2026 (1) TMI 16 - SC - Indian Laws

Cheque bounce case using distant bank branch to create jurisdiction - transfer allowed u/s446 BNSS, larger bench sought

SC considered whether proceedings under s.138 NI Act should be transferred under s.446 BNSS to meet the ends of justice, focusing on territorial ... Dishonour of Cheque - seeking transfer of the case u/s 138 of NI Act - determination of territorial jurisdiction - what situations may prompt this Court to transfer a proceeding under Section 446 BNSS [Corresponding to Section 406 CrPC.] (and High Courts under Section 447 BNSS [Corresponding to Section 407 CrPC.]) to meet the ends of justice? - HELD THAT:- Petitioners are facing prosecution under Section 138 of the N.I. Act. Section 138 of the N.I. Act was incorporated in order to promote financial discipline and credibility of banking systems. Penal liability was introduced to ensure confidence in transactions through negotiable instruments. It is essentially an offence against an individual, compoundable at his option, and not against the State. The nature of the offence is quasi-criminal and does not fall within the species of grave crimes like murder, rape and corruption etc. which may be termed as crimes against the society. Given this situation, shifting of situs of trial in such a case may not impact the State or societal interests and may be judged primarily on the relative convenience and inconvenience of the parties inter se and their witnesses. While the Bank may consider it convenient to present all cheques for collection at Chandigarh Branch, its stratagem to create jurisdiction in Chandigarh must be seen in light of the relative inconvenience caused to the accused to defend himself at such a far-off place. As the accused’s inconvenience by itself may not be a good ground for transfer, similarly, the bank’s convenience to present the cheques only at Chandigarh and institute proceeding there cannot be viewed in exclusion of inconvenience and hardship to the accused to defend himself at such distant place. The Bank has its branches throughout the country, including Adoni, Andhra Pradesh. Its resources are overwhelmingly more than the petitioner. The petitioners’ case is further bolstered by other relevant considerations, namely, overdraft facility was extended from the branch office at Adoni, availability of documents and witnesses (particularly of the accused) at Adoni and pendency of related proceedings at DRT, Hyderabad and High Court of Andhra Pradesh. Such a factual situation persuades us to hold that shift of the cases from Chandigarh would not seriously skew the scales and cause undue hardship to the Bank. However, instead of allowing the transfer to Adoni, the Apex Court is inclined to transfer the proceedings to the court of Chief Metropolitan Magistrate, Hyderabad, where the DRT proceedings arising out of the self-same transaction are also pending inter parties as it would be to the convenience of both of them. It is considered prudent to place the matters before the Hon’ble Chief Justice for constituting a Larger Bench to give a definitive opinion on the issue at hand. In the interregnum, the proceedings shall be transferred to the Court of Chief Metropolitan Magistrate, Hyderabad. ISSUES PRESENTED AND CONSIDERED 1. Whether, notwithstanding territorial jurisdiction fixed by Section 142(2) read with Section 142A of the Negotiable Instruments Act, the Supreme Court retains and may exercise power to transfer a prosecution under Section 138 when such transfer is expedient for the ends of justice. 2. Whether, on the facts, the comparative inconvenience/hardship and impact on fair-trial rights justified transferring the cheque dishonour prosecutions from the court where the cheques were presented for collection to another venue; and if so, what venue best balanced both sides' convenience. ISSUE-WISE DETAILED ANALYSIS Issue 1: Transfer power despite Section 142(2)/142A jurisdiction Legal framework (as discussed by the Court): The Court examined the post-2015 scheme under Section 142(2), which locates territorial jurisdiction primarily at the payee's bank where the cheque is delivered for collection through an account, and Section 142A, which gives overriding effect and validates/mandates filing and transfer consistent with Section 142(2). The Court also considered that transfer power under the criminal procedure framework (referred to as Section 446 BNSS corresponding to Section 406 CrPC) is available when transfer is expedient for the ends of justice. Interpretation and reasoning: The Court held that the amendments creating a statutory inclination toward the payee's convenience in instituting Section 138 proceedings do not eliminate the constitutional/statutory power of the Supreme Court (and High Courts) to transfer criminal cases when required to meet the ends of justice. The Court treated the 'ends of justice' inquiry as distinct from the statutory rule on where a complaint may be instituted, and it evaluated transfer on established factors including comparative hardship and fair trial concerns. Conclusion: The Court concluded that it retains jurisdiction to transfer Section 138 prosecutions even where they were instituted in the court identified by Section 142(2), provided the transfer is justified as expedient for the ends of justice. Issue 2: Whether comparative hardship/fair-trial concerns warranted transfer, and the appropriate transferee court Legal framework (as discussed by the Court): The Court applied the transfer standard 'expedient for the ends of justice' and treated comparative inconvenience/hardship to the accused, complainant, and witnesses as a material factor. It also evaluated the practical effect of Section 138's quasi-criminal nature and the statutory presumption/evidentiary features (including rebuttal burden) as relevant to assessing fair-trial impact in a distant forum. Interpretation and reasoning: Although the complaints were filed in a court having jurisdiction because the cheques were presented for collection there, the Court found the bank offered no substantial justification for choosing that distant presentation location beyond citing a collection centre. The Court reasoned that large spatial distance can diminish fair-trial rights by impairing access to legal representation of choice, preparation of defence, and the ability to produce defence witnesses-especially where the accused must rebut statutory presumptions and the complainant enjoys procedural/evidentiary advantages. The Court emphasized that inconvenience cannot be assessed in isolation: it must be balanced against the complainant's right to prosecute in a legally prescribed forum, but the relative status and resources of the parties matter. Given the bank's nationwide presence and superior resources, and the borrower's limited means, the balance of relative convenience tilted toward transfer. Additional weight was given to the location of the underlying lending relationship, the availability of documents and witnesses nearer the borrower, and the pendency of related proceedings arising from the same transaction at Hyderabad and in Andhra Pradesh. Conclusion: The Court held that continuing trial in the distant court would unfairly burden the accused and impair effective defence, while transfer would not impose undue hardship on the bank. However, instead of transferring to the borrower's local court, the Court ordered transfer to the court at Hyderabad as a venue convenient to both sides and aligned with the location where related proceedings between the parties were pending. FINAL DIRECTIONS (material to outcome) The Court directed transfer of the Section 138 prosecutions to the Court of Chief Metropolitan Magistrate, Hyderabad. It also directed that, because it was differing from an earlier two-judge view on the transfer question, the matter be placed before the Chief Justice for constituting a Larger Bench to give a definitive opinion, while the transfer ordered would operate in the interregnum.