Section 138 of the Negotiable Instruments
Act, 1881 contains the offence of ‘dishonour of cheque’, commonly known as
‘cheque bouncing’. Though it is one of the most commonly used provisions of
criminal law in India – in several court complexes there is a designated
courtroom dealing with only section 138 cases all year round – yet there has
been great confusion regarding the jurisdiction of courts in these cases which
the government sought to settle once and for all by promulgating the NegotiableInstruments (Amendment) Ordinance, 2015.
Section 138 lays down that the person who
receives a cheque which bounces when presented for payment can approach a
magistrate for bringing criminal action against the drawer of the cheque if the
cheque amount is not paid within 15 days of giving a notice to the drawer.
The Multiple jurisdictions system and
its problems
For several years, the victim who received
a cheque which bounced had the freedom to lodge a complaint before either the
magistrate in whose jurisdiction the collecting bank (bank branch where cheque
was presented for payment) is located or with the magistrate in whose
jurisdiction the drawee bank (bank branch in which accused has an account and
on which the cheque is drawn) is located or even the magistrate of the place
from where the notice was issued. Infact the 1999 Supreme Court judgement (K Bhaskaran v. Sankaran Vaidhyan
Balan) regarding jurisdiction in such matters was so broad that there
could even be five possible jurisdictions based on where each of the five
elements of the offence is committed. This often led to abuse of the system where
complainants presented the cheques in faraway places or issued notices from
cities with no link to the transaction just so that they could file the
complaint from these third cities.
Supreme Court changes course
However, the Supreme Court upset the existing
status quo when in Dashrath Rupsingh Rathod v. State of Maharashtra,
it held that the offence was committed only when the cheque was returned by the
drawee bank for the lack of funds and thus only the magistrate of the place
where the drawee bank is located had the jurisdiction to hear the case. This
now meant that if a cheque drawn on a bank branch in Srinagar was given to a
person living in Chennai and it bounced when presented it for payment at a bank
branch in Chennai, the victim shall have to travel all the way from Chennai to
Srinagar to file a case. This is because the offence is committed when the bank
in Srinagar returns the cheque for lack of funds and not before that.
Problems Galore
The Dashrath Rupsingh Rathod decision
of the Supreme Court meant that lakhs of cases had to be transferred to other
courts or withdrawn to be filed again. Further complications were added because
many banks now issue cheques that are ‘payable at par’. When presented for
payment, these cheques are processed not by the bank branch on which they are
drawn but by the same bank’s branch closer to where the cheque is presented for
payment. The Supreme Court had not clarified where exactly the offence is
deemed to be committed and where the jurisdiction shall lie in such cases.
The Ordinance Fix
The ordinance promulgated by the President
on Tuesday again changes the jurisdiction in cheque bounce matters by adding
section 142(2) –
“(2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated”
As per the ordinance, the local court
within whose jurisdiction the cheque is presented for payment shall have
jurisdiction over the matter meaning that if you issue a cheque drawn on a bank
in Srinagar and give it to someone who presents it to his bank branch in
Chennai for deposit in his account, only the courts of Chennai shall have
jurisdiction. In the past, in cases of multiple cheque bouncing, some
complainants used to present the various cheques which they held in different
places in order to harass the accused by have commencing criminal proceedings
in various different cities. However, the new ordinance puts an end to such
harassment by making it clear in section 142A(2) that once one cases is filed
in one court, for all the future cheque bounce instances between the
complainant and the accused, the same court shall have jurisdiction regardless
of where the cheques are presented for payment by the complainant.
The ordinance shall once again prompt
large scale transfers of cases, however by incorporating a clause pertaining to
jurisdiction within the Act itself, it eliminates the possibility of future
conflicting decisions of the courts on this issue. Furthermore, by prohibiting
complainants from approaching more than one court in respect of several cheques
of a single person, it also adequately takes care of the interests of the
accused and thus must be seen as a positive step.
Recourse to the ordinance route was
necessitated because though the Lok Sabha passed an identical Bill in the
previous session of the Parliament, it could not be taken up in the Rajya Sabha
due to the lack of time. It is imperative that both houses approve the Bill to
replace the ordinance in the next session because allowing the ordinance to
lapse would plunge the system back into a chaotic state.
