Amendment to NI Act regarding place of filing cheque bounce compliant has retro-effect

The amendments made to the Negotiable Instruments Act, 1882 by the Second Ordinance of 2015, as regards territorial jurisdiction for filing cheque bounce complaints, retrospectively apply to pending cases filed before the Ordinance came into force. The words "….as if that sub-section has been in force at all material times…."used wrt new section 142(2) in new section 142A(1) gives retrospective effect to new section 142(2)

Facts:

a)   A cheuqe was drawn on the Union Bank of India, Chandigarh by the respondent to the appellant - M/s Bridgestone India Pvt.Ltd. The appellant presented the said cheque at IDBI Bank in Indore for realization, the same was dishonoured on account of insufficient funds.

b)   On failing to discharge obligation by respondent, the appellant initiated proceeding in the Court of the Judicial Magistrate, First Class, Indore (‘Magistrate’) under Section 138 of the Negotiable Instruments Act, 1881

c)   The Magistrate by an order held that he had the territorial jurisdiction to adjudicate upon the controversy raised by the appellant under Section 138 of the Negotiable Instruments Act, 1881. The decision rendered by the Judicial Magistrate, First Class, Indore, was assailed by the accused-respondent in another petition under Section 482 of the Criminal Procedure Code, in the High Court of Madhya Pradesh before its Indore Bench

d)   The High Court accepted the prayer made by the accused-respondent - Inderpal Singh by holding, that the jurisdiction lay only before the Court wherein the original drawee bank was

located, namely, at Chandigarh, where-from the accused-respondent had issued the concerned cheque, drawn on the Union Bank of India, Chandigarh.

e) Dissatisfied with the order passed by the High Court, the appellant has approached Supreme Court. The appellant cited the decision rendered by a three-Judge Bench of this Court in Dashrath Rupsingh Rathod v. State of Maharashtra and another, (2014) 9 SCC 129

The Supreme Court held as under:

1)  In view of the decision rendered by this Court in Dashrath Rupsingh Rathod's case, it was apparent, that the impugned order passed by the High Court of Madhya Pradesh, Bench at Indore, was wholly justified. Howeve, Section 142(2)(a), amended through the Negotiable Instruments (Amendment) Second Ordinance, 2015, vests jurisdiction for initiating proceedings for the offence under Section 138 of the Negotiable Instruments 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).

2)   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.

3)   Since cheque was drawn on the Union Bank of India, Chandigarh, was presented for encashment at the IDBI Bank, Indore, which intimated its dishonor to the appellant we are of the view that the Judicial Magistrate, First Class, Indore, would have the territorial jurisdiction to take cognizance of the proceedings initiated by the appellant under Section 138 of the Negotiable Instruments Act, 1881, after the promulgation of the Negotiable Instruments (Amendment) Second Ordinance, 2015. The words "...as if that sub-section had been in force at all material times..." used with reference to Section 142(2), in Section 142A(1) gives retrospectivity to the provision.

4)  In the above view of the matter, the instant appeal was allowed, and the impugned order passed by the High Court of Madhya Pradesh, was set aside - Bridgestone India (P.) Ltd. v. Inderpal Singh [2015] 64 taxmann.com 50 (SC) 

Govt. issues ordinance to allow filing of complaint on cheque bouncing at place where payee maintains the account

Recently, there had been a dispute relating to the place of jurisdiction for filing complaint against dishonouring of cheque. The dispute arose mainly in those cases where complaint was filed in jurisdiction of that Court where cheque was presented even if drawer-bank was located in different jurisdiction.

The Supreme Court in case of Dashrath Rupsingh Rathod v. State of Maharashtra [2014] 49 taxmann.com 497 (SC) cleared air on this issue and it interpreted provisions of Negotiable Instrument Act relating to place of jurisdiction for filing complaint. It ruled that complaint for dishounouring of cheque can be filed only at territorial jurisdiction of that Court where cheque is dishonoured by bank on which it is drawn.

Various stakeholder expressed difficulties on Supreme Court’s verdict with regard to the legal interpretation regarding place of jurisdiction in case of dishonouring of cheque. In order to address the difficulties of stakeholders the Government has issued Negotiable Instrument (Amendment) Ordinance, 2015 (‘NI Ordinance, 2015’).

The NI Ordinance, 2015 provides that the offence of cheque dishonour shall be enquired into and tried only by a court within whose local jurisdiction –

(a)the bank branch of the payee (viz, the place where the payee presents the cheque for payment) is situated, if the cheque is delivered for collection through an account; or

(b)the branch of the drawee bank where drawer maintain the account is situated, if the cheque is presented for payment by the payee or holder in due course otherwise through an account.

Further, all cases arising out of Section 138* which are pending in any court before the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015 shall be transferred to the court having jurisdiction as per revised position. Also, in case of more that one prosecution filed by the same payee against the same drawer of cheques is pending before different courts, upon bringing the said fact to the notice of court, such court shall transfer the case to the court having jurisdiction under norms. *The Section 138 of the Negotiable Instrument Act, 1881 (‘NI Act’) deals with the offence relating to cheque dishonour for insufficiency, etc., of funds in the drawers account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability. The section 138 of the NI Act provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.

Place of issuance of notice on cheque dishonouring won’t confer jurisdiction upon Court to take cognizance of offence

Place of issuance of a statutory notice could not by itself confer territorial jurisdiction upon Court to take cognizance of an offence under section 138 of the Negotiable Instrument Act (‘the NI Act’).

Fact:

a)The petitioner had taken a loan from the respondent-company for its business purposes. It had issued a cheque (drawn on the Syndicate Bank, Bangalore) against repayment of the loan amount. However, the cheque was dishonoured when presented for encashment to ING Vysya Bank, Gurgaon.

b)The respondent-company issued a statutory notice to the petitioner and eventually filed a complaint before the Judicial Magistrate at Gurgaon under section 138 of the NI Act.

c)The Magistrate took cognizance and summoned the petitioners to face the trial. The petitioner, filed the instant petition seeking transfer of the complaint from Gurgaon to the competent Court at Bangalore.

d)The Petitioner contended that the Court located at Gurgaon had no jurisdiction to entertain the complaint, especially when the cheque was issued and dishonoured at Bangalore and the offence, if any, was committed only at Bangalore.

The Supreme Court held as under:

1)The only reason the complainant claimed jurisdiction for the Court at Gurgaon was the fact that the complainant-respondent had issued the statutory notices relating to dishonour of the cheque from Gurgaon. The issue of a statutory notice could not by itself confer jurisdiction upon the Court to take cognizance of an offence under section 138.

2)Where cheque issued by petitioner was dishonoured at Bangalore, Court of Gurgaon could not have jurisdiction to entertain complaint simply because complainant-respondent had issued statutory notices relating to dishonour of cheque from Gurgaon.

3)Accordingly, the petition was to be allowed and complaint was to be transferred from the Court of Gurgaon, to the Court of competent jurisdiction of Chief Metropolitan Magistrate at Bangalore who would try the case himself or transfer the same to any other Court competent to try the same. – SREE MAHESH STATIONARIES V. INDIABULLS FINANCIAL SERVICES LTD. [2014] 49 TAXMANN.COM 67 (SC)