Whether system of funds transfer that is RTGS, has expanded concept of “drawee bank” in case of dishonour of cheque?

  From the above clarifications, it would be clear that RTGS 
only   contemplates   transfer   of   funds   from   one   branch   of   the   bank 
where they are actually and physically held to the other branch of the 
bank which has received the cheque for processing and payment of the 

amount thereunder and this transfer of funds must take place within a 
time which is of not more than 30 minutes and if there is no transfer of 
funds   from   the   bank ­branch   where   they   are   actually   and   physically 
held, the payment of the cheque amount cannot be made.   In   other 
words, refusal to transfer funds would be the factor determining what 
is considered as dishonour of cheque by the the Hon'ble Apex Court in 
the judgment in the case of  Dashrath Rupsingh Rathod.  It would then 
follow   that   when   funds   are   not   transferred   for   the   reason   of 
insufficiency of funds, etc. as contemplated under Section 138  of the 
N. I. Act by the drawee or remitting bank (the term used by Reserve 
Bank of India in it's above answer to describe the drawee bank), the 
essential ingredient of dishonour of cheque is fulfilled.  It means that 
dishonour   of   cheque   takes   place   because   of   failure   or   refusal   to 
transfer funds and therefore, it takes place at the place where the bank 
which   so   fails   or   refuses,   which   is   the   “drawee   bank”,   is   situated. 

Therefore, the petitioner cannot be allowed to say that the system of 
funds   transfer,   which   is   RTGS,   has   expanded   the   concept   of   the 
“drawee bank” by making all the branches of the drawee bank as the 
drawee bank themselves in their own right.  Even in the RTGS, there is 
a   transfer   of   funds,   though   through   paper   entries   from   the   drawee 
bank   to   its   another   branch   which   has   accepted   the   cheque   for 
processing and which makes payment on receiving approval or funds 
In this view of the matter, I find neither any illegality nor 

transfer.
arbitrariness in the order impugned herein by which the complaint has 
been returned to the complainant, which  order  has  been passed on 
03/11/2014 by learned Judicial Magistrate, First Class, Nagpur. The 
writ petition deserves to be dismissed.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
CRIMINAL WRIT PETITION NO. 951 OF 2014
Smt. Sangita wd/o Ajay Shah

.. Versus ..

  
 Judicial Magistrate, First Class..
(deleted vide order dtd. 5/12/2014).
 Sukrant s/o Harilal Shah,


 CORAM :  S. B. SHUKRE, J.
 DATED  :  13th JANUARY, 2015.



2. Leave   to   amend   paragraph   No.13,   after   accepting 
unconditional apology tendered by learned Counsel for the petitioner, 
is granted.  He states that the contentions made therein are absolutely 
unintentional and without really meaning what is mentioned therein. 

Accordingly, the portion starting from the words, “But it is mentioned  
therein.....   to   the   last   line   ending   with   the   words,   “....and   illogical  
interpretation” are permitted to be deleted.  Amendment to be carried 
out forthwith.
3. Heard.
4. Rule.   Rule  made  returnable  forthwith.    Heard finally  by 
The whole crux of the issue involved in this case is about 

5.
consent.
understanding of the concept of “the drawee bank”.   In the case of 
Dashrath   Rupsingh   Rathod   Vs.   State   of   Maharashtra   and   another 
(Criminal Appeal No. 2287 of 2009) the Hon'ble Apex Court has held 
that   it   is   the   Court   within   whose   territorial   jurisdiction   the   drawee 
bank has dishonoured the cheque which has jurisdiction to deal with 
the complaint filed under Section 138 of the Negotiable Instruments 
Act.
6.
According to learned Counsel for the petitioner, the concept 
of the drawee bank has been enlarged after the advent of Real Time 
Gross   Settlement   (RTGS)   system.     He   submits   that  this   is   a   system 
wherein payments are made to the payee of the cheques by any of the 
branches of the same bank on one of whose branches the cheque is 
drawn, across the country whenever they are presented to any of those 
branches and, therefore, any or all of these branches of the bank, for 

the purposes of Section 138 of the Negotiable Instruments Act, 1881 
(hereinafter called N. I. Act) offence, can be called as the drawee bank. 
This   contention   has   been   opposed   by   learned   Counsel   for   the 
respondent,   Shri   Daga,   who   submits   that   RTGS   system   is   only   the 
system for expediting payment of amounts of cheque which does not 
expand the concept of “drawee bank” and nothing more.  
In   support   of   his   contentions,   learned   Counsel   for   the 
7.

