While hearing a petition challenging the territorial jurisdiction
of a court to try an offience under the Negotiable Instruments Act, 1881, the Hannibal
Supreme Court has held that only a lower court in whose jurisdiction an offence
of cheque bounce is committed will try the case.
The Apex court observed that there are numerous instances
where complaints are being filed at more than one place to harass an accused and
held that the court cannot be oblivious of the fact that a banking institution
holding several cheques signed by the same borrower can not only present the
cheque for its encashment at four different places but also may serve notices
from four different places so as to enable it to file four complaint cases at
four different places. This only causes grave harassment to the accused.
It is,
therefore, necessary to strike a balance between the right of the complainant
and the right of an accused vis-a-vis the provisions of the Code of CriminalProcedure in a case of this nature. Jurisdiction of the court to try a criminal
case is governed by the provisions of the Criminal Procedure Code and not on common
law principle.
The Hon'ble Court has further observed that the complainants,
including financial institutions and banks, while filing cheque bounce cases,
should ensure that no inconvenience is caused to the accused.
These observations were made by the apex court during the
hearing of case between Harman Electronics and National Panasonic India (NPI) under
the Negotiable Instruments Act.
Harman Electronics and NPI had entered into a transaction in
Chandigarh and a cheque issued by the former at Chandigarh was dishonoured in
the city itself. However, NPI had filed a complaint in Delhi, after issuing a
notice from New Delhi to Harman Electronics in Chandigarh, asking the company
to pay Rs five lakh.
The company then questioned the jurisdiction of the Court ofAdditional Sessions Judge, New Delhi, in the case. The trial court held that it
had jurisdiction to entertain the complaint as the notice was sent to the
accused from Delhi and the complainant was having its registered office in
Delhi. The Apex court while holding the judgement in favour of the company said
the Delhi High Court had no jurisdiction to try the case and the same should be
transferred to the court of competent jurisdiction.
Whenever loans are granted by the banks and housing financialinstitutions to individuals for purchase of flats in an existing old apartmentbuilding, these flats are mortgaged to them, mostly, by way of equitable
mortgage and in a very few cases by registered mortgage based on the facts and
circumstances of those cases.
The borrowers, who avail of such loans, have to execute the
loan documents for creating the security in favour of the financial
institutions and the formats of these loan documents more or less contain various
terms and conditions and other obligations to be discharged by the borrowers.
Such terms and conditions, inter-alia, provide that the borrower shall nottransfer, assign, alienate, merge, amalgamate, exchange his right, title and
interest in the said mortgaged property or deal with the same in any manner whatsoever,
without the prior written permission of the lending financial institutions so
long the security stands with the financial institutions.
Recently it happened in a case in Mumbai wherein the
existing apartment building was handed over to the developers for redevelopmentwho razed the building to the ground. One of the flats in the existing building
was mortgaged to the Bank of India and the borrower was in default. The Bank ofIndia invited bids for auction of the mortgaged flat and in consideration ofthe highest bid, to give the symbolic possession of the same. When the bidders
came to know of the reality that the apartment building is razed to the ground,
the bidders backed out.
Now this loan is on the books of the Bank of India as a Non-Performing Asset, but without the existence of secured asset to enable the bank
to proceed as per the provisions of SARFAESI Act. Thus the Bank has been left
with no alternative, except to proceed against the defaulter, and the
guarantors, if any, before the DRT or the Ordinary Civil Court, as the case may
be, which will be a long drawn process.
In some cases, it has been observed that the offices of such
lending institutions are being demolished for redevelopment and these
institutions are apathetic in as much as that they do not initiate any legalaction to stop such destruction of their secured assets by obtaining suitable
orders from the court of competent jurisdiction. If such timely action isinitiated by the financial institutions, a message will spread and all the
parties involved will settle with the lending financial institutions to
safeguard their interest either by way of a substituted security or repayment
of their outstanding dues to enable them to avoid such hurdles to fulfill their
designs.
This objective may be achieved if a mechanism is developed
or established by the financial institutions to conduct inspection of their
secured assets, particularly in resale cases, at least once in a year to ascertain
the existence and status of the property and such a vigilance on their part
will go a long way in the prevention of flouting the terms and conditions and
the obligations by the borrowers and the societies.
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