TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 2
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................................................... 6 C. ANALYSIS .............................................................................................. 6 (i) Position of law as regards jurisdiction of courts prior to the Amendment Act, 2015....................................................... 7 a. Analysis of the observations of this Court in Bhaskaran .................... 7 b. Analysis of the observations of this Court in Harman Electronics .......................................................................................... 13 c. Analysis of the observations of this Court in Dashrath Rupsingh Rathod....................................................................... 18 (ii) Position of law as regards jurisdiction of courts after the enactment of the Amendment Act, 2015........................................... 27 a. Meaning of the expressions "delivered for collection through an account" and "presentation for payment otherwise through an account" ................................................................... 30 b. Meaning of the expression "maintains an account" under Section 142(2...........
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.... an invoice generated by the complainant company, dated 23.03.2014. The cheque was drawn by the accused on the State Bank of Bikaner and Jaipur, Kolkata and the same was deposited by the complainant on 19.06.2014 in its account maintained with the State Bank of India, Bhopal branch. 6. The cheque referred to above came to be dishonoured due to insufficiency of funds on 20.06.2025 pursuant to which, the complainant issued the statutory notice dated 11.07.2014 to all the accused persons through registered speed post A/D, demanding that the sum of Rs. 19,94,996/- be paid within a period of 15 days as prescribed under Section 138 of the Act, 1881 in lieu of the dishonoured cheque. The said notice was delivered on 14.07.2014. 7. The accused company replied vide the letter dated 26.07.2014 which was received by the complainant on 30.07.2014, wherein all the accused persons took the defence that the said cheque had been issued as a 'Security Deposit' and not in discharge of any enforceable debt. As a result, the complainant company filed the Complaint Case No. 406978 of 2014 in the court of the Metropolitan Magistrate, Kolkata (the "MM, Kolkata") on 16.08.2014. The same was register....
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....s conspectus of facts has enabled the complainant to prosecute the accused and the sole controversy before us is as to which court has the territorial jurisdiction to try the accused persons for the offence punishable under Section 138 of the Act, 1881. B. ISSUES FOR DETERMINATION 12. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following two questions fall for our consideration: i. Whether after the enactment of the Amendment Act, 2015, the court within whose local jurisdiction the drawee bank is situated, has the jurisdiction to try a complaint under Section 138? ii. Whether after the enactment of the Amendment Act, 2015, a complaint under Section 138 of the Act, 1881 can be transferred to the court within whose local jurisdiction the drawee bank is situated, if the recording of evidence under Section 145 has already commenced in the said court? C. ANALYSIS 13. Before adverting to the conspectus of facts before us, we must discuss or rather clarify the position of law as regards jurisdiction of courts to entertain complaints under Section 138 of the Act, 1881 especially after the intr....
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....rocedure, 1973 (the "CrPC") lays down the rule that every offence must be tried by a court within whose jurisdiction it was committed, yet this rule was not invariable. Situations that may present uncertainty as regards the question of jurisdiction are accounted for by the CrPC, more particularly Section 178 thereof. Section 178 reads thus: "178. Place of inquiry or trial. (a) When it is uncertain in which of several local areas an offence was committed, or (b) where an offence is committed partly in one local area and partly in another, or (c) where an offence is a continuing one, and continues to be committed in more local areas than one, or (d) where it consists of several acts done in different local areas, it may be inquired into or tried by a Court having jurisdiction over any of such local areas." 19. The plain reading of Section 178(d) referred to above clarifies that when it is not possible to answer the question of jurisdiction with certainty due to several acts having been done in different local areas, the offence could be tried in a court having jurisdiction over any of such local areas. 20. This Court highlig....
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....ng different localities, the offence would have been committed the trial can be had in a court having jurisdiction over any of those localities. The provision has further widened the scope by stating that in case where the offence was committed partly in one local area and partly in another local area the court in either of the localities can exercise jurisdiction to try the case. Further again, Section 179 of the Code stretches its scope to a still wider horizon. It reads thus: "179. Offence triable where act is done or consequence ensues.-When an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be enquired into or tried by a court within whose local jurisdiction such thing has been done or such consequence has ensued." 13. The above provisions in the Code should have been borne in mind when the question regarding territorial jurisdiction of the courts to try the offence was sought to be determined. 14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence: (1) ....
