SYMBIOSIS INTERNATIONAL

UNIVERSITY, PUNE

CASE ANALYSIS
Supervised By:

Submitted By:

Prof. Trupti Rathi

Akriti Shikha
LL.B(THIRD SEMESTER)
PRN-15010122014

Subject: Banking Law

LL.B (Three Year) {2015-2018}
Symbiosis Law School, Pune

Name of the Case: Dashrath Rupsingh Rathod v. State Of Maharashtra & Anr
Parties to the case : Dashrath Rupsingh Rathod.Appellants
State Of Maharashtra & Anr.....Respondent
Case Number: Criminal Appeal No. 2287 of 2009
Court: Supreme Court of India
Date of the judgement: August 1, 2014
Hon'ble Judges: T.S. Thakur, Vikramajit Sen, C. Nagappan

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

CONTENTS
Particulars

Introduction
Issues
Rules
Judgment
Critical Appraisal
Conclusion
Bibliography

Page No.
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Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

INTRODUCTION
The landmark decision of the three-judge bench of the Supreme Court delivered on
August 1, 2014 has overturned the position of law laid down by the Apex body in K.
Bhaskaran v. Sankaran Vaidhyan Balan1 (Bhaskaran) which held the field for fifteen
years. The effect of this judgement is to now restrict cheque bouncing complaints only to
jurisdictions where the drawers bank is located. Under the Bhaskaran regime, the
complaint could be filed in any of the courts where any of the 5 ingredients of the offence
under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) occurred that is,
(a) drawing of a cheque,
(b) presentation to the bank,
(c) returning the cheque unpaid to the drawee bank,
(d) giving notice to the drawer demanding payment and
(e) finally failure to make payment within the stipulated period of 30 days from giving
notice.
The view then was that any of the aforementioned instances could constitute a cause of
action and the complainant was at liberty to file a complaint in any of the jurisdictions
where these acts had taken place. The Court now deviated from the previous position and
now the complaint has to be filed only where the cheque is dishonoured by the bank on
which it is drawn, and other courts will be bereft of territorial jurisdiction.

(1999) 7 SCC 510

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

ISSUES INVOLVED
Which court would have the territorial jurisdiction to try a case of dishonour of cheque
under Section 138 of the Negotiable Instruments Act, 1881 (the Act)?

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

RULES
Section 138 of the Negotiable Instruments Act, 1881

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

JUDGMENT OF BOMBAY HIGH

COURT
Recently Bombay high court in the case of Mr.Ramanbhai Mathurbhai Patel Vs State of
Maharashtra & Anr, had to deal with dishnour of At Par cheques issue. In this case two
cheques were drawn on State Bank of India and Bank of Maharashtra located at
Gandhinagar, Ahmedabad but payable at par at all braches of the same banks. These at
par cheques were deposited and dishonored in respective banks branches at Kurla and
not at Ahmedabad. Relying on Dashrath Rathods judgment, Bombay high court opined
that in the case of at par cheques, the place where cheques are deposited will have
jurisdiction. This judgment however is stayed by the apex court as it runs contrary to its
interpretation of Dashrath Rathod.

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

CRITICAL ANALYSIS
While the judgement appears to be correct on a strict interpretation of the CrPC and the
NI Act in holding that the offence is committed when the cheque gets dishonoured by the
drawers bank and therefore the offence is committed at the place where the drawers
bank is located, by making the judgement not entirely prospective and making it
applicable even to pending cases where they have not yet reached the stage of evidence
of complainant , it poses significant hardship to payees since until now the payees have
relied on the Bhaskaran case which has held the field for fifteen years. It is a common
phenomenon that the accused try to evade summons and the process of having them
served and attend court itself sometimes runs into months and years. Therefore, for the
payee who has filed a complaint in a court other than at the drawers bank by relying on
shankaran case, and his case has not yet reached the stage of evidence, to have the
complaint returned and represented to the proper court and to now have to go through the
same process again of trying to have the accused served would be a travesty of justice. It
is hoped that to alleviate this, the court returning the complaint would, where accused are
served with notice already, fix a date of appearance before the court where it will be
represented.
The Supreme Court recognized the manipulative abuse by payees deliberately depositing
cheques or issuing notices from places not connected with the actual transaction. In fact,
in cases where multiple cheques have been issued in connection with a single transaction,
the payee was at the liberty to present them in different locations and issue multiple
notices from different jurisdiction with the intention to harass the accused and push for a
settlement. The Court recognized that the complainant is statutorily bound to comply with
Section 177 of the Criminal Procedure Code, 1973 (CrPC) and therefore the place
where the Section 138 complaint is to be filed is not of his choosing, but where the
offence is committed, i.e. where the cheque has been dishonoured by the drawers bank.
The ingredients of issuing a notice to the drawer and his non-payment within 15 days are
only steps to be fulfilled to initiate prosecution but not a part of the offence itself. The
Court has however clarified that in respect of a bounced cheque, a complaint can also be

