Bombay High Court’s Aurangabad bench ruled that serving notice from a particular place in cheque bounce cases shouldn’t mean that the dispute would come under the jurisdiction of the court of that place. “Only because the cheque was presented at the bank from Aurangabad by the complainant, the place for ‘presentation of the cheque to the bank’ and ‘returning it unpaid by the drawee bank’ cannot become Aurangabad,” Justice TV Nalawade ruled, while allowing a petition by a Delhi based businessman against Videocon Industries Limited.

Videocon pleaded that since the notice regarding bouncing of cheque was served from Aurangabad, the case should be put on trial under the court’s jurisdiction in the same city. However, high court made it clear that place of transactions and other criteria point towards Delhi, hence Aurangabad court doesn’t have the required jurisdiction.

Madan Gupta had given a cheque of Rs5.09 lakh drawn from a Delhi based bank to Videocon’s registered office in Aurangabad. However, it bounced, so notice was served to him from Aurangabad and he was directed to make the payment in the same city. This is because, in the agreement, i.e. the tax invoice, it had been clearly mentioned that all disputes would be come under Aurangabad court’s jurisdiction. The respondent company filed a case under Section 138 of Negotiable Instruments Act, 1938 against the petitioner in Aurangabad. Gupta challenged this decision in Aurangabad JMFC stating that the cheque had been given to the company as security and it was misused by Videocon. The court rejected his application.

Gupta then moved the HC contending that since all the transactions had taken place in Delhi, the case comes under the courts there.

Citing an apex court verdict, Justice Nalawade laid down the test to determine where the jurisdiction will lie for such cases. Generally, the place of offence is used for determining the jurisdiction. “The SC verdict laid down five components for a cheque bounce case to test the required jurisdiction,” he observed. First is the place of drawing the cheque, second the place of presentation to the bank, third the place of returning of cheque unpaid by the drawee bank, fourth the place from where notice is served in writing to the drawer demanding payment, and the fifth is the place where the drawer had to make payment within 15 days of the notice being served.

more @ http://articles.timesofindia.indiatimes.com/2012-12-09/nagpur/35705047_1_drawee-bank-cheque-negotiable-instruments-act

Honorable Supreme Court has laid down some guidelines on Compounding of Cheque Bouncing Matters, in the following precedent….

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 963 OF 2010

[Arising out of SLP (Crl.) No. 6369 of 2007] Damodar S. Prabhu … Appellant (s) Versus

Sayed Babalal H. … Respondent (s) WITH

CRIMINAL APPEAL NOS. 964-966 OF 2010

[Arising out of SLP (Crl.) Nos. 6370-6372 of 2007] O R D E R

1. Leave granted.

2. The present appeals are in respect of litigation involving the offence enumerated by Section 138 of the Negotiable Instruments Act, 1881 [Hereinafter `Act’]. It is not necessary for us to delve into the facts leading up to the institution of proceedings before this Court since the appellant and the respondent have arrived at a settlement and prayed for the compounding of the offence as contemplated by Section 147 of the Act. It would suffice to say that the parties were involved in commercial transactions and that disputes had arisen on account of the dishonour of five cheques issued by the appellant. Thereafter, the parties went through the several stages of litigation before their dispute reached this Court by way of special leave petitions. With regard to the impugned judgments delivered by the High Court of Bombay at Goa, the appellant has prayed for the setting aside of his conviction in these matters by relying on the consent terms that have been arrived at between the parties. The respondent has not opposed this plea and, therefore, we allow the compounding of the offence and set aside the appellant’s conviction in each of the impugned judgments.

