More Confusion on Section 138?

The Government chose not to renew the Land Ordinance after the constitutional limit lapsed. The Constitutional limit spoken about is found in Article 123(2), specifying that an ordinance remains valid only for 6 weeks after the "reassembly" of the legislature. In the case of the Land Ordinance, the ordinance was passed before the Monsoon Session. Parliament "reassembled" on 21.07.2015 for the session, and six weeks lapsed on 31.08.2015. 

What went under the radar was another ordinance having the same time limit - the Negotiable Instruments (Amendment) Ordinance 2015 [available here]. Parliamentary Affairs Minister Mr. Naidu admitted that both the Land Ordinance and the Negotiable Instruments Ordinance would lapse on 31.08.2015. The Government has not re-promulgated either of the two. Now, the fallout of the failure to re-promulgate the Land Ordinance has been widely reported, but what about the Negotiable Instruments Ordinance? The Ordinance brought a pivotal change in the law on jurisdiction, which had been dramatically altered by the Supreme Court through its decision in Dasrath Rupsingh Rathod. This ever-changing position of law has been the subject of previous posts on this blog, accessible here, and here.

The most recent development on the Negotiable Instruments Jurisdiction Merry-Go-Round [for it is nothing less than a circus] is brilliant. What are its ramifications? Now that the Ordinance lapsed, we don't have the amended section 142 on the statute books. Which means Dasrath and the position of jurisdiction it offered becomes good law again. Which means that, again, there must be a transfer of all those cases that are currently pending before courts and have not yet reached the stage of cross-examination under Section 145(2) on the lines of jurisdiction as laid down by the three judges in Dasrath.

How's that for confusion.

Bidding Adieu to Dashrath Rupsingh Rathod?

If you haven't had a chance to read the news, the Lok Sabha passed the Negotiable Instruments (Amendment) Bill, 2015 yesterday, which is available here. Notably, it inserts Section 142-A to the statute, and inserts a new sub-clause to the existing Section 142 [sub-clause (2)]. The latter stipulates:

"(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"

So now, the only place where we can file complaints under Section 138 is the court where the cheque is presented for payment. The operation of this jurisdictional rule is affected/implemented by the new section 142-A, which reads:

"(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any other 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 a cheque in the court having jurisdiction under sub-section (2) of section 142 or 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 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 142(2) before which the first case was filed as if that sub-section had been in force at all material times."

The Statement of Objects & Reasons [SoR] appended to the Bill makes it pretty clear that the amendments are directed towards nullifying the effect of the three judge bench decision in Dashrath Rupsingh Rathod v. State of Maharashtra [(2014) 9 SCC 129]. It restricted the jurisdiction for filing of complaints under Section 138 to only those courts within whose jurisdiction the cheque was drawn, and did so with retrospective effect. I've discussed Dashrath and its problematic retrospective application in some detail before. The SoR reveals that the amendment is spurred by representations received by the Government from various stakeholders (read banks) that the decision affords undue protection to defaulters. More important reasons seem to have been the failure of the decision to consider (i) the uniqueness of "at-par" payable cheques, (ii) the electronic clearance of cheques which is devoid of territorial-links, and (iii) the potential for multiple litigation between same parties at different locations.

These concerns raised with the decision were quite pertinent and the amendment is welcome, in most parts at least because I have my reservations about the ease with which the amendment allows for transferring matters (not because of the supposed harm to the common man which follows). What I fail to understand though is the fetish both Judiciary and Legislature seem to have with making changes retrospective. Through the new Section 142-A these jurisdictional tweaks are made retrospective in their operation. On a plain reading it suggests that all cases pending before any other court shall be transferred to the court of proper jurisdiction as now defined by Section 142(2). 

The possibility of the retrospective operation being unconstitutional was being discussed with friends yesterday, where my initial gusto legally supporting a challenge was dampened by the clearly correct position of Legislature being supreme. The only limits to retrospective operation are found in Article 20(1) of the Constitution, prohibiting the retrospective imposition of liability. This is indisputable. A challenge can certainly be mounted to the vagueness in Section 142-A regarding the stage at which a complaint must be for a transfer to happen. Surely the Legislature does not envisage every pending case to be scrutinized. Or does it? Cue: several more months of confusion about the jurisdiction of courts to entertain complaints under Section 138.

Thanks to Chetna Kumar for pointing out important errors in the previous version of this post

Delhi High Court on Section 138 and Dashrath Rupsingh

Section 138 of the Negotiable Instruments Act, 1881 [NI Act] remains primarily responsible for clogging the dockets of most courts. The ease of prosecution had also transformed it into a weapon for abuse and misuse by errant litigants, so thought the Supreme Court while passing the important decision of Dashrath Rupsingh Rathod v. State of Maharashtra [(2014) 9 SCC 129]. The decision has been already discussed on this blog, and I remarked on how the follow up will be interesting. 

