This thesis is about cheques and their territorial distinction in India. The series of cases discussed above surely shows a changing trend pertaining to the territorial jurisdiction in cases of offences committed u/s 138 of the NI, Act, 1881. The Bhaskaran case has been a precedent in all cases relating to the concerned matter but its ratio had to be diluted by the series of cases which came after it. It is essential to understand that there is a demarcation between the completion of the offence and the cognizance of the offence for taking it to prosecution.
The case of Dasharath has been the trend setting case to absolutely dilute and overrule the ratio of the Bhashkaran case, and urge for the Amendment Act to make amends in the NI, Act and insert the provisions providing guidelines for determining the territorial jurisdiction of the courts to try the complaints filed u/s. 138 of the NI, Act, 1881. Thus, the cases, after the ordinance definitely favoured the drawee from all the distress, he would go through over cheques being dishonoured on being presented due to further litigation. There is a definite shift in the territorial jurisdiction as to from the place of the cheque being issued to the place of cheque being collected or presented by the payee in the bank. It also guides through in situations of transfer of cases to the original jurisdiction when there are multiple pending cases.
Table of contents
Introduction
The Negotiable Instruments (Amendment) Act,
The Bhaskaran And Harman Case- The dilution
Judicial Trend of Territorial Jurisdiction
a) Pre- Amendment Act or Post Bhaskaran Case
b) Post- Amendment Act or position post the Dasharath Case
Conclusion
Introduction
“Cheques” are the most common type of bill of exchange used, which plays a vital role by providing a new course to the corporate and the commercial world.1 “Cheques” are defined under Section 6 of the Negotiable Instruments Act, 1881 as “a bill of exchange drawn on a specific banker and not expressed to be payable otherwise than on demand.”2 The major hitch faced in case of cheques issued are dishonouring of the cheques by the banks on encashment due to insufficient funds of the drawer of the cheque. The Chapter XVII of the Negotiable Instruments Act from Section 138- 142 exclusively deals on the matter of dishonour of cheques.3
Section 138 deals with the Dishonour of cheques for insufficiency, etc., of funds in the account . The provision states that, the cheque is dishonoured due to insufficient funds or any other prescribed reasons, wherein any cheque drawn by a person on an account maintained by him with a bank for payment any amount of money to another person from the account in part or whole, of any debt or liability returned by the bank unpaid because of the insufficient funds in the account. Such person shall have committed the offence and shall be punished with imprisonment for a term of 2 years and with fine that may extend to twice the amount of the cheque or both. The exceptions to the section are:
a) If the cheque is presented to the bank within six months from the date of cheque drawn or within validity period, whichever earlier.
b) If the holder makes a demand for payment of the said amount by giving notice in writing to the drawer of the cheque within thirty days of the, receipt of information by him from the bank regarding the return of the cheque as unpaid; and
c) The drawer od such cheque fails to make the payment of the said amount of money to the payee or to the holder in due course of the cheque within fifteen days of the receipt of the said notice.4
The Amendment Act, 2015, provides a clarity on jurisdiction related issues for filling of cases in relation to offences committed U/s 138 of Negotiable Instrument Act, 1881 by inserting the Section 142 (2) to the Act.5 This paper focuses on the trend of the judicial pronouncements in relation to the territorial jurisdiction of dishonour cheques analysing cases pre and post Amendment Act, 2015.
The Negotiable Instruments (Amendment) Act, 2015
The Act inserted Section 142(2) to the NI, Act, wherein it states that, the offence under Section 138, NI, Act, shall be inquired into and tried only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for the payment is situated. The Amendment Act also inserted Section 142 A, where sub-section (1) deals with the transfer of the pending cases to the courts with jurisdiction. While the sub-section (2) states that, where a payee or holder of cheque has filed case against the drawer of a cheque in the court within the jurisdiction under sub-section (1) or the case is transferred to the court under sub-section (2), if any subsequent complaints are filed against the same drawer, it shall be dealt by the same court irrespective of the territorial jurisdiction of that court (not considering where the check was presented for payment). The sub-section (3) provides that, when more than one case filed by one person against the same drawer cheques pending in different courts brought to notice to the court, where such court shall transfer the cases to the court with jurisdiction.6
The Bhaskaran And Harman Case- The dilution
The landmark case of K. Bhaskaran v. Sankaran Vaidhyan Balan,7 pronounced by a two-bench judge, revolved around the issue as to whether the complaint filed was liable to be dismissed for want of territorial jurisdiction of the Magistrate court. And pondered upon the difficulty in fixing up any particular locality as a place of occurrence. This very case, may draw one to make stricter interpretations of the Section 138 of NI, Act. Wherein the court held that, in order to try any offences committed under the said section, it is not necessary that all the five acts should have been perpetrated at the same locality.
