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2010 DIGILAW 161 (JK)

Rohit Motors v. Punjab Tractors Ltd.

2010-03-25

GH.HASNAIN MASSODI

body2010
1. Trade and Commerce are of pivotal importance for over all development of a country. These while making contributions in shape of direct and indirect taxes to the State exchequer provide employment to a large number of people. It has been thus, all along endeavor of the law makers to enact laws that guarantee freedom of trade and commerce, facilitate and promote trade and commerce and impart credibility to the commercial transactions and respectability to the Negotiable Instruments. It needs no emphasis, that with new strides in trade and commerce, it is impracticable to rely on cash transactions alone. The parties to commercial transactions invariably rely on Negotiable Instruments like cheques to clinch commercial deals. It is thus of utmost importance that cheques are honoured as to discredit cheques as medium of commercial transactions is bound to have a negative spill over for over all health of economy. It is for the said reason that failure to adhere to the commitments by drawer of a cheque has been viewed seriously and frowned upon by the social planners. Before a special law, dealing with dishonor of cheques, was enacted, Section 420 RPC used to be pressed into service to deal with the problem. It was soon realized that, "deception", and "fraudulent or dishonest inducement" being necessary components of the offence of cheating it may not be possible for drawee or holder in due course of a bounced cheque to prove existence of such basic components of the offence of cheating. Cases are conceivable where the drawer of cheque at the time of issuing cheque had no intention to deceive a drawee and thus would go, of the hook, once the drawer failed to prove deception. In the circumstances a law was required to be enacted which would make return of cheque unpaid, an offence even when no deception was proved against the drawer of the cheque. The legislative effort in this regard crystallized in shape of Negotiable Instruments Act. The law relating to Negotiable Instruments is law of commercial world and is primarily concerned with sanctity to the instruments of the credit, convertible into money and easily passable from one person or other. 2. The legislative effort in this regard crystallized in shape of Negotiable Instruments Act. The law relating to Negotiable Instruments is law of commercial world and is primarily concerned with sanctity to the instruments of the credit, convertible into money and easily passable from one person or other. 2. Should societal concern for respectability of negotiable instruments like cheques, be stretched to an extent that permit the drawer or holder in due course to make a departure from settled principles governing jurisdiction of Criminal courts, and choose jurisdiction of his choice, is the question stared at the court in the present bunch of petitions under Section 561-A Code of Criminal Procedure; 3. The facts of petitions 102/2009, 103/2009 and 106/2009 to 113/2009 under Section 561-A Criminal Procedure Code, if not similar, the contours of controversy in all the ten petitions are identical and all the ten petitions may very well be taken-up together. This order thus shall govern the fate of all the above captioned petitions. 4. The respondent -- Punjab Tractors Limited was a company incorporated under Companies Act, 1956 with its registered office at Phase-IV Industrial Area S.A.S Nagar (District Mohalla) 160055 Chandigarh and regional office at Bhopal, Madhya Pradesh India. The respondent Company had also a branch office at Srinagar. The respondent Company -- Punjab Tractors, appears to have later merged with Mahindra and Mahindra Limited, a Company incorporated under the Companies Act, 1913 having its registered office at Gate Way Building Apollo Bhandra Mumbai 480001, in terms of order passed in scheme of amalgamation by Honble High Courts of Bombay and Punjab and Haryana. It is in the said back ground that a few of the complaints have been filed by Mahindra and Mahindra Limited and the company resultantly figures as respondent in some of the petitions relating to said complaints, though the cheques were drawn in favour of Punjab Tractors Limited. 