Monday, November 17, 2014

Dashrath Rupsingh Rathod Vs. State of Maharashtra & Anr. (Territorial jurisdiction of Court in cases of section 138 of the Negotiable Instruments Act)



In the above noted matter tagged with eight other criminal appeals, a three judge bench of hon’ble Supreme Court of India headed by Mr. T. S. Thakur J. looked into the legal nodus of substantial public importance pertaining to Court’s territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881.

After hearing the counsels and going through the provisions of the Negotiable Instruments Act and number of precedents, said hon’ble bench of Supreme Court opined that section 138 of the Act in question is in two parts. The enacting part of it, clarifies as to what constitutes an offence punishable with imprisonment and/or fine is the dishonor of a cheque for insufficiency of funds etc. in the account maintained by the drawer with a bank, which was issued for discharge of a debt or other liability whether in full or part. Thereby said enacting part constitutes of three elements as follows:

  1. Cheque is drawn by the accused on an account maintained by him with a banker. 
  2. The cheque amount is in discharge of a debt or liability. AND
  3. The cheque is returned unpaid for insufficiency of funds or that the amount exceeds the arrangement made with the bank.
Whereas the other part of section is the proviso, which draws an exception to the generality of the enacting part of the provision, by stipulating two steps that ought to be taken by the complainant holder of the cheque before the failure of the drawer gives to the former the cause of action to file a complaint and the competent Court to take cognizance of the offence. These two steps, which only postpones the actual prosecution of the offender till prescribed statutory period is as follows:
  1. The complainant has demanded the payment of the cheque amount from the drawer by issuing a written notice within thirty days of receipt of information by him from the bank regarding the dishonor.  AND
  2.  The drawer has failed to pay the cheque amount within fifteen days of the receipt of the notice.
Thus those two steps stipulated in the proviso to section 138 are distinct from the ingredients of the offence which the enacting provision creates and makes punishable. Under this kind of interpretation, offence under section 138 is complete with the dishonor of the cheque but taking cognizance of the same by any Court is forbidden so long as the complainant does not have the cause of action to file a complaint in terms of clause (c) of the proviso to section 138 read with Section 142 of the Negotiable Instruments Act.

The overall scheme of legislature by stipulating such law seems to have granted a concession and prescribe a way out under which dishonor need not necessarily lead to penal consequence if the drawer makes amends by making payment within the time stipulated once the dishonor is notified to him. Payment of the cheque amount within the stipulated period will in such cases diffuse the element of criminality that Section 138 attributes to dishonor by way of a legal fiction implicit in the use of the words “shall be deemed to have committed an offence”. The drawer would by such payment stand absolved by the penal consequences of dishonor.

The hon’ble bench of the apex court, hence, respectfully concured with K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 so far as concatenation of concomitants, constituents or ingredients of Section 138 Negotiable Intruments Act is essential for the successful initiation or launch of the prosecution is concerned. But so far as commission of the offence itself is concerned the proviso has no role to play. Accordingly a reading of Section 138 of the Negotiable Act in conjunction with Section 177 of Cr.P.C. leaves no manner of doubt that the return of the cheque by the drawee bank alone constitutes the commission of the offence and indicates the place where the offence is committed.

In the detailed and critical analysis of their lordships which ran as many as 87 pages, they hold that the place, situs or venue of judicial inquiry and trial of the offence under section 138 of the Negotiable Instruments Act must logically be restricted to where the drawee bank, is located.

Consequent on considerable consideration, Supreme Court thought it expedient to direct that only those cases where, post summoning and appearance of the alleged Accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Negotiable Instruments Act, 1881, the proceedings will continue at that place the same is going on. They have also clarified that regardless of whether evidence has been led before the Magistrate at the pre-summoning stage, either by affidavit or by oral statement, the Complaint will be maintainable only at the place where the cheque stands dishonoured. To obviate and eradicate any legal complications, the category of Complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by Supreme Court from the Court ordinarily possessing territorial jurisdiction to the Court where it is presently pending. All other Complaints (obviously including those where the accused/respondent has not been properly served) shall be returned to the Complainant for filing in the proper Court, in consonance with our exposition of the law. Such Complaints may be filed/ refiled within thirty days of their return to be deemed to have been filed within the time prescribed by law, unless the initial or prior filing was itself time barred.

Those willing to read detailed judgement may follow following link:

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