Supreme Court Clarifies Transfer of Section 138 NI Act Cases Under Section 406 CrPC

Introduction

The Supreme Court of India, in the case of M/S Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd. (2025 INSC 328), addressed the complex issue of transferring complaints under Section 138 of the Negotiable Instruments Act, 1881 (the “NI Act”), when questions of territorial jurisdiction are raised. The central question was whether the Court could, in exercise of its power under Section 406 of the Code of Criminal Procedure, 1973 (CrPC), transfer a Section 138 complaint from one State to another on the grounds that the complaint was allegedly filed in a location that inconveniences the accused or was claimed to lack territorial jurisdiction.

The Petitioner, M/s Shri Sendhur Agro & Oil Industries, contended that the entire transaction took place in Coimbatore, Tamil Nadu, and thus the complaint preferred by Kotak Mahindra Bank in Chandigarh was unwarranted. The Bank, on the other hand, relied on Section 142 of the NI Act, which allows filing of a complaint in the court within the local jurisdiction of the branch of the payee-bank where the cheque is presented for collection. The Judgment clarifies the scope of such transfers under Section 406 CrPC, the significance of Section 142(2) NI Act introduced by way of the 2015 amendments, and highlights that “mere inconvenience” or “distance” by itself is not enough to justify a transfer.

Summary of the Judgment

The Supreme Court dismissed the Petitioner’s plea to transfer the complaint filed under Section 138 NI Act from the Judicial Magistrate First Class, Chandigarh, to a court in Tamil Nadu. While acknowledging that multiple jurisdictions can technically be available for filing Section 138 complaints, the Court ruled that the Bank’s act of presenting the cheque at its Chandigarh branch for collection was legally permissible under Section 142(2) NI Act. The Court explained that mere allegations of inconvenience or linguistic barriers do not warrant transfer. Instead, an applicant must demonstrate genuine apprehension that justice will be denied if the trial continues at the current forum. Finding no such substantiated apprehension, the Supreme Court held that inconvenience or dissatisfaction with the chosen location does not, in itself, satisfy the “ends of justice” test requisite for transferring criminal proceedings under Section 406 CrPC.

The Court also underscored that lack of territorial jurisdiction—where another court might also have legitimate jurisdiction—does not suffice to invoke the discretionary transfer power in Section 406 CrPC. The petitioner’s arguments relating to other parallel proceedings, safety concerns, and distance from Coimbatore to Chandigarh did not meet the threshold to prove that trial in Chandigarh would be grossly unfair.

Analysis

1. Precedents Cited

The Supreme Court referred extensively to previous landmark judgments interpreting Section 138 NI Act and Section 406 CrPC:

  • Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129: The Court initially held that the correct jurisdiction is determined by the place where the cheque is dishonoured. However, subsequent statutory amendments in 2015 effectively modified this position.
  • K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510: Identified the five essential ingredients of a Section 138 offence and underlined that any court where one of these acts occurred could have territorial jurisdiction. This principle was revisited and refined in the Judgment under review.
  • YOGESH UPADHYAY v. ATLANTA LIMITED (2023 SCC OnLine SC 170): Affirmed that Section 142(2) NI Act confers exclusive jurisdiction on the court where the cheque is presented (for collection through an account). The Judgment clarified that the non-obstante clause in Section 142(1) does not oust the power of the Supreme Court to transfer cases under Section 406 CrPC.
  • Kaushik Chatterjee v. State of Haryana (2020) 10 SCC 92: Emphasized that challenges based on territorial jurisdiction alone, especially on grounds of inconvenience, are insufficient to trigger a transfer unless the apprehension of injustice is well-founded and supported by cogent evidence.
  • Amarinder Singh v. Parkash Singh Badal (2009) 6 SCC 260: Reiterated that transfer of a criminal case requires demonstrating a reasonable apprehension of bias or miscarriage of justice; mere inconvenience is inadequate.

