Supreme Court: While considering this petition wherein the issue was whether after the enactment of the Negotiable Instruments (Amendment) Act, 2015 (Amendment Act, 2015), the court within whose local jurisdiction the drawee bank is situated, has the jurisdiction to try a complaint under Section 138; the Division Bench of J.B. Pardiwala* and R. Mahadevan, JJ., held that jurisdiction to try a complaint filed under Section 138 in respect of a cheque delivered for collection through an account, i.e., an account payee cheque, is vested in the court within whose local jurisdiction the branch of the bank in which the payee maintains the account, i.e., the payee’s home branch, is situated.
Background:
A cheque for Rs. 19,94,996 was drawn by the accused company (petitioner herein) through its directors, against an invoice generated by the complainant (respondent herein), dated 23-03-2014. The cheque was drawn on the State Bank of Bikaner and Jaipur, Kolkata and the same was deposited by the complainant on 19-06-2014 in its account maintained with the State Bank of India, Bhopal branch.
The cheque, however, came to be dishonoured due to insufficiency of funds on 20.06.2025 pursuant to which, the complainant issued the statutory notice dated 11.07.2014 to all the accused persons through registered speed post A/D, demanding that the sum of Rs. 19,94,996 be paid within a period of 15 days as prescribed under Section 138 of the Act, 1881 in lieu of the dishonoured cheque. The said notice was delivered on 14-07-2014. The accused company took the defence that the said cheque had been issued as a ‘Security Deposit’ and not in discharge of any enforceable debt. As a result, the complainant company filed the case in the court of the Metropolitan Magistrate, Kolkata (the “MM, Kolkata”) on 16-08-2014. Consequently, the MM, Kolkata proceeded to frame charge to which the accused persons pleaded not guilty and claimed to be tried. The affidavit of evidence-in- chief of the complainant company’s officer was taken on record by the MM, Kolkata.
While the case was pending before the MM, Kolkata, the Government enacted the Amendment Act, 2015 on 26-12-2015. In accordance with the terms of the amendment to the Act, 1881, more particularly, Section 142 thereof, the territorial jurisdiction for prosecution and trial of cases registered under Section 138 was stipulated to be at the place where the payee or holder maintains his bank account. In this case, the payee, i.e., the complainant company maintained its bank account with the State Bank of India, Bhopal branch.
Upon request made by the complainant company, the MM, Kolkata returned the complaint observing that it lacked the jurisdiction to conduct trial for the case in hand and allowed the complainant to present the matter before the court of competent jurisdiction. The complainant company got the complaint for dishonour of cheque registered in the court of the Judicial Magistrate First Class, Bhopal (the “JMFC, Bhopal”). The accused company raised an objection as regards the territorial jurisdiction of the JMFC, Bhopal to try the offence relying on the provisions of the CrPC. However, the said objections were rejected by the JMFC, Bhopal. The same was then challenged by the accused persons vide Criminal Revision before the Sessions Court, Bhopal which is still pending adjudication.
Issues Framed:
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Whether after the enactment of the Amendment Act, 2015, the court within whose local jurisdiction the drawee bank is situated, has the jurisdiction to try a complaint under Section 138?
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Whether after the enactment of the Amendment Act, 2015, a complaint under Section 138 of the Act, 1881 can be transferred to the court within whose local jurisdiction the drawee bank is situated, if the recording of evidence under Section 145 has already commenced in the said court?
Court’s Assessment:
Perusing the case, the Court firstly clarified that position of law as regards jurisdiction of courts prior to the Amendment Act, 2015. The Court stated that the issue relating to territorial jurisdiction was quite complex.
Relying on relevant precedents, it was stated that the Court used to view the question of jurisdiction strictly from the lens of ‘territoriality of offences’. In other words, the payee could not select the jurisdiction for trial of an offence under Section 138 by presentation of the cheque at a location of his choosing. Though the presentation of cheque at any branch of the payee’s bank is permitted by the NI Act for the purposes of commercial convenience, yet it could not be said that such act of presentation confers jurisdiction on the court within whose territorial jurisdiction the said bank branch may be situated. Since an offence under Section 138 could be said to be committed upon dishonour of cheque by the drawee bank, it was held that such offence would be localised at the place where the drawee bank is situated. Therefore, only the court within whose territorial jurisdiction the drawee bank is situated, was empowered to proceed against an accused person under Section 138.
