2014 (8) TMI 417 - SC - Companies Law

Jurisdiction of Court - offence against cheque bounced - Interpretation of Section 138 of the NI Act - 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 - Whether sending of notice from Delhi itself would give rise to a cause of action for taking cognizance under the NI Act - Held that - The Explanation to that Section is important; it prescribes that a corporation shall be deemed to carry on business at its sole or principal office or in respect of any cause of action arising at any place where it has also a subordinate office at such place. Since this provision primarily keeps the Defendant in perspective the corporation spoken of in the Explanation obviously refers to the Defendant. A plain reading of Section 20 of the CPC arguably allows the Plaintiff a multitude of choices in regard to where it may institute its lis suit or action. The marginal note of Section 138 of the NI Act explicitly defines the offence as being the dishonour of cheques for insufficiency etc. of funds in the account. Of course the headings captions or opening words of a piece of legislation are normally not strictly or comprehensively determinative of the sweep of the actual Section itself but it does presage its intendment - Accordingly unless the provisions of the Section clearly point to the contrary the offence is concerned with the dishonour of a cheque; and in the conundrum before us the body of this provision speaks in the same timbre since it refers to a cheque being returned by the bank unpaid . None of the provisions of the IPC have been rendered nugatory by Section 138 of the NI Act and both operate on their own. It is trite that mens rea is the quintessential of every crime. Place situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located. The law should not be warped for commercial exigencies. As it is Section 138 of the NI Act has introduced a deeming fiction of culpability even though Section 420 is still available in case the payee finds it advantageous or convenient to proceed under that provision. An interpretation should not be imparted to Section 138 which will render it as a device of harassment i.e. by sending notices from a place which has no casual connection with the transaction itself and/or by presenting the cheque(s) at any of the banks where the payee may have an account. It is also now manifest that traders and businessmen have become reckless and incautious in extending credit where they would heretofore have been extremely hesitant solely because of the availability of redress by way of criminal proceedings. It is always open to the creditor to insist that the cheques in question be made payable at a place of the creditor s convenience. Today s reality is that the every Magistracy is inundated with prosecutions under Section 138 NI Act so much so that the burden is becoming unbearable and detrimental to the disposal of other 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. An offence under Section 138 of the Negotiable Instruments Act 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank - Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138. Once the cause of action accrues to the complainant the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured. - decided against Appellants.

Summary

Issues Involved:
1. Territorial jurisdiction for criminal complaints under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
2. Interpretation of Section 138 of the NI Act.
3. Precedents and conflicting judgments on the issue.
4. Legislative intent and statutory interpretation.
5. Practical implications and judicial approach on jurisdiction.
6. Civil law concepts versus criminal law principles.

Detailed Analysis:

1. Territorial Jurisdiction for Criminal Complaints under Section 138 of the NI Act:
The primary issue addressed is the territorial jurisdiction concerning criminal complaints filed under Section 138 of the NI Act. The judgment clarifies that the place where the cheque is dishonoured by the drawee bank is the locus for judicial inquiry and trial. The court emphasized that the place of issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment is irrelevant for determining territorial jurisdiction.

2. Interpretation of Section 138 of the NI Act:
Section 138 of the NI Act is interpreted to mean that the offence is committed when the cheque is dishonoured by the drawee bank. The proviso to Section 138, which includes the presentation of the cheque, issuance of notice, and failure to pay within 15 days, are conditions precedent for prosecution but not ingredients of the offence itself. The judgment underscores that the offence is complete upon dishonour, and the conditions in the proviso only defer prosecution.

3. Precedents and Conflicting Judgments:
The judgment reviews several precedents, including:
- K. Bhaskaran v. Sankaran Vaidhyan Balan (1999): Interpreted Section 138 to allow jurisdiction at any of the five places where the cheque was drawn, presented, dishonoured, notice issued, or payment failure occurred.
- Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009): Emphasized the receipt of notice and questioned the broad jurisdictional interpretation in Bhaskaran.
- Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001): Held that the cheque must be presented to the drawee bank within the statutory period.
The judgment aligns with the stricter interpretation in Harman and Ishar Alloy, overruling the liberal approach in Bhaskaran.

4. Legislative Intent and Statutory Interpretation:
The judgment discusses the legislative intent behind Section 138, introduced to enhance the acceptability of cheques. It underscores that the offence is deemed committed upon dishonour, and the proviso conditions are meant to provide a chance to the drawer to rectify the dishonour before prosecution. The judgment emphasizes a strict interpretation of penal provisions and the distinction between conditions precedent for prosecution and the ingredients of the offence.

5. Practical Implications and Judicial Approach on Jurisdiction:
The judgment addresses the practical implications of the interpretation of Section 138, noting the misuse of territorial jurisdiction leading to harassment of accused persons. It highlights the need for precision and exactitude in determining the place of trial to prevent vexatious litigation. The court directs that ongoing cases where evidence has commenced will continue at the current venue, while others must be filed in the proper jurisdiction.

6. Civil Law Concepts versus Criminal Law Principles:
The judgment cautions against the extrapolation of civil law concepts like "cause of action" to criminal law. It reiterates that the place of commission of the offence, as per Section 177 of the CrPC, determines jurisdiction in criminal cases. The judgment clarifies that the civil law principle of cause of action does not apply to criminal prosecutions under Section 138 of the NI Act.

Conclusion:
The judgment concludes that the offence under Section 138 of the NI Act is committed upon dishonour of the cheque by the drawee bank, and the jurisdiction for trial lies at the place of such dishonour. The court overrules the broader jurisdictional interpretation in Bhaskaran, aligning with the stricter interpretations in Harman and Ishar Alloy. The judgment aims to prevent misuse of territorial jurisdiction and ensure fair trial procedures.