TaxTMI 
TaxTMI 
2024 (4) TMI 896
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....n entity with its office in the United Arab Emirates (UAE) and is the sales and marketing wing of Right Choice Builders Private Limited, a company incorporated under the Companies Act, 2013, which is arrayed as accused no. 6 in the complaint. It is stated that the accused no. 6 has established various branches like Right Choice Properties, Right Choice Investment, etc. It is further contended that petitioner nos. 2 and 3, along with others, who have been arrayed as accused nos. 4 and 5 in the complaint, are the common Directors of the Group, namely, Right Choice Group of Companies, and are responsible for the day-to-day affairs of petitioner no. 1 and accused no. 6. 4. It is further contended in the complaint that petitioner nos. 2 and 3, along with accused nos. 4 and 5, are the ones who approached different investors for their business and directly dealt with them regarding all transactions with the Right Choice Group of Companies and such investors. It is further alleged that petitioner nos. 2 and 3, along with accused nos. 4 and 5, approached respondent no. 2 herein with various investment ideas and brochures mentioning the schemes and projects of petitioner no. 1 and accused n....
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....ent no. 2 presented the said cheques before the bankers, that is, National Bank of Abu Dhabi, and HSBC Bank, Middle East, and to the shock of respondent no. 2, the said cheques were returned dishonoured with the remarks 'insufficient funds'. Upon repeated follow-ups, the petitioner nos. 1 and 3 again paid an arbitrary and ad hoc amount of AED 42,500/- in bits and pieces against the cheques that had been returned dishonoured. 10. The respondent no. 2 asserts that being aggrieved of the aforesaid conduct, respondent no. 2 initiated criminal complaints against the accused with the Abu Dhabi Police for the dishonour of the ten cheques. The Abu Dhabi Courts of First Instance, vide its order dated 26.12.2016 passed in Case No. 13267/2016, convicted petitioner no. 3 and sentenced him with imprisonment of two years for the first set of five cheques totalling AED 295,089/-. The said Court, vide its order dated 27.03.2017 passed in Case No. 1918/2017, convicted petitioner no. 3 and awarded a sentence of imprisonment of three years for the second set of five cheques totalling AED 685,625/-. 11. It is stated that the accused are not travelling to Dubai out of fear of being arrested. 12. It ....
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....e aforesaid branch of the Complainant's bank comes under the territorial jurisdiction of this Hon'ble Court and hence this Complaint." 16. I must herein note that by an order dated 27.08.2018 passed by the learned Additional Sessions Judge-04 and Special Judge (NDPS) South East, Saket Courts, New Delhi, the order dated 23.02.2018 passed by the learned Trial Court in the above complaint issuing summons to the accused nos. 4 and 6 in the said complaint, has been set aside. The said order is under challenge by respondent no. 2 in CRL.MC. 3828/2019, titled Sachin Kumar Parolia v. Rahul Rajan & Ors. and is being disposed of by a separate judgment passed today. Submissions of the learned counsel for the Petitioners: 17. The learned counsel for the petitioners submits that the petitioner no. 1 is a Company registered and operating in the UAE. The petitioner nos. 2 and 3 are Indian citizens and are Directors of the petitioner no. 1/Company, but were residing in the UAE at the time when the transaction in question took place. The respondent no. 2/the Complainant was also a resident of UAE when the transaction took place. He further submits that the cheque in question is drawn on the Emir....
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....n admittedly took place in UAE; the cheque was drawn on Dubai based branch of a UAE Bank; there is no endorsement on the cheque that it is payable in India; the cheque is payable in the currency of UAE, that is, Emirati Dirham (AED); the respondent no. 2 was a resident of UAE at the time when the transaction had taken place; the petitioner no. 1 on whose behalf the cheque was issued is a company incorporated in UAE; and the petitioner nos. 2 and 3 were also at UAE at the time of the issuance of the cheque. He submits that, therefore, the courts in India would have no jurisdiction and the provision of Section 138 of the NI Act would not be applicable in the facts of the present case. In support, he places reliance on the judgment of the High Court of Madras in Pale Horse Designs v. Natarajan Rathnam, 2010 SCC OnLine Madras 5377; and of the High Court of Andhra Pradesh in Vinjanamapati Anantaramaiah v. M. Venkata Subba Rao, (1968) SCC OnLine AP 34. Submissions of the learned counsel for the Respondent no. 2 22. On the other hand, the learned counsel for the respondent no. 2/the Complainant submits that the present petition is liable to be dismissed on the ground of delay and laches....
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.... unpaid, the respondent no. 2 had earlier filed the proceedings before the Abu Dhabi Courts of First Instance and orders were also passed in favour of the respondent no. 2. 30. It is only on the non-compliance/non implementation of the said orders, that the respondent no. 2 thereafter presented the subject cheque to his bank at ICICI Bank, Greater Kailash-I, New Delhi, which was expectantly also returned unpaid with the remark 'insufficient funds'. 31. The issue that arises before this Court is whether the presentation of the subject cheque at the Branch in Greater Kailash-I, New Delhi will be sufficient to invoke the provisions of Section 138 of the NI Act and make the complaint filed by the respondent no. 2 as maintainable. 32. To answer the above issue, some of the provisions of the NI Act need to be noticed. 33. Section 11 of the NI Act defines an 'inland instrument', as under: - "11. Inland instrument.-A promissory note, bill of exchange or cheque drawn or made in India, and made payable in, or drawn upon any person resident, in India shall be deemed to be an inland instrument." 34. In the present case, the cheque in question is not made in India; it was not made payabl....
