The document discusses the territorial jurisdiction of Section 138 of the Negotiable Instruments Act regarding dishonored checks. It summarizes key cases that have established that complaints can only be filed: 1) where the drawee bank is located, and 2) within 30 days of a check being returned to the complainant. This clarifies that only one court has jurisdiction, preventing harassment from multiple complaints. However, the applicability of this interpretation to "At Par" checks is still being debated.

1. TERRITORIAL JURISDICTION
OF SEC 138 OF NEGOTIABLE
INSTRUMENT’S ACT, 1881

2. • Negotiable Instruments have been used in
commercial
world for a long period of time as one of
the convenient modes for transferring money.
• Development in Banking sector and with
the
opening of new branches, cheque becom
e one of the favorite Negotiable Instruments.
• Drawee of the cheque need was felt that dishon
our of cheque he made punishable offence

3. • Sec.138 to 142 are inserted by
Banking Public Financial Institutions and the
NegotiableInstruments
clause (Amendment) Act, 1988.
• This was done by making the drawer
liable for penalties in case of bouncing of th
e cheque.
• Insufficiency of funds with adequate safeguards to pre
vent harassment of the honest drawer was the reason.

4. • The object of this amendment Act is :
1.To regulate the growing business, trade,
commerce and Industrial activities.
2. To promote greater vigilance in financial
matters.
3.To safeguard the faith of creditors in draw
er of cheque.

5. The ingredients of the offence as contempl
ated under Sec.138 of the Act are as under :
• The cheque must have been drawn for discharg
e of existing debt or liability.
• Cheque must be presented within 6 months or
within validity period whichever is earlier.
• Cheque must be returned unpaid due to insuffic
ient funds or it exceeds the amount arranged.

6. • Fact of dishonor be informed to the drawe
r by notice within 30 days.
• Drawer of cheque must fail to make paym
ent within 15 days of receipt of the notic
e.

7. • There is presumptions under Section 118 and 139 of
the
Negotiable Instruments Act in favour of holder of the
cheque.
• Existence of legally
recoverable debt is not a matter of presumption u/s 13
9.
• Many times cheques are issued bearing no date or post
dated cheques. The holder of the cheque enters the da
te, and thereafter, cheques are presented.

8. • Return of cheque is itself an indication that funds are
not forthcoming. The words “refer to drawer” or “ac
count closed” are covered under the term “insufficie
nt funds”. Thus, the liability of the drawer
cannot be avoided if he closes the account a
nd cheque is dishonored.
• Offence u/s. 138 is computed only when payment is n
otmade by drawer on expiry of 15 days after service o
f the notice as prescribed by proviso (c) of Sec. 138.

9. Considering the ingredients of sec.138 referred above
theHon'ble Apex Court in case of:
“ K. Bhaskaran vs. Shankaran” AIR 1999, had give
n jurisdiction to initiate the prosecution at any of
the following places.
 Where cheque is drawn.
Where payment had to be made.
Where cheque is presented for payment
Where cheque is dishonored.
Where notice is served up to drawer.

10. • In the Case “Mr.Ramanbhai Mathurbhai Patel
Vs State of Maharashtra & Anr, :
had to deal with dishnour of At Par cheques
issue:
• Bombay high court opined that in the case of at
par cheques, the place where cheques are
deposited will have jurisdiction.
• Stayed by the apex court as it runs contrary to
its interpretation of Dashrath Rathod.

11. • In case of :
“ Dashrath Rupsingh Rathodvs. State of Maharashtra,”
interpreted various provisions of Sec.138 of Negotiable Instru
ment Act and held:
• held that in cases of dishonour of cheque, only those courts
within whose territorial limits the drawee bank is situated .
• Additionally, in a move that will have significant and far-
reaching consequences, the Court also directed that pending
cases in which the accused had not been properly served would
be returned to the complainants for filing before the appropriate
courts ,which filing is required to be done within 30 days of
return.

12. • It is useful to refer to the ingredients which are
essential for making out an offence under
Section 138 of the NI Act.
• An offence shall be “deemed to have been
committed”.
• The proviso to Section 138 stipulates
fulfillment the following essential conditions
for application of the Section:-

13. a) The cheque must have been presented for payment
within 6 months from the date of the cheque or within
its validity period, whichever is earlier;
b) The payee/holder in due course must have given a
written notice within 30 days from the date of
intimation of dishnour memo, demanding payment of
returned cheque amount.
c) The drawer fails to make the payment of demanded
sum within 15 days from the receipt of the notice (cause
of action arises on failure of drawer to make payment).

14. • Payee or holder in due course is a compet
ent person to file the complaint.
• Complaint must by corporal person
capable of making
physical appearance in the court.
• In case of company and firm naturalperso
n should represent it.

15. • This decision of the Court clarifies a very
contentious issue pertaining to the offence
of dishonour of cheques under
Section 138 of the Act.
• Party desirous of filing a complaint for
dishonour of a cheque will only be able to
file a complaint in the court having
territorial jurisdiction.

16. • The complainant will be required to file
the complaint before the appropriate court
within 30 days of such return.
• Complainant will not be able to file
multiple complaints before different
courts which could harass an accused, a
possible consequence may also be a
significant shift in the acceptability of a
cheque drawn on an inconveniently

17. • The issue of dishnour of ‘At Par” cheques
needs attention in view of the fact the cheque
really does not travel to the drawee bank’s
place unlike in olden days.
• Strict interpretation followed in Dashrath
Rathod case may be relaxed in public interest.
• Apex court may also take into view that this
relaxation does not result in multiplicity of
complaints.