid for the insufficiency of funds standing to the credit of the
account on which he cheque was drawn or for the reason that it exceeds the
arrangements made by the drawer of the cheque with the bankers for that
account, the drawer of the cheque shall be deemed to have committed an offence.
In that case, the drawer without prejudice to the other provisions of the said
Act, shall be punishable with imprisonment for a term which may extend to one
year, or with fine which may extend to twice the amount of the cheque, or with
both.
The provisions have
also been made that to constitute the said offence –
also been made that to constitute the said offence –
(a) such cheque
should not have been presented to the bank within a period of six months of the
date of its drawal or within the period of its validity, whichever is earlier;
and
should not have been presented to the bank within a period of six months of the
date of its drawal or within the period of its validity, whichever is earlier;
and
(b) the payee or
the holder in due course of such cheque should have made 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 the information by
him from the bank regarding the return of the cheque unpaid; and
the holder in due course of such cheque should have made 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 the information by
him from the bank regarding the return of the cheque unpaid; and
(c) the drawer of
such cheque should have failed to make the payment of the said amount of money
to the payee or the holder in due course of the cheque within fifteen days of
the receipt of the said notice.
such cheque should have failed to make the payment of the said amount of money
to the payee or the holder in due course of the cheque within fifteen days of
the receipt of the said notice.
It has also been
provided that it shall be presumed, unless the contrary is proved, that the
holder of such cheque received the cheque in discharge of a liability. Defenses
which may or may not be allowed in any prosecution for such offence have also
been provided to make the provisions effective. ”
provided that it shall be presumed, unless the contrary is proved, that the
holder of such cheque received the cheque in discharge of a liability. Defenses
which may or may not be allowed in any prosecution for such offence have also
been provided to make the provisions effective. ”
The Bill provided certain considerable
safeguards to ensure that genuine and honest customers of the bank were not
harassed. These safeguards included-
safeguards to ensure that genuine and honest customers of the bank were not
harassed. These safeguards included-
(a) that no court shall take cognizance of
such offence except on a complaint, in writing made to the payee or the holder
in due course of the cheque;
such offence except on a complaint, in writing made to the payee or the holder
in due course of the cheque;
(b) that such complaint is made within one
month of the date on which the cause of action arises; and
month of the date on which the cause of action arises; and
(c) that no court inferior to that of a
Metropolitan Magistrate or a Judicial Magistrate of the first class shall try
any such offence.[4]
Metropolitan Magistrate or a Judicial Magistrate of the first class shall try
any such offence.[4]
In the case of Dalmia Cement(Bharat) Ltd. V Galaxy Traders and Agencies Ltd.[5],
the Apex Court referred to the object of Section 138 of the Act. The court observed
that the Act was enacted and section 138 thereof incorporated with a specified
object of making a special provision by incorporating a strict liability so far
as the cheque, a negotiable instrument, is concerned. The law relating to the
negotiable instruments is the law of commercial world legislated to facilitate
the activities in trade and commerce making provision of giving sanctity to the
instruments of credit which could be deemed to be convertible into money and
easily passable from one person to another.
the Apex Court referred to the object of Section 138 of the Act. The court observed
that the Act was enacted and section 138 thereof incorporated with a specified
object of making a special provision by incorporating a strict liability so far
as the cheque, a negotiable instrument, is concerned. The law relating to the
negotiable instruments is the law of commercial world legislated to facilitate
the activities in trade and commerce making provision of giving sanctity to the
instruments of credit which could be deemed to be convertible into money and
easily passable from one person to another.
The offence under section 138 is not a
natural crime like hurt or murder. It is an offence created by a legal fiction
in the statute. It is a civil liability transformed into a criminal liability,
under restricted conditions by way of an amendment to the Act, which is brought
into force only in 1989. Till then, the offending acts referred to in section
138 constituted only a pure civil liability. Legitimately, the legislature
thought it fit to provide for adequate safeguards in the Act to protect honest
drawers from unnecessary harassment.
natural crime like hurt or murder. It is an offence created by a legal fiction
in the statute. It is a civil liability transformed into a criminal liability,
under restricted conditions by way of an amendment to the Act, which is brought
into force only in 1989. Till then, the offending acts referred to in section
138 constituted only a pure civil liability. Legitimately, the legislature
thought it fit to provide for adequate safeguards in the Act to protect honest
drawers from unnecessary harassment.
However, the sections 138 to 142 of the said
Act were found deficient in dealing with dishonour of cheques. Thereby, the
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002,
inter alia, amended sections 138, 141 and 142 and inserted new sections 143 to
147 in the said Act. These sections aimed at speedy disposal of cases relating
to dishonour of chequethrough their summary trial as well as making them
compoundable. Punishment provided under section 138 too was enhanced from one
year to two years. These legislative reforms aimed at encouraging the usage of
cheque and enhancing the credibility of the instrument so that the normal
business transactions and settlement of liabilities could be ensured.[6]
Act were found deficient in dealing with dishonour of cheques. Thereby, the
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002,
inter alia, amended sections 138, 141 and 142 and inserted new sections 143 to
147 in the said Act. These sections aimed at speedy disposal of cases relating
to dishonour of chequethrough their summary trial as well as making them
compoundable. Punishment provided under section 138 too was enhanced from one
year to two years. These legislative reforms aimed at encouraging the usage of
cheque and enhancing the credibility of the instrument so that the normal
business transactions and settlement of liabilities could be ensured.[6]
What came into the forefront of all the
disputed regarding section 138, was essentially with regard to the appropriate
court in which the complaint could be filed by the payee in case a cheque has
been dishonoured. This jurisdiction issue has been interpreted by the courts
from time to time and the law has witnessed a considerable number of changes
throughout. The developments in the law relating to the dishonor of cheques
have been traced further in the paper.
disputed regarding section 138, was essentially with regard to the appropriate
court in which the complaint could be filed by the payee in case a cheque has
been dishonoured. This jurisdiction issue has been interpreted by the courts
from time to time and the law has witnessed a considerable number of changes
throughout. The developments in the law relating to the dishonor of cheques
have been traced further in the paper.
