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Laxmi Travels, Nagpur v. G.E Countrywide Consumer & Anr.
Factual and Procedural Background
The petitioner challenged an order dated 4-4-2006 of the Judicial Magistrate (F.C.), 5th Court, Aurangabad, which had rejected an application filed by the complainant and held that the J.M.F.C., Aurangabad had jurisdiction and authority to entertain and decide the complaint. The underlying transaction occurred at Nagpur: the parties reside in Nagpur, the cheques were presented at Canara Bank, Nagpur, were dishonoured there, and the bank's endorsement was made at Nagpur. The complainant issued a notice of demand from Aurangabad; the notice was not complied with, and the complainant filed the present complaint at Aurangabad. The petitioner contended that the complaint should have been filed at Nagpur and challenged the Aurangabad court's jurisdiction.
Legal Issues Presented
- Whether the Court at Aurangabad had jurisdiction to entertain the complaint under Section 138 of the Negotiable Instruments Act when the cheque was drawn, presented, dishonoured and endorsed at Nagpur but the demand notice was issued from Aurangabad.
- Whether the place of issuance of the demand notice (Aurangabad) alone is sufficient to give jurisdiction to a court at that place for prosecution under Section 138 read with Section 142 of the Negotiable Instruments Act.
- Where, as a matter of law under Sections 138 and 142 of the Negotiable Instruments Act (and relevant authorities), the cause of action for an offence under Section 138 arises for the purpose of selecting the forum.
Arguments of the Parties
Petitioner's Arguments
- The essential events constituting the offence under Section 138 (issue, presentation, dishonour, bank endorsement, and failure to pay) occurred at Nagpur, so the cause of action arose at Nagpur and the complaint ought to have been filed there.
- The demand notice, though issued from Aurangabad, was received at Nagpur; issuance of the notice from Aurangabad does not, by itself, confer jurisdiction on a court in Aurangabad.
- For reasons of convenience and relevance of witnesses and evidence, the place where the cheque was issued, presented and dishonoured (Nagpur) is the appropriate forum for trial.
Complainant's Arguments
- The complainant relied on K. Bhaskaran v. Sankaran Vaidhyan Balan ((1999) 7 SCC 510 : AIR 1999 SC 3762) to support the proposition that the chain of acts constituting an offence under Section 138 may occur in different localities and the complainant can choose among courts in those localities; implicitly this was relied upon to assert Aurangabad's jurisdiction because the notice was issued from Aurangabad.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510 : AIR 1999 SC 3762 | Sets out the components of the offence under S.138 (drawing, presentation, return unpaid, notice, failure to pay) and recognizes that those acts may occur in different localities; refers to S.178(d) of the Code permitting trial in any locality where component acts occurred. | The court accepted that K. Bhaskaran outlines the multiple acts that constitute S.138 and the breadth of forum choice, but held that K. Bhaskaran does not support the complainant's specific contention that issuance of the notice from Aurangabad alone creates a cause of action at Aurangabad. |
| Prem Chand Vijay Kumar v. Yash Pal Singh, 2005 All MR (Cri) 2029 (SC) (followed in Musaraf Hossain Khan) | Re-stated the basic ingredients required to prosecute under S.138 and, in particular (with Musaraf), emphasized the combined reading of Ss.138 and 142 that cause of action arises upon failure to make payment within 15 days of notice. | The court relied on this authority to determine that cause of action, as contemplated by S.142, arises at the place where the drawer fails to make payment; thus the failure to pay (which occurred at Nagpur) is decisive for jurisdiction. |
| Musaraf Hossain Khan v. Bhagheeratha Engg. Ltd., 2006 (3) Bom CR 98 : (2006) 3 SCC 658 : AIR 2006 SC 1288 | Followed Prem Chand in restating the ingredients for S.138 and the significance of S.142 for cause of action. | Served as an authority affirming the principle that cause of action for the offence under S.138 is tied to the failure to pay after notice (S.142), which the court applied to locate the cause of action at Nagpur. |
| Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 1 SCC 631 : AIR 2001 SC 518 | Explains the object of issuing notice after dishonour: to give the drawer an opportunity to make payment within 15 days so that criminal proceedings may be avoided. | The court quoted this principle to emphasize that issuance of notice aims to elicit payment on receipt; because the notice in this case was received at Nagpur and payment was not made there, issuance from Aurangabad did not create jurisdiction at Aurangabad. |
| P.K. Muraleedharan v. Pareed, 1992 (Suppl) MWN (Cri) Kerala : 1992 Cri LJ 1965 | Observed that a cheque is akin to payment on demand and that issuing a cheque amounts to payment unless dishonoured; discussed venue of enquiry being determined by complaint averments and that cause of action arises where drawer fails to make payment. | The court cited this authority to support the proposition that the place where the drawer fails to make payment (e.g., where cheque was presented/returned) is the place where the cause of action arises and hence a proper forum (here, Nagpur). |