On the question of position of law as regards jurisdiction of courts after the enactment of the Amendment Act, 2015, the Court noted that bare textual reading of the amended Section 142 indicates that the jurisdiction to try the offence under Section 138 has been specified in two circumstances: first, when the cheque is delivered for collection through an account, and secondly, when the cheque is presented for payment otherwise through an account. It was noted that the Explanation to Section 142(2)(a) further clarifies the question of jurisdiction by taking into account the realities of negotiating by way of cheques and the technological advancement in the field. “However, this Court as well as the High Courts have been divided over the conjoint reading of Section 142(2)(a) and the Explanation thereto”.
The Court pointed out that the “making” of a cheque is complete only upon delivery of the same by the drawer. The act of “delivery” thus, creates a relationship between the drawer and the payee. Such relationship is what describes the entitlement of the payee to the amount of money for which the cheque is drawn and enables the payee to encash the same. Perusing Section 142(2)(a), the Court opined that terms “delivered” and “for collection through an account” are to be read in such a manner that the latter describes the nature of delivery. Therefore, the nature of the cheque becomes crystallized as an account payee cheque once the drawer delivers it to the payee who further delivers it to the bank in which he maintains his account. Once the cheque is delivered by the payee to his bank, the “making” of the cheque is said to be complete. The inclusion of the expression “for collection through an account” in Section 142(2)(a) is only to indicate the intention of the drawer to “make” the cheque in such a manner that it can only result in a transaction between the bank accounts of the drawer and the payee.
Presentment is the stage that immediately succeeds “delivery”. It stipulates that a cheque must be presented for payment to the maker of such cheque (the drawer) or the person to whom directions are given to pay the amount specified in the cheque (the drawee). Such presentment must be by or on behalf of the payee. Therefore, presentment creates a relationship between the drawee bank and the payee (in case of an account bearer cheque) or the payee’s bank (in case of an account payee cheque).
The Court clarified that presentment under Section 64 of the Act, 1881 and presenting of cheque by the payee to his bank are two distinct acts. The presentation of cheque by a payee to the payee’s bank is included in the concept of “delivery” defined under Section 46 of the Act, 1881. It is nothing but an extension of delivery in the case of non-transferable account payee cheques. The jurisdiction in such cases has been anchored by Section 142(2)(a) at the place where branch of the bank in which the payee maintains an account is situated.
The Court pointed out that what Section 138 describes by use of the expression “on an account maintained by him with a banker” is a simpliciter relationship between a person and his banker. the inclusion of “branch” in Sections 142(2)(a) and (b) places an additional condition for determining the place where the payee or drawer maintains the account. This additional condition is placed on the relationship between a person and his banker, in order to decide the question of jurisdiction and streamline the process of adjudication. In other words, for deciding jurisdiction, it is not sufficient to establish whether a person maintains an account in a particular bank. It is necessary to also ascertain the specific branch of the bank in which he maintains the account to completely and unambiguously decide the said question.
The Court pointed out that once it is identified that the cheque in question is an account payee cheque, the delivery must be to such branch in which the payee maintains the account as it is this branch of the bank that will receive the funds in the account maintained by the payee, from the drawee bank which will debit the drawer’s account to send such amount. However, the necessity of delivery of an account payee cheque to the home branch is only legal and not commercial. It is to address commercial exigencies that the legislature enacted the Explanation to Section 142(2)(a). The deeming fiction in the Explanation ensures that even if a cheque is delivered to a branch other than the home branch for commercial convenience, it shall be considered to have been delivered to the home branch for the legal purpose of determining jurisdiction.
Thus, with the afore-stated assessment, the Court clarified the position on territorial jurisdiction to try complaint under Section 138 NI Act vis-a-vis account payee cheque. On the issue that whether after the enactment of Amendment Act, 2015, a complaint under Section 138 of the Act, 1881 can be transferred to the court within whose local jurisdiction the drawee bank is situated, if the recording of evidence under Section 145 has already commenced in the said court; relying on Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, the Court opined that allowing the parties to contest the complaint afresh before the JMFC, Bhopal would amount to a procedural impropriety that may prove to be detrimental to the case of the accused.
Therefore, the Court directed that that the instant case be transferred to the jurisdiction of MM, Kolkata and the proceedings be resumed from the stage before the order of return of complaint dated 28-07-2016.
[Jai Balaji Industries Ltd. v. HEG Ltd., TRANSFER PETITION (CRL.) NO. 1099 OF 2025, decided on 28-11-2025]
*Judgment by Justice J.B. Pardiwala
Advocates who appeared in this case:
For Petitioner(s): Mr. Ramaswamy Meyappan, Adv. Mr. Kaustubh Shukla, AOR Mr. Praveen Kumar Singh, Adv. Ms. Pushpanjali Singh, Adv. Mr. Ramaswamy Ayappan, Adv. Mr. Kaustubh Shukla, AOR