PROCEDURE
FOR FILING A COMPLAINT UNDER SECTION 138
FOR FILING A COMPLAINT UNDER SECTION 138
The Section 143 of the Negotiable Act, post
amendment by the legislature in the year 2001, specifically provides for all
offences under the Chapter are to be tried by Judicial Magistrate of First
Class or Metropolitan Magistrate (hereinafter “MM”) in accordance with the
Summary Trial provisions of sections 262 to 265 of CrPC. It has been provided
for that in a case under the section 138 of the Act, the Magistrate is
empowered to pass a sentence of imprisonment upto one year and fine exceeding
Rs. 5000/-. It further provides that if at the
commencement or during the course of summary trial, MM finds that nature of
case was such that a sentence of imprisonment exceeding one year may have to be
passed or for some other reason MM comes to conclusion that case should not be
tried summarily, the Magistrate has to pass an order after hearing the parties,
giving reasons as to why he would like to try the case not in a summarily
manner but as a summon trial and he could recall witnesses who may have been
examined and proceed with the case to hear it as a summon trial case.[7]However, the procedure so
prescribed could not resolve the issues arising from the adversities to adopt
the summary procedure. The absence of the parties for the hearing or the
absence of the respective advocates, were highly detrimental to the objective
behind prescribing a summary procedure to be followed in cases of dishonour of
cheques. Subsequently, in the case of Rajesh
Agarwal v. State and Others [8], the Hon’ble Delhi High
Court prescribed certain guidelines with
respect to the summary trial procedure which would be followed with respect to
offences under section 138. The summary trial procedure
to be followed for offences under section 138, would thus be as under:
amendment by the legislature in the year 2001, specifically provides for all
offences under the Chapter are to be tried by Judicial Magistrate of First
Class or Metropolitan Magistrate (hereinafter “MM”) in accordance with the
Summary Trial provisions of sections 262 to 265 of CrPC. It has been provided
for that in a case under the section 138 of the Act, the Magistrate is
empowered to pass a sentence of imprisonment upto one year and fine exceeding
Rs. 5000/-. It further provides that if at the
commencement or during the course of summary trial, MM finds that nature of
case was such that a sentence of imprisonment exceeding one year may have to be
passed or for some other reason MM comes to conclusion that case should not be
tried summarily, the Magistrate has to pass an order after hearing the parties,
giving reasons as to why he would like to try the case not in a summarily
manner but as a summon trial and he could recall witnesses who may have been
examined and proceed with the case to hear it as a summon trial case.[7]However, the procedure so
prescribed could not resolve the issues arising from the adversities to adopt
the summary procedure. The absence of the parties for the hearing or the
absence of the respective advocates, were highly detrimental to the objective
behind prescribing a summary procedure to be followed in cases of dishonour of
cheques. Subsequently, in the case of Rajesh
Agarwal v. State and Others [8], the Hon’ble Delhi High
Court prescribed certain guidelines with
respect to the summary trial procedure which would be followed with respect to
offences under section 138. The summary trial procedure
to be followed for offences under section 138, would thus be as under:
Step
I: On the day complaint is presented, if the complaint is accompanied by
affidavit of complainant, the concerned MM shall scrutinize the complaint &
documents and if commission of offence is made out, take cognizance &
direct issuance of summons of accused, against whom case is made out.
I: On the day complaint is presented, if the complaint is accompanied by
affidavit of complainant, the concerned MM shall scrutinize the complaint &
documents and if commission of offence is made out, take cognizance &
direct issuance of summons of accused, against whom case is made out.
Step
II: If the accused appears, the MM shall ask him to furnish bail bond to ensure
his appearance during trial and ask him to take notice u/s 251 Cr. P.C. and
enter his plea of defence and fix the case for defense evidence, unless an
application is made by an accused under section 145(2) of
NI Act for recalling a witness for cross examination on plea of defence.
II: If the accused appears, the MM shall ask him to furnish bail bond to ensure
his appearance during trial and ask him to take notice u/s 251 Cr. P.C. and
enter his plea of defence and fix the case for defense evidence, unless an
application is made by an accused under section 145(2) of
NI Act for recalling a witness for cross examination on plea of defence.
Step
III: If there is an application u/s 145(2) of NI Act for recalling a
witness of complainant, the court shall decide the same, otherwise, it shall
proceed to take defence evidence on record and allow cross examination of
defence witnesses by complainant.
III: If there is an application u/s 145(2) of NI Act for recalling a
witness of complainant, the court shall decide the same, otherwise, it shall
proceed to take defence evidence on record and allow cross examination of
defence witnesses by complainant.
Step
IV: To hear arguments of both sides.
IV: To hear arguments of both sides.
Step
V: To pass order/judgment.
V: To pass order/judgment.
JURISDICTIONAL
DEVELOPMENT UNDER SECTION 138
DEVELOPMENT UNDER SECTION 138
The Act is silent on the matter
pertaining to the relevant jurisdiction with respect to filing of criminal
complaint in case the offence of Dishonour of the cheque is committed under
Section 138. Since the Criminal courts are approached, the issue needs to be
examined from the point of view of the Criminal Procedure Code, 1973. Section
177 of CrPC provides that “Every offence
shall ordinarily be inquired into and tried by a Court within whose local
jurisdiction it was committed”. Section 178 provides that “(a) When it is uncertain in which of
several local areas an offence was committed, or (b) Where an offence is
committed partly in one local area and party in another, or (c) Where an
offence is a continuing one, and continues to be committed in more local area
has one, or (d) Where it consists of several acts done in different local
areas, It may be inquired to or tried by a court having jurisdiction over any
of such local areas.”
pertaining to the relevant jurisdiction with respect to filing of criminal
complaint in case the offence of Dishonour of the cheque is committed under
Section 138. Since the Criminal courts are approached, the issue needs to be
examined from the point of view of the Criminal Procedure Code, 1973. Section
177 of CrPC provides that “Every offence
shall ordinarily be inquired into and tried by a Court within whose local
jurisdiction it was committed”. Section 178 provides that “(a) When it is uncertain in which of
several local areas an offence was committed, or (b) Where an offence is
committed partly in one local area and party in another, or (c) Where an
offence is a continuing one, and continues to be committed in more local area
has one, or (d) Where it consists of several acts done in different local
areas, It may be inquired to or tried by a court having jurisdiction over any
of such local areas.”
Thus,
in all the above situations, the court having jurisdiction over any of such
local areas may try the offence.
in all the above situations, the court having jurisdiction over any of such
local areas may try the offence.
The
jurisdiction is explained with reference to the Landmark cases of K.BhaskaranVs.SankaranVaidhyanBalan
and Anr[9]and
the later case of DashrathRupsinghRathod v. State of Maharashtra
&Anr[10],
while assessing the position before and after these judgements.
jurisdiction is explained with reference to the Landmark cases of K.BhaskaranVs.SankaranVaidhyanBalan
and Anr[9]and
the later case of DashrathRupsinghRathod v. State of Maharashtra
&Anr[10],
while assessing the position before and after these judgements.
.
Position
Before “K.BHASKARAN” Case
Before “K.BHASKARAN” Case
·
Bellie, J. observed, that a
prosecution for issuing of a cheque without sufficient funds in the Bank, will
have to be instituted before the Court within whose jurisdiction the cheque was
issued.
prosecution for issuing of a cheque without sufficient funds in the Bank, will
have to be instituted before the Court within whose jurisdiction the cheque was
issued.
·
In P.K. Muraleedharan v/s C.K.Pareed and Anr[12]
In P.K. Muraleedharan v/s C.K.Pareed and Anr[12]
Kerala High court held thatthe
place where the creditors resides or the place where the debtor resides cannot
be said to be the place of payment unless there is any indication to that
effect either expressly or impliedly. The cause of action as contemplated in S. 142 of the Act arises at the place where the drawer of the cheque
fails to make payment of the money. That can be the place where the Bank to
which the cheque was issued is located. It can also be the place where the
cheque was issued or delivered. The Court within whose jurisdiction any of the
above mentioned places falls has therefore got jurisdiction to try the offence
under Section 138 of the Act.
place where the creditors resides or the place where the debtor resides cannot
be said to be the place of payment unless there is any indication to that
effect either expressly or impliedly. The cause of action as contemplated in S. 142 of the Act arises at the place where the drawer of the cheque
fails to make payment of the money. That can be the place where the Bank to
which the cheque was issued is located. It can also be the place where the
cheque was issued or delivered. The Court within whose jurisdiction any of the
above mentioned places falls has therefore got jurisdiction to try the offence
under Section 138 of the Act.
·
M/s. Essbee Food Specialties
and Ors. v. M/s. Kapoor Brother[13]
M/s. Essbee Food Specialties
and Ors. v. M/s. Kapoor Brother[13]
High
Court of Punjab and Haryana on the question of jurisdiction stated as under: As
to the question of jurisdiction, it is to be considered that the issuance of
the cheques and their dishonoring are only a part of cause of action; the
offence was complete only when the petitioner failed to discharge their
liability to the respondent-firm. For discharging a debt, it is the debtor who
has to find out his creditor and since in the present case, the respondent, who
is the creditor, has its office at Panchkula, the Court at Ambala had the territorial jurisdiction.
