For Account Payee Cheque's Dishonour, Complaint Must Be Filed At Place Of Payee's Home Branch : Supreme Court Explains S.142(2)(a) NI Act

The Supreme Court on Friday (November 28) held that complaints arising from the dishonour of account payee cheques must be instituted only before the court that has jurisdiction over the branch of the bank where the payee maintains their account.

The Court clarified that even if the cheque is deposited at a branch different from the payee's home branch, for the purposes of jurisdiction under the Negotiable Instruments Act, the complaint must still be filed before the court governing the home branch of the payee's bank account.

Interpreting Section 142(2)(a) of the Negotiable Instruments Act, 1881, the bench of Justice JB Pardiwala and Justice R Mahadevan observed :

“it is as clear as a noon day that the jurisdiction to try a complaint filed under Section 138 in respect of a cheque delivered for collection through an account, i.e., an account payee cheque, is vested in the court within whose local jurisdiction the branch of the bank in which the payee maintains the account, i.e., the payee's home branch, is situated.”, observed the bench.

Section 142(2)(a) was introduced in 2015, which creates a statutory deeming fiction that even if a cheque is deposited at any branch of the payee's bank, it is legally deemed to have been delivered at the home branch. This, the Court said, prevents forum shopping and ensures uniformity.

Judgment explains Section 142 with illustration.

The judgment explained Section 142 with the following illustration :

Precedent in Yogesh Upadhyay declared per incurium

 The judgment authored by Justice Pardiwala declared the ruling in Yogesh Upadhyay v. Atlanta Ltd., 2023 LiveLaw (SC) 125, to be per incuriam. The Court observed that Yogesh Upadhyay wrongly held that the Courts situated at any of the branches of the payee bank, where the cheque is presented, will get jurisdiction. Only the home branch where the account of the payee is maintained will get jurisdiction. The judgment held that Yogesh Upadhyay ignored the Explanation to Section 142(2)(a), which deems a cheque delivered at any branch of the payee's bank to have been delivered at the payee's home branch, where their account is actually maintained.

The judgment held that the intepretation held in Yogesh will enable forum-shopping.

“If we accept the construction placed on Section 142(2)(a) by the decision in Yogesh Upadhyay (supra), we will be allowing a payee to manipulate the question of jurisdiction in his favour by letting him decide where he wants to deliver the cheque for collection. We are of the firm opinion that the legislature could not have intended to let misuse perpetuate in such a manner.”, the court observed, adding that the necessity of delivery of an account payee cheque to the home branch is only legal and not commercial.

“once it is identified that the cheque in question is an account payee cheque, the delivery must be to such branch in which the payee maintains the account as it is this branch of the bank that will receive the funds in the account maintained by the payee, from the drawee bank which will debit the drawer's account to send such amount. However, the necessity of delivery of an account payee cheque to the home branch is only legal and not commercial. It is to address commercial exigencies that the legislature enacted the Explanation to Section 142(2)(a). The deeming fiction in the Explanation ensures that even if a cheque is delivered to a branch other than the home branch for commercial convenience, it shall be considered to have been delivered to the home branch for the legal purpose of determining jurisdiction. This understanding is also apparent from this Court's recent judgment in Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat, reported in 2025 SCC OnLine SC 1511.”, the Court observed.

Reference was also made to the recent judgment in M/S Shri Sendhuragro and Oil Industries v. Kotak Mahidra Bank Ltd.  

The Case

The dispute arose after the payee/HEG Ltd. deposited a cheque issued by accused/Jai Balaji Industries into its Bhopal bank account. The cheque was dishonoured by the drawer's bank in Kolkata. HEG initially filed a complaint in Kolkata in 2014, where the Magistrate took cognizance and even recorded the complainant's evidence.

Following the Negotiable Instruments (Amendment) Act, 2015, which introduced Section 142(2), HEG sought return of the complaint on the ground that jurisdiction now lay exclusively in Bhopal. The Kolkata Magistrate returned the complaint in 2016, after which HEG re-filed the case in Bhopal. Challenging this, the accused approached the Supreme Court seeking a transfer back to Kolkata, arguing prejudice due to the advanced stage of the original trial.

Decision

The Court extensively examined the legislative intent of Section 142(2)(a) of NI Act, stating that when a cheque is 'delivered for collection through an account', jurisdiction vests only in the court where the payee's bank branch i.e., the home branch.

“a legal fiction that a cheque, when delivered for collection through an account, at 'any branch' of the bank in which the payee maintains the account, would be deemed to have been delivered to the particular branch of the bank in which the payee maintains his account, i.e., the home branch of the payee.”, the court said.

Distinction between 'delivery' and 'presentation' illustrated :

The Court distinguished delivery (Section 46 NI Act) from presentment (Section 64 NI Act):

• Delivery involves the drawer handing the cheque to the payee, and, in case of account-payee cheques, the payee delivering it to his own bank. This stage is covered by Section 142(2)(a).
• Presentment is the act of presenting the cheque to the drawee bank for payment; this stage is relevant for Section 142(2)(b).

Drawing from the recent decision in Bijoy Kumar Moni v. Paresh Manna (2024), the Court explained that “maintains an account” describes the personal relationship between the customer and the specific branch of the bank where the account exists. Jurisdiction therefore attaches not to the bank as a whole, but to the specific branch.

As per law, the complaint needs to have proceeded at Bhopal Court, where the Respondent-payee maintains a bank account; however, upon noting that the trial in Kolkata had substantially progressed, charges had been framed and evidence recorded, the Court found restarting the trial in Bhopal would have caused serious prejudice to the accused. Therefore, the Court while referencing Dashrath Rupsingh Rathod v. State of Maharashtra reported in (2014) 9 SCC 129 invoked its extraordinary powers to prevent unfairness, and ordered the trial to be continued in Kolkata from the stage at which it is returned.

In Dashrath Rupsingh Rathod, it was held that cases where the trial had reached the stage of summoning, appearance of the accused, and the recording of evidence had commenced as per Section 145(2) Negotiable Instruments Act, 1881, should continue in the same court where the trial was ongoing.

The Court directed the registry to send one copy each of the judgment to all the High Courts.

The petition was allowed.

Cause Title: JAI BALAJI INDUSTRIES LTD. AND ORS. Versus M/S HEG LTD.

Citation : 2025 LiveLaw (SC) 1149

Click here to download judgment

Appearance:

For Petitioner(s) : Mr. Ramaswamy Meyappan, Adv. Mr. Kaustubh Shukla, AOR Mr. Praveen Kumar Singh, Adv. Ms. Pushpanjali Singh, Adv. Mr. Ramaswamy Ayappan, Adv. Mr. Kaustubh Shukla, AOR

For Respondent(s) : None