WHAT TO DISCUSS?
CASE LAWS WHICH HAVE MADE THE DISPOSAL OF NI CASES EXPEDITIOUS
Territorial jurisdiction
Notice
Expeditious
Compromise
Allowing withdrawals as well
Impact of BNSS SEC 180 as now a notice has to be provided first…is this in
keeping with the legislative intent of NI ACT which mandates a speedy disposal.
Territorial jurisduction under NI Act 1881(Part I of III)
India has witnessed a significant change in its financial landscape with an increased adoption and
use of payment and fund transfers. Digital transactions have been positively adopted by various
sectors in India including consumers and small trade businesses. But, cheques still remain
relevant where large scale transactions are made by businesses. There was only a 10% decline in
use of cheques from the year 2012 to 20171. Thus, cheques remain a relevant mode of payment
even in times of digital transactions in India.
Seeing its popular use especially before the time of digital era in India, several laws, rules and
regulations have been put in place to deal with its drawbacks. But, these laws also came into
existence gradually as and when time called for a reform.
Chapter XVII of the Negotiable Instruments Act, 1881
The addition of this Chapter into the pre-independent Act of 1881 is one such example. To deal
with the deficiencies and the existing limitations in cheque dishonour cases, the
recommendations of the Banking Commision 1969 were taken into consideration by the then
Government of India. The Amendment2 introduced this chapter and introduced a penalty for
those who cldraw cheques that bounce.
The object of this amendment has been time and again discussed by Indian courts in various
judgments. In one Supreme Court judgment, the Honble Court stated its object as an important
way to “inculcate faith in the efficacy of banking operations and credibility in transacting
business of negotiable instruments. “3 In another judgment by the Supreme Court 4, the object
of this new addition was read in context with a better facilitation of commercial and trade
activities in India.
“ It has to be kept in mind that the law relating to Negotiable Instruments is the law of the
commercial world which was enacted to facilitate the activities in trade and commerce
making provision of giving sanctity to the instruments of credit which could be deemed to
be convertible into money and easily passable from one person to another.... The main
object of the Act is to legalise the system by which instruments contemplated by it could
pass from hand to hand by negotiation like any other goods.”
Thus, Chapter XVII of the Act criminalises cheque dishonour cases to maintain an orderly
manner in which mercantile instruments can pass easily and the trust to deal with such
instruments remain intact especially among the merchant world.
Whenever a party wants to file any criminal case, two things need to be kept in mind: a) the
territory where you want to file the case and whether you have the right to approach the court
situated in that territory and b) the maximum punishment that you have asked for. Thus, both
territorial and pecuniary jurisdiction need to be kept in mind respectively. For this, the procedure
1
RBI Figures
2
The Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988
3
Lafagaree Aggregates and Concrete India Pvt. Ltd. V. Sukarsh Azad 2014 (13) SCC 779
4
Ishar Alloy Steels Ltd. V. Jayaswals Neco Ltd. 2001 SCC (Cri.) 582 (585).
has been generally provided in the Code of Criminal Procedure. According to the Code, the
territorial jurisdiction in criminal cases revolves around, a) place of commission of offence, b)
place where consequence of an act, both of which constitute an offence ensues, c) place where
the accused was found, d) place where the victim was found, e) property in respect of which
offence was committed was found and f) place where property forming subject matter of an
offence was required to be returned or accounted for as the case may be. This part has been
provided from Section 177 to 189 of the Code of Criminal Procedure.
The role of sending a notice has always been indispensable to initiate any legal action. Likewise,
the Negotiable Instruments Act, 1881 mandates the complainant to send a legal notice
demanding the payment of the amount from the accused. Further, this mandatory requirement
has been held as an essential to constitute an offence under Section 138 Negotiable Instruments
Act, 1881. A series of judgments have been summarised to show the recent trends and the
manner in which different aspects of legal notice demanding payment have been dealt by the
Hon’ble Apex Court.
K.Bhaskaran v. Sankaran- Difference between ‘giving of notice’ and ‘receiving of notice:
The Respondent (Complainant) presented a cheque which bears the signature of the Appellant
(Accused) before the Bank's branch office at Kayamkulam (Kerala) on 29.01.1993 for
encashment of 1 lakh rupees. The said cheque was returned btly Bank with the reason:
Insufficiency of Funds. The notice under Section 138 was sent on 02.02.1993 and the same
returned unclaimed on15.03.1993. On 04.03.1993 a complaint was filed by the Respondent
before Judicial Magistrate- I of Adoor district of Kerala. An issue was raised regarding the lack
of territorial jurisdiction of the Trial Court as the cheque was dishonored in a different district.
This was accepted by the Trial Court and resulted in the acquittal of the Appellant (Accused) in
the case.
On appeal before the High Court of Kerala, the acquittal was reversed and the Appellant
(accused) was convicted. On the question of territorial jurisdiction of the Trial Court, the High
Court rejected the plea that the Trial Court did not possess any jurisdiction. It accepted that the
cheque was issued at the shop which was within the territorial limits of the Trial Court.
Hence, the Trial Court was incorrect in its finding of territorial jurisdiction and the lack of
it.
The conviction by High Court of Kerala was challenged by the Appellants (Accused) before the
Supreme Court of India where the Court among other things, discussed the issue of territorial
jurisdiction as well. Another important issue which was for consideration before the Supreme
Court was regarding the legal notice. The plea of the accused was that as the notice demanding
the payment of money was not received by the accused and returned ‘unclaimed’ to the
complainant, the offence under Section 138 could not be made out. The cause of action never
arose as the notice was not received by the accused.
Held: The Supreme Court conisdered that to constitute the offence under Section 138 it is
important that there is concatenation of the 5 essential acts which are as follows:
a) Drawing of cheque
b) Presentation of cheque
c) Returning of cheque unpaid by the drawee bank
d) Giving notice in writing to drawer of cheque demanding payment of the amount which
was dishonoured
e) Failure of drawer of cheque to make payment within 15 days of receipt of notice
Case no. 2: HARMAN ELECTRONICS CASE
In this case the appellant was a resident of Chandigarh and the cheque was issued, presented and
dishonoured at Chandigarh only. Now, in this case the notice was sent to the Respondent at the
Bank’s Head office Delhi. Hence, the notice demanding payment had been issued to the Delhi
office. The case was challenged on the basis that the cause of action had failed to arise as the
cheque was issued, resented and dishonoured in Delhi. Here, the accused had relied upon the SC
case of K Bhaskaran v. Sankaran Vaidyyan Balan and Another. Here, the HC had upheld the
cognizance as well as the jurisdiction of the Court in Delhi to try the case.
This judgment came to be challenged before the Supreme Court and there the main argument
raised was whether the cause of action had arisen as the notice had been served in Delhi and the
accused had actually been carrying out their business in Chandigarh. A reference was also made
to the Bhaskaran case. The Supreme Court of India had held that the Delhi High Court had no
jurisdiction to try the following the case.
