Delhi High Court
Canbank Financial Services Ltd. vs Gitanjli Motors Ltd. And Ors. on 6 January, 1995
Equivalent citations: 1995IAD(DELHI)361, [1996]85COMPCAS485(DELHI), 1995CRILJ1222, 1995(1)CRIMES342, 57(1995)DLT230, 1995(32)DRJ125, (1995)110PLR17, 1995RLR110
Author: Arun Kumar
Bench: Arun Kumar
JUDGMENT Arun Kumar, J.
(1) This revision petition is directed against the judgment of the learned Metropolitan Magistrate, Delhi, dated 13.2.1992 whereby the complaint filed by the petitioner under section 138 Negotiable Instruments Act against the respondent was returned for presentation to the proper Court on the ground that it has no territorial jurisdiction to deal with the matter.
(2) Briefly the facts are that the complainant is a leasing company having its registered office in Bangalore and a local office at 1 E, Vandana Building, 11 Tolstoy Marg, New Delhi. The complainant received from respondent No. 1 on 25.10.91 two cheques for Rs.3,60,000.00 each being the installments due towards the lease finance charges. The said cheques were deposited by the complainant with its bankers at New Delhi for encashment on 23.11.91 and 23.12.91. Both the cheques were returned dishonoured. As per the complaint the notice of dishonour was given as per Section 138 Negotiable Instruments Act. Despite the notice, the respondent failed to pay the amounts under the cheques. Hence the complaint was filed. By the impugned order the learned M.M. was pleased to direct the return of the complaint on account of lack of territorial jurisdiction.
(3) The complainant petitioner is in Delhi. The money was advanced at Delhi and was repayable at Delhi. The further fact is that the two cheques were drawn on a bank in Noida, Ghaziabad (U.P.). The cheques were dishonoured when they were presented for payment to the drawee bank at Noida. Therefore, the actual dishonour of the cheques took place at Noida, a place outside the jurisdiction of the courts at Delhi. On this basis the trial court felt that the courts at Delhi had no jurisdiction in the matter.
(4) For purposes of appreciating the legal issue involved in the present case it will be necessary to have a look at Section 138 Negotiable Instruments Act. The same is reproduced as under:- "138.Dishonour of cheque for insufficiency, etc., of funds in the account. - Where any cheque drawn by a person on- an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both; Provided that nothing contained in this section shall apply unless - (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails, to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. Explanation. - For the .purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
(5) This section was brought on the statute book by virtue of Act 66 of 1988. For the first time dishonour of cheque was made a punishable offence if the dishonour fell within the frame work of the section. With the increasing use of cheques in commercial transactions and requirement introduced regarding payments over a particular limit through cheques only, it became important that the acceptability of cheques as mode of payments be improved and those persons who accept cheques instead of cash towards payment should have a sense of security that the cheque will be honoured on presentation. The use of cheques towards payment is intended to serve as a substitute for payment through cash. The main section spells out the ingredients of the offence while proviso contains certain further requirements which have to be met before the section can be invoked. If the proviso is not satisfied the section cannot be invoked. The main part of the proviso seeks to give a chance to the defaulting debtor to meet his liability towards his creditor by requiring the holder of the cheque which has been dishonoured on presentation to give the drawer a notice in writing about the dishonour of the cheque and allowing 15 days time from the date of receipt of notice to the debtor to pay the amount in question.
(6) Section 138 Negotiable Instruments Act is aimed at persons who knowing fully well that they do not have sufficient funds in their bank accounts, still issue cheques from such accounts in favor of their creditors in purported discharge of their liabilities. Thus there is an element of dishonesty involved on the part of those who issue cheques in such circumstances. The debtor puts off his creditor by issuing a cheque which he very well knows will not be honoured on presentation. By making this an offence section 138 seeks to curb such dishonest acts in a bid to improve acceptability of cheques in the financial circles. An honest debtor is not affected in view of the requirement of notice to be given by the creditor to the debtor regarding dishonour of cheque and time being allowed to the debtor to pay after service of notice.
