Jurisdiction of Courts in Cheque Bouncing
Jul 08, 2015 | 12:07 PM IST
Jul 08, 2015 | 12:07 PM IST
Pendency of nearly forty lacks cases all over India relating to Cheque Bouncing itself would indicate the importance of Cheques Transactions in day to day affairs of people. All such pending cases and cases to be filed henceforth will be Governed by the provision of an Ordinance [called the Negotiable Instruments (Amendment) Ordinance, 2015] promulgated by the President of India on 15 June 2015. Territorial Jurisdiction to file cheque bouncing cases has now been changed by this Ordinance thereby superseding the 87 pages 3 Judges Bench Judgment of the Supreme Court in the case of Dashrath Rathod & ors. V/s. State of Maharashtra & ors. Thus as per this ordinance now a complaint for cheque dishonor has to be filed in the Court in whose jurisdiction the Bank Branch of the payee situates and necessary amendment has also been made to Sec.142(2). I have attempted to explain the legal provisions in this regard.
2.Dishonor of a Cheque and approach of Hon. Apex Court on Territorial Jurisdiction of the Court. :
The Judgments of Hon. Apex Court on territorial Jurisdiction were divided into two views. The most celebrated judgment of Hon. Apex Court on this point was delivered in the case of K. Bhaskaran V/s. Sankaran Vaidhyan Balan , which held that if a cheque gets dishonored then the Payee after performing all the legal preconditions had option of filing the Complaint in any of the court amongst five options and this principle was being followed in the law field over a period of 15 years. The two Judges Bench, in the case of K. Bhaskaran was pleased to hold that, the Offense under Sec.138 of the Negotiable Instruments Act, (the Act) can be completed only with the concatenation of a number of acts and which includes following components. 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 and 5) Failure of the Drawer of the Cheque to make payment within 15 days (now 30 days) of the receipt of the notice. It was further held that mere giving or receipt of the notice does not make the offense, but failure to make the payment within stipulated period of 15 days (now 30 days) makes the offense on the 16th day (now 31st day). The above referred five components could happen in 5 different places e.g. A business man carrying his business in Pune gives a cheque to B who carries business in Surat and when the Cheque is Dishonored, B issues notice to A through his Advocate having office in Mumbai. In this case B had option of filing case in Pune, Surat and Mumbai. K. Bhaskaran view was followed by subsequent decisions of Hon. Apex Court. However, 3 judges Bench of the Hon. Apex court by observing that the judgment of K. Bhaskarans case (Supra) was widely abused and misused, overruled the K. Bhaskarn view in the case of Dashrath Rathod & ors. V/s. State of Maharashtra & ors.
3) Cheque Bouncing and Preconditions of Law :Before moving further, we must have a short look at the provisions in Sec.138 of the N.I.Act, 1881. As per the said provision, if the Cheque is Dishonored for the reasons mentioned therein, then the Complaint would be maintainable only if it is filed when :
a)The Cheque was presented to the Bank within a period of 6 months (now 3 months) from the date on which it was drawn or within a period of its validity, whichever is earlier.
b)The payee or holder in due course issues a notice in writing to the drawer of the cheque thereby demanding the amount of dishonored cheque, within a period of 30 days from the date of receipt of intimation of dishonor of the cheque from the Bank.
c)After receipt of the notice, the Drawer fails to make the payment of amount so demanded in the notice within a period of 30 days from the receipt of the said notice.
4) Territorial Jurisdiction and Dashrath Rathod Case :As mentioned earlier that the Judgment of K. Bhaskarans case was widely being followed till recently by Hon. Apex Court in the cases of Nishant Aggarwal V/s. Kailas Sharma , Escorts Ltd. V/s. Rama Mukharjee . The other view of the Hon. Apex Court criticized and not followed K. Bhaskaran in the cases of Ishar alloy Steels Ltd. V/s. Jayaswals Neco Ltd , Harman Electronics Pvt. Ltd. V/s. National Panasnoic India Pvt. Ltd. Therefore it certainly required a larger bench judgment to put the controversy to an end and finally in Dahasrath Rathods case, the Honble Apex court by overruling the judgment in K. Bhaskarans case held that Presentation of cheques at any place cannot confer jurisdiction upon Court within whose territorial limit such presentation may have taken place. Dishonor of cheque would be localized at place where the drawee Bank is situated.
