TERRITORIAL JURISDICTION OF COURTS UNDER SECTION 138 R/W SECTION 142 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881

Authored by: Ms. Maansi Singhal, 2nd year student of B.A.L.L.B (Hons.) BITS Law School, Mumbai

This article explains the position under Indian law on territorial jurisdiction of Courts under section 138 read with section 142 of the Negotiable Instruments Act 1881 as amended.

Dashrath Rupsingh Rathod v State of Maharashtra (2014) 9 SCC 129:

A 3-judge bench of the Supreme Court of India delivered a judgment pertaining to the territorial jurisdiction of a court to try an offence under Section 138 of the Negotiable Instruments Act 1881 (NI Act). The Court observed that the moment, the cheque is dishonoured, offence under Section 138 gets attracted. Hence as the offence is committed at the place of drawee bank, the court situated therein will have jurisdiction.

However, within a year of the aforesaid judgment, the legislature issued an ordinance to address the confusion caused by varying court decisions and subsequently passed the Negotiable Instruments (Amendment Act), 2015 and introduced Section 142(2) and 142(A) in the Act on 26.12.2015 with retrospective effect from 15.06.2015.

Jurisdiction as per the 2015 Amendment:

The effect of aforesaid new provisions is to restrict jurisdiction only to two territorial areas. Clause (a) of the section 142(2) states that if the cheque is deposited for collection through the payee's bank account, the jurisdiction for filing the case lies with the court where the payee's bank branch, is located. As per the explanation to section 142(2)(a), if the cheque is delivered at a branch other than the one where the payee maintains their account, it is deemed to be delivered at the branch where the payee holds their account. Clause (b) of section 142(2) states that if the cheque is presented directly to the drawer's bank for payment, the jurisdiction lies with the court where the drawer’s bank branch (where they maintain their account) is located.

Section 142A dealt with the procedural aspect of effect of the retrospective amendment of section 142 of NI Act.

Position of the Supreme Court pursuant to the 2015 Amendment:

In Bridgestone India Pvt Ltd v Inderpal Singh (2016) 2 SCC 75, a coram of Justice Jagdish Singh Khehar and Justice R Banumathi of the Supreme Court recognised the Negotiable Instruments (Amendment) Second Ordinance, 2015. The case involved a cheque issued by the respondent, drawn on a Chandigarh bank, in favour of the appellant. The appellant presented the cheque at their Indore bank, where they held an account. Upon dishonour of the cheque by the Chandigarh bank, the dishonour was communicated to the appellant through the Indore bank. Subsequently, proceedings under Section 138 of the NI Act were initiated by the appellant in the Indore court.

The court reasoned that Section 142(2)(a) of the NI Act vests jurisdiction for initiating proceedings under Section 138 in the court where the cheque is delivered for collection, specifically through the bank branch where the payee or holder in due course maintains an account. The court further held that, regarding jurisdiction for offences under Section 138, the provisions of the Criminal Procedure Code must yield to the specific provisions of the NI Act, as indicated by the non obstante clause in Section 142A(1). This clause ensures that any previous court judgments, decrees, or orders would not affect the territorial jurisdiction for proceedings under Section 138. As a result, the court overruled its previous decision in Dashrath Rupsingh Rathod v State of Maharashtra, (2014) 9 SCC 129.

In this instance, the cheque was drawn on a bank in Chandigarh and presented for collection at a bank in Indore, which was subsequently dishonoured. The court held that the Indore court had territorial jurisdiction to take cognizance of the case under Section 138 after the enactment of theOrdinance. Therefore, the High Court's impugned order was set aside, and the parties were directed to appear before the Indore court.

Recently, in Yogesh Upadhyay v Atlanta Limited, 2023 SCC Online SC 170, the appellant sought the transfer of two cases pending in Nagpur courts to the District Court in Dwarka, New Delhi, to be tried alongside four other cases of similar nature. The Court examined Section 142(2)(a), which confers jurisdiction to the court where the cheque is delivered for collection through the payee’s bank. Citing the Bridgestone case, the Court reaffirmed that, after the 2015 amendment, jurisdiction lies with the payee's bank. Thus, while acknowledging the jurisdiction under Section 142(2), the Court held that its power to transfer cases under Section 406CrPC remains unaffected and allowed the transfer.

Recent Judgements of High Court:

In Abey Varkey v Union of India, 2017 SCC Online Ker 25445, a writ petition was filed in the Kerala High Court, challenging the 2015 amendment. The petitioner argued that the amendment, which reversed the Supreme Court’s ruling in Dashrath Rupsingh Rathod case restricted the prosecution of dishonoured cheques to the location where the cheque was dishonoured and violated Article 21 of the Constitution. The division bench dismissed the petition, stating that in the Bridgestone case, the Apex Court had already considered as to why this amendment was made and stated that the Dashrath case will not have any application. Moreover, the High Court found no violation of Article 21 and stated that the Amendment was necessary to prevent unfairness where complainants, deprived of their funds, would otherwise have to travel to pursue justice, thereby dismissing the petition.

In Indraveer Singh v State of UP, 2024 SCC Online All 4597, the Allahabad High Court under an application to quash the proceedings under SectioN 482 of CrPC at the court which lacked jurisdiction and praying for fresh cognizance to be taken held that even if cognizance was initially taken by a Court without jurisdiction, the proceedings would not be vitiated. It was stated that the transferee Court would continue from the current stage, not start afresh.

In Somani Worsted Pvt Ltd v Aez Infratech Pvt Ltd, 2019 SCC Online Del 8608, the petitioner filed a complaint alleging dishonour of cheques deposited for collection in Meerut. The respondent argued that jurisdiction lay in Delhi, where the drawer's bank was located. The court clarified that, as per the Explanation to Section 142(2)(a), jurisdiction lies where the payee maintains their account. Since the complainant was able to prove that they maintained their account was in Meerut, the court directed the transfer of the case from Delhi to Meerut, affirming the jurisdiction based on the payee’s bank location.

Recently the Delhi High Court in Right Choice Marketing Solutions JLT v State of NCT of Delhi, 2024 SCC Online Del 2831 clarified the position on whether Indian courts will have jurisdiction on foreign cheques deposited for encashment in India. In this case, the respondent number 2 had deposited a foreign cheque, issued by the petitioner from a bank in Abu Dhabi, at ICICI Bank in Delhi, where it was dishonoured due to insufficient funds. The petitioner sought to quash the proceedings under Section 138 of the NI Act, arguing lack of jurisdiction. The Delhi High Court held that under the amended Section 142(2) of the NI Act, the court where the cheque is deposited for collection has jurisdiction to adjudicate the matter, even if the cheque is foreign.

Conclusion:

The Supreme Court's ongoing deliberations in Kedar Bhausaheb Malhari v Axis Bank Ltd [Transfer Petition (Criminal) No. 33/2018] could significantly impact the interpretation of territorial jurisdiction under Section 142A of the Negotiable Instruments Act. Amicus Curiae Mr. Siddharth Luthra had argued that the 2015 amendment, which favours the complainant’s access to justice, unfairly burdens the accused, violating their right to a fair trial. This imbalance may lead to a reassessment of Sections 142(2) and 142A, potentially reshaping the jurisdictional framework to ensure equal access to justice for both parties and preventing misuse of the amended provisions in the future.