India: Cheque Dishonor – SC Redefined Jurisdiction Of Courts

Last Updated: 2 March 2015
Article by PSA


The perplexity over jurisdiction of courts in cheque bouncing cases has finally been resolved by the three judge bench of the apex court in Dashrath Rupsingh Rathod v State of Maharashtra & Anr ("Dashrath").1 The Supreme Court held that the complaints relating to dishonor of cheques must be filed only in the courts within whose territorial jurisdiction the drawee bank is situated. The judgment has taken a contrary view from the principle of territorial jurisdiction laid in Bhaskaran v Sankaran Vaidhyan Balan ("Bhaskaran")2, wherein the ruling was that complaints under section 138 of Negotiable Instruments Act, 1881 ("NI"), can be filed at any place other than the place of drawee bank. But, still confusion persists about the jurisdiction of courts on multi city cheques as the SC did not discuss or clarify its stance on such cheques payable at par at all branches of the bank.

This newsletter analyses the SC's interpretation under section 138 NI in determining the jurisdiction of courts in cheque dishonor complaints, the alternate remedies available for the drawee of dishonored cheques and the contrary view of the Bombay High Court ("BHC") on dishonor of multi city cheques.

1. Jurisprudential Position

As stated, the courts so far were following the principles of territorial jurisdiction laid in Bhaskaran's case for section 138 complaints. In that case, a two-judge bench of the SC interpreted section 138 NI along with sections 177 to 179 of Criminal Procedure Code ("CrPC") and indicated that the offence under section 138 can be completed only with the concatenation of the following acts: (i) Drawing a cheque; (ii) Presentation of the cheque to the bank; (iii) Return of the cheque unpaid by the drawee bank; (iv) Written notice to the drawer of the cheque demanding payment of the cheque amount; and (v) Failure of the drawer to make payment within 15 days of the receipt of notice. The SC held that the court, within whose jurisdiction any one of the aforesaid five acts takes place, will have the territorial jurisdiction to adjudicate the case.

The question is whether the liberal approach adopted by considering location of issue of notice of cheque bouncing tantamounts to commission of offence is legally correct? As per section 179 of CrPC,3 the offence must be tried only by the courts within whose jurisdiction the offence has been committed. So, will a mere issuance of notice to the drawer demanding payment for dishonored cheque be considered as an offence?

In Harman Electronics (P) Ltd ("Appellant") v National Panasonic India Ltd ("Respondent")4, the apex court analyzed the question whether the cause of action for section 138 cases arises by issuing demand notice or when the drawer receives notice. In this case, the Appellant and Respondent entered into a business transaction in Chandigarh. Appellant resided and carried on business in Chandigarh and issued a cheque to the Respondent in Chandigarh which was presented for encashment in that city. It was dishonored by the Appellant's bank in Chandigarh. The Respondent issued a legal notice under section 138 from Delhi. The question arose if a mere issue of notice from Delhi will constitute as cause of action? The case went all the way to the SC who took the view that if mere presentation of cheque or issue of notice bestows territorial jurisdiction upon the courts to try section 138 matters, then it would inevitably lead to harassment for a drawer. The SC held that only receipt of notice will give rise to cause of action for section 138 matters. A distinction must be made between the ingredients and commission of an offence. Issuance of notice under section 138 NI is an ingredient for maintaining the complaint and failure by the drawer to make payment within 15 days only give rise to cause of action.

The ratio held in Harman case sounds a discordant note to Bhaskaran's view as in the former case the SC categorically held that mere issue of notice will not be considered as commission of offence and, thus section 138 complaints cannot be filed in courts by claiming that notice issued to the drawer demanding defaulted payments was within jurisdiction of a court. The Harman case has adopted a strict approach towards territorial jurisdictions of courts with a view to uphold the law enshrined under section 179 CrPC and to restrain the drawee from harassing the drawer.

2. Dashrath Ruling and its Impact

In Dashrath's case, the SC analyzed the varied connotations laid in the above cases and the concept of cause of action to determine the place of cause of action and the principle for territorial jurisdictions. It held as follows:

2.1 Applicability of civil law: The SC took the view that unlike civil law, the phrase cause of action under section 138 NI must be construed in accordance with section 178 of CrPC. Under civil law, suits can be filed in courts within whose jurisdiction whole or part of cause of action arises i.e. a civil suit can be filed at the place where the drawer resides or where the transaction took place or where the drawer has its place of business. But, to initiate section 138 NI proceedings, the complaint must be filed only in the courts within whose jurisdiction the offence has been committed i.e. place where the drawer bank is situated.

