IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 2287 OF 2009

DASHRATH RUPSINGH RATHOD .….APPELLANT

VERSUS

STATE OF MAHARASHTRA & ANR. …...RESPONDENTS

WITH

CRL. APPEAL NO. 1593 OF 2014 [Arising out of S.L.P.(Crl.)No.2077 of 2009];

CRL. APPEAL NO. 1594 OF 2014 [Arising out of S.L.P.(Crl.)No.2112 of 2009];
CRL. APPEAL NO. 1595 OF 2014 [Arising out of S.L.P.(Crl.)No.2117 of 2009];
CRL. APPEAL NOS. 1596-1600 OF 2014 [Arising out of S.L.P.(Crl.)Nos.1308-1312 of 2009];
CRL. APPEAL NO.1601 OF 2014 [Arising out of S.L.P.(Crl.)No.3762 of 2012];
CRL. APPEAL NO. 1602 OF 2014 [Arising out of S.L.P.(Crl.)No.3943 of 2012];
CRL. APPEAL NO.1603 OF 2014 [Arising out of S.L.P.(Crl.)No.3944 of 2012]; AND
CRL. APPEAL NO. 1604 OF 2014 [Arising out of S.L.P.(Crl.)No.59 of 2013]

CORAM: T.S. THAKUR, VIKRAMAJIT SEN, C. NAGAPPAN

 INTRODUCTION
The judgment by the honourable Apex court in the case, resolved the long-drawn confusion with
respect to territorial jurisdiction of courts arising out of the complaints made under Section 138
of the Negotiable Instruments Act, 1881. The legislation in question had been the cause of
mayhem among litigants as to its operation in terms of the jurisdiction in cases of cheque
dishonour. The judgment is a detailed analysis and judicial interpretation of appropriate
provisions of the impugned legislation.

The present judgment has arose out of 8 Special Leave Petitions filed before the Supreme Court
of India, with respect to dishonour of cheques in an area falling under jurisdictions of certain
courts, however issued to the drawee/complainant at some other place. The facts of these appeals
remain substantially the same as to the issue of jurisdiction.

In a certain appeal, the court reiterated the findings of the High court of Bombay, Nagpur Bench
that the complaint must not be rejected since it was filed at a place other than where the cheque
was presented to the complainant, it merely be presented to the appropriate court for filing. The
appeal was rightly dismissed. In Crl. Appeal No. 1593 of 2014, the appeal was allowed calling
for further action by the complainant for action according to law, where the respondent-accused
who had purchased certain electronic items from the appellant company, issued cheques which
were later dishonoured at a different place. The other appeals were accordingly dismissed by the
court.

The case however, involved a substantial question of law, which could pose difficulty for future
litigants. It was referred to the then, Chief Justice of India, after a proposed draft order. The draft
order had analysed the precedents leading to the case by referring to several judgments and the
comparison of their positions, whether advantageous or perverse.
 FACTS OF THE CASE

In the case at hand, the central issue revolves around the interpretation of Section 138 of the
Negotiable Instruments Act (NI Act) and the associated question of territorial jurisdiction for
complaints filed under this section. Several key cases have shaped this legal landscape:

 Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510:

The interpretation of Section 138 in Bhaskaran's case established that the offense under this
section comprises multiple elements, including the drawing of the check, presenting it to the
bank, returning the check unpaid by the drawee bank, giving notice in writing to the drawer
demanding payment, and the drawer's failure to make payment within 15 days of notice. The
perspective in this case was more lenient towards the unpaid payee/holder, with an emphasis on
the importance of the notice.

 Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1 SCC
720:

This case introduced a shift in focus by placing greater importance on the receipt of the notice
rather than its mere issuance. It addressed the issue of where the cause of action arises and
questioned whether sending a notice from a place unrelated to the accused or the transaction
could give rise to territorial jurisdiction for a Section 138 case. It raised concerns about the
misuse of territorial jurisdiction under Section 138 of the NI Act, especially in cases where the
notice was sent from a place unrelated to the accused or the transaction.

 Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609:

Ishar Alloy addressed a critical issue: whether the drawee bank or the collecting bank was the
relevant bank for determining territorial jurisdiction under Section 138. The court concluded that
non-presentation of the check to the drawee bank within the specified period would absolve the
person issuing the check of criminal liability under Section 138. The judgment clarified that the
law mandates presenting the check at the bank on which it is drawn to establish territorial
jurisdiction.
The evolving interpretations and complexities arising from these cases indicate that Section 138
and its application to territorial jurisdiction have been subject to various judicial perspectives
over time. The pivotal factor is whether the offense is deemed complete upon the dishonor of the
check alone or whether it necessitates a sequence of specific acts. Ishar Alloy's clarification
regarding the importance of presenting the check at the drawee bank significantly modifies the
precedent set by Bhaskaran. These cases collectively highlight the changing landscape of Section
138 of the NI Act and its implications for territorial jurisdiction in cases involving dishonored
checks.

The court now faces a dilemma as to whether the more lenient approach in Bhaskaran, which
favored the unpaid payee/holder, should be maintained, or if a stricter interpretation should be
applied due to the misuse of territorial jurisdiction in Section 138 cases. There is a clear need to
resolve these conflicting opinions and provide clarity on the interpretation and application of
Section 138 of the NI Act concerning territorial jurisdiction in cases involving dishonored
checks.
 JUDICIAL APPROACH

The case pertains to the interpretation of Section 138 of the Negotiable Instruments Act, 1881
(NI Act) and the associated issue of territorial jurisdiction for complaints filed under this section.

Contextualizing Section 20 of CPC:

 Section 20 of the Code of Civil Procedure (CPC) outlines the jurisdiction of courts based
on the defendant's residence, business operations, or location of the cause of action.
 The section primarily focuses on the defendant's location and allows multiple options for
the plaintiff to file a suit.

Harmonizing Jurisdiction with Defendant’s Location:

 Courts have emphasized the defendant's location as pivotal in determining jurisdiction,

especially if the defendant has an office where the cause of action occurred.
 This principle is crucial to avoid forum shopping and ensure fairness.

Importance of "Cause of Action" in Criminal Law:

 In criminal law, "cause of action" is not strictly applicable, and territorial jurisdiction is
determined by the place where the crime was committed.
 The concept of "cause of action" is more relevant in civil proceedings than in criminal
prosecutions.

Analysis of Section 138 of NI Act:

 Section 138 deals with the dishonoring of cheques due to insufficient funds.
 The offence is deemed to occur when the drawee bank returns the cheque unpaid.

Role of Proviso in Section 138:

 The proviso in Section 138 imposes additional conditions for successful prosecution but
doesn't impact the commission of the offence itself.
 The proviso ensures that certain conditions must be met for the prosecution to proceed.
Interpretation of Section 177 and 178 of CrPC:

 Section 177 of the Criminal Procedure Code (CrPC) emphasizes that offences are tried
where they were committed.
 Section 178 provides exceptions for cases where the location of the offence is uncertain
or spans multiple areas.

Restrictions on Choosing Jurisdiction:

 The complainant must comply with the provisions of CrPC, and the place of filing is not
at their discretion.
 The jurisdiction is limited to the court where the cheque was dishonored by the bank on
which it was drawn.

Impact on Pending Cases:

 Only cases where evidence has been recorded in accordance with Section 145(2) of the
Negotiable Instruments Act, 1881 after the accused's appearance will continue before the
court where it is already pending.
 All other cases will be returned to the complainant for filing in the correct court.

