NI Act: Territorial Jurisdiction Lies Where Cheque is Delivered for Collection
The Gauhati High Court (High court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
NADRESS TU ………. Petitioner
THE STATE OF ASSAM AND ANR (Abdul Resak K.C) …….. Respondent(s)
On 29th July 2022, the Gauhati HC passed an order stating that for offences under section 138 of the Negotiable Instruments Act 1881 (“NI Act”), the territorial jurisdiction of the Court will be where the cheque is delivered for collection. A look at the highlights of the case:
- Nadress and (second respondent) Abdul Resak K.C were business partners.
- In discharge of the debt, Abdul Resak issued a cheque dated 08.11.2021, drawn in favour of Canara Bank, Thamarassery Branch, Kerala for a sum of Rs. 9,00,000/. The cheque was issued to Nadress.
- Nadress deposited the said cheque for collection on 25.11.2021 in his account maintained in State Bank of India, Hojai branch, Assam. However, the cheque came to dishonoured with an endorsement stating, ‘account closed’.
- Nadress issued a demand notice, but Abdul Resak failed to receive it. Hence, Nadress filed a petition u/s 138 of NIA Act in the Trial Court in Hojai.
- However, the trial court in Hojai dismissed the same on the ground of lack of territorial jurisdiction. The trial court based the dismissal on its interpretation of section 142(2) of the NI Act, that in case of a:
– Cross cheque or account payee cheque: the court where the complainant has an account will have the jurisdiction.
– Bearer cheque: the court where the accused has an account will have the jurisdiction.
The Judge observed that in this case, since the cheque issued was a bearer cheque (issued in the name of the petitioner Nadress), the Court, where Abdul Resak had an account has the jurisdiction. The case was dismissed on this ground.
- A criminal revision petition was filed by Nadress before the High Court of Assam challenging the trial court order.
- Section 142(2) of the NI Act states that offences u/s 138 of the NI Act will be 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; or (b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account (maintained by him / her), the branch of bank where the drawer maintains the account, is situated.
Therefore, it becomes abundantly clear that no classification of cheque as bearer or crossed cheque / account payee is made in the NI Act for the purpose of jurisdiction. As such, no classification can be made for the purpose of jurisdiction, being not provided in the Act.
- Moreover, the word ‘any cheque’ used in section 138 of the NI Act can be inferred to mean that a cheque may be an account payee cheque or bearer cheque. Dishonour of such cheque due to insufficiency or exceeding the amount would amount to an offence and attract penalty.
- The High Court also relied on the judgement passed by the Madhya Pradesh HC in the M/s Bridgestone India Pvt. Ltd. vs. Inderpal Singh, Criminal Appeal No.1557 of 2015 (arising out of slp(crl.) No.7850 of 2011), wherein it was held that Section 142(2)(a) amended through the Negotiable Instruments (Amendment) Second Ordinance, 2015, vests jurisdiction for initiating proceedings for the offence u/s 138 of NI Act, inter alia in the territorial jurisdiction of the Court, where the cheque is delivered for collection through an account of the branch of the bank where the payee or holder in due course maintains an account.Based on the above analysis, The Gauhati High Court set aside the order passed by the Trial court and directed the trial court to proceed with the case in accordance with the law.