3. However, there are some larger issues which can be appropriately addressed in the context of the present case. It may be recalled that Chapter XVII comprising sections 138 to 142 was inserted into the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988). The object of bringing Section 138 into the statute was to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. It was to enhance the acceptability of cheques 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. If the cheque is dishonoured for insufficiency of funds in the drawer’s account or if it exceeds the amount arranged to be paid from that account, the drawer is to be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. It may be noted that when the offence was inserted in the statute in 1988, it carried the provision for imprisonment up to one year, which was revised to two years following the amendment to the Act in 2002. It is quite evident that the legislative intent was to provide a strong criminal remedy in order to deter the worryingly high incidence of dishonour of cheques. While the possibility of imprisonment up to two years provides a remedy of a punitive nature, the provision for imposing a `fine which may extent to twice the amount of the cheque’ serves a compensatory purpose. What must be remembered is that the dishonour of a cheque can be best described as a regulatory offence that has been created to serve the public interest in ensuring the reliability of these instruments. The impact of this offence is usually confined to the private parties involved in commercial transactions.

4. Invariably, the provision of a strong criminal remedy has encouraged the institution of a large number of cases that are relatable to the offence contemplated by Section 138 of the Act. So much so, that at present a disproportionately large number of cases involving the dishonour of cheques is choking our criminal justice system, especially at the level of Magistrates’ Courts. As per the 213th Report of the Law Commission of India, more than 38 lakh cheque bouncing cases were pending before various courts in the country as of October 2008. This is putting an unprecedented strain on our judicial system.

5. Mr. Goolam E. Vahanvati, Solicitor General (now Attorney- General for India) had appeared as amicus curiae in the present matter and referred to the facts herein as an illustration of how parties involved in cheque bounce cases usually seek the compounding of the offence at a very late stage. The interests of justice would indeed be better served if parties resorted to compounding as a method to resolve their disputes at an early stage instead of engaging in protracted litigation before several forums, thereby causing undue delay, expenditure and strain on part of the judicial system. This is clearly a situation that is causing some concern, since Section 147 of the Act does not prescribe as to what stage is appropriate for compounding the offence and whether the same can be done at the instance of the complainant or with the leave of the court. The learned Attorney General stressed on the importance of using compounding as an expedient method to hasten the disposal of cases. In this regard, the learned Attorney General has proposed that this Court should frame some guidelines to disincentivise litigants from seeking the compounding of the offence at an unduly late stage of litigation. In other words, judicial directions have been sought to nudge litigants in cheque bounce cases to opt for compounding during the early stages of litigation, thereby bringing down the arrears.

6. Before examining the guidelines proposed by the learned Attorney General, it would be useful to clarify the position relating to the compounding of offences under the Negotiable Instruments Act, 1881. Even before the insertion of Section 147 in the Act (by way of an amendment in 2002) some High Courts had permitted the compounding of the offence contemplated by Section 138 during the later stages of litigation. In fact in O.P. Dholakia v. State of Haryana, (2000) 1 SCC 672, a division bench of this Court had permitted the compounding of the offence even though the petitioner’s conviction had been upheld by all the three designated forums. After noting that the petitioner had already entered into a compromise with the complainant, the bench had rejected the State’s argument that this Court need not interfere with the conviction and sentence since it was open to the parties to enter into a compromise at an earlier stage and that they had not done so. The bench had observed:-

… Taking into consideration the nature of the offence in question and the fact that the complainant and the accused have already entered into a compromise, we think it appropriate to grant permission in the peculiar facts and circumstances of the present case, to compound.

7. Similar reliefs were granted in orders reported as Sivasankaran v. State of Kerala & Anr., (2002) 8 SCC 164, Kishore Kumar v. J.K. Corporation Ltd., (2004) 12 SCC 494 and Sailesh Shyam Parsekar v. Baban, (2005) 4 SCC 162, among other cases. As mentioned above, the Negotiable Instruments Act, 1881 was amended by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 which inserted a specific provision, i.e. Section 147 `to make the offences under the Act compoundable’. We can refer to the following extract from the Statement of Objects and Reasons attached to the 2002 amendment which is self- explanatory:-

Prefatory Note – Statement of Objects and Reasons. – The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter XVII was incorporated for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque. These provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The existing provisions in the Negotiable Instruments Act, 1881, namely, Sections 138 to 142 in Chapter XVII have been found deficient in dealing with dishonour of cheques. Not only the punishment provided in the Act has proved to be inadequate, the procedure prescribed for the courts to deal with such matters has been found to be cumbersome. The courts are unable to dispose of such cases expeditiously in a time bound manner in view of the procedure contained in the Act. … (emphasis supplied)