petitioner has produced before the Court the answers given by Reserve 
Bank of India to various queries made in relation to the doubts arising 
from RTGS system.  Copy of these answers is taken on record and for 
the purpose of identification, it is marked as document 'X'.  On perusal 
of the answers given by Reserve Bank of India, it becomes quite clear, 
as rightly submitted by learned Counsel for the respondent, that the 
system called as RTGS is really a system meant for facilitating speedy 
payment of amounts of the cheque by reducing to minimum the time 
taken for processing of cheque and it has got nothing to do with, which 
is the drawee bank and which is not.   In conventional processing of 
cheques, considerable time is spent on obtaining instructions regarding 
payment or otherwise from the branch of the Bank on which cheque is 
drawn and where the funds are physically lodged. This processing time 
is   saved   in   RTGS   mode   of   payment   by   taking   resort   to   modern 
technology which has, through web­world or internet, made it possible 

to quickly access information including information contained in Bank 
accounts   under   certain   conditions.   At   this   juncture,   it   must   be 
understood that there is a difference between processing of cheque for 
the   purpose   of   making   payment   and  giving   nod   or   approval   to   the 
processing   branch   for   payment.   The   branch   which   processes   the 
cheque in the sense obtains approval for payment of the branch where 
funds are actually and physically held and makes the payment can only 

be called as the processing or facilitator branch.  Such branch cannot 
be called as the “dawee” within the meaning of Section 7, N. I. Act, 
which defines the term “drawee” as the person directed under the bill 
of exchange or cheque by it's maker to pay.   Such a direction can be 
given and is given only to the branch where the account is actually 
opened and maintained and funds are physically held.  If this were not 
true, there would be no need to seek transfer of funds by processing 
branch   to   it   from   the   branch   where   the   drawer   of   the   cheque   has 
maintained   a   physical   account.     Therefore,   there   can   be   only   one 
drawee  bank and not several  and when  the  RTGS cheques  bear  an 
endorsement “payable at all our branches” it   only means “payment 
instructions expedited” enabling receipt thereof immediately.  Such an 
endorsement, however, cannot be seen as a direction independently 
made, de­hors the branch, where funds are physically available, to the 
processing branch to pay.  All these conclusions can be seen as arising 

logically from the clarifications given by the Reserve Bank of India of 
which judicial notice can be taken and is taken  They are discussed in 
8.
subsequent paragraphs.
In the answer to question No.1, the Reserve Bank of India 
has made it clear that 'Real Time' means the time taken for processing 
of instructions at the time they are received rather than at some later 
time and “Gross Settlement” means the settlement of funds transfer 

instructions which occurs individually on an instruction to instruction 
basis.  It is also made clear that cheques are immediately processed by 
the branch to which they are presented because of the fact that funds 
are to be settled only in the books of the Reserve Bank of India.  There 
is a question No.4 which also broadly indicates the nature of system 
called RTGS. Answer to this question further makes it clear that what 
is contemplated under RTGS is only transfer of funds by the drawee 
bank where they are actually and physically maintained to the other 
branch of the bank which has received the cheque for making payment 
of the amount thereunder.   The question and answer thereto read as 
under.:
“Q4. What is the time taken for effecting funds transfer 
from one   account to another under RTGS?
Ans.   Under   normal   circumstances   the   beneficiary 
branches are expected to receive the funds in real time as 

soon as funds are transferred by the remitting bank.  The 
beneficiary  bank has  to  credit  the   beneficiary's  account 
within   30   minutes   of   receiving   the   funds   transfer 
message.”
9.
From the above clarifications, it would be clear that RTGS 
only   contemplates   transfer   of   funds   from   one   branch   of   the   bank 
where they are actually and physically held to the other branch of the 
bank which has received the cheque for processing and payment of the 

amount thereunder and this transfer of funds must take place within a 
time which is of not more than 30 minutes and if there is no transfer of 
funds   from   the   bank­branch   where   they   are   actually   and   physically 
held, the payment of the cheque amount cannot be made.   In   other 
words, refusal to transfer funds would be the factor determining what 
is considered as dishonour of cheque by the the Hon'ble Apex Court in 
the judgment in the case of  Dashrath Rupsingh Rathod.  It would then 
follow   that   when   funds   are   not   transferred   for   the   reason   of 
insufficiency of funds, etc. as contemplated under Section 138  of the 
N. I. Act by the drawee or remitting bank (the term used by Reserve 
Bank of India in it's above answer to describe the drawee bank), the 
essential ingredient of dishonour of cheque is fulfilled.  It means that 
dishonour   of   cheque   takes   place   because   of   failure   or   refusal   to 
transfer funds and therefore, it takes place at the place where the bank 
which   so   fails   or   refuses,   which   is   the   “drawee   bank”,   is   situated. 

Therefore, the petitioner cannot be allowed to say that the system of 
funds   transfer,   which   is   RTGS,   has   expanded   the   concept   of   the 
“drawee bank” by making all the branches of the drawee bank as the 
drawee bank themselves in their own right.  Even in the RTGS, there is 
a   transfer   of   funds,   though   through   paper   entries   from   the   drawee 
bank   to   its   another   branch   which   has   accepted   the   cheque   for 
processing and which makes payment on receiving approval or funds 
In this view of the matter, I find neither any illegality nor 
10.

transfer.
arbitrariness in the order impugned herein by which the complaint has 
been returned to the complainant, which  order  has  been passed on 
03/11/2014 by learned Judicial Magistrate, First Class, Nagpur. The 
writ petition deserves to be dismissed.
Interim stay granted by this Court on 19/11/2014, at the 
request of learned Counsel for the petitioner, is extended by ten days 
to enable the petitioner to resort to appropriate remedy in law. 
The writ petition stands dismissed.
Rule is discharged. 
    
                                                                      
JUDGE