Why Jurisdiction in Cheque Dishonour Cases Now Follows the Payee

The rules that determine where a cheque dishonour case can be filed have recently undergone an important transformation. For many years, the legal position required complainants to file cases only in the city where the drawer maintained a bank account. This meant that a business receiving a dishonoured cheque often had to initiate proceedings in a completely different city that had no connection to its own operations. As a result, many aggrieved parties were forced to travel, coordinate with unfamiliar lawyers and incur additional costs simply to pursue recovery.

In 2015, Parliament introduced a significant amendment to address this problem. The law was revised so that jurisdiction is now based on the location where the payee deposits the cheque for collection. In practical terms, this means the correct court is the one situated where the payee’s bank branch is located. This reform reflects an understanding of how modern commerce functions, particularly when transactions occur across multiple cities and banking activities are no longer confined to local branches.

The benefit of this change becomes clearer through simple illustrations. Consider a supplier located in Mumbai who receives a cheque from a buyer in Delhi. If the supplier deposits the cheque in Mumbai and the cheque is returned unpaid, the supplier can now initiate legal action in Mumbai. Under the earlier law, the supplier would have been compelled to file the complaint in Delhi because the drawer maintained an account there. The amended law removes this burden and allows the supplier to enforce rights within its own commercial environment.

A similar situation arises with smaller enterprises. Imagine a manufacturer in Coimbatore receiving a cheque from a distributor in Chennai. The cheque is deposited in Coimbatore and later dishonoured. Earlier, the manufacturer had no option except to file the complaint in Chennai. The amended law now permits the manufacturer to proceed in Coimbatore, which provides convenience, reduces costs and supports the operational realities of small and medium scale businesses.

Another important aspect of the amendment is its retrospective effect. The law expressly states that the revised jurisdiction rule applies as if it had always been in force. This ensures that even older or pending cases must follow the payee-centric jurisdiction rule. Courts are therefore required to recognise the location of the payee’s bank as the appropriate forum, regardless of the date of the cheque or the stage of the proceedings. This avoids unnecessary procedural disputes and helps accelerate the progress of cases.

For clients, the implications are practical and significant. The amendment reduces litigation-related travel and expense, minimises procedural objections and allows businesses to pursue claims efficiently. It strengthens confidence in cheque-based transactions by ensuring that the enforcement mechanism is accessible and fair. In a commercial climate where timely recovery is crucial, this change offers predictability and convenience.

The evolution of jurisdiction in cheque dishonour matters demonstrates an important step toward aligning legal procedure with commercial practicality. Businesses and individuals who deal with cheques should be aware of this shift, as it directly influences how and where they may seek remedies in the event of a default. A clear understanding of this rule can assist in planning, strategy and swift response when payment issues arise.

Target Audience:

• Business owners

• Small and medium enterprises

• Corporate clients

• Finance and accounts teams

• Credit control and receivables teams

• In-house legal counsels

• Startups

• Banking and finance professionals

• Students and young legal practitioners