Kiran Raj

The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan on Friday, November 28, 2025, held that complaints arising from dishonour of account payee cheques must be filed only before the court having territorial jurisdiction over the bank branch where the payee keeps the account, treated as the home branch for this purpose, even if the cheque is deposited at another branch. Applying this construction of Section 142(2) of the Negotiable Instruments Act, the Court, in a dispute between an accused company and a complainant company over a dishonoured cheque, directed that the pending prosecution under Section 138 be transferred back to and tried by the Metropolitan Magistrate at Kolkata, with proceedings to resume from the stage immediately preceding the order returning the complaint.

The dispute stems from a cheque issued by an accused company Jai Balaji Industries Ltd to a complainant company M/s HEG Limited represented through its directors. Against an invoice dated 23 March 2014, the accused issued a cheque for Rs. 19,94,996 drawn on a bank in Kolkata. The complainant deposited it in its account with a bank at Bhopal, where it was returned unpaid for insufficiency of funds. The complainant served a statutory notice demanding payment; the notice was delivered and the accused replied that the cheque was only a security deposit and not in discharge of an enforceable debt.

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When payment was not made, the complainant initiated proceedings under Section 138 of the Negotiable Instruments Act before the Metropolitan Magistrate at Kolkata, where process was issued, charge was framed and the affidavit of evidence-in-chief of an authorised officer of the complainant was taken on record. Following the 2015 amendment introducing Section 142(2), the complainant sought return of the complaint so it could be presented before the court having jurisdiction over the bank where it maintained its account, and the case was refiled before the Judicial Magistrate First Class at Bhopal. The accused contested the territorial jurisdiction of the Bhopal court and the propriety of returning the complaint after commencement of evidence, relying on the Code of Criminal Procedure and prior Supreme Court authority, and thereafter moved transfer petitions under Section 446 of the Bhartiya Nagarik Suraksha Sanhita read with the Supreme Court Rules.

The Court first recorded that “the sole controversy before us is as to which court has the territorial jurisdiction to try the accused persons for the offence punishable under Section 138 of the Act, 1881.” It then stated that “the following two questions fall for our 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?”

On the statutory scheme, the Court observed that “a bare textual reading of the amended Section 142 indicates that the jurisdiction to try the offence under Section 138 has been specified 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.” Explaining “delivery” and “presentment,” it recorded that “the ‘making’ of a cheque is complete only upon delivery of the same by the drawer” and 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,” whereas “presentment for payment is defined under Section 64 of the Act, 1881” and involves the cheque being presented to the drawee for payment.

Interpreting Section 142(2)(a) and its Explanation, the Court stated that “a bare textual reading of the provision indicates that the Explanation creates a legal fiction that a cheque, when delivered for collection through an account, at ‘any branch’ of the bank in which the payee maintains the account, would be deemed to have been delivered to the particular branch of the bank in which the payee maintains his account, i.e., the home branch of the payee.” It added that “the legislature ensures convenience of transaction by recognizing that a payee may deliver a cheque at ‘any branch’ of his bank” while “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.”

Drawing from Bijoy Kumar Moni v. Paresh Manna it quoted that “the expression ‘on an account maintained by him with a banker’ … describes the relationship between the account holder and the banker” and that this relationship is “fundamental to the application of Section 138.” Building on this, it noted that the phrases “the branch of the bank where the payee or holder in due course, as the case maybe, maintains the account” and “the branch of the drawee bank where the drawer maintains the account” indicate 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 (we may refer to this specific branch as the ‘home branch’ for ease of exposition).”

Referring to Yogesh Upadhyay v. Atlanta Ltd. the Court recorded that “we are constrained to observe that the position of law expounded in Yogesh Upadhyay (supra) is per incuriam.” It reasoned that “if the aforesaid be so and 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.”

Further, it stated that “we will be allowing a payee to manipulate the question of jurisdiction in his favour by letting him decide where he wants to deliver the cheque for collection” and “we are of the firm opinion that the legislature could not have intended to let misuse perpetuate in such a manner.” Referring to the Explanation, it concluded that “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,” an understanding reinforced by “this Court’s recent judgment in Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat, reported in 2025 SCC OnLine SC 1511,” and supported by “the decision rendered in Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd.”

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The Bench held that “in view of the aforesaid discussion, 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.” Finally, invoking the guidance in Dashrath Rupsingh Rathod, it ordered that “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.”

The Court directed: “Having regard to the pleadings in the memorandum of the transfer petition, we have reached the conclusion that a case has been made out for transfer of the proceedings in question. In the result, the petition succeeds and is hereby allowed. All other connected transfer petitions are also disposed of in the aforesaid terms. The Registry shall forward one copy each of this judgment to all the High Courts. Pending application(s), if any, are disposed of.”

Advocates Representing the Parties:

For Petitioner(s): Mr. Ramaswamy Meyappan, Adv. Mr. Kaustubh Shukla, AOR Mr. Praveen Kumar Singh, Adv. Ms. Pushpanjali Singh, Adv. Mr. Ramaswamy Ayappan, Adv. Mr. Kaustubh Shukla, AOR

Case Title: Jai Balaji Industries Ltd. and Ors. v. M/S HEG LTD.
Neutral Citation: 2025 INSC 1362
Case Number: Transfer Petition (Crl.) No. 1099 of 2025
Bench: Justice J.B. Pardiwala, Justice R. Mahadevan