- ABSTRACT:
“This article exploreshow the territorial jurisdiction under Section 138 of Negotiable Instruments Act,1881 which talks about Dishonour of Cheque has changed time and again.Dishonour of Cheque is a civil dispute but the offender can face criminal consequences. Due to this unique characteristic of the offence, jurisdiction of courts play an important role with regards to the proceedings of the case. Taking into consideration the judicial approach on the abovementioned legal issue, there is a discussion on the following: (1) An analysis on the classical judgement by Supreme Courtgiven on this particular question of law, (2) A comparative analysis on the position of law before and after the said judgement,(3) A discussion on different point of views which formed the basis of what was held in the court of law (4)Criticism faced by the judgement (5) and finallyoverruling of the judgement. Furthermore, we have also discussed the stance of legislature on thisissue and the amendment bill passed in 2015. In addition to this, we will also look into the issue that whether it is permissible to refer a compoundable criminal matter such as under section 138 i.e. Dishonour of Cheque, for settlement through mediation.
Keywords: Negotiable Instruments Act, Dishonour of Cheque, Territorial jurisdiction, Amendment bill, mediation.”
- INTRODUCTION
That proceedings under Section 138 of Negotiable Instruments Act, 1881 (hereinafter referred to as NI Act) have a special character. They arise from a civil dispute which is related todishonouringof a cheque but may result in a criminal consequence. Even though the nature of the statue is punitive, however, its spirit, intendment and motive is to provide compensation and ensure restitution. The proceedings under Section 138 of the NI Act are therefore, differentfrom the proceedings of the other criminal cases. There is no ambiguity that the abovementioned offence is a civil wrong given criminal overtones.
The judgment[1]takes notes that Chapter XVII of the enactment[2] is a unique exercise which bears the isolating line among civil and criminal jurisdictions and that it provides a single forum to enforce a civil and criminal remedy.Unlike that forother forms of crime, the punishment under abovementioned Section is not a means of seeking retribution, but is more a means to ensure and guarantee payment of money. The complainant’s principal interest lies in recovering the money rather than sending the drawer of the cheque to jail. The threat of jail is only a mode to ensure recovery. As against the accused who is willing to undergo a jail term, there is little available as remedy for the holder of the cheque.[3]Ergo, the payee can initiate both money recovering proceedings in jurisdictional civil court and criminal prosecution against the drawer.
The NI Act does not expressly say anything on the question of law pertaining to the appropriate jurisdiction with respect to filing of criminal complaint in case the offence of Dishonour of the cheque is committed under the abovementioned Section. Since the Criminal courts are approached, the issue needs to be examined under the guidelines of the Criminal Procedure Code, 1973 (hereinafter referred as to CrPC). Section 177 of CrPC provides that:
“Every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed“.
Section 178 of CrPC provides that:
“ Place of inquiry or trial. (a) When it is uncertain in which of several local areas an offence was committed, or (b) Where an offence is committed partly in one local area and party in another, or (c) Where an offence is a continuing one, and continues to be committed in more local area has one, or (d) Where it consists of several acts done in different local areas, It may be inquired to or tried by a court having jurisdiction over any of such local areas.”
Thus, in all the above situations, the court having jurisdiction over any of such local areas may try the offence.
- JUDICIAL APPROACH
CASE ANALYSIS: K. BHASKARAN VS. SHANKARAN VAIDHYAN BALAN AND ANR, 1999 SCC (Crl.) 1284
The appeal was filed in the Supreme Court by the accused against the complainant after the accused was acquitted in trial court and then convicted in higher court. Among the contentions which the accused raised, one was regarding the territorial jurisdiction of the said magistrate Court to try the case as the cheque was dishonoured at in another district in Kerala.
Supreme Court in its decision had given jurisdiction to the following places :
- Where cheque is drawn.
- Where payment had to made.
- Where cheque is presented for payment.
- Where cheque is dishonoured.
- Where notice is served upon the drawer.
