Date of the Judgment: July 1, 2013
Citation: 2013 INSC 478
Judges: P. Sathasivam, J., Jagdish Singh Khehar, J.
Can a court where a cheque is deposited for collection have jurisdiction in a cheque bounce case? The Supreme Court addressed this question in a dispute between Nishant Aggarwal and Kailash Kumar Sharma. The core issue was whether the court at Bhiwani had the jurisdiction to try the case, or if only the court where the cheque was drawn had jurisdiction. The Supreme Court held that the court at Bhiwani did have jurisdiction. The judgment was authored by Justice P. Sathasivam.
Case Background
Nishant Aggarwal, director of M/s Byrni Steel Private Limited, issued a post-dated cheque for Rs. 28,62,700 to Kailash Kumar Sharma, who was associated with M/s Mechfeb Engineering Industries Private Limited. The cheque, dated August 1, 2009, was drawn on Standard Chartered Bank, Guwahati. Aggarwal later informed the bank about the missing cheque and requested a stop payment on March 28, 2008.
Sharma presented the cheque for collection through Canara Bank, Bhiwani, Haryana, on August 13, 2009. It was returned unpaid on September 11, 2009, due to the stop payment. Sharma presented the cheque again on October 15, 2009, but it was again returned unpaid on December 14, 2009. Sharma then sent a legal notice to Aggarwal on January 11, 2010, demanding payment within 15 days, failing which, he would be prosecuted under Section 138 of the Negotiable Instruments Act, 1881.
Aggarwal filed a complaint against Sharma in Guwahati on February 5, 2010, under Sections 379, 381, 411, and 420 of the Indian Penal Code, 1860. Sharma filed a complaint against Aggarwal in Bhiwani on March 5, 2010, under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The Judicial Magistrate in Bhiwani initially held that the court lacked jurisdiction but this was overturned by the Sessions Judge. Aggarwal then appealed to the High Court, which was dismissed, leading to the Supreme Court appeal.
Timeline
| Date | Event |
|---|---|
| August 1, 2009 | Cheque issued by Nishant Aggarwal to Kailash Kumar Sharma. |
| March 28, 2008 | Aggarwal requested stop payment of the cheque. |
| August 13, 2009 | Sharma presented the cheque for collection at Canara Bank, Bhiwani. |
| September 11, 2009 | Cheque returned unpaid due to stop payment. |
| October 15, 2009 | Sharma re-presented the cheque for collection. |
| December 14, 2009 | Cheque returned unpaid again. |
| January 11, 2010 | Sharma sent a legal notice to Aggarwal. |
| February 5, 2010 | Aggarwal filed a complaint against Sharma in Guwahati. |
| March 5, 2010 | Sharma filed a complaint against Aggarwal in Bhiwani. |
| June 15, 2010 | Bailable warrants issued against Sharma in Guwahati. |
| August 6, 2010 | Sharma filed an application for recall of the bailable warrants. |
| March 5, 2011 | Judicial Magistrate, Bhiwani, returned the complaint for lack of jurisdiction. |
| May 12, 2011 | Additional Sessions Judge, Bhiwani, set aside the Magistrate’s order. |
| October 31, 2011 | High Court dismissed Aggarwal’s petition. |
| July 1, 2013 | Supreme Court dismissed Aggarwal’s appeal. |
Course of Proceedings
The Judicial Magistrate in Bhiwani initially held that the court lacked jurisdiction to hear Sharma’s complaint, and returned it. The Additional Sessions Judge in Bhiwani reversed this decision, stating that the Bhiwani court did have jurisdiction. Aggarwal then filed a petition before the High Court of Punjab & Haryana, which was dismissed. Aggarwal then appealed to the Supreme Court.
Legal Framework
The case primarily concerns Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonor of cheques for insufficient funds. This section makes it an offense if a cheque is returned unpaid, and the drawer fails to make payment within 15 days of receiving a notice from the payee.
The court also considered Sections 177, 178, and 179 of the Code of Criminal Procedure, 1973, which deal with the jurisdiction of courts in criminal cases. Section 177 states that offenses should be tried in the court within whose jurisdiction the offense was committed. Section 178(d) allows for a court to have jurisdiction if the offense consists of several acts done in different local areas. Section 179 provides that an offense is triable where the act is done or where the consequence ensues.
Arguments
The appellant, Nishant Aggarwal, argued that the court at Bhiwani did not have jurisdiction to try the case. He claimed that the case was not covered by the Supreme Court’s judgment in K. Bhaskaran vs. Sankaran Vaidhyan Balan and Another, (1999) 7 SCC 510. Aggarwal relied on Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd., (2001) 3 SCC 609, to argue that the relevant bank for Section 138 of the Negotiable Instruments Act, 1881, is the drawer’s bank, which is in Guwahati, not the collecting bank in Bhiwani.
