Introduction
A cheque recipient often expects the cheque to be honoured by the drawee bank when it is presented for payment. When the drawer’s account lacks sufficient funds, however, the cheque will be returned unpaid. Section 138 of the Negotiable Instruments Act, 1881 provides a criminal remedy in such cases: it makes it an offence to issue a cheque towards the discharge of a legally enforceable debt or liability that is subsequently dishonoured for insufficiency of funds. The offence carries imprisonment (up to two years) or a fine (up to twice the cheque amount), or both. Filing a Section 138 complaint requires strict adherence to procedural requirements (timely presentation, notice, and time‑limits), but equally critical is selecting the correct forum. As William Pitt famously warned, “Where Jurisdiction ends, Tyranny begins.” In other words, it is critically important to file the complaint in the correct court, because a court without jurisdiction simply cannot deliver justice. This article explains the Section 138 framework and why territorial jurisdiction matters in cheque‐bounce cases.
Legal Framework of Section 138 NI Act
Section 138 of the Negotiable Instruments Act is a specialized criminal provision enacted by amendment in 1988. It penalizes dishonour of a cheque issued for payment of a legally enforceable debt or other liability. In plain terms, if Party A issues a cheque to Party B to pay a debt, and that cheque bounces for lack of funds, the law treats the dishonoured cheque as a criminal act (subject to certain conditions). The aim is to deter parties from defaulting on their financial obligations by returning cheques as “dishonoured.”
The essential ingredients of a Section 138 offence are as follows:
- Legally enforceable liability. The cheque must have been drawn to discharge a debt or other liability that is legally enforceable. In other words, there must be a valid underlying obligation between the parties. A cheque given as a gift or token without a debt does not attract Section 138.
- Cheque dishonoured by bank. The drawer (the person who issued the cheque) must present the cheque to the drawee bank, and the bank must return it unpaid due to insufficient funds (or because it exceeds an agreed arrangement). The return memo from the bank (stating “insufficient funds” or similar) is proof of dishonour.
- Notice to drawer within 30 days. The payee (or holder) must send a written legal notice to the drawer demanding payment of the cheque amount. This notice must be sent within 30 days of receiving the bank’s return memo. Proper service is typically by registered post or courier.
- No payment within 15 days. The drawer then has 15 days from the date of receipt of the notice to make good on the payment. If the drawer fails to pay the cheque amount within this 15‑day period, the offence is complete.
- Complaint filed within one month. If the cheque remains unpaid after the 15‑day window, the payee can file a criminal complaint under Section 138. This complaint must be filed within one month of the expiry of the 15‑day notice period.
Each of the above conditions must be satisfied for a valid Section 138 prosecution. In summary: a cheque issued for a legitimate debt must bounce (due to insufficient funds), the payee must issue timely notice demanding payment, the drawer must default on paying within 15 days of that notice, and the complaint must be filed promptly thereafter. Compliance with these requirements is crucial before even considering which court will hear the case.
Importance of Jurisdiction in Cheque Dishonour Cases
Once the statutory ingredients of Section 138 are met, the next crucial question is: Which court has the territorial jurisdiction to try the offence? Jurisdiction refers to the power of a court to entertain and decide a case. It is critically important to file the complaint in the correct court, because a court that lacks territorial jurisdiction has no authority to try the matter. If a case is instituted in the wrong jurisdiction, it will typically be dismissed or transferred, wasting time and resources. A landmark maxim captures the stakes: “Where jurisdiction ends, tyranny begins.” In other words, a court without proper jurisdiction cannot do justice; it may only issue a nullity.
In the context of Section 138, jurisdiction is generally determined by the provisions of the Criminal Procedure Code and any special territorial rules in the NI Act. Under the Code of Criminal Procedure (CrPC), an offence can usually be tried where it was committed. But a Section 138 offence is somewhat unique: it is a composite offence involving several acts (drawal of cheque, presentation, dishonour, sending notice). Each of those steps might occur in a different locality. For example, a cheque may be drawn in City A, presented in City B, dishonoured at a bank in City B, and the notice sent to City A (where the drawer lives). Determining the proper venue requires sorting out where exactly the “offence” is deemed to have taken place under law.
Until recently, there was confusion over which of the various places constituted the place of offence for a bounced cheque. It is therefore vital that a complainant carefully ascertain the correct court before filing. Mistakes can lead to mandatory transfer or dismissal of the complaint. The Supreme Court of India has stressed that jurisdiction is not a mere technicality – it goes to the very heart of a fair trial. Consequently, litigants must pay close attention to the legal rules and recent case law when deciding where to file a cheque dishonour complaint.
