Which Court Hears a Cheque Bounce Case?

Cheque No. 1950 was for Rs 26,958. Inderpal Singh issued it to Bridgestone India Pvt. Ltd., and it was drawn on the Union Bank of India, Chandigarh. It is dated 2 May 2006. Bridgestone presented it at the IDBI Bank in Indore. On 4 August 2006, the company received word at Indore that the cheque had bounced, with the reason "exceeds arrangement."

Bridgestone sent a legal notice on 26 August 2006. It reached Inderpal Singh on 6 September 2006. The notice demanded the cheque amount and warned that Section 138 proceedings would follow if he did not pay within 15 days of receiving it. He did not pay. On 13 October 2006, Bridgestone filed its complaint before the Judicial Magistrate, First Class, Indore.

Inderpal Singh fought the choice of city. He applied under Section 177 of the Criminal Procedure Code, saying Indore had no territorial jurisdiction over a cheque drawn at Chandigarh. The Indore Magistrate turned him down on 2 June 2009, relying on the Supreme Court's earlier decision in K. Bhaskaran v. Sankaran Vaidhyan Balan, AIR 1999 SC 3762. He went to the Madhya Pradesh High Court's Indore Bench under Section 482 of the Code. Because he had produced a number of documents at the hearing, the High Court on 3 December 2009 sent the matter back for a fresh order.

The Magistrate again held, on 11 January 2010, that Indore had jurisdiction. Inderpal Singh returned to the High Court. This time he won. On 5 May 2011 the High Court held that jurisdiction lay only with the court where the original drawee bank was located, namely Chandigarh.

Bridgestone appealed to the Supreme Court. By then the Negotiable Instruments (Amendment) Second Ordinance, 2015 had arrived, deemed in force from 15 June 2015. No one appeared for Inderpal Singh before the Supreme Court despite service.

Bridgestone had a serious problem. A three-Judge Bench in Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129 had held that the court's jurisdiction is determined by the place where the cheque is dishonoured. It also held that the general Section 177 rule of the Criminal Procedure Code applies to Section 138 cases. The Bench in this case accepted that, on that decision alone, the High Court order was "wholly justified."

The Ordinance changed the statute itself. Amended Section 142(2)(a) says the offence is tried only by a court within whose local jurisdiction the branch of the bank where the payee or holder in due course maintains the account is situated, if the cheque is delivered for collection through an account. Clause (b) covers a cheque presented for payment otherwise than through an account. There, the court is the one where the drawee-bank branch at which the drawer maintains the account is situated.

The Explanation adds a safeguard. If a cheque is delivered at any branch of the payee's bank, it is deemed delivered to the branch where the payee maintains the account.

Section 142A(1) then opened with a non-obstante clause: "Notwithstanding anything contained in the Code of Criminal Procedure, 1973" or any judgment, decree, order or directions of any court. It deemed cases transferred to the court having jurisdiction under amended Section 142(2) to have been transferred under the Ordinance, as if that sub-section had been in force at all material times.

Justice Khehar, writing for the Bench, said the amended Section 142(2), "specially in view of the explanation thereunder," leaves no room for any doubt. For a Section 138 offence, the place where the cheque is delivered for collection decides territorial jurisdiction. In its concluding paragraphs, the Court held that Section 142(2)(a) vests jurisdiction in the court where the cheque is delivered for collection, through the branch of the bank where the payee or holder in due course maintains an account. On the overriding effect of Section 142A(1), the Court held that, for a Section 138 offence and on the issue of jurisdiction:

The Court closed two gaps with this reasoning:

• On jurisdiction, the Code of Criminal Procedure gives way. For a Section 138 offence, on the issue of jurisdiction, the Code yields to the Act. Inderpal Singh had invoked Section 177 of the Code against the Indore Magistrate's jurisdiction, but the Court held that the Code must give way on this point.
• Earlier judgments cannot block the new rule. The Court held that any judgment, decree, order or direction would have no effect on territorial jurisdiction for Section 138 proceedings, so Dashrath Rupsingh Rathod would not stand in Bridgestone's way. It also held that the words "as if that sub-section had been in force at all material times" give the provision retrospectivity. This is how a 2006 cheque and a complaint filed in October 2006 could be heard in Indore under a 2015 Ordinance.

Since the cheque was drawn at Chandigarh but presented at the IDBI Bank in Indore, which reported the dishonour, the Judicial Magistrate, First Class, Indore had territorial jurisdiction. The High Court order of 5 May 2011 was set aside. Three connected appeals (Criminal Appeals No. 1562, 1563 and 1564 of 2015) were allowed in the same terms.

The right city depends on how the cheque travelled and what is already pending against the same drawer.

• Gather the paper trail first. Collect the original dishonoured cheque, the bank's dishonour intimation, and proof of where the cheque was delivered for collection. In Bridgestone's case, the cheque was presented at IDBI Bank, Indore, and the dishonour intimation of 4 August 2006 reached the company at Indore. Keep the legal notice and proof of the date it was served as well. Bridgestone's notice of 26 August 2006, served on 6 September 2006, demanded the amount and gave 15 days to pay.
• Identify the correct court by how the cheque was presented. If it went in through your account, look to the court where your account branch is situated. If it was presented otherwise than through an account, look to the court where the drawer's drawee-bank branch is situated. In this case, the Supreme Court directed the parties to appear before the Judicial Magistrate, First Class, Indore, on 15 January 2016. It also directed that if the complaint had been returned, it was to be re-presented before that Magistrate on the date indicated.
• If you have several cases against one drawer, check Section 142A(2) and (3). Later complaints against the same drawer go to the court where the earlier one is pending. Where more than one prosecution by the same payee against the same drawer was pending in different courts on the Ordinance's commencement, the court, once the fact is brought to its notice, must transfer the case to the court having jurisdiction under Section 142(2), as amended, before which the first case was filed and is pending.
• Avoid the mistake that kept Bridgestone's complaint in dispute. Do not assume the drawer's bank city wins just because the cheque was drawn there. The Court looked at where the cheque was delivered for collection through the payee's account, not where it was drawn.