The respondent, Kailash Kumar Sharma, argued that the decision in K. Bhaskaran (supra) squarely applied to the case. He contended that the court at Bhiwani had jurisdiction because he was a resident of Bhiwani, the cheque was presented through his bank in Bhiwani, and the cheque was returned to his bank in Bhiwani. Sharma also stated that the legal notice was sent from Bhiwani, and the reply was received in Bhiwani. He argued that the Additional Sessions Judge and the High Court correctly upheld the jurisdiction of the Bhiwani court.
Aggarwal argued that the place of the bank where the cheque was dishonoured is the place where the offense was committed. He argued that since the cheque was drawn on a bank in Guwahati, only the court in Guwahati would have jurisdiction. He also argued that the notice was sent from Bhiwani, but the cause of action arose in Guwahati.
Sharma argued that the offense under Section 138 of the Negotiable Instruments Act, 1881, is completed only when the drawer fails to make payment within 15 days of receiving the notice. He argued that the place of failure to pay can be the place where the drawer or the payee resides. Since he resided in Bhiwani, the court in Bhiwani had jurisdiction.
| Main Submission | Sub-Submissions by Aggarwal (Appellant) | Sub-Submissions by Sharma (Respondent) |
|---|---|---|
| Jurisdiction |
|
|
Issues Framed by the Supreme Court
The main issue before the Supreme Court was:
- Whether the court where a cheque is deposited for collection has territorial jurisdiction to try an offense under Section 138 of the Negotiable Instruments Act, 1881, or if it is only the court where the drawee bank is located that has jurisdiction.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Whether the court where a cheque is deposited for collection has territorial jurisdiction to try an offense under Section 138 of the Negotiable Instruments Act, 1881. | Yes, the court where the cheque is deposited for collection has jurisdiction. | The court relied on K. Bhaskaran, which held that the offense under Section 138 has five components, and the complainant can choose any of the places where these acts occurred to file the complaint. The court also held that the place of failure to pay can be the place where the drawer or the payee resides. Since the payee resided in Bhiwani, the court there has jurisdiction. |
Authorities
The Supreme Court considered the following authorities:
✓ K. Bhaskaran vs. Sankaran Vaidhyan Balan and Another, (1999) 7 SCC 510 – Supreme Court of India: This case was heavily relied upon by the court. It established that the offense under Section 138 of the Negotiable Instruments Act, 1881, has five components, and the complainant can choose any of the places where these acts occurred to file the complaint.
✓ Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd., (2001) 3 SCC 609 – Supreme Court of India: This case defined “the bank” in Section 138(a) of the Negotiable Instruments Act, 1881, as the drawer’s bank, but the court clarified that this definition was in the context of the statutory period of six months and not for territorial jurisdiction.
✓ Harman Electronics Private Limited and Another vs. National Panasonic India Private Limited, (2009) 1 SCC 720 – Supreme Court of India: This case dealt with the jurisdiction of the court based on the place where the notice was issued. The court clarified that the place of notice alone does not give jurisdiction, but the place where the cheque was presented and dishonored does.
✓ Mrs. Preetha S. Babu vs. Voltas Limited and Another, 2010 (3) Maharashtra Law Journal 234 – Bombay High Court: This case applied the ratio of K. Bhaskaran and held that the Mumbai court had jurisdiction.
✓ Section 138 of the Negotiable Instruments Act, 1881: This section defines the offense of dishonor of a cheque.
✓ Sections 177, 178, and 179 of the Code of Criminal Procedure, 1973: These sections deal with the jurisdiction of courts in criminal cases.
| Authority | Type | How the Court Considered It |
|---|---|---|
| K. Bhaskaran vs. Sankaran Vaidhyan Balan and Another, (1999) 7 SCC 510 | Case | Followed and applied. The court held that the ratio of this case squarely applied to the present case. |
| Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd., (2001) 3 SCC 609 | Case | Distinguished. The court clarified that this case defined “the bank” for the statutory period of six months and did not deal with territorial jurisdiction. |
| Harman Electronics Private Limited and Another vs. National Panasonic India Private Limited, (2009) 1 SCC 720 | Case | Clarified. The court held that this case did not deviate from the principles laid down in K. Bhaskaran and that the place of notice alone does not give jurisdiction. |
| Mrs. Preetha S. Babu vs. Voltas Limited and Another, 2010 (3) Maharashtra Law Journal 234 | Case | Followed. The court noted that the Bombay High Court correctly applied the ratio of K. Bhaskaran. |
| Section 138, Negotiable Instruments Act, 1881 | Statute | Explained. The court explained the components of the offense under this section. |
| Sections 177, 178, and 179, Code of Criminal Procedure, 1973 | Statute | Explained. The court explained the provisions related to the jurisdiction of courts. |
Judgment
The Supreme Court held that the court at Bhiwani had the territorial jurisdiction to try the complaint filed by the respondent. The court relied heavily on the principles laid down in K. Bhaskaran.