| Kirloskar Bros. Ltd. v. Commissioner of Income-tax, AIR 1952 Bom 306 | Recognized in commercial practice that a cheque is looked upon as payment if accepted by a creditor. | Referenced (via the P.K. Muraleedharan citation) to underline commercial character of cheques and that issue equals payment unless dishonoured; used to contextualize where the cause of action arises when dishonour occurs. |
| Vuppala Venkata Nageshwara Rao v. Tulluri Chit Funds Pvt. Ltd., 2005 Cri LJ 575 | After considering K. Bhaskaran, restated that courts within whose jurisdiction the dishonoured cheque was presented for payment or where the cheque was returned unpaid by the drawee bank would have jurisdiction to entertain S.138 complaints. | The court relied on this authority to support the conclusion that courts where the cheque was presented and dishonoured (Nagpur) have jurisdiction; it reinforced the petitioner's position. |
| Indmark Finance and Investment Co. Pvt. Ltd. v. The learned Metropolitan Magistrate, 1992 (Supp) MWN (Cr) Calcutta | Expressed that the cause of action arose in Calcutta where the cheque was produced for encashment and was dishonoured. | Used to support the proposition that the place of presentation and dishonour is the place of cause of action for S.138 complaints. |
| Pobathi Agencies v. The State of Karnataka, 1991 Cri LJ 2529 | Held that the place where the cheque was sent for collection and dishonoured is the place for filing the complaint and that the respective court has jurisdiction to try the offence. | Relied upon to support the petitioner's argument that Nagpur (where the cheque was presented/dishonoured) is the appropriate forum, and that Aurangabad lacked jurisdiction. |
Court's Reasoning and Analysis
The court began by summarizing the undisputed facts: the core transactional acts (issue of the cheque, its presentation, dishonour, bank endorsement) occurred at Nagpur; the notice of demand was issued from Aurangabad but was received at Nagpur. The court examined the legal framework provided by the Negotiable Instruments Act, particularly Sections 138 and 142, and relied on authoritative exposition in K. Bhaskaran regarding the five component acts that constitute the offence under S.138 and the permissive forum rule of S.178(d) of the Code of Criminal Procedure that a court having jurisdiction over any local area where components occurred may try the offence.
The court then considered the combined reading of Sections 138 and 142 (as explained in Prem Chand and Musaraf) which narrows "cause of action" to the single event of the drawer's failure to make payment within 15 days of receipt of the notice. Applying that principle, the court concluded that the cause of action arises where the drawer fails to make payment — i.e., the place where the notice was received and where payment was not made. In the present case, that place was Nagpur.
The court rejected the complainant's contention that issuing the notice from Aurangabad conferred jurisdiction on Aurangabad. It observed that K. Bhaskaran does not deal with (and does not decide) the proposition that the place of issuance of the notice alone is sufficient to create a cause of action at that place. Quoting Rajneesh Aggarwal, the court emphasized that the object of the notice is to give the drawer an opportunity to make payment within 15 days upon receipt; the fact that the notice was dispatched from Aurangabad but received at Nagpur meant that the failure to make payment occurred at Nagpur.
The court further noted multiple authorities (including P.K. Muraleedharan, Vuppala, Indmark, and Pobathi Agencies) which support the proposition that jurisdiction lies where the cheque was presented, returned unpaid, or sent for collection and dishonoured. The convenience of parties and witnesses — given that the basic transaction and dishonour occurred at Nagpur — also favoured Nagpur as the proper forum.
On this basis, the court concluded that the impugned order holding Aurangabad competent was erroneous: issuance of the notice from Aurangabad did not create a cause of action in Aurangabad when all decisive acts and the failure to pay were linked to Nagpur.
Holding and Implications
Holding: The impugned order dated 4-4-2006 is quashed and set aside; the petitioner's application is allowed and the complaint filed at Aurangabad is dismissed for want of jurisdiction.
Implications and direct consequences:
- The complainant is granted liberty to file the complaint at Nagpur within 30 days.
- The concerned J.M.F.C. at Nagpur is directed to proceed with the matter within a reasonable time, giving notice and full opportunity to both parties.
- No costs were awarded.
The opinion resolves forum/territorial jurisdiction for the facts of this case in accordance with Sections 138 and 142 of the Negotiable Instruments Act and the cited authorities; it addresses the direct effect on the parties (dismissal for want of jurisdiction and permission to refile at Nagpur). The opinion does not purport to state that it sets a new precedent beyond the application of the cited authorities to these facts.
