The Territorial Jurisdiction Conundrum

By Rudrajyoti Nath Ray, Senior Associate

A person, A1, has an account, bearing No. Y, maintained by him with Bank X. A1 has a ‘debt or other liability’ to A2. A1 draws out a cheque to A2 in whole or in partial discharge of his debt or other liability. The money is to be paid by X from Account No. Y. The cheque is presented to X for payment, within the period of the cheque’s validity. The cheque is returned by X unpaid for insufficiency of funds, etc. A2 makes a demand, for the payment of the amount of money inscribed on the cheque, by giving a notice in writing to A1 within 30 days of A2 receiving information from X regarding return of the cheque as unpaid. A1, however, fails to make payment of the said amount of money even though 15 days pass since A1 receives the notice. The above chain of five events: i) the drawal of the cheque by A1, ii) the presentation of the cheque to X, iii) X’s returning of the cheque as unpaid, iv) A2’s giving of a notice to A1 and v) A1’s failure to make the payment within 15 days of receiving the notice – complete A1’s commission of the offence, described under Section 138 of the Negotiable Instruments Act, 1881 (“Act”). That is what K. Bhaskaran [(1999) 7 SCC 510] (“Bhaskaran”) held in 1999. The Hon’ble Supreme Court of India (“SC”) observed that the offence under Section 138 is only complete when the drawer fails to pay the cheque amount within the period of 15 days stipulated under clause (c) of the proviso to Section 138. And since it is difficult to identify where precisely the drawer failed – for the purposes of ascertaining territorial jurisdiction – “if the five different acts were done in five different localities any of the courts exercising jurisdiction in of the five local areas can become the place of trial for the offence under Section 138 of the Act” and the Complainant is at liberty to file a complaint petition at any of those places.

Under the “Bhaskaran Ratio”, if A2’s notice to A1 were to be dispatched from City Z, then irrespective of where else the other four events transpired (even if the four other events all transpired at one place), the relevant court in City Z would have the territorial jurisdiction to hold trial for an offence under Section 138. “The conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder”. The unpaid payee/holder was given an unwarranted freedom. The freedom was granted only because Bhaskaran in its root analysis read the proviso to Section 138 “as prescribing the ingredients of the offence”. Hence, the conclusion that the Section 138 offence completes itself only when the drawer fails to pay the cheque amount [clause (c) to the proviso]; hence, the conclusion, that it is difficult to spatially locate the drawer’s failure; and hence, the grant of freedom to the complainant to lodge his complaint at any of the places where the “ingredients of the offence” were committed.

The “Bhaskaran Ratio” led in effect to a “territorial jurisdiction conundrum”. Ten years later, in 2009, in Harman Electronics [(2009) 1 SCC 720] (“Harman”) it was observed that banking institutions holding several cheques from a borrower now send notices from four different places to make the accused borrower traverse across courts and cities: an “absurd and stressful situation” for “apparent transgressors of the law”. Harman was a case “where the complaint under Section 138 was filed in a Delhi Court, only because the statutory notice required to be issued under the proviso to Section 138 was issued from Delhi. If Bhaskaran was correctly decided, Harman should not have interfered with the exercise of jurisdiction by the Delhi Court for issue of a notice was in terms of Bhaskaran, one of the factors that clothed the Court in Delhi to take cognizance and try the case. Harman did not do so.” Harman interfered. Harman held “what would constitute an offence is stated in the main provision”. The proviso appended to Section 138 only imposes certain further conditions, which are required to be fulfilled before cognizance of the offence can be taken. The “Harman Approach” of differentiating between the commission of an offence and its cognizance leading to prosecution has met the approval of a Full Bench recently in Dashrath Rupsingh Rathod vs. State of Maharashtra & Another (“Dashrath”).

In Dashrath the “Harman Approach” and its effect on the “Bhaskaran Ratio” has been cleverly interpreted. It has been clarified that ordinarily, in criminal law, the place where the offence is committed is where the prosecution has to be conducted. “The offence in contemplation of Section 138 of the Act is the dishonour of the cheque alone”, i.e., the return of the cheque by the drawee bank (Bank X) and the “JMFC at the place where this occurs is ordinarily where the Complaint must be filed, entertained and tried.” The “territorial jurisdiction conundrum” arose only because Bhaskaran treated the proviso to Section 138 as stipulating the ingredients of the offence. The proviso does not stipulate any ingredients of the offence. It enables taking cognizance of the offence, prosecuting the offence – but so far as the commission of the offence itself is concerned, the proviso has no role to play. Once that is settled, there are no uncertainties anymore – like the ones Bhaskaran faced while trying to spatially locate the drawer’s failure. It shall not be difficult to identify where the cheque stood dishonoured and there only shall the trial for the offence under Section 138 be conducted. Dashrath, however, has made this proposition of law inapplicable to those cases where, post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Act. All other complaints have been ordered to be returned to the complainant for filing in the proper Court. If such complaints are filed/refiled within thirty days of their return, they shall be deemed to have been filed within the time prescribed by law, unless the initial or prior filing was itself time barred.

Readers are invited to read Dashrath in full.

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