Where to file Cheque Bounce Cases (Jurisdiction of Court – to file NI Act Complaint)?

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

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End Note:

The Prefatory Note of the Bill which lead to Act 26 of 2015 reads as under:

• “Statement of Objects and Reasons – The Negotiable Instruments Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 inserted in the Negotiable Instruments Act, 1881 (hereinafter called the said Act), a new Chapter XVII, comprising Sections 138 to 142 with effect from 1st April, 1989. Section 138 of the said Act provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.
• 2. As Sections 138 to 142 of the said Act were found deficient in dealing with dishonour of cheques, the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, inter alia, amended Sections 138, 141 and 142 and inserted new Sections 143 to 147 in the said Act aimed at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. Punishment provided under Section 138 too was enhanced from one year to two years. These legislative reforms are aimed at encouraging the usage of cheque and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities could be ensured.
• 3. The Supreme Court, in its judgment dated 1st August, 2014, in the case of Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, held that the territorial jurisdiction for dishonour of cheques is restricted to the court within whose local jurisdiction the offence was committed, which in the present context is where the cheque is dishonoured by the bank on which it is drawn. The Supreme Court has directed 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. All other complaints (including 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 exposition of the law, as determined by the Supreme Court.
• 4. Pursuant to the judgment of the Supreme Court, representations have been made to the Government by various stakeholders, including industry associations and financial institutions, expressing concerns about the wide impact this judgment would have on the business interests as it will offer undue protection to defaulters at the expense of the aggrieved complainant; will give a complete go-by to the practice/concept of ‘Payable at Par cheques’ and would ignore the current realities of cheque clearing with the introduction of CTS (Cheque Truncation System) where cheque clearance happens only through scanned image in electronic form and cheques are not physically required to be presented to the issuing branch (drawee bank branch) but are settled between the service branches of the drawee and payee banks; will give rise to multiplicity of cases covering several cheques drawn on bank(s) at different places; and adhering to it is impracticable for a single window agency with customers spread all over India.
• 5. To address the difficulties faced by the payee or the lender of the money in filing the case under Section 138 of the said Act, because of which, large number of cases are stuck, the jurisdiction for offence under Section 138 has been clearly defined. The Negotiable Instruments (Amendment) Bill, 2015 provides for the following, namely-
• (i) filing of cases only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated;
• (ii) stipulating that where a complaint has been filed against the drawer of a cheque in the court having jurisdiction under the new scheme of jurisdiction, all subsequent complaints arising out of Section 138 of the said Act against the same drawer shall be filed before the same court, irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court;
• (iii) stipulating that if more than one prosecution is filed against the same drawer of cheques before different courts, upon the said fact having been brought to the notice of the court, the court shall transfer the case to the court having jurisdiction as per the new scheme of jurisdiction; and
• (iv) amending Explanation I under Section 6 of the said Act relating to the meaning of expression “a cheque in the electronic form”, as the said meaning is found to be deficient because it presumes drawing of a physical cheque, which is not the objective in preparing “a cheque in the electronic form” and inserting a new Explanation III in the said section giving reference of the expressions contained in the Information Technology Act, 2000.
• 6. 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 keeping in view the interests of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonour of cheques.
• 7. The Bill seeks to achieve the above objects.”

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Read in this Cluster:

Civil Procedure Code

• Civil Rights and Jurisdiction of Civil Courts
• Res Judicata and Constructive Res Judicata
• Order II, Rule 2 CPC – Not to Vex Defendants Twice
• Law on Summons to Defendants and Witnesses
• Notice to Produce Documents in Civil Cases
• Production of Documents: Order 11, Rule 14 & Rule 12
• Sec. 91 CPC and Suits Against Wrongful Acts
• Remedies Under Sec. 92 CPC
• Mandatory Injunction – Law and Principles
• INJUNCTION is a ‘Possessory Remedy’ in Indian Law
• Interrogatories: When Court Allows, When Rejects?
• Decree in OI R8 CPC-Suit & Eo-Nomine Parties
• Pecuniary & Subject-Matter Jurisdiction of Civil Courts
• Transfer of Property with Conditions & Contingent Interests
• INJUNCTION is a ‘Possessory Remedy’ in Indian Law
• Doctrine of Substantial Representation in a Suit by or against an Association
• Who are Necessary Parties, Proper Parties and Pro Forma Parties in Suits

Power of attorney

• No Adjudication If Power of Attorney is Sufficiently Stamped
• Notary Attested Power-of-Attorney Sufficient for Registration
• Permission when a Power of Attorney Holder Files Suit

Title, ownership and Possession

• POSSESSION is a Substantive Right in Indian Law
• Adverse Possession: An Evolving Concept
• Adverse Possession: Burden to Plead Sabotaged
• When ‘Possession Follows Title’; ‘Title Follows Possession’?
• Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
• Preemption is a Very Weak Right; For, Property Right is a Constitutional & Human Right
• Transfer of Property with Conditions & Contingent Interests
• INJUNCTION is a ‘Possessory Remedy’ in Indian Law

