The Supreme Court of India has clarified that complaints regarding cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) must be filed in the court having jurisdiction over the branch of the bank where the payee maintains their account. This means that the location where the cheque is presented for collection determines the jurisdiction for filing the complaint. The Court also ruled that the accused cannot seek the transfer of such cases to another jurisdiction merely citing inconvenience.
The judgment was delivered by a bench comprising Justice JB Pardiwala and Justice R Mahadevan on March 6, 2025, in response to a transfer petition filed by M/s Shri Sendhuragro and Oil Industries. The petitioner had sought to transfer a cheque dishonour case from Chandigarh to Coimbatore, arguing that the entire transaction had taken place in Coimbatore, and thus, the Chandigarh court lacked jurisdiction.
Jurisdiction under Section 142(2) of the NI Act: The Court emphasized that the 2015 amendment to the NI Act introduced Section 142(2), which clearly states that the jurisdiction for cheque dishonour cases lies with the court where the payee’s bank branch is located. This amendment was brought in to address the confusion created by the Supreme Court’s earlier judgment in Dashrath Rupsingh Rathod v. State of Maharashtra (2014), which had held that the jurisdiction for such cases is determined by the place where the cheque was drawn.
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Cause of Action: The Court clarified that the cause of action for a complaint under Section 138 of the NI Act arises where the cheque is presented for collection. In this case, since the cheque was presented at the Chandigarh branch of the respondent bank, the Chandigarh court had the jurisdiction to adjudicate the complaint.
Rejection of Transfer Petition: The petitioner’s argument that the entire transaction occurred in Coimbatore was rejected. The Court stated that the law allows the complainant to file the complaint at the place where the cheque is presented for collection. The petitioner’s inconvenience in travelling from Coimbatore to Chandigarh was not considered a valid ground for transferring the case under Section 406 of the Criminal Procedure Code (CrPC).
“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.”
The Court further observed that the word ‘delivered’ in Section 142(2)(a) of the NI Act is not significant. What matters is the expression ‘for collection through an account’, which means that the place where the cheque is presented for collection is decisive in determining jurisdiction.
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Implications of the Judgment:
- Clarity on Jurisdiction: The judgment provides much-needed clarity on where cheque dishonour complaints should be filed, ensuring that complainants do not face unnecessary hurdles in pursuing legal action.
- No Transfer for Convenience: The ruling makes it clear that accused individuals cannot seek the transfer of cases to another jurisdiction merely because it is inconvenient for them to attend court proceedings in the jurisdiction where the complaint was filed.
- Fair Trial: The Court emphasized that the right to a fair trial does not include the convenience of the accused. The law allows the complainant to choose the jurisdiction based on where the cheque was presented for collection, and this choice cannot be overridden by the accused’s inconvenience.
Pending Cases:
The Supreme Court’s ruling in this case is particularly significant in light of another pending case, Kedar Bhausaheb Malhari vs. Axis Bank Limited, where the Court is set to consider whether a cheque dishonour complaint can be transferred to the jurisdiction where the drawer’s bank is situated, even though the amended NI Act specifically bars such transfers. This case raises important questions about the balance between the rights of the complainant and the accused, and the potential for misuse of the law.
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
