1001 Acc.

IN THE
LEARNED DISTRICT COURT OF JAMMU AT INDIA

IN THE MATTER OF
JAFFRAN TRADERS JAMMU
COMPLAINANT
v.
KUMAR
ACCUSED
CRIMINAL PROCEEDING NO.: XXX/2014
[UNDER SECTION 26 (B) AND SECTION 190 OF THE CODE OF CRIMINAL PROCEDURE,
1973]

MEMORIAL ON BEHALF OF THE ACCUSED

TABLE OF CONTENTS
Index of Authorities......................................................................................................iii
Statement of Facts..........................................................................................................v
Statement of Jurisdiction..............................................................................................vii
Issues for Consideration..............................................................................................viii
Summary of Arguments................................................................................................ix
Arguments Advanced.....................................................................................................1
I.

The District Court of Bhopal would be more suited to try the Case...................1

II.

The post-dated cheque does not come within the purview of Section 138........3
A. At the time of stop payment, the instrument was a Bill of Exchange............4
B.

Arguendo: There exists no legally enforceable debt or liability.....................5

1.

Post-dated cheques do not come within the ambit of Section 138..............5

2.

The liability was for non-payment of bill of exchange, not the goods

themselves..........................................................................................................7
C.

There was a valid cause for the stop-payment order and Section 138 is not

attracted..................................................................................................................7
D. The matter can be settled amicably without attracting penal provisions.......9
Prayer...........................................................................................................................11

ii

INDEX OF AUTHORITIES
Cases
Anil Kumar Sawhney v. Gulshan Rai, (1994) 79 Comp Cas 150 SC............................4
Asanammal Kasim v. Ceat Financial Services (M/s) (2002) 3 Crimes 494...................3
Ashok Yeshwant Babdave v. Surendra Madhavarao Nighojakar, AIR 2001 SC...........4
Associated Transports Co. v. PSR Murthy (1994) 80 Comp Cas 218...........................1
Bhagwathy Prasad Aggarwal v. Thriveni Glass House (2004) 3 JCC (NI) 219 Ker......8
Goa Plast Pvt. Ltd. v. Shri Chico Ursula Dsouza, (2003) 2 SCC 232............................4
Indus Airways v. Magnum Aviation, Criminal Appeal NO. 830 OF 2014....................6
Inmark Finance & Investments Co. (P) Ltd. v. Metropolitan Magistrate, Bombay,
(1993) Comp Cas 155................................................................................................1
Jugesh Sehgal v. Shamsher Singh, (2009) 14 SCC 683.................................................5
K Bhaskaran v. Sankaran Vidyan Balan (1999) 4 Crimes 212 SC................................2
K.J.L.B. Rama Reddy v. Annapurua Seeds (2005) 10 SCC 632..................................10
Kishor Kumar v. J.K Corp. Ltd. (2004) 13 SCC 494...................................................10
M. Rangaswamiah v. R. Shettappa 2002 Cr. L. J. 4792 (Karn.)..................................10
M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd., AIR 2002 SC 182.............8
M/s. Balaji Seafoods Exports (India) Ltd. and another v. Mac Industries Ltd. 1999 (1)
CTC 6.........................................................................................................................5
Modi Cement Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249.....................................8
R Vadivelu v. M/s Sakthi Asphalts and Pelts (2003) 1 JCC (NI) 105 Mad....................8
Ratan Lal v. State of Punjab, AIR 1965 SC 444............................................................6
Rayalseema Agro Enterprises v. State of Gujrat (1998) 94 Comp Cas 363...................3
S. Prithviraj Kukkillaya v. Mathew Koshy (1991) 71 Comp Cas 131...........................1

