Jurisdiction of Cheque Bounce Cases Redefined by Ordinance

The perplexity over jurisdiction of courts in cheque bouncing cases has finally been resolved by the three judge bench of the apex court in Dashrath Rupsingh Rathod v State of Maharashtra & Anr,  (2014) 9 SCC 129. The Supreme Court held that the complaints relating to dishonor of cheques must be filed only in the courts within whose territorial jurisdiction the drawee bank is situated. The bench of Justices TS Thakur, Vikramjit Sen and C Nagappan ruled that the case has to be initiated at the place where the branch of the bank on which the cheque was drawn is located.

The judgment has taken a contrary view from the principle of territorial jurisdiction laid in Bhaskaran v Sankaran Vaidhyan Balan (“Bhaskaran”) 2 , wherein the ruling was that complaints under section 138 of Negotiable Instruments Act, 1881 (“NI”), can be filed at any place other than the place of drawee bank.

The change in the existing law shifts the inconvenience and hardship on the payer because now he would have to travel to the place of the drawee bank where the cheque gets dishonored due to insufficiency of funds. Hence, guaranteeing more precaution by the payer at the time of issuing the cheque.

The President of India has promulgated an Ordinance called the “Negotiable Instruments (Amendment) Ordinance, 2015”] on 15 June 2015 as per which certain amendments have been made in the Negotiable Instruments Act, 1881. Jurisdiction to file cases of cheque bouncing has now been changed by this Ordinance superseding the judgment of the Supreme Court in the case of Dashrath Rupsingh Rathod, and all other similar judgments on this issue.

The ordinance will enable filing of cheque bounce cases in the place where the cheque was presented for clearance or payment and not the place of issue. Also, if there were three cases of bounced cheques against one person, then all these cases could be brought in one place and clubbed.

If a complaint against a person issuing a cheque has been filed in the court with the appropriate jurisdiction, then all subsequent complaints against that person will be filed in the same court, irrespective of the relevant jurisdiction area.

Mr. Ashish, the expert in cheque bounce cases at Chandigarh said that it will send the right message to defaulting borrowers. The law has to be on the side of the person who is suffering (lender unable to recover his money. This ordinance is a step in the right direction as the entire system is now looking at early signals of stress and taking early remedial action rather than waiting for asset to turn into a non-performing asset and then take an action.

Author: Gaurav Goel is a practicing lawyer at Punjab & Haryana High Court.

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