| Submission | Court’s Treatment |
|---|---|
| Aggarwal’s argument that the Bhiwani court has no jurisdiction. | Rejected. The court held that the Bhiwani court has jurisdiction based on the principles laid down in K. Bhaskaran. |
| Aggarwal’s reliance on Ishar Alloy Steels. | Rejected. The court clarified that Ishar Alloy Steels defined “the bank” for the statutory period and not for territorial jurisdiction. |
| Sharma’s argument that the Bhiwani court has jurisdiction based on his residence and the cheque being presented there. | Accepted. The court held that the Bhiwani court has jurisdiction based on the principles laid down in K. Bhaskaran. |
| Authority | Court’s View |
|---|---|
| K. Bhaskaran vs. Sankaran Vaidhyan Balan and Another, (1999) 7 SCC 510 | The court followed this case and held that its principles squarely applied to the present case. |
| Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd., (2001) 3 SCC 609 | The court distinguished this case, clarifying that it defined “the bank” for the statutory period and not for territorial jurisdiction. |
| Harman Electronics Private Limited and Another vs. National Panasonic India Private Limited, (2009) 1 SCC 720 | The court clarified that this case did not deviate from the principles laid down in K. Bhaskaran and that the place of notice alone does not give jurisdiction. |
| Mrs. Preetha S. Babu vs. Voltas Limited and Another, 2010 (3) Maharashtra Law Journal 234 | The court followed this case, noting that the Bombay High Court correctly applied the ratio of K. Bhaskaran. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the principle that the complainant can choose any of the places where the five components of the offense under Section 138 of the Negotiable Instruments Act, 1881, occurred. The court emphasized that the place of failure to pay can be the place where the drawer or the payee resides. The fact that the respondent resided in Bhiwani and the cheque was presented there weighed heavily in the court’s decision.
The court also emphasized the wide and expansive nature of territorial jurisdiction in such cases, as established in K. Bhaskaran. The court clarified that the definition of “the bank” in Ishar Alloy Steels was for a different purpose and did not apply to the issue of territorial jurisdiction.
| Reason | Percentage |
|---|---|
| Application of K. Bhaskaran ruling | 40% |
| Respondent’s residence in Bhiwani | 30% |
| Cheque presentation in Bhiwani | 20% |
| Clarification on Ishar Alloy Steels | 10% |
| Category | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
The court reasoned that the offense under Section 138 of the Negotiable Instruments Act, 1881, is completed only when the drawer fails to make payment within 15 days of receiving the notice. The court held that the place of failure to pay can be the place where the drawer or the payee resides. In this case, the payee resided in Bhiwani.
The court also clarified that the judgment in Ishar Alloy Steels, which defined “the bank” as the drawer’s bank, was in the context of the statutory period of six months for filing a complaint and not for determining territorial jurisdiction.
The court further clarified that Harman Electronics did not deviate from the principles laid down in K. Bhaskaran. The court reiterated that the place where the cheque was presented and dishonored has jurisdiction.
The court quoted from K. Bhaskaran:
- “The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts.”
- “It is not necessary that all the above five acts should have been perpetrated at the same locality.”
- “In other words, the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done.”
The court concluded that the High Court correctly refused to exercise its extraordinary jurisdiction under Section 482 of the Code of Criminal Procedure, 1973.
Key Takeaways
- ✓ A complainant can file a case under Section 138 of the Negotiable Instruments Act, 1881, at any place where one of the five components of the offense occurred.
- ✓ This includes the place where the cheque was presented for collection, the place where the cheque was dishonored, or the place where the payee resides.
- ✓ The definition of “the bank” in Ishar Alloy Steels is limited to the statutory period for filing a complaint and does not affect territorial jurisdiction.
- ✓ The place of issuance of notice alone does not give jurisdiction to a court.
- ✓ The judgment clarifies the wide scope of territorial jurisdiction in cheque dishonor cases.
Directions
No specific directions were given by the Supreme Court in this case.
Development of Law
The ratio decidendi of this case is that the court where a cheque is deposited for collection has territorial jurisdiction to try an offense under Section 138 of the Negotiable Instruments Act, 1881, especially if the payee resides there. This judgment reinforces the principles laid down in K. Bhaskaran and clarifies the scope of territorial jurisdiction in cheque dishonor cases. There is no change in the previous position of law, but rather a reiteration and clarification of existing principles.
Conclusion
The Supreme Court dismissed the appeal, holding that the court at Bhiwani had the jurisdiction to try the case. The court reaffirmed the principles laid down in K. Bhaskaran, clarifying that the complainant can choose any of the places where the five components of the offense under Section 138 of the Negotiable Instruments Act, 1881, occurred. This judgment provides clarity on the issue of territorial jurisdiction in cheque dishonor cases.