Shri Prakash Chand vs Devans Modern Breweries

When matter came up for consideration on 14.12.2019, there was no representation from either side. The instant petition is pending since 2008 and the proceedings before the trial court have been stayed by this Court vide order dated 08.12.2008. So I proposed to dispose it off on merits on the basis of material available on the file.

Through the medium of instant petition filed under Section 561-A of the Code of Criminal Procedure, petitioner seeks quashing of proceedings as also the process issued by the trial Court in Criminal Complaint under Section 138 of Negotiable Instruments Act and 420 RPC filed by the respondent against the petitioner, pending before court of learned Special Railway Magistrate, Jammu.

In the petition, it has been stated that the petitioner is a resident of Varanasi Uttar Pradesh and is running the business of sale/purchase of liquor of different kinds and remained dealing with the respondent also. The petitioner was having a current account in Oriental Bank of Commerce Lahurani, Varanasi, U.P. and got a cheque book issued from the said bank from serial No.785915 to 786000. The said cheque book issued by the banker was lost by the petitioner and accordingly he lodged necessary complaint/FIR with Police Station, Chetganj Varanasi, UP on 26.11.2007. After lodging the complaint/report with the said police station, the petitioner in order to avoid any problem arising out of theft/loss of his cheque book, approached his banker and got the said account closed on 28.11.2007.

It is further stated in the petition that out of aforesaid lost cheque book two cheques of Rs.1,20,000/- and Rs.1,10,000/- respectively allegedly issued by the petitioner came to be presented by the respondent for encashment through his banker i.e. Punjab National Bank Limited, Ghaziabad Branch, UP, but the same were not encashed because the reason that the petitioner had already closed the said account. The respondent has filed a totally false and frivolous complaint under Section 138 of Negotiable Instruments Act in the Court of learned Special Railway Magistrate, Jammu, in which the learned trial Court without any jurisdiction with regard to the cause accrued, has entertained the complaint and issued process against the petitioner in the complaint.

Petitioner is aggrieved of the proceedings having been initiated by the trial Court without any jurisdiction and power in a complaint filed by the respondent against petitioner and challenged the same on the following grounds:-

a) That the complaint filed by the respondent and entertained by the learned trial Court is totally illegal for the simple reason that the cheques in question allegedly issued by the petitioner have been presented by the respondent through his banker at Ghaziabad U.P. and the said cheques have been dishonored at Ghaziabad in the State of UP, therefore, the Courts at Ghaziabad Uttar Pradesh have the necessary jurisdiction to try such a complaint. Filing of complaint by the respondent before the trial Court at Jammu and cognizance taken by the trial Court in the aforesaid complaint is totally illegal and without any lawful jurisdiction.

b) That entertaining and thereafter issuing process upon a complaint by the trial Court is totally against the provisions of law and without any jurisdiction for the simple reason that it is the admitted case of the respondent that the cheques have been bounced/dishonored at Ghaziabad. Instead of filing the complaint before the competent court at Ghaziabad, the respondent has chosen to file the present complaint before the trial Court just to harass and cause prejudice to the petitioner.

c) That the trial Court ought to have first seen the place of occurrence i.e. dishonoring of cheque within its jurisdiction and only thereafter the said complaint ought to have been entertained. Without holding any enquiry worth the name as regards the place where the cheques allegedly issued by the petitioner have been dishonoured, the trial Court in a haphazard manner has issued the process against the petitioner which is totally illegal and unlawful.

d) That the learned trial court has fallen in grave error while entertaining the complaint in question and while issuing the process in the said complaint. It was the admitted case of the respondent as pleaded by him in his complaint that the cheques have been dishonoured at Ghaziabad. This vital and crucial aspect of the matter has been overlooked by the learned trial Court.

e) That by issuing the process in the aforesaid complaint, serious illegality has been committed by the learned trial court, therefore, the present petition is fully maintainable before this Court.

f) That the respondent has presented two cheques out of the cheque book of the petitioner which has been stolen and regarding which complaint has already been filed by the petitioner. The cheques in question were never issued by the petitioner to the respondent at any point of time.

For just decision in the case, it is apt to reproduce relevant extract of the complaint filed by the respondent before trial Court, it reads as under:-

"3. That in the course of its business, the complainant company had been supplying its goods to accused No.1 firm, on credit basis from time to time. The accused no.2 and 3 are the partners in the accused No.1 firm and are managing all the affairs of the firm.

That against the supply of beer by the complainant company to the accused no.1 firm, the accused no.2 and 3 on behalf of accused No.1 issued two cheques being cheque No.785916 and 785918 both dated 30th day of June, 2007 for an amount of Rs.1.20 lac and Rs.1.10 lac respectively, drawn on Oriental Bank of Commerce, Lahuravir Varanasi in favour of the complainant company. At the time of issuance of the aforesaid two cheques, the accused persons assured the complainant company that the cheques on presentation shall be encashed.

