Cheque dishonour : Jurisdiction lies where the payee maintains the account even if the cheque is collected at a different branch

Supreme Court clarifies territorial jurisdiction in cheque dishonour cases. The jurisdiction lies with payee's home branch court; procedural improprieties addressed in Supreme Court ruling.

The Supreme Court of India has clarified the legal position on territorial jurisdiction in cases involving dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1881. The ruling was delivered in the case of Jai Balaji Industries Ltd. v. M/s HEG Ltd., addressing the complexities arising from the cheque's dishonour and the subsequent legal proceedings.

The Court, through a bench comprising Justices J.B. Pardiwala and R. Mahadevan, examined the implications of the Negotiable Instruments (Amendment) Act, 2015, which sought to resolve jurisdictional ambiguities following its enactment. The judgment emphasized that complaints regarding dishonoured cheques should be lodged in the court where the payee's bank branch, in which the account is maintained, is located. This position reverses the earlier understanding that allowed for a more flexible approach to determining jurisdiction, often leading to forum shopping.

The case stemmed from a dispute where Jai Balaji Industries Ltd. issued a cheque which was dishonoured due to insufficient funds. M/s HEG Ltd. sought redress, leading to a legal challenge over which court had the jurisdiction to hear the case. The Supreme Court's decision confirms that the jurisdiction lies with the court within whose local limits the payee's home branch is situated, as per the amended Section 142(2) of the Negotiable Instruments Act.

Moreover, the Court addressed procedural concerns by ruling that cases where evidence recording has commenced should continue in the same court, even if it lacks jurisdiction under the new legal framework. This approach prevents procedural impropriety and ensures justice is served without unnecessary delays or complications.

The judgment also reflects on past Supreme Court rulings and legislative amendments aimed at providing clarity and consistency in the application of the law. It emphasizes the importance of adhering to the legal framework established by the amendment, which was intended to streamline the process and avoid misuse of jurisdictional provisions.

Regarding the transfer of pending cases, the Court observed that the complaints already at the stage of recording evidence under Section 145(2) should continue in the court where they are pending, even if that court lacks jurisdiction under the amended Section 142(2).

The Supreme Court's ruling is expected to have significant implications for the handling of cheque dishonour cases, reinforcing the legislative intent to provide a clear and coherent legal process for all parties involved.

Bottom Line:

Cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881 - Territorial jurisdiction lies with the court within whose local jurisdiction the branch of the bank where the payee maintains the account (home branch) is situated, even if the cheque is delivered for collection at a different branch.

Statutory provision(s): Section 138, Section 142, Section 145 of the Negotiable Instruments Act, 1881; Bharatiya Nagarik Suraksha Sanhita, 2023.

Jai Balaji Industries Ltd. v. M/s HEG Ltd., (SC) : Law Finder Doc id # 2813885