It was further observed by their Lordships in their 87 pages Judgment that once the cheque is dishonored, the Offense is committed, and not when the drawee fails to make the payment as per the demand notice within stipulated period. The factors such as Where the Drawer / Complaint resides or carries on business, place of Bank of the Complainant, have no role to play in deciding the Jurisdiction of the Court and it shall be wholly depending upon where the Branch of the Bank of the drawer situates It has also given a big blow to concept of At Par Banking. The retrospective effect of this judgment was tremendous on more than 40 lacks pending cases all over India and with some exceptions, such cases were transferred to its appropriate Court as per this Judgment !!
6) The Reasons for passing Ordinance :
The Judgment of Dashrath Rathod case (supra), created havoc and representations were made to Government by various Business and Financial Institutions and it was also brought to the notice of the Government that as the common adage goes Debtor should seek Creditor, the situation became exactly opposite and it jeopardized the Interest of the Complainants at large. It was also brought to the notice that this judgment is offering undue protection to the Defaulters. It would affect At Par transactions, because now a days after introducing CTS (Cheque Truncation system), cheque clearance happens through scanned images of Cheques in electronic forms and cheques are not physically required to be presented to drawee Bank Branch as same are settled between service branches of Drawee and Payee Banks and this judgment would become an obstacle for a single window agency with customers spread all over India and therefore the Ordinance came to passed and amendment to the N.I. Act has been made in following terms :To begin with, a new sub-section (2) has been inserted in Section 142 of the Negotiable Instruments Act, 1881, which now lays down as under:
(2) The offence under section 138 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 an account, the branch of the drawee bank where the drawer maintains the account, is situated.
Explanation.For the purposes of clause (a), where a 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.
Secondly, a new Section 142A has been inserted in the Negotiable Instruments Act, 1881, has been inserted, which lays down as under:
142A. (1) 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 which were pending in any court, whether filed before it, or transferred to it, before the commencement of the Negotiable Instruments (Amendment) Ordinance, 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.
(2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1), and such complaint is pending in that court, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.
(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015, more than one prosecution filed by the same payee or holder in due course, as the case may be, against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142 before which the first case was filed and is pending, as if that sub-section had been in force at all material times.
The amendment to the Explanation of Sec. 6 is also made thereby clarifying the definition a Cheque in the electronic form thereby giving reference of expression in Information Technology Act, 2000.
7) In Short :
This Ordinance protects the interest of Complainants as well as the Accused that may be summarised as under.
a)Now a cheque bouncing case U/Sec.138 of N.I. Act can be filed only in the court at the place where the Bank Branch in which the Complainant payee has account is located. E.g. The businessman in Pune gives a Cheque to his Customer in Mumbai and the Customer has a account in a Bank at particular area say Dadar. Now if this cheque gets Dishonored then the cheque bounce case can be filed only in Mumbai, Dadar in the court which has jurisdiction over the said area where payee bank is situated.
b)This a unique provision made by ordinance. Once you have filed a cheque bounce case in one particular court at a place, subsequently if there is any other cheque of the same party (drawer / accused) which also gets dishonored, then all such subsequent cheque bounce cases against the same drawer / accused will also have to filed in the same court, irrespective whether payee deposits the said subsequent cheques in some other Bank or Branch. This provision has been inserted to curtail the harassment of the Drawer and that drawer is not entangled in different cases at different Courts.
c)The most important aspect is the impact of this ordinance over pending cases. Interestingly there is no distinction which has been made as it was made in Rahtods case (supra) as to which cases will be transferred and which will not be transferred. Thus as per this ordinance all cheque bounce cases which are pending as on 15 June 2015 in different courts in India, will be transferred to the court the court which has jurisdiction over the place where the bank of the payee is located. If there are multiple cheque bounce cases pending between the same parties as on 15 June 2015, then all such multiple cases will be transferred to the court where the first case has jurisdiction as per above principle. There has been no time limit (like 30 days in Rahtods case ) given for transferring the pending cases, so it should be reasonable time.
Adv. Rohit U. Erande
B.Com, LLM, Pune.