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Cheque bounce case can be filed in jurisdiction of 'drawee bank'

In a significant judgment, the Bombay high court has ruled that in cheque bounce cases, only the drawee bank's jurisdiction could be considered during criminal proceedings under Section 138 of Negotiable Instruments (NI) Act, 1881, even as the Real Time Gross Settlement (RTGS) system facility enabled citizens to draw/pay cheques at any branches all over the country.

Justice SB Shukre of the Nagpur bench of the HC observed: "There can be only one drawee bank and not several. When the RTGS cheques bear an endorsement payable at all our branches', it only means 'payment instructions expedited' enabling receipt thereof immediately."

The HC was hearing a petition filed by one Sangita Shah against one Sukrant Shah. The judicial magistrate first class, Nagpur, had returned her complaint against Sukrant on November 3, 2014. Following this, she had filed a writ petition in the HC.

While dismissing Shah's petition, the judge made it clear that there is a difference between 'processing of cheque for payment', and 'giving approval to the processing branch' for the payment. "The branch which processes the cheque and obtains approval for payment from the original branch where funds are actually parked, can only be called as the facilitator. It can't be termed as the 'drawee' under Section 7 of the NI Act," observed the HC.

Nagpur-based Sangita had lodged a complaint against her father-in-law, who is based in Jamshedpur, for dishonouring a Rs2.25 crore cheque. She filed a complaint with the Nagpur magistrate under the NI Act stating that since RTGS system is in existence, the criminal proceedings should be conducted in Nagpur. However, the JMFC rejected the complaint and returned the same saying that she should file it in Jamshedpur where the bank, which had bounced the cheque, was located.

She challenged this before the HC through advocate AP Raghute contending that the concept of the 'drawee bank' was enlarged after RTGS wherein payments are made at any of the branches of the same bank, across the country. Therefore, all bank branches, for offences under the NI Act, can act as the 'drawee bank'.

Sukrant's advocate, Rajendra Daga, argued that RTGS is only for expediting payment and that doesn't expand the concept of 'drawee bank'.

Justice Shukre cited RBI guidelines and observed that RTGS is meant for facilitating speedy payment by reducing the time for processing cheques and it has got nothing to do with the 'drawee bank'.

He said: "In conventional processing, considerable time is spent on obtaining instructions from the branch on which cheque is drawn. RTGS saves this by resorting to the modern technology which has, through web-world or Internet, made it possible to quickly access information including those contained in accounts."

The judge said the RBI has made it clear that 'Real Time' is the time taken for processing of instructions after they are received while 'Gross Settlement' means the settlement of funds transfer instructions which occurs individually.

"The cheques are immediately processed by the branch to which they are presented because of the fact that funds are to be settled only in the RBI books. What is contemplated under RTGS is only transfer of funds by the 'drawee bank' to other branches which received the cheques. It means that dishonouring of cheque takes place because of failure or refusal to transfer funds which takes place at the place where the 'drawee bank' is situated," added justice Shukre while dismissing the petition.

 Article referred: http://www.dnaindia.com/mumbai/report-cheque-bounce-case-can-be-filed-in-jurisdiction-of-drawee-bank-says-bombay-high-court-2054891

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