5. The petitioners in all the petitions are business concerns dealing in sale and service of Tractors and have been at some point of time appointed as "authorized dealers" by the respondent Company. The petitioners in connection with business dealing with the respondent company -- Punjab Tractors Limited, issued cheques drawn on different Banks and payable at different places in M.P., U.P., and Uttrakhand States. In none of the cases the cheques were drawn on a bank at Srinagar or made payable at Srinagar; 6. The petitioners in connection with business dealing with the respondent company -- Punjab Tractors Limited, issued cheques drawn on different Banks and payable at different places in M.P., U.P., and Uttrakhand States. In none of the cases the cheques were drawn on a bank at Srinagar or made payable at Srinagar; 6. For facility of reference necessary details in respect of cheques forming subject matter of complaints/petitions may be tabulated here under:- 561-A Nos. Cheque amount. No & date. Bank on which drawn Place of payment. 102//2009 Rs. 35,00,000 003947 20.8.2008 Union Bank of India Sakla Disstt, Mandla M.P. Mandla M.P. 103/2009 Rs. 70,00,000 284379 30.10.2008 Union Bank of India Damoh M.P. Damoh M.P. 106/2009 Rs.34,16,000 642488 20.10.2008 State Bank of India Lakhmipure Kheri Lakhmipure 107/2009 Rs.25,00,000 642487 28.2.2008 State Bank of India Lakhmipure Kheri U.P. Lakhmipure 108/2009 Rs. 30,00,000 0526298 10.10.2008 Bank of Baroda, Palla Kalan Kheri Pala Kalan 109/2009 Rs.88,90,000 518074 28.1.2009 Bank of Baroda Kashipure Udham Nagar Uttrakhand Kashipure 110/2009 Rs.88,90,000 518074 20.09.2008 Bank of Baroda Kashipure Udham Nagar Uttrakhand Kashipure 111/2009 Rs.20,00,000 118944 29.2.2008 State Bank of India Mohammadi Lakhmipure Kheri U.P. Mohammadi 112/2009 Rs.30,00,000 118945 15.10.2008 State Bank of India Mohammadi Lakhmipure Kheri U.P. Mohammadi 113/2009 Rs.36,47,000 118944 31.10.2008 State Bank of India Mohammadi Lakhmipure Kheri U.P. Mohamamdi 7. The cheqeus were presented by the Company for collection at its bank namely Jammu and Kashmir Bank branch Residency Road Srinagar. The cheques were forwarded by the collecting bank to the respective banks on which the cheques were drawn. The respondent company, however, did not get the cheque amount as the funds were reported by the concerned banks to be "not sufficient". The respondent company after receiving said information from its Bank i.e. the Collecting Bank, dispatched a demand notice through its lawyer Sh. Irfan Andleeb Advocate, from Srinagar, asking the petitioners to pay the cheque amount within 15 days from the date of receipt of notice. The demand notice in each case was sent to the petitioner at its business address in States other than the State of Jammu and Kashmir. The petitioners, in each case, failed to act upon the demand notice and pay the cheque amount. The Respondent thereafter through its attorney Sh. The demand notice in each case was sent to the petitioner at its business address in States other than the State of Jammu and Kashmir. The petitioners, in each case, failed to act upon the demand notice and pay the cheque amount. The Respondent thereafter through its attorney Sh. Khursheed Ahmad Thoker Son of Ali Mohammad Thoker Resident of Khanyar Srinagar also an employee of respondent company filed a complaint in respect of each of the dishonoured cheques under Section 138 Negotiable Instruments Act, and 420 RPC. 8. The complainant in each case narrated the facts and events and alleged that the cheque issued by the petitioner had been dis-honored by the bank on which it was drawn and that the petitioner-drawer of the cheque had failed to pay the cheque amount within 15 days after the receipt of the demand notice. The Learned Trial Magistrate, after recording statements of the complainant in each complaint, took cognizance of the offences punishable under Section 138 Negotiable Instruments Act, and 420 RPC, and issued process against the petitioner. 9. The petitioners aggrieved of the order, taking cognizance of aforementioned offences on the complaint filed by the respondent company, have filed petition under Section 561-A Criminal Procedure Code invoking inherent jurisdiction of this Court and seek quashment of the orders taking cognizance in the matter as also directing issue of process against the petitioners. 