That the complainant company presented the aforesaid two cheques for clearance through its bankers Punjab National Bank but the cheques were dishonoured and returned to the complainant company alongwith memo of dishonor dated 30.11.2007 bearing remarks "Accounts Closed".

6) That the complainant company thereafter vide its notice bearing No.DMBL:UP:6318-20 dated 11.12.2007 sent through registered post with acknowledgement due informed the accused persons about the dishonor of cheques and resisted for remitting the amount of Rs.2.30 lac in lieu of the dishonoured cheques within fifteen days of the receipt of the notice. The notices were sent to the accused persons from the head office of the complainant company at Jammu.

7) That the notice sent to the accused no.1 through registered post was received back with the noting of the concerned post man dated 20.12.2007 that the accused not met. Similarly, the notice sent to the accused no.2 was received back with the noting of the notices to the accused persons have been sent by the complainant at their correct addresses and thereafter, it is presumed that the notices have been duly served upon the accused persons no.1 and 3 on 20.12.2007 and 01.01.2008 respectively.

8) That the accused persons despite the receipt of legal notice have not made any payment till date in lieu of the aforesaid two dishonored cheques.

9) That the accused persons at the time of issuance of the aforesaid two cheques were aware of the fact that there was insufficient fund in their account and the cheques on presentation for clearance shall be dishonoured for want of sufficient funds in their account and therefore, instructed their banker to close the account. But the fact remains that the cheques have been dishonoured for want of sufficient funds in the account of the accused persons.

10) That the accused no.2 and 3, the partners in accused no.1 firm who were looking after and managing all the affairs of the respondent No.1 firm induced the complainant company to deliver the goods to them by assuring that accused no.1 is a sound firm and the entire payment in respect of the goods supplied by the complainant company to the accused persons shall be made. The accused no.2 and 3 have thus defrauded and cheated the complainant company by inducing it to supply the beer to them and by depriving them of their lawful dues. The accused persons thus have committed offence under section 138 of the Negotiable Instruments Act and Section 420 RPC."

I have gone through the contents of the petition as well as complaint and also touched the law on the subject.

The offence under section 138 of N.I. Act is punitive as well as compensatory; the court while convicting has also power to compensate the complainant of cheque amount; procedure is summary in nature. At the time of taking cognizance, court has only to see from the contents of complaint as well documents annexed therein, whether all the essential elements of section 138 of N.I. Act are made out or not. Section 138 reads as under:-

" 138 Dishonour of cheque for insufficiency, etc., of funds in the account.

-Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20[within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

From bare perusal of this section, it is evident that a person (will be drawer of the cheque) should have a legally enforceable debt or other liability towards another person (will be payee or holder of the cheque, as the case may be) and a cheque is drawn to discharge the debt or liability; Cheque is returned due to insufficient funds or exceeds the amount agreed upon to be paid by the bank; Cheque is to be presented within six months from date of its drawn or till its validity, whichever being earlier; A written notice within 30 days is sent to the drawer along with the receipt of information from bank about failure of payment of cheque;

The payee or holder doesn‟t receive the payment within 15 days of the receipt of sent written notice to the drawer.The Section 138 was inserted with the objective to discourage the dishonest activity of issuing cheques which were later dishonoured for insufficient funds.

Petitioner has not denied that cheques in question do not bear his signatures; but taken plea that he lost the cheque book from where cheques in question were taken by respondent and got these cheques dishonoured.

Section 139 of N.I Act reads as under:-

"139. Presumption in favour of holder:

It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."

A three judges bench in case titled Hiten P. Dalal v . Bratindranatgh Banerjee AIR 2001 SC 3897, it is held as under:-

"That the four cheques were executed by the appellant in favour of the Standard Chartered Bank (hereafter referred to as the Bank), has not been denied nor was it in dispute that the cheques were dishonoured because of insufficient funds in the Appellants' account with the drawee, viz. Andhra Bank. Because of the admitted execution of the four cheques by the appellant, the Bank was entitled to and did in fact rely upon three presumptions in support of its case, namely, under Sections 118, 138 and 139 of the Negotiable Instruments Act. Section 118 provides, inter-alia, that until the contrary is proved it shall be presumed that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration. The presumption which arises under Section 138 provides more specifically that where any cheque drawn by a person on an account for payment of any amount of money for the discharge in whole or in part of any debt or other liability, is returned by the drawee bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque, such persons shall be deemed to have committed an offence and shall be punished with imprisonment for a term which may extend to twice the amount of the cheque, or with both. The nature of the presumption under Section 138 is subject to the three conditions specified relating to presentation, giving of the notice and the nonpayment after receipt of notice by the drawer of the cheque. All three conditions have not been denied in this case. The appellant's submission that the cheques were not drawn for the 'discharge in whole or in part of any debt or other liability' is answered by the third presumption available to the Bank under Section 139 of the Negotiable Instruments Act. This section provides that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability". The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability Because both Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted in State of Madras vs. A. Vaidyanatha Iyer AIR 1958 SC 61, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. "It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused" (ibid). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact.

