Breaking; Union Cabinet approves the promulgation of Negotiable Instrument (Amendment) Ordinance 2015

Union Cabinet Today has approved to promulgate the Negotiable Instruments (Amendment) Ordinance 2015 which redefined the Jurisdiction Clause in the Negotiable Instrument Act.

A judicial limbo has covered courts of the nation as the Negotiable Instruments (Amendment) Ordinance, 2015, which was promulgated by the President of India on June 15 2015 at the instance of the Central Government, has lapsed on August 31 2015. It has caused a limbo in a large number of cheque bouncing (Dishonour of cheques) cases pending before various courts apart from a large number of cases that are in the process of being filed. The uncertainty is with regard to jurisdictional competency of a court to entertain a cheque dishonour case u/s 138 of the Negotiable Instruments Act, 1881.

The Ordinances were promulgated u/a 123 of the Constitution. It wits as -

 “123. Power of President to promulgate Ordinances during recess of Parliament.—(1) If at any time, except when both Houses of Parliament are in session, the President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circumstances appear to him to require.

(2) An Ordinance promulgated under this article shall have the same force and effect as an Act of Parliament, but every such Ordinance—

(a) shall be laid before both Houses of Parliament and shall cease to operate at the expiration of six weeks from the reassembly of Parliament, or, if before the expiration of that period resolutions disapproving it are passed by both Houses, upon the passing of the second of those resolutions; and

(b) may be withdrawn at any time by the President.

Explanation.—Where the Houses of Parliament are summoned to reassemble on different dates, the period of six weeks shall be reckoned from the later of those dates for the purposes of this clause.

(3) If and so far as an Ordinance under this article makes any provision which Parliament would not under this Constitution be competent to enact, it shall be void.”

Dispute Timeline

Chronologically speaking, in the case of the Negotiable Instruments (Amendment) Ordinance, 2015, it was promulgated by the President of India on June 15 2015. The Parliament reassembled on July 21 2015 for the Monsoon session. Therefore, as per Art 123, this Ordinance shall cease to operate on the expiration of a period of 6 weeks w.e.f. July 21 2015. This means that this Ordinance lapsed on August 31 2015. During the Monsoon Session, the Negotiable Instruments (Amendment) Bill, 2015, that was based on the above Ordinance, was passed by the Lok Sabha on August 6 2015. However, this Bill was not passed by the Rajya Sabha. Therefore, the said Ordinance could not be replaced by the Parliament by passing the related Amendment Bill and a subsequent legislation.

Judicial pronouncements

On August 1 2014 the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 delivered a landmark judgment on territorial jurisdiction as to dishonor of cheque cases. It was held that a cheque bouncing case can be filed only in a court which has the territorial jurisdiction over the place where the cheque is dishonoured by the bank on which it is drawn. Thus, if a cheque is drawn by a person on his bank account at Jaipur, the cheque dishonour case in respect of this cheque can be filed only in a court at Jaipur within whose territorial jurisdiction the said bank is located. Such a case cannot be filed in any other court at any other place. For example, if you are the payee of the cheque and if you present this cheque for clearing at Delhi, it cannot be filed at Delhi. Thus, the uncertainty about the place where such a case can be filed was removed. Further, as per this judgment, the payee of a cheque could not unnecessarily harass the drawer of the cheque by filing the cheque bouncing case at the place of his choice by deliberately choosing a different place for presenting the cheque or for sending the notice, etc.

Subsequently, difficulties had cropped up about Dashrath Singh. This is so because the payee of the cheque had to file the case at the place where the drawer of the cheque has a bank account. Thus, if one resides at Jaipur and has a bank account in Jaipur, and he gets a cheque from a person from his bank account in Delhi, he’ll have to go to Delhi to file the case, even though the fault for cheque dishonour may be that of the person who gave him the cheque. Moreover, Dashrath Singh was also not clear on another issue as to what would happen in the case of a cheque which is “at par payable at all branches of the bank”. Within one month of the above SC decision, a decision of the Bombay High Court in the case of Ramanbhai Mathurbhai Patel v. State of Maharashtra [in Criminal Writ Petition No. 2362 of 2014] had created the same uncertainty again in respect of multiple-city cheques payable at par in all branches of the bank. This Bombay HC decision had laid down that the payee of a multiple-city cheque, which is payable at par in all branches of the bank, can choose the place where he wants to present the cheque, and thereafter when it is sent for clearing to the nearest branch of the bank in that city, the court having jurisdiction over that clearing branch has the territorial jurisdiction of the cheque bouncing case. So, it carved out an exception to Dashrath Singh returning to the same old problem. The SLP {7251/2014} against this judgment was dismissed so it has attained finality.

The Ordinance & route diversion

However, as we have seen a plenty of times, in another attempt to overrule a judgment by the ruling establishment, the jurisdiction to file cases of cheque bouncing was changed by the Ordinance. So, after this Ordinance, a cheque dishonour case u/s 138 of the Negotiable Instruments Act, 1881, could be filed in a court at a place as per the provisions of Section 142(2) of the Act, which had been inserted by this Ordinance, and even all pending cheque bouncing cases were required to be transferred to the courts.

The legal position was completely changed with the above Ordinance. The above judgments were superseded by it.

Firstly, in the Negotiable Instruments Act, 1881, a new clause (2) was inserted in Section 142, which laid 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 was inserted which laid 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 jurisdiction of filing cheque dishonour cases under Section 138 of the N.I. Act was altered by the above Ordinance as under:

(1)   Now a cheque bouncing case could be filed only in the court at the place where the bank in which the payee has account is located.

(2)   Secondly, 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 would also have to filed in the same court

(3)   Thirdly, all cheque bounce cases which were pending as on 15 June 2015 in different courts in India, were required to be transferred to the court which had jurisdiction to try such case in the manner mentioned above, i.e., such pending cases were to be transferred to the court which had 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 would be transferred to the court where the first case has jurisdiction as per above principle.

Thus, the Ordinance introduced some uniformity in the matter of cheque dishonour cases. This Ordinance took care of the interests of the payee of the cheque while at the same time also taking care that the drawer of the multiple cheques was not harassed by filing multiple litigations at different locations to harass him.

The Report is based on an Article written by Dr.Ashok Dhamija, Advocate Supreme Court of India, which is first published here.