NI Act Allows Filing Of Cheque Dishonour Complaint At Place Of Payee Bank; Accused Can't Seek Transfer Citing Inconvenience: Supreme Court

The Supreme Court today (March 6) ruled that a cheque dishonor complaint under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), should be filed in the court having jurisdiction over the branch of the bank where the payee maintains an account i.e., where the cheque is presented for collection.

Taking reference to Section 142(2) introduced via the 2015 amendment to the NI Act, the Court clarified that the jurisdiction to adjudicate upon the cheque dishonor complaint lies with the court where the branch of the bank (where the payee maintains the account) is located. The 2015 amendment was brought in by the Parliament to address the confusion created by the Supreme Court's judgment in Dasrath Rupsingh Rathod v State of Maharashtra (2014) which held that the jurisdiction for cases under Section 138 is determined by the place of the bank where the cheque was drawn.

“A conjoint reading of Section 142(2)(a) along with the explanation thereof, makes the position emphatically clear that, when a cheque is delivered or issued to a person with liberty to present the cheque for collection at any branch of the bank where the payee or holder in due course, as the case may be, maintains the account then, the cheque shall be deemed to have been delivered or issued to the branch of the bank, in which, the payee or holder in due course, as the case may be, maintains the account, and the court of the place where such cheque was presented for collection, will have the jurisdiction to entertain the complaint alleging the commission of offence punishable under Section 138 of the N.I. Act. In that view of the position of law, the word 'delivered' used in Section 142(2)(a) of the N.I. Act has no significance. What is of significance is the expression 'for collection through an account'. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the said place is decisive to determine the question of jurisdiction.”, the court observed.

The bench comprising Justice JB Pardiwala and Justice R Mahadevan decided a transfer petition (criminal) where the Appellant sought the transfer of the cheque dishonor case from Chandigarh to Coimbatore, contending that the entire transaction occurred in Coimbatore, and thus, the Chandigarh court lacked jurisdiction.

Rejecting the petitioner's argument that the entire transaction occurred in Coimbatore, the Court stated that the law allows the complainant to file the complaint at the place where the cheque is presented for collection.

Since the cheque was presented for collection at the Chandigarh branch of the respondent bank, the court clarified that the cause of action for a complaint under Section 138 of the N.I. Act arises where the cheque is presented for collection, which gave the Chandigarh court jurisdiction to adjudicate the complaint.

“The strong assertion on the part of the petitioner that no part of the cause of action could be said to have arisen within Chandigarh, is of no avail to them, more particularly when the law itself allows the institution of a complaint in Chandigarh. The enactment of sub-section (2)(a) of Section 142 of the N.I. Act and the Explanation thereto allows the complainant to file a complaint before the courts within whose jurisdiction the collection branch of the bank falls. In the present case, while contending that the court in Chandigarh lack the jurisdiction to entertain the case, it is not the case of the petitioner that the respondent Bank has no collection branch in Chandigarh.” the judgment authored by Justice Pardiwala observed.

When the Courts in Chandigarh has jurisdiction, the petitioner's arguments of incovenience in travelling from Coimbatore to Chennai cannot be ground to transfer the trial as per Section 406 CrPC.

Note

It is worthwhile to mention that a batch of similar transfer petitions with the lead petition titled Kedar Bhausaheb Malhari vs. Axis Bank Limited is also pending for the Court's consideration, where the Court is set to consider whether it can transfer a cheque dishonor complaint to the jurisdiction of a Court where the drawer's bank is situated when it is specifically barred by the amended NI Act? 

Last year, the bench led by Justice CT Ravikumar (now Retd.) suo moto impleaded the Union of India as a party to the proceedings, considering the importance of the matter as it involves the interpretation of Section 142(2) of the NI Act, introduced via the 2015 amendment to NI Act. Senior Advocate Siddharth Lutha, who was appointed as Amicus Curiae in the case, submitted that the 2015 amendment to Section 142A of the NI Act violates Articles 14 & 21 of the constitution as it won't provide equal access to justice to the drawer of the cheque (accused) to defend himself without any hardship which is against his right to get a fair trial.

Mr. Luthra argued that the amendment unfairly favors the complainant by allowing them to file cases where they maintain a bank account, creating hardship for the accused, who must defend themselves in multiple jurisdictions. He warned of potential misuse, as the amendment lacks clarity on whether the payee's account existed at the time of issuance, enabling complainants to manipulate jurisdiction by opening accounts strategically.

Since the Court in the present case held that the complaint would be filed before the Court where the payee maintains the bank account, it would be interesting to witness what interpretation of Section 142(2) of NI Act the Court would make in Kedar Bharsaheb Malhari's case i.e., whether the transfer of complaints be allowed to the jurisdiction where the drawer's bank is situated when it is specifically barred by the amended NI Act.

Also From Judgment: S.138 NI Act Complaint Cannot Be Transferred Under S.406 CrPC For Lack Of Territorial Jurisdiction : Supreme Court

When Can Criminal Trial Be Transferred From One State Under S.406 CrPC? Supreme Court Explains

Case Details: M/S SHRI SENDHURAGRO AND OIL INDUSTRIES PRANAB PRAKASH v. KOTAK MAHINDRA BANK LTD.|1503 T.P.(Crl.) No. 608/2024 and others

Citation : 2025 LiveLaw (SC) 292

Click here to read the judgment