The Negotiable Instruments (Amendment) Bill, 2015 Notified

Jurisdiction for Cheque Bouncing Offence Committed under Section 138 Clarified

The Negotiable Instruments (Amendment) Bill, 2015 was passed by the Parliament in the recently concluded Winter Session of the Parliament. The Negotiable Instruments (Amendment) Act, 2015 received the assent of the President on the 26th December, 2015 and will be deemed to have come into force on the Ordnances date of 15th Day of June, 2015

The Negotiable Instruments (Amendment) Act, 2015 is focused on clarifying the jurisdiction related issues for filing cases for offence committed under section 138 of the Negotiable Instruments Act, 1881. The Negotiable Instruments (Amendment) Act, 2015, facilitates filing of cases only in a court within whose local jurisdiction the bank branch of the payee, where the payee delivers the cheque for payment through his account, is situated, except in case of bearer cheques, which are presented to the branch of the drawee bank and in that case the local court of that branch would get jurisdiction.

The Negotiable Instruments (Amendment) Act, 2015 provides for retrospective validation for the new scheme of determining the jurisdiction of a court to try a case under section 138 of the Negotiable Instruments Act, 1881. It also mandates centralisation of cases against the same drawer. 

The clarification of jurisdictional issues may be desirable from the equity point of view as this would be in the interests of the complainant and would also ensure a fair trial. Further, the clarity on jurisdictional issue for trying the cases of cheque bouncing would increase the credibility of the cheque as a financial instrument.

The Negotiable Instruments Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. Section 138 of the Negotiable Instruments Act, 1881 deals with the offence pertaining to dishonor of cheque, drawn for discharge of any debt or other liability, on account of insufficiency of funds in the drawer’s account or on account of the fact that the cheque amount is more than the amount agreed to be paid by the bank, and provides for penalties for such dishonour. 

Earlier, the Hon’ble Supreme Court, in its judgment dated 1st August, 2014, in the case of Dashrath Rupsingh Rathod versus State of Maharashtra and another (Criminal Appeal No. 2287 of 2009) held that the territorial jurisdiction for cases relating to offence of dishonour of cheques is restricted to the court within whose local jurisdiction such offence was committed, which in the present context is where the cheque is dishonoured by the bank on which it is drawn. The Supreme Court had directed that only in those cases where post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in section 145(2) of the Negotiable Instruments Act, 1881, proceeding will continue at that place. All other complaints (including those where the accused / respondent has not been properly served) shall be returned to the complainant for filing in the proper court, in consonance with exposition of the law, as determined by the Supreme Court. 

Various financial institutions and industry associations had expressed difficulties, arising out of the legal interpretation by the Supreme Court about the jurisdiction of filing cases under section 138 of the Negotiable Instruments Act, 1881.The amendment now clarifies the situation with reference to the adverse court jusdgment.