The Supreme Court clarifies that under Section 138 of the NI Act, jurisdiction for cheque bounce cases lies with the payee’s bank branch, not the deposit location.
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NEW DELHI: The Supreme Court of India, in a landmark judgment, settled the ambiguity surrounding the territorial jurisdiction for filing complaints under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The decision reinforces the interpretation of Section 142(2)(a) post the 2015 amendment and sets the tone for ensuring procedural fairness in cheque dishonour cases.
Background of the Case
The appellant, Prakash Chimanlal Sheth, filed complaints under Section 138 of the NI Act against Jagruti Keyur Rajpopat, alleging dishonour of four cheques issued in repayment of a loan availed by her and her husband, Keyur Lalitbhai Rajpopat. Though the cheques were deposited at the Kotak Mahindra Bank’s Opera House Branch in Mumbai, the appellant maintained his account at the Bendurwell Branch in Mangalore.
The Judicial Magistrate at Mangalore returned the complaints, citing a lack of territorial jurisdiction, reasoning that the cheques were presented in Mumbai. The Karnataka High Court upheld this view. Aggrieved, the appellant approached the Supreme Court.
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Legal Issue
The legal issue before the Court was:
Whether territorial jurisdiction for filing a complaint under Section 138 NI Act lies with the court where the payee maintains his bank account or where the cheque was physically deposited for collection?
Supreme Court’s Observations
The Court referred to Section 142(2)(a) of the NI Act which mandates,
“The offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction the branch of the bank where the payee maintains the account is situated, in case the cheque is delivered for collection through an account.”
The Court also relied on the precedent laid down in Bridgestone India Pvt. Ltd. v. Inderpal Singh [(2016) 2 SCC 75], where it was affirmed that jurisdiction is determined by the location of the payee’s bank branch where the cheque is submitted for collection, not where it is presented physically.
It was factually established that the appellant maintained his bank account at the Bendurwell Branch of Kotak Mahindra Bank in Mangalore, even though the dishonoured cheques were physically deposited at the Bank’s Opera House Branch in Mumbai.
Since the cheques were deposited for the purpose of crediting the appellant’s account in Mangalore, the Court rightly held that the Judicial Magistrate at Mangalore had the proper territorial jurisdiction to entertain the complaints.
Consequently, the rejection of the complaints by the Magistrate and its affirmation by the High Court were found to be legally unsustainable and contrary to the clear mandate of Section 142(2)(a) of the Negotiable Instruments Act.
The Supreme Court allowed the appeals, setting aside the orders of both the Magistrate and the High Court. It directed the Judicial Magistrate at Mangalore to entertain and adjudicate the complaint cases on merits.
Case Title:
Prakash Chimanlal Sheth Versus Jagruti Keyur Rajpopat
S.L.P.(Crl.) Nos. 5540-5543 of 2024
READ JUDGMENT HERE
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