2013 (7) TMI 680 - SC - Indian Laws

Supreme Court clarifies territorial jurisdiction in cheque bounce cases under Section 138 of NI Act

Nishant Aggarwal Versus Kailash Kumar Sharma

The Supreme Court affirmed that the Magistrate at Bhiwani had territorial jurisdiction to try the complaint under Section 138 of the Negotiable ... Jurisdiction to entertain the petition for offence punishable u/s 138 - whether the Court would have territorial jurisdiction to try the accused for an offence punishable u/s 138 of the Negotiable Instruments Act where a cheque is deposited for collection or would it be only the Court exercising territorial jurisdiction over the drawee bank or the bank on which the cheque is drawn - Held that:- The Mumbai Court has jurisdiction to entertain the complaint – court relied upon the judgement of K. Bhaskaran vs. Sankaran Vaidhyan Balan and Another (1999 (9) TMI 941 - SUPREME COURT OF INDIA) - if the five different acts were done in five different localities - any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence u/s 138 - the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done - the amplitude stands so widened and so expansive it is an idle exercise to raise jurisdictional question regarding the offence u/s138. whether the sending of notice from Delhi itself would give rise to a cause of action in taking cognizance under the N.I. Act – Held that:- The place where the cheque was presented and dishonoured has jurisdiction to try the complaint - issuance of notice would not by itself give rise to a cause of action but communication of the notice - Section 178 of the Code has widened the scope of jurisdiction of a criminal court and Section 179 of the Code has stretched it to still a wider horizon – appeal decided against the appellant. Issues Involved:1. Territorial jurisdiction for trying an offence under Section 138 of the Negotiable Instruments Act, 1881.2. Applicability of the judgments in K. Bhaskaran vs. Sankaran Vaidhyan Balan and Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd.3. Interpretation of Section 138 of the N.I. Act and its components.4. Relevance of the judgment in Harman Electronics Private Limited vs. National Panasonic India Private Limited.Detailed Analysis:1. Territorial Jurisdiction for Trying an Offence under Section 138 of the N.I. Act:The core issue was whether the Court where a cheque is deposited for collection has territorial jurisdiction to try the accused under Section 138 of the N.I. Act, or if it is only the Court exercising jurisdiction over the drawee bank. The Supreme Court affirmed that the learned Magistrate at Bhiwani had territorial jurisdiction to try the complaint because the complainant was a resident of Bhiwani, the cheque was presented at Bhiwani, and the legal notice was sent from Bhiwani.2. Applicability of the Judgments in K. Bhaskaran vs. Sankaran Vaidhyan Balan and Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd.:The Court reiterated the applicability of the judgment in K. Bhaskaran, which outlines five components for an offence under Section 138 of the N.I. Act:- Drawing of the cheque.- Presentation of the cheque to the bank.- Returning the cheque unpaid by the drawee bank.- Giving notice in writing to the drawer of the cheque demanding payment.- Failure of the drawer to make payment within 15 days of the receipt of the notice.The judgment in K. Bhaskaran allows the complainant to choose any one of the five places to file a complaint. The Court clarified that the judgment in Ishar Alloy Steels, which defined 'the bank' as the drawer's bank, did not address territorial jurisdiction and thus did not affect the ratio in K. Bhaskaran.3. Interpretation of Section 138 of the N.I. Act and Its Components:The Supreme Court emphasized that the offence under Section 138 is completed only when the drawer fails to pay the cheque amount within 15 days of the receipt of the notice. The Court upheld that the place of failure to pay the amount can be where the drawer or the payee resides, or where either of them carries on business, thereby widening the scope of territorial jurisdiction.4. Relevance of the Judgment in Harman Electronics Private Limited vs. National Panasonic India Private Limited:The Court discussed the Harman Electronics case, which dealt with the jurisdiction based on the issuance and receipt of the notice. It clarified that Harman Electronics did not deviate from the principles laid down in K. Bhaskaran but rather affirmed that the place where the cheque was presented and dishonoured has jurisdiction. The Court noted that in the present case, the cheque was categorically stated to be presented at Bhiwani, thus affirming the jurisdiction of the Bhiwani Court.Conclusion:The Supreme Court concluded that the ratio laid down in K. Bhaskaran squarely applies to the present case. The learned Sessions Judge and the High Court correctly applied this principle, thereby affirming the jurisdiction of the Bhiwani Court. Consequently, the appeal was dismissed, and the interim order granted was vacated.