In order to address the deficiencies referred to above, Section 10 of the 2002 amendment inserted Sections 143, 144, 145, 146 and 147 into the Act, which deal with aspects such as the power of the Court to try cases summarily (Section 143), Mode of service of summons (Section 144), Evidence on affidavit (Section 145), Bank’s slip to be considered as prima facie evidence of certain facts (Section 146) and Offences under the Act to be compoundable (Section 147). At present, we are of course concerned with Section 147 of the Act, which reads as follows:-

147. Offences to be compoundable. – Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.

8. At this point, it would be apt to clarify that in view of the non-obstante clause, the compounding of offences under the Negotiable Instruments Act, 1881 is controlled by Section 147 and the scheme contemplated by Section 320 of the Code of Criminal Procedure [Hereinafter `CrPC’] will not be applicable in the strict sense since the latter is meant for the specified offences under the Indian Penal Code. So far as the CrPC is concerned, Section 320 deals with offences which are compoundable, either by the parties without the leave of the court or by the parties but only with the leave of the Court. Sub-section (1) of Section 320 enumerates the offences which are compoundable without the leave of the Court, while sub- section (2) of the said section specifies the offences which are compoundable with the leave of the Court. Section 147 of the Negotiable Instruments Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 of the CrPC which states that `No offence shall be compounded except as provided by this Section’. A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Indian Penal Code also cannot be compounded. However, since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non- obstante clause

9. In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305, this Court had examined `whether an offence punishable under Section 138 of the Act which is a special law can be compounded’. After taking note of a divergence of views in past decisions, this Court took the following position (C.K. Thakker, J. at Para. 17):-

 … This provision is intended to prevent dishonesty on the part of the drawer of negotiable instruments in issuing cheques without sufficient funds or with a view to inducing the payee or holder in due course to act upon it. It thus seeks to promote the efficacy of bank operations and ensures credibility in transacting business through cheques. In such matters, therefore, normally compounding of offences should not be denied. Presumably, Parliament also realised this aspect and inserted Section 147 by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 (Act 55 of 2002)…

In the same decision, the court had also noted (Para. 11):- … Certain offences are very serious in which compromise or settlement is not permissible. Some other offences, on the other hand, are not so serious and the law may allow the parties to settle them by entering into a compromise. The compounding of an offence signifies that the person against whom an offence has been committed has received some gratification to an act as an inducement for his abstaining from proceeding further with the case.

10. It would also be pertinent to refer to this Court’s decision in R. Rajeshwari v. H.N. Jagadish, (2008) 4 SCC 82, wherein the following observations were made (S.B. Sinha, J. at Para. 12):-

Negotiable Instruments Act is a special Act. Section 147 provides for a non obstante clause, stating:

147. Offences to be compoundable. –

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.

Indisputably, the provisions of the Code of Criminal Procedure, 1973 would be applicable to the proceedings pending before the courts for trial of offences under the said Act. Stricto sensu, however, the table appended to Section 320 of the Code of Criminal Procedure is not attracted as the provisions mentioned therein refer only to provisions of the Penal Code and none other.

11. The compounding of the offence at later stages of litigation in cheque bouncing cases has also been held to be permissible in a recent decision of this Court, reported as K.M. Ibrahim v. K.P. Mohammed & Anr., 2009 (14) SCALE 262, wherein Kabir, J. has noted (at Paras. 11, 12):-

11. As far as the non-obstante clause included in Section 147 of the 1881 Act is concerned, the 1881 Act being a special statute, the provisions of Section 147 will have an overriding effect over the provisions of the Code relating to compounding of offences. …

12. It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution.

12. It is evident that the permissibility of the compounding of an offence is linked to the perceived seriousness of the offence and the nature of the remedy provided. On this point we can refer to the following extracts from an academic commentary [Cited from: K.N.C. Pillai, R.V. Kelkar’s Criminal Procedure, 5th edn. (Lucknow: Eastern Book Company, 2008) at p. 444]:-

