Proposed amendment in Negotiable Instruments Act 1881 in some way would create further chaos

Amendment in Negotiable Instrument Act 1881 may bring some positive changes, while it will create chaos for the existing cases.

The Hon’ble Supreme Court in K. Bhaskaran judgment laid down that the territorial jurisdiction for the filing of a complaint u/s 138 of the N I Act was to be determined on the basis of location where either of the instances namely (1) Drawing of the cheque; or (2) Presentation of the cheque to the bank; (3) Returning the cheque unpaid by the drawee bank; or (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount; or (5) failure of the drawer to make payment within 15 days of the receipt of the notice had occurred.

Thereafter, Supreme Court in the matter namely Dashrath Rupsingh Rathod vs. State of Maharashtra & Anr. (AIR 2014 SC 3519) modified law in respect to territorial jurisdiction based on which complaint alleging dishonor of cheque under the provisions of Section 138 of the Negotiable Instruments Act has to be filed. In the process this three-judge bench overruled the position of law laid down by the judgment in K. Bhaskaran vs. Shankaran (AIR 1999 SC 3762) decided by Division Bench of the Apex Court.

This position as changed by the Dashrath Rupsingh judgment, is as under: 

The jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured. The general rule stipulated under S. 177 of Cr.P.C applies to cases under S. 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under S. 138 is committed along with other offences in a single transaction within the meaning of S. 220(1) read with S. 184 of the Code of Criminal Procedure or is covered by the provisions of S. 182(1) read with Ss. 184 and 220 thereof.

The above finding resulted into transfer of already filed or filing of fresh complaints under the new afore mentioned territorial jurisdiction rule. Supreme Court however gave above rule a prospective effect by clarifying that only those cases where, post the summoning and appearance of the alleged Accused, the recording of evidence has commenced as envisaged in S. 145(2) of the Negotiable Instruments Act, 1881, continue at that place. The Court further clarified that regardless of whether evidence has been led before the Magistrate at the pre-summoning stage, either by affidavit or by oral statement, the Complaint will be maintainable only at the place where the cheque stands dishonoured.

The above finding of the Supreme Court however remained silent on issues like cheques under RTGS clearing, cheques at par etc. which also led to explanatory interpretations by Bombay High Court.

Thus, in order to overcome the complications that resulted due to above finding and to settle down ambiguity on determination of territorial jurisdiction, the Union Government introduced a bill namely The Negotiable Instrument Act (Amendment) Bill, 2015 proposing to amend the relevant provisions by modifying and inserting the concerned clauses. The bill has already now been passed by the Lok Sabha, it proposes to amend Explanation I for clause (a) to Section 6 and inserts a third explanation to include cheque in the electronic form; inserts new sub-clause (2) to Section 142; and inserts a new section 142A;

The tabulated comparison would clarify the position as it exists and what has been proposed in the bill:

Existing postion of law Proposed position of law
Section 6 Explanation I  
“a cheque in the electronic form” means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system; a) “a cheque in the electronic form” means a cheque drawn in electronic medium by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or electronic signature, as the case may be;
Section 6 newly introduced Explanation III  
NA

“Explanation III.–– The expressions used in this Section shall have the same meanings as assigned to those exceptions in the Information Technology Act, 2000”.
Section 142 newly introduced sub-section 2  

142. Cognizance of offences

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 ( 2 of 1974 ) –

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause-of-action arises under 

clause (c) of the proviso to section 138:

Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

 “(2) The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated.”
Insertion of new Section – 142A after Section 142 in the Principal Act:  
NA

142A. Validation for transfer of pending cases.

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any judgment, decree, order or directions of any court, all cases arising out of section 138 which were pending in any court, whether filed before it, or transferred to it, before the commencement of the Negotiable Instruments (Amendment) Act, 2015 shall be transferred to the court having jurisdiction under sub-section (2) of section 142 as if that sub-section had been in force at all material times.

(2) Notwithstanding anything contained in sub-section (2) of section 142 of sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of cheque in the court having jurisdiction under sub-section (2) of section 142 of the case has been transferred to that court under sub-section (1), all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court.

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act, 2015, more than one prosecution filed by the same person against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142 before which the first case was filed as if that sub-section had been in force at all material times.”

 

The amendment in section 6 takes within its fold the payments made by RTGS mode. This would imply that if a person has issued instructions to its banker to make certain payments via the RTGS mode and funds in his account are insufficient then by virtue of the amended Explanation 1 to clause (a) to Section 6 he would become liable under Section 138 of the N I Act. As the words ‘cheque in the electronic form’, ‘digital signature’, ‘electronic signature’ will have the same meaning as assigned to those in the Information Technology Act. 

Section 142 is renumbered as Section 142(1) and another sub section is added as Section 142(2).  By virtue of this new sub-section the complaint u/s 138 would be filed at the place where the payee presents the cheque and not at the place where drawer has issued the cheque. This amendment undoes the effect of the judgment in Dashrath Rupchand’s case and therefore now again the payee can harass the drawer by presenting the cheque at the bank of his choice and filing the complaint u/s 138 at that place. 

As per new Section 142 (1) pending cases will be re-transferred and create chaotic situation all over again. Under Section 142(2) once a complaint has been filed against a drawer in one jurisdiction, any further complaints against the same drawer would be entertained by that court only and not by any other court. As per Section 142 (3) once the amendment comes into effect, all the cases pending against one drawer in different courts will be transferred to one court as per the jurisdiction provided in sub-section (2) of Section 142.