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by sayum
10 March 2026 10:31 AM
“Explanation to Section 142(2)(a) Creates a Legal Fiction—Delivery of Cheque at Any Branch Is Deemed Delivery to Payee's Home Branch” In a latest judgement Supreme Court of India clarifying the law relating to territorial jurisdiction under Section 138 of the Negotiable Instruments Act, 1881, especially post the 2015 Amendment. The Court ruled that a complaint under Section 138 must be tried only in the court within whose jurisdiction the branch of the bank where the payee maintains the account is situated, regardless of where the cheque was deposited.
This judgment has decisively overruled the earlier 2023 decision in Yogesh Upadhyay v. Atlanta Ltd. by declaring it per incuriam, i.e., rendered in ignorance of the binding statutory provision and the Explanation to Section 142(2)(a), which had created a legal fiction.
“The jurisdiction to try a complaint under Section 138 vests with the court where the payee maintains an account, not where he chooses to deposit the cheque”—Supreme Court affirms legislative intent to prevent forum shopping
At the heart of the dispute in this case was a recurring and highly contentious question—which court has the territorial jurisdiction to try cheque dishonour complaints under Section 138: Is it the place where the payee deposited the cheque, or is it the branch where the payee maintains the account? The Supreme Court, led by a bench of Justices J.B. Pardiwala and R. Mahadevan, answered with finality that jurisdiction lies only at the home branch of the payee, not at any branch where the cheque is deposited.
The Court also reaffirmed the legislative purpose behind the 2015 amendments to the NI Act, which was to bring clarity and uniformity to jurisdictional issues and prevent manipulation of legal forums by payees.
The dispute arose from a cheque for ₹19,94,996 issued by Jai Balaji Industries Ltd. in favour of HEG Ltd. The cheque was drawn on the State Bank of Bikaner and Jaipur, Kolkata, but deposited at the complainant’s bank—State Bank of India, Bhopal. The cheque was dishonoured, and after issuing notice and receiving a reply, the complainant filed the complaint before the Metropolitan Magistrate (MM), Kolkata.
Before evidence could progress significantly, the NI Act was amended in 2015, inserting Section 142(2) and an Explanation that changed the territorial jurisdiction framework. The MM, Kolkata returned the complaint in 2016 for want of jurisdiction, and the complaint was re-filed in the court of the Judicial Magistrate First Class (JMFC), Bhopal.
However, since recording of evidence under Section 145(2) had already commenced before the MM, Kolkata, the accused sought re-transfer of the case back to Kolkata, citing the principle from Dashrath Rupsingh Rathod v. State of Maharashtra (2014), which permitted pending cases to continue if they had reached the evidence stage.
The Supreme Court framed two main legal issues:
On Territorial Jurisdiction Post-Amendment:
The Court categorically held that Section 142(2)(a) read with the Explanation creates a deeming fiction. As per this legal fiction:
"Where a cheque is delivered for collection at any branch of the bank in which the payee maintains the account, it shall be deemed to have been delivered to the home branch where the payee maintains the account."
Thus, even if the cheque is physically deposited in Bhopal, the law deems it to have been delivered at Kolkata if that is the home branch of the payee.
The Court noted:
"The Explanation cannot be interpreted in a way that distorts the main provision. A deeming fiction must be honoured unless it leads to absurdity or injustice, which is not the case here."
It further ruled:
"We do not accept that a payee may choose any branch to deposit the cheque and thereby fix jurisdiction. That interpretation permits forum shopping, which the 2015 amendment expressly sought to prevent."
In this light, the Court held that the MM, Kolkata had no jurisdiction, and only the JMFC, Bhopal was competent to try the case.
Overruling Yogesh Upadhyay v. Atlanta Ltd.:
In a direct rebuke of the Yogesh Upadhyay judgment, which had interpreted Section 142(2)(a) to mean that jurisdiction lies where the cheque was deposited for collection, the Supreme Court held:
"The interpretation in Yogesh Upadhyay overlooks the Explanation to Section 142(2)(a) and legislative intent. The decision is per incuriam and not binding."
It observed that Yogesh Upadhyay misread Bridgestone India (2016) and failed to apply the deeming provision properly:
"Accepting such a view allows payees to manipulate jurisdiction by choosing where to deposit cheques. That cannot be the purpose of a statutory reform."
The Court emphasized the legislative intent expressed in the Statement of Objects and Reasons behind the 2015 amendment, noting:
"The amendment was brought precisely to overcome the mischief of forum shopping and to fix jurisdiction unambiguously at the payee’s home branch."
On Transfer of the Complaint Back to Kolkata:
Despite holding that Bhopal had jurisdiction, the Court made an exception based on procedural fairness. Since the recording of evidence under Section 145(2) had already begun before the return of the complaint in 2016, it invoked the principle laid down in Dashrath Rupsingh Rathod, which had protected such cases from being returned.
The Court thus directed:
"The complaint and proceedings are to be transferred back to the MM, Kolkata, and resumed from the stage prior to the return of complaint dated 28.07.2016."
This pragmatic approach ensured that the accused is not prejudiced by restarting the case afresh at Bhopal and upholds procedural efficiency.
The Supreme Court’s decision settles the long-standing confusion around territorial jurisdiction in Section 138 cases post the 2015 amendment, and reasserts the primacy of legislative purpose over misplaced literalism or judicial overreach.
The judgment:
In doing so, the Court has strengthened the rule of law and reaffirmed its role as a guardian of legislative intent and procedural fairness in criminal jurisprudence.
Date of Decision: 28 November 2025
