A three judge bench of the Hon`ble Supreme Court of India
(Supreme Court) in its very recent judgment (Dashrath Case) has now
held that all the criminal matters relating to dishonour of cheques
under Section 138 of the Negotiable Instrument Act, 1881 (Act)
would only be entertained by the court which has the territorial
jurisdiction on the location of the drawee bank or in simple words
where the cheque was dishonoured. This judgement will have far
reaching consequences for all the pending criminal matters and the
new matters filed under Section 138 of the Act. This update
endeavours to analyse the consequences of the Dashrath Case.
Earlier Position in relation to an Offence under Section
A division bench of Supreme Court in the Bhaskaran Case had held
that the offence under Section 138 of the Act is based on the
completion of the `chain of command` as explained below:
Drawing of the Cheque and presentation to the bank;
Return of the cheque unpaid by the bank where it was
Issue of a notice in writing is given to the drawee and
demanding the unpaid payment;
Inability to pay of the drawee to pay within a 15 (fifteen) day
period of the receipt of notice;
This, all together would amount to offence of `dishonour of
cheque` under Section 138 of the Act. In other words the court
would have the jurisdiction to entertain the offence at any place
where one of the following causes of action took place.
New Position in relation to an Offence under Section 138
The three judge bench of the Supreme Court in Dashrath Case has
overruled the division bench judgment in Bhaskaran Case holding
that any one of the above acts could not decide the Court that
shall have jurisdiction and as especially the place where the issue
was noticed by the drawer could not decide the Court that shall
have jurisdiction. The reason for the same given by the Supreme
Court is that the earlier position increases the hassles of the
drawer for no reason;
With regard to commission of an offence under Section 138 of
the Act, the Supreme Court has held that when dealing with criminal
offences the Code of Criminal Procedure (CrPC) and the Indian Penal
Code, 1860 should be followed. The CrPC clearly states that the
offence should be tried where it occurred. Therefore, in Section
138 cases, the jurisdiction of the court to try the offence should
be based on where the cheque was dishonoured and not where the
notice was issued as it would not be the location of the
Supreme Court further has provided the following approach
should be followed for pending Section 138 Cases:
* All the cases which have reached a crucial stage of recording
of evidence should be continued to be entertained under the said
courts where they are being entertained at present;
* All other cases, including wherein the accused has not been
served properly, the complaint will now be returned. The
complainant will be allowed to file a new complaint within 30 days
of return in the court having territorial jurisdiction of the
drawee bank and the same will be deemed to be filed within
This decision of the Supreme Court is a gift to the accused as
even after not being able to pay the amount due to the complainant,
he can enjoy the benefits of the court jurisdiction within his
territorial limits and have a hassle free process as compared to
the complainant for recovering his money.
Further, there will be transfer of several cases for territorial
jurisdiction where the recording of evidence has not yet began.
This would make the complainant look for other remedies or
settlement to recover his dues. However we believe over a long
term, this decision may reduce multiple proceedings for the same
action generally filed by the complainant to harass the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Singhania & Partners LLP, Solicitors and Advocates
Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva Convention, as the case may be.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).