Court of Punjab and Haryana on the question of jurisdiction stated as under: As
to the question of jurisdiction, it is to be considered that the issuance of
the cheques and their dishonoring are only a part of cause of action; the
offence was complete only when the petitioner failed to discharge their
liability to the respondent-firm. For discharging a debt, it is the debtor who
has to find out his creditor and since in the present case, the respondent, who
is the creditor, has its office at Panchkula, the Court at Ambala had the territorial jurisdiction.
·
Rakesh NemkumarPorwal v/s Narayan DhonduJoglekar and
anr[14].
Rakesh NemkumarPorwal v/s Narayan DhonduJoglekar and
anr[14].
The anatomy of S. 138 comprises certain necessary
components before the offence can be said to be complete, the last of them
being the act of non-payment inspite of 15 days having elapsed after receipt of
the final notice. It is true that the cheques may have been issued by the
accused at his place of residence or business, the Bank on which it is drawn
being often located at a second spot and inevitably the complainant or the
payee has his place of residence or business at yet another location. It was
for this reason that the Kerala High Court in the case of P.K.Muralendharanv.C.KPareed[15], took the view that any
of the three Courts could exercise jurisdiction. In our considered view, where
undoubtedly each of the components constitute a stage in the commission of the
of- fence, the final non-payment being the ultimate one, S. 178 Cr.P.C. would clearly apply
to an offence of this type.”
components before the offence can be said to be complete, the last of them
being the act of non-payment inspite of 15 days having elapsed after receipt of
the final notice. It is true that the cheques may have been issued by the
accused at his place of residence or business, the Bank on which it is drawn
being often located at a second spot and inevitably the complainant or the
payee has his place of residence or business at yet another location. It was
for this reason that the Kerala High Court in the case of P.K.Muralendharanv.C.KPareed[15], took the view that any
of the three Courts could exercise jurisdiction. In our considered view, where
undoubtedly each of the components constitute a stage in the commission of the
of- fence, the final non-payment being the ultimate one, S. 178 Cr.P.C. would clearly apply
to an offence of this type.”
High Court of Andhra Pradesh held that the Court within
whose jurisdiction the cheque is given, or where the information of dishonour
is received or where the office of the payee is situate, will have jurisdiction
to try the offence.
whose jurisdiction the cheque is given, or where the information of dishonour
is received or where the office of the payee is situate, will have jurisdiction
to try the offence.
·
Canbank Financial Services Ltd. v/s Gitanjali Motors
and Ors[17]
Canbank Financial Services Ltd. v/s Gitanjali Motors
and Ors[17]
Delhi High Court held that
the place where the cheque was given or handed over is relevant and the Courts
within that area will have territorial jurisdiction. Also held, “Then as
per Section 179 when an act is an offence by
reason of anything which has been done and of a consequence which has ensued.
The offence may be inquired into or tried by a court within those legal
jurisdiction such thing has been done or such consequence has ensued. Payment
of cheque against an account having sufficient funds to meet the liability
under the cheque is one act while dishonor of the cheque is a consequence of
such an act. Therefore as per Section 179 also the place where the
cheque was given or handed over will have jurisdiction and the courts of that
place will have jurisdiction to try the offence. Likewise for purposes of
Section 178(b) payment of cheque may be one
part of an offence and dishonor of the cheque may be another part and,
therefore, both places i.e. place where the cheque was handed over and the
place where it was dishonored will have jurisdiction.”
the place where the cheque was given or handed over is relevant and the Courts
within that area will have territorial jurisdiction. Also held, “Then as
per Section 179 when an act is an offence by
reason of anything which has been done and of a consequence which has ensued.
The offence may be inquired into or tried by a court within those legal
jurisdiction such thing has been done or such consequence has ensued. Payment
of cheque against an account having sufficient funds to meet the liability
under the cheque is one act while dishonor of the cheque is a consequence of
such an act. Therefore as per Section 179 also the place where the
cheque was given or handed over will have jurisdiction and the courts of that
place will have jurisdiction to try the offence. Likewise for purposes of
Section 178(b) payment of cheque may be one
part of an offence and dishonor of the cheque may be another part and,
therefore, both places i.e. place where the cheque was handed over and the
place where it was dishonored will have jurisdiction.”
The High Court of Allahabad
held “…so far as territorial jurisdiction is concerned, the cause of
action arises at a place where the cheque was drawn, or a place where the
cheque was presented, or a place where the payee made a demand for payment of
the money by giving a notice in writing to the drawer within the stipulated
period and at a place where the drawer failed to make the payment within 15
days of the receipt of notice.”
held “…so far as territorial jurisdiction is concerned, the cause of
action arises at a place where the cheque was drawn, or a place where the
cheque was presented, or a place where the payee made a demand for payment of
the money by giving a notice in writing to the drawer within the stipulated
period and at a place where the drawer failed to make the payment within 15
days of the receipt of notice.”
Position Of and After
‘K.BHASKARAN’ Case
‘K.BHASKARAN’ Case
·
K.BhaskaranVs.SankaranVaidhyanBalan
and Anr[19]
K.BhaskaranVs.SankaranVaidhyanBalan
and Anr[19]
It
was held in paragraph 12 of the judgment that “Under
Section 177 of the Code “every
offence shall ordinarily be inquired into and tried in a court within whose
jurisdiction it was committed.
was held in paragraph 12 of the judgment that “Under
Section 177 of the Code “every
offence shall ordinarily be inquired into and tried in a court within whose
jurisdiction it was committed.
“The locality where the bank (which dishonored the cheque) is situated
cannot be regarded as the sole criteria to determine the place of
offence……..Aplace, for that purpose, would depend upon a variety of
factors. It can either be at the place
where the drawer resides or at the place where the payee resides or at the
place where either of them carries on business. Hence, the difficulty to fix up any particular locality as the place of
occurrence for the offence under Section 138 of the Act.”
cannot be regarded as the sole criteria to determine the place of
offence……..Aplace, for that purpose, would depend upon a variety of
factors. It can either be at the place
where the drawer resides or at the place where the payee resides or at the
place where either of them carries on business. Hence, the difficulty to fix up any particular locality as the place of
occurrence for the offence under Section 138 of the Act.”
Considering and reproducing
the constituents of section 138 of NI Act and section 178(d) of the Code, held:
“(1) Drawing of the cheque, (2) Presentation of the cheque to the bank,
(3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in
writing to the drawer of the cheque demanding payment of the cheque amount, (5)
failure of the drawer to make payment within 15 days of the receipt of the
notice… It is not necessary that all
the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts
could be done at 5 different localities. But concatenation of all the above
five is a sine qua non for the completion of the offence under Section 138 of the Code. In this context
a reference to Section 178(d) of the Code is useful……Thus it is clear, if the five different acts
were done in five different localities any one of the courts exercising
jurisdiction in one of the five local areas can become the place of trial for
the offence under Section 138 of the Act. In other words, the complainant can choose
any one of those courts having jurisdiction over any one of the local areas
within the territorial limits of which any one of those five acts was
done”.
the constituents of section 138 of NI Act and section 178(d) of the Code, held:
“(1) Drawing of the cheque, (2) Presentation of the cheque to the bank,
(3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in
writing to the drawer of the cheque demanding payment of the cheque amount, (5)
failure of the drawer to make payment within 15 days of the receipt of the
notice… It is not necessary that all
the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts
could be done at 5 different localities. But concatenation of all the above
five is a sine qua non for the completion of the offence under Section 138 of the Code. In this context
a reference to Section 178(d) of the Code is useful……Thus it is clear, if the five different acts
were done in five different localities any one of the courts exercising
jurisdiction in one of the five local areas can become the place of trial for
the offence under Section 138 of the Act. In other words, the complainant can choose
any one of those courts having jurisdiction over any one of the local areas
within the territorial limits of which any one of those five acts was
done”.
