SUPREME COURT UPHOLDS THE POWER OF APEX COURT TO TRANSFER CHEQUE DISHONOUR CASES UNDER SECTION 406 OF THE CODE OF CRIMINAL PROCEDURE 1973

A two Judge Bench of the Supreme Court presided by Justice Dinesh Maheshwari and Justice Sanjay Kumar passed a Judgment dated 21.02.2023 in the case of Yogesh Upadhyay and Anr. vs. Atlanta Limited in Transfer Petition (Criminal) Nos.526-527 of 2022 observed that the power of Supreme Court to transfer criminal cases under Section 406 (Power of Supreme Court to transfer cases and appeals) of Code of Criminal Procedure (CrPC) remains intact in relation to offences under Section 138 (Dishonour of cheque for insufficiency, etc., of funds in the account) of the Negotiable Instruments Act, 1881 (NI Act 1881).

Facts:

The Petitioners, Yogesh Upadhyay and Ors. issued seven cheques (Cheques) in connection with purchase of a NAWA-make Crusher Plant from Atlanta Limited, (Respondent Company) for a sum of Rs.1,88,80,000/-, under Agreement dated 04.06.2019. The said amount was to be paid in seven installments by way of Cheques. The first Cheque issued by the Petitioners for a sum of Rs.11,80,000/- was duly honoured upon presentation by the Respondent Company. The remaining six Cheques, however, were dishonoured on the basis of ‘Stop Payment’ instructions. The first two Cheques that came to be dishonoured were presented by the Respondent Company through its bank at Nagpur, Maharashtra. The first two Complaints cases were accordingly filed before the Courts at Nagpur, Maharashtra. The remaining four Cheques were thereafter presented by the Respondent Company through its bank at New Delhi. Hence those Complaint cases were filed before the Dwarka Courts, New Delhi. All six Complaint Cases were filed against the Petitioners by the Respondent under Sections 138 and 142 (Cognizance of Offences) of the NI Act, 1881.

Subsequently, the Petitioners filed Transfer Petitions under Section 406 Cr.P.C., seeking transfer of SCC Nos.25668/2019 and 26875/2019, both titled ‘Atlanta Limited Vs. M/s Shakti Buildcon & Anr.’, pending before the Ld. Civil Judge, Senior Division, Nagpur, and the Ld. Civil Judge, Senior Division, Nagpur, respectively, to the District Courts, Dwarka, New Delhi, and that all Complaints should be tried together.

Supreme Court Observations:

At the outset, the Apex Court noted that it is now well settled that the offence under Section 138 of the Act of 1881 is complete upon dishonour of the cheque. However, the prosecution in relation to such offence is postponed, by virtue of the provisos therein, till the failure of the drawer of the cheque to make the payment within 15 days of receiving the demand notice. However, jurisdiction to try this offence remains a troublesome issue for a long time.

Thereafter, the Court further recalled the case of Dashrath Rupsingh Rathod Vs. State of Maharashtra and Another, (2014) 9 SCC 129, where a Three-Judge Bench of this Court had observed that the return of the cheque by the drawee bank would alone constitute commission of the offence under Section 138 of the Act of 1881 and would indicate the place where the offence is committed. It was, therefore, held that the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located, i.e., where the cheque is dishonoured upon presentation and not where the Complainant’s Bank is situated.

Perusal of the Statement of Objects and Reasons makes it amply clear that insertion of Sections 142(2)[1] and 142-A (Validation for transfer of pending cases) by way of amendment in the NI Act, 1881 was a direct consequence of the Judgment of this Court in Dashrath Rupsingh Rathod (supra). Section 142(2) now makes it clear that the jurisdiction to try such an offence would vest only in the Court within whose jurisdiction the branch of the Bank where the cheque was delivered for collection, through the account of the payee or holder in due course, is situated. The newly inserted Section 142-A further clarifies this position by validating the transfer of pending cases to the Courts conferred with such jurisdiction after the amendment. The later decision of this Court in Bridgestone India Private Limited Vs. Inderpal Singh, (2016) 2 SCC 75 has affirmed the said legal position and endorsed that Section 142(2)(a) of the Act of 1881 vests jurisdiction for initiating proceedings for an Offence under Section 138 in the Court where the cheque is delivered for collection, i.e., through an account in the branch of the bank where the payee or holder in due course maintains an account. Therefore, the institution of the first two complaint cases before the Courts at Nagpur is in keeping with the legal position above.

The Apex Court further observed that the contention that the non obstante clause in Section 142(1) of the Act of 1881 would override Section 406 Cr.P.C. and that it would not be permissible for this Court to transfer the said complaint cases, in exercise of power thereunder, cannot be countenanced. The clause, therefore, has to be read and understood in the context and for the purpose it is used and it does not lend itself to the interpretation that Section 406 Cr.P.C. would stand excluded vis-à-vis offences under Section 138 of the Act of 1881. The power of this Court to transfer pending criminal proceedings under Section 406 Cr.P.C. does not stand abrogated thereby in respect of offences under Section 138 of the Act of 1881.

The Hon’ble Supreme Court further noted that it had exercised power under Section 406 Cr.P.C. in relation to offences under Section 138 of the Act of 1881 even during the time the original Section 142 held the field. In A.E. Premanand Vs. Escorts Finance Ltd. &Others (2004) 13 SCC 527), this Court took note of the fact that the offences therein, under Section 138 of the Act of 1881, had arisen out of one single transaction and found it appropriate and in the interest of justice that all such cases should be tried in one Court. We, therefore, hold that, notwithstanding the non obstante clause in Section 142(1) of the Act of 1881, the power of this Court to transfer criminal cases under Section 406 Cr.P.C. remains intact in relation to offences under Section 138 of the Act of 1881, if it is found expedient for the ends of justice.

Hence, the Hon’ble Supreme Court observed that in the case on hand, as the six Complaint Cases pertained to the same transaction; it would be advisable to have a common adjudication to obviate the possibility of contradictory findings being rendered in connection therewith by different Courts.

Conclusion:-

Thus, for the reasons aforesaid, the Transfer Petitions were allowed vide Order dated 21.02.2023 and SCC Nos.25668/2019 and 26875/2019, both titled ‘Atlanta Limited Vs. M/s Shakti Buildcon & Anr.’, pending before Civil Judge, Senior Division, Nagpur and Civil Judge, Senior Division, Nagpur, respectively, were transferred to the District Courts, Dwarka, New Delhi.

Editor’s Comments

Section 142 A of the NI Act, 1881 has been introduced to facilitate transfer of pending cases to a single court in cheque bouncing cases to allow the complainant to have cases filed in different jurisdictions to be tried and decided by one court. This would necessarily mean that the complainant is saved the bother of approaching different courts when the cheques may be for the same transaction. This not only cuts down the time and cost but also helps the complainant in recovery of his dues spread over separate courts to one court which in this case would be the court that was first approached for recovery of amounts due under the bounced cheque irrespective of the territorial jurisdiction of that court. The very purpose is probably to cut short the time for deciding such commercial disputes that have arisen due to dishonored cheques

 

Roopal Bardia

Associate

The Indian Lawyer

 

Edited by

Sushila Ram Varma

Chief Consultant

The Indian Lawyer

 

 [1] Section 142(2) NI Act: The offence under section 138 shall be inquired into and tried only by a court within whose local local jurisdiction,—

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation.—For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.