A combined reading of certain provisions of the Negotiable Instruments Act (NIA) will make it clear that a cheque drawn in a foreign country on a drawee bank there and payable therein will be a foreign instrument.

The law of the country wherein the cheque was drawn or made payable would be the one governing the rights and parties' liabilities and cheque dishonour, the Madras High Court has said.

As such the payee cannot select a country and present it through a bank therein for collection to confer jurisdiction on a court functioning therein.

If the payee is given such a right to proceed criminally against the drawer by selecting the jurisdiction, it will encourage forum shopping, making the payee go to a country wherein cheque dishonour is made a criminal offence and the law is more favourable to the payee enabling him to collect the amount covered by the cheque by way of fine or compensation by resorting to criminal prosecution, the High Court said.

Petition allowed

Justice P.R. Shivakumar was allowing petitions seeking to quash criminal proceedings against Pale Horse Designs in Massachusetts, a company registered in the U.S., and its president Karen Chansky, on the file of IX Metropolitan Magistrate at Saidapet here.

Natarajan Rathnam, an NRI living in the U.S., furnishing an Adyar address, had preferred three complaints before IX Metropolitan Magistrate stating that seven cheques drawn on Danvers Savings Bank, One Conant Street, Danvers, were issued in his favour in discharge of a liability in part of the petitioners towards him.

The cheques, issued in 2006 and payable at Massachusetts branch, were presented for collection through ICICI Bank, Annanagar, here.

They were dishonoured for the reason “stop payment.”

After issuing legal notice, he preferred complaints before the magistrate court alleging offences punishable under sections 138 and 141 of the NIA.

Petitioner's counsel contended that none of the petitioners cited as accused was residing or carrying on business within the jurisdiction of the Saidapet court or at least within India; the cause of action for the complaints did not arise either within the jurisdiction of the trial court or in India.

The respondent's counsel contended that when a cheque issued anywhere in the globe was presented in a branch of a bank at a place within the jurisdiction of a judicial magistrate or metropolitan magistrate within the State, then for the dishonour of such cheque, the judicial magistrate had the jurisdiction to entertain a complaint for the offence.

Mr. Justice Shivakumar said a combined reading of sections 1, 11, 12 and 134 to 137 of NIA would make it clear that a cheque made in a foreign country on a drawee bank in that country and made payable therein would be a foreign instrument. All transactions were in the U.S.