In a simplified term, cheque is an order to bank to pay someone/payee or holder in due course, on your behalf. A cheque is paid to the person who is known as Payee and is never paid before the date mentioned on it. At present, cheque is valid only for three months from the date mentioned on it. There are various grounds on which the cheque would bounce and the same includes:
(a) The credit in the account is less than the amount mentioned in the cheque;
(b) Account closed
(c) Stop payment instructions
Cheque as an instrument accepted in lieu of money was getting dishonored on being presented and hence started loosing its credibility. The idea of introducing section 138 was to ensure that the cheque is not used as an instrument of dishonesty. Lots of cases came to filed on cheque bounce matters however, due to conflicting views, lot of confusion arose for jurisdiction of the cheque bounce case filing. Additionally, Section 138 to 142 of the Negotiable Instrument Act, 1881 (“Act”) was found to be deficient in dealing with cheque bounce matters. The law accordingly was amended in the year 2002 for speedy disposal of cases. Accordingly, Section 143 to 147 of the Act was inserted so that the process is summarily decided. It is important to mention that Section 138 of the Act consists of two parts-primary and provisory. Section 138 of the Act does not interfere with provisions under IPC to deal with cheque bounce issues. Recently, an ordinance too was passed relating to the Act. In view of the same, this article focuses on the status of jurisdiction, summary procedure relating to the cheque bounce matters for our readers.
A. Jurisdiction of the Court
A three judge bench of the Hon’ble Supreme Court of India in its very recent judgment passed in Dashrath Roop Singh Rathod vs. State of Maharastra has held that all the cheque bounce matters relating to dishonor of cheques under Section 138 of the Act would only be entertained by the court which has the territorial jurisdiction on the location of the drawee bank or in simple words where the cheque was dishonored. This judgment will have far reaching consequences for all the pending criminal matters and the new matters filed under Section 138 of the Act.
(i) Earlier Position in relation to an Offence under Section 138
Earlier the principal of territorial jurisdiction was laid down in relation to jurisdiction of the cheque bounce matters in the following judgment. A division bench of Supreme Court in the Bhaskaran Case (1999) had held that the offence under Section 138 of the Act is based on the completion of the `chain of commands’ as explained below:
- Drawing of the Cheque and presentation to the bank;
- Return of the cheque unpaid by the bank where it was dishonoured;
- Issue of a notice in writing given to the drawee
- Demanding the unpaid payment;
- Inability to pay of the drawee to pay within a 15 (fifteen) day period of the receipt of notice;
This, all together would amount to offence of dishonour of cheque under Section 138 of the Act. In other words, the court would have the jurisdiction to entertain the offence at any place where one of the following causes of action took place. Ishar and Harman judgment followed the Bhaskaran judgment. However, Nishanth distinguished Isher Alloys judgment.
(ii) New Position in relation to an Offence under Section 138
The three judge bench of the Supreme Court in Dashrath Case has overruled the division bench judgment in Bhaskaran Case holding that any one of the above acts could not decide the court that shall have jurisdiction and as especially the place where the issue was noticed by the drawer could not decide the Court that shall have jurisdiction. Section 177 of CrPC statutorily binds the Complainant and therefore the jurisdiction cannot be of choosing of the Complainant. Therefore, the complaint is to be filed in place within whose jurisdiction, the cheque was dishonored where the cheque is dishonored by bank on which it is drawn.
Supreme Court further has provided the following approach should be followed for pending Section 138 Cases. All the cases, which have reached a crucial stage of recording of evidence, should be continued to be entertained under the said courts where they are being entertained at present. All other cases, including wherein the accused has not been served properly, the complaint will now be returned. The complainant will be allowed to file a new complaint within 30 days of return in the court having territorial jurisdiction of the drawee bank and the same will be deemed to be filed within limitation period.
B. Process of Evidence
Section 145 of the Act provides for that the evidence of the Complainant be given on affidavit. This affidavit is to be read in evidence in enquiry, trial and other proceedings conducted under the Criminal Procedure Code, 1973. This section gives complete freedom to the accused to give their evidence either by way of affidavit or by way of oral evidence. The Complainant is not required to examine himself twice. Once this evidence is recorded the accused is summoned to produce before Court to ask whether he is willing to pay or not. In case, the accused does not wish to pay, the day-to-day trial would commence. Section 262 to 264 of the Criminal Procedure Code, 1973 is applicable for trial of cases. The process of trial is the one followed in summon cases and the imprisonment is for a period of three months. Affidavit and documents filed by the Complainant are good enough for taking into account both pre-summoning and post summoning stage. There is no necessity to recall and re-examine the Complainant unless the Complainant passes an order for recall of the Complainant.
C. Practice Directions given under Section 138 Matters
In Indian Bank Association vs. Union of India the Hon’ble apex court has mentioned about the practice directions in a cheque bounce matters, which are worth mentioning here.
1. Metropolitan Magistrate/Judicial Magistrate of appropriate jurisdicition on the day when the complaint under section 138 of the Negotiable Instrument Act is passed, shall scrutinize the complaint and if the complaint is in order, accompanied by the affidavit then the same should be taken cognizance of and the summon be issued. The list of documents to be included with the petition is:
(i) Photocopy of the Cheque issued
(ii) Copy of the legal notice sent to the accused along with the acknowledgement receipt of sending the same.
(iii) List of Witness
2. Summons is required to be issued both by e-mail and by post. Court can take help of the police for service of summons to the parties. Court may mention in the summon about the compounding of offence if any such step is taken by the parties, then court may pass appropriate orders accordingly.
3. Court may direct the accused to furnish a bail bond at the first hearing to ensure his appearance during the trial.
4. The court conducting cases should ensure that examination-re-examination-cross examination should be conducted in three months period. The court has power to accept the affidavit of the Witness. Witness of the Complainant and accused must be available for testimony.
Amidst all the interpretations related to jurisdiction there was a need of hour was to rest the case of jurisdiction with appropriate amendment The new ordinance has been passed by which difficulties arising out of the legal interpretation is taken care of. As per this ordinance, the offence would be tried at place where the branch of the bank is located, where the payee or holder in due course maintains the account. The ordinance would transfer the existing cases, in view of the definition of the jurisdiction.
Cheque is an instrument of maintaining of fiduciary relationship between drawer and drawee. The conflict of ratios was duly settled by Hon’ble apex court but the same was not in the interest of an innocent Complainant and due to representation from various stakeholders the issue is finally settled.