·
Sunil SrivastavaVs.Shri
Ashok Kalra[20]
Sunil SrivastavaVs.Shri
Ashok Kalra[20]
It is manifest from the law
laid down in the aforementioned judgment that the cause of action for filing a
complaint under Section 138 of the Act may also be at a
place where the drawer of the cheque resided or the place where the payee
resided for the place where either of them carried on business or the place
where payment was to be made. The complaint can be filed before the court which
has jurisdiction over any of these places. In the cited case a complaint under Section 138 was filed before a
Magistrate at Adoor in Pathanamthitta District in Kerala. The accused
challenged the territorial jurisdiction of the court of try the
case. His contention was that the cheque was dishonoured at the bank of the
Branch at Kayamkulam, situated in another District. he also denied the issue of
cheque and also receipt of notice of demand. The later two objections were
decided against the accused. On the first question the Supreme Court enunciated
the law as reproduced above.
laid down in the aforementioned judgment that the cause of action for filing a
complaint under Section 138 of the Act may also be at a
place where the drawer of the cheque resided or the place where the payee
resided for the place where either of them carried on business or the place
where payment was to be made. The complaint can be filed before the court which
has jurisdiction over any of these places. In the cited case a complaint under Section 138 was filed before a
Magistrate at Adoor in Pathanamthitta District in Kerala. The accused
challenged the territorial jurisdiction of the court of try the
case. His contention was that the cheque was dishonoured at the bank of the
Branch at Kayamkulam, situated in another District. he also denied the issue of
cheque and also receipt of notice of demand. The later two objections were
decided against the accused. On the first question the Supreme Court enunciated
the law as reproduced above.
The
dishonoured cheque had been presented for encashment by the Complainant/holder
in his bank within the statutory period of six months but by the time it
reached the drawer’s bank the aforementioned period of limitation had expired.
The question before the Court was whether the bank within the postulation of
Section 138 read with Sections 3 and 72 of the NI Act was the drawee bank or
the collecting bank and this Court held that it was the former. It was observed
that “non-presentation of the cheque to the drawee bank within the period
specified in the Section would absolve the person issuing the cheque of his
criminal liability under Section 138 of the NI Act, who otherwise may be liable
to pay the cheque Page 8 8 amount to the payee in a civil action initiated
under the law. This decision clarifies that the place where a complainant may
present the cheque for encashment would not confer or create territorial
jurisdiction
dishonoured cheque had been presented for encashment by the Complainant/holder
in his bank within the statutory period of six months but by the time it
reached the drawer’s bank the aforementioned period of limitation had expired.
The question before the Court was whether the bank within the postulation of
Section 138 read with Sections 3 and 72 of the NI Act was the drawee bank or
the collecting bank and this Court held that it was the former. It was observed
that “non-presentation of the cheque to the drawee bank within the period
specified in the Section would absolve the person issuing the cheque of his
criminal liability under Section 138 of the NI Act, who otherwise may be liable
to pay the cheque Page 8 8 amount to the payee in a civil action initiated
under the law. This decision clarifies that the place where a complainant may
present the cheque for encashment would not confer or create territorial
jurisdiction
·
Prem Chand Vijay Kumar v. Yashpal Singh[22]
Prem Chand Vijay Kumar v. Yashpal Singh[22]
Held
that upon a notice under Section 138 of the NI Act being issued, a subsequent
presentation of a cheque and its dishonour would not create another ‘cause of
action’ which could set the Section 138 machinery in motion.instead of the five
Bhaskaran concomitants, only four have been spelt out in the subsequent
judgment in Prem Chand.
that upon a notice under Section 138 of the NI Act being issued, a subsequent
presentation of a cheque and its dishonour would not create another ‘cause of
action’ which could set the Section 138 machinery in motion.instead of the five
Bhaskaran concomitants, only four have been spelt out in the subsequent
judgment in Prem Chand.
·
A slightly new face to law existing post K. Bhaskaran
case was given in Harman
Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd.[23]
A slightly new face to law existing post K. Bhaskaran
case was given in Harman
Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd.[23]
In this case
Hon’ble Supreme Court examined the question of jurisdiction yet again under
Section 138 of the Act. Appellant, was from Chandigarh and had issued a cheque
which was returned dishonored, the cheque was issued in Chandigarh to the
complainant where he had a branch and was actually present. Notice of payment
for the dishonored cheque was issued from the head office of the complainant in
Delhi to the accused office in Chandigarh. Due to failure on the part of the
drawer a complaint was filed in Delhi. When the case came before the lower
courts as well as high court, emphasis and reliance was laid down on ‘K.
Bhaskaran Case’ and finally coming to a conclusion so as to that Delhi Court
also have the ‘jurisdiction’. The appellant/respondent contended that
Chandigarh court had the jurisdiction to try the case but his contention was
dismissed, finally, leading to an appeal to Supreme Court. Court held that the
court derives its jurisdiction when a cause of action arises and jurisdiction
can’t be conferred on or for any act of omission on the part of the accused.
Also, held, issuance wont but communication will give rise to cause of action.
Hence, Delhi Court will not have jurisdiction to try the case. The court
adjudged on ‘whether a Delhi court would have jurisdiction merely on the ground
that the- statutory notice under section 138 was issued from Delhi’. The
Hon’ble Supreme Court held that:
Hon’ble Supreme Court examined the question of jurisdiction yet again under
Section 138 of the Act. Appellant, was from Chandigarh and had issued a cheque
which was returned dishonored, the cheque was issued in Chandigarh to the
complainant where he had a branch and was actually present. Notice of payment
for the dishonored cheque was issued from the head office of the complainant in
Delhi to the accused office in Chandigarh. Due to failure on the part of the
drawer a complaint was filed in Delhi. When the case came before the lower
courts as well as high court, emphasis and reliance was laid down on ‘K.
Bhaskaran Case’ and finally coming to a conclusion so as to that Delhi Court
also have the ‘jurisdiction’. The appellant/respondent contended that
Chandigarh court had the jurisdiction to try the case but his contention was
dismissed, finally, leading to an appeal to Supreme Court. Court held that the
court derives its jurisdiction when a cause of action arises and jurisdiction
can’t be conferred on or for any act of omission on the part of the accused.
Also, held, issuance wont but communication will give rise to cause of action.
Hence, Delhi Court will not have jurisdiction to try the case. The court
adjudged on ‘whether a Delhi court would have jurisdiction merely on the ground
that the- statutory notice under section 138 was issued from Delhi’. The
Hon’ble Supreme Court held that:
a) A cause of
action will not be triggered by issue of statutory notice but only
receipt/acceptance of notice does.
action will not be triggered by issue of statutory notice but only
receipt/acceptance of notice does.
b) Solely,
the specific provisions of Section 138 will make or build an offence and the
proviso is merely a condition required for taking cognizance.
the specific provisions of Section 138 will make or build an offence and the
proviso is merely a condition required for taking cognizance.
c) A sole
issue of notice or presentation of cheque can’t give or provide the court with
territorial jurisdiction to try offences under section 138 or it will
unreasonably harass the drawer.
issue of notice or presentation of cheque can’t give or provide the court with
territorial jurisdiction to try offences under section 138 or it will
unreasonably harass the drawer.
.
Distinction between K.Bhaskaran’s Case and
Harman’s Case- A Slight Dilution.
Harman’s Case- A Slight Dilution.