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

filed with the police for cheating under Section 420 of the Indian Penal Code, 1860
(IPC) where the drawer has deliberately issued a cheque with the knowledge that the
cheque would not be honoured and with the intention to defraud the payee and get the
latter to deliver some property to him or do any other act. With respect to pending cases
under S. 138 of the NI Act which are in courts other than those where drawers bank is
located, if the case has not reached the stage where evidence has commenced the Court
has made it clear that such complaints have to be returned and re-presented to the court
where the drawers bank is located.
The bench placed reliance on Harman Electronics (P) Ltd Vs National Panasonic India
(P) Ltd2 where, it was held that Delhi court has no jurisdiction even though notice was
issued from this place demanding payment of dishonoured cheque amount. Court at
Chandigarh where notice was received has jurisdiction and drawer failed to make
payment t Chandigarh. Thus emphasis was laid on receipt of notice rather than on
issuance of notice. A court derives jurisdiction when cause of action arises within its
jurisdiction. Jurisdiction can not be conferred by an act of omission or commission on
the part of the accused. A distinction must be made between the ingredients of an offence
and commission of a part of the offence. Further, the bench also took notice of In the case
of Ishar alloys steels Vs Jayaswals Neco Ltd 3, cheque was presented within 6 months
time before the payee bank for collection but it reached the drawee bank after expiry of 6
months. This decision clarified that cheuqe has to be presented at the bank on which it is
drawn as per combined reading of Section 3,72 and 138 of NI Act. In other words the
place where complainant may present cheque for encashment would not confer or create
territorial jurisdiction. This differs with one of the Bhaskarans components (presentation
of cheque to the bank. Bank means drawer bank and not payees bank although cheque
can be presented at any braches where the payee has an account). It had further analyzed
to ascertain the real purport and impact of provison to Section 138, by referring to several
judgments and finally expressed its view that proviso is an exception to the main section
and it simply defers/postpones filing of compliant and cognizance of offence till
2
3

(2009) 1 SCC 720

(2001)3 SCC 609
Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

conditions mentioned therein are complied with. In Bhaskarans case proviso has been
treated as prescribing essential conditions for making out an offence but fulfillment of
these will give rise to cause of action.
It emphasized that the concepts of Civil law for invoking territorial jurisdiction are wider
and cannot be strictly applied in criminal matters. The Court cautioned that the phrase
cause of action in Section 138 should not be assigned the same interpretation provided
under civil law. Relying on Section 178 of the CrPC, the Court held that territorial
jurisdiction in criminal matters, including under the Act, is determined solely by location
of the commission of offence. Also, that cause of action is appropriate for taking
cognizance of offence but inappropriate for determining commission of offence. Cause of
action arises on fulfilling the conditions in proviso (presentation of cheque within
validity, notice demanding payment and drawers failure to pay etc. Once the cause of
action accrues to the complainant, the jurisdiction of the court to try the offence shall be
determined by reference to the place where the cheque is dishonoured. Bhaskarans case
allows multiple venues(5places) as option for filing complaint results in harassment of
the drawer of the cheque and increases the burden of courts. If offence under 138 is
committed along with other offence (cheating) then the jurisdiction will be governed by
the CrPC 181(1) read with 184 and 220.

Relying on the decision in Harman, the Court held that the offence is committed when a
cheque is drawn by an accused in discharge of debt or liability and such cheque is
returned unpaid for insufficiency of funds or the amount exceeds the arrangement made
with the bank. Its cognizance can be taken by the court only when:

the cheque has been presented to the bank within a period of six months from the

date on which it is drawn or within the period of its validity, whichever is earlier;

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 thirty days of the receipt of information by him from the
bank regarding the return of the cheque as unpaid; and

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

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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.

Regarding the jurisdiction with Court where Drawee Bank is situated, the Court
concluded that under Section 138 of the Act, the offence is committed when the drawee
bank returns the cheque unpaid. The provision to Section 138 of the Act, merely
postpones the prosecution of the offender till the time that he fails to pay the amounts
within 15 days of the statutory notice. The place of commission of the offence would be
the place where the drawee bank is located (and, consequently, where the cheque is
dishonoured). Thus, courts of such place would have the territorial jurisdiction to try the
offence under the Act.