iii

S.A. Nanjundeswara v. Varlak Agrotech (P) Ltd., 2004 SCC (Cr.) 527.........................8
Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another, 2000 Cri.
L.J.1988 (Guj.)...........................................................................................................5
Shri Ishar Alloy Steels v. Jayaswals Neco Ltd. (2001) 1 RCR (Cri) 834 (SC)..............4
SIL Imports, USA (M/s) v. Exim Aides Silk Exporters, Bangalore, (1999) 3 AD 546;.6
State v. SJ Chaudhary (1996) 2 SCC 428......................................................................6
Subnarayan Jha v. Khan Palchowdhury & Co. (1991) C Cr LR 311 (Cal)....................1
T. Barai v. Henry Ah Hoe and Anr., AIR 1983 SC 150..................................................6
V.D Aggarwal v. 1st Addl. Munsif Magistrate, (1993) 11 LCD 1108 All.......................1
Vinod Kumar Gupta v. Jai Paul, 2008 Indlaw JK 94.....................................................8
Statutes
Constitution of India, 1950............................................................................................6
The Negotiable Instruments Act, 1881...........................................................................3
Books
OP FAIZI & ASHISH AGGARWAL, KHERGAMVALA ON THE NEGOTIABLE INSTRUMENTS
ACT 484 (20th ed. 2008)..............................................................................................2

iv

STATEMENT OF FACTS

Mr. Kumar entered into an agreement with Jaffran Traders (Jammu) for the

purchase/sale of dry fruits for Rs. 5000.

Mr. Kumar issued a bill of exchange (BOE) drawn on one of its debtors, Scion
Dealers for Rs. 8000 to Mr. Kumar with respect to prior trade transactions

which payment would become due on 12th August 2013.

This BOE could be presented on 10th August 2013, after the delivery of the dry

fruits.
In addition to the BOE, a post-dated cheque was issued for Rs. 5000, drawn on
HDFC Bank (Bhopal) dated 1st September 2013, which could be presented for
payment only if Scion Dealers could not pay the amount in the BOE. Further,
it was stated that in the absence of such inability to pay, the cheque will not be

payable.
On 10th August 2013, Jaffran Traders sought payment from Scion Dealers. But

as the money was not due yet, Scion Dealers refused the payment.
On 20th August 2013, Jaffran Dealers deposited the cheque with HDFC Bank
and the payment was refused, as the cheque had not yet matured for the

payment.
Mr. Kumar, upon being intimated of the same issued stop payment orders to

HDFC Bank.
Jaffran Traders presented the cheque again on 1st September 2013, which was
returned unpaid. On 5th September 2013, Jaffran Traders issued a notice of

dishonour under Section 138 of the Negotiable Instruments Act, 1881.

On 22nd September 2013, Jaffran Traders filed a complaint under Section 190
of the Code of Criminal Procedure for offence under Section 138 of the NIA at
Jammu Court.

vi

STATEMENT OF JURISDICTION

The Complainant has approached this Court under Section 26(b) and Section 190 of
the Code of Criminal Procedure, 1973.

All of which is urged in detail in the written submission and is most humbly
submitted.

vii

ISSUES FOR CONSIDERATION

I.

WHETHER

THE

DISTRICT COURT

OF

BHOPAL

WOULD BE MORE SUITED TO

TRY THE CASE?

II.

WHETHER POST-DATED CHEQUES COME WITHIN THE PURVIEW OF SECTION

138?

SUMMARY OF ARGUMENTS

I.

THE DISTRICT COURT OF BHOPAL WOULD BE MORE SUITED TO TRY THE

CASE.

The district court of Bhopal would be more suited to try the case as the cause of action
arose in Bhopal. The cheque was drawn in Bhopal and the notice was also served in
Bhopal. Further, the accused, who is based in Bhopal, was also expected to make the
payment while in Bhopal. As jurisdiction is not merely a matter of technicality, but
also practicality, and most of the elements of the cause of action have taken place in

viii

Bhopal, the district court of Bhopal would be more suited to try the case. This would
avoid unnecessary expenses and be more practical.
II.

THE POST-DATED CHEQUE DOES NOT COME WITHIN THE PURVIEW OF

SECTION 138.

