Unit - 4

1. Modi Cement v/s Kuchil Kumar Nandi. 1998

- FACTS
- It is alleged by the appellant in the complaint that the respondent purchased from
them non-levy Modi Cement on credit against the orders placed on behalf of his
concerns. These orders were placed by the respondent with the Calcutta office of
the appellant and it was agreed that the price of the consignments was to be paid
by the respondent at the said office.
- After the consignment was delivered the respondent drew three cheques in the
name of the appellant.
- When the appellant went forward to cash them, they were returned unpaid due to
an order of "Payment Stoppage" by the respondents.

- JUDGEMENT
- High Court ruled in the favour of the respondent saying that essential features
required to invoke sec 138 of NI are not present.
- Supreme court held that even “stop payment” instruction would attract the
mischief of section 138.

2. Sampelly Satyanarayan Rao vs Indian Renewable Energy ... on 19 September,

2016
- FACTS
- It was agreed that post-dated cheques would be furnished by way of security
towards repaying instalments of the loan (principal and interest). The post-dated
cheques issued by the appellant by way of security were dishonoured on
presentation and complaints were filed by the respondent in the court of the
concerned magistrate in New Delhi against the appellant and its director.
- JUDGEMENTS
- High court:- rejected the appellant's argument, holding that when the post-dated
cheques were issued, the loan amount had been authorised and was an existing
debt or liability and thus fell within the scope of Section 138 of the act.
- Supreme Court:- held that a dishonoured post-dated cheque for repayment of a
loan instalment that was described as 'security' in the loan agreement was
covered by Section 138 of the Negotiable Instruments Act 1881.
- While issuing its decision, the Supreme Court also relied on several earlier
judgments to hold that cheques issued towards partial repayment of fees under a
loan agreement would be an existing enforceable debt and their dishonour would
attract consequences under Section 138 of the act.

3. Bhaskaran vs Sankaran 1999

- Supreme court.
Called in question the decision of 2-judge bench in K. Bhaskaran v.
Sankaran Vaidhyan Balan, (1999) 7 SCC 510, on the issue of Territorial
Jurisdiction of trial for the Complaint made for dishonor of cheque, the 3-
 judge bench held that the liberal approach preferred in Bhaskaran case
calls for a stricter interpretation of Section 138 of the Negotiable
Instruments Act, 1881 (NIA) precisely because of its misemployment so
far as choice of place of suing is concerned.
- the Court overruled the Bhaskaran Ratio and, considering that Section 177
CrPC applies to Section 138 NIA, held that prosecution can be launched
only before the Court within whose jurisdiction the dishonour takes place
except in situations where such offence is committed along with other
offences in a single transaction.

4. Dashrath Rupsingh Rathod v. State of Maharashtra.

- jurisdiction of courts in cheque bouncing cases has finally been resolved
by the three judge bench of the apex court in Dashrath Rupsingh Rathod v
State of Maharashtra & Anr ("Dashrath").1 The Supreme Court held that
the complaints relating to dishonor of cheques must be filed only in the
courts within whose territorial jurisdiction the drawee bank is situated.
The judgment has taken a contrary view from the principle of territorial
jurisdiction laid in Bhaskaran v Sankaran Vaidhyan Balan
- The SC took the view that unlike civil law, the phrase cause of action
under section 138 NI must be construed in accordance with section 178 of
CrPC.
- The SC held that the return of the cheque by the drawer bank only
constitutes commission of offence under section 138. Hence, the courts
within which drawer bank is located will only have the jurisdiction to try
the case. Adopting a strict approach, the SC wanted to rule out the
unintended ramifications caused to the drawer by the principles laid in
Bhaskaran's case.