After 2015 Amendment, it is (only) the place where the Payee-Bank (Bank in which the Payee Presents the Cheque for ‘Collection’) is situated.

Saji Koduvath, Advocate, Kottayam.

1. Key Takeaways

• 1. Before the Negotiable Instruments (Amendment) Act, 2015 (Act 26 of 2015), there was no specific legislative commandment in the NI Act, as to territorial jurisdiction of courts for filing a complaint. Therefore, it was taken as the court (or courts) within whose territorial jurisdiction the offence was committed.
• 2. The Supreme Court held  Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519, that the jurisdiction for filing of complaints was ‘restricted to the location where the cheque was dishonoured, i.e., cheque was returned unpaid by the bank on which it was drawn (or, drawee bank – the Bank that is directed, by the drawer, to pay).
• 3. By the amendment of 2015, the dictum in Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519, was overturned – Section 142 has been re-numbered as Sub-section (1) and Sub-section (2) has been inserted (which specified the territorial jurisdiction of the court).
  • The dictum of the Supreme Court in Dashrath Rupsingh Rathod case has been “legislatively overruled”*^* by an amendment to the Negotiable Instruments Act, in 2015
    • *^{*(as observed in  P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd: (2021) 6 SCC 325 – RF Nariman, J.)}
• 4. After the 2015 amendment (after inserting Sub-section – 2) the territorial jurisdiction is limited to the Payee-Bank
• The amendment stands as under:
  • “(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction –
  • (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or
  • (b) if the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.
• 5. Section 142(2)(b) Simplified
  • The words ‘otherwise through an account‘ requires explanation.
• It can be simplified as under:
  • if the cheque is presented for payment by the payee or holder in due course directly^#– otherwise through an account – in the bank of the drawer, (the proper court is that within whose local jurisdiction) the branch of the drawee bank where the drawer maintains the account, is situated.
    • ^{#E.g. (i) a bearer cheque (contra-distinct to account-payee cheque), presented directly in the drawee Bank, “over the counter” (Brijendra Enterprise v. State of Gujarat, 2016(3) Guj LH 143; Mahendra Kumar Kedarnath Modi v. State of Gujarat, 2018 (1) Guj LH 288; 2018 (2) Crimes 441).}
    • ^{E.g. (ii) Using Kiosk Banking facility – Reserve Bank of India introduced the system of Kiosk Banking under which specified persons can avail  the banking facilities like cheque transfers, money transfers, balance inquiries, cash deposits, remittances etc., similar to that of ATM/CDM facility (See: Mahendra Kumar Agarwal v. The State of West Bengal, 2021 Cr LJ 3889; 2022-3 BC 135).}
• 6. The decision in Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519^#, was “legislatively overruled” by the amendment of 2015.^#* It is done within the ‘shortest‘ (?) time for ensuring “a fair trial“.
  • ^{#(rendered “keeping in perspective the hardship that … will continue to bear on alleged accused/respondents who may have to travel long distances in conducting their defence”)}
  • ^{#*(with the object of addressing “the difficulties faced by the payee or the lender of the money in filing the case under Section 138 of the said Act”, and “it is expected that the proposed amendments to the Negotiable Instruments Act, 1881 would help in ensuring that a fair trial of cases under Section 138 of the said Act is conducted ….”)}

2. Section 142 of the N I Act, after 2015 Amendment, reads as under:.

• “142. Cognizance of offences.—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),—
• no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;
•  (b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138:
• Provided that the cognizance of a complaint may be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such period.
• (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138.
• “(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,—
• (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or
• (b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.
• Explanation— For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.”

3. Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519

The Supreme Court, in Dashrath Rupsingh Rathod v. State of Maharashtra, AIR 2014 SC 3519, (T.S. Thakur, Vikramajit Sen, C. Nagappan, JJ.) held that the jurisdiction of the court in matters where the cheque is returned unpaid was ‘restricted to the location where the cheque was dishonoured, i.e., cheque was returned unpaid by the bank on which it was drawn’. It observed further as under:-

• “20. We are quite alive to the magnitude of the impact that the present decision shall have to possibly lakhs of cases pending in various Courts spanning across the country. One approach could be to declare that this judgment will have only prospective pertinence, i.e. applicability to complaints that may be filed after this pronouncement. However, keeping in perspective the hardship that this will continue to bear on alleged accused/respondents who may have to travel long distances in conducting their defence, and also mindful of the legal implications of proceedings being permitted to continue in a Court devoid of jurisdiction, this recourse in entirety does not commend itself to us. Consequent on considerable consideration we think it expedient to direct that only those cases where, post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in Section 145(2) of the Negotiable Instruments Act, 1881, will proceeding continue at that place. To clarify, regardless of whether evidence has been led before the Magistrate at the pre- summoning stage, either by affidavit or by oral statement, the complaint will be maintainable only at the place where the cheque stands dishonoured. To obviate and eradicate any legal complications, the category of complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the Court ordinarily possessing territorial jurisdiction, as now clarified, to the Court where it is those where the accused/respondent has not been properly served) shall be returned to the complainant for filing in the proper Court, in consonance with our exposition of the law. If such complaints are filed/refiled within thirty days of their return, they shall be deemed to have been filed within the time prescribed by law, unless the initial or prior filing was itself time barred.”

4. Legislative Overruling

In P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd: (2021) 6 SCC 325 (Rohinton Fali Nariman, B.R. Gavai, JJ.) it is held as under:

• “49. In Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, a three-Judge Bench of this Court answered the question as to whether the territorial jurisdiction for filing of cheque dishonour complaints is restricted to the court within whose territorial jurisdiction the offence is committed, which is the location where the cheque is dishonoured, i.e., returned unpaid by the bank on which it is drawn. This judgment has been legislatively overruled by Section 142(2) of the Negotiable Instruments Act set out hereinabove.” 

Read Blogs:

• Sec. 138 NI Act (Cheque) Cases: Presumption of Consideration u/s. 118 – Even if ‘Signed-Blank-Cheque’, No Burden on Complainant to Prove Consideration
• Suits and Criminal Complaints By and Against a Company
• “Otherwise Through an Account” in Section 142, NI Act
• Cheque Dishonour Case against a Company, Firm or Society