Dispute Resolution Quarterly Milestones (October-December 2025)

The Supreme Court of India (Supreme Court) has held that territorial jurisdiction for cheque dishonour cases under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) lies exclusively with the court within whose local limits the payee’s home branch is situated, i.e. “the specific bank branch where the payee maintains their account”, regardless of where the cheque was presented for collection.¹

The dispute arose when a cheque, drawn on a Kolkata-based bank, deposited by the complainant (i.e. the payee) into his bank account in Bhopal, was subsequently dishonoured. A complaint initially filed in Kolkata was returned following the introduction of the Negotiable Instruments (Amendment) Act, 2015 (Amendment Act). The Amendment Act conferred jurisdiction to decide cheque dishonour cases on courts located within the jurisdiction of the payee’s bank branch. The complaint was then re-filed in Bhopal, prompting the accused to file a transfer petition before the Supreme Court to determine the correct jurisdictional forum under the newly amended Section 142(2) of the NI Act.²

The Supreme Court’s findings were rooted in a detailed analysis of the legislative history of Section 142(2). The Supreme Court found that for cases like the present one, i.e. where the cheque is presented for collection through an account, the cheque shall be deemed to have been presented for collection at the payee’s home branch for purposes of jurisdiction. This principle for finding territorial jurisdiction was held to be applicable, regardless of which physical branch of the payee’s bank was presented with the cheque. This interpretation, the Supreme Court reasoned, was intended by Parliament to provide certainty and prevent the law from being misused to file cases in inconvenient locations. The Supreme Court expressly overruled its contrary view in an earlier decision in Yogesh Upadhyay v Atlanta Ltd.³ for having overlooked this critical deeming principle in Section 142(2).

This judgment brings much-needed clarity on the appropriate forum having jurisdiction to decide cheque-bouncing cases, providing businesses and individuals with greater confidence and certainty in commercial dealings. The decision may also potentially help reduce the vast backlog of such cases in Indian courts by reducing multiplicity of proceedings owing to technical defects, introducing clear principles for dismissal of wrongly filed cases, and providing complainants with clear rules when looking to have their grievances settled.

In its decision in the case of Robert Lalchungnunga Chongthu v State of Bihar,⁴ the Supreme Court quashed criminal proceedings against a public servant, holding that an inordinate and unexplained delay in investigation violates the fundamental right to a speedy trial under Article 21 of the Constitution (Protection of life and personal liberty). It was further held that a sanction (or approval) for prosecution of a public servant is legally invalid when granted mechanically without due application of mind.

The appellant, an Indian Administrative Service (IAS) officer, was accused of irregularities in the grant of arms licences. Although an initial police investigation exonerated him in 2006, the trial court permitted “further investigation” in 2009. This further investigation continued for nearly 11 years before a supplementary chargesheet was filed in 2020. The state government then granted sanction (or approval) to prosecute the appellant.⁵ The appellant challenged the proceedings, citing the extreme delay and the perfunctory nature of the sanction.

The Supreme Court found the 11-year delay in completing the investigation to be unjustified, holding that the right to a speedy trial encompasses every stage of a criminal case, including investigation. The Supreme Court held that allowing an investigation to continue endlessly creates undue hardship and uncertainty.

Critically, the Supreme Court also found the sanction order to be a non-speaking order that did not demonstrate independent application of mind to the facts and evidence. It was reiterated that the grant of sanction is a solemn safeguard to protect public servants from frivolous prosecution and is not an empty formality. The sanctioning authority is required to record its genuine satisfaction, and mechanical issuance of the sanction in this case rendered it invalid.

This ruling sets an important precedent for accountability in legal proceedings. It highlights the need for efficiency in investigation and underscores that procedural safeguards, like obtaining formal sanction, must be scrupulously followed in all circumstances.

In its recent decision in State of Jharkhand v Indian Builders⁶, the Supreme Court has referred for consideration to a larger bench the significant question of whether an arbitral tribunal is bound by “excepted” or “prohibitory” clauses in a contract. Simply put, such clauses are terms in a contract where both parties agree that certain claims will not be entertained. For example, a construction contract might state that there will be no claim for expenses against idle machinery lying at the site if a project is delayed. These clauses are used to allocate risk and create financial certainty for both sides. The Supreme Court revisited the correctness of its 2009 decision in Bharat Drilling & Foundation Treatment Pvt. Ltd. v State of Jharkhand⁷ (Bharat Drilling).

The current dispute originated from an arbitral award in a construction contract where the tribunal had granted claims for idle machinery (i.e., compensation for cost of unused equipment stuck at a project site during period of delay) and loss of profit (i.e., compensation for loss of taking up other projects during period of delay). The State of Jharkhand challenged the award, arguing that these claims were explicitly barred by specific prohibitory clauses in the agreement. The Jharkhand High Court, however, upheld the award, relying entirely on the Bharat Drilling precedent, which had been widely interpreted to mean that such clauses only restrict the parties themselves from asserting such claims and do not limit the arbitrator’s power to grant such claims.

In its referral order, the Supreme Court observed that an arbitral tribunal is a creature of the contract and cannot ignore its express terms. The Supreme Court doubted the correctness of its earlier decision in Bharat Drilling judgment, observing that the earlier decision had mistakenly applied principles governing an arbitrator’s statutory power to award interest to the very different issue of ignoring a clear contractual bar on substantive claims.

This referral signals a potential landmark development in Indian arbitration law. If the larger bench confirms the Supreme Court’s initial view, it will be a major victory for the principle that a contract means what it says. Such a decision would lead to greater contractual certainty, as businesses could be more confident that the risk allocation and limitations they negotiate into their agreements will be upheld in arbitration. It would discourage the common practice of raising speculative claims that are clearly barred by the contract, particularly in the construction and infrastructure sectors where prohibitory clauses are standard. Ultimately, it would compel arbitral tribunals to strictly enforce the bargain struck by the parties, reinforcing the sanctity and reliability of contracts.

In its decision in State of Rajasthan v Parmeshwar Ramlal Joshi,⁸ the Supreme Court has reiterated that a High Court has no power to recall or review its own final judgment in a criminal matter, and cannot use its inherent powers⁹ to bypass the express statutory bar against review.¹⁰

The case stemmed from a First Information Report (FIR) filed by the complainant alleging, among other crimes, criminal breach of trust, cheating, and criminal conspiracy in the context of a dispute over the transfer of company shares. After the local police concluded the dispute was civil in nature, the complainant filed a petition before the High Court seeking transfer of the criminal investigation to the Central Bureau of Investigation (CBI). The High Court initially disposed of the petition with a limited direction for the complainant to make a representation to the concerned police authorities. Shortly thereafter, on a modification application filed by the complainant, the same High Court recalled its final order, claiming it was passed due to an “inadvertent clerical mistake”. The High Court then reversed its earlier decision and transferred the investigation to CBI.

The Supreme Court held that the High Court’s action constituted an impermissible review of its own final order. It underscored that there is an absolute bar on any court altering or reviewing its judgment once signed,¹¹ with the sole exception of correcting clerical or arithmetical errors. The Supreme Court found that the High Court’s initial order was a reasoned one and contained no clerical or arithmetical errors. Therefore, it was concluded that using inherent powers to perform an act explicitly prohibited was a jurisdictional error.

The decision is a strong precedent for curbing the potential misuse of a court’s inherent powers to seek a backdoor review or second hearing before the same court. This helps uphold procedural discipline and is aimed towards preventing endless and frivolous litigation where matters have been finally decided.