G S Rao

Introduction:

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.

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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.

  • In the case of Harman Electronics (P) Ltd Vs National Panasonic India (P) Ltd(2009) 1 SCC 720, it was held that Delhi court has no jurisdiction even though notice was issued from this place demanding payment of dishonoured cheque amount. Court at Chandigarh where notice was received has jurisdiction and drawer failed to make payment t Chandigarh. Thus emphasis was laid on receipt of notice rather than on issuance of notice. A court derives jurisdiction when cause of action arises within its jurisdiction. Jurisdiction can not be conferred by an act of   omission or commission on the part of the accused. A distinction must be made between the ingredients of an offence and commission of a part of the offence.
  • In the case of Ishar alloys steels Vs Jayaswals Neco Ltd reported in (2001)3 SCC 609, cheque was presented within 6 months time before the payee bank for collection but it reached the drawee bank after expiry of 6 months. This decision clarified that cheuqe has to be presented at the bank on which it is drawn as per combined reading of Section 3,72 and 138 of NI Act. In other words the place where complainant may present cheque for encashment would not confer or create territorial jurisdiction. This differs with one of the Bhaskaran’s components (presentation of cheque to the bank. Bank means drawer’ bank and not payee’s bank although cheque can be presented at any braches where the payee has an account)
  • It had further analyzed to ascertain the real purport and impact of proviso to Section 138, by referring to several judgments and finally   expressed its view that proviso is an exception to the main section and it simply defers/postpones filing of compliant and cognizance of offence till conditions mentioned therein are complied with.In Bhaskaran’s case proviso has been treated as prescribing essential conditions for making out an offence but fulfillment of these will give rise to cause of action.
  • It emphasized that the concepts of Civil law for invoking territorial jurisdiction are wider and can not be strictly applied in criminal matters.
  • It emphasized that cause of action is appropriate for taking cognizance of offence but inappropriate for determining commission of offence. Cause of action arises on fulfilling the conditions in proviso (presentation of cheque within validity, notice demanding payment and drawers failure to pay etc.
  • Once the cause of action accrues to the complainant, the jurisdiction of the court to try the offence shall be determined by reference to the place where the cheque is dishonoured.
  • Bhaskaran’s case allows multiple venues(5places) as option for filing complaint results in harassment of the drawer of the cheque and increases the burden of courts.
  • If offence under 138 is committed along with other offence (cheating) then the jurisdiction will be governed by the CrPC 181(1) read with 184 and 220
  • Laws endeavor must be to book the culprit and to provide relief to aggrieved party but not to harass the culprit.

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.

Fine Interpretation

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.

Conclusion:

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.

Source:

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 –   gsrao@ocl.in

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0 responses to “Confusion over Territorial Jurisdiction in Cheque dishnour cases”

  1. deepak says:

    Ramanbhai Patel who approched Supreme court aganist the judgment of Bombay High Court, has withdraw his petition on 20/3/2015. So Justice Tahilayani’s view will help the complainants.

  2. dakshesh says:

    Dear Sir,
    I am from Mumbai, I had given materials to a client in pune, for payment he gave me at par cheque but it eventually bounced i had filed a case in 2007 but now the court says the case to be transferred to pune is it so. I heard that high court had given a judgement that at par cheque can be filed at Mumbai but the Supreme Cout has given a stay on that order. Can anyone tell me what is the result of that stay and now what should I do.

  3. venkateshvedam says:

    results no credit policy to those not having local branch accounts, aany nationlwide firms, companies were forced to have multiple accounts in their area of operation as getting supplies for their requrement will be diificult with one account in case the supplier refuses to accept the outside cheques simultaneosy the business opprtunities for the local suppliers were reduced one way this will reduce the burden of supplying material on credit.

