Delhi High Court

Laxmi Vishnu Textiles vs Indiabulls Credit Servises Ltd. on 24 February, 2010

Author: V. K. Jain

*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                Crl.M.C.3309/2009 & Crl.M.C.3334/2009
%
                         Date of Order : 24th February, 2010

#    LAXMI VISHNU TEXTILES              ..... Appellant
!               Through:  Mr.Arvind Chaudhary, Adv.


                         versus


$    INDIABULLS CREDIT SERVISES LTD. &.... Respondent
^                 Through:   Mr.Sanjay Abbot, Advocate for
                  Respondent No.2.

*    CORAM:
     HON'BLE MR. JUSTICE V.K. JAIN


     1.    Whether the Reporters of local papers
           may be allowed to see the judgment?           No

     2.    To be referred to the Reporter or not?        No

     3.    Whether the judgment should be                No
           reported in the Digest?


: V.K. JAIN, J. (ORAL)

1. This is a petition seeking quashing of the criminal

complaint filed against the petitioner under Section 138 of

Negotiable Instruments Act. Quashing has been sought primarily

on the ground that Delhi Court does not have jurisdiction to

entertain and try the complaint.

2. There are five essential ingredients of offence under

Section 138 of the Negotiable Instruments Act: (i) drawing of

the cheque, (ii) presentation of the cheque to the bank of the

payee, (iii) return of the cheque unpaid by the drawee bank,

(iv) giving of notice to the drawer of the cheque demanding

payment of the cheque amount and (v) failure of the drawer to

make payment within 15 days of the receipt of the notice.

3. This is not the case of the complainant that cheque in

question was issued and delivered to it in Delhi. There is no

such allegation to this effect in the complaint and during the

course of arguments also no such stand was taken by the

learned counsel for the complainant. It is an admitted case

that the petitioner is a resident of Mumbai and does not have

either a residence or a place of work in Delhi. It is an admitted

case that cheque in question was drawn on a bank in Mumbai

and was dishonoured by that bank at Mumbai. It is also an

admitted position that the notice of demand though issued

from Delhi was sent to the petitioner at Mumbai. This is

nowhere the case of the complainant that the notice of demand

was served upon the petitioner in Delhi.

4. The averments made in the complaint show that according

to the complainant, cheque issued by the petitioner/respondent

was deposited by it with HDFC Bank, New Delhi and the Notice

of Demand was also issued from Delhi.

5. The question whether issue of Notice of Demand from Delhi

to a person who resides and works for gain outside Delhi came

up for consideration before the Hon‟ble Supreme Court in

„Harman Electronics Private Limited and Anr. v. National

Panasonic India Private Limited', (2009) 1 SCC 720. In that

case, the appellant was carrying business at Chandigarh. The

complainant had its head office at Delhi and a branch office at

Chandigarh. The cheque in question was issued, presented

and dishonoured at Chandigarh. The respondent/complainant

issued notice to the appellant from Delhi. The notice was

served upon the appellant at Chandigarh. On failure of the

appellant to pay the amount of the cheque, a complaint was

filed at Delhi. An application filed by the appellant questioning

jurisdiction of the court at New Delhi was dismissed on the

ground that since the notice was sent by the complainant from

Delhi, the appellant had failed to make payment at Delhi and

the respondent was carrying out business at Delhi, the Delhi

court had jurisdiction to entertain the complaint.

6. As regard, issue of notice from Delhi, Hon‟ble Supreme

Court held that issuance of notice would not by itself give rise

to a cause of action but communication of notice would give.

The Hon‟ble Court was of the view that for constituting offence

u/s 138 of Negotiable Instruments Act, the notice must be

received by the accused, though it may be deemed to have

been received in certain situations.

7. It was noted that while issuance of notice by the holder of

Negotiable Instrument is necessary, service thereof is also

imperative and only after service of such notice and failure on

the part of the accused to pay the demanded amount, within a

period of 15 days thereafter, the commission of an offence

completes and, therefore, giving of notice cannot have

precedence over the service. The Hon‟ble Court declined to

apply the civil law Principle that the debtor must seek the

creditor, to a criminal case. Holding that jurisdiction in a

criminal case is governed by the provisions of Criminal

Procedure Code and not on common law principle, it was held

that Delhi Court had no jurisdiction to try the case.

8. The following observations made by the Hon‟ble Supreme

Court in this case are pertinent:

"A distinction must also be borne in mind between the ingredient of an offence and commission of a part of the offence. While issuance of a notice by the holder of a negotiable instrument is necessary, service thereof is also imperative. Only on a service of such notice and failure on the part of the accused to pay the demanded amount within a period of 15 days thereafter, the commission of an offence completes."

9. This issue has been examined by me in a number of

cases, including the WP.(Crl.).861/09, 884/09, 885/09

decided on 8th February, 2010 and Crl.M.C.1841/2009

decided on 17th February, 2010. After referring to the decision

of the Hon‟ble Supreme Court in the case of Herman

Electronics (supra), this Court, inter alia, held as under:

"Proviso (b) to Section 138 of Negotiable Instruments Act requires payee of the cheque or its holder in due course, as the case may be, to make a demand of the amount of the cheque by giving a written notice to the drawer of the cheque. The question which arises for consideration is as to whether the demand is made at the place where the drawer of the cheque resides or works for gain or it is made at the place from where the notice of demand is dispatched to the drawer of the cheque. Since the requirement of the proviso will not be fulfilled without

service of notice upon the drawer and considering the decision of the Hon‟ble Supreme Court in the case of Harman Electronics (supra) holding therein that civil law principle that the debtor must seek the creditor does not apply to a criminal case, the demand shall be deemed to have been made at the place where the notice is served upon the drawer and not at the place from where it is dispatched to him. In fact in view of the decision in the case of Harman Electronics (supra), the notice shall be deemed to have been given at the place where it is served upon the addressee and not at the place from where it was dispatched."

10. In 'Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco

Ltd,' (2001) 3 SCC 609, the Hon‟ble Supreme Court inter-alia,

held that "The bank" referred to in clause (a) to the proviso of

Section 138 of the Act would mean the drawee bank on which

the cheque is drawn and not all the banks where the cheque is

presented for collection including the bank of the payee, in

whose favour the cheque is issued."

It was further observed that "the payee of the cheque has the

option to present the cheque in any bank including the collecting

bank where he has his account but to attract the criminal

liability of the drawer of the cheque such collecting bank is

obliged to present the cheque in the drawee or Payee bank on