A crime is essentially a wrong against the society and the State. Therefore, any compromise between the accused person and the individual victim of the crime should not absolve the accused from criminal responsibility. However, where the offences are essentially of a private nature and relatively not quite serious, the Code considers it expedient to recognize some of them as compoundable offences and some others as compoundable only with the permission of the court. …

In a recently published commentary, the following observations have been made with regard to the offence punishable under Section 138 of the Act [Cited from: Arun Mohan, Some thoughts towards law reforms on the topic of Section 138, Negotiable Instruments Act – Tackling an avalanche of cases (New Delhi: Universal Law Publishing Co. Pvt. Ltd., 2009) at p. 5]

… Unlike that for other forms of crime, the punishment here (in so far as the complainant is concerned) is not a means of seeking retribution, but is more a means to ensure payment of money. The complainant’s interest lies primarily in recovering the money rather than seeing the drawer of the cheque in jail. The threat of jail is only a mode to ensure recovery. As against the accused who is willing to undergo a jail term, there is little available as remedy for the holder of the cheque. If we were to examine the number of complaints filed which were `compromised’ or `settled’ before the final judgment on one side and the cases which proceeded to judgment and conviction on the other, we will find that the bulk was settled and only a miniscule number continued.

13. It is quite obvious that with respect to the offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect. There is also some support for the apprehensions raised by the learned Attorney General that a majority of cheque bounce cases are indeed being compromised or settled by way of compounding, albeit during the later stages of litigation thereby contributing to undue delay in justice- delivery. The problem herein is with the tendency of litigants to belatedly choose compounding as a means to resolve their dispute. Furthermore, the written submissions filed on behalf of the learned Attorney General have stressed on the fact that unlike Section 320 of the CrPC, Section 147 of the Negotiable Instruments Act provides no explicit guidance as to what stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave of the court. As mentioned earlier, the learned Attorney General’s submission is that in the absence of statutory guidance, parties are choosing compounding as a method of last resort instead of opting for it as soon as the Magistrates take cognizance of the complaints. One explanation for such behaviour could be that the accused persons are willing to take the chance of progressing through the various stages of litigation and then choose the route of settlement only when no other route remains. While such behaviour may be viewed as rational from the viewpoint of litigants, the hard facts are that the undue delay in opting for compounding contributes to the arrears pending before the courts at various levels. If the accused is willing to settle or compromise by way of compounding of the offence at a later stage of litigation, it is generally indicative of some merit in the complainant’s case. In such cases it would be desirable if parties choose compounding during the earlier stages of litigation. If however, the accused has a valid defence such as a mistake, forgery or coercion among other grounds, then the matter can be litigated through the specified forums.

14. It may be noted here that Section 143 of the Act makes an offence under Section 138 triable by a Judicial Magistrate First Class (JMFC). After trial, the progression of further legal proceedings would depend on whether there has been a conviction or an acquittal.

• In the case of conviction, an appeal would lie to the Court of Sessions under Section 374(3)(a) of the CrPC; thereafter a Revision to the High Court under Section 397/401 of the CrPC and finally a petition before the Supreme Court, seeking special leave to appeal under 136 of the Constitution of India. Thus, in case of conviction there will be four levels of litigation.
• In the case of acquittal by the JMFC, the complainant could appeal to the High Court under Section 378(4) of the CrPC, and thereafter for special leave to appeal to the Supreme Court under Article 136. In such an instance, therefore, there will be three levels of proceedings.

15. With regard to the progression of litigation in cheque bouncing cases, the learned Attorney General has urged this Court to frame guidelines for a graded scheme of imposing costs on parties who unduly delay compounding of the offence. It was submitted that the requirement of deposit of the costs will act as a deterrent for delayed composition, since at present, free and easy compounding of offences at any stage, however belated, gives an incentive to the drawer of the cheque to delay settling the cases for years. An application for compounding made after several years not only results in the system being burdened but the complainant is also deprived of effective justice. In view of this submission, we direct that the following guidelines be followed:-

THE GUIDELINES

(i) In the circumstances, it is proposed as follows:

(a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused.