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....vations of this Court in Harman Electronics 23. In Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd., reported in (2009) 1 SCC 720, the cheque was issued by the drawer in Chandigarh and was presented by the complainant in Chandigarh itself. The complainant sent the statutory notice under Section 138 from Delhi which was admittedly served on the drawer in Chandigarh. Upon non-clearance of dues, the complainant filed a complaint under Section 138 before the Additional Sessions Judge, New Delhi (the "ASJ, Delhi"). 24. It was the grievance of the accused therein that although most of the acts required to constitute an offence under Section 138 were committed in Chandigarh, yet the complainant had filed the complaint in the court at New Delhi only on the strength of the fact that the statutory notice was issued in Delhi. The accused therein had contended that this by itself would amount to absurdity if the complaint was entertained in Delhi. 25. The ASJ, Delhi held that the court in Delhi had the territorial jurisdiction to conduct trial in respect of the complaint as the statutory notice was sent by the complainant from Delhi. The High Court of Delhi affirmed th....
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.... court taking cognizance, even if taken into consideration does not show that the cheque was presented at the Delhi branch of Citibank. We, therefore, have no other option but to presume that the cheque was presented at Chandigarh. Indisputably, the dishonour of the cheque also took place at Chandigarh. The only question, therefore, which arises for consideration is that as to whether sending of notice from Delhi itself would give rise to a cause of action for taking cognizance under the Negotiable Instruments Act. 13. It is one thing to say that sending of a notice is one of the ingredients for maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence. For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be proved. What would constitute an offence is stated in the main provision. The proviso appended thereto, however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken. If the ingredients for constitution of the offence laid down in pr....
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....e 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. [(2001) 6 SCC 463 : 2001 SCC (Cri) 1163 : AIR 2001 SC 676] emphasis has been laid on service of notice. 21. We cannot, as things stand today, be oblivious of the fact that a banking institution holding several cheques signed by the same borrower can not only present the cheque for its encashment at four different places but also may serve notices from four different places so as to enable it to file four complaint cases at four different places. This only causes grave harassment to the accused. It is, therefore, necessary in a case of this nature to strike a balance between the right of the complainant and the right of an accused vis-à-vis the provisions of the Code of Criminal Procedure." (Emphasis supplied) 30. This Court, while applying the principles relating to jurisdiction as laid down in Bhaskaran (supra), explained the legal effect of....
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....s Neco Ltd., (2001) 3 SCC 609 : 2001 SCC (Cri) 582] is very relevant and conclusive to the discussion in hand. It also justifies emphasis that Ishar Alloy [Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd., (2001) 3 SCC 609 : 2001 SCC (Cri) 582] is the only case before us which was decided by a three-Judge Bench and, therefore, was binding on all smaller Benches. We ingeminate that it is the drawee Bank and not the complainant's bank which is postulated in the so-called second constituent of Section 138 of the NI Act, and it is this postulate that spurs us towards the conclusion that we have arrived at in the present appeals. There is also a discussion of Harman [Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd., (2009) 1 SCC 720 : (2009) 1 SCC (Civ) 332 : (2009) 1 SCC (Cri) 610] to reiterate that the offence under Section 138 is complete only when the five factors are present. It is our considered view, which we shall expound upon, that the offence in the contemplation of Section 138 of the NI Act is the dishonour of the cheque alone, and it is the concatenation of the five concomitants of that section that enable the prosecution of the offence in contradistin....
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....t in mind that the legislature does not ordain with one hand and immediately negate it with the other. The proviso often carves out a minor detraction or diminution of the main provision of which it is an appendix or addendum or auxiliary. Black's Law Dictionary states in the context of a proviso that it is "[a] limitation or exception to a grant made or authority conferred, the effect of which is to declare that the one shall not operate, or the other be exercised, unless in the case provided. A clause or part of a clause in a statute, the office of which is either to except something from the enacting clause, or to qualify or restrain its generality, or to exclude some possible ground of misinterpretation of its extent". It should also be kept in perspective that a proviso or a condition are synonymous. In our perception in the case in hand the contents of the proviso place conditions on the operation of the main provision, while it does (sic not) form a constituent of the crime itself, it modulates or regulates the crime in circumstances where, unless its provisions are complied with, the already committed crime remains impervious to prosecution. T....
