Amendments introduced in the Cheque Bounce Cases

Introduction

Following the apex court ruling in the famous Dashrath Rupsingh judgment, representations have been made to the government by various stakeholders, including industry associations and financial institutions, expressing concerns about the wide impact the judgment on the business interests as it was offering undue protection to defaulters, at the expense of the aggrieved complainant.

As you are aware, to resolve the concerns, the President of India had promulgated an Ordinance called the “Negotiable Instruments (Amendment) Ordinance, 2015” on June 15, 2015 as per which, certain amendments have been made in the Negotiable Instruments Act, 1881. Jurisdiction in cheque bounce matter has been in debate in light of the recent decisions until off recently same was settled by way of ordinances and now amendment replacing the ordinance. Jurisdiction to file cases of cheque bouncing changed by the Ordinance superseding the judgment dated, August 1, 2014 of the Supreme Court in the case of Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129, and all other similar judgments on this issue. So, now a cheque dishonor case under Section 138 of the Negotiable Instruments Act, 1881, was to be filed in a court at a place as per the provisions of Section 142(2) of the Negotiable Instruments Act, 1881 which had been inserted by the new Ordinance and thereafter by the amendment, and even all pending cheque bouncing cases were also be transferred to the courts, as per this new provision.

Recently, on August 1, 2014, a three Judge bench of the Supreme Court in Dashrath Rupsingh Rathod (Supra), in Criminal Appeal No. 2287 of 2009 gave its verdict in order to settle this issue as to which court has the territorial jurisdiction in an offence committed under Section 138 of the Negotiable Instruments Act, 1881, for dishonor of a cheque, commonly known as a case of cheque bouncing. The Supreme Court held that the territorial jurisdiction is restricted only to the court within whose local jurisdiction the offence was committed, which is where the cheque is dishonored by the bank on which it is drawn. Thus, it was held that such a case couldn’t be filed, for example, in a court in whose area the cheque was presented in a bank by the payee or where the notice was issued, etc. This judgment was aimed at ensuring that such cases are not filed at places other than the place where the bank account from which the cheque was issued (i.e., the branch of the bank on which the cheque was drawn) is located. Thus, the Supreme Court set an old controversy about the territorial jurisdiction in cheque bouncing cases to rest. However, within a month of the aforesaid judgment of the Supreme Court, a single judge bench of the Bombay High Court, vide its judgment dated August 25, 2014 in the case of Ramanbhai Mathurbhai Patel v. State of Maharashtra [in Criminal Writ Petition No. 2362 of 2014], has reignited the old controversy again and has again created the uncertainty as to where a cheque bouncing case can be filed.

On September 22, 2015, the President of India had promulgated another new ordinance on the subject, namely, the Negotiable Instruments (Amendment) Second Ordinance, 2015, which shall be deemed to have come into existence with effect from June 15, 2015, i.e., the date from which the first such Ordinance had come into effect. This was to ensure continuity from the first such ordinance issued on June 15, 2015. This means that the period from August 31, 2015 to September 22, 2015, during which there was no such Ordinance in operation, shall also be deemed to have been covered under this new Ordinance issued on September 22, 2015

Negotiable Instruments (Amendment) Act, 2015 was passed in the Lok Sabha seeking to overturn a Supreme Court 2014 ruling. The amendment passed by the Lok Sabha provides that cases of bouncing of cheques can be filed only in a court in whose jurisdiction the bank branch of the payee (person who receives the cheque) lies. If a complaint against a person issuing a cheque has been filed in the court with the appropriate jurisdiction, then all subsequent complaints against that person will be filed in the same court, irrespective of the relevant jurisdiction area. The Bill has now passed inserting section 142 (2) and the highlights of amendment is shared below.

Highlights of Amendment

  • The amendment has come into force from June 15, 2015.
  • A cheque in electronic form has been defined as cheque drawn in electronic form by using any computer resource and signed in a secure system with a digital signature (with or without biometric signatures) and asymmetric cryptosystem or with electronic signatures as the case may be.
  • Section 142 has been amended to include that the cheque bounce matter is to be filed within court within whose jurisdiction the branch within whose jurisdiction of the payee or holder in due course, cheque is delivered for collection through an account.
  • If the cheque is presented for payment, by the payee or holder in due course or otherwise through an account, the branch of the drawee bank where the drawer maintains the account, then the case would be filed in same jurisdiction.

Effect of Amendment

The amendment paved the way for transfer of all cases in appropriate jurisdiction as per the amendment notwithstanding anything contained in any judgment, decree and order. Post transfer, all subsequent cheque bounce matters against the drawer would be filed in same jurisdiction where the transfer has been affected under the amended Act.

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