The complainant has the liberty to 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 reasoning behind decision of the apex court is based on the components of Section 138 of the NI Act as the offence can only be completed with the concatenation of the following acts:
- Drawing of the cheque,
- Presentation of the cheque to the bank,
- Returning the cheque unpaid by the drawee bank,
- Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,
- failure of the drawer to make payment within 15 days of the receipt of the notice.
It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities.The locality where the bank (which dishonoured the cheque) is situated cannot be regarded as the sole criteria to determine the place of offence.The provisions[4] in the Code of Criminal Procedure should be borne in mind when the question regarding territorial jurisdiction of the Courts to try the offence is to be determined.
POSITION OF LAW BEFORE K. BHASKARAN’S CASE | POSITION OF LAW AFTER K. BHASKARAN’S CASE |
There were different approaches taken by the courts to determine this issue. VIEW 1: As to the question of jurisdiction, it is to be considered that the issuance of the cheques and their dishonouring are only a part of cause of action.[5]The anatomy of S. 138 comprises certain necessary components before the offence can be said to be complete undoubtedly each of the components constitute a stage in the commission of the offence, the final non-payment being the ultimate one.[6] A prosecution for dishonouring of a cheque will have to be instituted before the Court within whose jurisdiction the cheque was issued.[7] VIEW 2: The cause of action arises at the place where the drawer of the cheque fails to make payment of the money. That can be the place where the Bank to which the cheque was issued is located. It can also be the place where the cheque was issued or delivered.[8]So, both places i.e. place where the cheque was handed over and the place where it was dishonoured will have jurisdiction.[9] VIEW 3: The cause of action arises at a place where the cheque was drawn, or a place where the cheque was presented, or a place where the payee made a demand for payment of the money by giving a notice in writing to the drawer within the stipulated period and at a place where the drawer failed to make the payment within 15 days of the receipt of notice.[10] Ergo, as far as territorial jurisdiction is concerned all these places will have jurisdiction. | The principle laid down in the K. Bhaskarn’scase was then followed by the courts in various cases. In Sunil Srivastava vs Shri Ashok Kalra[11] the court held that there are the various causes of action in a case under Section 138 of the NI Act to give territorial jurisdiction to a court. It is manifest from the law laid down in the aforementioned judgment[12]that the cause of action may also be at a place where the drawer of the cheque resided or the place where the payee resided for the place where either of them carried on business or the place where payment was to be made. CRITICISM FACED BY THE JUDGEMENT OF K. BHASKARAN’S CASE: The aforementioned case had many unintended consequences.This causes suffering to the drawer, although gives flexibility to the payee to choose the place where he was to file the cheque bouncing case. Sometimes, several cheques are issued at the same time by a person to the same payee, which are deliberately presented in different banks located at different places, and thereafter, cheque bouncing cases are filed at different places against the drawer of those cheques. In the abovementioned case it was held that the expression “giving of notice” occurring in proviso (b) to Section 138 of the NI Act means “sending of notice”. This is considered as the rampant misuse of liberal interpretation. The said expression means “receipt of notice”.[13]
|
OVERRULING OF K. BHASKARAN’S CASE BY DASHRATH RUPSINGH RATHOD V. STATE OF MAHARASHTRA AND ANR[14]
The 3-judge bench of the Supreme Court took a strict approach and held that the territorial jurisdiction under Section 138 of the NI Act should exclusively be determined and considered by place/location of the offence. The return of the cheque by the drawer bank only constitutes commission of offence under section 138. The court clearly addressed the term ‘cause of action’ and held that the facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act. And, once the cause of action is triggered in favour of the complainant, the jurisdiction of the court to try the case will be determined by the place where the cheque was returned dishonoured. What is important is whether the drawee bank who dishonoured the cheque is situated within the jurisdiction of the Court taking cognizance.[15]Hence, the courts within which drawer bank is located will only have the jurisdiction to try the case.