10. The main plank of the petitioners case in all the petitions is that the Court at Srinagar lacked jurisdiction to entertain and deal with the complaint. Resultantly, it is urged, the order taking cognizance of offences punishable under Section 138 Negotiable Instruments Act, and 420 RPC in complaints filed by the respondent company is without jurisdiction and amounts to abuse of process of court within the meaning of Section 561-A Criminal Procedure Code. In some petitions peripheral issues like competence of the complainant to file complaint on behalf of the respondent company, liability of the petitioners to pay the cheque amount and back ground in which cheque/s was/were issued are also raised. But in view of the jurisdictional issues raised in the petitions all other grounds recede to the back ground. The court is thus to deal with the primary or jurisdictional issue set out in the petitions. But in view of the jurisdictional issues raised in the petitions all other grounds recede to the back ground. The court is thus to deal with the primary or jurisdictional issue set out in the petitions. In case the Court at Srinagar is found to have jurisdiction to entertain and proceed with the complaint, the focus is to shift to other grounds of challenge taken up in the petition. 11. I have gone through each of the petitions as well as record in each case received from the Court below. 12. I have heard learned counsel for the parties. 13. Chapter (XV) of Criminal Procedure Svt 1989, deals with the jurisdiction of Criminal Courts in enquires and trials Section 177 of the Code lays down that every offence shall ordinarily inquired into and tried by court within local limits of whose jurisdiction it was committed. There is thus no scope for controversy as regards jurisdiction of a court to inquire into and try an offence where a single act constitutes the alleged offence. The difficulty arises when series of acts together constitute offence, Section 179 takes care of the cases where the act is done at one place and the consequences which ensue, take place at a different place. In such cases the offences may be inquired into and tried by the Court within local limits of whose jurisdiction the Act has been done or any such consequences have ensued. The illustrations (a) to (d) illustrate the cases where Section 179 may come into play. Thus where a person is wounded within territorial jurisdiction of court A and he thereafter moves to territorial jurisdiction of Court B where he breaths his last in consequence of wounds received at the former place, both the Courts i.e. one having jurisdiction over the place of attack and other having the jurisdiction over the place where the death occurred have jurisdiction to inquire into and try the case. Section 182 Criminal Procedure Code incorporates yet another exception to the general rules embodied in Section 177 Criminal Producer Code. It would be advantageous to reproduce Section 182 Criminal procedure Code here under:- 182. Section 182 Criminal Procedure Code incorporates yet another exception to the general rules embodied in Section 177 Criminal Producer Code. It would be advantageous to reproduce Section 182 Criminal procedure Code here under:- 182. Place of inquiry or trial where scene of offence is uncertain or not in one district only; or where offence is continuing, or consists of several acts When it is uncertain in which of several local areas an offence was committed, or Where an offence is committed partly in one local area and partly in another ; or Where an offence is a continuing one; and continues to be committed in more local areas than one; or 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. 14. The offence under Section 138 Negotiable Instruments Act, is not a local offence i.e. it does not comprise of a single act, and thus Section 177 of the Code is not relevant for the purpose of jurisdiction of the Court to inquire into and try the offence punishable under Section 138 Negotiable Instruments Act, The offence under Section 138 Negotiable Instruments Act, as laid down in K. Bhaskaran v. Sankaram Vaidhyan Balan & Another AIR 1999 SC 3762, is complete only with the concatenation of a number of acts namely; (i) drawing of the cheque (ii) presentation of cheque to the Bank (iii) Return of the cheque by drawee Bank (iv) Giving notice of the demand, to the drawer of the cheque for payment of the cheque amount. (v) Failure of the drawer to make payment within 15 days of receipt of the notice. 15. The offence under Section 138 of the Act, (for short Act) consists of several Acts within the meaning of Section 182 code of Criminal Procedure and obviously the Court having jurisdiction over any of such local areas has jurisdiction to inquire and try the offence. This however, does not clinch the mater. It remains to be seen as to what are the acts that together constitute the offence. It needs no emphasis that some of the acts done while committing the offence, that attract Section 182 Criminal Procedure Code may be taken in aid of the main acts and such steps are not to be allowed to decide the jurisdiction of the Court. It needs no emphasis that some of the acts done while committing the offence, that attract Section 182 Criminal