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....ther equally pressing litigation. We think that courts are not required to twist the law to give relief to incautious or impetuous persons; beyond Section 138 of the NI Act." (Emphasis supplied) 35. It was further observed in Dashrath Rupsingh (supra) that the infusion of the concept of 'cause of action' in criminal proceedings as done by Bhaskaran (supra) perpetuated ambiguity relating to jurisdiction by allowing filing of a complaint under Section 138 at multiple venues. This Court held that the interpretation of Sections 177 and 178 of the CrPC respectively, set forth in the said judgment ran counter to the approach of simplifying law. It was observed that Section 178 despite being an exception to Section 177 which informs about criminal jurisdiction ordinarily, did not envisage the concept of 'cause of action' as being a consideration germane for determining territorial jurisdiction in criminal trials. Therefore, the plain meaning obtained from Sections 177 and 178 respectively ought not to be warped for commercial exigencies and the logical conclusion flowing therefrom can only be that territorial jurisdiction was anchored at the place where the offence was committ....
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....stify a departure from the stipulation that the place where the offence is committed is where the prosecution has to be conducted. In fact, since cognizance of the offence is subject to the five Bhaskaran [K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510 : 1999 SCC (Cri) 1284] components or concomitants the concatenation of which ripens the already committed offence under Section 138 of the NI Act into a prosecutable offence, the employment of the phrase "cause of action" in Section 142 of the NI Act is apposite for taking cognizance, but inappropriate and irrelevant for determining commission of the subject offence. There are myriad examples of the commission of a crime the prosecution of which is dependent on extraneous contingencies such as obtainment of sanction for prosecution under Section 19 of the Prevention of Corruption Act, 1988. Similar situation is statutorily created by Section 19 of the Environment (Protection) Act, 1986; Section 11 of the Central Sales Tax Act, 1956; Section 279 of the Income Tax Act; Sections 132 and 308 CrPC; Section 137 of the Customs Act, etc. It would be idle to contend that the offence comes into existence only on the grant of permiss....
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....le under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque; (b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138: Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period; (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138. (2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,-- (a) 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; or (b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situat....
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....given notice of such signing to the holder or to some person on his behalf, he is called the "acceptor". "Acceptor for honour". -- When a bill of exchange has been noted or protested for non-acceptance or for better security,] and any person accepts it supra protest for honour of the drawer or of any one of the indorsers, such person is called an "acceptor for honour". "Payee". -- The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the "payee"." (Emphasis supplied) a. Meaning of the expressions "delivered for collection through an account" and "presentation for payment otherwise through an account" 42. The expression "delivered for collection through an account" is an integral part of Section 142(2)(a) and distinguishes it from the provision in Section 142(2)(b) which comes into operation when a cheque is "presented for payment otherwise through an account". We find it apposite to clarify that the expressions "delivered for collection" and "presented for payment" respectively, are distinct. They operate in separate stages of discharging a liability by way of a cheque. 43. The word ....
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.... that immediately succeeds "delivery". The expression "presentment for payment" is defined under Section 64 of the Act, 1881. It stipulates that a cheque must be presented for payment to the maker of such cheque (the drawer) or the person to whom directions are given to pay the amount specified in the cheque (the drawee). Such presentment must be by or on behalf of the payee. The relevant provision reads thus: "64. Presentment for payment. (1) Promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder. Where authorized by agreement or usage, a presentment through the post office by means of a registered letter is sufficient. Exception.--Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof. (2) Notwithstanding anything contained in section 6, where an electronic image of a truncated cheque is presented for payment, the dr....
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....bes an intrinsic relationship between an account holder and the bank in which he holds such account. Such relationship could not be altered by a delegation of authority. Therefore, even though a person may draw a cheque on the bank account of another person, it is not possible to hold such a person who draws the cheque, liable for the offence under Section 138 as he is not the one who maintains the account with the bank. The relevant portion of the judgment in Bijoy Kumar Moni (supra) is reproduced below: "45. It is of vital importance to understand the import of the expression "on an account maintained by him with a banker" used in Section 138 of the NI Act. The expression, in our considered opinion, describes the relationship between the account holder and the banker. This relationship is fundamental to the application of Section 138. The act of maintaining an account is exclusively tied to the account holder and does not extend to any third party whom the account holder may authorize to manage the account on its behalf. Therefore, any delegation of authority to manage the account does not alter the intrinsic relationship existing between the account holder and the banke....