- NEGOTIABLE INSTRUMENT (AMENDMENT) ACT, 2015
The legal position regarding territorial jurisdiction of courts in cases of dishonour of cheques has completely changed with above new Ordinance, i.e., the Negotiable Instruments (Amendment) Ordinance, 2015, which has been promulgated by the President on 26 December 2015, and which has retrospectively come into force with effect from 15 June 2015. The above Supreme Court judgment is now of no consequence since this amendment act supersedes it.[16]New clause i.e. Section 142(2) has been added in Section 142 and a new sub-section i.e. Section 142A has been inserted in the Negotiable Instruments Act, 1881. Here is what is done by this amendment act.
- A cheque bouncing case can be filed only in the court at the place where the bank in which the payee has account is located.
- Once you have filed a cheque bounce case in one particular court at a place in this manner, subsequently if there is any other cheque of the same party (drawer) which has also bounced, then all such subsequent cheque bounce cases against the same drawer will also have to filed in the same court (even if you present them in some bank in some other city or area). This will ensure that the drawer of cheques is not harassed by filing multiple cheque bounce cases at different locations.
- All cheque bounce cases which are pending as on 15 June 2015 in different courts in India, will be transferred to 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.
- NEW DEVELOPMENT IN LAW: MEDIATION FOR OFFENCE U/S 138 OF NI ACT
In a remarkable judgment[17] passed by the Delhi High Court, it was held that it is legal to refer a criminal compoundable case as under Section 138 of NI Act to mediation. The question of law was whether it is permissible to refer a criminal matter such as under section 138, for settlement through mediation.
While considering the question of law, the Court has drawn a line of distinction between traditional criminal cases and offence under Section 138 of NI Act.[18] The High Court battled with the power of a criminal court to refer criminal cases for mediation and the nature of proceedings under section 138 of NI Act. The Court, after referring to various statutory provisions, observed that tough neither the CrPC nor the NI Act provides for any particular provision which confers power on a criminal court to refer a case for mediation, the Court can still refer a criminal case for mediation as compounding of criminal cases is permissible under section 320 of CrPC. The Court basically relied on section 19(5) of the Legal Service Authorities Act, 1987 (LSA Act) which gives jurisdiction to Lok Adalat to settle ‘any case’ pending before or falling under jurisdiction of any court. In addition to that, The Court in the case expounded the procedure that is to be followed in cases of mediation for offences under Section 138 of NI Act and also outlined the contents of the settlement.
- BIBLIOGRAPHY
Articles and Journals
- Ganga Dutt Sharma, Jurisdiction of Cases for Dishonour of cheque in the Pretext of the Statutory Laws & Recent Judgements, 3 Issue 9, Global Journal for Research Analysis, 2014.
- PushpanjaliSood, Dishonour of Cheque: An Overview, Vol 2, issue 6, International Law journal, 2016.
Books
- Avtar Singh, Laws of Banking and Negotiable Instruments, (2011 Ed), Eastern Book Company.
- Bhashyam and Adiga’s,The Negotiable Instruments Act, (22nd ), Bharat Law House, New Delhi.
Cases
- Bridgestone India Pvt.Ltd. v. Inderpal Singh,2015 AIR SCW 6556.
- Canbank Financial Services Ltd. v. Gitanjali Motors and Ors, 1995 CriLJ 1222.
- Damodar S. Prabhu v. Sayed Babalal H, (2010) 50 SCC 663.
- DashrathRupsingh Rathod v. State of Maharashtra and Anr,AIR 2014 SC 3519.
- Dayawati v. Yogesh Kumar Gosain, 2017 SCC OnLine Del 11032.
- Ess Bee Food Specialities And Ors. v. Kapoor Brothers, 1992 Cri LJ 739.
- Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd, (2009) 1 SCC 720.
- Jugal Kishore Arun v. V.A. Neelakandan, 1990 L.W. (Cri.) 492.
- Kaushalya Devi Massand RoopkishoreKhore, (2011) SCC 4 593.