(b) If the accused does not make an application for compounding as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the Court deems fit.

(c) Similarly, if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs.

(d) Finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount.

Let it also be clarified that any costs imposed in accordance with these guidelines should be deposited with the Legal Services Authority operating at the level of the Court before which compounding takes place. For instance, in case of compounding during the pendency of proceedings before a Magistrate’s Court or a Court of Sessions, such costs should be deposited with the District Legal Services Authority. Likewise, costs imposed in connection with composition before the High Court should be deposited with the State Legal Services Authority and those imposed in connection with composition before the Supreme Court should be deposited with the National Legal Services Authority.

16. We are also in agreement with the Learned Attorney General’s suggestions for controlling the filing of multiple complaints that are relatable to the same transaction. It was submitted that complaints are being increasingly filed in multiple jurisdictions in a vexatious manner which causes tremendous harassment and prejudice to the drawers of the cheque. For instance, in the same transaction pertaining to a loan taken on an installment basis to be repaid in equated monthly installments, several cheques are taken which are dated for each monthly installment and upon the dishonor of each of such cheques, different complaints are being filed in different courts which may also have jurisdiction in relation to the complaint. In light of this submission, we direct that it should be mandatory for the complainant to disclose that no other complaint has been filed in any other court in respect of the same transaction. Such a disclosure should be made on a sworn affidavit which should accompany the complaint filed under Section 200 of the CrPC. If it is found that such multiple complaints have been filed, orders for transfer of the complaint to the first court should be given, generally speaking, by the High Court after imposing heavy costs on the complainant for resorting to such a practice. These directions should be given effect prospectively.

17. We are also conscious of the view that the judicial endorsement of the above quoted guidelines could be seen as an act of judicial law-making and therefore an intrusion into the legislative domain. It must be kept in mind that Section 147 of the Act does not carry any guidance on how to proceed with the compounding of offences under the Act. We have already explained that the scheme contemplated under Section 320 of the CrPC cannot be followed in the strict sense. In view of the legislative vacuum, we see no hurdle to the endorsement of some suggestions which have been designed to discourage litigants from unduly delaying the composition of the offence in cases involving Section 138 of the Act. The graded scheme for imposing costs is a means to encourage compounding at an early stage of litigation. In the status quo, valuable time of the Court is spent on the trial of these cases and the parties are not liable to pay any Court fee since the proceedings are governed by the Code of Criminal Procedure, even though the impact of the offence is largely confined to the private parties. Even though the imposition of costs by the competent court is a matter of discretion, the scale of costs has been suggested in the interest of uniformity. The competent Court can of course reduce the costs with regard to the specific facts and circumstances of a case, while recording reasons in writing for such variance. Bona fide litigants should of course contest the proceedings to their logical end. Even in the past, this Court has used its power to do complete justice under Article 142 of the Constitution to frame guidelines in relation to subject-matter where there was a legislative vacuum.

18. The present set of appeals are disposed of accordingly. ………………………… CJI

(K.G. BALAKRISHNAN)

…………………………. J.

(P. SATHASIVAM)

…………………………. J.

(J.M. PANCHAL)

New Delhi

May 03, 2010

As regards the Jurisdiction, it has been laid down in the following precedent, that the complaint can be filed at any place either where the cheque was drawn or where it was presented for encashment.

K. Bhaskaran vs Sankaran Vaidhyan Balan And … on 29 September, 1999 [AIR 1999 SC 3762] 

ORDER

K.T. Thomas, J.

1. Leave granted.

2. This is a case where the complainant and the accused are siblings, being sons of the same parents. They are fighting over a dishonoured cheque. Both must have experienced a roller-coaster ride in this criminal litigation. Fortune favoured the accused in the first round as he scored an acquittal from the Trial Court, but it favoured the complainant in the next round when the High Court reversed the acquittal and convicted his brother of the offence under Section 138 of the Negotiable Instruments Act (for short ‘the Act’). Perhaps the accused would have remained quiet by then, but for the sentence of imprisonment (six months) which he has now to undergo besides a fine of rupees one lakh which the High Court has imposed on him. So this time it is the turn of the accused to move and hence he has filed this appeal.

