Background and Facts of the case:
Let's revisit an important judgment that had arisen out of 8 Special Leave Petitions filed before the Supreme Court of India, with respect to dishonour of cheques in an area falling under jurisdictions of various courts, however issued to the drawee/complainant at some other place. The facts of these appeals remain substantially the same as to the issue of jurisdiction.
This case involved a substantial question of law, which could pose difficulty for future litigants. It was referred to the then, Chief Justice of India, after a proposed draft order. The draft order had analysed the precedents leading to the case by referring to several judgments and the comparison of their positions, whether advantageous or perverse.
Issue:
The question of jurisdiction of courts for an offence falling under the ambit of Section 138 of The NI Act, codifying the requirements of the offence constituting cheques’ dishonour. The court had in front of it, the components of Section 138 of the NI Act, 1881, pronouncing the essentials of the offence, to be investigated upon. The court further analysed the nexus amongst the ingredients of the section. The issue before the courts was to create a settlement between the various precedents based on similar circumstances and dubieties. The analysis of precedents on the issue of jurisdiction led to the discovery of evident lacunae amongst them.
Rule:
The case of K. Bhaskaran v. Sankaran Vaidhyan Balan, formed the crux of the precedents that operated in this regard, it was noted that the judgment held Section 138 of the Negotiable Instruments Act, 1881 to be a judicial mix of certain events that could lead up to the offence as suggested by the provision. The occurrences under Section 138 of The NI Act, 1881, as per the judgment of the said precedent consisted of several components which together led to the
- Drawing of the cheque
- Presentation of the cheque to the bank
- Return of the cheque unpaid by the drawee bank
- Presentation of notice in writing to the drawer of the cheque demanding payment of the mentioned amount
- Failure of the drawer to make payment within 15 days of the receipt of the notice.
It is stated that the offence under Section 138 of the NI Act, 1881 is completed upon satisfaction of the above stated array of events. The judgment in the Bhaskaran case allowed for complaints to be filed at any place other than where the drawee’s bank is situated.
Analysis:
The precedents in this regard demand a novel interpretation since the ratio in the Bhaskaran case was set in favour of the complainant and afforded major complications and unjustified hardships to the accused, as in the complaint. Hence, the need for a new or consolidated view of the precedents to be stipulated was felt essential in order to decide the present case. While deciding so, precedential reliance was placed on the following two cases:
- Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. wherein 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, however, the cheque has to be presented to the drawee bank within the cheque’s validity period for any offence under Section 138 of The NI Act, 1881 to be attracted.
- Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd., wherein it was held that the return of the cheque by the drawee bank itself constituted the commission of an offence under Section 138 of The NI Act, 1881. It was also 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.
With that, the holding from Ishar Alloy case was relied upon to check the relevance of the presentment of the cheque to the drawee bank and whether the deposit of cheque with payee’s bank constituted an offence under Section 138 of The NI Act, 1881 or not. The stipulation led to the conclusion that situation or location of the drawee bank and not the payee’s bank would lead to conferring the jurisdiction upon a competent court.
Conclusion:
The court finally held that the place of issuance or delivery of the statutory notice to present the cheque for encashment by his bank are not relevant for ascertaining the territorial jurisdiction of the allegations or complaints. The Supreme Court has directed that the present decision shall apply retrospectively to all the related cases excluding those whose trials have commenced. This seems to imply that all complaints led by the courts otherwise than where the drawee bank is situated will have to be mandatorily transferred to the appropriate or competent court and the same shall apply in the future wherein creditors will have to file complaints only in a court having the requisite jurisdiction over the fact of the situation of the drawee bank.
Case Name and Citation: Dashrath Rupsingh Rathod v. State of Maharashtra & Anr. [1 August 2014]
Jurisdiction: Criminal Appellate Jurisdiction
Appeal No.: 2287 of 2009
Bench: Justice T.S. Thakur, Justice Justice Vikramajit Sen, Justice C. Nagappan
Author of the Judgment: Justice T.S. Thakur
Appellant: Dashrath Rupsingh Rathod
Respondents: State of Maharashtra & Anr.
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