Breaking; Dis-honour of Cheque cases can be filed only to the Court within whose local jurisdiction, the offence was Committed; ie, where the cheque is dishonoured by the bank on which it is drawn. Bhaskaran Vs Balan (1999) which allowed Five territorial Jurisdictions overruled [Read the Judgment]

Breaking; Dis-honour of Cheque cases can be filed only to the Court within whose local jurisdiction, the offence was Committed; ie, where the cheque is dishonoured by the bank on which it is drawn. Bhaskaran Vs Balan (1999) which allowed Five territorial Jurisdictions overruled [Read the Judgment]

A three Judge Bench of the Supreme Court finally held that  a Complaint of Dis-honour of Cheque can be filed only  to  the  Court  within  whose  local jurisdiction the offence was committed, which  in  the  present  context  is where the cheque is dishonoured by the bank on which it is drawn. The Court clarified that the Complainant  is  statutorily  bound  to comply with Section 177 etc. of the CrPC and therefore the  place  or  situs where the Section 138 Complaint is to be filed is not of his choosing. The Supreme Court in Dashrath Rupsingh Rathod Vs. State of Maharashtra & Anr. Overruled the two Judge Bench Judgment in K. Bhaskaran v. Sankaran Vaidhyan  Balan  (1999)  7 SCC 510 wherein  it was held that “the offence under Section 138 of the Act 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 by the drawee bank, (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”.” if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the Act. 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 of which any one of those five acts was done.” The Court accepted the view of another two Judge Bench Judgment in Harman  Electronics  Pvt.Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1  SCC  720. “It is one thing to say that sending of a notice is one of the ingredients for maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence. For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be  proved. 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. If the ingredients for constitution of the offence laid down in the provisos (a), (b) and (c) appended to Section 138 of the Negotiable Instruments Act intended to be applied in favour of the accused, there cannot be any doubt that receipt of a notice would ultimately give rise to the cause of action for filing a complaint. As it is only on receipt of the notice the accused at his own peril may refuse to pay the amount. Clauses (b) and (c) of the proviso to Section 138 therefore must be read together. Issuance of notice would not by itself give rise to a cause of action but communication of the notice would.”.

Justice Vikramjit Sen who wrote the main Judgment held that “We  respectfully agree  with  this  statement  of  law  and  underscore  that   in   criminal jurisprudence there is  a  discernibly  demarcated  difference  between  the commission of an offence and its  cognizance  leading  to  prosecution.  The

Harman  approach  is  significant  and  sounds  a  discordant  note  to  the Bhaskaran ratio.  Harman also highlights the reality  that  Section  138  of the NI Act is being rampantly misused so  far  as  territorial  jurisdiction for trial of the Complaint is concerned.  With the passage of time  equities have therefore transferred from one end of the pendulum to  the  other.   It is now not uncommon for the Courts to encounter the issuance of a notice  in compliance with clause (b) of the proviso to Section 138 of the NI Act  from a situs which bears no connection with the Accused or with any facet of  the transaction between the parties, leave aside the place where  the  dishonour of the cheque has taken place.  This is also the  position  as  regards  the presentation of the cheque, dishonour  of  which  is  then  pleaded  as  the territorial platform of the Complaint under  Section  138  of  the  NI  Act.

Harman, in fact,  duly  heeds  the  absurd  and  stressful  situation,  fast becoming common-place where several cheques signed by the  same  drawer  are presented  for  encashment  and  requisite  notices  of  demand   are   also despatched from different places.  It appears to us that justifiably  so  at that time, the conclusion in Bhaskaran was influenced in  large  measure  by curial compassion towards the unpaid payee/holder, whereas with the  passage of two decades  the  manipulative  abuse  of  territorial  jurisdiction  has become a recurring and piquant factor.  The liberal  approach  preferred  in Bhaskaran now calls for a stricter interpretation of the statute,  precisely because of its  misemployment  so  far  as  choice  of  place  of  suing  is concerned.  These are the circumstances which have propelled us to  minutely consider the decisions rendered by two-Judge Benches of this Court.