The post-dated cheque does not come within the ambit of Section 138 of the
Negotiable Instruments Act. When the stop-payment order was issued, the cheque had
not yet matured and it was still a bill of exchange and assuming, but not conceding,
that it was a cheque, there was still no legally enforceable debt or liability. This is
because post-dated cheques do not attract 138 as at the time of drawing the cheque
there was no legally enforceable debt or liability. Further, the cheque was an
additional security to the bill of exchange. As there was a valid cause for stopping the
payment, Section 138 is not attracted and the matter can be settled amicably without
attracting the penal provisions of Section 138.

ARGUMENTS ADVANCED

A.

THE DISTRICT COURT OF BHOPAL WOULD BE MORE SUITED TO TRY

THE

CASE.

It has been held by several courts that the cause of action arises where the dishonour
occurs, and where the drawer fails to pay. In the present factual matrix, both these acts
occurred in Bhopal.

ix

In Inmark Finance & Investments Co. (P) Ltd. v. Metropolitan Magistrate, Bombay,1
it was held that the cause of action arises at the place where the cheque is
dishonoured. It has been held by several courts that cause of action arises only on the
drawers omission or failure to pay within 15 days after receiving the statutory
notice,2 and the court whose territorial jurisdiction covers the place where such
omission or failure takes place has jurisdiction to entertain the complaint under
Section 138.3 The failure happens at the drawers office, where the demand notice is
served and not complied with.4 The Allahabad High Court has held that cause of
action arises where the notice to pay within 15 days is served and the drawer of the
cheque fails to pay the amount.5
As there were some contradictory views on the matter of jurisdiction, the Supreme
Court in the case of K Bhaskaran v. Sankaran Vidyan Balan6 held that the offence
under Section 138 could be completed with the following acts:
(a)
(b)
(c)
(d)

drawing of cheque
presentation of cheque to the bank
returning of cheque unpaid by the drawee bank
giving notice in writing to the drawer of the cheque demanding payment of

cheque amount
(e) failure of the drawer to make payment within 15 days of receipt of notice.
The Court held that the local court at any one of these places could be approached by
the complainant.
1

Inmark Finance & Investments Co. (P) Ltd. v. Metropolitan Magistrate, Bombay,

(1993) Comp Cas 155.

2

S. Prithviraj Kukkillaya v. Mathew Koshy (1991) 71 Comp Cas 131.

Associated Transports Co. v. PSR Murthy (1994) 80 Comp Cas 218.

Subnarayan Jha v. Khan Palchowdhury & Co. (1991) C Cr LR 311 (Cal).

V.D Aggarwal v. 1st Addl. Munsif Magistrate, (1993) 11 LCD 1108 All.

K Bhaskaran v. Sankaran Vidyan Balan (1999) 4 Crimes 212 SC.

x

Many scholars and academicians have criticized this view. Learned author OP Faizi
and Ashish Aggarwal in their book Khergamvala on The Negotiable Instruments Act
have held that such a pronouncement goes too far on the issue of territorial
jurisdiction. The purpose of creating territorial jurisdiction is not merely scientific, but
also practical. It should not be so that it always one party to prefer a jurisdiction that
would put the other party to unnecessary convenience and expense. Jurisdiction
should follow the cause of action, and such an interpretation can promote abuse and
misuse.7
In the case at hand, 3 out of the 5 places set out by the case of K Bhaskaran are
Bhopal, and not Jammu. As jurisdiction is a matter of practicality, the District Court of
Bhopal would be more suited to try the case at hand.
It has been held that even where the court has no territorial jurisdiction, the complaint
cannot be dismissed and the same has to be returned to the complainant to be filed
before the competent court having jurisdiction.8 Therefore, the complaint itself is not
being dismissed. It is pleaded that this Court direct the complainant to the District
Court of Bhopal, as it is more suited to hear the case, in order to avoid unnecessary
expenses and impracticality.

B.

THE POST-DATED CHEQUE DOES NOT COME WITHIN THE PURVIEW

OF

SECTION 138.

