Delhi High Court Rules: Indian Courts Can Try Cases Of Dishonoured Foreign Cheques Cashed

Delhi High Court Rules: Indian Courts Can Try Cases Of Dishonoured Foreign Cheques Cashed

The Delhi High Court has ruled that simply because the recipient or rightful holder of a foreign cheque chooses to present it in India for reasons that might be seen as ill-intentioned, it does not negate the applicability of Section 138 of the Negotiable Instruments Act, 1881. Additionally, the court where the cheque is deposited for payment retains jurisdiction over the case.

Justice Navin Chawla, was considering a petition filed under Section 482 of the Code of Criminal Procedure, 1973. The petition sought to quash the proceedings initiated against the petitioner under Section 138 of the Negotiable Instruments Act based on a complaint filed by the respondent.

The case involved an entity registered in the United Arab Emirates (UAE) that functioned as the sales and marketing arm of Right Choice Builders Private Limited. This entity was named as an accused in the complaint. The petitioner had established branches in various locations, and the common directors of these branches, along with others, were also listed as accused in the complaint.

In 2014, one of the petitioners, claiming to be a director of Right Choice Group of Companies, personally approached the respondent with an investment proposal, promising high returns. The respondent, persuaded by persistent follow-ups and assurances of guaranteed quarterly returns, invested 600,000 Emirati Dirham (AED) in the petitioner's company's Dubai branch office through multiple cheques. The investment was made with the promise of a 26.5 per cent annual return.

Later, in January 2016, when the respondent visited the company's headquarters in Pune, the petitioners and other accused, acting on the instructions of the main petitioner, issued 10 fresh post-dated cheques to repay the interest to the respondent. However, when these cheques were presented to the banks (National Bank of Abu Dhabi and HSBC Bank, Middle East), they were dishonoured due to insufficient funds.

The respondent then filed criminal complaints against the accused with the Abu Dhabi Police for dishonouring the cheques. The Abu Dhabi Courts of First Instance found one of the petitioners guilty and sentenced him to imprisonment. It was further stated that the accused, fearing arrest, avoided travelling to Dubai.

Following this, the respondent, through his lawyer in Abu Dhabi, issued a legal notice to the accused. The notice was addressed to both the Dubai and India offices of the accused and was duly served on the Indian office. The respondent's lawyer also proposed settlement terms, but the accused never responded.

When the respondent subsequently presented the cheque for the principal amount of AED 600,000 drawn on Emirates NBD Bank Gold Branch, it was dishonoured again. The respondent then filed a legal demand notice under Section 138 of the Negotiable Instruments Act.

The Court clarified that the offence under Section 138 of the NI Act is considered to have been committed at the location where the cheque is presented for collection at the payee or holder's bank branch. The inquiry and trial for such an offence must be conducted by a court within whose jurisdiction the branch of the payee or holder's bank, where the cheque was deposited for collection, is situated.

In this specific case, the cheque was presented for payment by the respondent in Delhi. There was no restriction on the respondent depositing the cheque for collection in Delhi. Therefore, the Court ruled that based on Section 142(2) of the NI Act, the court in Delhi has the authority to investigate and try the offence under Section 138 of the NI Act.

An amendment to Section 142 of the NI Act further strengthens this point. Due to this amendment, the dishonouring of the cheque, because it was presented for payment at the respondent's bank in Delhi, is considered to have occurred in Delhi itself.

Section 134 of the NI Act specifies that unless there's a contrasting agreement, the liability of the issuer of a foreign cheque is governed in all significant matters by the law of the place where the cheque was issued. However, the Court emphasised that there is nothing in this provision that excludes the application of Section 138 of the NI Act read together with Section 142 of the NI Act.

The Court firmly stated that simply because the payee or rightful holder of a foreign cheque chooses to present it in India with potentially malicious intent does not eliminate the applicability of Section 138 of the NI Act and the jurisdiction of the court where the cheque is deposited for payment.

The respondent, in his role as the complainant, argued that the petitioners who are also Indian citizens and currently residing in India, had fled the jurisdiction of the Dubai Courts. Therefore, they cannot claim that the respondent's act of presenting the cheque in India for encashment was malicious.

Referring to Section 4 of the CrPC, the Bench noted that the offense under Section 138 of the NI Act is to be tried in accordance with the provisions of the Cr.P.C., subject to the provisions of the NI Act itself, including Section 142 of the NI Act.

"Thus, by interpreting Section 4 of the Cr.P.C. along with Section 142 (2) of the NI Act, it must be concluded that the Courts in India (Delhi), where the cheque has been deposited for encashment, shall have the jurisdiction to adjudicate on the complaint for an offense under Section 138 of the NI Act, even if it is a foreign cheque," the Bench stated.

The court emphasized that the petitioners failed to provide any reason for the delay in approaching the Court. Consequently, the unexplained delay alone constituted adequate grounds for this Court to decline to exercise its inherent jurisdiction under Section 482 of the Cr.P.C. to dismiss the complaint at this late stage.

Consequently, as there was no merit found in the petition, the Bench dismissed it.