There exists conflict between the two decisions inasmuch as
in Bhaskaran’s case (supra) it was held
that the expression “giving of notice” occurring in proviso (b) to
Section 138 of the NI Act means “sending of notice” whereas in Harman’s case (supra) it was held that the said
expression means “receipt of notice”. The Harman case has adopted a
strict approach towards territorial jurisdictions of court. It thus correctly
addressed the rampant misuse of the liberal interpretation in Bhaskaran’s case.
in Bhaskaran’s case (supra) it was held
that the expression “giving of notice” occurring in proviso (b) to
Section 138 of the NI Act means “sending of notice” whereas in Harman’s case (supra) it was held that the said
expression means “receipt of notice”. The Harman case has adopted a
strict approach towards territorial jurisdictions of court. It thus correctly
addressed the rampant misuse of the liberal interpretation in Bhaskaran’s case.
·
Nishant Aggarwal v. Kailash Kumar Sharma[24]
Nishant Aggarwal v. Kailash Kumar Sharma[24]
Court was once again dealing with a case where the complaint
had been filed in Court at Bhiwani in Haryana within whose territorial
jurisdiction the complainant had presented the cheque for encashment, although
the cheque was drawn on a bank at Gauhati in Assam. Relying upon the view taken
in Bhaskaran this Court held that the Bhiwani Court had jurisdiction to deal
with the matter. While saying so, the Court tried to distinguish the
three-Judge Bench decision in Ishar Alloy Steels (supra) and that rendered in
Harman Electronics case (supra) to hold that the ratio of those decisions did
not dilute the principle stated in Bhaskaran case.
had been filed in Court at Bhiwani in Haryana within whose territorial
jurisdiction the complainant had presented the cheque for encashment, although
the cheque was drawn on a bank at Gauhati in Assam. Relying upon the view taken
in Bhaskaran this Court held that the Bhiwani Court had jurisdiction to deal
with the matter. While saying so, the Court tried to distinguish the
three-Judge Bench decision in Ishar Alloy Steels (supra) and that rendered in
Harman Electronics case (supra) to hold that the ratio of those decisions did
not dilute the principle stated in Bhaskaran case.
Impact of K. Bhaskaran Case
The aforesaid Bhaskaran case had many unintended
consequences. As per the case, the cheque bouncing case can be registered
either at locations, at the convenience of the payee as the cheque may be drawn
at Location A, presented for payment and consequently dishonoured at Location
B, and legal notice may be issued to the drawer of the cheque for payment of
the cheque amount from his branch office located in Location C, as he may have
several bank accounts in various places. This causes suffering to the drawer of
the cheque, although gives flexibility to the payee of the cheque to choose the
place where he was to file the cheque bouncing case. Sometimes, several cheques
are issued at the same time by a person to the same payee, which are
deliberately presented in different banks located at different places, and
thereafter, cheque bouncing cases are filed at different places against the
drawer of those cheques.
consequences. As per the case, the cheque bouncing case can be registered
either at locations, at the convenience of the payee as the cheque may be drawn
at Location A, presented for payment and consequently dishonoured at Location
B, and legal notice may be issued to the drawer of the cheque for payment of
the cheque amount from his branch office located in Location C, as he may have
several bank accounts in various places. This causes suffering to the drawer of
the cheque, although gives flexibility to the payee of the cheque to choose the
place where he was to file the cheque bouncing case. Sometimes, several cheques
are issued at the same time by a person to the same payee, which are
deliberately presented in different banks located at different places, and
thereafter, cheque bouncing cases are filed at different places against the
drawer of those cheques.
New Dimensions To Law- DashrathRupsinghRathod
v. State of Maharashtra &Anr[25]
v. State of Maharashtra &Anr[25]
After the K. Bhaskaran judgement
it was felt at large that the law in its wide expansive amplitude allowed the
complainant to rather rampantly abuse and misuse the law to result in hardship
and adversity to the drawer, with relative ease. It gave the payee unrestricted
power to the payee to singlehandedly confer jurisdiction on a place of his
convenience, consequently, leading to harassment as the payer had, at times, no
concern or relation with the distant places where the cheque was issued or
which had no link to the transaction or drawer.
The alteration in the law was thus welcomed as a much required change in
prevalent laws as laid down by K.Bhaskaran. The leniency thus, was the cause of
much upheaval. Thus, the new judgement by means of a strict approach sought to
discourage the payer from misusing or carelessly issuing cheques. Due sympathy
was thus shown or given to the drawer.
it was felt at large that the law in its wide expansive amplitude allowed the
complainant to rather rampantly abuse and misuse the law to result in hardship
and adversity to the drawer, with relative ease. It gave the payee unrestricted
power to the payee to singlehandedly confer jurisdiction on a place of his
convenience, consequently, leading to harassment as the payer had, at times, no
concern or relation with the distant places where the cheque was issued or
which had no link to the transaction or drawer.
The alteration in the law was thus welcomed as a much required change in
prevalent laws as laid down by K.Bhaskaran. The leniency thus, was the cause of
much upheaval. Thus, the new judgement by means of a strict approach sought to
discourage the payer from misusing or carelessly issuing cheques. Due sympathy
was thus shown or given to the drawer.
In fact the Supreme Court in
DashratRathod case has observed rightly that “Courts are enjoined to
interpret the law so as to eradicate ambiguity or nebulousness, and to ensure
that legal proceedings are not used as a device for harassment, even of an
apparent transgressor of the law. Law’s endeavour is to bring the culprit to
book and to provide succour for the aggrieved party but not to harass the former
through vexatious proceedings.”
DashratRathod case has observed rightly that “Courts are enjoined to
interpret the law so as to eradicate ambiguity or nebulousness, and to ensure
that legal proceedings are not used as a device for harassment, even of an
apparent transgressor of the law. Law’s endeavour is to bring the culprit to
book and to provide succour for the aggrieved party but not to harass the former
through vexatious proceedings.”
The court held that, the
territorial jurisdiction acc. to section 138 or under the act should
exclusively be determined and considered by place/location of the offence. The
return of the cheque by the drawer bank only constitutes commission of offence
under section 138. Hence, the courts within which drawer bank is located will
only have the jurisdiction to try the case.
territorial jurisdiction acc. to section 138 or under the act should
exclusively be determined and considered by place/location of the offence. The
return of the cheque by the drawer bank only constitutes commission of offence
under section 138. Hence, the courts within which drawer bank is located will
only have the jurisdiction to try the case.
1.
An offence under section 138
of the Act, will be considered committed as soon as the cheque drawn by the
accused on an account maintained by him for the discharge of debt or liability
is returned without honored, either due to insufficiency of funds of the said
drawer’s account or the amount exceeds the drawer’s arrangement with the bank.
But, the the cause of action could be derived or triggered only when:
An offence under section 138
of the Act, will be considered committed as soon as the cheque drawn by the
accused on an account maintained by him for the discharge of debt or liability
is returned without honored, either due to insufficiency of funds of the said
drawer’s account or the amount exceeds the drawer’s arrangement with the bank.
But, the the cause of action could be derived or triggered only when:
Ø if
the dishonored cheque is presented to the drawee bank within 6 months from its
issue.
the dishonored cheque is presented to the drawee bank within 6 months from its
issue.
Ø if
the complainant demands for the questioned amount within 30 days of receipt of
his intimation from the concerned bank.(bank which dishonored)
the complainant demands for the questioned amount within 30 days of receipt of
his intimation from the concerned bank.(bank which dishonored)
Ø
if the drawer or the payer
of the cheque has failed to pay the amount in question within 15 days of notice
given by the complainant, payee or due holder of cheque.
if the drawer or the payer
of the cheque has failed to pay the amount in question within 15 days of notice
given by the complainant, payee or due holder of cheque.
