The Supreme Court of India, in a judgment delivered on 24 November 2025, clarified the jurisdictional framework for complaints under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) in respect of account payee cheques. A Bench of Justice JB Pardiwala and Justice R Mahadevan held that jurisdiction for filing Section 138 complaints over account payee cheques vests in the court within whose territorial jurisdiction the payee's home bank branch is located.
Background
The question of territorial jurisdiction in cheque bouncing cases has generated extensive litigation since the enactment of the criminal liability provision under Section 138 of the NI Act. The 2015 amendment to the Act sought to address jurisdictional confusion by providing that complaints should be filed at the location where the cheque is presented for collection. However, in practice, the determination of where an account payee cheque is "presented" has remained a point of contention, particularly in commercial transactions involving parties across different states.
The dispute between Jai Balaji Industries and Heg Ltd raised this precise question. The respondent had received account payee cheques that were dishonoured upon presentation. A jurisdictional challenge was raised regarding which court had the territorial competence to entertain the Section 138 complaint, given that the drawer's bank, the payee's bank, and the parties' places of business were in different locations.
Key Holdings
The Supreme Court settled the jurisdictional question with the following principles:
Payee's bank branch determines jurisdiction: For account payee cheques, the territorial jurisdiction for Section 138 complaints vests in the court within whose jurisdiction the payee's home bank branch is situated. This is the branch where the payee deposits or presents the cheque for collection.
Interpretation of 2015 amendment: The Bench interpreted the 2015 amendment to the NI Act as establishing the location of presentation for collection — rather than the location of dishonour — as the relevant jurisdictional nexus. For account payee cheques, presentation necessarily occurs at the payee's bank.
Commercial certainty promoted: The Court emphasised that this interpretation promotes certainty in commercial transactions by providing payees with a predictable forum. Complainants can file proceedings where they maintain their bank accounts, avoiding the burden of litigating in distant jurisdictions.
Distinction from bearer cheques: The Bench noted that the jurisdictional analysis may differ for bearer or order cheques that are not crossed as "account payee," where the location of presentation could potentially vary. The holding was specifically confined to account payee instruments.
Implications for Practitioners
This judgment resolves a frequently litigated jurisdictional question that has consumed judicial time across Magistrate courts nationwide. Commercial litigation practitioners handling cheque bouncing matters should update their filing practices to align with this ruling — the payee's home bank branch location is now the definitive jurisdictional anchor for account payee cheques.
For creditors and commercial entities, the practical benefit is clear: Section 138 complaints can be filed in the jurisdiction where the complainant maintains its bank account, rather than having to pursue proceedings in the drawer's location. This materially reduces the litigation burden on payees, particularly in inter-state commercial transactions.
Defence practitioners should note that jurisdictional challenges in Section 138 matters involving account payee cheques are now substantially foreclosed. The energy previously directed at jurisdictional objections will need to shift to substantive defences. However, where cheques are not account payee instruments, jurisdictional disputes may continue to arise.