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CHEQUE BOUNS CASE

Where the jurisdiction – at issue of cheque , at drawee bank , at drawer bank at issue of notice, at receiving of notice30. Issuing of cheque per-se is not an offence. Presentation of the cheque and the dishonor of the cheque by the drawee bank may be referred to as commencement of the offence, which is followed by issuing of a statutory notice demanding payment and giving an opportunity to the drawee to avoid criminal prosecution. In the present case, though the cheque was issued at Bangalore and the notice was also served at Bangalore, the place where the cheque has been returned unpaid by the drawee bank is only at Chennai. 34. In the additional common set of typed set of papers filed by the respondent, the return memo of Central Bank of India having office at Montieth Road, Chennai has been furnished. The respondent has presented the cheque to his bank viz., Indian Bank, Padi Branch, Chennai and the same has been forwarded to Central Bank of India, Montieth Road, Chennai where it is returned with an endorsement stating

High Court Madras

High Court Madras (Photo credit: Wikipedia)

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 13-6-2011

CORAM

THE HONOURABLE MR. JUSTICE G.M. AKBAR ALI

CRL.O.P.Nos. 3265, 3266, 3267 and 3268 of 2010
and M.P.Nos.1 of 2010 (4 in Nos.)

Mohammed Haneef … Petitioner in all the petitions

Vs

Shankarraj .. respondent in all the petitions
Criminal Original Petitions filed under Section 482 Cr.P.C. for the reliefs as stated therein.

For petitioner : Mr.Abudu Kumar Rajarathinam
for Mr.S. Ahok Kumar
Respondents : Mr.A.Laxmi Raj Rathnam

COMMON ORDER

The petitions are filed seeking a direction to call for the records in C.C.Nos.437, 438, 439 and 440 of 2009 on the file of the learned Judicial Magistrate, Ambattur.

2. The respondent has initiated proceedings under Sec.138 and 142 of Negotiable Instruments before the learned Judicial Magistrate Court, Ambattur against the petitioner. In the complaint, it is alleged that the petitioner has taken a sum of Rs.35,00,000/- assuring an admission for a post graduate course in M.S. Ortho for the respondents son Dr.S. Manivannan. Since he did not obtain any admission, he is liable to pay the amount.

3. It is further submitted that the petitioner executed promissory notes dated 8.3.2009 and also issued four cheques dated 26.3.2009 each for Rs.7,50,000/-. He also assured the complainant that he will pay the amount within sixty days. Since the amount was not paid, the cheques were presented by the complainant in his bank on 5.9.2009 and the cheques were dishonoured by the petitioners banker on 7.9.2009. The complainant issued a statutory notice on 23.9.2009 demanding repayment within fifteen days which was received by the petitioner who also sent a reply on 30.9.2009. Since the demand made in the notice was not complied with, the respondent has initiated the above said proceedings. The learned Magistrate had also taken cognizance of the offence.

4. Challenging taking cognizance of the offence by the learned Judicial Magistrate, Ambattur, the petitioner is before this Court on the sole ground that the learned Judicial Magistrate has no jurisdiction to take cognizance.

5. Mr.Abudu Kumar Rajarathinam, learned counsel for the petitioner would submit that the entire transaction took place only at Bangalore and the cheque was drawn on Central Bank of India, Indira Nagar Branch, Bangalore and the same has been returned dishonoured only by the drawee bank, the notice has been received by the petitioner only at Bangalore and therefore, the learned Judicial Magistrate, Ambattur had no jurisdiction.

6. The learned counsel relied on the judgment reported 2009 (1) SCC 720 (Harman Electronics Pvt Ltd vs National Panasonic India Private Limited) (hereinafter referred to as Harman Electronics Case).

7. The learned counsel also relied on an order of this court dated 1.2.2011 in Crl.O.P.No.23732 and 23733 of 2010.

8. In the case of Harman Electronics Private Limtied and another vs National Panosonic India Private Limited, reported in 2009 (1) SCC 720, the Hon’ble Supreme Court held as follows:
13. It is one thing to say that sending of a notice is one of the ingredients maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence. For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be proved. What would constitute an offence is stated in the main provision. The proviso appended thereto, however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken. If the ingredients for constitution of the offence laid down in provisos (a), (b) and (c) appended to Section 138 of the Negotiable Instruments Act are intended to be applied in favour of the accused, there cannot be any doubt that receipt of a notice would ultimately give rise to the cause of action for filing a complaint. As it is only on receipt of the notice that the accused at his own peril may refuse to pay the amount. Clauses (b) and (c) of the proviso to Section 138 therefore must be read together. Issuance of notice would not by itself give rise to a cause of action but communication of the notice would.

9. Following the above said decisions, this Court has also held in Crl.O.P.No.23732 and 23733 of 2010 that place of issuance of notice will not give rise to jurisdiction.

