Section 177 CrPC Not Applicable To NI Act Cases Because Of Section 142(2): Jammu & Kashmir & Ladakh High Court

The Court clarified, “The provisions contained in section 177 of the Cr.P.C. do not apply to cases under Negotiable Instruments Act while determining the territorial jurisdiction of a court because Section 142 of the Negotiable Instruments Act begins with a non obstinate clause and Section 142 (2) uses the expression “only” meaning thereby only those courts which are mentioned in the said sub section will have jurisdiction to entertain the complaint notwithstanding anything contrary provided under the Cr.P.C.”

Advocate Vishal Kapoor represented the Petitioner, while Senior Advocate Sunil Sethi appeared for the Respondent.

Brief Facts

A complaint was filed by the Respondent against the Petitioner before the Trial Court alleging that a cheque for Rs. 60 lakhs was issued by the Petitioner from his account in the discharge of his liability towards the Respondent. The complaint stated that when the cheque was presented by the Respondent for encashment through his banker, it was returned unpaid with the endorsement on the memo “title of account required”. It was further alleged that a legal demand notice was served by the Respondent upon the Petitioner, but in spite of receipt, he failed to repay the cheque amount.

The Trial Court, after going through the preliminary statement of the Respondent by way of an sworn affidavut and the documents annexed with the complaint, framed a prima facie opinion that the offence under Section 138 Negotiable Instruments Act was made out against the Petitioner, and accordingly, by the impugned order, process was issued against the Petitioner. Aggrieved, the Petitioner approached the High Court.

The Petitioner contended that the cheque in question was presented by the Respondent with his bank account maintained with the Noida branch, and, as such, the Trial Court did not have the territorial jurisdiction to entertain the complaint. He further submitted that the Trial Court should not have accepted preliminary evidence of the Respondent by way of an affidavit, and ought to have followed the procedure prescribed under section 200 of the Code of Criminal Procedure (CrPC), to record the statement of the complainant on oath before issuing process against the Petitioner.

The Respondent contended that the Petitioner participated in the proceedings before the Trial Court for two years, without raising any objection with regard to jurisdiction of the Trial Court. He further submitted that during the pendency of the proceedings before the Trial Court, negotiations regarding settlement of the took place, and the Petitioner even liquidated a substantial portion of the cheque amount, thereby acquiescing to the jurisdiction of the Trial Court, and he could not turn around and challenge the same.

Reasoning of the Court

While deciding the issue of whether courts in Jammu would have the territorial jurisdiction to entertain the complaint, the Bench adverted to Section 142(2) of the Negotiable Instruments Act, 1881 (NI Act), and noted that a complaint for offence under Section 138 Negotiable Instruments Act can be inquired into and tried only by the court within whose local jurisdiction a cheque is delivered for collection i.e. the branch of the bank of the payee or the holder in due course or if the cheque is presented for payment otherwise through an account, the location of the branch of the drawee bank where the drawer maintains the account would be determinative of the territorial jurisdiction.

The Court referred to the decision of the Apex Court in Sh. Sendhuragro and Oil Industries v Kotak MahindraBank Limited (2025), where it was held that 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 explained, “From the foregoing analysis of law on the subject, it is clear that inquiry trial or other proceedings in respect of a case under section 138 Negotiable Instruments Act can be held only by a court within whose local jurisdiction the cheque is delivered for collection i.e. the branch of the bank of the payee where the payee or the holder in due course, as the case may be, maintains the account”, holding that the Trial Court in Jammu did not have jurisdiction to entertain the complaint.

The Bench further observed that in the present case, the proceedings before the Trial Court were still at the initial stages and only evidence by way of affidavits had been filed by the complainant, and the witnesses of the complainant are yet to be cross-examined, and it cannot be stated that the Petitioner had by his conduct acquiesced to the jurisdiction of the learned Trial Court. The Bench stated, “…a Court which lacks inherent jurisdiction to entertain a case cannot be vested with jurisdiction by consent of the parties.”

Consequently, the Court allowed the petition, and set aside the order of the Trial Court on the ground of lack of jurisdiction.

Cause Title: Aditya Malhotra Prop. M/s ANN Infrastructure v. Dharminder Singh (CRM(M) No. 967/2022)

Appearance:

Petitioner: Advocate Vishal Kapoor

Respondent: Senior Advocate Sunil Sethi; Advocate Navyug Sethi

Click here to read/download Judgment