Complaint under Section 138 NI Act for cheque dishonor can be filed only at place where the account from which the cheque is issued and dishonored is located

In a landmark decision which is going to have very wide ramifications in the cheque dishonor cases throughout India, a 3-Judge Bench of the Hon'ble Supreme Court of India on 1st August 2014 in the case titled as 'Dashrath Rupsingh Rathod vs State of Maharashtra' held that a complaint case under Section 138 of Negotiable Instruments Act for dishonor of cheque can be filed only in the court at the place where the bank branch in which the accused has his account and from which account the cheque was issued and dishonored, is located. This is departure from the earlier judicial dispensation whereunder the complainant could file case at any of the several places like the place where the cheque was deposited by the complainant. The latest judgment on territorial jurisidiction of criminal court in a case under Section 138 has taken into account the harassment faced by the people who are impleaded as accused in complaint cases filed under Section 138 at places far away from the accused's place. The court also took note of the fact that Section 138 of the NI Act is being rampantly misused so far as territorial jurisdiction for trial of the complaint is concerned.

The Court further clarified that all pending complaint cases under Section 138 where the case is still at early stage and recording of evidence under Section 145(2) of the NI Act after appearance of accused has not yet started, will be returned by the concerned magistrate's courts for the complainant to file the same in proper court within 30 days from the date of return of complaint. 

This judgment is going to affect lakhs of cases and is likely to set a milestone in criminal jurisprudence as far as the law relating to cheque dishonor is concerned. 

Read the Full Judgment.

Supreme Court comes to the rescue of person against whom false case of cheque dishonor was filed

Ramdass vs  Krishnanand   Criminal Appeal No.1522/2014

Facts of the case are that the cheque of Rs.5 lakh issued by the appellant Ramdass in favour of respondent was dishonored as the appellant instructed the bank to stop the payment. The respondent filed criminal case under Section 138 of Negotiable Instruments Act against the appellant. The complainant/respondent set up the case that he had given hand loan of Rs.1.75 lakh to the appellant and that to discharge said liability, the appellant had issued the cheque of Rs.5 lakh.  The case of the appellant, on the other hand, was that he had entered into an agreement with the complainant to purchase 3 acres of land belonging to the complainant for a total consideration of Rs.10,00,000/- and for that purpose, an advance of Rs.30,000/- in cash was paid and the Cheque in question for Rs.5,00,000/- was handed over to the complainant in presence of B.S. Pai (DW 2) and that when the complainant failed to execute the sale agreement and not even willing to return the advance amount of Rs.30,000/- and the Cheque of Rs.5,00,000/-, he had to instruct the Bank to stop payment against the said Cheque.

The Magistrate Court took note of the financial condition of the complainant and found his version to be false on the evidence led before him and dismissed the complaint and acquitted the appellant of the offence.

The complainant filed appeal in the High Court. The High Court while allowing the appeal, set aside the judgment of the Trial Court and sentenced the appellant-accused to pay a fine of Rs.8,50,000/- within a period of eight weeks, failing which, to suffer simple imprisonment for a period of six months.

Aggrieved by the reversal of his acquittal, the appellant appealed to Supreme Court of India. The appellant deposited Rs.1,75,000/- in the trial court in accordance with the Supreme court’s order initially. However, vide final judgment dated 23^rd July 2014, the Supreme Court allowed the appeal and set aside the  judgment of High court and restored the judgment of trial court acquitting the appellant. The Court observed that it can not be believed that the complainant had raised loan of Rs.1,75,000/- only to give hand loan to his employer/appellant. The court observed that it is not trustworthy that complainant was in a position to extend hand loan of such a big amount to the appellant particularly when the complainant himself admitted that his net savings in a year came to Rs.10,000/- per year and he was working as lorry driver with appellant who used to deal in sale purchase of properties. The supreme court permitted appellant to withdraw Rs.1,75,000/- which were earlier deposited by the appellant in the trial court in pursuance to Supreme Court’s initial order.

Read the full Judgment.

Sunil Goel advocate B.Sc. L.Lb L.Lm