Tuesday, August 5, 2014

Jurisdiction of cheque dishonor complaint - Judgement

Dis-honour of Cheque cases can be filed only to the Court within whose local jurisdiction, the offence was Committed; ie, where the cheque is dishonoured by the bank on which it is drawn.

Bhaskaran Vs Balan (2009) which allowed Five territorial Jurisdictions overruled [Read the Judgment]On August 4, 2014 by M.A.Rashid

A three Judge Bench of the Supreme Court finally held that  a Complaint of Dis-honour of Cheque can be filed only  to  the  Court  within  whose  local jurisdiction the offence was committed, which  in  the  present  context  is where the cheque is dishonoured by the bank on which it is drawn. The Court clarified that the Complainant  is  statutorily  bound  to comply with Section 177 etc. of the CrPC and therefore the  place  or  situs where the Section 138 Complaint is to be filed is not of his choosing.

The Supreme Court in Dashrath Rupsingh Rathod Vs. State of Maharashtra & Anr. Overruled the two Judge Bench Judgment in K. Bhaskaran v. Sankaran Vaidhyan  Balan  (1999)  7 SCC 510 wherein  it was held that “the offence under Section 138 of the Act can be completed only with the concatenation of a number of acts.

Following are the acts which are components of the said offence : (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”.” 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 Court accepted the view of another two Judge Bench Judgment in Harman  Electronics  Pvt.Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1  SCC  720. “It is one thing to say that sending of a notice is one of the ingredients for maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence.

For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be  proved. What would constitute an offence is stated in the main provision. The proviso appended thereto, however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken.

 If the ingredients for constitution of the offence laid down in the provisos (a), (b) and (c) appended to Section 138 of the Negotiable Instruments Act intended to be applied in favour of the accused, there cannot be any doubt that receipt of a notice would ultimately give rise to the cause of action for filing a complaint. As it is only on receipt of the notice the accused at his own peril may refuse to pay the amount. Clauses (b) and (c) of the proviso to Section 138 therefore must be read together. Issuance of notice would not by itself give rise to a cause of action but communication of the notice would.”.

Justice Vikramjit Sen who wrote the main Judgment held that “We  respectfully agree  with  this  statement  of  law  and  underscore  that   in   criminal jurisprudence there is  a  discernibly  demarcated  difference  between  the commission of an offence and its  cognizance  leading  to  prosecution.

The Harman  approach  is  significant  and  sounds  a  discordant  note  to  the Bhaskaran ratio.  Harman also highlights the reality  that  Section  138  of the NI Act is being rampantly misused so  far  as  territorial  jurisdiction for trial of the Complaint is concerned.  With the passage of time  equities have therefore transferred from one end of the pendulum to  the  other.

 It is now not uncommon for the Courts to encounter the issuance of a notice  in compliance with clause (b) of the proviso to Section 138 of the NI Act  from a situs which bears no connection with the Accused or with any facet of  the transaction between the parties, leave aside the place where  the  dishonour of the cheque has taken place.
This is also the  position  as  regards  the presentation of the cheque, dishonour  of  which  is  then  pleaded  as  the territorial platform of the Complaint under  Section  138  of  the  NI  Act.

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