Court Where Cheque Is Presented For Collection Has Jurisdiction To Entertain Dishonour Complain U/S 138 NI Act: Kerala High Court

The Kerala High Court has held that the word ‘delivered’ used in Section 142(2)(a) of the Negotiable Instruments Act, 1881 ("NI Act") has no significance for the purpose of determining jurisdiction. Rather, significance must be given to the text ‘for collection through an account’. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the latter place is decisive to determine the question of jurisdiction.The Bench comprising Justice A. Badharudeen while dismissing the writ petition has observed that when an issue of jurisdiction arises, the challenge upon jurisdiction has to be raised before the same court and it cannot be a subject matter of writ petition. RELEVANT LAWSection 142(2) of NI Act"Section 142(2): The offence under section 138 shall be inquired into and tried only by a Court within whose local jurisdiction, -(a) 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; XXXXExplanation.- 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."BACKGROUND FACTSThe Accused issued a cheque to the Complainant pursuant to an agreement between them. As per the Agreement, the Complainant is a permanent resident of Mumbai. The cheque was delivered at Kannur by the Accused, drawn on South Indian Bank Ltd., Kannur.The Cheque was presented by the Complainant for collection through a bank in Alappuzha district and it was allegedly dishonoured. The Complainant instituted proceedings under Section 138 of NI Act against the Accused before the Judicial First Class Magistrate Court (JFCM) – 1, Alappuzha district. In the said proceedings, the Compainant stated that he is presently residing at Alappuzha. The Accused filed a writ petition before the High Court alleging that Magistrate Court in Alappuzha lacks jurisdiction to take cognizance of the offence. The Accused (Petitioner) while relying on Section 142(2)(a), argued that since the cheque was delivered for collection through an account maintained by the drawer of the cheque at Kannur, the Complainant at present residing within the jurisdiction of Magistrate Court (Alappuzha) cannot launch prosecution in Alappuzha, merely on the ground that the cheque was presented for collection through a bank in Alappuzha District.The Complainant (Respondent) relied upon the Supreme Court judgment in M/s Himalaya Self Farming Group & Anr. v M/s Goyal Feed Suppliers and argued that the Magistrate Court at Alappuzha has jurisdiction under Section 142 of NI Act, as the cheque was presented by the Complainant through her account in State Bank of India situated Alappuzha. As per Section 142(2)(a), an offence under Section 138 is triable by a Court under whose jurisdiction the branch of the bank where the payee (here Complainant) maintains the account is situated.HIGH COURT VERDICTThe issue before the Court was "when the payee or holder in due course presents a cheque through an account maintained by the payee or holder in due course in a bank within the jurisdiction of a court, whether the court, where the cheque was presented for collection, has jurisdiction to entertain the complaint, alleging commission of offence under Section 138 of the NI Act?"The Court found that the cheque was delivered for collection through a bank in Kannur and presented for payment at Alappuzha. The Complainant presented the cheque through her account in a bank in Alappuzha where it was dishonored. Therefore, the Court where the cheque was presented for collection, will have jurisdiction to entertain a case under Section 138 of the NI Act. “A conjoint reading of Section 142(2)(a) along with explanation thereof, makes the position emphatically clear that, when a cheque is delivered or issued to a person with liberty to present the cheque for collection at any branch of the bank where the payee or holder in due course, then, the cheque shall be deemed to have been delivered or issued to the branch of the bank, in which, the payee or holder in due course, as the case may be, maintains the account, and within the jurisdiction of the court, where such cheque was presented for collection, will have jurisdiction to entertain complaint alleging commission of offence punishable under Section 138 of the NI Act.”The Court also held that when an issue of jurisdiction arises, the challenge regarding the jurisdiction has to be raised before the same court and that same court has to decide upon the issue of jurisdiction. It stated that no writ petition can lie to a High Court seeking for determining the question of...

Court Where Cheque Is Presented For Collection Has Jurisdiction To Entertain Dishonour Complain U/S 138 NI Act: Kerala High Court

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Court Where Cheque Is Presented For Collection Has Jurisdiction To Entertain Dishonour Complain U/S 138 NI Act: Kerala High Court

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