10. On the contrary, Mr.Laxmi Rajarathinam, learned counsel for the respondent would submit that the cause of action arose only within the jurisdiction of the learned Judicial Magistarte, Ambattur, where the cheque was received, presented for encashment, returned dishonoured and the statutory notice was issued.

11. The learned counsel also relied on a decision reported in 1999(7) SCC 510 (K.Bhaskaran vs Shankaran Vaidhyan Balan and another) herein after referred to as Bhaskarans case, wherein the Apex Court has held
“14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence:(1) (1) drawing of the cheque, (2) presentation of the cheque to the bank, (3) returning the cheque unpaid by the drawee bank, (4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount (5) failure of the drawer to make payment within 15 days of the receipt of the notice”
15. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at five different localities. But a concatenation of all the above five is a sine qua non for the completion of the offence under Section 138 of the Code, In this context a reference to Section 178(d) of the Code is useful. IT is extracted below:
178 (a)-(c)
(d) where the offence consists of several acts done in different local areas
It may be enquired into or tried by a court having jurisdiction over any of such local areas
16. Thus it is clear, if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the

12. He also relied on the following unreported judgment of High Court of Bombay in Criminal Writ Petition No.615 of 2008 and also an order passed by this Court in Crl.O.P.No.8673 of 2010 dated 1.2.2011

13. According to the learned counsel, the court has jurisdiction where any one of the transaction takes place viz., issuance of cheque, presentation of the cheque, return of the cheque by drawee bank or place of issuing of statutory notice.
14. Heard and perused the materials available on record.

15. The question of jurisdiction in compliance under Sec.138 of NI Act came up for consideration before the Apex Court in Bhaskarans case. The Apex Court referred five components which constitute an offence under Sec.138 of NI Act. The Apex Court further held that if these five different acts were done in five different localities, any of the courts exercising jurisdiction in one of the five local areas can become the place for trial for offence under Sec.138 of NI Act and the complainant can choose any one of those Courts having jurisdiction over any one of those local areas where any of these five acts were done.

(1) drawing of the cheque
(2) presentation of the cheque to the bank
(3) returning the cheque unpaid by the drawee bank
(4)giving notice in writing to the drawer of the cheque demanding payment of the cheque amount
(5) failure of the drawer to make payment within 15 days of the receipt of the notice.

16. However, in the case of Shri Ishar Alloy Steels Ltd vs Jayaswals Neco Ltd reported in (2001) 3 SCC 609, (cited supra), the following questions were raised.
“2.(a) what is meant by “the bank” as mentioned in clause(a) of the proviso to Section 138 of the Negotiable Instruments Act, 1881?
(b) Does such bank mean the bank of the drawer of the cheque or covers within its ambit any bank including the collecting bank of the payee of the cheque?
(c) To which bank the cheque is to be presented for the purposes of attracting the penal provisions of Section 138 of the Act?

17. The three Judges Bench of the Hon’ble Supreme Court held that the Bank referred to in proviso (a) to Sec.138 of the Act would mean the drawee bank on which the cheque is drawn and not all banks where the cheque is presented for collection including the bank of the payee in whose favour the cheque is issued.

18. By this judgment the five different acts were reduced to four local areas which can become the place for trial. The place where the bank of the payee is situated is excluded from having jurisdiction.
19. Further, in the case of Harmans Electronics, the Apex Court categorically held that issuance of notice would not by itself give rise to cause of action but communication of notice would. Therefore, five different acts referred by the Apex court in Bhaskarans case have been reduced into three different acts viz., a) where the cheque has been issued b) where the cheque has been returned by the drawee bank and (c ) where the notice has been served or communicated to the accused. The place of presentation of cheque of the holders bank and the place of issuance of notice by the complainant would no more have jurisdiction.

20. In similar circumstances, referring to all the above case laws, this court in Crl.O.P.(MD)No.14835 of 2010 has held that the courts which has jurisdiction to the offence under Sec.138 of the Act shall be
1) the place where the cheque has been drawn;
2) the place where the cheque returned unpaid by the drawee bank;
3) the place where the statutory notice demanding payment of the cheque was served on the drawer.

21. However, Mr.Abudu Kumar Rajarathinam, learned counsel for the petitioner would submit that the jurisdiction lies only in the place where the statutory notice demanding payment of the cheque was served on the accused.

22. The learned counsel pointed out that on the part of the payee he has to make a demand by giving a notice in writing and that was the only requirement to complete the offence. According to the learned counsel, the offence is said to have been committed only on the failure of the drawer to pay the cheque amount within fifteen days from the date of receiving of such statutory notice. In other words, the learned counsel restricted the place of jurisdiction where a statutory notice was served or received and failure to make such payment.

23. On the contrary, Mr.A. Laxmi Raj Rathnam, learned counsel for the respondent relied on an unreported judgment of Bombay High Court in Criminal Writ Petition No.615 of 2008 , wherein, it has been observed as follows:

In fact, it would appear that in Harman Electronics, whole of the transaction had taken place at Chandigarh and the complainant had also its branch office at Chandigarh but only to cause harassment to the accused, the notice was issued from Delhi and complaint was filed in Delhi. In these circumstances, the Supreme Court held that merely issuance of notice from Delhi would not give jurisdiction to the Delhi Court. Therefore, on facts, the authority in Harman Electronics would not be applicable to the facts of the present case.

