Section 142(2) Of Negotiable Instruments Amendment Act, 2015 Is Constitutionally Valid: Madras HC [Read Judgment]

The Petitioner-Company, Refex Energy Ltd. had asserted that the amendment is in violation of the Supreme Court ruling in Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519, whereby it was held that in cases of dishonour of cheque, only those courts within whose territorial limits the drawee bank is situated would have the jurisdiction to try the case.

"The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof," the Apex Court had held.

By way of the Amendment Act however, the Centre had diluted the ruling, and stipulated that if the cheque is presented for payment by the payee or holder otherwise through an account, the court within whose local jurisdiction the branch of the drawee bank where the drawer maintains the account, is situated will have the jurisdiction to try offences under Section 138 of NI Act.

"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," the provision read.

Notwithstanding the Petitioner's submissions, the division bench of Chief Justice AP Sahi and Justice Subramonium Prasad said,

"It is well settled right from the decision in Shri Prithvi Cotton Mills Ltd., etc., v. Broach Borough Municipality and others reported in AIR 1970 SC 192 that Legislation can take away the basis of a judgment."

…the Parliament is competent to bring out the amendment under the Negotiable Instruments Act. The said amendment cannot be said to be ultra vires in view of the provisions of the Act or Part III of the Constitution of India. The amendment cannot also be called to be manifestly arbitrary in the absence of any materials on record."

Case Details:

Case Title: Refex Energy Ltd. v. Union of India & Ors.

Case No.: WP (MD) No.11150/2016 & WMP (MD) No. 8571/2016

Quorum: Justice Subramonium Prasad

Appearance: Advocate K. Govindarajan for Advocate Srinath Sridevan (for Petitioner); Advocate D. Saravanan (for Centre)

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