Background of the Case
In the case of K. Bhaskaran v. Sankaran Vaidhyan Balan, the Supreme Court in a
division bench had held that an offence under Section 138 (a penal provision dealing
with cases of cheque bouncing) can be completed
only with the occurrence of all the 5 following
elements: (a) Drawing of the
cheque, (2) then presentation of the cheque to the bank, (3) thereafter return of
the cheque as unpaid by the drawee bank, (4) consequently giving of a notice in
writing to the drawer of the cheque demanding payment of the cheque amount, and
finally (5) failure of the drawer to make payment within 15 days of the receipt
of the notice.
Now, the consequence of the decision was that
the holder of the cheques (i.e., the person to whom the cheque is issued or
person entitled to be paid) after getting the cheque dishonoured would initiate
litigation at any place suitable to his/her own convenience [sometimes to even cause
harassment to the accused], not necessarily a place convenient to the accused.
Since, there were 5 ingredients of the offence as per Bhaskaran, therefore, the case can be instituted in the
territoriality of any Court at whose place any of the ingredients occurred or one
of the “cause of action” arose.
I. Precedents Involved
The precedents cited that are overruled, clarified
or upheld:
(a) K.
Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 [Division Bench]
(b) Harman
Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1 SCC 720 [Division
Bench]
(c) Shri
Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609 [Full Bench]
(d) Prem
Chand Vijay Kumar v. Yashpal Singh (2005) 4 SCC 417 [Division Bench]
(e) SIL
Import, USA v. Exim Aides Silk Exporters (1999) 4 SCC 567 [Division Bench]
(f) Mosaraf
Hossain Khan v. Bhagheeratha Engg. Ltd. (2006) 3 SCC 658 [Division Bench]
(g) Nishant
Aggarwal v. Kailash Kumar Sharma decided on 1.7.2013 Criminal Appeal No. 808 of
2013 [Division Bench]
(h) Escorts
Limited v. Rama Mukherjee decided on 17.09.2013 Criminal Appeal No. 1457 of
2013 [Division Bench]
II. Relevant Provisions
Ø
Negotiable Instruments Act 1882
§ Section
138. Dishonour of cheque for insufficiency, etc., of funds in the
account.- Where any cheque drawn by a
person on an account maintained by him with a banker for payment of any amount
of money to another person from out of that account for the discharge, in whole
or in part, of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank, such person shall
be deemed to have committed an offence and shall, without prejudice to any
other provisions of this Act, be punished with imprisonment for a term which
may be extended to two years, or with fine which may extend to twice the amount
of the cheque, or with both:
Provided that nothing
contained in this section shall apply unless-
(a) the cheque has been
presented to the bank within a period of six months from the date on which it
is drawn or within the period of its validity, whichever is earlier.
(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer
of the cheque, within thirty days of the receipt of information by him from the
bank regarding the return of the cheque
as unpaid; and
(c) the drawer of such
cheque fails to make the payment of the said amount of money to the payee
or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the
said notice.
Explanation. For the purposes of this section, "debt or other
liability" means a legally enforceable debt or other liability.
§ Section 142. Cognizance
of offences- Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974) -
(a) no court shall take
cognizance of any offence punishable Under Section 138 except upon a complaint, in writing, made by the payee
or, as the case may be, the holder in due course of the cheque;
(b) Such complaint is made within
one month of the date on which the cause of action arises Under Clause (c)
of the proviso to Section 138; Provided that the cognizance of a complaint may
be taken by the Court after the prescribed period, if the complainant satisfies
the Court that he had sufficient cause for not making a complaint within such
period.
(c) No court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any offence punishable Under Section
138.
Ø
Code of Criminal Procedure, 1973
§ Section 177.
Ordinary place of inquiry and trial.- Every offence shall ordinarily
be inquired into and tried by a Court
within whose local jurisdiction it was committed.
§ Section 178. Place
of inquiry or trial. -(a) When it is
uncertain in which of several local areas an offence was committed, or (b)
where an offence is committed partly in one local area and partly in another,
or (c) where an offence is a continuing one, and continues to be committed in
more local areas than one, or (d) where it consists of several acts done in
different local areas, it may be inquired into or tried by a Court having
jurisdiction over any of such local areas.
§ Section 179.
Offence triable where act is done or consequence ensues.-When an act is an offence by reason of anything which has been
done and of a consequence which has ensued, the offence may be inquired into or
tried by a Court within whose local jurisdiction such thing has been done or
such consequence has ensued.
III.
Issues
1. Whether
the offence u/s 138 NI Act is complete when the cheque is dishonoured or when the drawer fails to
make the payment even after receipt of notice informing about the return of the
cheque by drawee unpaid. In other words, whether the offence is complete when
the main text of provision of Section 138 NI Act is satisfied, or when the Provisos to the Section 138 of the NI
Act are fulfilled.
