Section 138 of N.I. Act Articles

INTRODUCTION: Recently, relying on two decisions of the hon'ble Supreme Court in the case of Harman Electronics Private Limited Vs. National Panasonic India Private Limited {2009 (1) SCC 720; Decided on 12.12.2008} and in the case of Shri Ishar Alloy Steels Ltd. Vs. Jayaswals Neco Ltd {(2001) 3 SCC 609; Decided on 22.02.2001}, hon’ble High Court of Delhi in Surjeet Singh Vs M/s G.E. Capital Transport Financial Services & Anr (CRL.M.C.No.2876/2009; Decided on 22.01.2010) has held as follows.

“9. Since sending of notice from Delhi to Raipur does not confer jurisdiction on Delhi Court in view of the decision of the Hon'ble Supreme Court in the case of Harman Electronics Private Limited (supra) and the deposit of cheque with the banker of respondent No. 2 in Delhi also does not confer jurisdiction of Delhi court when the cheque is presented to a bank outside Delhi, and there is no other ground which would confer jurisdiction on Delhi Court, it cannot be said that the Delhi Court has the jurisdiction to try this complaint.”

COMMENTS: It is with great respect and humbly submitted that I am unable to agree with this judgment of Delhi High Court. Hon'ble Delhi High Court has grossly misplaced reliance on these SC judgments to draw its conclusion that the  Delhi Court had no TERRITORIAL JURISDICTION to try the complaint u/s 138 of N.I. Act, 1881. Therefore, I am unable to agree with this judgment due to following reasons.

(1) A TWO JUDGE bench of hon'ble SC in ‘Harman Electronics’ clearly disagreed with the ratio of TWO JUDGE bench of hon'ble SC in K. Bhaskaran Vs. Sankaran Vaidhyan Balan & Another {(1999) 7 SCC 510; Decided on 29.09.1999}.  It may please be noted that subsequently the SC judgment in ‘K. Bhaskaran’ has been relied on by a two Judge bench of hon’ble Supreme Court in the case of Smt. Shamshad Begum Vs. B. Mohammed {2008 (13) SCALE 669; 2008 (11) JT 428; Decided on 03.11.2008).

            (2) Recently, Hon'ble Supreme Court in Union of India & Others Vs S.K. Kapoor  {(2011) 4 SCC 589; Decided on 16.03.2011} held as follows (SCC Pp 591, para 9) :

“9.…………..It is well settled that if a subsequent co-ordinate bench of equal strength wants to take a different view, it can only refer the matter to a larger bench, otherwise the PRIOR DECISION OF A CO-ORDINATE BENCH IS BINDING ON THE SUBSEQUENT BENCH OF EQUAL STRENGTH. Since, the decision in S.N. Narula's case (S.N.Narula vs. Union of India & Others, Civil Appeal No.642 of 2004 decided on 30th January, 2004 {Order Cited now vide (2011) 4 SCC 591} was not noticed in T.V. Patel's case {(2007) 4 SCC 785}, the latter decision is a judgment per incuriam. The decision in S.N. Narula's case (supra) was binding on the subsequent bench of equal strength and hence, IT COULD NOT TAKE A CONTRARY VIEW, as is settled by a series of judgments of this Court.”

            (3) Therefore, when a subsequent co-ordinate bench of equal strength in ‘Harman Electronics’ wanted to take a different view from that of ‘K. Bhaskaran’, it could have only referred the matter to a larger bench, otherwise the prior decision of a co-ordinate bench in ‘K. Bhaskaran’ is binding on the subsequent bench of equal strength in ‘Harman Electronics’. However, exercising its extra-ordinary jurisdiction under Article 142 of the Constitution of India, the co-ordinate bench of SC in ‘Harman Electronics’ issued directions that Complaint Case pending in the Court at New Delhi, be transferred to  the Court at Chandigarh.(It may also be carefully noted that in para 13, the SC observed “We, therefore, have no other option BUT TO PRESUME THAT THE CHEQUE WAS PRESENTED AT CHANDIGARH”). In other words, ‘Harman Electronics’ does not, and cannot, overrule ‘K. Bhaskaran’ on this issue.

