2006 (2) TMI 610 - SC - Companies Law

Supreme Court rules Kerala HC lacked jurisdiction over Section 138 dishonour case as cause of action arose outside territorial limits

SC held that Kerala HC lacked jurisdiction to entertain writ petition under Articles 226/227 as no part of cause of action arose within its territorial ... Territorial Jurisdiction of the High Court - Determination of cause of action - scope of jurisdiction under Articles 226 and 227 of the Constitution - Dishonour of cheques - Offence punishable under Section 138 of the Negotiable Instrument Act, 1881 ('the Act') - post-dated cheques - HELD THAT:- We have referred to the scope of jurisdiction under Articles 226 and 227 of the Constitution only to highlight that the High Courts should not ordinarily interfere with an order taking cognizance passed by a competent court of law except in a proper case. Furthermore only such High Court within whose jurisdiction the order of subordinate court has been passed, would have the jurisdiction to entertain an application under Article 227 of the Constitution of India unless it is established that the earlier cause of action arose within the jurisdiction thereof. A bare perusal of the complaint petition would clearly go to show that according to the complainant the entire cause of action arose within the jurisdiction of the district courts of Birbhum and in that view of the matter it is that court which will have jurisdiction to take congnizance of the offence. In fact the jurisdiction of the court of CJM, Suri, Birbhum is not in question. It is not contended that the complainant had suppressed material fact and which if not disclosed would have demonstrated that the offence was committed outside the jurisdiction of the said court. Even if Section 178 of the Code of Criminal Procedure is attracted, the court of the Chief Judicial Magistrate, Birbhum will alone have jurisdiction in the matter. In this case, the averments made in the writ petition filed by the respondent herein even if given face value and taken to be correct in their entirety would not confer any jurisdiction upon the Kerala High Court. The agreement was entered into within the jurisdiction of the Calcutta High Court. The project for which the supply of stone chips and transportation was being carried out was also within the State of West Bengal. Payments were obviously required to be made within the jurisdiction of the said court where either the contract had been entered into or where payment was to be made. Thus, we are of the opinion that the Kerala High Court had no jurisdiction to entertain the writ petition as no part of cause of action arose within its jurisdiction. Thus, the appeal is allowed. The impugned Judgment and order is set aside. The core legal questions considered by the Court include:(1) Whether the High Court of Kerala had territorial jurisdiction to entertain the writ petition challenging the complaint filed under Section 138 of the Negotiable Instruments Act, 1881;(2) The proper interpretation of 'cause of action' for the purpose of jurisdiction under Articles 226 and 227 of the Constitution of India and relevant statutory provisions;(3) The applicability of Sections 177, 178, and 188 of the Code of Criminal Procedure regarding the place of inquiry, trial, and jurisdiction in criminal matters, particularly offences under Section 138 of the Negotiable Instruments Act;(4) The scope and limits of High Court's writ jurisdiction in interfering with orders taking cognizance under Section 190 of the Code of Criminal Procedure;(5) The legal requirements to establish an offence under Section 138 of the Negotiable Instruments Act and the relevance of these requirements to jurisdictional questions.Issue-wise Detailed Analysis:1. Jurisdiction of the Kerala High Court to entertain the writ petition:The legal framework involves Articles 226 and 227 of the Constitution of India, which confer writ jurisdiction on High Courts, and Sections 177, 178, and 188 of the Code of Criminal Procedure, which govern the place of inquiry and trial of offences.Precedents considered include Navinchandra N. Majithia v. State of Maharashtra, Augustine v. Omprakash Nanakram, State of Rajasthan v. M/s Swaika Properties, Aligarh Muslim University v. Vinay Engineering Enterprises, Oil and Natural Gas Commission v. Utpal Kumar Basu, Nakul Deo Singh v. Deputy Commandant, Union of India v. Adani Exports Ltd., and Kusum Ingots & Alloys Ltd. v. Union of India.The Court examined the respondents' contention that part of the cause of action arose within Kerala because the registered and head office of the respondent company was located at Ernakulam, Kerala, and one cheque payment was sent from there.Relying on the principles laid down in Navinchandra N. Majithia, the Court reiterated that cause of action means a 'bundle of facts' necessary to be proved and that mere sending of cheques or notices from a place does not constitute an integral part of the cause of action unless the offence is committed there.The Court noted that the entire contract was entered into and performed in West Bengal, the cheques were issued for payment arising from transactions in West Bengal, and the dishonour of cheques and demand notices pertained to that jurisdiction.It was held that the Kerala High Court had no territorial jurisdiction since no part of the cause of action arose within its jurisdiction. The Court emphasized that the situs of the accused or the place where the offence was committed is determinative for jurisdiction in criminal matters.The Court also referred to Section 188 of the Code of Criminal Procedure, which allows trial where the accused is found, but noted that this exception applies to offences where the accused is likely to be on the move, which was not the case here.Thus, the Court concluded that the Chief Judicial Magistrate, Birbhum, West Bengal, had exclusive jurisdiction to take cognizance of the offence under Section 138 of the Negotiable Instruments Act.2. Interpretation of 'cause of action' and its relevance to jurisdiction:The Court clarified that 'cause of action' is a