1. The petitioner has challenged the impugned order dated 4-4-2006, passed by the Judicial Magistrate (F.C), 5th Court, Aurangabad, whereby, an application filed by the complainant was rejected, thereby, it has been held by the Court that the J.M.F.C, Aurangabad has jurisdiction and authority to entertain and decide the complaint in question.
2. The basic transaction between the par ties took place at Nagpur. The parties are residing at Nagpur. The cheques are also presented at Canara Bank at Nagpur. As it was bounced, the endorsement also made by the Canara Bank at Nagpur. However, the com plainant had issued notice of demand from Aurangabad and as there was no compliance of the same, the present complaint has been filed at Aurangabad. Both the parties have relied on K. Bhaskaran v. Sankaran Vaidhyan Balan, reported in (1999) 7 SCC 510 : (AIR 1999 SC 3762). The Apex Court while considering the scheme of Negotiable Instruments Act (N.I Act) and specially Ss. 138, 139 and 118 of the Act observed in para 14 as under:
“14. The offence under S. 138 of the Act can be completed only with the concatenation of a number of acts. The 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.
15. 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 five different localities. But a concatenation of all the above five is a sine qua non for the completion of the offence under S. 138 of the Code. In this context a reference to S. 178(d) of the Code is useful. It is extracted below:
“178. (a) to (c) ***************
(d) where the offence consists of several acts done in different local areas, it may be enquired into or tried by a Court having jurisdiction over any of such local areas.”
16. 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 S. 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 S. 138 of the Act.”
3. The Apex Court in Prem Chand Vijay Kumar v. Yash Pal Singh, reported in 2005 All MR (Cri) 2029 (SC), followed in Musaraf Hossain Khan v. Bhagheeratha Engg. Ltd., reported in 2006 (3) Bom CR 98 : ((2006) 3 SCC 658 : AIR 2006 SC 1288), further re-stated the basic ingredients which are necessary to lodge complaint u/S. 138 of the Negotiable Instruments Act. Those are as under:
“9. In a generic and wide sense (as in S. 20 of the Civil Procedure Code, 1908 (in short ‘CPC’) “cause of action” means every fact which it is necessary to establish to support a right or obtain a judgment. Viewed in that context, the following facts are required to be proved to successfully prosecute the drawer for an offence under S. 138 of the Act:
(a) that the cheque was drawn for payment of an amount of money for discharge of a debt/liability and the cheque was dishonoured;.
(b) that the cheque was presented within the prescribed period;
(c) that the payee made a demand for payment of the money by giving a notice in writing to the drawer within the stipulated period; and
(d) that the drawer failed to make the payment within 15 days of the receipt of the notice.
Proceedings on the basis of the generic meaning of the term “cause of action,” certainly each of the above facts would constitute a part of the cause of action but Cl. (b) of S. 142 gives it a restrictive meaning, in that, it refers to only one fact which will give rise to the cause of action and that is the failure to make the payment within 15 days from the date of the receipt of the notice. A combined reading of Ss. 138 and 142 makes it clear that cause of action is to be reckoned accordingly. The combined reading of the above two sections of the Act leaves no room for doubt that cause of action within the meaning of S. 142(c) arises and can arise only once.”
4. In view of above undisputed position of facts and law, the cause of action as contemplated in S. 142 of the Negotiable Instruments Act, arises at a place where the drawer fails to make payment of the cheque. In the present case except the demand notice from Aurangabad but received at Nagpur, there was no cause of action arose at Aurangabad for the purpose of filing such complaint. The issuance of demand notice from Aurangabad, considering the scheme of N.I Act, and in the facts and circumstances of the case, cannot give jurisdiction to the Court at Aurangabad.
5. Admittedly, the basic transaction took place at Nagpur. The cheque was issued and presented at Nagpur. It was presented for a collection at Nagpur. It was dishonoured at Nagpur. The Bank from Nagpur has endorsed and returned the cheque at Nagpur for want of money. Taking into account above certain facts and all these basic ingredients if taken note of, a complaint in the circumstances should have been filed at Nagpur and not at Aurangabad. The offence in question has been committed at Nagpur by not honouring the cheque where it was presented and dishonoured and further not paying the amount as demanded by the notice received at Nagpur.