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....s that the payee or drawer, by maintaining the account in a particular branch of the bank, share a relationship not with the bank as a whole but with the specific branch thereof (we may refer to this specific branch as the "home branch" for ease of exposition). Therefore, the inclusion of "branch" in Sections 142(2)(a) and (b) places an additional condition for determining the place where the payee or drawer maintains the account. This additional condition is placed on the relationship between a person and his banker, in order to decide the question of jurisdiction and streamline the process of adjudication. In other words, for deciding jurisdiction, it is not sufficient to establish whether a person maintains an account in a particular bank. It is necessary to also ascertain the specific branch of the bank in which he maintains the account to completely and unambiguously decide the said question. c. Conjoint reading of Section 142(2)(a) and the Explanation thereto 54. It is limpid from the aforesaid discussion that the necessary corollary of including 'branch' as a factor that shapes the relationship between the payee/drawer and their bank, is that a complaint under Section ....
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....scussed in the aforesaid, "delivery" is continued by the payee to also include delivery of the cheque to the payee's bank. In such a case, the act of making of the cheque is influenced by the payee allowing him to deliver the cheque for collection at any branch of the bank in which he maintains an account. 57. If the aforesaid be so and the jurisdiction is to be decided on the basis of the place where the cheque was delivered to the bank of the payee, the same would lead to conferring unbridled power to the payee in deciding jurisdiction which may be misused for the purposes of forum shopping. We are cognizant of the fact that the dictum in Dashrath Rupsingh (supra) sought to minimize such abuse of law that arose from the wide ambit of jurisdiction specified in Bhaskaran (supra). While a bare perusal of the amended Section 142 and the Statement of Objects and Reasons of the Amendment Act, 2015 shows that the Parliament has made a departure from the offence-centric understanding of jurisdiction in Dashrath Rupsingh (supra), yet we find it difficult to accept that the legislature would relegate the position of law back to a situation that would facilitate its manipulation. 58. ....
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....75 wherein it was observed that the legal position declared in Dashrath Rupsingh (supra) has been overturned by the Negotiable Instruments (Amendment) Second Ordinance, 2015 whereby Section 142 was amended such that the jurisdiction would be fixed at the place where the cheque is delivered for collection, i.e., the branch of the bank in which the payee maintains an account. The relevant portions of the judgment in Bridgestone (supra) are reproduced below: "11. In order to overcome the legal position declared by this Court in Dashrath Rupsingh Rathod case [Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129: (2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673], the learned counsel for the appellant has drawn our attention to the Negotiable Instruments (Amendment) Second Ordinance, 2015 (hereinafter referred to as "the Ordinance"). A perusal of Section 1(2) thereof reveals that the Ordinance would be deemed to have come into force with effect from 15-6-2015. It is, therefore, pointed out to us that the Negotiable Instruments (Amendment) Second Ordinance, 2015 is in force. Our attention was then invited to Section 3 thereof, whereby, the original Section 142 of the....
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....makes it amply clear that insertion of Sections 142(2) and 142-A in the 1881 Act was a direct consequence of the judgment of this Court in Dashrath Rupsingh Rathod [Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 : (2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673]. Therefore, the use of the phrase: "shall be inquired into and tried only by a court within whose local jurisdiction ..." in Section 142(2) of the 1881 Act is contextual to the ratio laid down in Dashrath Rupsingh Rathod [Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 : (2014) 4 SCC (Civ) 676 : (2014) 3 SCC (Cri) 673] to the contrary, whereby territorial jurisdiction to try an offence under Section 138 of the 1881 Act vested in the court having jurisdiction over the drawee bank and not the complainant's bank where he had presented the cheque. Section 142(2) now makes it clear that the jurisdiction to try such an offence would vest only in the court within whose jurisdiction the branch of the Bank where the cheque was delivered for collection, through the account of the payee or holder in due course, is situated. The newly inserted Section 142-A further clarifies this position by v....
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....ncerns about the wide impact this judgment would have on the business interests as it will offer undue protection to defaulters at the expense of the aggrieved complainant; will give a complete go-by to the practice/concept of 'Payable at Par cheques' and would ignore the current realities of cheque clearing with the introduction of CTS (Cheque Truncation System) where cheque clearance happens only through scanned image in electronic form and cheques are not physically required to be presented to the issuing branch (drawee bank branch) but are settled between the service branches of the drawee and payee banks; will give rise to multiplicity of cases covering several cheques drawn on bank(s) at different places; and adhering to it is impracticable for a single window agency with customers spread all over India. 5. To address the difficulties faced by the payee or the lender of the money in filing the case under Section 138 of the said Act, because of which, large number of cases are stuck, the jurisdiction for offence under Section 138 has been clearly defined. The Negotiable Instruments (Amendment) Bill, 2015 provides for the following, namely- (i) filing of cases....