One issue among several left open in Dashrath is how do we interpret the requirement that cases shall not be transferred if they have reached the stage of Section 145(2) of the Act. The relevant extract from the decision reads as follows:

Consequent on considerable consideration we think it expedient to direct that only those cases where, post the summoning and appearance of the alleged Accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Negotiable Instruments Act, 1881, will proceeding continue at that place. To clarify, 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. To obviate and eradicate any legal complications, the category of Complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the Court ordinarily possessing territorial jurisdiction, as now clarified, to the Court where it is presently pending.

Pendulum Swinging in the High Court

I have been following the decisions from the High Courts of Bombay and Delhi in the aftermath of Dashrath on this point, and the Delhi High Court has provided interesting material for study. Two material decisions are discussed below:

1. New Delhi Tele Tech v. Cisco Systems Capital (India) Pvt Ltd [Crl. M.C. 4690/2014, decided on 12.01.2015, Vaish J.]

This matter was part of a series of cases, with the same Bench passing another order in separate but connected cases on 13.01.2015. Here, an application under Section 145(2) was filed by the Accused persons and allowed on 25.03.2014 but no examination was conducted, and then a jurisdictional challenge under Dashrath was made. The Single Judge held this was sufficient to conclude trial has commenced, thus warranting the case to remain with the same judge though a jurisdictional challenge existed under Dashrath. The Court held:

The Apex Court in Dashrath Rupsingh Rathod’s case (supra) observed in para 22 that the category of complaint cases where proceedings have gone to the stage of Section 145(2) of the Act or beyond shall be deemed to have been transferred from the Court ordinarily possessing territorial jurisdiction, as clarified therein, to the Court where it is presently pending. Thus, it is only when the stage of proceedings in cases filed under Section 138 of the Act has reached the stage of Section 145(2) of the Act or beyond thereof, such case shall continue to be dealt with by the Court where it is pending trial [Emphasis supplied].

2. Neerav J. Shah v. State & Anr [Crl. M.C. 700/2012, decided on 23.03.2015, Gaur J.]

Similar to the previous case, here an application for cross-examination of the Complainant under Section 145(2) was allowed by the Magistrate in 2011, but no cross-examination had been conducted till the challenge under Dashrath was made. The decisions in the Cisco litigation were relied upon to argue that the cases must be retained by the same magistrate albeit there was no jurisdiction. On this occasion, a co-ordinate Bench disagreed thus dismissing this and other connected matters. 

Relying upon Dashrath as seemingly clarified in Shivgiri Associates & Ors v. Metso Mineral (India) Pvt Ltd [(2014) 12 SCC 366], the Court held that it was necessary for actual evidence to be recorded and merely allowing the application would not do. The Court held:

On careful perusal of afore-noted two decisions of this Court, it becomes apparent that Apex Court decision rendered by Hon’ble Mr. Justice T.S.Thakur and Hon’ble Mr. Justice Vikramjit Sen in Shivgiri Associates (supra) was not brought to the notice of the two Coordinate Benches of this Court, which had rendered the decision in cases of CISCO Systems (supra) and Naveen Malhotra (supra). The Apex Court’s decision in Dashrath Rupsingh (supra) is authored by Hon’ble Mr. Justice Vikramajit Sen, who is also party to the later Apex Court decision in Shivgiri (supra), wherein paragraph No.22 of Dashrath Rupsingh (supra) stands duly explained. In Shivgiri (supra), it has been clearly held that evidence post-summoning has not been recorded and so the complaint under Section 138 of Negotiable Instruments Act, 1881 was directed to be transferred to the Court of competent territorial jurisdiction. In the face of latest Apex Court decision in Shivgiri (supra), reliance placed upon decisions in Peter David Xavier Pinto v. Dinesh M. Ranwat & Anr. 2014 SCC Online Bom 1248, New Delhi Tele Tech Pvt. Ltd. v. M/s CISCO Systems Capital (India) Pvt. Ltd. 2015 SCC Online Del.6533, Radhey Shyam Garg v. Naresh Kumar Gupta (2009) 13 SCC 201 and CISCO Systems Capital (India) Pvt. Ltd. v. New Delhi Tele Tech. Pvt. Ltd. & Ors. 2015 SCC Online Del 6535 is of no avail. Applying the dictum of Apex Court in Dashrath Rupsingh (supra) which is reiterated in Shivgiri (supra), it is held that the complaints in which cross examination in pursuance to allowing of application under Section 145(2) of Negotiable Instruments Act, 1881 has not commenced, shall stand transferred to the court of competent territorial jurisdiction.

Conclusion

Thus, after holding that an application for cross-examination need only be allowed for the matter to remain with the original court, the High Court has now shifted its position to require for the actual cross-examination to have begun. In my opinion, it does not further the underlying intent behind the restriction provided by the Supreme Court in Dashrath, despite the best efforts of Gaur J. to convince us otherwise. The Supreme Court in Dashrath created this exception to reduce the number of matters which were bound to be transferred due to the decision being given retrospective effect. The delays caused in examining witnesses before the trial courts are notorious but very real, and to allow matters to be transferred even where applications for cross-examination have been allowed is a position ignorant of this reality. 

The latest decision only worsens the confusion currently pervading across trial courts in cheque bouncing cases. But on the bright side, this clearly contradictory stand of co-ordinate benches might necessitate intervention by a higher bench/higher court to finally put the issue to bed.  

