Assignment 1

Continuous Assessment 1
(Assignment towards fulfilment of assessment in the subject of Banking and Finance)

Submitted By
Shalini Wunnava
LL.M. (Banking & Finance)







National Law University, Jodhpur
Summer Session
(July to November 2014)










JURISDICTION MATTER IN CASES OF DISHONOUR OF CHEQUE
The matter related to dishonour of cheques is governed under the criminal justice system in
India, one has to see both the Negotiable Instrument Act (hereinafter referred as NI Act)
and the Criminal Procedure Code (hereinafter referred as CrPC). The procedure to file and
jurisdiction was governed under K. Bhaskaran v. Sankaran Vidhyan Balan
1
. In the aforesaid
case the Supreme Court laid down the following criteria for territorial jurisdiction of any
court
1) Drawing of cheques
2) Presentation of cheque in a bank
3) Returning of cheques unpaid by the drawee bank
4) Giving notice in writing to the drawee of the cheque, demanding payment of cheque
amount
5) Failure of the drawee to make payment within 15 days of receipt of the notice.
The abovementioned was a law stands altered with the Supreme Court decision in Dashrath
Rupsingh Rathod v. State of Maharashtra
2
which is clubbed with 9 other SLPs pending
before the Supreme Court. This decision was taken by a division bench of three judges they
laid that the jurisdiction of the court for trying matters relating to dishonour is restricted to
where the dishonour has taken place, that is, where the drawee bank is situated. Justice
Thakur distinguished the in his judgement that Bhaskarans Case laid the components of the
offence covered under Section 138 of NI Act, the case did not lay down the jurisdictional
aspect, rather Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd.
3
while
applying the decision of Bhaskarans Case the court allowed all the five possible places is
valid jurisdiction. The decision of Bhaskarans cases with regards to application of Section
179 CrPC was been now reversed to application of Section 177 of CrPC. In Section 138 is
out of the offences committed in a single transaction within the meaning of Section 220 (1) of
the Cr.P.C. then the offender may be charged with and tried at one trial for every such
offence and any such inquiry or trial may be conducted by any Court competent to enquire
into or try any of the offences as provided by Section 184 of the CrPC. The court made it
clear that the decision of shall have retrospective application only for cases currently pending
with in the Indian courts, but those cases where recording of evidence has started after

1
[1999]7 SCC 510.
2
Criminal Appeal 2287 of 2009.
3
(2009) 1 SCC 720
issuance of summons to the accused, would continue to be tried at the place they were
instituted. The court in its decision distinguished the cause of action from the place for the
jurisdiction of the court is same as the criminal trials wherein cause of action, being the
bundle of facts required to be proved in a suit and accordingly also being relevant for the
place of suing, is not pertinent or germane for determining territorial jurisdiction of criminal
Trials.
The court allowed the levy for the payee to pursue the matter elsewhere if he succeeds in
establishing that the inducement for accepting a cheque which subsequently bounced had
occurred where he resides or ordinarily transacts business, he will not have to suffer the
travails of journeying to the place where the cheque has been dishonoured.
The decision of the Supreme Court has not only made physical difficulty for the current
pending cases which as be the 213
th
Report of the Law Commission is said to be 38 Lacs. The
case has not only made procedural havoc but also has titled the law towards the respondent.
The court has failed to appreciate the legislative uptake of Section 138 of NI Act, which to
protect the interest of the drawer, the provision of law had enough safeguards and caution
valves to avoid the dishonour of the cheque, which the drawee failed to meet. The object of
bringing section 138 on the statute is to inculcate faith in the efficacy of banking operations
and credibility in transacting business on negotiable instruments. It is to enhance the
acceptability of cheque in settlement of liabilities by making the drawer liable for penalties in
case of bouncing of cheques due to insufficient arrangements made by the drawer, with
adequate safeguards to prevent harassment of honest drawers.
4
The application of Section
177 of CrPC has added to further difficulty for the person who has failed to receive the
money consideration. The court has failed to appreciate the fact that the dishonour of cheques
a combination of the civil and criminal liability on the drawee, which is levied by the payee.
These additions procedurals safeguards shall add to the delay in the disposal procedure of the
dishonour cases. This decision may make it convenient for the banks as the party to the case
but shall put the payee in a disadvantageous position.
Issuing a cheque which is dishonoured is criminal offence in India. People are dissuaded to
trust bank cheques due to non-payment. This all because courts in India are awefully
overburdened with dishonoured cheque cases. A speedy trial is not only required to give

4
213
th
Report of the Law Commission of India, p 18 (2008).
quick justice but it is also an integral part of the fundamental right of life and liberty, as
envisaged in Article 21 of the Constitution of India. But this shall effect the further in
deterrence of the legal enforcement of the dishonour of cases.

RELIED UPON:
1. Dishonour of Cheques: Liability-Civil & Criminal by S.N. Gupta, Universal Law
Publishing.
2. 213th Report of the Law Commission of India (2008).
3. Tannans Banking Law and Practice, ML Tannan, LexisNexis Butterworth.