SUPREME COURT HOLDS THAT CHEQUE DISHONOUR PROSECUTION CAN BE HELD ONLY AT THE COURT IN WHOSE JURISDICTION THE CHEQUE WAS ISSUED

A three judge bench of the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra (criminal Appeal No. 2287 of 2009) has laid the controversy pertaining to jurisdiction of the courts in cheque bouncing cases under Section 138 at rest conclusively.

The court has laid down that the place of the issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of the complaints. The court noted that the liberal approach preferred in Bhaskaran was being misused by issuance of notice from a situs which had no connection with the accused or with any facet of the transaction to confer territorial jurisdiction on courts which had none.

The court upheld the validity of the three judge bench in Ishar alloy steels v Jayaswals Neco 2001 3 SCC 609 which stated that the word ‘bank’ used in Section 138 (a) refers to the drawee bank and not the drawer/collecting bank. The Supreme Court relied on Ishar Alloy which had categorically stated that for criminal liability to be attracted the subject cheque has to be presented to the bank on which it is drawn (drawee bank) within the prescribed period. (para 5)

The court also noted that the verdict in Bhaskaran diluted by Harman Electronics v National Panasonic India 2009 1 SCC 720 as the latter judgment has given primacy to the service of a notice on the accused instead of its mere issuance by the complainant.

6. The Supreme Court also relied upon Premchand Vijay Kumar v Yashpal Singh 2005 4 SCC 417 to hold that the commission of the crime was distinguished from its prosecution. The court stated that the offence comes into existence as soon as subject cheque is dishonoured by the drawee bank. (para 6)

The court then held that "We ingeminate that it is the drawee bank and not the complainants bank which is postulated in the so called second constituent of Section 138 of the NI Act… 

In our consider view the offence in the contemplation of Section 138 of the Ni Act is the dishonour of the cheque alone and it is the concatenation of the five concomitants of that Section that enable the prosecution of the offence in contradistinction to the completion of the offence." (para 8)

The Court overruled Shamshad Begum v B Mohammed 2008 13 SCC 77 as being not reconcilable with the later decision in Harman and held Mosaraf Hossain Khan v Bhageeratha Engg 2006 3 SCC 658 per incuriam on the ground that the doctrine of Forum non conveniens has no role to play under Section 138 of the NI Act. 

The Court relied upon Om Hemrajani v State of UP 2005 1 SCC 617 to support its conclusion that jurisdiction is on the place where the alleged offence was committed.

Nishant Aggarwal v Kailash Kumar Sharam decided on 1.7.2013 did not follow Ishar Alloy which said presentation of the cheque refers to the drawee bank and not holders banks and therefore, even implicity doubted the validity of this decision as well.

It is axiomatic that when a court interprets any statutory provision, its opinion must apply to and be determinate in all factual and legal permutations and situations.

The court further noted that the judgment in Bhaskaran was diluted by FIL Industries v Imtiyax Ahmed Bhat wherein it was decided that the place from where the statutory notice had emanated would not of its own have the consequence of vesting jurisdiction upon that place.

At paragraph 11, the court observed that Bhaskaran allows multiple venues to the complainant which runs counter to this court’s preference for simplifying the law.

Relying on Section 178 of the Criminal Procedure Code, the court stated that the said section admits of no debate that in criminal prosecution, the concept of cause of action, being the bundle of facts required to be proved in a suit and accordingly also being relevant for the place of suing, is not pertinent or germane for determining territorial jurisdiction of criminal trials. The employment of the phrase ‘cause of action’ in Section 142 of the NI Act is apposite for taking cognizance, but inappropriate and irrelevant for determining the commission of a crime, the prosecution of which is dependent on extraneous contingencies.

The court then drew an analogy with the situation wherein sanction is required for the prosecution of a crime and said that even if the sanction is not granted, it does not mean that the offence has vanished. Equally, if the sanction is granted from a place other than the place of commission of the offence, it is the latter which will remain the place for its prosecution.

At paragraph 15, the court held that Section 138 unequivocally states that the offence is committed no sooner the drawee banks returns the cheque unpaid and observed (at para 16) that Section 142 correctly employs the term cause of action as compliance with the three factors contained in the proviso to Section 138 are essential for the cognizance of the offence, even though they are not part of the action constituting the crime.The Court held that the five constituents in bhaskaran are essential for the successful initiation or launch of the prosecution though so far as offence itself, the proviso has no role to play.

The court said that an interpretation should not be imparted to section 138 which would render it as a device for harassment ie, by sending notices from aplace which has no causal connection with the transaction itself, and by presenting the cheques at any of the banks where the payee may have an account. (para 17).

The Court finally held (at para 19) that "the interpretation of section 138 of the NI Act which commends itself to us is that the offence contemplated therein stands committed on the dishonour of the cheque and accordingly the JMFC at the place where this occurs is ordinarily where the complaint must be filed, entertained and tried. We clarify that the place of the issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of the complaints even through non-compliance thereof will inexorably lead to the dismissal of the complaint".

As regards the operation of the judgment and its applicability, the Supreme Court held as follows:

"20. we are quite alive to the magnitude of the impact that the present decision shall have to possibly lakhs of cases pending in various courts spanning across the country. Consequent on considerable consideration we think it expedient to direct that only those cases where post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in Section 145(2) of the NI Act, 1881 will proceeding continue at that place. 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 us from the court ordinarily possessing jurisdiction, as now clarified, to the court where it is presently pending."