24. The learned counsel also relied on the judgment reported in 2008 (1) MHLJ 889, wherein, the High Court of Bombay had also discussed about the issuance of notice and the practice of presenting a cheque to the payees or holders own banker. The court ultimately held that

In other words, the accused after having received the statutory demand notice, having failed to make the payment to the Complainant’s at his address where he permanently resides, within the jurisdiction of JMFC, Panaji, committed the offence within the jurisdiction of JMFC, Panaji and it is the JMFC, Panaji, who has to try the same. To reiterate, the money due on the cheques which were dishonoured we required to be paid by the accused to the Complainant at his residence and that is within the jurisdiction of learned JMFC, Panaji.

25. The learned counsel for the respondent also relied on an unreported judgment of this court Crl.O.P.No. 8673 of 2010 dated 1.2.2011, wherein this court has held

13. Now it is very clear that the place of issuance of notice would not by itself give rise to cause of action, but the above referred five acts which constitute an offence in any one area alone confers jurisdiction.

26. The learned counsel also relied on an unreported judgment of Bombay High Court in Crl.Appln.No.2674 of 2008 wherein it is held as follows:

20. It thus appears to be a consistent view that in order to avoid unnecessary harassment to an accused, if the complaint is filed at a place where the complainant does not ordinarily reside or carries on his business and the cheque is presented at some other place and a notice is given to such place only in order to file a complaint at such place, the complaint would not be tenable in the Court of such a place. However, if the cheque is presented at a place where the complainant ordinarily resides or carries on business or if it is a company where its registered office is situated and if a notice demanding payment is issued from such a place, then the Court at such a place will have jurisdiction to entertain the complaint.

27. As stated earlier, in Bhaskarans case, the Apex Court has referred five local areas which can become the place for trial for an offence under Sec.138 of NI Act. However, the three judges Bench of the Apex Court in Shri Ishar Alloy Steels Ltd vs Jayaswals Neco Ltd reported in (2001) 3 SCC 609 has clarified the bank referred to in proviso a to Sec.138 of the Act would mean that the drawee bank on which the cheque is drawn and not all banks where the cheque is presented for collection including the bank of the payee or holder.

28. In Harmans case it is held that the issuance of notice would not by itself give rise to a cause of action but the communication of the notice would .

29. However, I am unable to agree with the contentions of the learned counsel for the petitioner, who would insist that the place where the statutory notice demanding payment of cheque was received or served on the accused alone can have jurisdiction.

30. Issuing of cheque per-se is not an offence. Presentation of the cheque and the dishonor of the cheque by the drawee bank may be referred to as commencement of the offence, which is followed by issuing of a statutory notice demanding payment and giving an opportunity to the drawee to avoid criminal prosecution.

31. On receipt of such notice and on failure to make payment, the offence is completed and therefore, the cumulative effect of all the above acts has to be taken into consideration to decide the jurisdiction of the Court.

32. Therefore, this court has already held that the jurisdiction for a trial of the offence shall be the place where a) the cheque has been issued b) the place where the cheque has been returned unpaid by the drawee bank and c) the place where the statutory notice demanding payment of the cheque was served or received.

33. In the present case, though the cheque was issued at Bangalore and the notice was also served at Bangalore, the place where the cheque has been returned unpaid by the drawee bank is only at Chennai.

34. In the additional common set of typed set of papers filed by the respondent, the return memo of Central Bank of India having office at Montieth Road, Chennai has been furnished. The respondent has presented the cheque to his bank viz., Indian Bank, Padi Branch, Chennai and the same has been forwarded to Central Bank of India, Montieth Road, Chennai where it is returned with an endorsement stating exceeds arrangement. Though the cheque was drawn on the Central Bank of India, Indira Nagar, Bangalore Branch, it has been returned by the Central Bank of India, Montieth Road, Egmore Branch, Chennai.

35. Therefore, the court which has jurisdiction is neither the Magistrates court at Bangalure nor the Judicial Magistrate court, Ambattur, Chennai, but the Metropolitan Magistrates Court at Egmore, Chennai.

36. Therefore, initiation of proceedings and taking cognizance by the learned Judicial Magistrate, Ambattur, Chennai is not proper but it is only a curable defect which can be rectified by giving an opportunity to the respondent to withdraw the complaint and present the same before the jurisdiction court at Egmore, Chennai.

37. In the result, the criminal original petition is disposed of with a direction to the respondent to withdraw the complaint pending before the Judicial Magistrate, Ambattur and present the same before the jurisdictional Metropolitan Magistrate Court at Egmore, Chennai within a period of four weeks from the date of receipt of copy of this order.

 

 

 

 

sr
To
The Judicial Magistrate,
Ambattur

 

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