The Supreme Court (“Court”) has, in its recent decision in Dashrath Rupsingh Rathod v.

State of Maharashtra & Anr. Held that in cases of dishonour of cheque under section 138 of
Negotiable Instruments Act, only those courts within whose territorial limits the drawee bank
is situated would have the jurisdiction to try the case.

The Court has made it mandatory that the above complaint related to cheque bouncing must
be filed only where the drawee bank is located.

The Court has further held that the only thing to be considered to confer jurisdiction was,
where the offence was committed, and in case of section 138, the offence was committed
where the cheque was bounced. Therefore the complaint under section 138 could be lodged
only in the court, within whose jurisdiction, the drawee bank bouncing the cheque is located.

As far as the jurisdiction of the court in cheque dishonor cases u/s 138 of the Negotiable
Instruments Act, 1881 (NI Act), there were two views promulgated by the earlier judgments.
These two views have been laid down in two different cases as follows:

1. Bhaskaran Apporach laod down in K. Bhasakaran Vs. Sanakaran Vaidhyhan

Balan(1999)7 SCC 510.

In this case, the Supreme Court observed that the offence under Section 138 can be
completed only with the concatenation of the following five acts:

 Drawing of the cheque;

 Presentation of the cheque to the bank;
 Returning the cheque unpaid by the drawee bank;
 Giving notice in writing to the drawer of the cheque demanding payment of
the cheque amount;
 Failure of the drawer to make payment within 15 days of the receipt of the
notice.

2. Harman approach laid down in Harman Electronics Pvt. Ltd Vs. National Pendasonic
India (Pvt.) Ltd (2009)1 SCC 720.
The Court addressed the issue of whether a Delhi Court would have jurisdiction solely
because the statutory notice under Section 138 of the Act was issued from Delhi. The
Court held that:

 Issue of the statutory notice does not give rise to a cause of action. Only
receipt of the notice does;

 Only the main provision of Section 138 constitutes an offence. The proviso
 thereto merely enlisted the conditions necessary for taking cognizance of the
offence;

If mere presentation of the cheque or issue of notice would bestow upon a court the
territorial jurisdiction to try offences under Section 138 of the Act, it would inevitably
lead to harassment of the drawer.

Jurisdiction with Court where Drawee Bank situated

The Court concluded that under Section of the Act, the offence is committed when the
drawee bank returns the cheque unpaid. The proviso to Section of the Act, merely postpones
the prosecution of the offender till the time that he fails to pay the amounts within 15 days of
the statutory notice.

The place of commission of the offence would be the place where the drawee bank is located
(and, consequently, where the cheque is dishonoured). Thus, courts of such place would have
the territorial jurisdiction to try the offence under the Act.

The Court clarified that nothing would prevent an aggrieved person from availing other
remedies under the Indian Penal Code or the Cr PC. Where a payee was able to establish that
the inducement for accepting a cheque which subsequently was dishonoured had occurred
where he resides or transacts business, he will not have to suffer the travails of journeying to
the place where the cheque had been dishonoured.

Remedies Effects:

1. Cases which have been filed and recording of evidence has commenced:

No alteration. The case can continue in the same court with no effect of this new
judgment.

2. Cases which have been filed and recording of evidence is not yet commenced

In this situation, one has to file for procuring certified copy in the court where the
original case was first initiated. After securing certified copy of the file from the first
court a fresh case must be filed in those courts having appropriate jurisdiction
(according to new law laid down by Supreme Court).

Further, It was summarized by Justice Thakur as follows:

(i) An offence under Section 138 of the Negotiable Instruments Act, 1881 is committed no
sooner a cheque drawn by the accused on an account being maintained by him in a bank for
discharge of debt/liability is returned unpaid for insufficiency of Funds or for the reason that
the amount exceeds the arrangement made with the bank.

(ii) Cognizance of any such offence is however forbidden under Section 142 of the Act except
upon a complaint in writing made by the payee or holder of the cheque in due course within a
period of one month from the date the cause of action accrues to such payee or holder under
clause (c) of proviso to Section 138.

(iii) The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in

due course if (a) the dishonoured cheque is presented to the drawee bank within a period of
six months from the date of its issue. (b) If the complainant has demanded payment of
cheque amount within thirty days of receipt of information by him from the bank regarding
the dishonour of the cheque and (c) If the drawer has failed to pay the cheque amount within
fifteen days of receipt of such notice.

(iv) The facts constituting cause of action do not constitute the ingredients of the offence under
Section 138 of the Act.

(v) The proviso to Section 138 simply postpones/defers institution of criminal proceedings and
taking of cognizance by the Court till such time cause of action in terms of clause (c) of
proviso accrues to the complainant.

(vi) Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the
case will be determined by reference to the place where the cheque is dishonoured.

(vii) The general rule stipulated under Section 177 of Cr.P.C. applies to cases under Section 138 of
the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against
the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes
place except in situations where the offence of dishonour of the cheque punishable under
Section 138 is committed along with other offences in a single transaction within the meaning
of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by
the provisions of Section 182(1) read with Sections 184 and 220 thereof.