In a significant judgment bringing long-awaited clarity to cheque dishonour litigation, the Supreme Court of India has conclusively settled the law on territorial jurisdiction under Section 138 of the Negotiable Instruments Act, 1881, particularly after the 2015 Amendment.
The judgment, delivered on 28 November 2025 in Jai Balaji Industries Ltd. & Ors. vs HEG Ltd., resolves conflicting interpretations adopted by courts across the country and lays down a clear rule regarding which court has jurisdiction in cheque bounce cases.
Background of the Case
The dispute arose out of a complaint under Section 138 NI Act filed by HEG Ltd., where the cheque in question was an account payee cheque.
- The drawer (issuer of the cheque) maintained its bank account in Kolkata.
- The payee deposited the cheque for collection at its bank branch in Bhopal.
Conflicting views emerged on whether jurisdiction lay with:
- the court where the drawer’s bank was located, or
- the court where the payee deposited the cheque.
This confusion intensified after the insertion of Sections 142(2) and 142A by the Negotiable Instruments (Amendment) Act, 2015, which was intended to streamline jurisdiction but instead gave rise to divergent interpretations.
Key Legal Issue Before the Supreme Court
The Supreme Court was called upon to decide:
Which court has territorial jurisdiction in a Section 138 NI Act case after the 2015 amendment—especially where the cheque is an account payee cheque?
Additionally, the Court examined whether a case should be transferred merely because the court initially entertaining it lacked jurisdiction under the amended law, even when the trial had already progressed.
Supreme Court’s Findings: Clear Distinction Between Cheque Types
1. Account Payee Cheques: Jurisdiction Lies With Payee’s Bank
The Supreme Court categorically held that:
In case of an account payee cheque, territorial jurisdiction lies exclusively with the court within whose jurisdiction the payee’s bank branch—where the cheque is deposited for collection—is situated.
This interpretation flows directly from Section 142(2)(a) NI Act, which uses the phrase “delivered for collection through an account”.
Legal Impact
- The drawer’s bank location becomes irrelevant for account payee cheques.
- The payee’s bank branch alone determines jurisdiction.
This ruling effectively puts an end to forum shopping by drawers and removes ambiguity faced by complainants.
2. Account Bearer / Self Cheques: Jurisdiction Lies With Drawer’s Bank
The Court further clarified that:
- For bearer cheques, self cheques, or account bearer cheques, jurisdiction is governed by Section 142(2)(b).
- In such cases, the court having jurisdiction is the one within whose limits the drawer maintains the bank account.
Thus, the Supreme Court has drawn a clear statutory distinction based on the nature of the cheque.
Important Clarification on Ongoing Trials
Although the Court held that JMFC Bhopal had jurisdiction in the present case (as the cheque was deposited there), it refused to send the matter back to Bhopal.
Why?
- Evidence under Section 145(2) NI Act had already commenced before the Metropolitan Magistrate at Kolkata.
- Transferring the case at such an advanced stage would cause procedural prejudice and unnecessary delay.
Relying on earlier principles laid down in Dashrath Rupsingh Rathod, the Supreme Court ruled that where trial has substantially progressed, proceedings may continue in the same court in the interest of justice, even if jurisdiction would otherwise lie elsewhere.
Earlier Judgment Declared Per Incuriam
In a crucial development, the Supreme Court declared its earlier decision in Yogesh Upadhyay vs Atlanta Ltd. to be per incuriam, holding that it incorrectly interpreted Section 142(2) NI Act.
This declaration removes lingering confusion and ensures uniform application of the law across India.
Final Legal Position After This Judgment
Settled Law on Jurisdiction Under Section 138 NI Act
| Type of Cheque | Court Having Jurisdiction |
|---|---|
| Account Payee Cheque | Court where payee’s bank branch (depositing branch) is situated |
| Account Bearer / Self Cheque | Court where drawer’s bank branch is situated |
This judgment now stands as a binding precedent and will govern all cheque dishonour cases filed across the country.
FLOWCHART / DIAGRAM (Jurisdiction under Section 138 NI Act after 2015 Amendment)
┌──────────────────────────┐
│ Cheque Type? │
└────────────┬─────────────┘
│
┌────────────────────────────┴────────────────────────────┐
│ │
┌─────────────────────────┐ ┌──────────────────────────┐
│ ACCOUNT PAYEE CHEQUE │ │ ACCOUNT BEARER CHEQUE │
│ ("A/C Payee Only") │ │ (Bearer / Self / Cash) │
└─────────────┬───────────┘ └───────────────┬──────────┘
│ │
│ │
┌───────────────▼────────────────┐ ┌──────────────▼───────────────────┐
│ Where was the cheque │ │ Where does the *drawer* │
│ DEPOSITED FOR COLLECTION? │ │ maintain their BANK ACCOUNT? │
│ (Payee’s bank branch) │ │ (Home branch of drawer) │
└───────────────┬────────────────┘ └───────────────┬──────────────────┘
│ │
│ │
┌───────────────▼────────────────┐ ┌──────────────▼──────────────────┐
│ This location FIXES │ │ This location FIXES │
│ TERRITORIAL JURISDICTION │ │ TERRITORIAL JURISDICTION │
│ (Section 142(2)(a)) │ │ (Section 142(2)(b)) │
└───────────────┬────────────────┘ └───────────────┬──────────────────┘
│ │
│ │
┌───────────────▼────────────────┐ ┌──────────────▼──────────────────┐
│ COURT HAVING JURISDICTION │ │ COURT HAVING JURISDICTION │
│ = Court where PAYEE maintains │ │ = Court where DRAWER maintains │
│ the bank account. │ │ the bank account. │
└────────────────────────────────┘ └──────────────────────────────────┘
The Supreme Court’s judgment dated 28 November 2025 marks a decisive step in stabilising cheque dishonour jurisprudence in India. By clearly demarcating jurisdiction based on the nature of the cheque, the Court has settled a long-standing controversy and strengthened the effectiveness of the Negotiable Instruments Act.
This ruling will significantly influence pending and future cases under Section 138 NI Act, making it one of the most important commercial law judgments of recent times.
About Advocate Anoop Verma
Advocate Anoop Verma is a distinguished Advocate at the Punjab and Haryana High Court, Chandigarh, and also appears before the Supreme Court of India. With years of dedicated experience in criminal law, bail matters, quashing petitions, and cases under Section 138 of the Negotiable Instruments Act, he is known for his practical approach and sharp legal strategy.
He has represented clients in numerous complex criminal and financial cases across Chandigarh, Haryana, Punjab, and Delhi, earning a reputation for professionalism, clarity, and result-driven advocacy.
For legal consultation or representation before the High Court or Supreme Court, you may contact:
Phone: +91-9463742964
Email: advanoopverma@gmail.com
Website: www.vlaoffice.com
Office: Punjab & Haryana High Court, Chandigarh