It listed five components of the offence committed: (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. The jurisdiction cannot be determined pertaining to the place where the cheque was dishonoured, where dishonour of the cheque alone cannot be an offence under the Section 138 but it shall be construed as an offence when the drawer of the cheque has failed to pay the stipulated amount within a period of fifteen days. The court further held that, any court can assume its jurisdiction at any place where the five components of the offence that was committed or the complainant can choose any one of those courts having jurisdiction within the territorial limits of which any one of those five acts was done.
While in the two-bench judge case of Harman Electronics Pvt. Ltd v. National Panasonic India Pvt. Ltd., 8 the court observed that what constitutes an offence is provided in the Section 138, NI, Act and further the proviso exerts additional conditions to be completed before the cognizance of the offence. The court further pointed out that there is a demarcation as to the commission of any offence and cognizance that offence leading to prosecution. Therefore, pronouncing in contrary to the judgment given in the Bhaskaran Case.9 Which has diluted the ratio of the Bhaskaran case.
Judicial Trend of Territorial Jurisdiction
a) Pre- Amendment Act or Post Bhaskaran Case
1. In the case Nishant Aggarwal v. Kailash Kumar Sharma ,10 dealt with the issue as to where a cheque is deposited for collection, would have territorial jurisdiction to try the accused for an offence punished under S. 138, NI, Act, 1881 or only the court exercising territorial jurisdiction over the drawee bank or the bank on which the cheque is drawn. The complainant in this case was a resident of Bhiwani, who had represented a cheque in the bank at Bhiwani and the cheque was further presented in the drawer’s bank at Guwahati. The presented cheque was returned uncashed to the complaint’s bank at Bhiwani with an endorsement stating, “payment stopped by the drawers” and received the bounced cheque back. On non-payment of the cheque amount, the complainant filled the complaint under the s.138 and S.141 of the NI, Act before the Magistrate at Bhiwani. But the Magistrate court at Bhiwani set the case aside stating it had no jurisdiction and sent it for presentation before a proper court having jurisdiction. The bench in this case relied upon the ratio of the Bhaskaran case, and held that the Bhiwani court had jurisdiction to deal with the complaint filed. The court further interpreted the judgment provided in the case of Harman Electronics and Isher Alloy Steel case and observed that the ratios of the above-mentioned cases certainly had not diluted the Bhaskaran case’s principle.11
2. In the case, Escorts Limited v. Rama Mukherjee 12, the two-judge bench gave the judgment after the pronouncement of the Nishant Aggarwal v. Kailash Kumar Sharma case. The Respondent in this case had issued the cheque to the complainant in Kolkata and the cheque was submitted in Delhi for encashment. The Cheque was dishonoured, so a notice was issued from Delhi and a proceeding was initiated U/s 138 before the Magistrate of Delhi. The issue was as to whether the court where the complaint had presented the dishonoured cheque has the jurisdiction to entertain the complaint filed u/s. 138. The HC held that due to dishonour of cheques when presented for encashment in Delhi by the complainant, the Delhi courts shall not have the jurisdiction to try the case. On appeal, the court observed that the HC’s decision was not in terms with the Nishant Aggarwal case decision, stating that the court within the jurisdiction of the dishonoured check shall have the jurisdiction to entertain the complaint. The HC’s decision was set aside reiterating the ratio that, “the territorial jurisdiction of the court to try complain shall not be confirmed if there is question of fact for determination based on factual position expressed ” and the appeal was allowed.13
