High Court of Judicature at Bombay Dismisses Challenge to Issuance of Process Under Section 138 of Negotiable Instruments Act. Court Holds That Once Plea is Recorded and Evidence Commences, High Court Should Not Ordinarily Interfere Under Inherent Jurisdiction Under Section 482 CrPC.

Case Note & Summary

The present criminal writ petition was filed under Article 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973, by Subhiksha Trading Services Ltd. and its officers (the accused) seeking to quash the order of issuance of process passed by the Metropolitan Magistrate, 23rd Court, Esplanade, Mumbai, in a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The complainant, Kotak Mahindra Bank Limited, had alleged that the accused No.1 approached it for working capital and cash credit facilities, which were sanctioned from its Mumbai office on 13 December 2006. The accused failed to repay the outstanding dues despite an initial agreement to repay by 31 September 2008, which was later extended to 31 January 2009. As partial payment, the accused issued an 'at par' cheque dated 31 December 2008 for Rs.35,00,00,000/-. The cheque was initially deposited in Chennai and later re-deposited in Mumbai, where it was dishonoured on 21 January 2009 with the endorsement 'funds insufficient'. After issuing a statutory notice, the complainant filed a private complaint in Mumbai. The Magistrate, after recording verification, issued process. The accused challenged the issuance of process on three grounds: (1) the Magistrate failed to conduct an enquiry under Section 202 CrPC; (2) there was no legally enforceable debt or liability on the date of the cheque because the overdraft facility had been extended up to 31 January 2009 and could only be recalled thereafter, and the recall was made only in February 2009; and (3) the Mumbai court lacked territorial jurisdiction since the accused were based in Chennai, the facilities were availed from the Chennai branch, and no part of the cause of action arose in Mumbai; the re-deposit of the cheque in Mumbai was allegedly done only to harass the petitioners. The accused relied on judgments including Harman Electronics, Dipti Kumar Mohanty, and Ahuja Nandkishore Dongre to argue that jurisdiction cannot be created by depositing the cheque or issuing notice from a place where no transaction took place. The complainant, on the other hand, argued that the High Court should not interfere at this stage because the plea had already been recorded on 18 September 2009 and evidence had commenced with the filing of the affidavit in lieu of examination-in-chief on 22 December 2009. On the merits, the complainant contended that the existence of debt or liability is a matter of trial, and the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act apply. On jurisdiction, the complainant pointed out that the drawee bank (HDFC Bank, Mumbai) was within the territorial jurisdiction, the registered office was in Mumbai, the notice was issued from Mumbai, and the cheque being 'at par' was payable at all branches of the drawee bank across India, thus giving jurisdiction to the Mumbai court. The complainant relied on K. Bhaskaran, Samshad Begum, and several other authorities. The High Court, after hearing both sides, dismissed the petition primarily on the ground that once the plea is recorded and evidence has commenced, the High Court should not ordinarily exercise its inherent jurisdiction to quash the proceedings. The court cited Subramanium Sethuraman, Nikumbh Dairy Products, Ratilal Bhanji Mithani, and Nandkishor Rampal Lohiya to support this principle. While the court acknowledged the other points argued, it observed that the existence of debt or liability is a matter for trial and the jurisdictional challenge also involved disputed facts. The court thus found no case for interference at this stage. The petition was accordingly dismissed.

Headnote

Issue of Consideration

Final Decision

Petition dismissed. No case made out for interfering with the order of issuance of process, particularly since the plea of the accused had been recorded and evidence had commenced, and the High Court ordinarily should not exercise inherent jurisdiction at such a stage.

Law Points