3. We thought that the two brothers would settle their disputes over this cheque case and we granted sufficient opportunity to both . But the battle is destined to continue as the expected settlement eludes like a mirage. We do not know at whose fault the parleys went away. We cannot but proceed with the case and so we heard the counsel for both.

4. Before dealing with the two main points on which the counsel argued in this Court we may set out the facts in brief. The respondent (who will hereinafter be referred to as the ‘complainant’) presented a cheque which bears the signature of the appellant (hereinafter referred to as the ‘accused’) before the Syndicate Bank’s branch office at Kayamkulam (Kerala) on 29.1.1993 for encashment. The cheque was for an amount of rupees one lakh. The bank bounced the cheque due to insufficiency of funds in the account of the accused. Complainant then issued a notice by registered post in the address of the accused on 2.2.1993. The notice was returned to the complainant on 15.2.1993 with the following endorsements inscribed thereon:

3.2.1993 Addressee absent

4.2.1993 Addressee absent

5.2.1993 Addressee absent

6.2.1993 Intimation served on addressee’s house

As the postal article remained unclaimed till 15.2.1993 it was returned to the sender with a further endorsement ‘unclaimed.’

5. A complaint was filed by the complainant on 4.3.1993 before the Court of the Judicial Magistrate, 1st Class, Adoor (in Pathanamthitta District in Kerala) against the accused under Section 138 of the Act. Among the contentions which the accused raised, one was regarding the territorial jurisdiction of the said magistrate Court to try the case as the cheque was dishonoured at the Syndicate Bank’s Branch office at Kayamkulam (it is situate in another district in Kerala). Accused denied having issued the cheque although he owned his signature therein. According to the accused, his brother (the complainant) had snatched away some signed blank cheque leaves from his possession and utilised one such cheque leaf for the present case. He also contended that he did not receive any notice from the complainant regarding dishonour of the cheque and hence no cause of action would have arisen in this case. The complaint, according to him, is not maintainable on that score also.

6. The complainant examined himself as PW-1 and two more witnesses for the prosecution. (PW-2 is the Manager of Syndicate Bank’s branch office and PW-3 Devarajan who claimed to have seen the accused issuing the cheque at his shop). Accused examined his wife as DW-1.

7. The trial magistrate repelled the defence contention that the cheque leaf was stolen by the complainant. It was held that the cheque was actually

8. issued by the accused to the complainant. However, the magistrate upheld the contention that his Court had no territorial jurisdiction to try the case as the cheque was dishonoured by the Branch office of the bank situated in a different district. The magistrate further held that as the accused did not receive the notice no cause of action has arisen. As a corollary thereof the Magistrate acquitted the accused.

9. The High Court of Kerala, on the appeal preferred by the complainant, set aside the order of acquittal and converted him and sentenced him as aforesaid. Learned single judge of the High Court accepted the version of the complainant that cheque was issued at the shop of PW-3 which is situated within the territorial limits of the Trial Court’s jurisdiction. Regarding notice, learned single judge relied on the decision of a Division Bench of the same High Court Kunjan Panicker v. Christudas (1997) 2 Kerala Law Times 539 wherein it was held that “refusal and even failure to claim in circumstances as here will tantamount to service of notice.”

10. As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption. The Trial Court was not persuaded to rely on the interested testimony of DW-1 to rebut the presumption. The said finding was upheld by the High Court. It is not now open to the accused to contend differently on that aspect.

11. Learned Counsel for the appellant first contended that the Trial Court has no jurisdiction to try this case and hence the High Court should not have converted the acquittal into conviction on the strength of the evidence collected in such a trial. Of course, the Trial Court had upheld the plea of the accused that it had no jurisdiction to try the case.

