2006 (2) TMI 610 - SC - Companies Law

Whether the Kerala High Court had jurisdiction in the matter? Held that - The Kerala High Court had no jurisdiction to entertain the writ petition of the offence under Section 138 of the Act, as no part of cause of action arose within its jurisdiction. For the foregoing reasons this appeal is allowed. The impugned Judgment and order is set aside. Interim orders passed by the High Court shall stand vacated. The respondent shall now appear before the court concerned.

Issues Involved:
1. Jurisdiction of the Kerala High Court in the matter.
2. Validity of the order taking cognizance by the Chief Judicial Magistrate, Birbhum.
3. Applicability of Section 138 of the Negotiable Instruments Act, 1881.
4. Compliance with procedural requirements under Section 138 of the Negotiable Instruments Act.
5. Determination of cause of action and its relevance to territorial jurisdiction.

Detailed Analysis:

1. Jurisdiction of the Kerala High Court in the Matter:
The primary question was whether the Kerala High Court had jurisdiction. The respondents filed a writ petition in the Kerala High Court, arguing that part of the cause of action arose within its jurisdiction because the cheques were issued from their registered office in Ernakulam. However, the Supreme Court held that the entire cause of action arose within the jurisdiction of the District Courts of Birbhum. The Court emphasized that sending cheques from Ernakulam or the respondents having an office there did not form an integral part of the cause of action. Thus, the Kerala High Court had no jurisdiction to entertain the writ petition.

2. Validity of the Order Taking Cognizance by the Chief Judicial Magistrate, Birbhum:
The Chief Judicial Magistrate, Birbhum, took cognizance of the offence under Section 138 of the Negotiable Instruments Act, 1881, on the basis that a prima facie case was made out. The Supreme Court upheld this order, stating that the Chief Judicial Magistrate had the jurisdiction to take cognizance as the entire cause of action arose within his jurisdiction.

3. Applicability of Section 138 of the Negotiable Instruments Act, 1881:
The appellant alleged that several cheques issued by the respondents were dishonoured, constituting an offence under Section 138 of the Act. The Court noted that the object of Section 138 is to ensure the integrity and honesty of business transactions involving cheques. The respondents admitted to the outstanding amount but claimed financial difficulties. The Supreme Court emphasized the importance of Section 138 in maintaining the credibility of business transactions and upheld its applicability in this case.

4. Compliance with Procedural Requirements under Section 138 of the Negotiable Instruments Act:
For securing a conviction under Section 138, the complainant must prove that the cheque was drawn for payment of a debt, was dishonoured, a demand for payment was made within the stipulated period, and the drawer failed to make the payment within 15 days of receiving the notice. The Supreme Court found that the appellant had complied with these procedural requirements, as the cheques were presented, dishonoured, and a demand notice was sent. The respondents admitted to part of the payment but failed to clear the remaining amount.

5. Determination of Cause of Action and Its Relevance to Territorial Jurisdiction:
The Court analyzed the concept of 'cause of action' and its relevance to territorial jurisdiction. It referred to several precedents, concluding that the cause of action means a bundle of facts required to be proved. In this case, the cause of action arose entirely within the jurisdiction of the Chief Judicial Magistrate, Birbhum, as the cheques were issued and dishonoured there. The Supreme Court reiterated that the place where the offence was committed is crucial in determining jurisdiction and that the Kerala High Court's jurisdiction could not be invoked merely because the respondents' office was in Ernakulam.

Conclusion:
The Supreme Court allowed the appeal, set aside the impugned judgment of the Kerala High Court, and vacated the interim orders. The respondents were directed to appear before the court concerned. The appellants were awarded costs of Rs. 10,000/-.

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