Cheque Bounce u/s 138Cheque Bounce Jurisdiction of Payee U/s 138 & 142 of N.I.Act,1881

The Negotiable Instruments (Amendment) Ordinance, 2015  brought a relief to all sufferers of cheque bounce on O15th June 2015 . This ordinance has amended the provisions of Negotiable Instrument Act,1881.

Object of Ordinance The objective is to ensure that a fair trial is conducted keeping in view the interests of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonour of cheques. The Ordinance is similar to the Bill in the sense that the substantive principle for determination of the jurisdiction of the cases under section 138 of the NI Act remains the same, except that that two distinct situations of payment of cheque (i) by submitting the same for collection through an account or (ii) payment of a cheque otherwise through an account, that is, when cheques are presented across the counter of any branch of drawee bank for payment, are covered under the Ordinance.

Jurisdiction Decided u/s 142 The place of jurisdiction for trying cases of dishonour of cheques ,under section 138 of the NI Act,1881, has been fixed by virtue of sub-section (2) of Section 142 as what it used to be before the Apex Court’s ruling in Dasrath Rupsingh Rathod .

Why Section 138 The section 138 of the N.I.Act,1881 provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.

 Amendments in N.I.Act,1881 Via Ordinance w.e.f 15.06.2015 Amendment of section 6  In the Negotiable Instruments Act,1881 (26 of 1881) (hereinafter referred to as the principal Act), in section 6,- (i) in the Explanation I, for clause (a), the following clause shall be substituted, namely:-  

(a) ‘‘a cheque in the electronic form” means a cheque drawn in electronic medium by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or electronic signature, as the case may be;’;  

Unquote – the expression ” a cheque in the electronic form ” has been defined .   (ii) after Explanation II, the following Explanation shall be inserted, namely:- “Explanation III.-The expressions used in this section shall have the same meanings as assigned to those expressions in the Information Technology Act, 2000 (21 of 2000)”. Amendment of section 142  

3. In the principal Act, section 142 shall be numbered as sub-section (1) thereof and after sub-section (1) as so numbered, the following sub-section shall be inserted, namely:-

  “(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated.”.

 Unquote – this is the most prominent and relieving provision which has been inserted in the N.I.Act,1881 in as much as it nullifies the ratio laid down by Apex court in the matter of Dasrath Rupsingh Rathod . The Payee or holder of a cheque can file case, under Section 138 of N.I.Act, in the jurisdictional court where the branch of bank is situated and in which the cheque was presented for clearence w.e.f 15 June 2015 . The said change has been effected with sub-section (2) of Section 142 of the act.

4. Insertion of new section 142A. In the principal Act, after section 142, the following section shall be inserted, namely:-

Validation for transfer of pending cases ‘‘142A.  (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) or any judgment, decree, order or directions of any court, all cases arising out of section 138 which were pending in any court, whether filed before it, or transferred to it, before the commencement of the Negotiable Instruments (Amendment) Act, 2015, shall be transferred to the court having jurisdiction under sub-section (2) of section 142 as if that sub-section had been in force at all material times.  

Unquote – Irrespective of Code of Criminal Procedure, 1973 or any judgment, decree, order or directions of any court, if situation under section 138  like a.pendency of complaint in any court, b.complaint  filed or c.complaint earlier transferred to another jurisdiction , exists before the commencement of the Negotiable Instruments (Amendment) Act, 2015, shall have to be transferred to the court having jurisdiction of payee where the branch of bank is situated and in which he has presented the cheque for payment as if  such provision was effective at the time of aforesaid situations .  

(2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1), all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court.  

Unquote – It maintains the status quo of cases which have been filed in jurisdiction of payee and/or transferred earlier to the same jurisdiction as provided under sub-section (2) of section 142 of the act .  

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act, 2015, more than one prosecution filed by the same person against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142 before which the first case was filed as if that sub-section had been in force at all material times.  

Unquote – Where one and the same person has filed cases , in different jurisdictions , against one and the same drawer of cheque , then all such cases have to be transferred to the jurisdiction court of such a person where the bank branch of the payee, in which he has presented the cheque for payment , is situated .

  Reason of Amendment in N.I.Act,1881 The amendment in N.I.Act,1881 was very much required since while disposing the CRIMINAL APPEAL NO. 2287 OF 2009 in Dashrath Rupsingh Rathod …..Appellant Versus State of Maharashtra & Anr, the Honourable Apex Court  laid down the following ratio : “31. To sum up: (i) 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. (ii) 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. (iii) The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if (a) the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue. Page 83 83 (b) If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonour of the cheque and (c) If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice. (iv) The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act. (v) The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant. (vi) 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. (vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose Page 84 84 jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof. “

Conclusion The change is a very welcome move by the Government of India  .It will nullify  the aforesaid ratio of Apex court .

Henceforth,  a complaint can be filed by a payee in its own jurisdiction where the bank is situated & in which the cheque was  presented  for the clearence .

Before this amendment, all complainant were facing double jeopardy in as much as firstly they could not recover the legitimate money and secondly, in order to file a complaint, they had to  suffer the agony and pain of going to the jurisdictional court of drawer of the cheque.

by Anand Mishra, Founder Advocate, AMLEGALS ( The author is a leading indirect tax & corporate laws advocate handling cases in CESTAT & High Courts of India. He can be contacted on anand@amlegals.com and for more please refer www.amlegals.com .)