Factual Background and Procedural History
The dispute centered on the territorial jurisdiction for filing a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) concerning dishonour of cheques.
The appellant, Prakash Chimanlal Sheth, had advanced a sum of ₹38,50,000 to Keyur Lalitbhai Rajpopat, whose wife, Jagruti Keyur Rajpopat (respondent), stood as guarantor and had also availed financial assistance herself. To discharge these liabilities, she issued four cheques in September 2023. These cheques were deposited by the appellant at Kotak Mahindra Bank, Opera House Branch, Mumbai, for crediting to his account.
The cheques were returned unpaid on 15 September 2023 due to insufficiency of funds. Consequently, the appellant filed four complaint cases (C.C. Nos. 1258–1261 of 2023) under Section 200 CrPC read with Section 138 of the NI Act before the Judicial Magistrate First Class (JMFC), Fifth Court, Mangalore.
However, the Magistrate returned the complaints on 12 December 2023, holding that the drawee bank was in Mumbai, and hence, his court had no territorial jurisdiction.
Aggrieved, the appellant approached the Karnataka High Court at Bengaluru under Section 482 CrPC, but the High Court upheld the Magistrate’s view on 5 March 2024, affirming that jurisdiction lay in Mumbai.
The appellant thereafter approached the Supreme Court of India, challenging both orders.
Identification of Legal Issues
The Supreme Court was called upon to determine:
- Whether a complaint under Section 138 of the NI Act should be filed at the place where the cheque was presented for collection or where the payee maintains his bank account.
- Whether the High Court and the Magistrate erred in assuming jurisdiction based on the drawee bank’s location rather than the payee’s bank branch as per the 2015 amendment to Section 142(2)(a) of the NI Act.
Arguments of the Parties
Appellant’s Contentions:
- The appellant maintained his bank account at Kotak Mahindra Bank, Bendurwell Branch, Mangalore, and had only deposited the cheques at the Opera House Branch in Mumbai for collection.
- He argued that the High Court incorrectly assumed that his account was in Mumbai and that such a misinterpretation violated Section 142(2)(a) as amended in 2015.
- As per the statutory amendment and settled case law, jurisdiction vests where the payee’s bank branch is located, i.e., Mangalore.
Respondent’s Contentions:
- The respondent initially disputed the appellant’s claim but later conceded that his account was indeed transferred to the Bendurwell Branch, Mangalore.
- The respondent maintained, however, that the cheques were deposited in Mumbai, suggesting jurisdiction should lie there.
Court’s Analysis and Reasoning
Justice Sanjay Kumar, speaking for the Bench, focused on Section 142(2)(a) of the Negotiable Instruments Act, which post the 2015 amendment, reads as follows:
“The offence under Section 138 shall be inquired into and tried only by a Court within whose local jurisdiction — (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee maintains the account is situated.”
The Court reaffirmed that the determinative factor for jurisdiction is where the payee maintains the bank account, not where the cheque is physically deposited or presented.
To support this interpretation, the Court relied on Bridgestone India Private Limited v. Inderpal Singh [(2016) 2 SCC 75], wherein it was held that jurisdiction vests with the court within whose jurisdiction the payee’s bank branch lies, because that is where the cheque is deemed delivered for collection “through an account.”
The Bench found that:
- The appellant’s account was indeed with Kotak Mahindra Bank, Bendurwell Branch, Mangalore, as confirmed by bank certification.
- The cheques were only deposited at the Opera House Branch, Mumbai, for transmission to Mangalore.
- Therefore, the Magistrate at Mangalore had proper territorial jurisdiction to try the case.
The Court observed that both the Magistrate and the High Court misconstrued the statutory mandate, wrongly assuming that the locus of presentation determined jurisdiction. The 2015 amendment had overturned the earlier judicial interpretation under Dashrath Rupsingh Rathod v. State of Maharashtra (2014), which had tied jurisdiction to the drawee bank’s location.
The Supreme Court thus restored the law’s intended clarity and consistency, emphasizing that the place where the payee holds and operates his account determines where the complaint must be filed.
Final Conclusion and Holding
The Supreme Court allowed the appeals, setting aside:
- The High Court’s order dated 05.03.2024, and
- The Magistrate’s order dated 12.12.2023.
It directed the Judicial Magistrate First Class, Fifth Court, Mangalore, to entertain and proceed with the complaints expeditiously in accordance with law.
The Court conclusively held that:
- Jurisdiction under Section 142(2)(a) of the NI Act lies where the payee maintains his account, not where the cheque was presented or where the drawee bank is situated.
- The High Court and Magistrate erred in misapplying this principle.
- The 2015 amendment to Section 142(2) was enacted precisely to eliminate such confusion and ensure uniformity.
This ruling reinforces that complaints for cheque dishonour must be filed at the payee’s bank location, thereby simplifying procedural compliance and aligning with the legislative intent of efficient cheque litigation.
FAQs:
1. Where should a cheque bounce complaint be filed under Section 138?
As per Section 142(2)(a) of the NI Act, the complaint must be filed in the court where the payee’s bank branch is located, i.e., where the payee maintains the account used to deposit the cheque.
2. Did the 2015 amendment change jurisdiction rules for cheque bounce cases?
Yes. The 2015 amendment to Section 142(2) clarified that jurisdiction lies with the payee’s bank branch, reversing the earlier law laid down in Dashrath Rupsingh Rathod (2014).
3. What happens if the cheque is deposited in a different city branch of the same bank?
Jurisdiction remains with the branch where the payee’s account is maintained, even if the cheque is deposited elsewhere for collection.
4. Can a Magistrate return a complaint for lack of territorial jurisdiction in such cases
Only if the complaint is filed in a court outside the jurisdiction of the payee’s bank branch. Filing elsewhere would be improper after the 2015 amendment.
5. What precedent did the Supreme Court rely on for this ruling?
The Court relied on Bridgestone India Pvt. Ltd. v. Inderpal Singh (2016) 2 SCC 75, reaffirming that the payee’s bank location determines jurisdiction under Section 142(2)(a) NI Act.
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