Dashrath Rupsingh Rathod v. State of Maharashtra and Anr.

By Shatakshi Vats- Amity Law School, Noida

Introduction

The judgment by the honourable Apex court in the case, resolved the long-drawn confusion with respect to territorial jurisdiction of courts arising out of the complaints made under Section 138 of the Negotiable Instruments Act, 1881. The legislation in question had been the cause of mayhem among litigants as to its operation in terms of the jurisdiction in cases of cheque dishonour. The judgment is a detailed analysis and judicial interpretation of appropriate provisions of the impugned legislation.

Facts of the case

The present judgment has arose out of 8 Special Leave Petitions filed before the Supreme Court of India, with respect to dishonour of cheques in an area falling under jurisdictions of certain courts, however issued to the drawee/complainant at some other place. The facts of these appeals remain substantially the same as to the issue of jurisdiction.

In a certain appeal[1], the court reiterated the findings of the High court of Bombay, Nagpur Bench that the complaint must not be rejected since it was filed at a place other than where the cheque was presented to the complainant, it merely be presented to the appropriate court for filing. The appeal was rightly dismissed. In Crl. Appeal No. 1593 of 2014, the appeal was allowed calling for further action by the complainant for action according to law, where the respondent-accused who had purchased certain electronic items from the appellant company, issued cheques which were later dishonoured at a different place. The other appeals were accordingly dismissed by the court.

The case however, involved a substantial question of law, which could pose difficulty for future litigants. It was referred to the then, Chief Justice of India, after a proposed draft order. The draft order had analysed the precedents leading to the case by referring to several judgments and the comparison of their positions, whether advantageous or perverse.

The case of K. Bhaskaran v. Sankaran Vaidhyan Balan[2], (hereinafter, Bhaskaran case) formed the crux of the precedents that operated in this regard, it was asserted that the judgment held Section 138 to be a judicial mix of certain events that could lead up to the offence as suggested by the provision. Section 138, as per the judgment of the said precedent consisted of several components which together led to the commission of the offence, these were:

• Drawing of the cheque in name of the drawee,
• Presentation of the cheque to the bank by the drawee,
• Return of the unpaid cheque by the bank to the drawee,
• Presentation of notice in writing to the drawer of the cheque to pay the amount of the cheque,
• Failure of the drawer to pay the amount demanded, within 15 days of such notice.

It is stated that the offence under Section 138 is completed upon satisfaction of the above string of events. The judgment in Bhaskaran allowed for complaints to be filed at any place other than where the drawee’s bank is located.

Issues in the case

The courts had the question of jurisdiction of courts for an offence falling under the purview of Section 138 of the NI Act, codifying the requirements of the offence constituting dishonour of cheques. The court had to investigate the components of Section 138, which were the essentials of the offence. The court analysed the concatenation of the ingredients of the section. The issue before the courts was to create a settlement between the various precedents based on similar circumstances and dilemmas. The analysis of precedents on the issue of jurisdiction led to the discovery of glaring lacunae among them.

The components of Section 138 were elucidated at length in the Bhaskaran case which furthered the need for distinction between the serving of notice, and receipt of the same by the drawer. The issue as to the circumstances of the notice were further a main issue in the case of Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd.[3], (hereinafter, Harman case). Here, the court laid emphasis on the receipt of the notice and pronounced that  a cause of action did not lie on a mere omission on part of the accused, since the question before the court was whether a cause of action arose when the notice was issued from a place distinct from the place where the cheque was issued. This led the court to ponder upon the proviso to Section 138 of the NI Act. The decision clearly distinguished between the jurisprudential aspect of cognizance of an offence and its actual commission, which points to the discrepancy in the present case, that is jurisdiction to try the offence.

The present bench was faced with the question of interpretation of the proviso to section 138, its jurisprudential value while consolidation of the requirements offered by the body of the section. It was also faced with an issue of giving a paraphrased and novel interpretation to the precedents in the area. This was because, the court took into realisation the ratio in Bhaskaran case, which was unexpectedly set in favour of the complainant and afforded major complication and unjustified hardship to the accused, as in the complaint.

Since a co-ordinate is required to uphold previous decisions, it was urgent that new precedential views be added in the present circumstance. The co-ordinate bench found it compelling to refer it to the larger bench comprising of the Chief Justice, in the best interests of justice.

Section 20 of the Code of Civil Procedure was also judicially interpreted to take a diverging view from its ordinary meaning. The Explanation appended to the section was of great relevance here. The section states that the suit must be instituted at a place, where the Defendant ordinarily resides. The Explanation however, considers the operations of a corporation or a company to be going on in its principal offices, and all suits shall be instituted accordingly. Therefore, the plaintiff is precluded from instituting a suit at any other place, where the cause of action may have arisen.

The court also took into view, the extrapolation of the concepts of criminal law onto civil law, where the concept of cause of action and its arousal has been applied to commission of crimes.

The order was referred to the larger bench, for an opinion by the Chief Justice.

Judgment

In his judgment, Hon’ble Thakur J. as he was then, upheld the observations of the co-ordinate bench. He stated that the conditions set forth by Section 138 and elucidated in Bhaskaran case were not be construed to have occurred at the same place. Those conditions have the inherent capacity to have occurred at different places, at different times. However, the relationship of the essentials of Section 138 were essential to establish the offence irrespective of other factors. In this regard, the Section 178(d) of the Code of Civil Procedure was also referred. Perusal of the section made it crystal clear that each of the acts, constituting a single offence could be committed in many places, and each could be decided by the courts exercising jurisdiction in that locality.

The judgment further stated the loopholes in the Bhaskaran case, which were enlarged as gaping holes in the fabric of the judgment by the Shri Ishar Alloy Steels Ltd. v.Jayaswals Neco Ltd.[4],. On a combined reading of Sections 3, 72 and 138 of the NI Act. If the drawer has to be held criminally liable, the presentation of cheque should necessarily be within 6 months.

The proviso appended to the section posed some difficulty to which principles of statutory interpretation were applied. The dishonour of a cheque and the  sending a notice to the drawer for dishonour are 2 different fact altogether, hence for proving the offence the ingredients of the main section are to fulfilled, the proviso provides for a mere set of other conditions necessary for the application of the offence. There is not a speck of doubt that once the notice is received by the accused, he at his own risk, refrains from the payment of the amount due. He is deserving for any action taken in that behalf.

The court held that the scope of Bhaskaran case was considerably diluted in light of circumstances where the cheque was presented in some other locality. The view taken by the court in the Bhaskaran state could not be proper in the present case. The court also cleared the confusion with respect to the limitation period of 6 months to the accused, to pay the amount of the cheque after issuance of notice. This is done to afford a chance to the accused. In case the limitation period expires without payment, the cause of action arises accordingly. Hence, the order was held to be right in all respects, and a complaint could be instituted only in court exercising jurisdiction in the locality of the drawee’s bank as per the ratio in the case.

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Citation: 

• [1] [Crl. Appeal No.2287 of 2009]
• [2] (1999) 7 SCC 510.
• [3] (2009) 1 SCC 720.
• [4] (2001) 3 SCC 609.