G S Rao
The recent judgment of Apex Court in Dasarth Rupsingh Rathod Vs State of Maharashtra created confusion in the business circles for the reason that the new interpretation had lead to withdrawal of the cases filed in courts having no jurisdiction and compelled fresh filing of the same in the appropriate courts having territorial jurisdiction.. This judgment came at a time when the recent past judgments of Supreme court in MSR leathers and Laxmi Dyechem avoided strict interpretation as it will help the dishonest drawers of cheuqes and defeats the very purpose of the Negotiable Instruments Act, 1881(referred as NI Act). These judgments have sent a message that cheques play an important role in commerce and faith should be inculcated in the use of such instruments.
Background to Dashrath Rathod’s judgment:
Many 138 cases have been filed at places other than the place of drawee bank, following the interpretation in Bhaskaran’s case. Some confusion prevailed over rejection of complaint cases filed u/s 138 of NI Act by Delhi and Bombay high courts on the ground that courts will not have jurisdiction over a place where the cheque is presented but will have jurisdiction at the place where drawee bank dishonors the cheque. Thus several appeals on the territorial jurisdiction issue came up for consideration of the Supreme Court and a Judgment was rendered on 01.08.2014 by a 3 judge bench comprising of Justices Mr.T.SThakur, Mr.Vikramjit Sen and C. Nagappan.The focus of this article is Apex court’s recent judgment in the case of Dasrath Rupsingh Rathod Vs State of Maharashtra, its impact.
When an offence under NI Act is committed?
It is useful to refer to the ingredients which are essential for making out an offence under Section 138 of the NI Act.
As per Section 138 of the NI Act, an offence shall be deemed to have been committed, if a cheque issued by the drawer in discharge of a whole or part of legally enforceable debt is returned unpaid on presentation by the payee’s banker due to lack of sufficient funds in the account of drawer or exceeds the arrangement made with the bank.
The proviso to Section 138 stipulates fulfillment the following essential conditions for application of the Section:
a) The cheque must have been presented for payment within 6 months from the date of the cheque or within its validity period, whichever is earlier;
b) The payee/holder in due course must have given a written notice within 30 days from the date of intimation of dishnour memo, demanding payment of returned cheque amount
c) The drawer fails to make the payment of demanded sum within 15 days from the receipt of the notice (cause of action arises on failure of drawer to make payment).
A complaint has to be filed within 30 days from the date, on which cause of action has arisen, for taking cognizance of the offence by a competent court having jurisdiction to try the offence. As per section 142 of NI Act, court has power to try 138 cases summarily and dispose of the same as expeditiously as possible but within a time frame of 6 months.
What are the hurdles in NI Act cases?
Recently the issue of courts dragging the NI Act cases for long has come up under scrutiny of the Apex in a PIL filed by Indian Banks Association. It was brought to the notice of the Apex court that although NI Act, mandates for summary trial within a time frame, the courts trying 138 cases were not following the same resulting in huge pending of 138 cases. The unscrupulous drawers of cheque buy time and courts are allowing it defeating the provision of summary trial. There is a tendency amongst the drawers in cases where huge amount is involved to protract the litigation and compound at a later date. Supreme Court directed all criminal courts in the country to follow the guidelines framed by it for speedy disposal of cases u/s 138 of NI Act.
Principles laid down in Bhaskaran’s case:
In the case of K Bhaskaran Vs Sankaran Vaidhyan Balan (1999) 7 SCC 510, two judges’ bench of Supreme Court had to examine the issue of territorial jurisdiction for filing a criminal complaint.
In this case, the court observed that concatenation of all the following components is a pre-requisite for making out an offence punishable under Section 138 of the NI Act.Online GST Certification Course by TaxGuru & MSME- Click here to Join
i) Drawing of the cheque
ii) Presentation of the cheque to the bank
iii) Returning the cheque unpaid by the drawee bank
iv) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount.
v) Failure of the drawer to make payment within 15 days of the receipt of the notice.
After considering the provisions of Section 177- 179 of CRPC, the Supreme Court had opined that where an offence consists of several acts done in many localities, such offence can be tried in any Court having jurisdiction over said localities. 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 any one of those five acts was done.
Interpretation of Section 138 in Dasrath Rupsing Rathod’s case:
While analyzing the past judgments of brother judges, the 3 judge bench of Apex court observed certain distinct deviations made from the interpretation made in Bhasakaran’s case. Following are the cases which were referred by the Apex court and its observations for delivering its judgment.
With the above observation, it held that Section 130 of NI Act read in conjunction with Section 177 of CrPC leaves no doubt that return of the cheque by the drawee bank alone constitutes the commission of offence and the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank, is located.
This judgment indeed is result of a detailed examination of Apex court’s past judgments, distinguishing them by fine interpretation of the Section 138 with reference to provisions of CrPC and CPC with regard to cause of action and jurisdiction. It justified its strict interpretation on the ground that law should book the culprit and should not harass the accused. While sympathizing with the drawer, it brought on record their observation that complainant is choosing jurisdiction suiting his convenience and with an intent to harass. Further it remarked that courts are burdened by the pending cases on account of multiplicity of complainants at various places..
Impact of the Dashrath Rathod ‘s judgment:
The Apex court has considered the ramifications of its judgment on several pending cases in the lower courts. In order to mitigate the rigors of this judgment, it indicated in the judgment itself following path for convenience of the complainants and courts.
1.Principle laid down by this judgment will be prospective in operation.
2. In respect of pending cases it distinguished 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: Cases in which summons have not been issued will be maintainable only at the place where the cheque stands dishonored. Even though evidence is led on affidavit or by oral statement, further proceedings can not continue.
Debatable issue: With due respect to the 3 judge bench for its fine analysis, a question comes to one’s mind as to whether the interpretation of the Apex court is inappropriate in respect of “At par Cheuqes”.
Judgment of Bombay high court
Recently Bombay high court in the case of Mr.Ramanbhai Mathurbhai Patel Vs State of Maharashtra & Anr, had to deal with dishnour of At Par cheques issue. In this case two cheques were drawn on State Bank of India and Bank of Maharashtra located at Gandhinagar, Ahmedabad but payable at par at all braches of the same banks. These at par cheques were deposited and dishonored in respective banks’ branches at Kurla and not at Ahmedabad. Relying on Dashrath Rathod’s judgment, Bombay high court opined that in the case of at par cheques, the place where cheques are deposited will have jurisdiction. This judgment however is stayed by the apex court as it runs contrary to its interpretation of Dashrath Rathod.
The issue of dishnour of ‘At Par” cheques needs attention in view of the fact the cheque really does not travel to the drawee bank’s place unlike in olden days. Now clearances are done through electronic transfers. Keeping this in view, strict interpretation followed in Dashrath Rathod case may be relaxed in public interest. Apex court may also take into view that this relaxation does not result in multiplicity of complaints.
1. Negotiable Instruments Act, 1881,Code of Criminal procedure,1973
2. RBI circulars, Judgments of Supreme court, Bombay High Court, Delhi high court
Disclaimer: This article contains interpretation of the Act and personal views of the author are based on such interpretation. Readers are advised either to cross check the views of the author with the Act / judgments or seek the expert’s views if they want to rely on contents of this article.
Author- G S Rao, Deputy General Manager (Legal) OCL India Limited, Email – firstname.lastname@example.org