OP FAIZI & ASHISH AGGARWAL, KHERGAMVALA

ON

THE NEGOTIABLE

INSTRUMENTS ACT 484 (20th ed. 2008).

8

Rayalseema Agro Enterprises v. State of Gujrat (1998) 94 Comp Cas 363;

Asanammal Kasim v. Ceat Financial Services (M/s) (2002) 3 Crimes 494.

xi

The post-dated cheque does not come within the ambit of Section 138 of the
Negotiable Instruments Act.9 When the stop-payment order was issued, the cheque
had not yet matured and it was still a bill of exchange [A] and assuming, but not
conceding, that it was a cheque, there was still no legally enforceable debt or liability
[B]. As there was a valid cause for stopping the payment, Section 138 is not attracted
[C] and the matter can be settled amicably without attracting the penal provisions of
Section 138 [D].

i. At the time of stop payment, the instrument was a Bill of

Exchange.
A post-dated cheque becomes a cheque only on the date, which is written on the
cheque, and till that time, it is a mere bill of exchange. 10 The said cheque can be
presented within its period of validity, which has to be computed from the date it
bears.11
The Apex Court in the case of Anil Kumar Sawhney v. Gulshan Rai held that a postdated cheque is not payable on demand till a particular date and it is not a cheque in
the eyes of law till the date it becomes payable on demand. When a posted dated
cheque is written or drawn, it is only a bill of exchange and as such, the provisions of
Section 138 are not applicable to the said instrument. 12 Therefore, so long as an action
was taken on the cheque before its maturity, Section 138 would not apply to it.13
9

Section 138, The Negotiable Instruments Act, 1881.

10

Shri Ishar Alloy Steels v. Jayaswals Neco Ltd. (2001) 1 RCR (Cri) 834 (SC).

11

Anil Kumar Sawhney v. Gulshan Rai, (1994) 79 Comp Cas 150 SC.

12

Id.

13

Ashok Yeshwant Babdave v. Surendra Madhavarao Nighojakar, AIR 2001 SC.

xii

In the landmark case of Goa Plast Pvt. Ltd. v. Shri Chico Ursula Dsouza, the Supreme
Court held that the countermanding of the post-dated cheque was done prior to the
date of maturity while it was still a bill of exchange in the eyes of law. There was no
cheque, which could be dishonoured so as to attract the provisions of Section 138 of
the Act. Section 138 being a penal provision requires to be strictly construed. Since
there were no cheques in existence, which have been dishonoured, the provisions of
Section 138 are not attracted.14

The facts of this case are very similiar to the case at hand. Even in this case, the
accused issued the stop-payment orders on the post-dated cheque before September 1 st
2013, which was the date of maturity. Therefore, as there was no cheque in place at
that time, the provisions of Section 138 are not attracted.

ii. Arguendo: There exists no legally enforceable debt or

liability.
There exists no legally enforceable debt or liability as the cheque is post-dated in
nature [1] and the liability was for the non-payment of bill of exchange, not the goods
themselves [2].
1. Post-dated cheques do not come within the ambit of
Section 138.

14

Goa Plast Pvt. Ltd. v. Shri Chico Ursula Dsouza, (2003) 2 SCC 232.
xiii

The cheque in question should have been issued in discharge of whole or part of the
debt or liability.15 As per Section 138, the cheque should be issued for some legally
enforceable debt or other liability at the time of drawing of the cheque.16
The Gujarat High Court in Shanku Concretes v. State of Gujarat dealing with Section
138 of the N.I. Act held that to attract Section 138 of the N.I. Act, there must be
subsisting liability or debt on the date when the cheque was delivered. The very fact
that the payment was agreed to some future date and there was no debt or liability on
the date of delivery of the cheques would take the case out of the purview of Section
138 of the N.I. Act.17
The recent Supreme Court judgment of Indus Airways v. Magnum Aviation clearly
states that for a criminal liability to be made out under Section 138, there should be
legally enforceable debt or other liability subsisting on the date of drawal of the
cheque.18 The Court further held that drawal of the cheque in discharge of existing or
past-adjudicated liability is sine qua non for bringing an offence under Section 138.
The counsels for the complainant may assert that this judgment does not apply to the
case at hand, as it was pronounced in 2014 whereas the cause of action arose in 2013.
It is a well-established principal that a criminal law does not have retrospective
operation by way of Article 20(1) of the Constitution of India.19 Yet, there is an
exception to this rule. In Ratan Lal v. State of Punjab, it was unequivocally declared
15

