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India – Dashrath Rupsingh Rathod V. State Of Maharashtra.

14 October, 2014

 

Legal News & Analysis – Asia Pacific – India – Dispute Resolution

 

A three judge bench of the Supreme Court, in the case of Dashrath Rupsingh Rathod v. State of Maharashtra & Anr.1, holds that criminal complaints in respect of bounced cheques can only be led before a court within the territorial jurisdiction of which, the drawee bank is situated.

 
Background

 
Abatch of appeals were preferred before the Supreme Court for its decision on the question pertaining to courts territorial jurisdiction concerning criminal complaints led under Section 138 of the Negotiable Instruments Act, 1881. The facts and circumstances differed in each of the appeals preferred before the Apex Court, however, the question of law involved was common i.e. what would be the place, situs or venue of judicial inquiry and trial of the offence of cheque bounce in view of Section 138 of the Negotiable Instruments Act, 1881 and Section 177 – 179 of the Code of Criminal Procedure, 1973.

 
In an earlier judgment, a two judge bench of the Supreme Court in the case of K. Bhaskaran v. Sankaran Vaidhyan Balan2 had held that a criminal complaint for dishonor of a cheque, being a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 (the “Act”) could be led before a court within the local limits of which any of the following ve acts were committed, namely, (i) drawing of the cheque; (ii) presentment of the cheque to the bank; (iii) returning the cheque by the drawee bank; (iv) giving a notice in writing to the drawer of the cheque and thereby demanding payment of the cheque amount; and/or (v) failure of the drawer of the cheque to make payment of the cheque amount within the statutory period.

 
Bhaskaran’s decision was based on the reasoning that an offence under Section 138 could be said to arise only upon the fulllment of all the of aforestated ve acts and since Section 178 (d) of the Code of Criminal Procedure, 1973 provided that where an offence consists of several acts done in different local areas, it may be enquired into or tried by a court having jurisdiction over any such local areas. Accordingly, a complainant could choose to initiate action in any one of such courts.

 
Though in subsequent decisions, though the Supreme Court made observations which were inconsistent with the observations made in Bhaskaran’s case, it was not overruled, until the Supreme Court’s decision in Dashrath Rupsingh Rathod.

 
Reasoning In The Present Case

 
While deciding the present case, the Supreme Court placed heavy reliance on its earlier two decisions, one in Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd.3,which is a decision by a bench comprising of three judges of the Supreme Court, and the other in Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd.4, which has been decided by a two judge bench of the Supreme Court.

 
In Ishar Alloy’s case it was held that it was not enough that the presentment of the cheque by a payee to his bank was within the validity period of the cheque; the cheque has to be presented to the drawee bank within the cheque’s validity period for any offence under Section 138 to be attracted.

 
The decision in Ishar Alloy’s case categorically stated that for criminal liability to be attracted, the subject cheque had to be presented to the bank on which it is drawn within the prescribed period of limitation and Bhaskaran’s case has been signicantly differed if notoverruled. However, it is pertinent to note that the three judge bench in Ishar Alloy’s case had not considered its decision in Bhaskaran’s case while giving its decision in Ishar Alloy’s case.

 
In Harman Electronics, it was, inter alia, held that the return of the cheque by the drawee bank itself constituted the commission of an offence under Section 138 and the conditions imposed in the Proviso thereto (i.e. (i) the cheque to be presented to the bank within its validity period; (ii) a written demand to be made by the payee to the drawer of the cheque for payment within thirty days from receipt of information about dishonour; and (iii) failure of the drawer of the cheque to make payment within fteen days), are only conditions which need to be complied with by the complainant prior to the court being entitled to take cognizance of the complaint. It was held that issue of notice under Section 138 did not give rise to a cause of action, while receipt did. It was also held that allowing presentment of a cheque to determining jurisdiction of a court would amount to harassment of a drawer of the cheque.

 
On this basis, in the present case, the Court relied on Ishar Alloy to hold that if what was relevant was the presentment of the cheque to the drawee bank (and that therefore deposit of cheque with payee’s bank did not constitute an offence under Section 138), it logically followed that the location of the drawee bank (and not the payee’s bank), could only confer jurisdiction upon a court.

 
The Apex Court further held that on reading of Section 138 of the Negotiable Instruments Act, 1881 in conjunction with Section 177 of Code of Criminal Procedure, 1973 which states that “every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed”, there is no manner of doubt that the return of the cheque by the drawee bank alone constitutes the commission of the offence and indicates the place where the offence was committed.

 
The Court also observed that in view of the decision in Ishar Alloy’s case being a decision of larger bench than the bench that decided Bhaskaran’s case, the decision in Bhaskaran’s case has significantly whittled down if not overruled and in view of the decision in Harman’s case has been heavily diluted.

 
The Court claried that the place of issuance or delivery of the statutory notice or where the Complainant chooses to present the cheque for encashment by his bank are not relevant for the purpose of territorial jurisdiction of complaints.

 
Retrospective Operation And Conclusion:

 
The Supreme Court has directed that the present decision shall apply retrospectively to all cases, except those wherein trial has commenced. This seems to imply that all complaints led in courts otherwise than where the drawee bank is situated, will have to be transferred to the appropriate court, and in future, creditors will have to le complaints only in a court having jurisdiction over the place where the drawee bank is located.

 
The Supreme Court has undermined the fact that there will be lot of inconvenience and hardship to the Complainants in re-ling the cases after the papers are
returned by the courts. The Supreme Court ought to have taken into account that the whole process of return of papers and re-ling of the same will lead to more delay in disposal of cases when speedy disposal of cases has been emphasized time and again by the Supreme Court itself. The Supreme Court could have remedied the situation by declaring that this judgment
will have prospective application and the same was contemplated by the Supreme Court in Paragraph 20 of the judgment, however the Supreme Court chose not to do so, keeping in mind the hardship the accused will have to go through to conduct its defense and also the legal implications of the proceedings being permitted to continue in courts devoid of jurisdiction.

 
However, in terms of law, this decision is certainly welcome since it clearly lays down the law on the place of ling of a complaint under Section 138 of the Negotiable Instruments Act, 1881.

 

End Notes:


Judgment dated August 1, 2014 passed in Criminal Appeal No. 2287 of 2009.
2 (1999) 7 SCC 510.
(2001) 3 SCC 609
(2009) 1 SCC 720

 

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