A three judge Bench of the Supreme Court of India has recently in August 2014 delivered an important judgment pertaining to Court’s territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881. The Court observed that place of issue of notice or the place of dishonour of cheques is not the place to decide the jurisdiction of the court to take cognition of the complaints.

Earlier, in K. Bhaskaran v. Sankaran Vaidhyan Balan a two-Judge Bench had interpreted Section 138 of the NI Act to indicate that “the offence under Section 138 can be completed only with the concatenation of a number of acts. It was stated that the offence under Section 138 could be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence: (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) Failure of the drawer to make payment within 15 days of the receipt of the notice.Thus It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at five different localities.

However, placing greater reliance in Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009), the apex court upheld the orders appealed for. The following appeals were disposed off by the Court by issuing appropriate directions where the place of issuing cheque was different from the territorial jurisdiction of Judicial Magistrate First Class (JMFC) who issued notices under NI Act.

Crl. Appeal No.	Bank Branch Cheque Was Drawn at	Bank Branch Cheque Presented at	Order Upheld
. 2287/2014	Bhandara, Maharashtra	Yavatmal Maharashtra	Complaint be returned to the complainant for filing in the appropriate Court
. 1593/2014	Tangi, Orissa	Ahmednagar, Maharashtra	Complaint be returned to the Complainant for further action in accordance with law
1596-1600/2014	Connaught Place, New Delhi	Nagpur, Maharashtra	Complaints be returned for filing before the proper Court
1604/2014	New Delhi	Aurangabad	Complaint be returned for being presented before a competent court

The relevant excerpts of the Judgment are as under:

“The issuance and the receipt of the notice is significant because in a subsequent judgment of a Coordinate Bench, namely, Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1 SCC 720 emphasis has been laid on the receipt of the notice, inter alia, holding that the cause of action cannot arise by any act of omission or commission on the part of the ‘accused’, which on a holistic reading has to be read as ‘complainant’. It appears that Harman transacted business out of Chandigarh only, where the Complainant also maintained an office, although its Head Office was in Delhi. Harman issued the cheque to the Complainant at Chandigarh; Harman had its bank account in Chandigarh alone. It is unclear where the Complainant presented the cheque for encashment but it issued the Section 138 notice from Delhi. In those circumstances, this Court had observed that the only question for consideration was “whether sending of notice from Delhi itself would give rise to a cause of action for taking cognizance under the NI Act.” It then went on to opine that the proviso to this Section “imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken.” We respectfully agree with this statement of law and underscore that in criminal jurisprudence there is a discernibly demarcated difference between the commission of an offence and its cognizance leading to prosecution. The Harman approach is significant and sounds a discordant note to the Bhaskaran ratio. Harman also highlights the reality that Section 138 of the NI Act is being rampantly misused so far as territorial jurisdiction for trial of the Complaint is concerned. With the passage of time equities have therefore transferred from one end of the pendulum to the other. It is now not uncommon for the Courts to encounter the issuance of a notice in compliance with clause (b) of the proviso to Section 138 of the NI Act from a situs which bears no connection with the Accused or with any facet of the transaction between the parties, leave aside the place where the dishonour of the cheque has taken place. This is also the position as regards the presentation of the cheque, dishonour of which is then pleaded as the territorial platform of the Complaint under Section 138 of the NI Act. Harman, in fact, duly heeds the absurd and stressful situation, fast becoming common-place where several cheques signed by the same drawer are presented for encashment and requisite notices of demand are also despatched from different places. It appears to us that justifiably so at that time, the conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder, whereas with the passage of two decades the manipulative abuse of territorial jurisdiction has become a recurring and piquant factor. The liberal approach preferred in Bhaskaran now calls for a stricter interpretation of the statute, precisely because of its misemployment so far as choice of place of suing is concerned.”

“The question is not whether or not the payee can deposit his cheque in any bank of his choice at any place. The question is whether by such deposit can the payee

confer jurisdiction on a Court of his choice? Our answer is in the negative. The payee may and indeed can present the cheque to any bank for collection from the drawee bank, but such presentation will be valid only if the drawee bank receives the cheque for payment within the period of six months from the date of issue. Dishonour of the cheque would be localised at the place where the drawee bank is situated. Presentation of the cheque at any place, we have no manner of doubt, cannot confer jurisdiction upon the Court within whose territorial limits such presentation may have taken place.”

“To sum up:

(i)    An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.

(ii)    Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.

(iii)   The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if

(a)    the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue.

(b)    If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonour of the cheque and

(c)    If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.

(iv)   The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.

(v)   The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant.

(vi)   Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.

(vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof.”

“Reliance is often placed on Bhaskaran’s case to justify institution of such cases far away from where the transaction forming basis of the dishonoured cheque had taken place. It is not uncommon to find complaints filed in different jurisdiction for cheques dishonoured in the same transaction and at the same place. This procedure is more often than not intended to use such oppressive litigation to achieve the collateral purpose of extracting money from the accused by denying him a fair opportunity to contest the claim by dragging him to a distant place. Bhaskaran’s case could never have intended to give to the complainant/payee of the cheque such an advantage. Even so, experience has shown that the view taken in Bhaskaran’s case permitting prosecution at any one of the five different places indicated therein has failed not only to meet the approval of other benches dealing with the question but also resulted in hardship, harassment and inconvenience to the accused persons. While anyone issuing a cheque is and ought to be made responsible if the same is dishonoured despite compliance with the provisions stipulated in the proviso, the Court ought to avoid an interpretation that can be used as an instrument of oppression by one of the parties. The unilateral acts of a complainant in presenting a cheque at a place of his choice or issuing a notice for payment of the dishonoured amount cannot in our view arm the complainant with the power to choose the place of trial. Suffice it to say, that not only on the Principles of Interpretation of Statutes but also the potential mischief which an erroneous interpretation can cause in terms of injustice and harassment to the accused the view taken in the Bhaskaran’s case needs to be revisited”

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