12. We fail to comprehend as to how the Trial Court could have found so regarding the jurisdiction question. Under Section 177 of the Code “every offence shall ordinarily be inquired into and tried in a court within whose jurisdiction it was committed.” The locality where the bank (which dishonoured the cheque) is situated cannot be regarded as the sole criteria to determine the place of offence. It must be remembered that offence under Section 138 would not be completed with the dishonour of the cheque. It attains completion only with the failure of the drawer of the cheque to pay the cheque amount within the expiry of 15 days mentioned in Clause (c) of the proviso to Section 138 of the Act. It is normally difficult to fix up a particular locality as the place of failure to pay the amount covered by the cheque. A place, for that purpose, would depend upon a variety of factOrs. It can either be at the place where the drawer resides or at the place where the payee resides or at the place where either of them carries on business. Hence, the difficulty to fix up any particular locality as the place of occurrence for the offence under Section 138 of the Act.

13. Even otherwise the rule that every offence shall be tried by a court within whose jurisdiction it was committed is not an unexceptional or unchangeable principle. Section 177 itself has been framed by the legislature thoughtfully by using the precautionary word ‘ordinarily’ to indicate that the rule is not invariable in all cases. Section 178 of the Code suggests that if there is uncertainty as to where, among different localities, the offence would have been committed the trial can be had in a Court having jurisdiction over any of those localities. The provision has further widened the scope by stating that in case where the offence was committed partly in one local area and partly in another local area the Court in either of the localities can exercise jurisdiction to try the case. Further again, Section 179 of the Code stretches its scope to a still wider horizon. It reads thus:

179. Offence triable where act is done or consequence ensues. -When an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be inquired into or tried by a Court within whose local jurisdiction such thing has been done or such consequence has ensued.

14. The above provisions in the Code should have been borne in mind when the question regarding territorial jurisdiction of the Courts to try the offence was sought to be determined.

15. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice.

16. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities. But concatenation of all the above five is a sine qua non for the completion of the offence under Section 138 of the Code. In this context a reference to Section 178(d) of the Code is useful. It is extracted below:

Where the offence consists of several acts done in different local areas, it may be inquired into or tried by a Court having jurisdiction over any of such local areas.

17. Thus it is clear, if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the Act. In other words, the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done. As the amplitude stands so widened and so expansive it is an idle exercise to raise jurisdictional question regarding the offence under Section 138 of the Act.

18. The more important point to be decided in this case is whether the cause of action has arisen at all as the notice sent by the complainant to the accused was returned as ‘unclaimed.’ The conditions pertaining to the notice to be given to the drawer, have been formulated and incorporated in Clauses (b) and (c) of the proviso to Section 138(1) of the Act. The said clauses are extracted below:

(b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.

19. On the part of the payee he has to make a demand by ‘giving a notice’ in writing. If that was the only requirement to complete the offence on the failure of the drawer to pay the cheque amount within 15 days from the date of such ‘giving’ the travails of the prosecution would have been very much lessened. But the legislature says that failure on the part of the drawer to pay the amount should be within 15 days ‘of the receipt’ of the said notice. It is, therefore, clear that ‘giving notice’ in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment. It is for the payee to perform the former process by sending the notice to the drawer in the correct address.

20. In Black’s Law Dictionary, ‘giving of notice’ is distinguished from ‘receiving of the notice.’ (vide page 621) “A person notifies or gives notice to another by taking such steps as may be reasonably required to inform the other in the ordinary course, whether or not such other actually comes to know of it.” A person ‘receives’ a notice when it is duly delivered to him or at the place of his business.

21. If a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice on the correct address, a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act. It must be borne in mind that Court should not adopt in interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure.

22. In Maxwell’s ‘Interpretation of Statues’ the learned author has emphasized that “provisions relating to giving of notice often receive liberal interpretation,” (vide page 99 of the 12th edn.) The context envisaged in Section 138 of the Act invites a liberal interpretation for the person who has the statutory obligation to give notice because he is presumed to be the loser in the transaction and it is for his interest the very provision is made by the legislature. The words in Clause (b) of the proviso to Section 138 of the Act show that payee has the statutory obligation to ‘make a demand’ by giving notice. The thrust in the clause is on the need to ‘make a demand’. It is only the mode for making such demand which the legislature has prescribed. A payee can send the notice for doing his part for giving the notice. Once it is despatched his part is over and the next depends on what the sender does.