Principles and Procedure

• Will – Probate and Letters of Administration
• Best Evidence Rule in Indian Law
• Declaration and Injunction
• Pleadings Should be Specific; Why?
• Does Alternate Remedy Bar Civil Suits and Writ Petitions?
• Void, Voidable, Ab Initio Void, and Sham Transactions
• Can Courts Award Interest on Equitable Grounds?
• Natural Justice – Not an Unruly Horse
• ‘Sound-mind’ and ‘Unsound-Mind’
• Can a Party to Suit Examine Opposite Party, as of Right?
• Forfeiture of Earnest Money and Reasonable Compensation
• Doctrine of ‘Right to be Forgotten’ in Indian Law
• Who has to fix Damages in Tort and Contract?
• Admission, Relevancy and Proof
• Relevancy, Admissibility and Proof of Documents
• Proof and Truth of Documents
• Production, Admissibility & Proof Of Documents
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Marking Documents Without Objection – Do Contents Proved
• Substantive Documents, and Documents used for Refreshing Memory and Contradicting 
• Oral Evidence on Contents of Document, Irrelevant

Land Laws/ Transfer of Property Act

• Transfer of Property with Conditions & Contingent Interests
• Vested Remainder and Contingent Remainder
• Vested interest and Contingent Interest
• Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
• Land Acquired Cannot be Returned – Even if it is Not Used for the Purpose Acquired
• ‘Mutation’ by Revenue Authorities will not Confer ‘Title’
• FERA, 1973 And Transfer of Immovable Property by a Foreigner
• Relevant provisions of Kerala Land Reforms Act in a Nutshell
• Government is the OWNER of (Leasehold) Plantation Lands in Kerala.
• Law on SUCCESSION CERTIFICATE and LEGAL HEIRSHIP CERTIFICATE

Evidence Act – General

• Expert Evidence and Appreciation of Evidence
• How to Contradict a Witness under Sec. 145, Evidence Act
• Rules on Burden of proof and Adverse Inference
• Best Evidence Rule in Indian Law
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Significance of Scientific Evidence in Judicial Process
• Polygraphy, Narco Analysis and Brain Mapping Tests
• Sec. 65B
• Sections 65A & 65B, Evidence Act and Arjun Panditrao: in Nutshell
• Sec. 65B, Evidence Act: Arjun Paditrao Criticised.
• Sec. 65B Evidence Act Simplified
• ‘STATEMENTS’ alone can be proved by ‘CERTIFICATE’ u/s. 65B
• Sec. 65B,  Evidence Act: Certificate for Computer Output
• Certificate is Required Only for ‘Computer Output’; Not for ‘Electronic Records’: Arjun Panditrao Explored.
• Law on Documents
• Registration of Documents Executed out of India
• Are RTI Documents Admissible in Evidence as a ‘Public Documents’?
• Oral Evidence on Contents of Document, Irrelevant
• Marking Documents Without Objection – Do Contents Stand Proved?
• Proof of Documents & Objections To Admissibility – How & When?
• Notary-Attested Documents: Presumption, Rebuttable
• Presumptions on Registered Documents & Collateral Purpose
• Notice to Produce Documents in Civil Cases
• Production of Documents: Order 11, Rule 14 & Rule 12
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Presumptions on Documents and Truth of its Contents
• Proof and Truth of Documents
• Unstamped & Unregistered Documents and Collateral Purpose
• Marking Documents Without Objection – Do Contents Proved
• Production, Admissibility & Proof Of Documents
• Substantive Documents, and Documents used for Refreshing Memory and Contradicting 
• Visual and Audio Evidence (Including Photographs, Cassettes, Tape-recordings, Films, CCTV Footage, CDs, e-mails, Chips, Hard-discs, Pen-drives)
• Relevancy, Admissibility and Proof of Documents
• No Adjudication Needed If Power of Attorney is Sufficiently Stamped
• Can an Unregistered Sale Agreement be Used for Specific Performance

Contract Act

• ‘Sound-mind’ and ‘Unsound-Mind’ in Indian Civil Laws
• Forfeiture of Earnest Money and Reasonable Compensation
• Who has to fix Damages in Tort and Contract?
• Can an Unregistered Sale Agreement be Used for Specific Performance

Easement

• What is Easement?
• Does Right of Easement Allow to ‘Enjoy’ After Making a Construction?
• What is “period ending within two years next before the institution of the suit”?
• Is the Basis of Every Easement, Theoretically, a Grant
• Extent of Easement (Width of Way) in Easement of Necessity
• Can an Easement-Way be Altered by the Owner of the Land?
• Village Pathways and Right to Bury are not Easements.
• Custom & Customary Easements in Indian Law
• ‘Additional Burden Loses Lateral Support’ – Incorrect Proposition

