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138: Jurisdiction issue once again

By February 3, 2016 December 20th, 2019 No Comments
Section
138 of
the
Negotiable Instruments Act, 1881(hereinafter “Act”), deals with the dishonor
of cheque. The Negotiable Instruments (Amendment and Miscellaneous Provisions)
Act, 2002, inter alia, amended sections 138, 141 and 142 and inserted new
sections 143 to 147 in the said Act to facilitate speedy disposal of cases
relating to dishonor of a cheque through its summary trial as well as making
them compoundable. The Act had not been very clear about the jurisdiction of
the cases related to dishonor of a cheque. The present case sets out a bench
mark with respect to the jurisdiction of the courts in such cases.
Brief
Facts
1.      A
cheque No. 1950, drawn on the Union Bank of India, Chandigarh, was issued
by Inderpal Singh (hereinafter “Respondent”)
to M/s. Bridgestone India Pvt. Ltd. (hereinafter
“Appellant”) The cheque was in the sum of Rs. 26,958. The Appellant – presented the above cheque at the IDBI Bank in Indore. The
Appellant received intimation of its being dishonored on 04.08.2006 at Indore.
2.      The
Appellant issued a legal notice on 26.08.2006, which was served on the
Respondent
on 06.09.2006, demanding the amount
depicted in the cheque. The Appellant informed the Respondent, that he would be
compelled to initiate proceedings u/s
138 of
the Act, if payment was not made by the Respondent within 15 days from the date
of receipt of the legal notice.
3.     
Consequent upon the
issuance of the aforementioned legal notice wherein the Respondent was required
to reimburse the cheque amount to the Appellant, and the Respondent having
failed to discharge his obligation, proceedings were initiated by the Appellant
on 13.10.2006 in the Court of the Judicial Magistrate, First Class, Indore, u/s
138 of
the Act.
4.     
The Respondent,
preferred an application before the Judicial Magistrate, First Class, Indore,
Madhya Pradesh, u/s
177 of
the Code of Criminal Procedure 1973 (hereinafter “Code”), contesting the territorial jurisdiction with respect to the
above cheque drawn on the Union Bank of India, Chandigarh. The prayer made by
the Respondent, that the Judicial Magistrate, First Class, Indore, did not have
the jurisdiction to entertain the proceedings initiated by the Appellant was declined on 02.06.2009. The Judicial Magistrate, First Class,
Indore, relied on the judgment rendered by this Court in K. Bhaskaran v.
Sankaran Vaidhyan Balan and Anr[1], to record a finding in favour
of the Appellant. Dissatisfied with the order passed by the Judicial
Magistrate, First Class, Indore, dated 02.06.2009, the Respondent
preferred
a petition u/s
482 of
the Code, in the High Court of Madhya Pradesh before its Indore Bench.
5.      Having
examined the controversy in hand the High Court, by an order dated 03.12.2009,
the petition filed by the Respondent was disposed of, by remitting the case to
the Judicial Magistrate, First Class, Indore, requiring him to pass a fresh
order after taking into consideration the additional documents relied upon, and
the judgments cited before the High Court.
6.     
The Judicial
Magistrate, First Class, Indore, yet again, by an order dated 11.01.2010 held,
that he had the territorial jurisdiction to adjudicate upon the controversy raised by the Appellant u/s
138 the Act. The decision
rendered by the Judicial Magistrate, First Class, Indore, was again assailed by
the Respondent in yet another petition filed by him u/s
482 of the Code in the High
Court of Madhya Pradesh before its Indore Bench. The High Court accepted the
prayer made by the Respondent
by holding,
that the jurisdiction lay only before the Court wherein the original drawee
bank was located, namely, at Chandigarh, where-from the Respondent had issued
the concerned cheque.
Issue
for Consideration

1.      Whether
the Judicial Magistrate, First Class, Indore had jurisdiction to adjudge a
complaint u/s 138 of the Act?
Decision of the Court

1.      A perusal of the amended Section 142(2)
by way of the Negotiable Instruments
(Amendment)Second Ordinance, 2015 (hereinafter referred to as ‘the Ordinance’),leaves no room for any
doubt, especially in view of the explanation there under, that with reference
to an offence u/s
138 of the Act, the place where a cheque is delivered for
collection i.e. the branch of the bank of the payee or holder in due course,
where the drawee maintains an account, would be determinative of the place of
territorial jurisdiction.
2.     
We are
satisfied, that Section 
142(2)(a), amended through Ordinance, vests jurisdiction for
initiating proceedings for the offence u/s
138 of the Act, inter
alia
 in the territorial
jurisdiction of the Court, where the cheque is delivered for collection
(through an account of the branch of the bank where the payee or holder in due
course maintains an account). We are also satisfied, based on Section 
142A(1) to the effect, that the judgment rendered by this
Court in Dashrath Rupsingh Rathod’s case, would not stand in the way of the
Appellant, insofar as the territorial jurisdiction for initiating proceedings
emerging from the dishonor of the cheque in the present case arises.
Critique:
The
legislative reforms have always aimed at encouraging the usage of cheque and
enhancing the credibility of the instrument so that the normal business
transactions and settlement of liabilities could be ensured. The judgment
accepted the explanation that  after the
Negotiable Instruments (Amendment) Second Ordinance, 2015, “the place where a
cheque is delivered for collection, i.e. the branch of the bank of the payee or
holder…where the drawee maintains an account, would be determinative of the
place of territorial jurisdiction.” It also noted that on the issue of
jurisdiction, Section 142A of the Negotiable Instruments Act, 1881 would take
precedence over the Code of Criminal Procedure.
This decision
succeeded in breaking the judicial limbo caused so far, when the Supreme Court,
held that the Ordinance will have a retrospective effect and any complaint
under Section 138 of the Act will be filed in the place where the cheque is
delivered for collection i.e., the branch of the bank of the payee, or holder
in due course, or where the drawee maintains an account. It distinguished
the judgment rendered in Dashrath’s case, to have no effect in view
of the Ordinance.

In addition to the
aforesaid judgment of the Supreme Court, the Negotiable Instrument (Amendment)
Bill 2015 (“Amendment”) came to be passed by both the Houses of the Parliament
on 07.12.2015, which further clarified that cheque bounce cases were to be
filed in the courts which had jurisdiction over places where the cheque was
presented for clearance or payment, and not the place of issue. And if a
complaint against a person issuing a cheque had been filed in the court with
the appropriate jurisdiction, then all subsequent complaints against that
person would be filed in the same court, irrespective of the relevant
jurisdiction area. The said amendments to the Negotiable Instruments Act will
have far-reaching implications for over 18 lakh cheque bounce cases across the
country, of which about 38,000 are pending in High Courts.

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