The court's decision emphasizes that the offence under Section 138 of the NI Act occurs when
the cheque is dishonored by the drawee bank. This decision ensures clarity in jurisdictional
matters and aims to prevent misuse of legal proceedings. It also provides relief to accused
individuals who may have been burdened by having to defend themselves in distant courts.
 DISPOSAL OF CASES WITH QUESTIONS OF TERRITORIAL
JURISDICTION

The Bench adjudged the cases involving issues related to the territorial jurisdiction of the Courts
in cases of dishonor of cheques under Section 138 of the Negotiable Instruments Act, 1881:

CRL. APPEAL NO. 1593 OF 2014 - JURISDICTION BASED ON CHEQUE LOCATION

 The case involved a learned Single Judge of the High Court of Judicature at Bombay,
Nagpur Bench.
 The concerned cheque was drawn on the Bank of India, Bhandara Branch, Maharashtra,
where it was dishonored.
 The Judicial Magistrate First Class, Digras, District Yavatmal, was found to have no
jurisdiction to entertain the complaint.
 The appeal was dismissed with the direction to return the complaint to the complainant
for filing in the appropriate court.

CRL. APPEAL NOS. 1594, 1595 & 1601 TO 1603 OF 2014 - JURISDICTION BASED ON
DEMAND NOTICE LOCATION

 The respondent-accused issued a cheque drawn on UCO Bank, Tangi, Orissa.

 The cheque was presented by the complainant-company at State Bank of India,
Ahmednagar Branch, Maharashtra.
 Disagreement arose over the territorial jurisdiction of JMFC Ahmednagar.
 The Appeals were allowed, and the complaints were directed to be returned to the
complainant for further action in accordance with the law.

CRL. APPEAL NOS. 1596-1600 OF 2014 - TERRITORIAL JURISDICTION ISSUES

 The complainant had its registered office in Delhi, while the respondent-accused
conducted business from Delhi.
 The cheques were presented and dishonored at Nagpur, Maharashtra.
 The jurisdiction of JMFC, Nagpur, was challenged.
  The appeals were dismissed due to territorial jurisdiction concerns.

CRL. APPEAL NO. 1604 OF 2014 - JURISDICTION DISPUTE OVER CHEQUE

LOCATION AND PROCESS ISSUANCE

 The respondent-accused drew a cheque on State Bank of Travancore, Delhi.

 The cheque was presented by the complainant at Aurangabad.
 An application was filed to dismiss the complaint under Section 203 of CrPC,
questioning jurisdiction.
 The High Court ordered the complaint to be returned for filing before a competent court
with jurisdiction.
 The appeal was dismissed, emphasizing that civil law principles on jurisdiction do not
apply in criminal prosecutions.

These appeals primarily revolve around the territorial jurisdiction of the courts to hear cases
related to dishonored cheques and provide guidance on when and where complaints should be
filed.
 OBITER DICTA

The observations of the Hon'ble Justice, T.S.Thakur are:

 The Hon'ble Judge observed that the main provision of Section 138 of the NI Act clearly
defines the offense of dishonoring a check when the bank returns it unpaid, typically due
to insufficient funds.
 The Hon'ble Judge noted that the proviso to Section 138 outlines three conditions
precedent that must be met before launching a prosecution.
 The Hon'ble Judge emphasized that these conditions stipulated in the proviso are not
ingredients of the offense but rather prerequisites for initiating a prosecution.
 The Hon'ble Judge highlighted that the offense is considered to have occurred as soon as
the check is returned by the bank, but the cause of action for prosecution arises only
when the conditions in the proviso are fulfilled.
 The Hon'ble Judge referred to legal cases, such as MSR Leathers, to underscore that
successive causes of action can be established based on repeated dishonors and the
drawer's failure to make payments.
 The Hon'ble Judge stressed that distinguishing between the elements of the offense and
the conditions precedent is crucial in determining the liability of the accused in check
bounce cases.

In these observations, the Hon'ble Judge provided a detailed legal analysis of Section 138 of the
NI Act, clarifying the distinction between the offense itself and the prerequisites for initiating
legal action in cases of dishonored checks.
 CONCLUSION

The following was the conclusion of the judgment:

(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.

(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.