  4. jatinder says:

    WHAT IF AN PERSON ISSUED 100 AT PAR CHE QUES SITTING IN DELHI TO OTHER STATES LIKE PUNJAB ,RAJASTHAN, GUJARAT ETC AND GETTING ALL HIS CHE QUES DISHONORED WITH REMARK INSUFFICIENT FUNDS WHOM MAY INDIAN SUPREME COURT GO IN FAVOR FOR OR OPENLY SUPPORT
    the said procedure of presenting cheque ,dishonouring,notice,failure to make said payment is ok where its the first time offence/lapse. in case of habitual offender whose cheques invariably are bounced to buy time/malafide intention,there must be stringent act to deal summaraly without waiting for other formalities. – See more at: https://taxguru.in/corporate-law/confusion-territorial-jurisdiction-cheque-dishnour-cases.html#sthash.9FUf5rE0.dpuf

  5. vswami says:

    To add: The burden of the ‘song’ (longish comment ventured) is to pin point that,in such or similar matters of commonly aired public grievances, it is for the RBI, as the empowered sole authority to, realize and tale all precautions even while conceiving of and bringing in any such innovative changes in the extant system/ practice.

    May be contd.

  6. vswami says:

    WPRT the “Conclusion”, based on information gathered from known reliable sources, to share a few thoughts:
    The SC verdict, as read and understood, applies, ipso facto, to cheques issued fraudulently; that is, drawer knowing full well that it is sure to be ‘dishonored’ for want of funds (credit balance in his account) at the point in time of its being presented for clearing (‘the instant case’). Now, with CTS (electronic) clearing in place, under which it is the ‘image’ of the cheque that is transmitted to the central clearing, not the physical cheque. At the central clearing, it is learnt, there are varying reasons for it not being cleared but returned to the drawee via his bank; such as, signature not tallying even if minutely. To cite one such real life experience but of bizarre kind , the CTS cheque book issued , for gross negligence on the part of drawer’s bank branch, got omitted to be entered on the system at the time of issuance, hence not found on manually viewing the system by the clearing. Further, in such a case, the drawer’s bank branch, has no means of coming to know of the fact of the cheque returned unless and until reported; and further, even then it has no clue, the bank heads / staff being what they are, is in no position to readily and satisfactorily explain the story behind. Anyone or more is sure to have had similar experience, also burdened with so called ‘cancellation charges’, – an insult added to the injury suffered for no fault of his. Yet another point, – cheque issued may not necessarily always be in discharge of ‘debt owed’; e.g. in payment of a subscription/membership fee. Most certainly, common sense should tell, the apex court ruling in the instant case can have no application to the rest of cases. It is unto the RBI, as the architect of the whole idea of CTS clearing, to promptly have a re-look into and advise its constituents to revamp by plugging in the wanted correctives; thereby save the innocent banking public from any disgusting hassle any- more/longer.

  7. Nitin says:

    what judgement came on supreme court stay on mumbai high court judgement of at par cheque boumce

  8. anil says:

    Yes, whatever has been interpreted by supreme court is law and binding on all courts. The Bombay High court judge also has interpreted the judgement of supreme court and passed judgement concerning ” payable at par” cheques. Supreme court has stayed this order, they have not rejected it. How much time will Supreme court need to pass their judgement on this small matter for them. In various cases they order time bound orders for agencies to report to them, then why in orders which have been stayed, why can’t they themselves bind on time frame.

  9. sounder rajan advocate says:

    The jurisdiction provision has been interpreted by the Hon’ble Supreme Court.The Law has been laid down by the Supreme Court and is binding on all Courts under Article 141 of the Constitution of India.

  10. Anil says:

    Does the Supreme Court not know that in almost all the cases, it is the issuer of cheque who comes to negotiate and pays the dues, thus if the jurisdiction will be limited to the accused’s bank’sbranch where it is situated then Supreme Court is knowingly putting the burden on the complainant.

  11. jatinder says:

    WITH THIS DECISION SUPREME COURT IS OPENLY SUPPORTING THE CRIMINALS WHY SO THINK OVER ONES AGAIN

  12. Nitin says:

    is there any latest judgement passed by supreme court on juridision matter after mumbai high court judgement

  13. Krishan Singla says:

    Bombay High Court judgment is absolutely right . Even the Supreme Court held so in its para 17 and the whole gist of the judgment of SC is that the case be filed where the cheque is dishonored .

    The cheque / DD which is issued at par at a particular branch , is deemed to be issued by the branch situated at that Place . Thus a cheque issued at par all Branches is deemed to be issued at every branch of that place at the memo issued by the branch situated at a place where the cheque is presented . Otherwise in case it is decided not in such a way then the position will become very peculiar , then one will open a account with account situated at Andaman and issue the cheque so that case can be filed at that place only , which will very badly effect the business of the country . And moreover no body will accept cheque and in case he will accept then he will ask that other party to open account to his place .

