Recovering cheque-bounce money to get more tedious

The Supreme Court has ruled that the jurisdiction of cheque-bounce cases has to be the location where the cheque bounced, meaning the bank of the person who issued the cheque – and not the bank location of the complainant.

Earlier, a case under Section 138 of Negotiable Instruments Act could be initiated by the holder of the cheque at his place of business or residence. Now, a bench of justices TS Thakur, Vikramjit Sen and C Nagappan have 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. Alternatively, the holder of the cheque may institute a case under Section 420 (cheating) at the place of his residence or where he ordinarily carries out business. “If the payee succeeds in establishing that the inducement for accepting a cheque which subsequently bounced had occurred where he resides or ordinarily transacts business, he will not have to suffer the travails of journeying to the place where the cheque has been dishonoured,” the bench clarified.

The bench said: “In this analysis, we hold that the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located.

“An interpretation should not be imparted to Section 138 which will render it as a device of harassment, that is, by sending notices (about the bouncing of cheque under Section 138) from a place which has no casual connection with the transaction itself, and/or by presenting cheques at any of the banks where the payee may have an account.”

Referring to the rapid increase in institution of cases under Section 138 after it was made a criminal offence, the bench said, “It is also now manifest that traders and businessmen have become reckless and incautious in extending credit where they would heretofore have been extremely hesitant, solely because of the availability of redress by criminal proceedings.”

The judgement will apply retrospectively. In effect, lakhs of cases pending in various courts across the country will witness interstate transfer of cheque-bouncing cases. However, the court said that in those cases where recording of evidence has started after issuance of summons to the accused, the same would continue to be tried at the place they were instituted at.