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.... the payee presents the cheque for payment. It is apposite to note that, on the face of it, the language used in the Statement of Objects and Reasons is not synonymous with the language of Section 142(2)(a) and the Explanation thereto. Therefore, in our considered view, Yogesh Upadhyay (supra) could not have derived support from the Statement of Objects and Reasons. 66. We say so because no value could have been attached to the language adopted in the Statement of Objects and Reasons for the purpose of discerning the true meaning and effect of a substantive provision occurring in the statute book. This principle of interpretation has been settled by this Court in Devadoss v. Veera Makali Amman Koil Athalur, reported in (1998) 9 SCC 286 wherein it was observed thus: "21. The question arises naturally whether the court can refer to the Statement of Objects and Reasons mentioned in a bill when it is placed before the legislature and even if it is permissible, to what extent the court can make use of the same. On this aspect, the law is well settled. In Narain Khamman v. Parduman Kumar Jain [(1985) 1 SCC 1] it was stated that though the Statement of Objects and Reasons acco....
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....d by the payee. However, the payee delivered the cheque for collection at another branch instead of the home branch. According to the dictum as laid in Yogesh Upadhyay (supra), primacy has to be accorded to the action of the payee in "delivery of the cheque for collection" for the purpose of determining jurisdiction. The only understanding that we can obtain from the aforesaid is that the court exercising territorial jurisdiction over the home branch will have to share the inherent powers that it possesses under Section 142(2)(a), with the court in whose jurisdiction such other branch is situated, in which the payee delivered the cheque for collection. 70. Having undertaken the academic exercise of understanding the ways in which the Explanation may be read, we do not have any qualms in saying that the aforesaid construction of Section 142(2)(a) and the Explanation thereto does not appeal to us. We say so for the following two reasons: (i) First, the understanding of the Explanation in such a manner leads to distorting of the plain language of Section 142(2)(a). This Court, in Dashrath Rupsingh (supra) observed that "the legislature does not ordain with one hand and imm....
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....is not in consonance with how Yogesh Upadhyay (supra) perceived Section 142(2)(a). It was observed that presentation of a cheque to the drawee bank will be "through the account" of the payee and that such place would be determinative for the purpose of identifying jurisdiction. The relevant portion of the judgment in Sendhur Agro (supra) is reproduced below: "61. It is clear on a reading of Section 142(2)(a) and the Explanation thereto that, 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. 62. A conjoint reading of Section 142(2)(a) along with the explanation thereof, makes the position emphatically clear that, when a cheque is delivered or issued to a person with liberty to present the cheque for collection at any branch of the bank where the payee or holder in due course, as the case may be, maintains the account then, the cheque shall be deemed to have been delivered or issued to the branch of the bank, in ....
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....ted Bridgestone (supra) - Section 142(2)(a) of the 1881 Act vests jurisdiction for initiating proceedings for an offence under Section 138 in the court where the cheque is delivered for collection i.e. through an account in the branch of the bank where the payee or holder in due course maintains an account Yogesh Upadhyay (supra) - Section 142(2) now makes it clear that the jurisdiction to try such an offence would vest only in the court within whose jurisdiction the branch of the Bank where the cheque was delivered for collection, through the account of the payee or holder in due course, is situated Sendhur Agro (supra)- In that view of the position of law, the word 'delivered' used in Section 142(2)(a) of the N.I. Act has no significance. What is of significance is the expression 'for collection through an account'. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the said place is decisive to determine the question of jurisdiction. 74. The above diagrammatic representation shows that each judgment has considered specific phrases ....
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....ormed that the court of MM, Kolkata returned the complaint when it had already reached the stage of recording of evidence under Section 145(2) of the Act, 1881. In such view of the matter, we are of the considered opinion that allowing the parties to contest the complaint afresh before the JMFC, Bhopal would amount to a procedural impropriety that may prove to be detrimental to the case of the accused. 79. In Dashrath Rupsingh (supra), this Court, with a view to obviate and eradicate legal complications, had allowed the category of complaint cases in which proceedings had reached the stage of recording evidence under Section 145(2), to remain in the court where they were pending, despite such courts not being vested with jurisdiction in terms of the judgment. The relevant portion of the judgment is reproduced below: "22. (...) To obviate and eradicate any legal complications, the category of complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the court ordinarily possessing territorial jurisdiction, as now clarified, to the court where it is presently pending." 80. In light of the ob....