Lapsing of Negotiable Instruments (Amendment) Ordinance 2015 causes uncertainty in cheque bounce...

Lapsing of Negotiable Instruments (Amendment) Ordinance 2015 causes uncertainty in cheque bounce cases

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The Negotiable Instruments (Amendment) Ordinance, 2015, which was promulgated by the President of India on 15 June 2015, has lapsed on 31 August 2015. From the information available, it appears that this ordinance has not been re-promulgated so far (as of the writing of this article on 3 September 2015). It has caused uncertainty in a large number of cheque bouncing cases pending before various courts in India and also a large number of cases that are in the process of being filed. The uncertainty is with regard to the issue as to which court will have jurisdiction to entertain a cheque dishonour case under Section 138 of the Negotiable Instruments Act.

[Update (23 September 2015): Negotiable Instruments (Amendment) Second Ordinance issued on 22 September for cheque dishonour jurisdiction.]

[Update (16 September 2015): Cabinet approves new Negotiable Instruments (Amendment) Ordinance for jurisdiction in cheque bounce cases.]

It may be pointed out that as per the provisions of Article 123 of the Constitution of India, an Ordinance is valid for a maximum period of 6 weeks from the date of reassembly of Parliament after the promulgation of the Ordinance. Article 123 of the Constitution is reproduced below:

123. Power of President to promulgate Ordinances during recess of Parliament.—(1) If at any time, except when both Houses of Parliament are in session, the President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circumstances appear to him to require.

(2) An Ordinance promulgated under this article shall have the same force and effect as an Act of Parliament, but every such Ordinance—

(a) shall be laid before both Houses of Parliament and shall cease to operate at the expiration of six weeks from the reassembly of Parliament, or, if before the expiration of that period resolutions disapproving it are passed by both Houses, upon the passing of the second of those resolutions; and

(b) may be withdrawn at any time by the President.

Explanation.—Where the Houses of Parliament are summoned to reassemble on different dates, the period of six weeks shall be reckoned from the later of those dates for the purposes of this clause.

(3) If and so far as an Ordinance under this article makes any provision which Parliament would not under this Constitution be competent to enact, it shall be void.”

In the case of the Negotiable Instruments (Amendment) Ordinance, 2015, it was promulgated by the President of India on 15 June 2015 and the Parliament reassembled on 21 July 2015 for the Monsoon session. Therefore, this Ordinance shall cease to operate on the expiration of a period of 6 weeks w.e.f. 21 July 2015. This means that this Ordinance lapsed on 31 August 2015.

It is noteworthy that during the aforesaid Monsoon session of the Parliament, the Negotiable Instruments (Amendment) Bill, 2015, that was based on the above Ordinance, was passed by the Lok Sabha on 6 August 2015. However, this Bill could not be passed by the Rajya Sabha. It is due to this reason that the said Ordinance could not be replaced by the Parliament by passing the related Amendment Bill.

As I had written earlier, the jurisdiction to file cases of cheque bouncing was changed by this Ordinance superseding the judgment dated 1 August 2014 of the Supreme Court in the case of Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, and all other similar judgments on this issue. So, after this Ordinance, a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881, could be filed in a court at a place as per the provisions of Section 142(2) of the Negotiable Instruments Act, which had been inserted by this Ordinance, and even all pending cheque bouncing cases were also required to be transferred to the courts as per this new provision. However, with the lapsing of this Ordinance, the previous uncertainty with regard to jurisdiction of cheque bouncing cases against returns. Le me explain it.

Jurisdiction issue as settled by Supreme Court in Dashrath Rupsingh Rathod case:

In a recent article, I had explained as to how, on 1 August 2014, the Supreme Court had settled the issue of territorial jurisdiction in cases under Section 138 of the Negotiable Instruments Act (cheque bouncing cases) bringing uniformity and certainty on the issue where such cases can be filed [Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129]. In this case, a 3-Judge bench of the Supreme Court had held that a cheque bouncing case can be filed only in a court which has the territorial jurisdiction over the place where the cheque is dishonoured by the bank on which it is drawn. Thus, if a cheque is drawn by a person on his bank account at Mumbai, the cheque dishonour case in respect of this cheque can be filed only in a court at Mumbai within whose territorial jurisdiction the said bank is located. Such a case cannot be filed in any other court at any other place. For example, if you are the payee of the cheque and if you present this cheque for clearing at Delhi, it cannot be filed at Delhi. Thus, the uncertainty about the place where such a case can be filed was removed. As per this judgment, the payee of a cheque could not unnecessarily harass the drawer of the cheque by filing the cheque bouncing case at the place of his choice by deliberately choosing a different place for presenting the cheque or for sending the notice, etc.

However, this was the position as per the aforesaid Dashrath Rupsingh Rathod judgment of the Supreme Court.

Difficulties arising from Dashrath Rupsingh Rathod case and subsequent Bombay High Court decision in Ramanbhai Mathurbhai Patel case:

Subsequently, many people had raised difficulties about this judgment. This is so because the payee of the cheque had to file the case at the place where the drawer of the cheque has a bank account. Thus, if you reside in Delhi and have a bank account in Delhi, and you get a cheque from a person from his bank account in Mumbai, you’ll have to go to Mumbai to file the case, even though the fault for cheque dishonour may be that of the person who gave you the cheque.

