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India – Supreme Court On Territorial Jurisdiction For Cheque Bouncing Cases.

26 August, 2014

 

Legal News & Analysis – Asia Pacific – India – Banking & Finance

 

Dashrath Rupsingh Rathod v. State of Maharashtra & Anr., Supreme Court, decided on 01.08.2014

 
Bench: T.S. Thakur, Vikramjit Sen, C. Nagappan

 
A Three Judge Bench of the Hon’ble Supreme Court of India recently considered an interesting issue regarding the territorial jurisdiction of Courts to entertain complaints under Section 138 of the Negotiable Instruments Act, 1981. In the much talked about judgment of Dashrath Rupsingh Rathod v. State of Maharashtra & Anr. passed on 01.08.2014, the Hon’ble Supreme Court has overruled the judgment of K. Bhaskaran v. Sankaran Vaidhyan Balan (1999)7SCC510 (Bhaskaran).

 
The cannons set out in the Bhaskaran judgment were, that, “the offence under Section 138 can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence:

 
1. Drawing of the cheque,
2. Presentation of the cheque to the Bank
3. Returning the cheque unpaid
4. Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount
5. Failure of the drawer to make payment within 15 days of the receipt of the notice.”

 
As Bhaskaran considered all the above ingredients to be components of the offence under section 138, the provisions of Section 177-178 of the Criminal Procedure Code, lead to the conclusion, that wherever the offence was committed, the complaint could be filed. Thus the local court within whose jurisdiction, any of the above acts were committed, would have jurisdiction. Therefore, the judgment had the effect of laying down that even the act of the Complainant in issuing the notice would confer jurisdiction on the court within whose jurisdiction the notice was issued.

 
The Hon’ble Supreme Court, however, taking cue from the judgment in Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1SCC720 (Harman), held that the law in Bhaskaran was not good law. In Harman, the Hon’ble Supreme Court had dealt with the issue of whether sending of notice from Delhi itself would give rise to a cause of action in Delhi. Harman has interpreted the terms “giving of notice” to mean, the act of receipt of the notice. On that basis it had laid down, that a Complainant cannot confer jurisdiction by his own unilateral act, such as issuance of the legal notice. If that interpretation was to be accepted, then on the basis of the same cheque, a complaint could be lodged in various jurisdictions simultaneously and would act as harassment to the accused. Therefore such an interpretation was rejected by Harman. Harman had further laid down that, “What would constitute an offence is stated in the main provision. The proviso appended thereto,however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken.

 
Taking forward the law as touched upon by Harman, the Hon’ble Supreme Court held that the provisio to section 138 did not constitute the offence, but were merely pre-conditions to taking cognizance of the offence. It was held that in criminal jurisprudence there is a discernibly demarcated difference between commission of an offence and its cognizance leading to prosecution. Thus, the components mentioned in the provisio could not be used to confer jurisdiction upon the court.

 
The Hon’ble Supreme Court further held that the only thing which was to be considered to confer jurisdiction was, where the offence was committed, and in the case of Section 138, the offence was committed where the cheque was bounced. Therefore a complaint under Section 138 could be lodged only in the court, within whose jurisdiction, the drawee bank bouncing the cheque was located.

 
Another issue which was considered was whether the place of inducement can be considered to be an ingredient for conferring jurisdiction. This was considered by the Court possibly because in a large majority of cases, the place where the accused induces the Complainant into relying upon the cheque and the place of handing over the cheque were being utilized to confer jurisdiction. In this respect the Hon’ble Court observed if an offence punishable under Section 138 of the Act is committed as a part of single transaction with other offences such as cheating and dishonestly inducing delivery of property, then such offence may be tried either at the place where the inducement took place or where the cheque forming part of the same transaction was dishonored or at the place where the property which the person cheated was dishonestly induced to deliver or at the place where the accused received such property. To that extent provisions of Chapter XIII of the Criminal Procedure Code would bear relevance.

 
As regards the effect of the case, the Hon’ble Court observed that the judgment was to apply retrospectively. However, all cases which had proceeded beyond the stage of examination in section 145(2) or were at that stage were to continue where they were lying and the cases would be deemed to have been transferred. However all remaining cases would be returned to the Complainant to be filed within the appropriate Courts and as long as the Complaints were filed within thirty days of the return, they would be deemed to be within time prescribed by law, unless initial or prior filing was itself time barred.

 

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For further information, please contact:

 

Shambhu Sharan, Partner, Rajani Singhania & Partners

shambhu.sharan@rsplaw.in

 
Banking & Finance Law Firms in India

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