Section 138, Jurisdiction, and Dashrath Rupsingh Rathod

In August this year, three judges handed down the decision in Dashrath Rupsingh Rathod v State of Maharashtra [(2014) 9 SCC 129], restricting jurisdiction over the offence under Section 138 Negotiable Instruments Act. Trial courts across the country have been returning complaints ever since, as the decision retrospectively applies to a certain class of pending cases. Here, I discuss this landmark case, looking at Justice Sen's approach to understanding the Section 138 offence for jurisdictional purposes.

Prelude

Lets not place the cart before the horse, and get a hand of Section 138 - the infamous cheque bouncing offence. The bouncing of cheques as unpaid is not sufficient: a proviso adumbrates several steps that must be fulfilled to enable one to file a complaint. These are:

• The drawer issues a negotiable instrument towards discharge of a legally enforceable debt;
• The instrument is subsequently presented by the /payee within six months of issue, and is dishonoured by the drawee bank;
• The payee issues a notice within thirty days of dishonour to the drawer regarding dishonour;
• The drawer fails to pay the amount fifteen days after receipt of notice.

The question before the Supreme Court in Dashrath was very specific: would courts at the place from where where statutory notice was sent have jurisdiction to entertain complaints? Conflicting decisions had been rendered by co-ordinate benches of the Supreme Court on the point, to resolve which a three judge bench had been constituted. But the leading judgment of Justice Sen answered a different question: were complaints complaints filed at places other than where the drawee bank is located maintainable? Overturning more than a decade of settled precedent, the Court answered this question in the negative. 

The Court's Approach to Jurisdiction

To understand this aspect better, we need to revisit the structuring of Section 138. A person is "deemed to have committed an offence" when the cheque issued is dishonoured upon presentment. But this is followed by a proviso, which states "nothing contained in this section shall apply unless" the steps discussed above are complied with in full.

Courts before Dashrath considered these conditions an integral part of the offence, and held them relevant for determining the jurisdiction of courts. Naturally, it meant a complaint could be filed at multiple places. All this changed with Dashrath, for the Court viewed the "offence" under Section 138 as separate from the "proviso", which only created conditions for maintainability of a complaint. Viewing this to be the 'offence' under Section 138, the Court turned to jurisdiction in Chapter XVII of the Cr.P.C. The common element therein was of jurisdiction being determined by the location of the 'offence', nothing else. Thus, as the offence itself was complete whenever the drawee bank returned the cheque as unpaid, jurisdiction would be restricted to that court alone.

Statutory Interpretation 2.0
If we accept this interpretation of Section 138, limiting jurisdiction seems the only correct conclusion possible. The Court goes to great lengths to remind us how the simple solution it offers would remedy the 'mischief' created by allowing for multiple avenues to file complaints. How simple the solution remained after ordering retrospective application of the judgment remains a controversial point, but that doesn't concern us here. A deeper look is warranted at the interpretation of Section 138 itself. There are two problems which emerge, one based on a holistic reading of the Negotiable Instruments Act, and another specific to the structure of Section 138 therein.

One: Reading the Act Holistically
The separate, concurring opinions of Thakur and Sen JJ. elaborate the point of construing the 'offence' of Section 138 shorn of its proviso, observing the latter imposed additional conditions on taking cognizance. To quote Sen J. "the cognizance of the crime ... can be taken only when the concomitants or constituents contemplated by the Section concatenate with each other". But when Section 142 of the Act specifically addresses the question of cognizance, is such interpretation not akin to re-writing the text of the statute? After all, the Legislature was open to place these conditions within Section 142, as opposed to Section 138. In ignoring the text, the Court re-wrote the statute, without due regard to established canons of judicial restraint.

Two: The Structure of Section 138
Are Provisos in the section creating an offence anomalous? No. These may be present in slightly different forms though. For instance, Section 300 IPC (defining culpable homicide amounting to murder) and Section 499 IPC (defining defamation), contain Exceptions, which carve out and protect conditions/situations from the broad definition of the offence. These have a direct bearing on the offence itself, for facts which fall within an exception make conduct a 'non-offence'. Cognizance is a step much ahead: it is the application of the judicial mind for determining whether or not proceedings should commence. The difference in stages is important: for instance, if its not an offence, the police may refuse to conduct an investigation; a quashing petition would be against the complaint and not a judicial order and so on.

The proviso to Section 138 tells us that mere bouncing of a cheque is not an offence, similar to how the exceptions to Section 300 tell us that simply killing another person is not murder. Admittedly, it so happens that the stage of taking cognizance is very close to the filing of a complaint in the case of Section 138. But the approach of separating provisos from the section may be transplanted to other statutes, with more onerous consequences.

Right End, Wrong Means
That is my take on the decision. Limiting avenues for filing complaints does indeed simplify the law and prevent its abuse by either party. This was undoubtedly needed in context of Section 138. But these desirable conclusions have been reached through troublesome paths. Petitions are currently pending in the Supreme Court which may result in re-assessing Dashrath [SLP (Cri) 8073/2014]. It would be interesting to see how the Court develops a fascinating, and hugely important area of law.