Top 26 Judgements You Must Cover 2025
December 5, 2025
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December 5, 2025S.142 NI ACT EXPLAINED – COMPLAINTS ARISING FROM DISHONOUR OF ACCOUNT PAYEE CHEQUES MUST BE INSTITUTED ONLY BEFORE THE COURT THAT HAS JURISDICTION OVER THE BRANCH OF THE BANK WHERE THE PAYEE MAINTAINS THEIR ACCOUNT – SCI
Name of the Court: The case was decided by the Supreme Court of India.
This judgment of the Supreme Court deals with multiple transfer petitions arising from a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The central issue concerns territorial jurisdiction—specifically, which court is legally competent to try complaints related to dishonour of account-payee cheques after the 2015 amendment to the NI Act.
Factual Background
The accused company, Jai Balaji Industries Ltd., issued a cheque of ₹19,94,996 to the complainant, HEG Ltd.
The cheque was drawn on a bank in Kolkata and deposited by the complainant in its State Bank of India, Bhopal branch, where the complainant maintains its bank account. The cheque was dishonoured for insufficient funds. A statutory notice was issued and replied to, after which the complainant initially filed a complaint before the MM, Kolkata. Later, relying on Dashrath Rupsingh Rathod, that court returned the complaint for lack of jurisdiction, leading to re-filing before JMFC, Bhopal. Proceedings continued, reaching the stage of evidence under Section 145(2). The accused then sought transfer back to Kolkata.
Legal Issue
The core question was:
Which court has jurisdiction to try an offence under Section 138 when the dishonoured cheque is an “account-payee cheque” delivered through a bank account?
This required interpretation of Section 142(2)(a) of the NI Act, inserted by the 2015 Amendment, which restructured territorial jurisdiction for cheque dishonour cases.
Interpretation of Section 142(2)(a)
The Supreme Court examined how the law evolved:
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Before 2015, jurisdiction depended on where the offence occurred—i.e., where the drawee bank dishonoured the cheque (Dashrath Rupsingh Rathod).
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After 2015, Parliament shifted to a payee-centric jurisdiction model. The amended Section 142(2)(a) states that when a cheque is delivered for collection through an account, jurisdiction lies only at the branch where the payee maintains the account.
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The Explanation creates a legal fiction that even if a cheque is deposited at any branch, it is deemed to be delivered at the payee’s home branch. The aim is to ensure consistency and prevent forum-shopping.
Court’s Findings
After detailed analysis, the Supreme Court held:
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For account-payee cheques, jurisdiction is exclusively at the court within whose limits the payee’s home bank branch is located.
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Therefore, in the present case, only JMFC, Bhopal had jurisdiction, not MM, Kolkata, because the payee maintained its account in Bhopal.
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However, since proceedings before MM, Kolkata had already reached the stage of evidence under Section 145(2) before return of complaint, the Supreme Court used its powers to avoid injustice. It held that, despite Bhopal being the correct jurisdiction, the case should be transferred back to MM, Kolkata, restoring the position before the erroneous return of the complaint.
Final Conclusion
The Supreme Court allowed the transfer petition, holding that:
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Legally, jurisdiction lies only at the payee’s home branch court under Section 142(2)(a).
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But in the interest of fairness and continuity of proceedings, the case was transferred to MM, Kolkata, where evidence had already begun.
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All connected petitions were disposed of accordingly.