            (4) Directions Issued By Supreme Court In Exercise Of Its Power Under Article 142 Of The Constitution Do Not Constitute A Binding Precedent: This has been observed by hon’ble SC in several cases, to quote a few: (a) State of U.P. Vs Neeraj Awasthi & Others {2005 (5) Suppl. SCR 906 , 2006 (1) SCC 667 , 2005 (10) SCALE 286 , 2006(1) JT19; Date of Judgment: 16/12/2005}, (b) State of Kerala & Anr. Vs Mahesh Kumar & Ors. {(2009) 3 SCC 654; (2009) 3 JT 424; Decided on 23.02.2009} and recently in (c) Chowdhury Navin Hemabhai & Ors. Vs The State Of Gujarat & Ors. {2011 STPL (Web) 145 SC; (2011) 3 SCC 617; Decided on 18.02.2011}. Therefore, directions issued by SC in ‘Harman Electronics’ in exercise of its power under article 142 of the constitution do not constitute a binding precedent.

(5) Even assuming, without admitting, that the ratio of ‘Harman Electronics’ is correct viz. “Only on a service of such notice and failure on the part of the accused to pay the demanded amount within a period of 15 days thereafter, the COMMISSION OF AN OFFENCE COMPLETES.” It is implied that in ‘K. Bhaskaran’ the Supreme Court had proceeded on the premise that on receipt of notice and then failure to pay by the accused, as soon as the commission of offence has been completed, section 178(d) of the CrPC will immediately fully spring into action and it may be tried by a court having jurisdiction OVER ANY OF SUCH LOCAL AREAS.

(6) Further, hon’ble Supreme Court in Shankar Finance & Investments Vs State of Andhra Pradesh & Ors. {Cr. Appeal No. 1449 of 2003; 2008 (10) Scale 654;  Date of Decision: 26-Jul-2008} held as follows (in para 7):

“Section 142(a) of the Negotiable Instruments Act, 1881 requires that no Court shall take cognizance of any offence punishable under section 138 except upon a complaint made in writing by the payee. Thus the two requirements are that (a) the complaint should be made in writing (in contradistinction from an oral complaint); and (b) the complainant should be the payee (or the holder in due course, where the payee has endorsed the cheque in favour of someone else). The payee, as noticed above, is M/s Shankar Finance & Investments. Once the complaint is in the name of the `payee' and is in writing, the requirements of section 142 are fulfilled. who should represent the payee where the payee is a company, or how the payee should be represented where payee is a sole proprietary concern, is not a matter that is governed by section 142, but by the General Law (Author’s note: here ‘General Law’ means ‘CrPC’).”

 (7) The admitted facts of ‘Shri Ishar Alloy’ case are that the appellant issued Cheque drawn on the State Bank of Indore, Industrial Estate Branch at INDORE in favour of the respondent. A three judge bench of hon’ble Supreme Court in ‘Shri Ishar Alloy’ case held that “A combined reading of Sections 3, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable. such presentation is necessarily to be made within six months at the bank on which the cheque is drawn……” It is implied that in ‘K. Bhaskaran’ the Supreme Court had proceeded on the premise that as soon as the commission of offence has been completed, section 178(d) of the CrPC will immediately fully spring into action and it may be tried by a court having jurisdiction OVER ANY OF SUCH LOCAL AREAS. (capitals mine in all above paras)

(8) In other words, in ‘Shri Ishar Alloy’ case it has been held that the essential requirement of Proviso (a) to Section 138 was not  satisfied, hence the  criminal court at RAIPUR had no INHERENT JURISDICTION to issue the process against the appellant. There is not a whisper in the judgment that the court at RAIPUR had no TERRITORIAL JURISDICTION to issue the process against the appellant (and that the court at INDORE only had the TERRITORIAL JURISDICTION). Hon’ble Delhi High Court wrongly appreciated the ratio of the judgment in ‘Shri Ishar Alloy’ case as the said matter was confined to the issue that “the cheque must reach the drawer bank within six months”. It did not have any bearing on the issue of jurisdiction. Therefore, Delhi High Court has grossly misplaced reliance on this judgment to draw its conclusion that the Delhi Court had no TERRITORIAL JURISDICTION to try the complaint.

CONCLUSION: Therefore, it is with great respect and humbly submitted that hon’ble Delhi High Court has grossly misplaced reliance on these two Supreme Court judgments to draw its erroneous conclusion that the Delhi Court had no TERRITORIAL JURISDICTION to try the complaint in Surjeet Singh Vs M/s G.E. Capital Transport Financial Services & Anr (supra). (END)