2. Whether
for the purposes of Court’s jurisdiction, Section 177 CrPC or civil proceedings
“cause of action” operates.
3. Whether
the jurisdiction is of the Court in whose territoriality the bank on whom the
cheque is drawn is situated or jurisdiction is on all those Courts in whose
territoriality incidents of (a) drawing of the cheque, (b) Presentation of the
cheque to the bank, (c) Returning the cheque unpaid by the drawee bank, (d)
Giving notice in writing to the drawer of the cheque demanding payment of the cheque
amount, (e) Failure of the drawer to make payment within 15 days of the receipt
of the notice, may have occurred.
4. On
the scope of allegations of commission of offences under the Indian Penal Code
and the jurisdiction of which Court thereof.
IV. Judgment on the Issues
Vikramkjit and Thakur, JJ. though wrote separate
opinions, concurred on their conclusions.
On Issue 1
The Court speaking through the twin
opinions of Vikramjit and Thakur, JJ. held that the Bhaskaran judgment had wrongly read the proviso to Section
138 NI Act’s main text, as prescribing the ingredients of the offence. In the Court’s
opinion, the proviso instead should be treated as an exception to the generality of the enacting part
by stipulating further conditions
before a competent Court may take cognizance of the same.[2]
The Court opined that the legislature has made
a clear distinction between what would
constitute an offence and what
would give to the complainant the cause of action to file a complaint for the
court competent to take cognizance. Therefore, though an offence within the contemplation of
Section 138 is complete with the dishonour of the cheque,[3] 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 read with
Section 142.
On Issue 2
The Court while noting that Section 138 NI
Act is a penal provision, stated that Sections 177 and 178 of the CrPC are the
guiding provisions to be followed, which require that the Court in whose
territory the offence is committed, to be the Court of jurisdiction. The usage
of phrase “cause of action” in Section 142 NI Act, in the Court’s opinion, has irrelevantly
led to the blind borrowing of civil law attributes in Criminal proceedings. In the
Court’s opinion, the reason why Section 142 uses the phrase “cause of action” is
because the proviso to Section 138 of the NI Act features three factors which
are additionally required for prosecution to be successful as compliance with
the three factors contained in the proviso are essential for the cognizance of
the offence, even though they are not part of the action constituting the crime.
In my opinion, the Court rightly notes that
the CrPC under Sections 177 and 178 mandates that the place where the offence is committed is the place relevant for
conducting criminal prosecution. Therefore, the concept of “cause of
action” where the bundle of facts required to be proved in a suit and
accordingly also being relevant for the place of suing, is not pertinent/germane
for determining the territorial jurisdiction of criminal Trials.
On Issue 3
Since, as the Court has already held that the
offence under Section 138 NI is committed when the cheque is dishonoured, therefore,
the Criminal
Prosecution logically is the place where the cheque is dishonoured
as per Section 177 CrPC. Thakur, J. rightly pointed out that the confusion as
to the place of commission of the offence for the purposes of Sections 177 to
179 of the CrPC is meaningless, since once
it is held that the conditions precedent for taking cognizance are not the
ingredients constituting the offence of dishonour of the cheque, there
is no room for any such confusion or vagueness about the place where the
offence is committed, i.e., the place where the cheque is dishonoured.[4]
On Issue 4
The Court envisaged the possibility of
cases where the offence under Section 138 NI Act is out of the offences [like the
offence of cheating and dishonestly inducing the delivery of the property] committed
in a single transaction within
the meaning of Section 220(1) CrPC[5]. In such cases, the offender
may be charged with and tried at one trial for
every such offence and any such inquiry or trial may be conducted by
any Court competent to enquire into or try any of the offences as provided by Section 184[6]
CrPC.
V.
Conclusion
The Court concluded that the offence under
Section 138 NI Act is completed as soon as the cheque is dishonoured, while the
prosecution is delayed till the satisfaction of the conditions mentioned in the
proviso to Section 138 NI Act are fulfilled. Therefore, in light of Section 177
CrPC, the place, situs or venue of judicial inquiry and trial of the offence
must logically be restricted to where the drawee bank is located, since it is
the place where the offence under Section 138 NI Act is committed.
[2] Present Case, ¶¶ 16, 51.
[4] Present judgment, ¶¶ 19, 52.
[5] Section 220 (1) CrPC- Trial
for more than one offence- If, in one
series of acts so connected together as to form the same transaction, more offences than one are committed by
the same person, he may be charged with, and tried at one trial for, every such offence.
[6] Relevant part of Section
184 CrPC- “where the offences committed by any person are such that he may be
charged with, and tried at one trial for, each such offence by virtue of
Section 220… [then] the offences may be
inquired into or tried by any Court competent to inquire into or try any of the offences.”
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