Negotiable Instruments

If a bank has reason to believe any unusual or suspicious transaction in a bank account it can freeze the debit operations of the account without notice to the account holder, as per the directions of the High Court in Abdul Azeez v Union of India [2025:KER:88312].

Complaints relating to dishonour of account payee cheques under Section 138 of the Negotiable Instruments Act must be instituted only before the court that has jurisdiction over the branch of the bank where the payee maintains their account ( the home branch of the payee), observed the Supreme court in Jai Balaji Industries Ltd. and Ors. v. M/s HEG Ltd [2025 INSC 1362].

In Rangappa v. Sri Mohan [AIR 2010 SC 1898], the Supreme Court ruled that under Section 139 of the Negotiable Instruments Act (NI Act), if the accused admits his signature on the cheque, the court must presume the existence of a legally valid debt or obligation.

The supreme Court, in Sanjabij Tari v. Kishore S Borcar & Anr. [2025 INSC 1158], observed that a very large number of cheque bouncing cases are pending and interest rates have fallen in the last few years. Therefore, the Supreme Court modified the guidelines of compounding cheque dishonour cases issued fifteen years ago in Damodar S. Prabhu vs. Sayed Babalal H. [AIR 2010 SC 1907].

Every complaint of cheque dishonour case, under Section 138 of the NI Act, shall contain a synopsis in the following format.as directed by the Supreme Court in Sanjabij Tari v. Kishore S Borcar & Anr. [2025 INSC 1158].

In Sanjabij Tari v. Kishore S Borcar & Anr. [2025 INSC 1158], the Supreme Court has issued a set of directives aimed at the speedy disposal of cases under Section 138 of the Negotiable Instruments Act, 1881.These guidelines represent a concerted judicial effort to tackle the immense backlog of cheque dishonour cases that burden the Indian judiciary.

n cheque dishonour cases filed under Section 138 of the Negotiable Instruments Act, 1881, the Supreme Court has held that an accused person does not have a right to be heard at the pre-cognizance stage. In Sanjabij Tari v. Kishore S Borcar & Anr. [2025 INSC 1158], the Court clarified that the inquiry conducted by a Magistrate under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), does not require the participation of the prospective accused.

In Kaveri Plastics v. Mahdoom Bawa Bahruden Noorul [2025 INSC 1133], the Supreme Court has reiterated a mandatory requirement for a valid complaint under Section 138 of the Negotiable Instruments Act, 1881. For the complaint to be maintainable, the statutory demand notice sent to the drawer of the cheque must demand the exact amount covered by the dishonoured cheque.

The Supreme Court, in Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat [2025: INSC: 897], has reiterated the principle governing territorial jurisdiction for an offence of cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). Jurisdiction lies with the court within whose limits the bank branch is situated where the payee maintains the account through which the cheque was presented for collection.

A complaint under Section 138 of the Negotiable Instruments Act, 1881, can be maintained against individual partners of a firm even if the firm itself is not named as an accused, says the Supreme Court (SC) in Dhanasingh Prabhu v Chandrasekar & Another [2025 INSC 831].

The power of attorney holder is competent to file a complaint under Section 138 of the NI Act, even if knowledge is not stated in the complaint but is affirmed in the affidavit, says the High Court of Kerala (KCK) in G.  Komalan, S/o.  Late Gangadharan v Thomas Alexander, S/o.  Eapen Thomas, (Represented by His Power Of Attorney Holder Sanil Thomas, S/o.  Thomas) [2024 KER 95315].

The Supreme Court (SC) in Bijoy Kumar Moni v Paresh Manna & Anr [2024 INSC 1024], reiterated that the authorised signatory of a company cannot be held liable under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of a cheque drawn on the company's account, unless the company is arraigned as the principal accused.