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....ns only the civil liability. Therefore, unless there is a contract to the contrary shown, in case of a foreign cheque, as is in the present case, the civil liability of the drawer, that is, the petitioner no. 1, is governed by the law of place where the cheque was drawn, that is, Dubai. Reliance in this regard is also placed on the judgment of the Andhra Pradesh High Court in Vinjanamapati Anantaramaiah, (Supra). 39. Section 135 of the NI Act states that where a cheque is made payable in a place different from that in which it is made or indorsed, the law of the place where it is made payable, determines what constitutes dishonour and what notice of dishonour is sufficient. 40. The learned counsel for the respondent no. 2 has submitted that as the cheque in question does not specifically state the place where it is payable, in terms of Section 70 of the NI Act, the cheque can be presented for payment at the place of business or the usual residence of the drawee that is, the respondent no. 2, and in the present case, at Delhi. He submits that in terms of Section 135 of the NI Act, the law as prevalent in India shall therefore, determine what constitutes dishonour and what notice o....
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....on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt....
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....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. 58.2. 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. 58.3. 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. 58.4. The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act. 58.5. The proviso to Section 138 simply ....
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....yee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated. Explanation.-For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account." 49. In view of the above amendment, and more specifically in terms of Section 142(2) of the NI Act, the offence under Section 138 of the NI Act is now to be inquired into and tried only by a court within whose local jurisdiction, if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated. The Explanation to Sub-Section (2) to Section 142 further reiterates that for the purposes of clause (a) to Sub-Section (2) to Section 142, where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of t....
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....s quite clear that the liability of a foreign negotiable instrument shall be governed by law of the place where the instrument was made in all essential matters. In this case, it is not in dispute that the cheques were drawn in Massachusetts, United States of America. Therefore, in all essential matters the law in the United States of America shall be attracted towards any action against the drawer. It is again reiterated that the said section deals with the question of civil liability and not criminal liability. 25. Similarly, Section 135 is to the effect that law of the place where the cheque is made payable determines what constitutes dishonour and what notice of dishonour is sufficient in case of a negotiable instrument made payable at a different place from the place wherein it is made or indorsed. The said section also will not render any help to the respondent because the place wherein the cheques concerned in these petitions are payable is only at Massachusetts, United States of America. This is made clear by the judgment of the Apex court in in Shri Ishar Alloy Steels Ltd vs. Jayaswals Neco Limited reported in (2001) 3 SCC 609. In the case on hand, all the cheques were d....
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.... an offence under the law of India, the same shall have also been made punishable under the law of any foreign country. It must be kept in mind that though the liability is civil in nature, by a special provision under Section 138 of the Negotiable Instruments Act, 1881, the dishonour of a cheque when the cheque amount is not paid within a specified time after the receipt of statutory notice of demand, it is made an offence. The section has been placed in Chapter XVII of Negotiable Instruments Act, 1881. Therefore, the presumption enshrined in Section 137 i.e. found in Chapter XVI regarding the position of foreign law shall not be extended to the penal provision found in Section 138 of the Negotiable Instruments Act, 1881. xxxxx 31. A combined reading of Sections 1, 11, 12 and 134 to 137 of the Negotiable Instruments Act, 1881, will make it clear that a cheque made/drawn in a foreign country on a drawee bank functioning in the foreign country and made payable therein shall be a foreign instrument and the law of the country wherein the cheque was drawn or made payable shall be the law governing the rights and liabilities of the parties and the dishonour of the cheque. As such th....
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....place where he made the cheque, there is nothing in the said provision which would exclude the application of Section 138 of the NI Act read with Section 142 of the NI Act. Merely because the payee or holder in due course of a foreign cheque chooses to present the cheque in India out of mala fide, the application of the provision of Section 138 of the NI Act and the jurisdiction of the court where such cheque is deposited for payment, cannot be ousted. 55. It is also to be kept in mind that Section 138 of the NI Act was inserted with the purpose of regulating financial promises in growing business, trade, commerce, and industrial activities of the country, and the strict liability to promote greater vigilance in financial matters. The object was to enhance the acceptability of cheques in the settlement of liabilities and there can be no difference in this regard between an Indian cheque or a foreign cheque. Ultimately the cheque has to bind the drawer to fulfil its obligation, as the provision is designed to safeguard the faith of the creditor in the drawer of the cheque, which is essential to the economic life of a developing country like India. Therefore, equity also does not re....
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....said to be a 'civil sheep' in a 'criminal wolf's clothing', as it is the interest of the complainant/victim that is sought to be protected, the larger interest of the State being subsumed in the complainant/victim alone moving a court in cheque bouncing cases. It was further observed that it is in actuality a hybrid provision to enforce payment of a bounced cheque. It is because of such a nature of the offence under Section 138 of the NI Act, that the Legislature in its wisdom has used the term 'cause of action' in Section 142 of the NI Act. While interpreting Section 142 of the NI Act, the Supreme Court held as under: "49. A cursory reading of Section 142 will again make it clear that the procedure under the CrPC has been departed from. First and foremost, no court is to take cognizance of an offence punishable under Section 138 except on a complaint made in writing by the payee or the holder in due course of the cheque - the victim. Further, the language of Section 142(1)(b) would again show the hybrid nature of these provisions inasmuch as a complaint must be made within one month of the date on which the "cause of action" under clause (c) of the proviso to Section 138 arises.....