India: Amendment To Negotiable Instruments Act, 1881

Last Updated: 9 October 2015
Article by DSK Legal

Hon'ble Supreme Court in its judgment dated August 1, 2014 in the case of Dashrath Rupsingh Rathod vs. State of Maharashtra and another (Criminal Appeal No. 2287 of 2009) inter alia held that the territorial jurisdiction for dishonor of cheques is restricted to the Court within whose local jurisdiction the offense was committed i.e. where the cheque is dishonoured by the Bank on which it is drawn.

Pursuant to the said judgment of the Supreme Court number of pending proceedings under Section 138 of the NI Act, were transferred to the Courts having jurisdiction as per the said judgment. Further, various representations were made to the Government, inter alia by industry associations and financial institutions expressing their concerns about the wide impact of the said judgment on the business interest since the same would offer undue protection to defaulters at the expense of the Complainants.

Considering various aspects and to address the difficulties faced by the payee of cheques in filing the case under section 138 of the NI Act, the bill No. 151-C of 2015 ("Earlier Bill") was introduced to amend the provisions of NI Act, which was passed by Lok Sabha on May 13, 2015. In said amendment bill it was inter alia proposed to amend the section 142 of NI Act, and following sub-section was proposed to be inserted:

"... The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction, the bank branch of the payee, where the payee presents the cheque for payment, is situated..."

Since the aforesaid bill was pending for consideration before Rajya Sabha and Parliament was not in Session, the Negotiable Instruments (Amendment) Ordinance, 2015 has been promulgated by the President on 15 June, 2015 ("said Ordinance") which, inter alia, provides the following amendment in relation to the territorial jurisdiction of the Court to try and entertain a complaint filed under Section 138 of the NI Act. The said Ordinance is currently in force.

In the principal Act, Section 142 shall be numbered as sub-section (1) thereof and after sub-section (1) as so numbered, the following sub-section shall be inserted, namely:

"(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction-

  1. If the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or
  2. If the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account, situated.

Explanation: For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account".

Further, to inter-alia clarify the position regarding the pending/transferred cases, the said Ordinance, provides for insertion of new Section 142A.

"142A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any judgement, decree, order or directions of any court, all cases arising out of section 138 which were pending in any court, whether filed before it, or transferred to it, before the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015 shall be transferred to the court having jurisdiction under sub-section (2) of section 142 as if that sub-section had been in force at all material times.

(2) Notwithstanding anything contained in sub-section c(2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under subsection (1), and such complaint is pending in that court, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Ordinance , 2015, more than one prosecution filed by the same payee or holder in due course, as the case may be, against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142 before which the first case was filed and is pending, as if that sub-section had been in force at all material times."

The Earlier Bill dated 6th May, 2015 has been withdrawn on 24th July, 2015 and a new Bill No. 186 of 2015 to amend the NI Act, on similar lines of provisions of said Ordinance, was introduced in Lok Sabha on 27th July, 2015 and was passed by Lok Sabha on 6th August, 2015. The said new bill is pending to be introduced in Rajya Sabha.


Pending the passing of said new bill, the said Ordinance holds the field and is now in force. The jurisdiction for filing and transfer of complaints under Section 138 of NI Act is currently governed by the said Ordinance i.e. jurisdiction depends on the place where the payee maintains the bank account.

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.

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