Dealing with cheque bouncing cases

Written by Indu Bhan | Updated: Aug 6 2014, 09:58am hrs
ChequeSupreme Court has held that a cheque bounce complaint must be filed only at a place where the bank has dishonoured the cheque.
Settling the doubts raised by its earlier conflicting judgments, the Supreme Court has held that a cheque bounce complaint must be filed only at a place where the bank has dishonoured the cheque and the place cannot be of a complainants choosing.

The unilateral acts of a complainant in presenting a cheque at a place of his choice or issuing a notice for payment of the dishonoured amount cannot arm the complainant with the power to choose the place of trial, it said.

Laying down the law in a large number of appeals led by Dashrath Rupsingh Rathod vs State of Maharashtra, a larger bench of three-judge unanimously held that the place of dishonour is the right place to file a complaint. However, to avoid inconvenience and hardship to litigants whose cases are pending at present, the new rule will have only prospective pertinence, i.e. applicability to complaints that may be filed after this judgment.

If presentation of the cheque referred to in Section 138 means presentation to the drawee bank, there is no gainsaying that dishonour would be localised and confined to the place where the drawee bank is situated, the bench said.

There were conflicting views on the jurisdiction of the magistrate who can try cases under Section 138 of the Negotiable Instruments Act, so the matter was referred to a larger bench, which overruled its earlier ruling in the case, K Bhaskaran vs Sankaran Vaidhyan Balan (1999) that allowed multiple venues for filing of a complaint.

Stating that the liberal approach preferred in Bhaskaran called for a stricter interpretation of the statute, the judges felt that the Bhaskarans judgment ran counter to its preference for simplifying the law. Courts are enjoined to interpret the law so as to eradicate ambiguity or nebulousness, and to ensure that legal proceedings are not used as a device for harassment, even of an apparent transgressor of the law. Laws endeavour is to bring the culprit to book and to provide succour for the aggrieved party but not to harass the former through vexatious proceedings. Therefore, precision and exactitude are necessary especially where the location of a litigation is concerned, the apex court emphasised.

Accepting the significant approach of the judges in the case, Harman Electronics Pvt Ltd vs National Panasonic India (2009), the top court said the ruling highlighted the reality that Section 138 is being rampantly misused so far as territorial jurisdiction for trial of the complaint is concerned Harman, in fact, duly heeds the absurd and stressful situation, fast becoming common-place where several cheques signed by the same drawer are presented for encashment and requisite notices of demand are also despatched from different places.

This is the second major ruling in recent months dealing with this Act. In April, another bench issued guidelines, including issuance of summons through e-mails and completion of evidence within three months. Such clarities in law have become significant as cheque bounce cases are choking the criminal justice system at the magistrates level. As per a Law Commission report, so far there are 40 lakh cases pending in four metro cities. More than 5.5 lakh such cases are pending in criminal courts in Delhi alone. The position is no different in other cities where large number of complaints are filed under Section 138 not necessarily because the offence is committed in such cities but because multinational and other companies and commercial entities and agencies choose these places for filing the complaints for no better reason than the fact that notices demanding payment of cheque amounts were issued from such cities or the cheques were deposited for collection in their banks in those cities. This procedure is, more often than not, intended to use such oppressive litigation to achieve the collateral purpose of extracting money from the accused by denying him a fair opportunity to contest the claim by dragging him to a distant place, the judgment noted.

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