Territorial Jurisdiction in Section 138 NI Act for Account Payee Cheques -A Doctrinal Consolidation

I. Introduction

The law governing territorial jurisdiction under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) has undergone a complex and, at times, inconsistent evolution. The difficulty stems from the composite nature of the offence, which is not a singular act but a sequence of interconnected events – drawing of the cheque, presentation, dishonour, issuance of notice, and failure to pay.

This multi-jurisdictional character gave rise to prolonged judicial uncertainty regarding the appropriate forum for prosecution. While legislative intervention in 2015 sought to resolve this ambiguity, interpretational inconsistencies persisted, particularly in cases involving account payee cheques.

The Supreme Court’s decision dated 28 November 2025 in Jai Balaji Industries Ltd. v. HEG Ltd. (2025 SCC OnLine SC 2581) has now provided a definitive clarification. Rather than altering the statutory framework, the judgment consolidates prior jurisprudence and settles the doctrinal position on jurisdiction with precision.

II. The Pre-Amendment Position: Expansive Jurisdiction and Its Consequences

The jurisprudential foundation was laid in K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510, where the Supreme Court conceptualised the offence under Section 138 as a “concatenation of five acts”. These included drawing of the cheque, its presentation, dishonour, issuance of notice, and failure to pay within the stipulated period.

On this reasoning, the Court held that jurisdiction could be invoked at any place where any of these acts occurred. This interpretation significantly expanded the territorial reach of Section 138 proceedings. As the Court observed, each of these acts could occur in different localities, thereby enabling the complainant to choose among multiple forums.

While this approach was intended to facilitate recovery for the payee, it resulted in practical complications. The absence of a clear territorial anchor led to forum shopping, multiplicity of proceedings, and harassment of accused persons who were often required to defend themselves in distant jurisdictions.

III. Judicial Correction: Restricting Jurisdiction

A. Harman Electronics: Emphasis on Cause of Action

In Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd., (2009) 1 SCC 720, the Supreme Court curtailed the expansive approach adopted in Bhaskaran. It held that mere issuance of statutory notice does not confer jurisdiction; rather, it is the receipt of notice by the drawer that gives rise to a cause of action.

This marked a shift towards a more restrictive and rational basis for jurisdiction, aimed at preventing abuse.

B. Dashrath Rupsingh Rathod: The Offence-Centric Approach

The jurisprudence took a decisive turn in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129. A three-Judge Bench held that:

• • The offence under Section 138 is committed upon dishonour of the cheque;
  • Consequently, jurisdiction lies only where the drawee bank is situated.

The Court expressly rejected the application of the “cause of action” doctrine in criminal proceedings, observing that criminal jurisdiction must be tied to the place of commission of the offence, not convenience or multiplicity of acts.

While doctrinally consistent with criminal law principles, this interpretation imposed significant burdens on payees, who were compelled to initiate proceedings in locations where the drawer maintained his bank account.

IV. Legislative Response: The 2015 Amendment

In response to the difficulties created by Dashrath, Parliament enacted the Negotiable Instruments (Amendment) Act, 2015, introducing Section 142(2).

The amended provision created a bifurcated regime:

• • Section 142(2)(a): Where the cheque is delivered for collection through an account, jurisdiction lies where the payee maintains the account;
  • Section 142(2)(b): Where the cheque is presented otherwise, jurisdiction lies where the drawee bank is situated.

An important Explanation further clarified that if a cheque is deposited at any branch of the payee’s bank, it shall be deemed to have been delivered to the branch where the payee maintains the account.

Although the amendment sought to restore a payee-centric approach, interpretational uncertainties continued, particularly regarding:

• • the meaning of “delivery for collection”,
  • the role of the “branch”,
  • and the distinction between account payee and bearer cheques.

V. The 2025 Supreme Court Judgment: Clarification and Consolidation

The decision in Jai Balaji Industries Ltd. addresses these unresolved issues and provides a coherent interpretative framework.

A. Jurisdiction Anchored to the Payee’s Bank Branch

The Court unequivocally held that in cases involving account payee cheques, jurisdiction lies only where cheque is delivered for collection through an account (typically account payee cheques).

This interpretation reinforces the statutory mandate under Section 142(2)(a) and eliminates any residual ambiguity regarding competing forums.

B. Distinction Between “Delivery” and “Presentment”

A significant doctrinal contribution of the judgment lies in its distinction between:

• • “Delivery” (Section 46) – which includes the act of the payee depositing the cheque into his bank account; and
  • “Presentment” (Section 64) – which refers to the stage at which the cheque is presented to the drawee bank for payment.

The Court clarified that, in the context of account payee cheques, the act of depositing the cheque with the payee’s bank is part of “delivery for collection through an account”, thereby attracting Section 142(2)(a).

This distinction resolves prior confusion where courts had conflated deposit with presentment.

C. Centrality of the “Branch” Concept

The judgment places considerable emphasis on the term “branch” in Section 142(2). It clarifies that the relationship between the account holder and the bank is not merely with the bank as an institution, but with a specific branch.

Accordingly, for jurisdictional purposes, it is insufficient to identify the bank; it is necessary to ascertain the precise branch where the account is maintained.

This interpretation introduces a high degree of precision and eliminates jurisdictional vagueness.

D. Reinforcement of the Statutory Legal Fiction

The Court also reaffirmed the Explanation to Section 142(2)(a), holding that:

• • Even if a cheque is deposited at a different branch,
  • It is deemed to have been delivered to the payee’s home branch.

This deeming fiction ensures that jurisdiction cannot be artificially created by depositing cheques at convenient locations.

VI. Practical and Doctrinal Implications

The 2025 judgment has far-reaching implications:

1. Elimination of Forum Shopping

The possibility of choosing among multiple jurisdictions – a feature of the Bhaskaran regime – has been decisively curtailed.

2. Doctrinal Consistency

The judgment harmonises the statutory text of Section 142(2) with the conceptual framework of the NI Act, particularly the distinction between delivery and presentment.

3. Predictability in Commercial Litigation

By anchoring jurisdiction to a specific and identifiable factor – the payee’s bank branch – the Court has introduced certainty, which is essential for commercial transactions.

4. Reduction in Procedural Litigation

Jurisdictional objections, which previously consumed significant judicial time, are likely to diminish due to the clarity provided.

VII. Conclusion

The evolution of law on territorial jurisdiction under Section 138 reflects a gradual movement from expansion to restriction, and finally to structured clarity.

• • Bhaskaran enabled expansive jurisdiction;
  • Harman Electronics introduced restraint;
  • Dashrath imposed strict territoriality;
  • The 2015 Amendment restored balance;
  • The 2025 judgment has now crystallised the law.

The Supreme Court has effectively reconciled statutory intent with practical realities, ensuring that jurisdictional rules are both legally sound and commercially workable.

The position today is unequivocal: In cases involving account payee cheques, jurisdiction lies with the court within whose territorial limits the payee’s bank branch is located, and no other forum.

This doctrinal consolidation marks a significant step towards certainty and efficiency in cheque dishonour litigation under the NI Act.

Authored By:
Varun S. Ahuja
Ahuja Law Offices
M: 9971673660