By Administrator

In an important order in a cheque bouncing case, Gujarat high court has explained and clarified the new law regarding jurisdiction of courts in such matters and where an aggrieved party can file a complaint.

In this case, the petition was filed by a resident of Uttar Pradesh after an Ahmedabad-based firm moved the Ahmedabad metropolitan court under Section 138 of the Negotiable Instruments Act against a dishonoured cheque. The cheque was issued in Badalpur, UP, and deposited in a bank in Gorakhpur, UP. When the cheque was dishonoured due to inadequate balance, the payee filed a complaint in Ahmedabad.

The UP resident questioned the jurisdiction of Ahmedabad court on the ground that the cheque was issued in UP and delivered in UP. No action in the matter had taken place in Ahmedabad. On the other hand, the Ahmedabad-based firm argued that the complaint was maintainable because the company had its bank account in Ahmedabad.

Justice J B Pardiwala rejected the UP resident’s contention and gave a clarification on the amended law. The court made it clear that “when the cheque is delivered for collection through an account, the complaint is to be filed before the court where the branch of the bank is situated, where the payee or the holder in due course maintains his account and, secondly, when the cheque is presented for payment over the counter, the complaint is to be filed before the court where the drawer maintains his account.”

The issue has a curious history. In 2014, the Supreme Court ruled that cheque return cases can be filed in a court where the issuer (drawer) maintains his account. This resulted in shifting of lakhs of cases from one town to the other and caused complainants difficulties.

To put an end to the payee’s troubles, the President promulgated the Negotiable Instruments (Amendment) Ordinance in June 2015. This provided that the complaint can be filed in a court where the payee maintains his bank account. While the amended law takes care of interest of the payee of the cheque, it also tries to ensure that drawer of multiple chequess is not harassed by payees filing different complaints at different places. In such a case, all complaints should be filed in the court where the first case was lodged.