2.2 Cognizance of offence: The SC held that there is a discernibly demarcated difference between the commission of an offence and cognizance of offence. Cognizance leads to cause of action. For section 138 complaints, the cause of action arises only when the drawer fails to pay the defaulted payment. The complaints can be filed only in the courts within whose jurisdiction the cheque is presented for encashment. But, the courts can take cognizance of the offence only when: (i) the cheque is presented to the bank within 6 months from the date on which it is drawn; (ii) notice has been issued to the drawer demanding the defaulted payment within 30 days from the date of dishonor by the bank; and (iii) the drawer fails to pay the defaulted payment within 15 days from the receipt of the notice.

2.3 Jurisdiction under section 138 NI: The SC held that the return of the cheque by the drawer bank only constitutes commission of offence under section 138. Hence, the courts within which drawer bank is located will only have the jurisdiction to try the case. Adopting a strict approach, the SC wanted to rule out the unintended ramifications caused to the drawer by the principles laid in Bhaskaran's case. The flexibility given to the drawee so far with respect to choosing the place for initiating action under section 138 NI had caused severe hardships to the drawer as the places sometimes had no connection with the drawer or with any facet of the transaction. With the Dashrath ruling, the judicial inquiry or trial has been restricted to place of the commission of offence so as to restrain abuse of section 138.

2.4 Alternate remedies: In terms of alternate remedies, the SC also observed that the relief sought under section 138 is in addition to the reliefs available under Indian Penal Code ("IPC") and common law. The drawee of a dishonored cheque can lodge a First Information Report with the Police or file a complaint directly before the concerned Magistrate or a civil suit. If the drawee succeeds in establishing that the inducement for accepting a cheque which subsequently was dishonored, had occurred where he/she resides or ordinarily transacts business, he/she will not have to travel to the place where the cheque was dishonored. All remedies under the IPC, CrPC will be available to a drawee, if he/she chooses to pursue this course of action, rather than a complaint under section 138.

The SC decision will have a massive impact on the cases already pending before various courts because numerous cases will have to be transferred to the courts within whose jurisdiction the cheque was dishonored. However, keeping in perspective the (a) hardship caused to the accused who may have to travel long distances to conduct their defense, and (b) mindful of the legal implications of proceedings permitted to continue in a court devoid of jurisdiction, the SC held that the cases, in which evidence has commenced (as envisaged under section 145(2) of NI) will continue in the same court. To obviate and eradicate any legal complications, the category of cases where proceedings have gone to the stage of section 145(2) or beyond will be deemed to have been transferred from the courts, which possess the territorial jurisdiction to the court where it is presently pending. All other complaints, including the ones where the accused has not been properly served will be returned to the complainant for filing in the proper court. If such complaints are re-filed within thirty days of their return, they shall be deemed to have been filed within the time prescribed by law, unless the initial or prior filing was itself time barred

3. At Par Cheques

The BHC in Ramanbhai Mathurbhai Patel ("Petitioner") v State of Maharashtra & Anr ("Respondent")5, dealt with territorial jurisdiction of the courts on "At Par cheques". In this case, two cheques were drawn on State Bank of India and Bank of Maharashtra located at Gandhinagar in Gujarat. Both these cheques were multi-city cheques payable at par in any of the branches of the respective banks. The drawee presented them in his bank at Mumbai, and they were sent for clearing to the respective branches of the two banks located in Kurla, Mumbai. Both the cheques were dishonored and section 138 proceedings were launched at Metropolitan Magistrate, Kurla. The Petitioner challenged the jurisdiction of Kurla court by filing criminal writ petition before BHC. However, BHC held that in the case of at par cheques, the drawer has given an option to the banker of the drawee to get the cheques cleared from the nearest branch of the drawee bank. In the case of multi-city cheque section 138 complaints can be filed in Mumbai i.e. place of drawee bank. Thus, BHC ruling implies that the drawee can choose the court where section 138 proceedings may be initiated which is contrary to the ratio held in Dashrath case. Since SC, in Dashrath's case did not held specifically on the territorial jurisdictions of courts in multi-city cheques, it becomes necessary that another case will need to clarify the confusion emanating from the BHC judgment.


The SC has finally ruled on and clarified a very complicated issue by categorically holding that the place where the drawee bank is situated will only be the place for judicial inquiry and trial for section 138 NI complaints. On the flipside, the present decision will burden the courts as the pending matters will have to be transferred to the appropriate courts and potentially will cause unnecessary procedural delays. The recent BHC decision has raised the issue of territorial jurisdiction of courts in multi- city cheques. However, the SC has stayed the BHC decision6 as it runs contrary to the essence of Dashrath. Thus, the jurisdiction of courts on multi-city cheques is yet to be determined by the SC.


1 AIR 2014 SC 3519

2 (1999) 7 SCC 510

3 Section 179 of CrPc states - When an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be inquired into or tried by a Court within whose local jurisdiction such thing has been done or such consequence has ensued

4 (2009) 1 SCC 720

5 2014(4)Bom CR(Cri)126

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

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions