IMPORTANT POINT
Territorial jurisdiction is restricted to Court within whose local jurisdiction cheque is dishonoured by bank on which it is drawn. Cause of action as perceived in civil law are not relevant in criminal prosecution.

Headnote:VIKRAMAJIT SEN, J.
       (A) Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Sections 177, 178 and 179—Dishonour of cheque—Territorial jurisdiction of court to entertain complaint—There is difference between commission of offence and its cognizance—Precision and exactitude are necessary especially where location of a litigation is concerned—Law mandates cheque to be presented at bank on which it is drawn if drawer is to be held criminally liable—Place where complainant may present cheque for encashment would not confer or create territorial jurisdiction. (Paras 11 and 12)
       (B) Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Sections 177, 178 and 179—Dishonour of cheque—Territorial jurisdiction of court to entertain complaint—Place of judicial inquiry and trial of offence must logically be restricted to where drawee bank is located—An interpretation should not be imparted to Section 138 which will render it as a device of harassment by sending notices from a place which has no causal connection with transaction itself, and/or by presenting cheque(s) at any of banks where payee may have an account. (Paras 16 and 17)
       (C) Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Sections 177, 178 and 179—Dishonour of cheque—Territorial jurisdiction of court to entertain complaint—Place of issuance or delivery of statutory notice or where Complainant chooses to present cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of Complaints even though non-compliance thereof will inexorably lead to dismissal of complaint—Complainant is statutorily bound to comply with Section 177 of Cr.P.C. and place or situs where Section 138 Complaint is to be filed is not of his choosing—Territorial jurisdiction is restricted to Court within whose local jurisdiction offence was committed which is where cheque is dishonoured by bank on which it is drawn—Regardless of whether evidence has been led before Magistrate at pre-summoning stage, either by affidavit or by oral statement, complaint will be maintainable only at place where cheque stands dishonoured. (Paras 19 and 20)
       (D) Precedent—Judicial Decorum—It is imperative for Court to diligently distill and then apply ratio of a decision and view of a larger Bench ought not to be disregarded—Once decision of a larger Bench has been delivered it is that decision which mandatorily has to be applied; whereas a Co-ordinate Bench, in the event that it finds itself unable to agree with an existing ratio, is competent to recommend precedent for reconsideration by referring the case to Chief Justice for constitution of a larger Bench. (Para 5)
       T.S. Thakur, J. (Assenting View)
       (A) Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Sections 177, 178 and 179—Dishonour of cheque—Territorial jurisdiction of court to entertain complaint—Dishonour of cheque would be localised at place where drawee bank is situated—Presentation of cheque at any place cannot confer jurisdiction upon Court within whose territorial limits such presentation may have taken place—Unilateral acts of complainant in presenting a cheque at a place of his choice or issuing a notice for payment of dishonoured amount cannot arm complainant with power to choose place of trial. (Paras 27 and 32)
       (B) Negotiable Instruments Act, 1881—Sections 138 and 142—Criminal Procedure Code, 1973—Sections 177, 178 , 179 , 184 and 220(1)—Dishonour of cheque—Maintainability of complaint—Once cause of action accrues to complainant, jurisdiction of Court to try the case will be determined by reference to place where cheque is dishonoured—Prosecution in such cases can be launched against drawer of cheque only before Court within whose jurisdiction dishonour takes place except in situations where offence of dishonour of cheque punishable under Section 138 is committed along with other offences in a single transaction. (Para 31)

Judgement Key Points

Key Points: - The judgment holds that territorial jurisdiction is restricted to the place where the cheque is dishonoured by the drawee bank (drawee location) (!) (!) (!) (!) . - It clarifies the distinction between the offence (dishonour of cheque) and the cause of action for filing a complaint, with cognizance governed by Section 142 CrPC and the proviso conditions (six-month presentation, notice, 15-day payment window) (!) (!) (!) (!) . - It explains that the proviso to Section 138 does not form part of the offences’ ingredients but sets conditions precedent for launching prosecution, which accrues only after those conditions are satisfied (!) (!) (!) . - It discusses that the place of issuance/delivery of notice or presentation at the complainant’s bank does not confer jurisdiction; the drawee bank’s location is determinative for territorial jurisdiction (!) (!) (!) . - It notes the legislative intent to avoid harassment and suggests that Bhaskaran’s wider five-venue view has been reconsidered in favor of localisation to the drawee bank’s location (!) (!) . - It provides guidance for cases pending at various stages, transferring those with commenced evidence to the proper court and returning others to proper courts, with 30-day refile window (!) . - It reiterates that civil law concepts like "cause of action" are not applicable for determining territorial jurisdiction in criminal prosecutions under Section 138 NI Act (!) (!) .

How to determine territorial jurisdiction for offences under Section 138 NI Act?

What is the correct place for cognizance and trial of complaints under Section 138 NI Act?

What is the effect of the proviso to Section 138 NI Act on the offence vs. the initiation of prosecution?

JUDGMENT

Vikramajit Sen, J. —Leave granted in Special Leave Petitions. These Appeals raise a legal nodus of substantial public importance pertaining to Court’s territorial jurisdiction concerning criminal complaints filed under Chapter XVII of the Negotiable Instruments Act, 1881 (for short, ‘the NI Act’). This is amply adumbrated by the Orders dated 3.11.2009 in I.A.No.1 in CC 15974/2009 of the three- Judge Bench presided over by the then Hon’ble the Chief Justice of India, Hon’ble Mr. Justice V.S. Sirpurkar and Hon’ble Mr. Justice P. Sathasivam which SLP is also concerned with the interpretation of Section 138 of the NI Act, and wherein the Bench after issuing notice on the petition directed that it be posted before the three-Judge Bench.

PRECEDENTS

2. The earliest and the most often quoted decision of this Court relevant to the present conundrum is K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 wherein a two-Judge Bench has, inter alia, interpreted Section 138 of the NI Act to indicate that, “the offence under Section 138 can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence:

(1) Drawing of the cheque,

(2) Presentation of the cheque to the bank,

(3) Returning the cheque unpaid by the drawee bank,

(4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,

(5) Failure of the drawer to make payment within 15 days of the receipt of the notice.”

The provisions of Sections 177 to 179 of the Code of Criminal Procedure, 1973 (for short, ‘CrPC’) have also been dealt with in detail. Furthermore, Bhaskaran in terms draws a distinction between ‘giving of notice’ and ‘receiving of notice’. This is for the reason that clause (b) of proviso to Section 138 of the NI Act postulates a demand being made by the payee or the holder in due course of the dishonoured cheque by giving a notice in writing to the drawer thereof. While doing so, the question of the receipt of the notice has also been cogitated upon.

3. The issuance and the receipt of the notice is significant because in a subsequent judgment of a Coordinate Bench, namely, Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd., (2009) 1 SCC 720 emphasis has been laid on the receipt of the notice, inter alia, holding that the cause of action cannot arise by any act of omission or commission on the part of the ‘accused’, which on a holistic reading has to be read as ‘complainant’. It appears that Harman transacted business out of Chandigarh only, where the Complainant also maintained an office, although its Head Office was in Delhi. Harman issued the cheque to the Complainant at Chandigarh; Harman had its bank account in Chandigarh alone. It is unclear where the Complainant presented the cheque for encashment but it issued the Section 138 notice from Delhi. In those circumstances, this Court had observed that the only question for consideration was “whether sending of notice from Delhi itself would give rise to a cause of action for taking cognizance under the NI Act.” It then went on to opine that the proviso to this Section “imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken.” We respectfully agree with this statement of law and underscore that in criminal jurisprudence there is a discernibly demarcated difference between the commission of an offence and its cognizance leading to prosecution. The Harman approach is significant and sounds a discordant note to the Bhaskaran ratio. Harman also highlights the reality that Section 138 of the NI Act is being rampantly misused so far as territorial jurisdiction for trial of the Complaint is concerned. With the passage of time equities have therefore transferred from one end of the pendulum to the other. It is now not uncommon for the Courts to encounter the issuance of a notice in compliance with clause (b) of the proviso to Section 138 of t

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IMPORTANT POINTTerritorial jurisdiction is restricted to Court within whose local jurisdiction cheque is dishonoured by bank on which it is drawn. Cause of action as perceived in civil law are not relevant in criminal prosecution.

How to determine territorial jurisdiction for offences under Section 138 NI Act?

What is the correct place for cognizance and trial of complaints under Section 138 NI Act?

What is the effect of the proviso to Section 138 NI Act on the offence vs. the initiation of prosecution?

Cases Referred (27)

IMPORTANT POINT
Territorial jurisdiction is restricted to Court within whose local jurisdiction cheque is dishonoured by bank on which it is drawn. Cause of action as perceived in civil law are not relevant in criminal prosecution.