2.
The general rule stipulated under Section 177 of Cr.P.C applies to cases
under Section 138 of the Negotiable Instruments Act. Prosecution in such cases
can, therefore, be launched against the drawer of the cheque only before the
Court within whose jurisdiction the dishonour takes place except in situations
where the offence of dishonour of the cheque punishable under Section 138 is
committed along with other offences in a single transaction within the meaning
of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is
covered by the provisions of Section 182(1) read with Sections 184 and 220
thereof.
The general rule stipulated under Section 177 of Cr.P.C applies to cases
under Section 138 of the Negotiable Instruments Act. Prosecution in such cases
can, therefore, be launched against the drawer of the cheque only before the
Court within whose jurisdiction the dishonour takes place except in situations
where the offence of dishonour of the cheque punishable under Section 138 is
committed along with other offences in a single transaction within the meaning
of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is
covered by the provisions of Section 182(1) read with Sections 184 and 220
thereof.
3. The court clearly addressed the term ’cause
of action’ and held that the facts constituting
of action’ and held that the facts constituting
cause of action do not constitute
the ingredients of the offence under Section 138 of the Act. And, once the
cause of action is triggered in favor of the complainant, the jurisdiction of
the court to try the case will be determined by the place where the cheque was
returned dishonored.
the ingredients of the offence under Section 138 of the Act. And, once the
cause of action is triggered in favor of the complainant, the jurisdiction of
the court to try the case will be determined by the place where the cheque was
returned dishonored.
4. In respect of pending cases it distinguished
them into following categories and suggested
them into following categories and suggested
actions as follows: a. Cases in
which trial has commenced: Cases in which summoning and appearance of the accused
has taken place and recording of evidence has commenced will continue at the
same court. These cases will be deemed to have been transferred from the court
which had jurisdiction to the court where they are tried, as per the relaxation
provided in public interest. b. Cases pending at the pre summoning stage: All
other complaints including those where the accused/respondent has not been
properly served, cases in which summons have not been issued will be
maintainable only at the place where the cheque stands dishonored.
which trial has commenced: Cases in which summoning and appearance of the accused
has taken place and recording of evidence has commenced will continue at the
same court. These cases will be deemed to have been transferred from the court
which had jurisdiction to the court where they are tried, as per the relaxation
provided in public interest. b. Cases pending at the pre summoning stage: All
other complaints including those where the accused/respondent has not been
properly served, cases in which summons have not been issued will be
maintainable only at the place where the cheque stands dishonored.
Position
after DasrathRathod Case
after DasrathRathod Case
Supreme
Court observed “The issue of a notice from Delhi or deposit of the cheque in a
Delhi bank by the payee or receipt of the notice by the accused demanding
payment in Delhi would not confer jurisdiction upon the Courts in Delhi. What
is important is whether the drawee bank whodishonoured the cheque is situate
within the jurisdiction of the Court taking cognizance.”
Court observed “The issue of a notice from Delhi or deposit of the cheque in a
Delhi bank by the payee or receipt of the notice by the accused demanding
payment in Delhi would not confer jurisdiction upon the Courts in Delhi. What
is important is whether the drawee bank whodishonoured the cheque is situate
within the jurisdiction of the Court taking cognizance.”
·
RamanbhaiMathurbhai Patel v. State of Maharashtra[27]
RamanbhaiMathurbhai Patel v. State of Maharashtra[27]
In
a case before the Bombay High Court, two cheques were issued, one before the
Gandhinagar branch of the State Bank of India and one before the Bank of
Maharashtra. The cheques being ‘At par’,i.e. multi-city cheques payable at par
in all branches of the bank, were payable at all branches the abovementioned
banks. Factually, the
cheque deposited by the complainant in the branches of the banks at Kurla,
Mumbai, the nearest available branch of the banks and were dishonored. So, the
isse raised was that whether the complaint should be filed at Kurla or at
Gandhinagar, as the cheques were payable at par across all the branches. It was
held that by issuing cheques payable at all branches, the drawer is giving an
option to get the cheques cleared from the nearest available branch of the bank
and therefore the cause of action has arisen in the jurisdiction of the
Metropolitan Magistrate, Kurla Court. The courts in Mumbai will have the
jurisdiction to try the offence as the cheques were dishonoured in Mumbai.
However, the above decision of the Bombay High Court was challenged in the
Supreme Court vide SLP (Criminal) No. 7251 of 2014. This SLP was dismissed by
the Supreme Court as withdrawn on 20 March 2015.
a case before the Bombay High Court, two cheques were issued, one before the
Gandhinagar branch of the State Bank of India and one before the Bank of
Maharashtra. The cheques being ‘At par’,i.e. multi-city cheques payable at par
in all branches of the bank, were payable at all branches the abovementioned
banks. Factually, the
cheque deposited by the complainant in the branches of the banks at Kurla,
Mumbai, the nearest available branch of the banks and were dishonored. So, the
isse raised was that whether the complaint should be filed at Kurla or at
Gandhinagar, as the cheques were payable at par across all the branches. It was
held that by issuing cheques payable at all branches, the drawer is giving an
option to get the cheques cleared from the nearest available branch of the bank
and therefore the cause of action has arisen in the jurisdiction of the
Metropolitan Magistrate, Kurla Court. The courts in Mumbai will have the
jurisdiction to try the offence as the cheques were dishonoured in Mumbai.
However, the above decision of the Bombay High Court was challenged in the
Supreme Court vide SLP (Criminal) No. 7251 of 2014. This SLP was dismissed by
the Supreme Court as withdrawn on 20 March 2015.
New
Negotiable Instruments (Amendment) Bill, 2015
Negotiable Instruments (Amendment) Bill, 2015
It may be noted that the Apex
Court ruling in DashrathRathod case only takes care of traditional method of
cheque clearance. As per this method the cheque physically travels from the
bank branch where it is presented to the drawee bank branch. The decision thus
posed difficulties in the modern day cheque truncation system, where the cheque
does not travel to drawee bank. Financial institutions and banks pronounced
difficulty in coping with the situation.
Court ruling in DashrathRathod case only takes care of traditional method of
cheque clearance. As per this method the cheque physically travels from the
bank branch where it is presented to the drawee bank branch. The decision thus
posed difficulties in the modern day cheque truncation system, where the cheque
does not travel to drawee bank. Financial institutions and banks pronounced
difficulty in coping with the situation.
It has been opined, in view of the
rationale for changing the law with respect to jurisdiction under section 138
of the negotiable instruments act, 1881 that:
rationale for changing the law with respect to jurisdiction under section 138
of the negotiable instruments act, 1881 that:
“The proposed amendments to the
Negotiable Instruments Act, 1881 (“The NI Act”) are focused on clarifying the
jurisdiction related issues for filing cases for offence committed under
section 138 of the NI Act. The clarification of jurisdictional issues may be
desirable from the equity point of view as this would be in the interests of
the complainant and would also ensure a fair trial. The clarity on
jurisdictional issue for trying the cases of cheque bouncing would increase the
credibility of the cheque as a financial instrument. This would help the trade
and commerce in general and allow the lending institution, including banks, to
continue to extend financing to the economy, without the apprehension of the
loan default on account of bouncing of a cheque.”[28]
Negotiable Instruments Act, 1881 (“The NI Act”) are focused on clarifying the
jurisdiction related issues for filing cases for offence committed under
section 138 of the NI Act. The clarification of jurisdictional issues may be
desirable from the equity point of view as this would be in the interests of
the complainant and would also ensure a fair trial. The clarity on
jurisdictional issue for trying the cases of cheque bouncing would increase the
credibility of the cheque as a financial instrument. This would help the trade
and commerce in general and allow the lending institution, including banks, to
continue to extend financing to the economy, without the apprehension of the
loan default on account of bouncing of a cheque.”[28]
The Government proposed the
Negotiable Instruments (Amendment) Bill, 2015[29]
with a view to amending the Negotiable Instruments Act, 1882.Concerns had been raised by
various stakeholders (creditors, industry associations, financial institutions,
etc) expressing apprehensions that the DasrathRathod decision will offer undue
protection to defaulters at the expense of the aggrieved complainant; and would
ignore the current realities of cheque clearing with the introduction of CTS
(Cheque Truncation System). In CTS cheque clearance happens only through
scanned image in electronic form and cheques are not physically required to be
presented to the issuing branch (drawee bank branch) but are settled between
the service branches of the drawee and payee banks.