23. It is well settled that a notice refused to be accepted by the addressee can be presumed to have been served on him, [vide Harcharan Singh v. Smt. Shivrani and Ors. , and Jagdish Singh v. Natthu Singh .]

24. Here the notice is returned as unclaimed and not as refused. Will there be any significant different between the two so far as the presumption of service is concerned? In this connection a reference to Section 27 of the General Clauses Act will be useful. The Section reads thus:

27. Meaning of service by post. – Where any central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression ‘serve’ or either of the expressions ‘give’ or ‘send’ or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

25. No doubt Section 138 of the Act does not require that the notice should be given only by ‘post’. Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sender unless he proves that it was not really served and that he was not responsible for such non-service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice.

26. Thus, when a notice is returned by the sender as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in Clause (c) to the proviso of Section 138 of the Act. Of course such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address. In the present case the accused did not even attempt to discharge the burden to rebut the aforesaid presumption.

27. The High Court is, therefore, right in holding the accused guilty of the offence under Section 138 of the Act. Still there is one more aspect, though neither side has argued about it before us, which requires elucidation. We will deal with that aspect now.

28. The High Court has imposed a sentence of imprisonment for 6 months and a fine of Rs. one lakh on the accused. Section 138 of the Act provides punishment with “imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of cheque or with both”. But the court cannot obviate the jurisdictional limit prescribed in Section 386 of the Code. Though the said provision confers power on the Court of appeal to reverse an order of acquittal and find the accused guilty and pass sentence on him according to law, even the High Court when it is the Court of appeal has to conform to the second proviso to the Section 386 of the Code. It reads thus:

Provided further that the Appellate Court shall not inflict greater punishment for the offence which in its opinion the accused has committed, than might have been inflicted for that offence by the Court passing the order or sentence under appeal.

29. In this context a reference to Section 29(2) of the Code is necessary as it contains a limitation for the magistrate of first class in the matter of imposing fine as a sentence or as a part of the sentence. Section 29(2) reads thus:

The court of a Magistrate of the first class may pass a sentence of imprisonment for a term not exceeding three years, or of fine not exceeding five thousand rupees, or of both.

30. The trial in this case was held before a Judicial Magistrate of first class who could not have imposed a fine exceeding Rs. 5,000 besides imprisonment. The High Court while convicting the accused in the same case could not impose a sentence of fine exceeding the said limit.

31. It is true, if a judicial magistrate of first class were to order compensation to be paid to the complainant from out of the fine realised the complainant will be the loser when the cheque amount exceeded the said limit. In such a case a complainant would get only the maximum amount of Rupees five thousand.

32. However, the magistrate in such cases can alleviate the grievance of the complainant by making report to Section 357(3) of the Code. It is well to remember that this Court has emphasized the need for making liberal use of that provision, (Hari Kishan and State of Haryana v. Sukhbir Singh and Ors. ). No limit is mentioned in the sub-section and therefore, a magistrate can award any sum as compensation. Of course while fixing the quantum of such compensation the Magistrate has to consider what would be the reasonable amount of compensation payable to the complainant. Thus, even if the trial was before a court of magistrate of first class in respect of a cheque which covers an amount exceeding Rs. 5,000 the Court has power to award compensation to be paid to the complainant.

33. The question of sentence and award of compensation must be considered by the Trial Court. We deem it feasible that the magistrate shall hear the prosecution and the accused on those aspects. Of course, if the complainant and accused settle their disputes regarding this cheque, in the meanwhile, that fact can certainly be taken into consideration in determining the extent or quantum of sentence.

34. We, therefore, uphold the conviction of the offence under Section 138 of the Act, but we set aside the sentence awarded by the High Court for enabling the trial court to pass orders on the question of sentence and the compensation, if any payable.