Judicial Evolution on Jurisdiction
| Year | Case (Citation) | Jurisdiction Rule |
| 1999 | K. Bhaskaran v. Sankaran Vaidhyan Balan [1999 (7) SCC 510] | The Court took a broad view. It held that a Section 138 complaint could be filed in any court within the local limits of whose jurisdiction any part of the transaction occurred. This meant the complaint could be instituted where the cheque was drawn, where it was presented for encashment, where it was dishonoured, or where the notice was issued. In effect, any of these four locations was sufficient under CrPC §§177–179. |
| 2009 | Harman Electronics (P) Ltd. v. National Panasonic (India) (P) Ltd. [2009 (1) SCC 720] | A two‑judge bench narrowed the rule. It emphasized that the cause of action for the offence arises only when the cheque is dishonoured (and the notice has been duly communicated), not at the earlier step of issuing the notice. The court held that jurisdiction cannot be based merely on the place from which notice is sent. In other words, issuing the notice does not itself give a court jurisdiction; it is the ultimate dishonour and communication of that dishonour which triggers the offence. |
| 2014 | Dashrath Rupsingh Rathod v. State of Maharashtra & Anr. [2014 (9) SCC 129] | A three‑judge bench clarified the issue conclusively. It overruled the broad rule in Bhaskaran. It confirmed (drawing on Harman) that a Section 138 offence is complete at the moment the cheque is dishonoured, and that the only relevant location is the bank branch where this dishonour occurs. Thus, jurisdiction lies exclusively in the court within whose territorial limits the drawee bank’s branch (that returned the cheque) is situated. Filing elsewhere (even where the cheque was drawn, presented, or notice sent) is not permitted. |
Between 1999 and 2014, the Supreme Court progressively refined the law on jurisdiction. K. Bhaskaran initially allowed a complaint to be filed at any of four places connected to the transaction, adopting a very liberal approach. In Harman Electronics (2009), the Court carved out that sending the notice (in and of itself) does not create a new cause of action at the sender’s location; it tied the offence more closely to the actual dishonour event. Finally, in Dashrath Rupsingh Rathod (2014), a larger bench held that only the place of dishonour counts – the bank branch where the cheque bounced – overruling any broader jurisdictional claims. This 2014 ruling made the law uniform across the country: the offence is deemed committed at the drawee bank’s branch. Henceforth, a complainant must go to the court in that specific location.
Current Position of Law
The law on jurisdiction for cheque dishonour cases has since been codified by legislation. In 2015, Parliament enacted the Negotiable Instruments (Amendment) Act, 2015, which introduced Section 142(2) into the NI Act. This amendment superseded prior judicial rules and laid down clear statutory criteria. The current law provides:
- Section 142(2)(a): If the cheque is delivered to the bank for collection through an account (i.e. presented by depositing it into a payee’s account for onward processing), then the case can only be tried by a court in the district where the branch of the bank (which maintains the payee’s account) is located. In short, if the payee used his own bank account to collect the cheque, jurisdiction lies at that bank branch’s location.
- Section 142(2)(b): If the cheque is presented for payment by the payee directly (otherwise than by account credit), then the case can only be tried by a court in the district where the branch of the drawee bank (on which the cheque is drawn) is situated. In other words, if the payee presents the cheque without using an account (for example, by handing it over in person), jurisdiction lies at the drawer’s bank branch.
In plain language, the amended law ties jurisdiction to the location of the relevant bank branch: either the branch of the payee’s bank (if the cheque was delivered via an account) or the branch of the drawer’s bank (if not). This statutory rule provides a definitive answer to the earlier confusion. It means that only one court – the one covering the proper bank branch – can hear the complaint. All other courts are ousted of jurisdiction.
For example, suppose the cheque was deposited into the complainant’s account at Branch X of Bank Y in City M. Then under Section 142(2)(a) the complaint must be filed in a court in City M where Branch X is located. If instead the cheque was presented directly at Branch Z of Bank Y in City N (where the drawer’s account is), then under Section 142(2)(b) the complaint must be filed in City N. The amendment was explicitly designed to simplify and clarify venue rules. It also includes provisions (Section 142A) to transfer any pending cases to the correct courts according to these rules.
In sum, the current law makes it straightforward: determine how the cheque was presented (through an account or directly) and then go to the court where the corresponding bank branch is located. All earlier Supreme Court judgments on jurisdiction have been superseded by this statutory scheme. It remains essential for complainants to check this rule before filing a Section 138 case, to ensure the complaint is brought in the proper court from the outset.
Conclusion & Practical Takeaways
The offence under Section 138 of the NI Act serves as a powerful deterrent against dishonouring cheques used for debt payments. However, success in a cheque bounce case depends not only on proving the offence itself, but also on presenting the case in the right forum. Jurisdictional rules – as refined by the courts and now codified in law – must be followed to the letter. A complaint filed in an incorrect court will be struck down regardless of the merits. Thus, choosing the correct jurisdiction is as important as meeting all the procedural steps (presentation, notice, deadlines) of Section 138.
Where justice must be done, it must also be done in the right place. Adhering to legal requirements prevents delay and ensures that the cheques law fulfills its purpose of protecting honest payees. In practice, parties should pay close attention to both substance and procedure. Apart from filing in the proper court, a few practical steps can improve the chances of a smooth remedy under Section 138:
- Preserve all evidence. Always keep the dishonoured cheque intact, along with the bank’s return memo or memo copy showing “insufficient funds.” Also retain a proof of dispatch and delivery of the legal notice (for example, postal receipts and the proof of delivery slip). These documents are crucial evidence of compliance with the statute’s requirements.
- Check jurisdiction before filing. Confirm that the chosen court is within the territorial limits prescribed by Section 142(2). Mistaking the venue can lead to your complaint being rejected or transferred. If in doubt, examine where the cheque was deposited or presented and where the drawer’s bank account is maintained. Filing at the outset in the correct district avoids unnecessary litigation and expense.
- Meet all deadlines. Act promptly when a cheque bounces. The law imposes strict time limits (30 days to send notice, 15 days for repayment, 1 month to file). Missing any deadline can invalidate the complaint. Sending the notice by registered post with acknowledgment is advisable to prove on-time service.
In the final analysis, the old maxim holds true: without proper jurisdiction, legal power becomes tyranny. By carefully preserving records, observing procedural timelines, and choosing the correct court (as defined by law), a payee maximizes the chance of recovering the cheque amount through Section 138 proceedings. Careful attention to these details ensures that the legal process can operate fairly and effectively, giving rightful relief where a debt has been dishonoured.