Jugesh Sehgal v. Shamsher Singh, (2009) 14 SCC 683.

16

M/s. Balaji Seafoods Exports (India) Ltd. and another v. Mac Industries Ltd. 1999

(1) CTC 6.
17

Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another, 2000 Cri.

L.J.1988 (Guj.).
18

Indus Airways v. Magnum Aviation, Criminal Appeal NO. 830 OF 2014.

19

Article 20(1), Constitution of India, 1950.

xiv

by this Court that an ex post facto criminal law, which only mollifies the rigour of law
is not hit by Article 20(1) of the Constitution and that if a particular law makes
provision to that effect, though retrospective in operation, it would still be valid.20
In T. Barai v. Henry Ah Hoe and Anr., this view was reiterated and it was emphasized
that if an amending Act reduces the punishment for an offence, there is no reason why
the accused should not have the benefit of such reduced punishment.21
It is very important that an interpretation should keep track of changes brought in with
times, in accordance to current law.22 Therefore in the case at hand, the judgment does
have retrospective operation as it is for the benefit of the accused and mitigates the
rigour of law.
2. The liability was for non-payment of bill of exchange,
not the goods themselves.
Upon perusal of the facts of the case, it is clear that the initial bill of exchange was
issued, drawn on Scion Dealers for payment for the delivery of dry fruits. The cheque
was merely an additional security, or collateral security, which would come into play
only upon the inability of Scion Dealers to pay. In the absence of such inability, the
cheque would not be payable. The cheque was a security for the bill of exchange, and
not the goods themselves. Therefore, there was no legally enforceable debt or liability
even after the cheque was drawn as Jaffran Traders inappropriately approached the
bank for presentment, as Scion Dealers had not displayed inability to pay. They
merely stated that it had not matured yet, and Jaffran Traders could have approached
them two days later. Instead, Jaffran Traders presented the cheque 10 days later,
20

Ratan Lal v. State of Punjab, AIR 1965 SC 444.

21

T. Barai v. Henry Ah Hoe and Anr., AIR 1983 SC 150.

22

SIL Imports, USA (M/s) v. Exim Aides Silk Exporters, Bangalore, (1999) 3 AD

546; State v. SJ Chaudhary (1996) 2 SCC 428.

xv

without presenting the bill of exchange, post maturity. Therefore, the complainants
have inappropriately presented the cheque and there was no legally enforceable debt
or liability at the time.

iii. There was a valid cause for the stop-payment order and
Section 138 is not attracted.
The accused can show that the stop payment instructions were not issued because of
insufficiency or paucity of funds, and be absolved of his liability under Section 138 23.
If the accused shows that in his account there was sufficient funds to clear the amount
of the cheque at the time of presentation of the cheque for encashment at the drawer
bank and that the stop payment notice had been issued because of other valid causes
including that there was no existing debt or liability at the time of presentation of
cheque for encashment, then, offence under Section 138 will not be made out. The
important thing is that the burden of so proving would be on the accused. Thus, a
Court cannot quash a complaint on this ground.24
The Court can be justified in quashing the proceedings if it comes to the conclusion
that even the statements taken on face value do not make out any offence.25

The High Court of Jammu and Kashmir has acknowledged that every order of stop
payment is not an offence under Section 138. The case of Vinod Kumar Gupta v. Jai
Paul highlighted one such eventuality where the drawer informed the payee of the fact

23

Section 138, Negotiable Instruments Act, 1881.