- Bhaskaran v. Shankaran Vaidhyan Balan and Anr, 1999 SCC (Cri.) 1284.
- K. Muraleedharan v.C.K.Pareed and Anr, 1992 CriLJ 1965.
- Rakesh NemkumarPorwal v. Narayan DhonduJoglekar, 1993 CriLJ 680.
- Rule Vijayan v. Baby, (2012) 1 SCC 260.
- SanjaiMakkar and Ors.v..Saraswati Industrial Syndicate Limited and Ors, 1999 CriLJ 1958.
- Sunil Srivastava v. Shri Ashok Kalra,2003 CriLJ 1443.
- Vinay Kumar Shailendra v Delhi High Court Legal Services Committee and Anr, (2014)10 SCC 708.
Statutes
- The Code of Criminal Procedure, 1973.
- The Legal Service Authorities Act, 1987.
- The Negotiable Instruments Act, 1881.
- The Negotiable Instruments (Amendment) Act, 2015.
Websites
- Umesh Prajapati, Moving towards jurisdictional achievement of NI Act, 1881edu https://www.academia.edu/22329004/_Moving_Towards_Juridictional_Achievment_of_N.I._ACT_1881_
- Archana Balasubramaniam, Dishonor of cheque: Section 138 of the Negotiable Instruments Act, 1881, lawyered.in
https://www.lawyered.in/legal-disrupt/articles/dishonor-cheque-section-138/
- Editorial Team, Dayawati v. Yogesh Kumar Gosain: Expanding the Scope of mediation to criminal matters?,mappingadr
- Effect of the recent amendments in the NI Act on the pending cases and appeals, mja.gov.in
http://mja.gov.in/Site/Upload/GR/Criminal%20Summary%20.pdf
- Alpha Partners, India: Section 138 of the Negotiable Instruments Act, 1881: An In depth analysis, mondaq
- Ashok Dhamija, Jurisdiction in cheque bouncing cases is changed by ordinance, superseding SC judgement, tilakmarg.org
- Shilpi Sharan, Landmark judgements on Section 138 of the NI Act, 1881, in 2017, vakilno1.com
https://www.vakilno1.com/legal-news/landmark-judgments-section-138-ni-act-2017.html#_ftn4
[1]Rule Vijayan v. Baby, (2012) 1 SCC 260.
[2] Negotiable Instruments Act, 1881.
[3]Damodar S. Prabhu v. Sayed Babalal H, (2010) 50 SCC 663.
[4] Section 177, Section 178, Section 179 of Negotiable Instruments Act, 1881.
[5]Ess Bee Food Specialities And Ors. v. Kapoor Brothers, 1992 Cri LJ 739.
[6]Rakesh Nemkumar Porwal v. Narayan Dhondu Joglekar, 1993 CriLJ 680.
[7]Jugal Kishore Arun v. V.A. Neelakandan, 1990 L.W. (Cri.) 492.
[8]P.K. Muraleedharan v. C.K.Pareed and Anr, 1992 CriLJ 1965.
[9]Canbank Financial Services Ltd. v. Gitanjali Motors and Ors, 1995 CriLJ 1222.
[10]Sanjai Makkar and Ors. v.Saraswati Industrial Syndicate Limited and Ors, 1999 CriLJ 1958.
[11]2003 CriLJ 1443.
[12]K. Bhaskaran v. Shankaran Vaidhyan Balan and Anr,1999 SCC (Cri.) 1284.
[13]Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd, (2009) 1 SCC 720.
[14]AIR 2014 SC 3519.
[15]Vinay Kumar Shailendra v. Delhi High Court Legal Services Committee and Anr, (2014)10SCC708.
[16]Bridgestone India Pvt.Ltd. v. Inderpal Singh, 2015 AIR SCW 6556.
[17]Dayawati v. Yogesh Kumar Gosain, 2017 SCC OnLine Del 11032.
[18]Kaushalya Devi Massand v. Roopkishore Khore, (2011) SCC 4 593.