legal term meaning the facts which give rise to a right to sue or prosecute. It is not to be confused with incidental or collateral facts such as service of notice or receipt of orders.Decisions like State of Rajasthan v. M/s Swaika Properties and Nakul Deo Singh v. Deputy Commandant were cited to underscore that the place where consequential effects are felt does not necessarily constitute cause of action within that jurisdiction.The Court distinguished between facts that have a nexus with the lis (dispute) and those which do not, emphasizing that only facts relevant to the cause of action can confer jurisdiction.It was held that the mere presence of the company's registered office in Kerala or sending of cheques from that office does not create a cause of action there for the purpose of challenging the complaint under Section 138.3. Place of inquiry and trial under the Code of Criminal Procedure:Sections 177 and 178 of the Code of Criminal Procedure provide that ordinarily, offences are to be inquired into and tried where they are committed, including situations where offences are committed partly in different local areas.Section 188 allows for trial where the accused is found, but this is an exception applicable mainly to offences where the accused is likely to be on the move.The Court relied on the recent decision in Om Hemrajani v. State of U.P., which interpreted these provisions broadly but emphasized that the locus of the offence is the primary determinant of jurisdiction.Applying these principles, the Court held that the offence under Section 138 of the Negotiable Instruments Act was committed within the jurisdiction of the Chief Judicial Magistrate, Birbhum, West Bengal, and hence that court alone had jurisdiction.4. Scope of High Court's writ jurisdiction in criminal matters:The Court noted that while High Courts have extraordinary writ jurisdiction under Articles 226 and 227 of the Constitution, interference with an order taking cognizance under Section 190 of the Code of Criminal Procedure is limited.Reliance was placed on Naresh Shridhar Mirajkar v. State of Maharashtra and Surya Dev Rai v. Ram Chander Rai, which hold that writs of certiorari against judicial orders require an error apparent on the face of the record.The Court observed that the High Court's jurisdiction under Section 482 of the Code of Criminal Procedure is similarly circumscribed and cannot be exercised beyond the scope of the application.It was emphasized that the High Court should not ordinarily interfere with cognizance orders unless there is a manifest error or miscarriage of justice.5. Ingredients of offence under Section 138 of the Negotiable Instruments Act:The Court reiterated the requirements for conviction under Section 138 as laid down in Prem Chand Vijay Kumar v. Yashpal Singh:(a) The cheque must be drawn for payment of money to discharge a debt or liability and must be dishonoured;(b) The cheque must be presented within the prescribed period;(c) A demand notice must be given within the stipulated period;(d) The drawer must fail to make payment within 15 days of receipt of the notice.The Court noted that the complainant-appellant had complied with these requirements and that the respondents admitted the debt but sought time to pay.The Court underscored that the provisions of Section 138 are designed to ensure the integrity of negotiable instruments and to provide a speedy remedy to the payee, preventing unscrupulous drawers from delaying payments through technical pleas.Treatment of competing arguments:The respondents argued that the Kerala High Court had jurisdiction because the registered office was located there and that the cheques were sent from that office. They also contended that multiple cheques could not be the subject of a single complaint under Section 219 of the Code of Criminal Procedure.The Court rejected these contentions, holding that the situs of the offence was the place where the cheques were issued and dishonoured, i.e., West Bengal, and that the complaint was properly filed there.The Court also clarified that the question of multiple cheques being the subject of a single complaint was not relevant to the jurisdictional issue before it.Conclusions:The Court concluded that the Kerala High Court lacked territorial jurisdiction to entertain the writ petition and that the complaint under Section 138 of the Negotiable Instruments Act was rightly taken cognizance of by the Chief Judicial Magistrate, Birbhum, West Bengal.The impugned order of the Kerala High Court granting interim stay was set aside, and the respondents were directed to appear before the competent court in West Bengal.The appellants were awarded costs of Rs. 10,000/-.Significant Holdings:'The entire cause of action arose within the jurisdiction of the district courts of Birbhum and in that view of the matter it is that court which will have jurisdiction to take cognizance of the offence.''Sending of cheques from Ernakulam or the respondents having an office at that place did not form an integral part of 'cause of action' for which the complaint petition was filed by the appellant and cognizance of the offence under Section 138 of the Negotiable Instruments Act, 1881 was taken by the Chief Judicial Magistrate, Suri.''The High Court should not ordinarily interfere with an order taking cognizance passed by a competent court of law except in a proper case.''The expression 'cause of action' has a definite connotation. It means a bundle of facts which would be required to be proved.''Facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned.''For securing conviction under Negotiable Instruments Act, 1881 the facts which are required to be proved are: (a) that the cheque was drawn for payment of an amount of money for discharge of a debt/liability and the cheque was dishonoured; (b) that the cheque was presented within the prescribed period; (c) that the payment made a demand for payment of the money by giving a notice in writing to the drawer within the stipulated period; and (d) that the drawer failed to make the payment within 15 days of the receipt of the notice.'