(7) It has to be noted that dishonour of a cheque is by itself not an offence under section 138. . To come within the purview of the section certain other requirements have to be fulfillled. They are:-
1.The cheque has to be towards payment of an amount of money for the discharge in whole or in part of any debt or any other liability;
2.The cheque is returned by the bank unpaid;
3.The reason for non-payment of the cheque should be insufficiency of funds or amount of cheque exceeding the amount arranged to be paid from the account.
(8) But before the offence can be said to be made out the proviso to the section requires that-
(A)The cheque must be presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.
(B)The payee or the holder in due course of the cheque makes a demand for the payment of amount of money under the cheque by giving a notice in writing to the drawer of the cheque within 60 days of information received by him from the bank regarding dishonour of the cheque.
(C)The drawer of the cheque fails to make payment of the amount of money within 15 days of the receipt of said notice.
(9) Thus dishonour of a cheque per se is not an offence. To become an offence under Section 138 Negotiable Instruments Act some further requirements have to be fulfillled.
(10) The question for consideration in the present case is of jurisdiction of the court to try a complaint under Section 138 Negotiable Instruments Act. As per the impugned judgment of the trial court the place of dishonour of the cheque alone will have jurisdiction to try the case. According to the learned trial Judge the cause of action arises on the dishonour of the cheque. Therefore, the place where dishonour of the cheque took place should alone be relevant. I have given my careful consideration to the whole issue. I am .unable to subscribe to the view of the trial court. It is not correct to say .that the place of dishonour of the cheque alone will determine the jurisdiction to try an offence under Section 138 Negotiable Instruments Act. The place of dishonour of a cheque may be one of the places which may have jurisdiction, but it cannot be the only place to have jurisdiction.
(11) A closer look at the statutory provision will show that the place where payment was to be made as per the contract in a given case will also confer jurisdiction on the local court. If payment under a contract is to be made at place Y and a cheque is tendered at place X towards the payment, place Y will also have jurisdiction in the event of dishonour of the cheque. Part of cause of action arises at the place where payment is made. Payment through cheque is accepted in lieu of cash payment. Suppose cash is tendered at the place where payment is to be made under a contract and some of the currency notes are found to be counterfeit, will the court at the place where such notes were tendered not have jurisdiction? Place of payment cannot be rendered irrelevant whether one pays cash or through cheque. The place where payment had to be made will always retain its primacy in the matter of territorial jurisdiction in case of offence relating to payment. A cheque is only one of the modes of payment. Infact the proviso to Section 138 supports the view because the proviso brings out the ultimate object of the main section which is to ensure payment to the creditor. Under the proviso after service of notice on the debtor regarding dishonour of the cheque issued by him, fifteen days time is allowed to him to pay. It is only on his failure to avail of this opportunity that he is brought under dragnet of the section. Payment for purposes of the proviso is required to be made to the creditor at his place. In the present case the cheques in question were handed over to the complainant at Delhi. After the service of the notice if debtor had to pay, it had to pay to the creditor at Delhi; Therefore, place of payment will always be important and relevant in such matters. I am supported in this view by a judgment of a Division Bench of this court in R.K.Jain vs. State & Others (1988) 1 Crimes 514. In this case the cheque was given at Delhi but was deposited by the payee in his account at Rajouri (J & K). Prosecution was sought to be launched at Jammu for dishonour of the cheque. It was held that such cheque was given at Delhi. The alleged incident was committed at Delhi and Delhi Courts will have jurisdiction.
(12) The cheque is a commercially accepted mode of payment. Therefore, the place of payment will normally have jurisdiction. Actually the offence under section 138 Negotiable Instruments Act involves an element of dishonesty on the part of the debtor. When in discharge of a debt or liability or part thereof a debtor issues a cheque in normal course of events it should be honoured and payment should be received by the creditors. The dishonour of a cheque in these circumstances and that too on account of insufficiency of funds in the bank account of the debtor on which the cheque is drawn shows that there was actually no intention to pay. The account of the debtor did not have sufficient funds to meet the liability under the cheque. The debtor knew this and still he issued the cheques in favor of his creditor. The dishonour of the cheque is the manifestation of a dishonest intention. Dishonor of a cheque is only a consequence of insufficiency of funds in the account. The offence is really the dishonest intention of not paying while the debtor professed to pay by handing over a cheque on our account having no funds sufficient to meet the amount payable. The dishonest intention of not to pay emerges when a cheque is handed over to the creditor. The place of payment is thus material for purpose of jurisdiction of a court to try an offence under section 138 of Negotiable Instruments Act.
