TaxTMI 
TaxTMI 
2011 (9) TMI 1259
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....were impleaded as co-accused on the allegation that as Directors they were incharge of the day to day affairs of the company and hence were vicariously liable for the defaults of the company. The complaint was filed in the Court of Additional Chief Metropolitan Magistrate (hereinafter referred to as the "ACMM‟) New Delhi, inter-alia, averring that the respondent company and the accused No.1 company had entered into 2 agreements in terms whereof the accused No.1 company had issued 45 cheques drawn on State Bank of India Mumbai Branch, in favour of the respondent company, which cheques when presented for encashment by the respondent company with its Banker ICICI Bank New Delhi, were dishonoured and upon the cheques being returned the respondent company issued notices contemplated under proviso (b) to Section 138 N1 Act from Delhi to the accused No.1 company which failed to make payment in respect of the sum for which the cheques were drawn within 15 days of the receipt of the said notices. With respect to the jurisdiction of the Courts at Delhi it was pleaded that for the reason the respondent company had presented the cheques in question for collection with its banker ICICI Ba....
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....h a direction that the same be filed in a court of competent jurisdiction. 7. Aggrieved by the order dated 14.02.2011 passed by the learned ACMM, the petitioners have filed the above- captioned petition(s) under Section 482 Cr.P.C. requiring this Court to hold that courts at Delhi have no jurisdiction to take cognizance of the complaints in question and seek directions to the learned ACMM to return the same for filing before the Court of Competent Jurisdiction. 8. It is the case of the petitioners that the cheques in question were drawn at Mumbai. The drawee bank is at Mumbai, notice issued by the respondent to the petitioner company was received at Mumbai and thus merely because the respondent posted the notice from Delhi and deposited the cheque with its bank at Delhi would not confer jurisdiction on Courts in Delhi. 9. The issue has to be debated with reference to Section 138 of the NI Act and the applicable provisions of the Code of Criminal Procedure i.e. Sections 177, 178 and 179 of the Code of Criminal Procedure. 10. In the decision reported as 1999 (7) SCC 510 K.Bhaskaran Vs. Shankaran Vaidhyan Balan & Anr., the Supreme Court has opined, after considering Sectio....
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....f the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and (c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability. 13. In Bhaskaran's case (supra) the Supreme Court had an occasion to deal with the issue of territorial jurisdiction in relation to Section 138 of the NI Act, and of necessity, the discussion required the Supreme Court to identify the various acts of commission and omission which constituted the offence punishable under Section 138 of the NI Act and suffice would it be to highlight that in para 14 of the decision, the Supreme Court highlighted that there are 5 acts which are the components of the offence punishable under Section 138 of the NI Act and I re-produce the same from para 14 of the decision of the Supreme Court. They read as under:- (i) drawing of the cheque, (ii)....
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....ch lessened. But the legislature says that failure on the part of the drawer to pay the amount should be within 15 days "of the receipt" of the said notice. It is, therefore, clear that "giving notice" in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment. It is for the payee to perform the former process by sending the notice to the drawer at the correct address. ..... 20. If a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice on the correct address, a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act. It must be borne in mind that the court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure. 21. ....The context envisaged in Section 138 of the Act invites a liberal interpretation for the person who has the statutory obligation to give notice because he is presumed to....
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....ne of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the Act‟ to be found in paras 14 and 16 respectively in Bhaskaran's case (supra) have been understood by many to mean that the Court within local limits of which the payee Bank i.e. the Bank where the complainant deposited the cheque is situated has the jurisdiction to try the complaint under Section 138 of the NI Act, and the understanding appears to be fortified by the observations of the Supreme Court in paras 15 and 16 that if the 5 acts contemplated as the ingredient of an offence under Section 138 of the NI Act were done in 5 different localities, any one of the court exercising jurisdiction in any one of the 5 local areas would have jurisdiction. 17. But, it is apparent that the observations in para 15 and 16 are an obiter as it is not 5 places where the 5 acts constituting an offence under Section 138 of the NI Act can possibly be performed. The acts can be performed, as would be explained hereinafter, only at 4 places and I would immediately state that act No.2 and act No.3 relate to only one place i.e. the place where the draw....
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.... 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 punishable with imprisonment as prescribed therein subject to the conditions mentioned in clauses (a), (b) and (c) of the proviso. Section 3 of the Act defines the "banker" to include any person acting as a banker and any post office savings bank. Section 72 of the Act provides that a cheque must, in order to charge the drawer, be presented at the bank upon which it is drawn before the relations between the drawer and his banker has been altered to the prejudice of the drawer. 9. The use of the words "a bank" and "the bank" in the section is an indicator of the intention of the legislature. The former is an indirect (sic indefinite) article and the latter is prefixed by a direct (sic definite) article. If the legislature intended to have the same meanings for "a bank" and "the bank", there was no cause or occasion for mentioning it distinc....
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....e bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee." (Emphasis Supplied) 21. Though the decision in Ishar Alloy's case (supra) has been rendered in the context of limitation for presentation of a cheque, the said decision brings out in no uncertain terms that Section 138 of the NI Act contemplates that a cheque is required to be presented for encashment to the drawee Bank and that the payee Bank, merely acts as an agent of the payee/complainant for the purposes of presenting the cheque in question for encashment to the drawee Bank. 22. Thus, the 2nd act to which the Supreme Court referred to in Bhaskaran's case as one of the 5 which constitutes the offence under Section 138 of the NI Act was the presentation of the cheque to the drawee bank and needless to state the 3rd act which constitutes an ingredient of the offence is the return of the cheque unpaid by the drawee bank and thus it becomes crystal clear that the 2nd and 3rd act constituting the offence would relate to only one place i.e. the place where the drawee bank is located. 23. These are my humble reasons to hold that the observat....
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....es of presenting the cheque in question to the drawee Bank. The necessary corollary thereof is that no part of cause of action for the offence punishable under Section 138 of the NI Act arises in the Court within the local limits of which the collecting Bank of the complainant i.e. payee Bank is situated and thus said Court has no jurisdiction to try a complaint under Section 138 of the NI Act filed by the complainant. 28. This takes me to the consideration of second question involved in the present case i.e. whether the court within the local limits of which the place from where the complainant had sent a notice contemplated under proviso (b) appended to Section 138 of the NI Act is situated has the jurisdiction to try a complaint filed under Section 138 of the NI Act. 29. I have already noted the observations made by the Supreme Court in Bhaskaran's case (supra) in the foregoing paras and would highlight that in paras 17 to 23 the Supreme Court has reflected upon the limitation within which the notice has to be given to the accused. The Supreme Court was considering the expression "giving a notice‟ in proviso (b) to Section 138 of the NI Act, with reference to the 15 ....
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....accused. It may be deemed to have been received in certain situations. The word "communicate" inter alia means "to make known, inform, convey, etc". ..... 20. ..... A court derives a jurisdiction only when the cause of action arose within its jurisdiction. The same cannot be conferred by any act of omission or commission on the part of the accused. A distinction must also be borne in mind between the ingredient of an offence and commission of a part of the offence. While issuance of a notice by the holder of a negotiable instrument is necessary, service thereof is also imperative. Only on a service of such notice and failure on the part of the accused to pay the demanded amount within a period of 15 days thereafter, the commission of an offence completes. Giving of notice, therefore, cannot have any precedent over the service. It is only from that view of the matter that in Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd emphasis has been laid on service of notice." (Emphasis Supplied) 32. At a first blush reading of the decisions of the Supreme Court in Bhaskaran and Harman's cases (supra) it may strike to the reader that there is a conflict be....