Moreover, the above judgment of the Supreme Court was also not clear on another issue as to what would happen in the case of a cheque which is “at par payable at all branches of the bank”. This is what I had mentioned in my above article. Within one month of the above SC decision, a decision of the Bombay High Court (see here) in the case of Ramanbhai Mathurbhai Patel v. State of Maharashtra [in Criminal Writ Petition No. 2362 of 2014] had created the same uncertainty again in respect of multi-city cheques payable at par in all branches of the bank. This Bombay HC decision laid down that the payee of a multi-city cheque, which is payable at par in all branches of the bank, can choose the place where he wants to present the cheque, and thereafter when it is sent for clearing to the nearest branch of the bank in that city, the court having jurisdiction over that clearing branch has the territorial jurisdiction of the cheque bouncing case! So, in respect of the multi-city cheques, the old problem of uncertainty about territorial jurisdiction of cheque bouncing cases returned merely within one month of the authoritative decision of the Supreme Court delivered on 1 August 2014.

Thereafter, in another article, I had pointed out that the above decision of the Bombay High Court was challenged in the Supreme Court vide SLP (Criminal) No. 7251 of 2014. This SLP was dismissed by the Supreme Court as withdrawn on 20 March 2015. This meant that the Bombay High Court decision had become final, though there were certain other legal implications as explained in that article.

The Ordinance changed the jurisdiction issue:

However, the above legal position was completely changed with the above Ordinance, i.e., the Negotiable Instruments (Amendment) Ordinance, 2015, which came into force with effect from 15 June 2015. The above Supreme Court judgment and the above Bombay High Court judgment (and, also, all other judgments) were superseded by the said Ordinance. Here is what was done by this Ordinance.

Firstly, in the Negotiable Instruments Act, 1881, a new sub-section (2) was inserted in Section 142, which laid down as under:

“(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,—

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation.—For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.”

Secondly, a new Section 142A was inserted in the Negotiable Instruments Act, 1881, which laid down as under:

“142A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any 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) Ordinance, 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 or 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), and such complaint is pending in that court, 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 delivered for collection or presented for payment within the territorial jurisdiction of that court.

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015, more than one prosecution filed by the same payee or holder in due course, as the case may be, 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 (2) of section 142 before which the first case was filed and is pending, as if that sub-section had been in force at all material times.”

So, what was the change in jurisdiction for cheque bouncing cases made by the said Ordinance?

The jurisdiction of filing cheque dishonour cases under Section 138 of the N.I. Act was changed by the above Ordinance as under:

(1)   Now a cheque bouncing case could be filed only in the court at the place where the bank in which the payee has account is located. For example, if you are based at Delhi and you have an account in a bank in a particular area of Delhi. You receive a cheque from someone in Mumbai. You present your cheque in Delhi in the bank where you have your account. Now, if this cheque is dishonoured, then the cheque bounce case could be filed only in Delhi in the court which has jurisdiction over the area where your bank is located.

(2)   Secondly, once you have filed a cheque bounce case in one particular court at a place in this manner, subsequently if there is any other cheque of the same party (drawer) which has also bounced, then all such subsequent cheque bounce cases against the same drawer would also have to filed in the same court (even if you present them in some bank in some other city or area). This would ensure that the drawer of cheques is not harassed by filing multiple cheque bounce cases at different locations. So, even multiple cheque bounce cases against the same party could be filed only in one court even if you presented the cheques in different banks at different locations.

(3)   Thirdly, all cheque bounce cases which were pending as on 15 June 2015 in different courts in India, were required to be transferred to the court which had jurisdiction to try such case in the manner mentioned above, i.e., such pending cases were to be transferred to the court which had jurisdiction over the place where the bank of the payee is located. If there are multiple cheque bounce cases pending between the same parties as on 15 June 2015, then all such multiple cases would be transferred to the court where the first case has jurisdiction as per above principle.

Thus, this new Ordinance introduced some clarity and uniformity in the matter of cheque dishonour cases. This Ordinance took care of the interests of the payee of the cheque while at the same time also taking care that the drawer of the multiple cheques was not harassed by filing multiple litigations at different locations to harass him (if more than one cheque has bounced). This Ordinance superseded the Supreme Court decision dated 1 August 2014 [Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129] or any other judgment / decision of any court (Supreme Court or High Courts) on this issue.

Lapsing of the said Ordinance again creates uncertainty in jurisdiction of courts in cheque bouncing cases:

This Ordinance has lapsed on 31 August 2015. From all information available so far, it appears that the Government of India has not re-promulgated this Ordinance. Meanwhile, the Parliament has also not passed the corresponding Negotiable Instruments (Amendment) Bill, 2015, that was supposed to replace the said Ordinance. This factual situation is on the basis of my research on this issue from all available information sources, and I believe that this is the correct factual situation (i.e., that the Ordinance has not been re-promulgated).