  14. anil says:

    I have supplied material, party has given C form, the customer has given statement of account, the cheques are also given by the customer, customer has diverted funds in another venture and cheques have bounced, please advise recourse for getting early payment, cheque bouncing cases have been filed it is approx. 2 years, court has issued warrants also, now the question of jurisdiction has arisen, if we transfer the case to the location of the bank, then it will take another 2 years and unnecessary costs will be on us, please suggest.

    • jatinder says:

      I LIKE MODI AND ALL HIS DECISSIONS HE MAY ONCE AGAIN THINK IF ITS AN CHEQUE PERSONEL FROM AN COMPANY THIS LAW MUST NOT BE FOR THEM COMPANY TO COMPANY THATS OTHER STORY MODI JI KUCH SOCHO YEH DHAKA PERSONEL BANDO SE KYON KAR RAHE HON REQUEST

  15. jatinder says:

    what does payable at par at all branches ( written on cheque means)K. Bhaskaran v. Sankaran Vidhyan Balan (1999) 7 SCC 510 Dasrath Rupsingh Rathod Vs State of Maharashtra think it over RBI – See more at: https://taxguru.in/corporate-law/confusion-territorial-jurisdiction-cheque-dishnour-cases.html#comments Video conferencing facility has been made available at Dwarka Court Complex in Court Room No. 8, Ground Floor, ‘B’ Wing of the Court Building. At present the conferencing between the Court and the Jail and other Court Complexes including the Hon’ble High court is possible from the Conferencing room. – See more at: https://taxguru.in/corporate-law/confusion-territorial-jurisdiction-cheque-dishnour-cases.html#comments

  16. sounder rajan advocate says:

    It is believed that “on par cheques”-“place of presentation question “is still not decided by the Hon’ble Apex Court.Therefore the “place of the Drawers Bank Jurisdiction”as held in Dasarth Rupsingh Rathod Vs State of Maharashtra holds the field and is binding on all Courts under Article 141 of the Constitution of India.

  17. Allan says:

    I have filed case in year 2010 of dishonour of cheque “at par all branches” mentioned on cheque got returned along with all stamp duty.
    currently the case is in juridication where the chque is returned & aftr such supreme court judgements what to do & where the case should run nw of “at par cheques” ?

  18. jatinder says:

    Video conferencing facility has been made available at Dwarka Court Complex in Court Room No. 8, Ground Floor, ‘B’ Wing of the Court Building. At present the conferencing between the Court and the Jail and other Court Complexes including the Hon’ble High court is possible from the Conferencing room.

  19. jatinder says:

    my case is in the court nawansahar from last one and half year and today in the meanwhile this SC judgement came out. what is the position of the case. is the case to be tried in the same court or to return the complaint to the complainant. may i ask supreme court what was i doing from last one and half year in nawansahar that so today i will have to go to delhi and what about the expenses do supreme court known about video conference what does that mean

  20. sounder rajan advocate says:

    Your case should fall in the Category of Court retention where by filingof Chief Examination-Trial is deemed to be commenced for retention.

  21. bhargava sarma says:

    I am dealing with one case on behalf of Accused, wherein the chief examination of the complainant filed time taken to mark further documents. in the meanwhile this SC judgement came out. what is the position of the case. is the case to be tried in the same court or to return the complaint to the complainant. plz advise me.

  22. jatinder says:

    what does payable at par at all branches ( written on cheque means)K. Bhaskaran v. Sankaran Vidhyan Balan (1999) 7 SCC 510 Dasrath Rupsingh Rathod Vs State of Maharashtra think it over RBI

  23. sounder rajan advocate says:

    Already the Trial courts have started transferring the cases.In the mind of the Trial Courts there is no confusion.The Law laid down by the Supreme Court is binding on all Courts under Article 141 of the Constitution of India.

  24. dr rajesh saini says:

    the said procedure of presenting cheque ,dishonouring,notice,failure to make said payment is ok where its the first time offence/lapse. in case of habitual offender whose cheques invariably are bounced to buy time/malafide intention,there must be stringent act to deal summaraly without waiting for other formalities.

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