The Negotiable Instruments Act, 1881 (NI Act), particularly Section 138, deals with the dishonour of cheques. Taking cognizance of an offence refers to the stage when a Magistrate or a court first takes judicial notice of an offence with a view to initiating proceedings. Under the NI Act, specific provisions govern when and by which court cognizance can be taken.

When Cognizance of Offences Can Be Taken Under the Negotiable Instruments Act, 1881:

Section 142 of the NI Act specifies the conditions for taking cognizance of an offence under Section 138. Cognizance can be taken only if the following conditions are met:

1. Complaint in Writing: No court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque.
2. Within One Month of Cause of Action: Such complaint must be made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138. The cause of action arises when:
   • The drawer fails to make the payment of the said amount to the payee or, as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the demand notice.
3. No Court Inferior to Metropolitan Magistrate or Judicial Magistrate of the First Class: No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try any offence punishable under Section 138.

In summary, cognizance is taken upon a timely written complaint by the aggrieved party, after the drawer has failed to pay within 15 days of receiving the demand notice, and within one month of that 15-day period expiring.

Provision as to the Court Within Whose Local Jurisdiction the Offence Under Section 138 Shall Be Inquired Into and Tried:

The issue of jurisdiction for Section 138 cases was a subject of considerable judicial debate and conflicting interpretations, leading to forum shopping and inconvenience. To address this, the Parliament introduced the Negotiable Instruments (Amendment) Ordinance, 2015, which later became the Negotiable Instruments (Amendment) Act, 2015, specifically amending Section 142 and inserting Section 142A.

Amended Section 142(2) and Section 142A:

Section 142(2) now explicitly defines the territorial jurisdiction for trying offences under Section 138:

• Where the payee's bank account is located: The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction the bank branch of the payee or the holder in due course, as the case may be, where the cheque is delivered for collection, is situated.
• Where the drawer's bank account is located (if cheque is presented by payee over the counter): If the cheque is presented for payment by the payee or holder in due course otherwise through a bank, then the offence shall be inquired into and tried by a court exercising jurisdiction over the territorial limits where the branch of the drawee bank (drawer's bank) is situated.

Section 142A (Validation for Transfer of Pending Cases):

This section was introduced to clarify the position regarding pending cases and to ensure the smooth transfer of cases to the appropriate jurisdictional court. It states that:

• Any case arising out of a cheque dishonour under Section 138, which has been filed before the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015, shall be transferred to the court having jurisdiction under the amended Section 142(2).
• All courts having jurisdiction under the amended Section 142(2) shall have the power to inquire into and try all such cases, notwithstanding anything contained in the Code of Criminal Procedure, 1973, or any other law for the time being in force.

Impact of the Amendment:

Prior to the amendment, the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra (2014) had held that the place where the cheque was dishonoured (i.e., the drawee bank's location) would determine jurisdiction. This created difficulties for payees who had to travel to the drawer's location to file cases.

The 2015 amendment effectively reversed the Dashrath Rupsingh Rathod judgment and restored the jurisdiction to the place where the payee's bank account is located (where the cheque is presented for collection). This was done to facilitate the filing of complaints by the payee at their convenience and to reduce the burden of travel.

In summary: Cognizance under Section 138 NI Act is taken by a Metropolitan Magistrate or Judicial Magistrate First Class upon a timely written complaint. The territorial jurisdiction for trying such an offence is now primarily determined by the location of the payee's bank branch where the cheque was presented for collection, or the drawee bank's location if the cheque was presented over the counter.