In Goaplast (P) Ltd. v. Chico Ursula D'Souza and Another [(2003) 3 SCC 232], the apex Court held that the presumption arising under Section 139 of the Act can be rebutted by adducing evidence and the burden of proof is on the person who want to rebut the presumption."

In view of above laws, the petitioner can rebut the presumption and take defence that he lost the cheque book during course of trial by leading evidence.

Another ground taken is that cheques in question allegedly issued by the petitioner have been presented by the respondent through his banker at Ghaziabad U.P. and the said cheques have been dishonored at Ghaziabad in the State of UP, therefore, the Courts at Ghaziabad Uttar Pradesh have the necessary jurisdiction to try such a complaint.

I have considered this aspect of the matter and gone through the law on the subjects; firstly I will say that there are two modes of existence of new laws; one is called direct way, when laws is amended by parliament of State Legislature due to need of day; another mode is indirect way, when already law in existence is interpreted from time to time in different way by courts; some time interpretation of law given by Apex Court or High Court is reversed and new interpretation is given by larger bench.

Previously laws with regard to jurisdiction of trial of offence under section 138 of N.I. Act was given in K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 wherein a two-Judges Bench has, inter alia, interpreted Section 138 of the NI Act to indicate that, "the offence under Section 138 can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence: (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." The provisions of Sections 177 to 179 of the Code of Criminal Procedure, 1973 (for short, „CrPC‟) have also been dealt with in detail. Furthermore, Bhaskaran in terms draws a distinction between „giving of notice‟ and „receiving of notice‟. This is for the reason that clause (b) of proviso to Section 138 of the NI Act postulates a demand being made by the payee or the holder in due course of the dishonoured cheque by giving a notice in writing to the drawer thereof. While doing so, the question of the receipt of the notice has also been cogitated upon.

This law remained in existence till 01.08.2014, when a three judges bench of Apex court in Dashrath Rupsingh Rathod vs State of Maharashtra & Anr., 2014 (9) SCC 129 on 1 August, 2014, has held as under:-

"31. To sum up: (i) An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank. (ii) Cognizance of any such offence is however forbidden under Section 142 of the Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138. (iii) The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if (a) the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue. Page 83 83 (b) If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonour of the cheque and (c) If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice. (iv) The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act. (v) The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant. (vi) Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured. (vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof."

In this way, Apex court restricted the jurisdiction to try the case under section 138 of N.I Act to the Court where the bank of drawee is situated. Thereafter section 142 of Act was amended finally by ordinance and then vide Amendment Act 2015 on 29.12.2015 and in principle section 142 of Act sub clause (2) has been added, and it has been stated that it shall be deemed to have come in force on the 15th day of June 2015.

It would be pertinent to reproduce here the relevant provision of N.I. Act, i.e. Section 142 which is as follows:-

"142 Cognizance of offences. --Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),--

(a) no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of Action arises under clause (c) of the proviso to Section 138:

Provided that the cognizance of a complaint may be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for making a complaint within such period.

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138.

2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction,-

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation.- For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account."

From the bare perusal of Section 142(2) of NI Act, it is evident that the complaint under section 138 of NI Act shall be enquired into and tried only by the Court within whose jurisdiction the cheque is delivered for collection. Clause (2) of the above Section clearly states that if the cheque is delivered for collection through an account, the branch of the bank, where the payee or holder in due course, as the case may be, maintains the account, is situated or if the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank, where the drawer maintains the account is situated, so both the courts would have jurisdiction.

Now law is well settled that the procedural law has retrospective effect.

Since in present case, cheques No.785916 and 785918 dated 30.6.2007 for an amount of Rs. 1.20 lac and 1.10 lakh respectively drawn in Oriental Bank of commerce Varanasi and same were deposited in PNB Ghaziabad, so Judicial Magistrate, First Class, Varanasi or Ghazibad would have the territorial jurisdiction to take cognizance of the proceedings initiated in terms of Section 142(2) of NI Act. In this way JMIC at Jammu has no territorial jurisdiction to take cognizance. Accordingly order of cognizance taken by court below is set aside.

Complaint be returned to respondent for presenting it before competent court of territorial jurisdiction.

The instant petition stands disposed of in the aforesaid terms.