In a significant judgment settling the law on territorial jurisdiction for offences under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), the Supreme Court has ruled that the jurisdiction to try a complaint regarding an account payee cheque lies with the court where the payee’s “home branch” is situated.
The Bench of Justice J.B. Pardiwala and Justice R. Mahadevan, in the case of Jai Balaji Industries Ltd. and Ors. v. M/s HEG Ltd. (2025 INSC 1362), held that the earlier decision of the Supreme Court in Yogesh Upadhyay v. Atlanta Ltd. (2023) is per incuriam as it failed to consider the statutory scheme and the Explanation to Section 142(2)(a) of the NI Act.
The Supreme Court was hearing Transfer Petitions seeking the transfer of a complaint pending in the court of Judicial Magistrate First Class (JMFC), Bhopal to the Metropolitan Magistrate (MM), Kolkata. The Court analysed the legal position regarding jurisdiction post the Negotiable Instruments (Amendment) Act, 2015. It concluded that under Section 142(2)(a), jurisdiction vests in the court where the payee maintains their bank account. However, relying on the saving clause in Dashrath Rupsingh Rathod v. State of Maharashtra (2014), the Court allowed the transfer to Kolkata because the recording of evidence had already commenced there before the complaint was returned.
Background of the Case
The dispute arose from a cheque of Rs. 19,94,996 issued by Jai Balaji Industries Ltd. (Accused) in favour of M/s HEG Ltd. (Complainant). The cheque was drawn on the State Bank of Bikaner and Jaipur, Kolkata, and was deposited by the complainant in its account at the State Bank of India, Bhopal branch. The cheque was subsequently dishonoured due to insufficiency of funds.
The complainant initially filed a complaint in 2014 before the Metropolitan Magistrate (MM), Kolkata. Summons were issued, charges were framed, and the affidavit of evidence-in-chief was taken on record. However, following the enactment of the Negotiable Instruments (Amendment) Act, 2015, the MM, Kolkata returned the complaint in 2016, observing it lacked jurisdiction. The complainant then refiled the case before the JMFC, Bhopal.
The accused petitioners approached the Supreme Court seeking a transfer of the case back to Kolkata, arguing that under the dictum of Dashrath Rupsingh Rathod, cases where evidence recording had commenced under Section 145(2) of the NI Act should continue in the original court where they were pending.
Court’s Analysis: The Jurisdiction Conundrum
The judgment provides an exhaustive analysis of the evolution of the law on territorial jurisdiction, discussing precedents like K. Bhaskaran v. Sankaran Vaidhyan Balan (1999), Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd. (2009), and the landmark Dashrath Rupsingh Rathod.
The core legal issue addressed was the interpretation of Section 142(2)(a) introduced by the Amendment Act, 2015, which states that an offence shall be tried by a court within whose local jurisdiction “the branch of the bank where the payee… maintains the account, is situated,” if the cheque is delivered for collection through an account.
1. Interpretation of “Maintains an Account”
The Court clarified that the expression “maintains an account” implies an intrinsic relationship between the account holder and the specific branch (home branch) where the account is held. The inclusion of the word “branch” in the section places an “additional condition” for deciding jurisdiction.
2. The ‘Yogesh Upadhyay’ Error
The Bench critically examined the coordinate Bench decision in Yogesh Upadhyay v. Atlanta Ltd. (2023), which had held that jurisdiction lies where the cheque is “delivered for collection,” giving primacy to the act of delivery over the location where the account is maintained.
Disagreeing with this view, Justice Pardiwala observed:
“In our considered view, the interpretation of jurisdiction under Section 142(2)(a) in Yogesh Upadhyay (supra) is not borne out of the statutory scheme of the Act, 1881… The understanding of the Explanation in such a manner leads to distorting of the plain language of Section 142(2)(a).”
The Court noted that Yogesh Upadhyay did not account for the Explanation to Section 142(2)(a), which creates a “legal fiction.” The Explanation provides that even if a cheque is delivered for collection at any branch, it is deemed to be delivered to the branch where the payee maintains the account.
The Court held:
“We are of the firm opinion that the legislature could not have intended to let misuse perpetuate… If we accept the construction placed on Section 142(2)(a) by the decision in Yogesh Upadhyay (supra), we will be allowing a payee to manipulate the question of jurisdiction in his favour by letting him decide where he wants to deliver the cheque for collection.”
Consequently, the Court declared the position of law expounded in Yogesh Upadhyay as per incuriam.
Decision
On Jurisdiction: The Court authoritatively stated:
“It is as clear as a noon day that the jurisdiction to try a complaint filed under Section 138 in respect of a cheque delivered for collection through an account, i.e., an account payee cheque, is vested in the court within whose local jurisdiction the branch of the bank in which the payee maintains the account, i.e., the payee’s home branch, is situated.”
Thus, legally, the MM, Kolkata did not have jurisdiction under the 2015 Amendment, as the complainant maintained its account in Bhopal.
On Transfer Petition: Despite the finding on jurisdiction, the Court ruled in favour of the petitioners regarding the transfer. The Court referred to Dashrath Rupsingh Rathod, which had directed that cases where proceedings had gone to the stage of Section 145(2) (recording of evidence) should remain in the court where they were pending to “obviate and eradicate any legal complications.”
Noting that the MM, Kolkata had returned the complaint after the stage of recording evidence, the Court held:
“In such view of the matter, we are of the considered opinion that allowing the parties to contest the complaint afresh before the JMFC, Bhopal would amount to a procedural impropriety that may prove to be detrimental to the case of the accused.”
Conclusion
The Supreme Court allowed the Transfer Petition. The case is transferred from the JMFC, Bhopal to the MM, Kolkata, with a direction to resume proceedings from the stage before the order of return of the complaint dated July 28, 2016.
Case Details:
- Case Title: Jai Balaji Industries Ltd. And Ors. v. M/s HEG Ltd.
- Case No.: Transfer Petition (Crl.) No. 1099 of 2025
- Citation: 2025 INSC 1362
- Bench: Justice J.B. Pardiwala and Justice R. Mahadevan