6. The contention as raised by the learned counsel in favour of complainant that the above judgment of the Apex Court in K. Bhaskaran ((1999) 7 SCC 510 : AIR 1999 SC 3762) (supra) supports his case to this extent that giving of notice in writing to the drawer of the cheque demanding payment of the cheque amount and failure of the drawer to make payment within 15 days from the notice gives cause of action only at Aurangabad. This contention has no force. The Apex Court, nowhere dealt with this aspect. What has been decided by the Apex Court in K. Bhaskaran and Prem Chand (supra) refers to the basic ingredients which are necessary for an offence under S. 138 of the Act. There is no dispute about this that all these ingredients are necessary. We are concerned with the cause of action in the present matters. The demand notice is a must. But a place of issuance of notice and no payment thereafter cannot sufficient to file complaint under S. 138 of N.I Act. The notice was though sent from Aurangabad, but received at Nagpur. The party failed to make the payment as per notice. Therefore, issuance of notice from Aurangabad itself cannot give cause of action to file complaint at Aurangabad. The object of issuing notice as observed by the Apex Court to Rajneesh Aggarwal v. Amit J. Bhalla., reported in (2001) 1 SCC 631 : (AIR 2001 SC 518) is as under:
“Mere dishonour of a cheque would not raise to a cause of action unless the payee makes a demand to writing to the drawer of the cheque for the pyament and the drawer fails to make the payment of the said amount of money to the payee. The object of issuing notice indicating the factum of dishonour of the cheques is to give an opportunity to the drawer to make the payment within 15 days, so that it will not be necessary for the payee to proceed against in any criminal action, even though the bank dishonoured the cheques.”
7. The following are the other authorities which support the case of the petitioner:
(i) P.K Muraleedharan v. Pareed, reported in 1992 (Suppl) MWN (Cri) Kerala : 1992 Cri LJ 1965. The Kerala High Court has observed as under:
“On the other hand the cheque is always drawn on a bank or banker and is payable immediately on demand. It is as good as payment in cash. The Bombay High Court in Kirloskar Bros. Ltd. v. Commissioner of Income-tax, AIR 1952 Bom 306 held (at page 308).”
“It is also well settled in commercial practice, as I shall presently point out, that a cheque is looked upon as a payment if a creditor accepts a cheque in place of the country's currency.”
In short the issue of a cheque amounts to a payment unless it is dishonoured.
21. From the discussions in the foregoing paragraphs the position that emerges is that the venue of enquiry or trial has primarily to be determined by the averments contained in the complaint. If on the basis of such averments the Court has jurisdiction, it has to proceed with the complaint. The place where the creditor resides or the place where the debtor resides cannot be said to be the place of payment unless there is any indication to that effect either expressly or impliedly. The cause of action as contemplated in S. 142 of the Act arises at the place where the drawer of the cheque fails to make payment of the money. That can be the place where the bank to which the cheque was issued is located. It can also be the place where the cheque was issued or delivered. The Court within whose jurisdiction any of the above-mentioned places falls has therefore got jurisdiction to try the offence under S. 138 of the Act.”
(ii) Vuppala Venkata Nageshwara Rao v. Tulluri Chit Funds Pvt. Ltd., reported in 2005 Cri LJ 575. Andhra Pradesh High Court after considering K. Bhaskaran (1999) 7 SCC 510 : AIR 1999 SC 3762) (supra) further re-stated that the Courts in whose jurisdiction the dishonoured cheque was presented for payment or the place where the cheque was returned unpaid by the drawee bank etc. would have jurisdiction to entertain the complaint under S. 138 of the Act.
8. Indmark Finance and Investment Co. Pvt. Ltd. v. The learned Metropolitan Magistrate, reported in 1992 (Supp) MWN (Cr) Calcutta (sic) wherein the Calcutta High Court has expressed that the cause of action arisen wholly in Calcutta where the alleged offence under S. 138 of the Negotiable Instruments Act was committed as where the cheque was produced for encashment at Calcutta and where it was dishonoured.
9. In Pobathi Agencies v. The State of Karnataka, reported in 1991 Cri LJ 2529, the Karnataka High Court has expressed the place where the cheque was sent for collection and dishonour is the place for filing complaint and the respective Court has jurisdiction to try the offence of dishonour of the cheque.
10. The another facet is the convenience of the parties. In such matter whenever there is a contest and trial is necessary, it is in the interest of all that the place where such cheque is issued, presented and dishonoured should be the place for detail enquiry and adjudication of all the issues. In such matters basic parties including witnesses are definitely need to play relevant role during the trial. The convenience of all the parties, in the facts and circumstances of the case and considering the scheme is also important facet that goes to support the case of the petitioner that the complaint ought to have been filed at Nagpur and not at Aurangabad. Taking all this into account, the impugned order dated 4-4-2006 is quashed and set aside. The application filed by the petitioner is allowed. The complaint is dismissed for want of jurisdiction. However, liberty is granted to the complainant to file complaint at Nagpur within 30 days and the concerned J.M.F.C to proceed with the matter within reasonable time by giving notice and full opportunity to both the parties. The Criminal Revision Application is, therefore, allowed in terms of prayer clause (D). No costs.
11. Application allowed.
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