3. The Dasharath Rupsingh Rathod v. State of Maharashtra 14 case has given a new dimension to the law overruling the Bhaskaran case judgement. Where the common observation was that the complainant would misuse the law in his favour that created hardship to the drawer, thus this judgement was pronounced to turn the leaf as to discourage the person issuing cheque from being careless. This case led to the Amendment Act of 2015 and insertion of the Section 142 (2) and 142 A into the NI, Act,1881. The court dealt with the issue as to whether the complainant chooses to present the cheque for encashment by his bank are not relevant for purpose of territorial jurisdiction of the complaint u/s 138 of NI, Act along with S.177 and 179 of Cr.Pc. The cheques were issued in New Delhi and presented and dishonoured in Maharashtra, where the complainant has a registered office. Among the multiple appeals filled by the complainant. The JMFC in Nagpur set aside the complaint and acquitted the accused observing that the court had no jurisdiction. The HC too justified the lower courts judgement as to filing the complaint before the proper court. In another criminal appeal it was observed that the cheque was drawn by the accused in Delhi and was presented in Aurangabad, the complainant had filed the case in Aurangabad and the court dismissed the appeal on grounds of no jurisdiction. This showed the trend of returning complaints by the courts due to the restricting jurisdiction in case of the offences under the S.138 of the NI, Act. Analysing the offence the court derived the conditions for the maintainability of a complaint and devising the location of the offence as the integral part to determine the jurisdiction rather than the at the place of the issuance of the cheque because the offence is said to be completed only when the drawee’s bank returned uncashed cheque and the jurisdiction shall fall to that court only. Thus, the court held that the jurisdiction of the court shall be determined by the place where the cheque was dishonoured.
4. The Vinay Kumar Shailendra v. Delhi high Court Legal Services Committee 15 case was dealt post Dasharath Rathod case, the court dealt with the issue as to whether the HC had rightly directed the Magistrate to examine and return complaints if they did not have jurisdiction to entertain the same. The court held that the in order to determine the jurisdiction of the Delhi court, mere issue of the notice from Delhi or encashment of the cheque in Delhi by the complainant or the receipt of the notice demanding payment by the accused in Delhi is not important. The main issue lies as to whether the drawee’s bank who had dishonoured the cheque presented is situated within the jurisdiction of the court taking cognizance.16
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2 Section 6, The Negotiable Instruments Act, 1881
3 Pushpanjali Sood,Dishonour of Cheque: An Overview,[vol. 2 Issue 6]Int'l J. of L.IJL08-11, www.lawresearchjournal.com (last visited Nov. 4, 2020).
4 Section 138, The Negotiable Instruments Act, 1881
5 Abhay Nevagi,effect of the Negotiable Instruments (Amendment) Ordinance, 2015 (6 of 2015), July 1, 2015 at, https://www.legallyindia.com/views/entry/effect-of-the-negotiable-instruments-amendment-ordinance-2015-6-of-2015#ftnref1 (last visited Nov. 4, 2020).
6 Negotiable Instruments (Amendment) Act, 2015 to Amend NI Act, 1881, https://taxguru.in/corporate-law/negotiable-instruments-amendment-act-2015-amend-ni-act-1881.html (last visited Nov. 4, 2020)
7 (1999) 7 SCC 510.
8 (2009) 1 SCC 720
9 Bhaskaran Case on Dishonour of Cheque Stands Overruled,The SCC Online Blog, Aug. 8, 2014 at, https://www.scconline.com/blog/post/2014/08/08/bhaskaran-case-on-dishonour-of-cheque-stands-overruled/ (last visited Nov. 4, 2020).
10 (2013) 10 SCC 72.
11 Effect of Recent Amendments in Negotiable Instruments Act on the Pending Cases As Well As Appeals, http://mja.gov.in/Site/Upload/GR/Title%20NO.200(As%20Per%20Workshop%20List%20title%20no200%20pdf).pdf (last visited Nov. 3, 2020).
12 Criminal Appeal no. 1457 of 2013.
13 Escorts Limited V. Rama Mukherjee, https://main.sci.gov.in/pdf/SupremeCourtReport/2013_v10_pii.pdf (last visited Nov. 4, 2020).
14 (2014) 9 SCC 129
15 (2014)10SCC708(INDIA)
16 Effect of Recent Amendments in Negotiable Instruments Act on the Pending Cases As Well As Appeals, http://mja.gov.in/Site/Upload/GR/Title%20NO.200(As%20Per%20Workshop%20List%20title%20no200%20pdf).pdf (last visited Nov. 3, 2020).