The present case can also be misused by unscrupulous drawers by opening bank accounts
in remote places and making the payee come all the way there to prosecute them. On the
flip side, this could also have the effect of payees becoming reluctant to accept cheques
drawn on banks located in places they are not comfortable with or which is inconvenient
to them. This may in effect come in the way of smooth and quick financial transactions
by relying on cheques and payees may start insisting on DDs or cheques drawn on banks
where payees have presence and would not be inconvenient to prosecute in case the
cheque bounces. Further, by clarifying that complaints of cheating can also be entertained
by the police under Section 420 of the IPC, it creates room for the police to be burdened
with a multitude of cases which could have otherwise been expeditiously disposed off
under Section 138 of the NI Act. Conversely, the police may also view this as a welcome
move by which they are provided with a way to unduly benefit from the complainant and
the accused in the guise of investigating and facilitating recovery of the amounts due. The
objective of law being to strike a chord of balance between abuse of law and curtailment
of crime, whether in the present environment of increased financial crimes this decision
achieves the objective remains questionable.

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

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The Apex court has considered the ramifications of its judgment on several pending cases
in the lower courts. In order to mitigate the rigors of this judgment, it indicated in the
judgment itself following path for convenience of the complainants and courts.
1. Principle laid down by this judgment will be prospective in operation.
2. In respect of pending cases it distinguished them into following categories and
suggested actions as follows:
a. Cases in which trial has commenced: Cases in which summoning and appearance of
the accused has taken place and recording of evidence has commenced will continue at
the same court. These cases will be deemed to have been transferred from the court which
had jurisdiction to the court where they are tried, as per the relaxation provided in public
interest.
b. Cases pending at the pre summoning stage: Cases in which summons have not been
issued will be maintainable only at the place where the cheque stands dishonored. Even
though evidence is led on affidavit or by oral statement, further proceedings cannot
continue.
With the above observation, it held that Section 130 of NI Act read in conjunction with
Section 177 of CrPC leaves no doubt that return of the cheque by the drawee bank alone
constitutes the commission of offence and the place, situs or venue of judicial inquiry and
trial of the offence must logically be restricted to where the drawee bank, is located.

RETROSPECTIVE OPERATION:
The Supreme Court has directed that the present decision shall apply retrospectively to all
cases, except those wherein trial has commenced. This seems to imply that all complaints
filed in courts otherwise than where the drawee bank is situated, will have to be
transferred to the appropriate court, and in future, creditors will have to file complaints
only in a court having jurisdiction over the place where the drawee bank is located.
The Supreme Court has undermined the fact that there will be lot of inconvenience and
hardship to the Complainants in re-filing the cases after the papers are returned by the
courts. The Supreme Court ought to have taken into account that the whole process of

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

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return of papers and re-filing of the same will lead to more delay in disposal of cases
when speedy disposal of cases has been emphasized time and again by the Supreme
Court itself. The Supreme Court could have remedied the situation by declaring that this
judgment will have prospective application and the same was contemplated by the
Supreme Court in Paragraph 20 of the judgment, however the Supreme Court chose not
to do so, keeping in mind the hardship the accused will have to go through to conduct its
defense and also the legal implications of the proceedings being permitted to continue in
courts devoid of jurisdiction.
However, in terms of law, this decision is certainly welcome since it clearly lays down
the law on the place of filing of a complaint under Section 138 of the Negotiable
Instruments Act, 1881.

CONCLUSION
This judgment indeed is result of a detailed examination of Apex courts past judgments,
distinguishing them by fine interpretation of the Section 138 with reference to provisions
of CrPC and CPC with regard to cause of action and jurisdiction. I would justify it on the
ground that law should book the culprit and should not harass the accused.

Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

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This decision of the Court clarifies a very contentious issue pertaining to the offence of
dishonour of cheques under Section 138 of the Act. Going forward, a party desirous of
filing a complaint for dishonour of a cheque will only be able to file a complaint in the
court having territorial jurisdiction.
There will also be a return of pending cases (where recording of evidence has not yet
begun). The complainant will be required to file the complaint before the appropriate
court within 30 days of such return. Return of proceedings may also lead to further
procedural red-tape and consequential delays. In some instances, a complainant may now
find it cumbersome to prosecute a complaint before the appropriate court, which may
well be in another city.
While a complainant will not be able to file multiple complaints before different courts
which could harass an accused, a possible consequence may also be a significant shift in
the acceptability of a cheque drawn on an inconveniently located bank. Additionally, in
cases of intra-state business dealings, creditors may well prefer to avoid any such
potential complications and press for alternative and risk-less payment
While sympathizing with the drawer, it brought on record their observation that
complainant is choosing jurisdiction suiting his convenience and with an intent to harass.
Further, it remarked that courts are burdened by the pending cases on account of
multiplicity of complainants at various places.

BIBLIOGRAPHY
1. Negotiable Instruments Act, 1881,Code of Criminal procedure,1973
2. RBI circulars, Judgments of Supreme court, Bombay High Court, Delhi high court

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Dashrath Rupsingh Rathod v State of Maharashtra & Anr.

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