Notwithstanding the Non-obstante Clause: Supreme Court Extends Power to Transfer Sec.138 Cases

[By Anupama Reddy Eleti]

The author is a student of Gujarat National Law University.

 

Introduction

Recently the Supreme Court in the case of Yogesh Upadhyay vs. Atlanta Limited, established the power of the court under sec.406 of CrPC to transfer cases to include cases of cheque  dishonor under sec.138 of the Negotiable Instruments Act, 1881 (hereinafter “NI Act”). The court restored this power by “notwithstanding the non-obstante clause” present in sec.142(1) of the NI act, which provides for the procedure in which cognizance of sec.138 offences must be taken, as well as the territorial jurisdiction for such offences. The judgement delved into the jurisdictional conundrum surrounding sec.138 offences by tracing the evolution of cases on the same up until The Negotiable Instruments (Amendment) Act, 2015 (hereinafter “the 2015 amendment”) and conclusively justified extension of the scope of sec.406 by analyzing the underlying object of sec.142 and of the 2015 amendment.

This article seeks to analyze the consequences of this judgement upon the rights of the drawer and payee of a cheque, in light of previous judgements and reasonings of the court.

Background on the jurisdictional conundrum

Earlier, a lack of clarity, broadness of legislation, and contrasting position of the judiciary in different cases, created confusion and burden on courts handling claims of territorial jurisdiction. Inundated with prosecutions on this issue, the apex court in K. Bhaskaran v. Sankaran Vaidhyan Balan (hereinafter “K.Bhaskaran”), framed five actions forming the essentials of the offence and declared, “the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done”. Such leniency and expansive allocation of power in the hands of the payee to establish jurisdiction in a place of his convenience caused much expected upheaval. It was not until  Dashrath Rupsingh Rathod v State of Maharashtra & Anr (hereinafter “Dashrath Rupsingh”), that the court narrowed down the scope of jurisdiction. In this landmark judgement, the court observed that an unreasonable use of the court’s ruling in K.Bhaskaran as an instrument of oppression by the payee was leading to “hardship, harassment and inconvenience to the accused persons”. An unfair manipulation of the legal system by the payee for personal collateral benefits, while hindering the accused’s exercise of his right to fair trial was highlighted. The ratio in this instance was that the jurisdiction must be limited to the location of the drawee bank. In addition, the court expanded the scope of the ruling by giving it retrospective application, thereby offering relief to all accused.

However, the Dashrath Rupsingh case only held the field for one year, until a subsequent amendment came about. The Negotiable Instruments (Amendment) Act, 2015 was introduced by the legislature with retrospective effect, upholding the rights of the payee. The present position of the law clearly demarcates the jurisdiction to try such an offence, in the Court within whose jurisdiction the branch of the Bank where the cheque was delivered for collection, through the account of the payee or holder in due course, is situated. The ordinance provided a definitive resolution to this confusion.

Facts of the case

In the present case, Yogesh Upadhyay and his proprietary concern, M/s. Shakti Buildcon, filed transfer petitions under Section 406 Cr.P.C. seeking the transfer of two cases titled ‘Atlanta Limited Vs. M/s Shakti Buildcon & Anr.’ pending before the Civil Judges at Nagpur, Maharashtra, to be tried along with four complaint cases titled ‘Atlanta Limited Vs. Yogesh Upadhyay’ pending before the Courts at Dwarka, New Delhi. These cases involved six cheques issued by the petitioners, out of which the first cheque was honoured, but the remaining six cheques were dishonoured on the basis of ‘Stop payment’ instructions. The first two complaint cases were filed in Nagpur, Maharashtra, as the first two cheques were presented there, and the remaining four complaint cases were filed in Dwarka, New Delhi, as the remaining four cheques were presented there.

The counsel representing the respondent company argued that Section 142 of the Negotiable Instruments Act, 1881 superseded Section 406 of the Criminal Procedure Code (Cr.P.C.) due to the non-obstante clause present in Section 142. Consequently, the counsel asserted that the two cases filed in Nagpur, Maharashtra could not be transferred.

Judicial Reasoning and Ratio Decidendi

The court’s reasoning was three-fold. Firstly, it was noted that the ‘non-obstante clause’ is not a recent addition resulting from the amendment but has been present in the original Section 142 itself. It is to be noted that the amendment inserted two new additions, Sec.142(2) and 142A which clarified the territorial jurisdiction as well as attached retrospective application to it.

Secondly, the non-obstante clause is present in Sec.142(1), which provides for certain procedural requirements that need to be fulfilled for cognizance of the offense. This includes, ensuring that the complaints for Sec.138 offences are filed within one month of the cause of action, unless the complainant can provide sufficient cause for the delay, allowing the court to take cognizance of the complaint even after the prescribed period. In light of this, the reasoning of the court in the instant case is that the non-obstante clause must be understood and applied only for the purposes of the section for which it is used and therefore cannot be taken to mean an express bar on the power of the court in Sec.406.

Thirdly, the court placed reliance on a previous case, (A.E. Premanand Vs. Escorts Finance Ltd. & Others), wherein the court exercised its power under Sec.406  to transfer Sec.138 petitions. Herein the court found it appropriate in the “interest of justice” to transfer all petitions to be tried in one court.

Owing to the foregoing reasons, the court finetuned the understanding of the non-obstante clause to state that, “notwithstanding the non obstante clause in Section 142(1) of the Act of 1881, the power of this Court to transfer criminal cases under Section 406 Cr.P.C. remains intact in relation to offences under Section 138 of the Act of 1881, if it is found expedient for the ends of justice.”

Conclusion

The non-obstante clause has previously been subjected to questioning in the case of M/s Bridgestone India Pvt. Ltd. vs. Inderpal Singh wherein the apex court stated, “insofar as the offence under Section 138 of the Negotiable Instruments Act is concerned, on the issue of jurisdiction, the provisions of the Code of Criminal Procedure, 1973, would have to give way to the provisions of the instant enactment on account of the non-obstante clause in sub-section (1) of Section 142A”. Furthermore, in a recent case of S. Nalini Jayanthi vs. M. Ramasubba Reddy, transfer petitions were filed as a result of hardships faced by the accused, who was a woman and a senior citizen. Herein, the court had noted that the convenience or distress of the accused cannot be deemed sufficient grounds for the transfer of complaint under Sec.138. Although the non-obstante provision in the section had not been mentioned, it can be assumed to be the case.

In view of the foregoing, the court’s ruling in the present case should be considered a welcome move, as it eliminates any likelihood of harassment and abuse stemming from the payee’s powers and privileges. In a way, it also pays homage to the reasoning of the court in the Dashrath Rupsingh Case, wherein the court accounted and considered the severe hardships faced by accused in these cases. By reinstating the power of the court under Sec.406 of CrPC the judgement restores some well needed balance between the rights of the payee and the drawer.

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