Latest ruling of territorial jurisdiction of 138 ni act

The Negotiable Instruments Act, 1881, specifically Section 138, addresses dishonored cheques due to insufficient funds or a stop-payment instruction. Section 138, popularly known as the NI Act, aims to ensure financial discipline and prevent cheque fraud, and it has undergone significant judicial interpretations, especially regarding territorial jurisdiction. Recent rulings by the Indian judiciary have further clarified where cases related to cheque dishonor should be filed, providing guidance to both complainants and defendants.

The Evolution of Jurisdiction in Section 138 NI Act Cases

1. Bhaskaran Case (1999): The initial judgment regarding jurisdiction in Section 138 cases was laid down in K. Bhaskaran v. Sankaran Vaidhyan Balan & Anr., where the Supreme Court held that any of the following places could establish territorial jurisdiction:
   • The place of drawing of the cheque.
   • The place of dishonoring by the bank.
   • The place where the notice of demand was issued.
   • The place where payment was to be made.

   This ruling expanded jurisdictional options for complainants but led to concerns about forum shopping, where cases were filed at distant or inconvenient locations for the accused.

2. Dashrath Rupsingh Rathod Case (2014): To address forum shopping, the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra overruled the Bhaskaran ruling. It held that complaints could only be filed at the place where the cheque was dishonored, i.e., the bank of the drawer, reducing the complainant’s options for jurisdiction.
3. 2015 Amendment: Parliament amended the NI Act in 2015 by inserting Sections 142(2) and 142A, specifying that cases under Section 138 can be filed in the court where the payee’s bank is located, effectively counteracting Dashrath Rupsingh Rathod and providing more clarity and flexibility to complainants.

Latest Judicial Interpretation and Ruling: K. Parameswaran Unni v. G. Kannan

In 2022, the Supreme Court delivered a critical judgment in K. Parameswaran Unni v. G. Kannan & Anr., further clarifying territorial jurisdiction. The Court reinforced the 2015 amendment’s provisions, confirming that:

• The complaint may be filed where the cheque is presented for payment – the location of the bank of the payee (or holder in due course).
• Even if the cheque is deposited outside the drawer’s bank jurisdiction, the case can be heard where the payee’s bank is located.

This ruling reinstates the position that the complainant has some discretion to file the case in a convenient jurisdiction, addressing previous concerns that complainants had limited venue options.

Implications of the Latest Ruling

1. Ease for Complainants: The ruling allows the payee to initiate proceedings in a more convenient jurisdiction, ensuring that the accused does not evade accountability by choosing a distant location.
2. Streamlined Legal Process: This approach reduces the risk of cases being filed across multiple locations for a single transaction, creating efficiency in legal proceedings.
3. Enhanced Compliance: Clear jurisdiction guidelines under the NI Act provide a deterrent to cheque dishonoring by increasing the likelihood of timely redress for payees.

Conclusion

The recent rulings regarding Section 138 of the NI Act align with both the Act’s purpose of enforcing financial discipline and the convenience of involved parties. The judiciary has continually adapted the NI Act’s interpretation to strike a balance between preventing forum shopping and facilitating ease of access for genuine complainants. This latest ruling emphasizes the need for transparent legal processes while reducing the misuse of jurisdictional technicalities, which ultimately strengthens the Act’s intent of maintaining the sanctity of financial transactions.