24

M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd., AIR 2002 SC 182.

25

S.A. Nanjundeswara v. Varlak Agrotech (P) Ltd., 2004 SCC (Cr.) 527.
xvi

that stop payment orders had been issued, and it was held that in such a case,
dishonour under Section 138 is not made out.26
The burden of proving the other valid causes for the stopped payment would lie on the
accused.27 Even the Kerala and Madras High Courts have affirmed that if the accused
can show that he had a valid cause for issuing the stop payment memo 28 or there exists
no debt or liability,29 then Section 138 would not be attracted.

In the case at hand, there was a valid cause for issuing a stop-payment order. The bill
of exchange was due to mature on August 12th 2013. The complainant presented it for
payment on August 10th 2013, and it was not paid, as it had not matured as yet. As per
the contract between Mr. Kumar and Jaffran Traders, the cheque could have been
presented only upon inability of Scion Dealers to pay. In this case, no such inability is
made out. It can be reasonably presumed that they possessed the ability to pay upon
maturity. Instead of presenting the bill of exchange two days later, on the 12 th of
August, the complainant presented the cheque on 20th August 2013, which is ten days
after the initial presentment of bill of exchange. On any one of those days, the
complainant could have approached Scion Dealers and received the money.
The accused issued a stop payment order because the contractual obligations had not
been respected. The accused was aware that the bill of exchange had matured by then,
and Scion Dealers could have been approached for payment. The cheque was merely a
collateral security, in case of absolute inability of Scion Dealers to pay. No such
inability can be made out from the facts of the case. Therefore, in view that the
26

Vinod Kumar Gupta v. Jai Paul, 2008 Indlaw JK 94.

27

Modi Cement Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249.

28

Bhagwathy Prasad Aggarwal v. Thriveni Glass House (2004) 3 JCC (NI) 219 Ker.

29

R Vadivelu v. M/s Sakthi Asphalts and Pelts (2003) 1 JCC (NI) 105 Mad.
xvii

complainant would present the bill of exchange for payment, the accused issued a
stop-payment order. As this is a valid cause for stoppage of payment, Section 138
cannot apply.

iv. The matter can be settled amicably without attracting penal

provisions.
It is one of the distinct features of Section 138 that it is compoundable in nature.
Where the complainant being present before the Court submits before the Court that
the accused has paid him the money covered by the cheque, it would be appropriate to
allow the parties to compound, rather than negating such a request, and proceeding to
inflict the sentence on the accused. 30 Particularly when there is no prohibition against
compounding, any rejection of a request in that regard would not further the cause of
justice, and particularly where the commission of offence is not related to the society
at large, but only against a particular person, i.e., the complainant to whom a certain
sum is due under the cheque.31
Therefore, as there was no dishonour of cheque under Section 138 and the accused is
not denying the payment, the counsel for the accused proposes that the matter be
settled amicably. The complainants are free to approach Scion Dealers for the
payment of the bill of exchange, which was not done appropriately the first time, as it
has matured as of today. Only upon inability of Scion Dealers to pay the amount can
the complainant approach the accused again. As for now, an amicable settlement can
be initiated, where the complainants can get their payment from Scion Dealers.

30

Kishor Kumar v. J.K Corp. Ltd. (2004) 13 SCC 494; K.J.L.B. Rama Reddy v.

Annapurua Seeds (2005) 10 SCC 632.

31

M. Rangaswamiah v. R. Shettappa 2002 Cr. L. J. 4792 (Karn.).

xviii

xix

PRAYER
In light of the facts stated, issued raised, arguments advanced and authorities cited, it
is most humbly and respectfully prayed before this learned District Court to:

Dismiss the criminal proceeding.

And pass any such order which the learned Court may deem fit in the eyes of equity,
justice and good conscience.

All of which is most humbly and respectfully, submitted.

Date: 17th April 2014

S/d:

Place: Jammu

(Counsel for the Accused)