SC explains jurisdiction of courts under NI Act for dishonour of account payee or bearer cheques

Supreme Court explains jurisdiction of courts under NI Act for dishonour of account payee or bearer cheques

In a recent judgment, Hon’ble Supreme Court has held that a payee may deliver a cheque at any branch of his bank.  However, in case of dishonour of an account payee cheque, it would be deemed that the cheque was delivered at the home branch so as to empower the court, within whose local territorial jurisdiction the said branch falls, to try the complaint under Negotiable Instrument Act 1881.

ABCAUS Case Law Citation:
4892 (2025) (11) abcaus.in SC

In the instant case, a transfer petition was filed under Section 446 of the Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS) for transfer of a Complaint Case under section 138 of the Negotiable Instrument Act 1881 (Act 1881) pending in the court of Judicial Magistrate, Bhopal to the Court of Metropolitan Magistrate, Kolkata.

The cheque drawn by the accused/petitioner company through its directors was drawn on the bank branch at Kolkata and the same was deposited by the complainant in its account maintained with Bank at Bhopal branch.

The cheque was dishonoured due to insufficiency of funds leading to the filing of complaint at the Court of Metropolitan Magistrate Court Kolkata.

While the case was pending before the MM, Kolkata, the Negotiable Instruments (Amendment) Act, 2015 (Amendment Act 2015 was enacted under which Section 142 provided that the territorial jurisdiction for prosecution and trial of cases registered under Section 138 were to be at the place where the payee or holder maintains his bank account.

The complainant company got the complaint for dishonour of cheque registered in the court of the Judicial Magistrate Bhopal. The accused company raised an objection as regards the territorial jurisdiction of the Bhopal Court to try the offence relying on the provisions of the Code of Criminal Procedure, 1973 (Act 1973).

The dispute travelled to the Hon’ble Supreme Court.

The Hon’ble Supreme Court noted that the Amendment Act, 2015 introduced sub-section (2) to Section 142 of the Act, 1881 which provide for the jurisdiction to try the offence under Section 138 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.

The Hon’ble Supreme Court observed that 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. 

The Hon’ble Supreme Court further observed that 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). Also, when a person maintains an account with a bank, he establishes a relationship with such bank for the management of his money.

The Hon’ble Supreme Court further observed that while Section 138 describes by use of the expression “on an account maintained by him with a banker”, Sub-section (2) of Section 142 includes the word “branch” of the drawee bank. This signifies that the payee or drawer, by maintaining the account in a particular branch of the bank, share a relationship not with the bank as a whole but with the specific branch of the bank (the home branch).

The Hon’ble Supreme Court opined that if the jurisdiction is to be decided on the basis of the place where the cheque was delivered to the bank of the payee, the same would lead to conferring unbridled power to the payee in deciding jurisdiction which may be misused for the purposes of forum shopping.

The Hon’ble Supreme Court opined that in the amended act, the legislature ensured convenience of transaction by recognizing that a payee may deliver a cheque at ‘any branch’ of his bank. However, in a situation where such cheque comes to be dishonoured, it would be deemed that the cheque was delivered at the home branch so as to empower the court, within whose local territorial jurisdiction the said branch falls, to try the complaint in this regard.

The Hon’ble Supreme Court explained the amended law with the help of the following example:

The Hon’ble Supreme Court observed 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. Explanation to Section 142(2)(a) creates a deeming fiction to ensure 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.

The Hon’ble Supreme Court held that there is no doubt 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.

On the second question, the Hon’ble Supreme Court observed that in the instant case the jurisdiction to try the complaint lied exclusively with the JMFC, Bhopal. However, Kolkata Court, due to amendment, had returned the complaint when it had already reached the stage of recording of evidence under Section 145(2) of the Act, 1881. Therefore, 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.

Accordingly, the Supreme Court ordered that 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.

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