The Court found that the two Judge Benches of the Supreme Court and various High Courts are following the above two Judgments at their discretion. It is held that “The territorial jurisdiction conundrum which, candidly is currently  in  the cauldron owing to varying if not  conflicting  ratios,  has  been  cogitated upon very recently by a two-Judge Bench in Criminal Appeal  No.808  of  2013 titled Nishant Aggarwal v. Kailash Kumar  Sharma  decided  on  1.7.2013  and again by the same Bench in Criminal Appeal No.1457 of  2013  titled  Escorts Limited v. Rama Mukherjee decided on  17.09.2013.   Bhaskaran  was  followed and Ishar Alloy and Harman were explained.

Justice T.S.Takur who wrote a separate but concurrent opinion held that “Three recent decisions need be mentioned  at  this  stage  which  have followed Bhaskaran and attempted to reconcile the ratio of  that  case  with the subsequent decisions in Ishar Alloy Steels and  Harman  Electronics.  In Nishant Aggarwal v. Kailash Kumar Sharma (2013) 10 SCC  72  this  Court  was once again dealing with a case where the complaint had been filed  in  Court at Bhiwani in Haryana within whose territorial jurisdiction the  complainant had presented the cheque for encashment, although the cheque was drawn on  a bank at Gauhati in Assam. Relying upon the  view  taken  in  Bhaskaran  this Court held that the Bhiwani Court had jurisdiction to deal with the  matter. While saying so, the  Court  tried  to  distinguish  the  three-Judge  Bench decision  in  Ishar  Alloy  Steels  (supra)  and  that  rendered  in  Harman Electronics case (supra) to hold that the ratio of those decisions  did  not dilute the principle stated in Bhaskaran case. That  exercise  was  repeated by this Court in FIL Industries Ltd. v. Imtiyaz Ahmad Bhat (2014) 2 SCC  266 and in Escorts Ltd. v. Rama Mukherjee (2014) 2 SCC 255  which  too  followed Bhaskaran and held that complaint under Section  138  Negotiable  Instrument Act could be instituted at any  one  of  the  five  places  referred  to  in Bhaskaran’s case.

We have, with utmost respect to the Judges comprising the  Bench  that heard the above cases, found it difficult to follow suit  and  subscribe  to the view stated in Bhasakaran.

Justice Thakur summarized the principles as follows

(i)   An offence under Section 138 of the Negotiable Instruments  Act,  1881is committed no sooner a cheque drawn by the accused  on  an  account  being maintained by him in a bank for  discharge  of  debt/liability  is  returned unpaid for insufficiency of funds or for the reason that the amount  exceeds the arrangement made with the bank.

(ii)  Cognizance of any such offence is however forbidden under Section  142 of the Act except upon a complaint in writing made by the  payee  or  holder of the cheque in due course within a period of one month from the  date  the cause of action accrues to such payee or holder under clause (c) of  proviso to Section 138.

(iii)  The  cause  of  action   to   file   a   complaint   accrues   to   a complainant/payee/holder of a cheque in due course if

(a)   the dishonoured cheque is  presented  to  the  drawee  bank  within  a period of six months from the date of its issue.

(b) If the complainant has demanded payment of cheque amount  within  thirty days of receipt of information by him from the bank regarding the  dishonour of the cheque and

(c)   If the drawer has failed to pay the cheque amount within fifteen  days of receipt of such notice.

(iv)   The  facts  constituting  cause  of  action  do  not  constitute  the ingredients of the offence under Section 138 of the Act.

(v)   The proviso to Section  138  simply  postpones/defers  institution  of criminal proceedings and taking of cognizance by the Court  till  such  time cause  of  action  in  terms  of  clause  (c)  of  proviso  accrues  to  the complainant.

(vi)  Once the cause of action accrues to the complainant, the  jurisdiction of the Court to try the case will be determined by reference  to  the  place where the cheque is dishonoured.

(vii)  The general rule stipulated under Section 177 of  Cr.P.C  applies  to cases under Section 138 of the Negotiable Instruments Act.   Prosecution  in such cases can, therefore, be launched against  the  drawer  of  the  cheque only before the Court within whose jurisdiction the  dishonour  takes  place except  in  situations  where  the  offence  of  dishonour  of  the   cheque punishable under Section 138 is committed along with  other  offences  in  a single transaction within the meaning of Section 220(1)  read  with  Section 184 of the Code of Criminal Procedure or is covered  by  the  provisions  of Section 182(1) read with Sections 184 and 220 thereof.