Supreme Court Allows Transfer of Cheque Dishonour Cases from Chandigarh to Hyderabad, Refers Issue to Larger Bench

Case Overview

In a significant ruling on the transfer of criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), the Supreme Court of India has ordered the transfer of two cases from the Chief Judicial Magistrate's Court in Chandigarh to the Chief Metropolitan Magistrate's Court in Hyderabad. The decision, pronounced by a bench comprising Justices Surya Kant and Joymalya Bagchi on November 13, 2025, highlights the balance between statutory jurisdiction and the ends of justice, particularly in disputes involving unequal parties like small borrowers and large banks.

The petitioners, Golla Naraesh Kumar Yadav (proprietor of M/s Hari Cotton Traders and M/s Hari Cotton Ginning Pressing Factory) and others, approached the Supreme Court via Transfer Petitions (Crl.) Nos. 204-205 of 2025. They sought to shift proceedings related to dishonoured cheques worth over Rs. 9 crores, originally filed by respondent Kotak Mahindra Bank in Chandigarh. The underlying transactions stemmed from overdraft and loan facilities of Rs. 10 crores extended by the bank's Adoni branch in Andhra Pradesh in 2021-2022. The accounts were declared Non-Performing Assets (NPAs) in April 2023, leading to SARFAESI Act proceedings, Debt Recovery Tribunal (DRT) cases in Hyderabad (S.A. No. 397 of 2023 and O.A. No. 787 of 2023), and a writ petition in the Andhra Pradesh High Court (W.P. No. 16295 of 2024).

The cheques, drawn on accounts at Adoni branches of HDFC Bank and Kotak Mahindra Bank, were presented for collection in Chandigarh, resulting in complaints Nos. 23195 of 2023 and 23197 of 2023 under Section 138 NI Act.

Arguments Presented

The petitioners argued that the entire transaction occurred in Adoni, Kurnool district, Andhra Pradesh, with related civil proceedings already pending in Hyderabad and Andhra Pradesh. They emphasized the extreme hardship of traveling over 2,000 km to Chandigarh, where language barriers and lack of local legal support would impair their defense, causing irreparable injury.

In response, Kotak Mahindra Bank invoked Section 142(2) NI Act, asserting that jurisdiction lies where the payee's account branch for collection is located—here, Chandigarh. The bank relied on the recent decision in Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd. (2025 SCC OnLine SC 508), arguing that mere inconvenience or distance does not justify transfer, and accused could seek exemptions from personal appearance or virtual hearings.

Legal Principles and Precedents

The judgment delves into the evolution of jurisdiction for Section 138 offences. Pre-2015, K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 interpreted Sections 177 and 178(d) CrPC to allow filing where any of five acts (drawing, presentation, dishonour, notice, failure to pay) occurred. This was narrowed in Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129 to the drawee bank's location.

The 2015 amendments introduced Section 142(2), mandating jurisdiction at the payee's account branch for collection or drawer's for direct presentation, with Section 142A validating transfers. However, the Court affirmed in Yogesh Upadhyay v. Atlanta Ltd. (2023) 19 SCC 404 that Sections 406 (CrPC, now 446 BNSS) and 407 CrPC (now 447 BNSS) powers for transfer remain intact for ends of justice, overriding the non-obstante clause.

Drawing from Nahar Singh Yadav v. Union of India (2011) 1 SCC 307, the bench outlined factors for transfer: state bias, witness influence, comparative hardships (including financial burden), communal atmosphere, and hostility. It critiqued Shri Sendhur Agro for undervaluing relative inconvenience in unequal disputes, noting Section 138 as a quasi-criminal, compoundable offence promoting financial discipline, not a societal crime like murder.

Key excerpt: "Spatial distance... involves diminution... of his fair trial rights which inter alia include his right to legal representation, preparation of defence and examination of witnesses... Judged in the backdrop of such statutory slant [S.139 presumption], it is a herculean task for a petty borrower... to traverse over a thousand kilometres."

The Court emphasized balancing conveniences, especially for a "small-time borrower" against a "gargantuan bank," considering the bank's nationwide branches, local documents/witnesses in Adoni, and pendency of related DRT/High Court matters.

Court's Decision

Differing from Shri Sendhur Agro , the bench held that transfer is warranted where it ensures a "level-playing field" without undue hardship to the complainant. It rejected Chandigarh as a mere "stratagem" for harassment, given the bank's resources. Instead of Adoni, transfer was ordered to Hyderabad for mutual convenience, alongside DRT proceedings.

In deference to judicial discipline, the matters are referred to the Chief Justice of India for a Larger Bench to resolve the conflict. Interim transfer to Hyderabad's Chief Metropolitan Magistrate proceeds.

Implications

This ruling reinforces fair trial protections under Article 21, potentially easing burdens on small borrowers in cheque dishonour cases against powerful financial institutions. It signals judicial scrutiny of jurisdictional choices that exacerbate inequalities, pending clarification by a larger bench. For banks, it underscores that convenience in filing cannot override accused hardships. The decision may influence hundreds of similar cases, including 476 noted by petitioners pending in Chandigarh against outstation accused.

The order was pronounced on November 13, 2025, in Transfer Petition (Crl.) Nos. 204-205 of 2025, with an ex-parte stay application (IA No. 59717/2025).