So, where do we stand today? We go back to the legal position that existed prior to 15 June 2015 when this Ordinance was promulgated. This means that jurisdiction of the court in cheque dishonour will be decided by Supreme Court judgment in Dashrath Rupsingh Rathod case, read with the decision of the Bombay High Court in the case of Ramanbhai Mathurbhai Patel against which SLP was dismissed as withdrawn (I agree that this second case creates confusion and uncertainty in the case of “at par” cheques which are payable in various branches of a bank – please read this article for more details; but, then it is for the courts to remove this confusion, and in a jest, I may say that at least I am not responsible for this confusion and uncertainty). This position is mainly for the cheque dishonour cases which are yet to be filed.

What happens to cases that have already been transferred in accordance with the provisions of the said Ordinance?

This is also an important issue. What happens to cases that have already been transferred in accordance with the provisions of the said Ordinance? Well, there will be some amount of uncertainty, but I may offer some solace in this regard.

There is a legal principle that even if an Ordinance comes to an end for whatever reasons, the Ordinance does not become void ab initio. It is valid when promulgated and whatever transactions have been completed under the provisions of the Ordinance cannot generally be reopened when the Ordinance comes to an end.

In this regard, let me firstly point out that as per clause (c) of Section 6 of the General Clauses Act, 1897, the repeal of a Central Act shall not “affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed”, unless a different intention appears from the repealing Act. In the present case, there is no repealing Act. So, there is no different intention. Therefore, any right, privilege, obligation or liability acquired, accrued or incurred under the said Ordinance which stands “repealed” shall not be affected due to the coming to end of the said Ordinance. To remove doubts in the minds of some readers, let me point out that clause (2) of Article 123 of the Constitution clearly lays down that an Ordinance shall have the same force and effect as an Act of Parliament; therefore, Section 6 of the General Clauses Act, which is applicable for “Central Acts”, shall apply equally to an Ordinance.

If at all there is any further doubt in this regard, it is resolved by the decisions of the Supreme Court in the cases of T. Venkata Reddy v. State of A.P., (1985) 3 SCC 198 and State of Orissa v. Bhupendra Kumar Bose, 1962 Supp (2) SCR 380 : AIR 1962 SC 945, as per which the action already taken under the Ordinance that has lapsed will continue to be valid. Of course, the Supreme Court has also held that the Parliament is not powerless to bring into existence the same state of affairs as they existed before an Ordinance was passed even though they may be completed and closed matters under the Ordinance, and that can be achieved by passing an express law operating retrospectively to the said effect, of course, subject to the other constitutional limitations. But, no such further power has been exercised in the present case.

This would be for the cases that have already been transferred under the provisions of the Ordinance. However, in so far as the fresh cases are concerned, they may have to be filed in accordance with the legal position as it existed prior to 15 June 2015.

In the end, I only want to add that the Government has created unnecessary confusion by first promulgating the said Ordinance and then allowing it to lapse instead of re-promulgating it. This has created further confusion and uncertainty in the jurisdiction of cheque bounce cases, when already there was a lot of confusion. Either the Government should not have promulgated the Ordinance in the first place, and if it had done so, it should have taken it to logical end by getting the corresponding Amendment Bill enacted from the Parliament well in time (i.e., within 6 weeks) or else, it should have at least re-promulgated the Ordinance. This strange behaviour of the Government has led to uncertainty that is bothering lakhs of complainants / accused persons in cheque bounce cases, many of whom had to change the courts and engage new advocates at the places where their cases were transferred. I am writing so since I can feel the difficulties being faced by litigants, as is evident from a very large number of messages that I have received from the litigants, requesting for guidance in this matter.

So, this issue will continue to remain uncertain till an authoritative Amendment Act is passed by the Parliament to amend the Negotiable Instruments Act, 1881.

Also see, our other articles on cheque bounce cases:

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  • hemant pandey

    I agree. this article must reach to law makers who have made a large number of victims harassed. in my matter ( i am victim), since then this ordinance came in June 2015, no progress is being done in my cheque bounce case. i have case in delhi court. my case is neither being transferred nor being resumed in same court. i am only getting date and date from june 2015 with no progress. court is waiting orders of higher court if to transfer or resume. accused is taking very well benefit of this situation. as per settlement he had to give me money in June end and suddenly this ordinance came. he is denying money now and postponing payment to next date every time before court. but this next date for payment is not coming. now this ordinance is lapse. i don’t know what will happen in my next hearing. i am heighly harassed. many victims must be facing such or similar harassment due to this law.

  • arpana kabra

    Sir in my matter, after passing of ordinance had not restored the matter in the same court of jurisdiction neither filed my complaint in the court where it was transferred but now after lapse of ordinance, am i eligible to restore my matter before the same court(previous court) which had transferred my case.

  • The ordinance has again been promulgated on 22 September 2015, and it is deemed to have become applicable since the back-date of 15 June 2015 (i.e., the date of first ordinance). Therefore, it covers also the period during which the ordinance had lapsed. Please read: http://tilakmarg.com/news/negotiable-instruments-amendment-second-ordinance-issued-on-22-september-for-cheque-dishonour-jurisdiction/