Supreme Court: Jurisdiction To Try Complaint U/S 138 NI Act For A/C Payee Cheque Is Vested In Court Within Whose Local Jurisdiction Payee’s Home Branch Is Situated

The Supreme Court held that the jurisdiction to try a Complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) in respect of an account payee cheque is vested in the Court within whose local jurisdiction the payee’s home branch is situated.

The Court held thus in a batch of Transfer Petitions out of which the leading one sought transfer of the Complaint Case pending before the Judicial Magistrate First Class (JMFC), Bhopal to the Metropolitan Magistrate (MM), Kolkata.

The two-Judge Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan observed, “… it is as clear as a noon day that the 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. Therefore, we find no force in the petitioner’s argument that as per the relevant provisions of the CrPC, the jurisdiction to try the complaint under Section 138 is vested in the court within whose local bounds the drawee bank is situated where the cheque was dishonoured. We say so because the enactment of the Amendment Act, 2015 and the introduction of Section 142(2) thereby, being a special legislation, occupies the field over a general procedural legislation viz. CrPC. Thus, the MM, Kolkata does not have jurisdiction to try the case.”

The Bench said 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.

AOR Kaustubh Shukla, Advocates Pushpanjali Singh, and Gursimrat Kaur appeared for the Petitioners.

Brief Facts

In the lead case, the Petitioner company was the accused, while the other Petitioners were the directors. The Respondent company was the Complainant. A cheque of Rs. 19,94,996/- was drawn by the accused company through its directors, against an invoice generated by the complainant company, dated March 23, 2014. The cheque was drawn by the accused on the State Bank of Bikaner and Jaipur, Kolkata and the same was deposited by the complainant on June 19, 2014 in its account maintained with the State Bank of India, Bhopal branch. The said cheque was dishonoured due to insufficiency of funds, pursuant to which the complainant issued the statutory notice to all the accused persons. They took the defence that the said cheque had been issued as a ‘Security Deposit’ and not in discharge of any enforceable debt.

Resultantly, a Complaint Case was filed before the MM, Kolkata. Upon request made by the complainant company, the MM 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. Hence, the complainant company got the Complaint for dishonour of cheque registered before 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 Code of Criminal Procedure, 1973 (CrPC). However, the said objections were rejected by the JMFC, Bhopal and the same was then challenged by the accused persons vide Criminal Revision before the Sessions Court, Bhopal which was pending adjudication.

Issues for Determination

The following two issues arose before the Court for consideration –

i. 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?

ii. 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 Observations

The Supreme Court in view of first issue, noted, “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, is empowered to proceed against an accused person under Section 138.”

The Court enunciated that the terms “delivered” and “for collection through an account” under Section 142(2)(a) of the NI Act are to be read in such a manner that the latter describes the nature of delivery.

“The plain reading of Section 46 supports this line of argument as the definition contained therein indicates that the making of the cheque is complete upon the act 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”, it added.

The Court said that 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.

“We may with a view to obviate any confusion, clarify at the threshold 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”, it observed.

The Court emphasised that the act of “maintaining an account in a branch” is to enable the primary action of “delivery for collection” and accordingly, the jurisdiction must lie at the place where the primary action was performed, i.e., the branch of the payee’s bank where the cheque was actually delivered for collection, is situated.

“… the understanding of the Explanation in such a manner leads to distorting of the plain language of Section 142(2)(a). This Court, in Dashrath Rupsingh (supra) observed that “the legislature does not ordain with one hand and immediately negate it with the other”. We find the said principle to be of much significance especially while reading explanations attached to the provisions that seek to clarify the operation of such provision. In our considered view, an explanation cannot be raised to such a high pedestal that the provision which it intends to clarify becomes a mere supporting device”, it further noted.

The Court elucidated that a perusal of the Statement of Objects and Reasons to the Negotiable Instruments (Amendment) Act, 2015 indicates that the legislature intended to change the process of determination of jurisdiction for trial of complaints under Section 138.

“The inclusion of Section 142(2) in the Act, 1881, which is a special legislation, meant that the jurisdictional vacuum was filled. The natural consequence of such amendment was that there remained no requirement of approaching the issue of jurisdiction from an ordinary criminal perspective as provided in the CrPC, as was done in Dashrath Rupsingh (supra). However, the Statement of Objects and Reasons gives no indication that the said judgment made erroneous observations about the misuse of the wide ambit of jurisdiction by complainants to the inconvenience of the accused persons”, it remarked.

The Court also said that the necessity of delivery of an account payee cheque to the home branch is only legal and not commercial and 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”, it added.

Conclusion

Moreover, the Court observed that the Petitioner i.e., the accused company in the Complaint instituted by the Respondent-Complainant prayed for transfer of the complaint on the ground that the MM, Kolkata, before returning the complaint, had already reached the stage of recording of evidence under Section 145(2) of the NI Act.

“It is apposite to note that Section 142A of the Act, 1881 provides for transfer of pending cases under Section 138, to the court having jurisdiction in terms of Section 142(2). We are aware that the jurisdiction to try the complaint in the instant case lied exclusively with the JMFC, Bhopal. If the matter had remained pending at the stage prior to the recording of evidence, there would have been no difficulty in accepting the deemed transfer of the complaint under Section 142A(1) to the court of JMFC, Bhopal from the court of MM, Kolkata. However, much water has floated under the bridge”, it enunciated.

The Court was of the view 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.

“In light of the observations in Dashrath Rupsingh (supra) and to meet the ends of justice, we are of the view 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. … we have reached the conclusion that a case has been made out for transfer of the proceedings in question”, it concluded.

Accordingly, the Apex Court allowed the Transfer Petition, disposed of all other connected Petitions, and directed the Registry to forward one copy each of the Judgment to all the High Courts.

Cause Title- Jai Balaji Industries Ltd. and Ors. v. M/s HEG Ltd. (Neutral Citation: 2025 INSC 1362)

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