(13) Looking at this issue from another angle it has to be seen that the place of dishonour cannot be determinative of the question of territorial jurisdiction because dishonour of the cheque is only a part of the cause of action. On the basis of dishonour of the cheque alone the offence under section 138 is not made out. The creditor has to thereafter give a. notice in writing to the drawer of the cheque within fifteen days of the information received by him from the bank regarding the return of the cheque as unpaid. Thereafter further requirement under sub-clause (c) of the proviso is that the creditor has to wait for fifteen days to enable the drawer of the cheque to make payment to him. It is only when the drawer fails to make the payment of the amount of the cheque to the payee that a cause for lodging criminal complaint arises. The time allowed to the drawer to pay to the creditor the amount of the cheque again implies that the debtor has to make the payment of the amount under the cheque to the creditor within the period of fifteen days from the date of receipt of the notice by him. Again the place of payment becomes important. The payment by the debtor or drawer of the cheque to the creditor is obviously to be made at the place of the creditor. The place of payment assumes importance from this angle also.
(14) In this connection reference to Sections 178 and 179 Cr.P.C. is also necessary. These sections run as under:- "178.Place of inquiry or trial- (a) When it is uncertain in which of several local areas on offended was committed, or (b) where an offence is committed partly in one local area and partly in another, or (c) where an offence is continuing one, and continuous to. be committed in more local areas than one, or (d) where it consists of several acts done in different local areas, it may be inquired into or tried by a court having jurisdiction over any of such local areas. 179. Offence friable where act is done or consequence ensues When an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be inquired into or tried by a Court within whose local jurisdiction such thing has been done or such consequence has ensued."
(15) SUB-SECTION (b) of Section 178 deals with the situation where an offence is committed partly in one local area and partly in another. According to the said section such an offence may be inquired into or tried by a court having jurisdiction over any of such local areas.
(16) Then as per section 179 when an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be inquired into or tried by a court within whose legal jurisdiction such thing has been done or such consequence has ensured. Payment of cheque against an account having insufficient funds to meet the liability under the cheque is one act while dishonour of the cheque is a consequence of such an act. Therefore, as per section 179 also the place where the cheque was given or handed over will have jurisdiction and the courts of that place will have jurisdiction to try the offence. Likewise for purposes of section 178(b) payment of cheque may be one part of an offence and dishonour of the cheque may be another part and, therefore, both places, i.e. place where the cheque was handed over and the place where it was dishonoured will have jurisdiction.
(17) Learned counsel for the petitioner cited M.M.Malik & Ors. vs. Prem Kumar Goyal,1992 Cc 425. Pobathi Agencies vs. State of Karataka, 1992 Cc 431, & Muraleedharan vs. Pareed,1992 (2) 18 All India Banking Law ]udgments 336 in support of his contention. These judgments of the Punjab & Haryana, Karnataka and Kerala High Courts have reached the same conclusion as mine though on somewhat different reasoning. To me the matter appears to be simple and the views expressed hereinbefore appear to be sufficient for disposing of the matter.
(18) Learned counsel for the respondents, however, cited Bodh Raj us. Bari Chawla & Co. , P&-H 2 & landmark Finance and Investment Co.Pvt.Ltd. & Anr. vs. The Learned Metropolitan Magistrate 28th Court & Ors.,1992 (1) Crimes 973 at 975. So far as the judgment in Bodh Raj (supra) is concerned, that is prior to the statutory provision of Section 138 Negotiable Instruments Act and is not material or relevant. The judgment in landmark Investment Company (supra) turns more on the peculiar facts of the case. It does not consider the other aspects as discussed in the present judgment.
(19) The result of the above discussion is that the impugned judgment dated 13.2.1992 is set aside and the matter is sent back to the trial court to try and dispose of the complaint of the petitioner under section 138 of the Negotiable Instrument Act in accordance with law. The petition is disposed of.