Procedure Code may be taken in aid of the main acts and such steps are not to be allowed to decide the jurisdiction of the Court. To illustrate the drawee, after he gets cheque back unpaid, may go to his lawyer at place A to get the demand notice drafted and then return to place B where he hands-over demand notice to the drawer. The drafting of demand notice is just a step towards the one of the key or crucial acts and not by itself decisive of jurisdiction. In K. Bhaskarans case (supra), the Supreme Court held that as the offence punishable under Section 138 of the Act, can be complete only with concatenation of five acts (supra) and the five different acts, may be done at five different localities, any one of the courts exercising jurisdiction in any one of the five local areas can become the place of trial for offence under Section 138 of the Act. From the law laid down in K. Bhaskarans case, relied upon by the Learned Counsel for the respondent, it emerges that a complainant can choose any one of the courts having jurisdiction over any one of the local areas within territorial limits of which any of the following acts was done; (i) the cheque was drawn (ii) the cheque was presented (iii) the drawee Bank returned the cheque unpaid. (iv) Notice was given to the drawer of the cheque demanding payment and cheque amount. (v) the drawer failed to make payment within 15 days of the receipt of the notice. 16. Learned Counsel for the respondents relying upon the law laid down in K. Bhaskarans case insists that as the cheque was presented to the Bank for payment at Srinagar and the notice of demand was also dispatched from Srinagar, the court at Srinagar having jurisdiction over the area, where the cheque was presented and notice given, has jurisdiction to take cognizance of the offence and issue process against the petitioner(s). If the arguments advanced by the Learned Counsel for the respondent is accepted then a business concern like a company or a Bank or a financial Institution having network of offices through-out the country may receive a cheque in connection with its business transactions at a place in any part of the country say at Aizwal (Mizoram) -Easternmost part of the country and present it for collection at Barmir (Rajasthan) _ western most part of the country, and in the event of cheque being received unpaid issue a demand notice from Barmir (Rajasthan), file a complaint under Section 138 Negotiable Instruments Act, at Barmir and drag small time businessman from Aizwal (Mizoram) to Barmir (Rajasthan) a few thousand k.ms from his residence. The same can be true about a businessman from Kanyakumari, made to appear in a Court at Nobra, (Ladakh) or for that matter from any part of the country to any farthest place of the country. It would amount to virtually penalizing the accused in a complaint under Section 138 Negotiable Instruments Act, before he is actually afforded a opportunity to face the trial and the complainant embarks on a exercise to prove his case against the drawer of the cheque and before he is found guilty. Such, an interpretation of law laid down in K. Bhaskarans case would be repugnant to and violative of right to life and liberty guaranteed under Article 21 of the Constitution of India. No person in terms of the aforesaid constitutional provision is to be deprived of his life or personal liberty except according to procedure established by law. It is well settled law that the procedure "established by law" must be reasonable, fair and just and the law that makes room for prosecution of a person a few thousand k.ms. or for that matter even a few hundred kms from his place of residence when the offence alleged is not committed within the local limits of the court where the prosecution is launched, can not be said to be reasonable, fair and just. The law laid down in K. Bhaskarans case is thus to be interpreted in such a manner that the constitutional mandate is not violated. The law laid down in K. Bhaskarans case is thus to be interpreted in such a manner that the constitutional mandate is not violated. It is pertinent to point out that the offence punishable under Section 138 is a statutory offence and unlike other offences it is not complete unless and until the accused is given an opportunity to set right. The lapse/mistake and the accused does not within the statutory period set right lapse/mistake. In other words the offence under Section 138 Negotiable Instruments Act, is not complete when cheque is drawn even if at the time the cheque is drawn, the drawer of the cheque may be aware that on that date there were not sufficient funds in his