2023 (9) TMI 444 - HC - Indian Laws

Dishonour of Cheque - jurisdiction to entertain a complaint - cheque was presented for collection through State Bank of India, Chennithala branch, Alappuzha District, within the jurisdiction of Judicial First Class Magistrate Court-1, Chengannur - complainant at present residing within the jurisdiction of Chengannur Court - Section 142(2)(a) or (b) of the NI Act. When the payee or holder in due course presents a cheque through an account maintained by the payee or holder in due course in a bank within the jurisdiction of a court, whether the court, where the cheque was presented for collection, has jurisdiction to entertain the complaint, alleging commission of offence under Section 138 of the NI Act? HELD THAT - As per the decision in Dashrath Rupsingh Rathod v. State of Maharashtra and Anr. reported in 2014 (8) TMI 417 - SUPREME COURT , the Apex Court, while overruling the ratio of the decision in K.Bhaskaran v. Sankaran Vaidhyan Balan reported in 1999 (9) TMI 941 - SUPREME COURT , held An interpretation should not be imparted to S.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. Indubitably, Section 142 of the NI Act was amended and Section 142-A was introduced with effect from 15.06.2015, to clarify the jurisdictional issue and to address the crisis of transfer of cases as per the ratio in Dashrath Rupsingh s case 2014 (8) TMI 417 - SUPREME COURT . The word delivered used in Section 142(2)(a) of the NI Act has no significance and significance must be given to the text 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. Therefore, challenge raised by the learned counsel for the petitioners referring definition of the word delivered contemplated under Section 46 of the NI Act could not succeed. This petition is found to be meritless and is accordingly dismissed.

Summary

Issues Involved:
1. Jurisdiction of Judicial First-Class Magistrate Court, Chengannur.
2. Nature of dispute (Civil vs. Criminal).
3. Maintainability of proceedings against erstwhile partners.
4. Mediation and Arbitration clause in the agreement.

Summary:

Issue 1: Jurisdiction of Judicial First-Class Magistrate Court, Chengannur
The petitioners argued that the Judicial First-Class Magistrate Court, Chengannur lacks jurisdiction to entertain the complaint under Section 138 of the Negotiable Instruments Act (NI Act). They contended that the cheque was delivered for collection through an account maintained at Kannur, and thus jurisdiction should be with the court where the cheque was delivered. The court, however, referred to Section 142(2)(a) of the NI Act and the explanation provided therein, which states that the court within whose jurisdiction the branch of the bank where the payee maintains the account is situated, will have jurisdiction. The court cited the Supreme Court's decision in M/s Himalaya Self Farming Group & Anr. v. M/s Goyal Feed Suppliers to support this interpretation. Therefore, the Judicial First-Class Magistrate Court, Chengannur, has jurisdiction as the cheque was presented through an account maintained within its jurisdiction.

Issue 2: Nature of Dispute (Civil vs. Criminal)
The petitioners argued that the dispute arising out of an agreement for the specific performance of construction of a commercial building is a civil dispute and should not entail criminal consequences. The court dismissed this argument, stating that penal consequences on dishonor of the cheque must be borne by the person who issued the cheque and cannot be delegated to another person.

Issue 3: Maintainability of Proceedings Against Erstwhile Partners
The petitioners claimed that the liability under the cheque and NI Act proceedings taken over by the contracting parties (Respondents 2 & 3) should not be maintainable against them as erstwhile partners. The court found no merit in this argument, emphasizing that the person who issued the cheque must face the penal consequences.

Issue 4: Mediation and Arbitration Clause in the Agreement
The petitioners sought to declare that mediation and arbitration provided in the agreement should preclude criminal prosecution. The court did not find any argument or evidence to substantiate this claim and thus did not grant this relief.

Conclusion:
The petition was found to be meritless and was accordingly dismissed. The court directed the trial court to expedite the trial and dispose of the case within three months. The registry was instructed to forward a copy of the judgment to the trial court for compliance.