Stamp Act

• Adjudication as to Proper Stamp under Stamp Act
• Unstamped & Unregistered Documents and Collateral Purpose

Will

• Interpretation of Inconsistent Clauses in a Will
• Will – Probate and Letters of Administration
• Executors of Will – Duties & their Removal

Book No. 2: A Handbook on Constitutional Issues

• Judicial & Legislative Activism in India: Principles and Instances
• Can Legislature Overpower Court Decisions by an Enactment?
• Separation of Powers: Who Wins the Race – Legislature or Judiciary?
• Kesavananda Bharati Case: Never Ending Controversy
• Mullaperiyar Dam: Disputes and Adjudication of Legal Issues
• Article 370: Is There Little Chance for Supreme Court Interference
• Maratha Backward Community Reservation: SC Fixed Limit at 50%.
• Polygraphy, Narco Analysis and Brain Mapping Tests
• CAA Challenge: Divergent Views
• FERA, 1973 And Transfer of Immovable Property by a Foreigner
• Doctrine of ‘Right to be Forgotten’ in Indian Law
• Religious issues
• Secularism and Art. 25 & 26 of the Indian Constitution
• Secularism & Freedom of Religion in Indian Panorama
• ‘Ban on Muslim Women to Enter Mosques, Unconstitutional’
• No Reservation to Muslim and Christian SCs/STs (Dalits) Why?
• Parsi Women – Excommunication for Marrying Outside
• Knanaya Endogamy & Constitution of India
• Sabarimala Review Petitions & Reference to 9-Judge Bench
• SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
• Ayodhya Disputes: M. Siddiq case –Pragmatic Verdict

Book No. 3: Common Law of CLUBS and SOCIETIES in India

• General
  • General Features
  • Bye Laws Fundamental
  • Effect of Registration of Societies and Incorporation of Clubs
  • Societies and Branches
• Property & Trust
  • Vesting of Property in Societies and Clubs
  • Incidents of Trust in Clubs and Societies
• Juristic Personality
  • Juristic Personality of Societies and Clubs
  • Legal Personality of Trustees and Office Bearers
• Suits
  • Suits and Criminal Complaints By and Against a Company
  • Suits By or Against Societies, Clubs
  • Court’s Jurisdiction to Interfere in the Internal Affairs
  • How to Sue Societies, Clubs and Companies
• Amendment and Dissolution
  • Amendment of Bye laws of Societies and Clubs
  • Dissolution of Societies and Clubs
• Rights and Management
  • Rights & Liabilities of Members of Clubs and Societies
  • Individual Membership Rights in Societies & Clubs
  • Management – Powers of General Body and Governing Body
  • Expulsion of Members & Removal of Office-Bearers
  • Law on Meetings: An Overview
• Election
  • Election & Challenge in Societies and Clubs
  • Court Interference in Election Process
• State Actions
  • State-Interference in Affairs of Societies & Clubs

Book No. 4: Common Law of TRUSTS in India

• General Principles
  • What is Trust in Law?
  • Classification of Trusts
  • Public & Private Trusts in India.
  • Trust is ‘An Obligation’; Not a Legal Entity
  • Indian Law Does Not Accept Salmond, as to Dual Ownership
• Dedication and Vesting
  • Dedication of Property in Public Trusts
  • Vesting of Property in Trusts
  • Incidents of Trust in Clubs and Societies
• Trustees and Management
  • Trustees and Administration of Public Trusts
  • Alienation of Public Trust Property
  • Extinction, Discharge, Revocation, etc. of Public Trusts
• Breach of Trust
  • Breach of Trust and Removal of Trustees
• Suits by or against Trusts
  • Suits By or Against Trusts and Trustees
  • Remedies Under Sec. 92 CPC
• Law on Hindu Religious Endowments
  • Philosophy of Idol Worship
  • Is an Idol a Perpetual Minor?
  • Hindu Temples & Law of Trusts
  • Public & Private Trusts
  • Law of Mutts and Other Hindu Endowments
  • Shebaits & Mahants and Law of Trustees
• Temples, Gurudwaras, Churches and Mosques – General
  • Legal Personality of Temples, Gurudwaras, Churches and Mosques
• Constitutional Principles
  • Secularism and Art. 25 & 26 of the Indian Constitution
  • Secularism & Freedom of Religion in Indian Panorama
  • ‘Muslim Women: Ban to Enter Mosques, Is it Unconstitutional
  • Parsi Women Excommunication, Unconstitutional.
  • Knanaya Endogamy & Constitution of India
  • State & Court – Protectors of All Charities
• Ayodhya and Sabarimala Disputes
  • Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
  • Sabarimala Review Petitions & Reference to 9-Judge Bench
  • SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
• General
  • Public Trusts and (State) Endowments/Trusts Acts
  • Public Trusts and Indian Trusts Act – An Overview
  • Business by Charitable Trusts & Institutions