account to pay the cheque amount, the offence is not complete even when the cheque is dishonored and the drawee or the holder in due course informed by the Bank that there are no sufficient funds in drawers account to pay. The offence is incomplete even when the drawer issues demand notice to the drawer requiring him to pay the cheque amount within 15 days from the date of receipt of the cheque notice, for the simple reason that the drawee may respond to the notice and pay the cheque amount. In the event the drawer pays the cheque amount to the drawee, no offence is committed even if at the time the cheque was drawn no amount was available in the account and that the drawer knew that the cheque was dishonored. Why should an offence under Section 138 of the Act, be declared complete only after the drawer fails to pay the cheque amount despite demand notice, is not difficult answer. Section 138 of the Act, does not make element of "deceit" as a sine qua non for the offence. In other words, the complainant has not to prove that there was any deception on the part of the drawer of the cheque that preceded "fraudulent or dishonest inducement" of the drawee. If a cheque is dishonored for paucity of funds, offence under Section 138 is complete, no matter that the drawer had or had not the dishonest intention at the time of drawing the cheque. If a cheque is dishonored for paucity of funds, offence under Section 138 is complete, no matter that the drawer had or had not the dishonest intention at the time of drawing the cheque. It is because of said reason that even when the cheque is dishonored the drawer is to be given a fair opportunity (15 days time) to make the payment after receipt of the demand notice. The law visualizes that the drawer might having bonafide belief at the time of drawing the cheque, expected the cheque amount to have been credited to his account and because of some reason beyond his control, the amount did not reach the drawers account. In the circumstances the failure to pay the cheque amount within 15 days after receipt of the demand notice assumes pivotal importance in commission of the offence under Section 138 of the Act. If we go a step further, the receipt of the demand notice by the drawer of the cheque is the key event in commission of the offence. The receipt of the demand notice by the drawer of the cheque, whether actually received or presumed to have been received in terms of Section 27 of the General Clauses Act, and Section 118 of the Evidence Act, is to be integral part of act of giving of the notice, as mere giving of notice can not be said to be by itself a component of offence under Section 138 of the Act. In the circumstances component IV identified in K. Bhaskarans case is to be interpreted to refer to giving and receipt of the demand notice. It follows that when the place from which a demand notice is given and the place where the demand notice is to go are situated within local limits of territorial jurisdiction of the same Court, the complaint under Section 138 Negotiable Instruments Act, may be filed in that court. However, when the place from which the demand notice is dispatched and the place where demand notice is to go are two different jurisdictional areas, the complaint under Section 138 may be filed at the place where the notice is received or presumed to have been received as the giving of notice is only a step towards the key act of receipt of notice and is complete only when the notice is received or presumed to have been received. Again the presentation of the cheque for collection by drawee or holder in due course in a Bank, where the drawee/holder in due course, has an account is not the deciding factor of identifying the Court that has jurisdiction to try Complaint under Section 138 of the Act. The drawee of the cheque or holder in due course may present the cheque for collection at any place in the country and if such presentation before Collecting Bank is held to give jurisdiction to the Court where Collecting Bank is situated, it shall have disastrous consequences for the drawer of the cheque and expose the drawer to immense hardship. It may be reiterated that procedure contemplated by Article 21 of the constitution is to be reasonable, fair and just., It follows that component No.2 identified in the K. Bhaskarans case is to be interpreted to mean presentation of the cheque to the Bank on which the cheque is drawn. To illustrate if the cheque is drawn on a Bank at Srinagar and presented for collection at Kanyakumari, it is the court at Srinagar where the Bank on which the cheque is drawn that has jurisdiction to inquire