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...

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

Yash Mittal

A deeming fiction is created under Explanation to Section 142(2)(a) of the NI Act, that the cheques deposited anywhere are deemed delivered at the home branch, the court said.

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