Negotiable Instruments (Amendment) Bill, 2015[29]
with a view to amending the Negotiable Instruments Act, 1882.Concerns had been raised by
various stakeholders (creditors, industry associations, financial institutions,
etc) expressing apprehensions that the DasrathRathod decision will offer undue
protection to defaulters at the expense of the aggrieved complainant; and would
ignore the current realities of cheque clearing with the introduction of CTS
(Cheque Truncation System). In CTS cheque clearance happens only through
scanned image in electronic form and cheques are not physically required to be
presented to the issuing branch (drawee bank branch) but are settled between
the service branches of the drawee and payee banks.
The Ordinance inserted Section 142(2)
in the Principal Act. It reads as follows:
in the Principal Act. It reads as follows:
“(2) The offence under Section 138
shall be inquired into and tried only by a court within whose local
jurisdiction –
shall be inquired into and tried only by a court within whose local
jurisdiction –
(a) If the cheque is
delivered for collection through an account, the branch of the bank where the
payee or holder in due course, as the case may be, maintains the account, is
situated; or (b) If the cheque is presented for
payment by the payee or holder in due course otherwise through his account, the
branch of the drawee bank where the drawer maintains the account, is situate.
delivered for collection through an account, the branch of the bank where the
payee or holder in due course, as the case may be, maintains the account, is
situated; or (b) If the cheque is presented for
payment by the payee or holder in due course otherwise through his account, the
branch of the drawee bank where the drawer maintains the account, is situate.
Explanation – For the purpose of
clause (a), where the cheque is delivered for collection at any branch of the
bank of the payee or holder in due course, then, the cheque shall be deemed to
have been delivered to the branch of the bank in which the payee or holder in
due course, as the case may be, maintains the account.”
clause (a), where the cheque is delivered for collection at any branch of the
bank of the payee or holder in due course, then, the cheque shall be deemed to
have been delivered to the branch of the bank in which the payee or holder in
due course, as the case may be, maintains the account.”
It also inserts a new Clause 142A,
which provides that notwithstanding anything contained in the Code of Criminal
Procedure, 1973 or any judgment, decree, order or directions of any court, all
cases arising out of Section 138 of the Act which were pending in any court,
whether filed before it, or transferred to it, before the commencement of the
Negotiable Instruments (Amendment) Act, 2015, shall be transferred to the court
having jurisdiction under sub-section (2) of section 142 as if that sub-section
had been in force at all material times. Where one and the same person has
filed cases, in different jurisdictions , against one and the same drawer of
cheque , then all such cases have to be transferred to the jurisdiction court
of the bank branch of the payee, in which he has presented the cheque for
payment, is situated .
which provides that notwithstanding anything contained in the Code of Criminal
Procedure, 1973 or any judgment, decree, order or directions of any court, all
cases arising out of Section 138 of the Act which were pending in any court,
whether filed before it, or transferred to it, before the commencement of the
Negotiable Instruments (Amendment) Act, 2015, shall be transferred to the court
having jurisdiction under sub-section (2) of section 142 as if that sub-section
had been in force at all material times. Where one and the same person has
filed cases, in different jurisdictions , against one and the same drawer of
cheque , then all such cases have to be transferred to the jurisdiction court
of the bank branch of the payee, in which he has presented the cheque for
payment, is situated .
All complaints between the same
parties are to be tried at one place irrespective of where the payee deposits
the cheques.
parties are to be tried at one place irrespective of where the payee deposits
the cheques.
Citing the earlier law to be
unfair in as much as it required the creditor to go the debtor, creditors and
stakeholders have welcomed the change.
unfair in as much as it required the creditor to go the debtor, creditors and
stakeholders have welcomed the change.
CONCLUSION
As we trace the history and
establishment of the Negotiable Instruments Act,1881 and focus on the
jurisdictional debate under Section 138, which deals with dishonor of cheques,
we analyse the necessities which forced the Courts and the Government to adopt landmark
changes in the law. The latest change and the present prevalent law being the
2015 Ordinance, has the effect of nullifying the law as laid down by the
Supreme Court in 2014, DasratRathod case. The legal effect of the Ordinance is
that, so as to institute a complaint under Section 138, the same must be
instituted as per :If the cheque is delivered for collection through an
account, the branch of the bank where the payee or holder, maintains the account,
is situated; or If the cheque is presented for payment by the
payee or holder otherwise through his account, the branch of the drawee bank
where the drawer maintains the account, is situated. This law comes with a
promise to solve and aid in not only the speedy disposal of the pending cases
pertaining to complaints under 138, but also to bring a sanctity to the system
by seeking to clamp down on defaults in payments. It clarifies the legal
position as to jurisdiction and also seeks to keep up with the modern banking
system.
establishment of the Negotiable Instruments Act,1881 and focus on the
jurisdictional debate under Section 138, which deals with dishonor of cheques,
we analyse the necessities which forced the Courts and the Government to adopt landmark
changes in the law. The latest change and the present prevalent law being the
2015 Ordinance, has the effect of nullifying the law as laid down by the
Supreme Court in 2014, DasratRathod case. The legal effect of the Ordinance is
that, so as to institute a complaint under Section 138, the same must be
instituted as per :If the cheque is delivered for collection through an
account, the branch of the bank where the payee or holder, maintains the account,
is situated; or If the cheque is presented for payment by the
payee or holder otherwise through his account, the branch of the drawee bank
where the drawer maintains the account, is situated. This law comes with a
promise to solve and aid in not only the speedy disposal of the pending cases
pertaining to complaints under 138, but also to bring a sanctity to the system
by seeking to clamp down on defaults in payments. It clarifies the legal
position as to jurisdiction and also seeks to keep up with the modern banking
system.
REFERENCES
ARTICLES
& JOURNALS
& JOURNALS
1.
Anjana Dave, An Analytical Study
of the Provisons relating to Dishonour of Cheques under Chapter XVII of the
Negotiable Instruments Act, 1881, Vol. 7 Issue 5, Pacific Business Review
International,2014
Anjana Dave, An Analytical Study
of the Provisons relating to Dishonour of Cheques under Chapter XVII of the
Negotiable Instruments Act, 1881, Vol. 7 Issue 5, Pacific Business Review
International,2014
2.
Ganga Dutt Sharma, Jurisdiction of
Cases for Dishonour of cheque in the Pretext of the Statutory Laws & Recent
Judgements, Vol. 3 Issue 9, Global Journal for Research Analysis, 2014
Ganga Dutt Sharma, Jurisdiction of
Cases for Dishonour of cheque in the Pretext of the Statutory Laws & Recent
Judgements, Vol. 3 Issue 9, Global Journal for Research Analysis, 2014
BOOKS
1.