into and try the offence. I am fortified in my view by law laid down, in Harman Electronics (P) Limited and others v. National Panasonic Limited AIR 2009 SC 1166, where it has been held that the issuance of notice by itself would not give rise to the cause of action and that the cause of action for the complaint under Section 138 would rise only on receipt of the notice and failure of the accused to pay the cheque amount within 15 days thereafter. The court held that while issuance of a notice by the drawer or holder in due course is necessary, the service of the demand notice is equally imperative. The court held that giving of notice, therefore, can not have any precedence over its service. It was further held that the principle that debtor must seek the creditor can not be applied in criminal case as jurisdiction to try the case is governed by the provision of Criminal Procedure Code and not of common-law principle. The court held that giving of notice, therefore, can not have any precedence over its service. It was further held that the principle that debtor must seek the creditor can not be applied in criminal case as jurisdiction to try the case is governed by the provision of Criminal Procedure Code and not of common-law principle. In Ishar Alloy Steel Limited v. Jayaswals NECO Limited, 2001 (2) KLT 148 (SC) it has been held that the Bank referred to in the proviso (a) Section 138 is the drawee Bank and not the Collecting Bank i.e. Bank where, cheque is presented by the complainant for collection. The principle has been reiterated in Santosh Kumar v. Mohanan I (2009) Banking Cases 384. From the above discussion, it emerges that complaint under Section 138 Negotiable Instruments Act, may be filed in a Court within the local limits of whose jurisdiction any of the following acts are done: - (i) Cheque is drawn (ii) The cheque is presented to the drawee Bank and returned unpaid. (iv) The demand notice is given and received or presumed to have been received and where the notice is dispatched from a place different from the place where it is to be received, where the notice is received or presumed to have been received. (vi) Where the drawer fails to make the payments within 15 days of the receipt of the notice. 17. In the present cases the cheque was neither drawn within local limits of jurisdiction at Srinagar nor presented to the drawee Bank within said limits and the demand notice was not received or presumed to have been received within the jurisdiction of the Court at Srinagar. Again the drawer did not fail to make the payment within 15 days of the receipt of the aforesaid notice within jurisdiction of court at Srinagar. The court at Srinagar thus lacked jurisdiction to entertain much less proceed with the complaint and take cognizance of the offence under Section 138 of the Act. The Court resultantly had no jurisdiction to issue process against the petitioner. 18. The order taking cognizance and directing issuance of the process against the petitioner in each of the compliant in the circumstances amounts to abuse of process of court and thus liable to be quashed under Section 561-A Code of Criminal Procedure. 19. The Court resultantly had no jurisdiction to issue process against the petitioner. 18. The order taking cognizance and directing issuance of the process against the petitioner in each of the compliant in the circumstances amounts to abuse of process of court and thus liable to be quashed under Section 561-A Code of Criminal Procedure. 19. So viewed, all ten petitions under Sections 561-A captioned above are allowed and orders taking cognizance and directing issuance of process detailed below, are quashed. (1) Order dated 24.01.2009 passed by 1st. Addl. Munsiff (JMIC) Srinagar in Cr. Complaint No.89/A. (2) Order elated 24.02.2009 passed by 3rd Addl. Munsiff Srinagar. (3) Order dated 30.03.2009 passed by Judicial Magistrate, Srinagar in Cr. Complaint No.81/A (4) Order dated 07.05.2008 passed by 3rd Addl. Munsiff, Srinagar in Cr. Compliant 10/A (5) Order dated 09.06.2009 passed by Ist. Addl. Munsiff (JMIC) Srinagar in Cr. Complaint No.12/A (6) Order dated 16.3.2009 passed by Ist. Addl. Munsiff Srinagar, in Cr. Complaint 106/A (7) Order dated 16.3.2009 passed by Ist. Addi. Munsiff Srinagar, in Cr. Complaint 106/A (8) Order dated 07.10.2008 passed by 3d, Addl. Munsiff Srinagar, in file No.31/C (9) Order dated 01.04.2009 passed by Forest Judl. Judicial Magistrate, Srinagar in Cr. Complaint No.1/A. (10) Order dated 01.04.2009 passed by Judge Small Causes Court Srinagar, Srinagar in Cr. Complaint No.2/A. Disposed of. The record in all the ten petitions be send down.