Supreme Court Clarifies: Territorial Jurisdiction in NI Act Cases Not Grounds for Transfer Under Section 406 CrPC - 2025-03-07

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Supreme Court: Territorial Jurisdiction Disputes in NI Act Cases Not Grounds for Transfer Under CrPC Section 406

New Delhi, March 6, 2025 - The Supreme Court of India has dismissed a batch of transfer petitions seeking to move cheque dishonor cases under Section 138 of the Negotiable Instruments Act (NI Act) from Chandigarh to Tamil Nadu. Justices J.B. Pardiwala and R. Mahadevan , presiding over the bench, clarified that territorial jurisdiction issues in NI Act cases are not a valid basis for transfer petitions under Section 406 of the Code of Criminal Procedure (CrPC).

Case Overview: Transfer Petitions Filed by M/s Shri Sendhur Agro

The judgment arose from a transfer petition filed by M/s Shri Sendhur Agro & Oil Industries seeking to transfer a criminal case initiated by Kotak Mahindra Bank Ltd. under Section 138 of the NI Act pending in Chandigarh to a court in Coimbatore, Tamil Nadu. Similar transfer petitions with identical issues were also clubbed together and disposed of by this common judgment.

The petitioner, M/s Shri Sendhur Agro, argued that the entire loan transaction occurred in Coimbatore, Tamil Nadu, where they maintain their bank account and where the loan was processed. They contended that no cause of action arose in Chandigarh, and the bank’s decision to file the complaint there was solely to harass them, especially as other legal proceedings related to the same loan were already ongoing in Coimbatore. The petitioner cited inconvenience, language barriers, and fear for safety as additional grounds for seeking the transfer.

Kotak Mahindra Bank, represented by their counsel, countered that the Chandigarh court had proper jurisdiction as their collection account for the cheque was located there, a legally valid ground under Section 142 of the NI Act. They emphasized that the petitioner was not disputing jurisdiction outright but seeking transfer purely for convenience, which is not a sufficient ground under Section 406 CrPC. The bank also pointed out the availability of virtual hearing facilities in Chandigarh courts.

Court's Analysis and Legal Principles

The Supreme Court meticulously analyzed Section 406 of the CrPC, which empowers the apex court to transfer cases for the "ends of justice." Referring to a series of precedents, including Kaushik Chatterjee v. State of Haryana , the court reiterated that transfer under Section 406 CrPC is not a routine matter and is not meant to address territorial jurisdiction disputes.

The judgment emphasized that the issue of territorial jurisdiction in criminal cases, particularly under the NI Act, depends on factual evidence and should be primarily raised and decided by the trial court itself. Quoting extensively from Kaushik Chatterjee , the court highlighted the procedural framework within the CrPC to address jurisdictional issues, noting the distinction between civil and criminal proceedings in this regard.

The court further delved into the amended Section 142 of the NI Act, particularly sub-section (2), which clarifies the jurisdictional aspect in cheque dishonor cases post the Dashrath Rupsingh Rathod judgment. The amended provision explicitly grants jurisdiction to the court where the payee's bank branch, where the cheque is presented for collection, is located.

> "A conjoint reading of Section 142(2)(a) along with the explanation thereof, makes the position emphatically clear that, when a cheque is delivered or issued to a person with liberty to present the cheque for collection at any branch of the bank where the payee or holder in due course, as the case may be, maintains the account then, the cheque shall be deemed to have been delivered or issued to the branch of the bank, in which, the payee or holder in due course, as the case may be, maintains the account, and the court of the place where such cheque was presented for collection, will have the jurisdiction to entertain the complaint alleging the commission of offence punishable under Section 138 of the N.I. Act."

The court cited Yogesh Upadhaya and Another v. Atlanta Limited to underscore that while the Supreme Court retains the power to transfer NI Act cases under Section 406 CrPC, even with the non-obstante clause in Section 142, this power is reserved for ensuring the "ends of justice" and not for resolving territorial jurisdiction arguments.

Referring to Bhiaru Ram & Ors. v. Central Bureau of Investigation & Ors and Rajkumar Sabu v. Sabu Trade Private Limited , the bench reiterated that "mere convenience or hardship" is not a sufficient ground for transfer under Section 406 CrPC. The court emphasized that transfer is warranted only when there is a "reasonable apprehension" that justice will not be done impartially, objectively, and without bias, as highlighted in Nahar Singh Yadav & Anr. v. Union of India & Ors. and Amarinder Singh v. Parkash Singh Badal .

Decision and Implications

Ultimately, the Supreme Court found no merit in the transfer petitions and dismissed them. The court concluded that the Chandigarh court possessed territorial jurisdiction under Section 142(2) of the NI Act and that the petitioner's grievances were primarily related to convenience and territorial jurisdiction, which are not valid grounds for transfer under Section 406 CrPC.

The judgment reinforces the principle that Section 406 CrPC is not a tool to circumvent established jurisdictional rules or merely for the convenience of parties. It clarifies that disputes regarding territorial jurisdiction in NI Act cases should be addressed before the trial court, and transfer petitions to the Supreme Court should be reserved for exceptional circumstances where the "ends of justice" genuinely require intervention beyond territorial concerns. This ruling provides clarity for legal professionals and businesses regarding the jurisdictional aspects of NI Act Section 138 cases and the limited scope of transfer petitions in such matters. ```