Avtar Singh, Laws of Banking and
Negotiable Instruments, (2011 Ed), Eastern Book Company
Avtar Singh, Laws of Banking and
Negotiable Instruments, (2011 Ed), Eastern Book Company
2.
Bhashyam and Adiga’s,The
Negotiable Instruments Act, (19th Ed.), Bharat Law House, New
Delhi
Bhashyam and Adiga’s,The
Negotiable Instruments Act, (19th Ed.), Bharat Law House, New
Delhi
3.
The Negotiable Instruments Act, 1881, (2015 Ed.), EBC Publishing
Pvt. Ltd
The Negotiable Instruments Act, 1881, (2015 Ed.), EBC Publishing
Pvt. Ltd
CASE
LAWS
LAWS
1.
Canbank Financial Services Ltd. v/s Gitanjali Motors and Ors 1995
Cri.L.J. 1272
Canbank Financial Services Ltd. v/s Gitanjali Motors and Ors 1995
Cri.L.J. 1272
2.
Dalmia Cement (Bharat) Ltd. V Galaxy Traders
and Agencies Ltd (2001) 6 SCC 463
Dalmia Cement (Bharat) Ltd. V Galaxy Traders
and Agencies Ltd (2001) 6 SCC 463
3.
DashrathRupsinghRathod v. State of Maharashtra &Anr AIR 2014 SC 3519
DashrathRupsinghRathod v. State of Maharashtra &Anr AIR 2014 SC 3519
4.
Gautham T. V. Centre v. Apex Agencies (1993) 1 Crimes 723
Gautham T. V. Centre v. Apex Agencies (1993) 1 Crimes 723
5.
Jugal Kishore Arun v. V.A. Neelakandan 1990 L.W. (Cri.) 492
Jugal Kishore Arun v. V.A. Neelakandan 1990 L.W. (Cri.) 492
6.
K. Bhaskaran Vs. SankaranVaidhyanBalan and Anr (1999) 7 SCC 510
K. Bhaskaran Vs. SankaranVaidhyanBalan and Anr (1999) 7 SCC 510
7.
M/s. Essbee Food Specialties and Ors. v. M/s. Kapoor Brother 1992
(Suppl) MWN (Cri. 132)
M/s. Essbee Food Specialties and Ors. v. M/s. Kapoor Brother 1992
(Suppl) MWN (Cri. 132)
8.
Nishant Aggarwal v. Kailash Kumar Sharma (2013) 10 SCC 72
Nishant Aggarwal v. Kailash Kumar Sharma (2013) 10 SCC 72
9.
P.K. Muraleedharan v/s C.K.Pareed and Anr 1993(1)ALT(Cri)424
P.K. Muraleedharan v/s C.K.Pareed and Anr 1993(1)ALT(Cri)424
10. Prem Chand Vijay Kumar v. Yashpal Singh
(2005) 4 SCC 417
(2005) 4 SCC 417
11. Rajesh Agarwal v. State and Others (2010) ILR
6 Del 610
6 Del 610
12. Rakesh NemkumarPorwal v/s Narayan
DhonduJoglekar and anr (1993 Cri.L.J. 680)
DhonduJoglekar and anr (1993 Cri.L.J. 680)
13. RamanbhaiMathurbhai Patel v. State of Maharashtra
2014(4)BomCR(Cri)126
2014(4)BomCR(Cri)126
14. Rangachari(N.) v Bharat Sanchar Nigam Ltd. 2007 (3) Supreme
626
626
15. SanjaiMakkar and Ors. Vs. Saraswati Industrial Syndicate Limited and Ors1999CriLJ1958
16. Shri Ishar Alloy Steels Ltd. v. JayaswalsNeco
Ltd (2001) 3 SCC 609
Ltd (2001) 3 SCC 609
17. Sunil Srivastava Vs. Shri Ashok Kalra
101(2002)DLT245
101(2002)DLT245
18. Vinay Kumar Shailendra v Delhi High Court Legal Services Committee and
Anr (2014)10SCC708
Anr (2014)10SCC708
STATUTES
1.
The Code of Criminal Procedure, 1973
The Code of Criminal Procedure, 1973
2.
The Negotiable Instruments Act, 1881
The Negotiable Instruments Act, 1881
3.
The Negotiable Instruments
(Amendment) Bill, 2015
The Negotiable Instruments
(Amendment) Bill, 2015
WEBSITES
1.
http://pib.nic.in/newsite/PrintRelease.aspx?relid=122425
http://pib.nic.in/newsite/PrintRelease.aspx?relid=122425
2.
http://bombayhighcourt.nic.in/libweb/ordinc/2015/2015.06.pdf
http://bombayhighcourt.nic.in/libweb/ordinc/2015/2015.06.pdf
3.
www.ssrn.com
www.ssrn.com
[1]Bhashyam and Adiga’s The Negotiable Instruments Act, 19th
Edition, Bharat Law House, New Delhi
Edition, Bharat Law House, New Delhi
[2]Rangachari(N.) v Bharat Sanchar
Nigam Ltd. 2007 (3) Supreme 626
Nigam Ltd. 2007 (3) Supreme 626
[3]Rangacari(N.) v Bharat Sanchar Nagam Limited (2007) 3 Supreme 626.
[4] Banking, Public Financial Institutions and Negotiable Instruments
Laws(Amendment) Bill, 1988
Laws(Amendment) Bill, 1988
[5]Dalmia Cement (Bharat) Ltd. V Galaxy Traders and Agencies Ltd (2001) 6
SCC 463
SCC 463
[6]The Negotiable Instruments (Amendment) Bill, 2015.
[7] Section 143, The Negotiable Instrument Act, 1881
[8] Rajesh Agarwal v. State and Others (2010) ILR 6 Del 610
[9] K. Bhaskaran Vs. SankaranVaidhyanBalan and Anr (1999) 7 SCC 510
[10]DashrathRupsinghRathod v. State of Maharashtra &Anr
AIR 2014 SC 3519
AIR 2014 SC 3519
[11]Jugal Kishore Arun v. V.A. Neelakandan 1990 L.W. (Cri.) 492
[14] Rakesh NemkumarPorwal v/s Narayan DhonduJoglekar and anr(1993 Cri.L.J. 680)
[16]Gautham T. V. Centre v. Apex Agencies (1993) 1 Crimes 723 (AndhPra)
[17]Canbank Financial Services Ltd. v/s Gitanjali Motors and Ors 1995
Cri.L.J. 1272
Cri.L.J. 1272
[18]SanjaiMakkar and Ors. Vs. Saraswati Industrial Syndicate Limited and Ors1999CriLJ1958
[19] K. Bhaskaran Vs. SankaranVaidhyanBalan and Anr (1999) 7 SCC 510
[20] Sunil Srivastava Vs. Shri Ashok Kalra101(2002)DLT245
[21] Shri Ishar Alloy Steels Ltd. v. JayaswalsNeco Ltd (2001) 3 SCC 609
[22]Prem Chand Vijay Kumar v. Yashpal Singh (2005) 4 SCC 417
[23] Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1 SCC 720
[24]Nishant Aggarwal v. Kailash Kumar Sharma (2013) 10 SCC 72
[25]DashrathRupsinghRathod v. State of Maharashtra &Anr
AIR 2014 SC 3519
AIR 2014 SC 3519
[26] Vinay Kumar Shailendra v Delhi High Court Legal Services Committee and
Anr (2014)10SCC708
Anr (2014)10SCC708
[27]RamanbhaiMathurbhai Patel v. State of Maharashtra 2014(4)BomCR(Cri)126
[28] http://pib.nic.in/newsite/PrintRelease.aspx?relid=122425
[29] http://bombayhighcourt.nic.in/libweb/ordinc/2015/2015.06.pdf
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