Placing the burden of bounced cheques

As per the proposed changes, a cheque bounce case will be tried only by a court in whose jurisdiction the payee’s bank lies

In a move to fast track disposal of around 40 lakh cheque bounce cases pending before various courts in the country, the Union Cabinet last week approved amendments in the Negotiable Instruments Act 1881 to provide for filing of such cases only in places where cheque is presented. The Negotiable Instruments (Amendment) Bill 2015 is likely to be taken up in the ongoing session of Parliament.

The aim is to encourage the usage of cheques and enhance the credibility of the instrument so that normal business transactions and settlement of liabilities can be ensured and also allay the loan-default fears of banks and other lending institutions.

Such clarities in law have become significant as cheque bounce cases are choking the criminal justice system and have become one of the most common offences plaguing the financial world. As per a Law Commission report, of the 40 lakh cases pending, more than 5.5 lakh are pending in Delhi alone. The situation is no different in other cities; a large number of complaints are filed under Section 138 not necessarily because the offence is committed in these 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.

The amendments, which are focused on clarifying jurisdiction related to filing of cases committed under Section 138, include the stipulation that the offence of rejection/return of cheque “will be enquired 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.

Further, where a complaint has been filed against the drawer of a cheque in the court having jurisdiction under the new scheme of jurisdiction, all subsequent complaints arising out of the provision 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.

The amendments were proposed after various financial institutions and industry associations expressed difficulties in view of the apex court’s legal interpretation of the place of jurisdiction for filing cases to be the place of the drawer’s bank.

The Supreme Court had last year 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 complainant’s “choosing”. This means, if a man from Delhi gave a cheque drawn on a Delhi bank for buying something in Chennai and it bounced for insufficiency of funds, then the aggrieved person will have to travel all the way from Chennai to Delhi to initiate prosecution under Section 138.

“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,” the SC had said, while laying down the law in a large number of appeals led by Dashrath Rupsingh Rathod vs State of Maharashtra. It had said that the place of dishonour is the right place to file a complaint.

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

Experts have welcomed the move by the government to remove ambiguities on the jurisdictional issue. Supreme Court lawyer Sanjay Kapur believes the decision of the Cabinet to introduce the Bill shall help restore the faith and confidence of the common man and the credibility of the business transaction. “It has come for the rescue of the persons in trouble (payee) and rightly shifts the hardship, inconvenience on the payer,” he added.

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