20 Mar 2010

Courts only at payor's bank have jurisdiction on cheque bounce: High Court

In a recent decision the Delhi High Court has declared that the jurisdiction to deal with a cheque-bounce case is only where the bank of the payer is located as the cheque is deemed to be presented at the payer's bank. It makes no distinction from the fact that the cheque has been deposited at any other bank for payment or that the notice demanding payment has been made from another place. The High Court declined to exercise jurisdiction in the case where the cheques were drawn by the payor on a Raipur bank turning down the argument that they were presented for payment in Delhi bank and that the notice demanding payment was issued from Delhi.

The High Court held as under;

3. There are five essential ingredients of offence under Section 138 of the Negotiable Instruments Act, as held by the Supreme Court in the case of “K.Bhaskaran Vs. Sankaran VAidhyan Balan & Another”, (1999) 7 SCC 510, (i) drawing of the cheque, (ii) presentation of the cheque to the bank of the payee, (iii) return of the cheque unpaid by the drawee bank, (iv) giving of notice to the drawer of the cheque demanding payment of the cheque amount and (v) failure of the drawer to make payment within 15 days of the receipt of the notice.
4. This is not the case of the complainant that the cheque in question was issued and delivered to it in Delhi. There is no allegation to this effect in the complaint. On the other hand, the petitioner has specifically stated that cheques in question was issued in Raipur. It is also not disputed that the cheque in question was drawn on a bank in Raipur and was dishonoured by that bank at Raipur. It is also not in dispute that the notice of demand, though issued from Delhi, was sent to the petitioner at Raipur and, therefore, this is not the case of the complainant/respondent No.1 that the notice was served upon the petitioner in Delhi.
5. It was held by the Hon’ble Supreme Court in the case of “Harman Electronics Private Limited & Another Vs. National Panasonic India Private Limited”, 2009 (1) SCC 720: “A distinction must also be borne in mind between the ingredient of an offence and commission of a part of the offence. While issuance of a notice by the holder of a negotiable instrument is necessary, service thereof is also imperative. Only on a service of such notice and failure on the part of the accused to pay the demanded amount within a period of 15 days thereafter, the commission of an offence completes.”
6. The only plea taken by the learned counsel for the complainant/respondent No.1 was that the cheque in question having been deposited with the bank of the complainant in Delhi and presentation of the cheque being an essential component of the offence under Section 138 of Negotiable Instruments Act, Delhi Court would have jurisdiction to entertain and try the complaint.
7. As regards presentation of the cheque, the Hon’ble Supreme Court in “Shri Ishar Alloy Steels Ltd. Vs. Jayaswals Neco Ltd”; (2001) 3 SCC 609, inter-alia, held that “The bank” referred to in clause (a) to the proviso of Section 138 of the Act would mean the drawee bank on which the cheque is drawn and not all the banks where the cheque is presented for collection including the bank of the payee, in whose favour the cheque is issued.”
It was further observed that “the payee of the cheque has the option to present the cheque in any bank including the collecting bank where he has his account but to attract the criminal liability of the drawer of the cheque such collecting bank is obliged to present the cheque in the drawee or Payee bank on which the cheque is drawn within the period of six months from the date on which it is shown to have been issued.”
In para 10 of the judgment the Hon’ble Supreme Court further observed that “Sections 3, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable.”
8. The ratio of the above referred judgment of the Hon’ble Supreme Court is that a cheque is deemed to have been presented to the banker of the drawer irrespective of the fact whether it is deposited by the payee in his own bank. The banker of the payee, after receiving the cheque from him, is required to present it to the banker of the drawer and therefore if the cheque issued from a bank in Raipur is deposited in Delhi, the bank in which it is deposited in Delhi, is required to present it to the bank at Raipur, for the purpose of encashment. Therefore, it cannot be said that the cheque issued by the petitioner was presented in Delhi. Despite the fact that the bank in which the respondent No. 2 had an account was in Delhi, the cheque shall be deemed to have been presented only to the bank at Raipur on which it was drawn. Therefore, deposit of cheque in Delhi would not confer jurisdiction on Delhi court to try this complaint.

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