2. Legal Reasoning

At the heart of the case lies the detailed interplay between: Section 142(2) NI Act, introduced by the 2015 amendment, which clarified that the local court where the payee-bank (i.e., the bank in which the complainant maintains the account) is situated has jurisdiction to entertain Section 138 proceedings, and Section 406 CrPC, which grants the Supreme Court the power to transfer criminal cases “if it is expedient for the ends of justice.”

The Court reasoned that even if multiple courts have territorial jurisdiction, the complainant (payee) may choose in which jurisdiction to file. For a transfer to be justified, the Supreme Court must be satisfied that proceeding in the chosen court will impede fair adjudication—mere “forum shopping” allegations or inconveniences are not enough. The Judgment laid out guidelines to be followed in deciding future Section 406 applications:

  1. A claim of lack of territorial jurisdiction does not by itself warrant transfer. Courts must first assess whether the court in question is expressly barred from trying the case.
  2. Proving real and reasonable apprehension of bias or miscarriage of justice is essential, supported by convincing evidence.
  3. Mere distance or language barriers—absent demonstration of serious prejudice—will not meet the “ends of justice” requirement.
  4. Accused persons can request exemption from personal appearance or seek participation via video conferencing in appropriate circumstances.

3. Impact

This Judgment is significant for both complainants and accused in cheque dishonour cases:

  • Reaffirms clarity on the forum-shopping concerns post the 2015 amendments, emphasizing that a bank’s choice to deposit a cheque for collection in a certain branch cannot be easily thwarted by a transfer plea.
  • Ensures uniform approach in applying Section 406 CrPC. It highlights the high standard required—showing genuine apprehension of injustice rather than mere inconvenience or distance.
  • Balances litigant rights by noting that accused persons may seek exemption from personal appearance where feasible, thus making sure that practical hindrances do not overshadow court proceedings.
  • Deters unwarranted transfers, thereby aiding in faster disposal of Section 138 NI Act cases without repeated re-litigation over jurisdiction.

Complex Concepts Simplified

Several legal concepts were extensively discussed in the Judgment. Below are concise explanations:

  • Section 406 CrPC (“Power of Supreme Court to transfer cases and appeals”): This provision allows the Supreme Court to transfer a criminal case from a court (subordinate to one High Court) to another court (subordinate to a different High Court) only if it is “expedient for the ends of justice.” Generally, this covers cases where there is a real likelihood of bias, undue influence, or intimidation.
  • Section 138 NI Act (Cheque Dishonour Offence): Makes dishonouring a cheque for insufficient funds or similar reasons a criminal offence, once the statutory demand notice is not complied with within the prescribed timeline.
  • Section 142(2) NI Act: Specifies, after the 2015 amendments, that the court within whose jurisdiction the collecting bank’s branch (where the payee maintains the account) is located has the power to try the matter.
  • Cause of Action in Section 138 Cases: It includes drawing the cheque, cheque presentation, its dishonour, statutory notice of demand, and failure to pay within the notice period. Where these acts or consequences occur can determine which court obtains jurisdiction.

Conclusion

In M/S Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd., the Supreme Court reaffirmed that lack of territorial jurisdiction or convenience alone does not justify transferring a Section 138 NI Act complaint from one State to another under Section 406 CrPC. The Court emphasized that any such plea must be backed by a genuine and reasonable apprehension that continuing the proceedings in the chosen forum would jeopardize fair trial principles. By providing further clarity on how Section 142(2) NI Act interacts with Section 406 CrPC, this ruling ensures that while accused persons have fair recourse to request a transfer, the fundamental aim remains dispensing justice—and not simply addressing a party’s inconvenience.

Consequently, this Judgment significantly impacts how litigants perceive jurisdictional issues under Section 138, preserving the complainant’s statutory right to choose a rightful venue while safeguarding the accused’s right to a fair trial through a heightened standard of proof necessary for securing a transfer.