Court’s Decision
In a significant ruling, the Supreme Court held that complaints under Section 138 of the Negotiable Instruments Act, 1881 must be instituted in the court where the payee maintains their account, not merely where the cheque is deposited. The Court quashed the orders of both the Karnataka High Court and the Magistrate at Mangalore, observing that their decisions were based on a flawed understanding of territorial jurisdiction.
“The understanding to the contrary of the learned Magistrate at Mangalore was erroneous and completely opposed to the clear mandate of Section 142(2)(a) of the N.I. Act.”
Facts
The appellant alleged that a sum of ₹38,50,000 was borrowed from him by one Keyur Lalitbhai Rajpopat, with his wife, the respondent, acting as guarantor. It was also stated that she independently availed financial assistance from the appellant. To discharge their liabilities, she issued four cheques in September 2023. These cheques were presented by the appellant at the Opera House Branch of Kotak Mahindra Bank in Mumbai for credit to his account at the Bendurwell Branch in Mangalore. The cheques were dishonoured due to insufficient funds, with intimation received on 15 September 2023.
The appellant thereafter filed four complaints under Section 138 of the Negotiable Instruments Act read with Section 200 of the Code of Criminal Procedure before the Judicial Magistrate First Class, Fifth Court, Mangalore. However, by order dated 12 December 2023, the Magistrate returned the complaints on the ground that the drawee bank was located in Mumbai, and hence his court lacked territorial jurisdiction.
This order was challenged before the Karnataka High Court through petitions under Section 482 of the Code of Criminal Procedure, but the High Court upheld the Magistrate’s view, leading to the present appeals before the Supreme Court.
Issues
- Whether the Mangalore court had territorial jurisdiction to entertain a complaint under Section 138 of the Negotiable Instruments Act when the cheques were deposited in Mumbai.
- Whether Section 142(2)(a) of the Act confers jurisdiction based on the location of the payee’s bank account or the bank where the cheque was deposited.
Petitioner’s Arguments
The appellant contended that he maintained his operative bank account with Kotak Mahindra Bank at the Bendurwell Branch, Mangalore, and the cheques were only presented at the Opera House Branch in Mumbai to credit this account. He submitted a bank letter certifying that his account number (0412108431) was held at the Mangalore branch, and the bank statement of the respondent also reflected this. He argued that the High Court had proceeded on a misapprehension that he maintained his account at the Mumbai branch. He relied on Section 142(2)(a) of the Negotiable Instruments Act and the Supreme Court’s judgment in Bridgestone India Private Limited v. Inderpal Singh to argue that jurisdiction lies where the payee maintains their account.
Respondent’s Arguments
The respondent, while not disputing the existence of the appellant’s account at the Mangalore branch, initially relied on the location of deposit—Mumbai—as the relevant factor. She pointed to the previous association of the appellant with the Mumbai branch of the bank. However, in fairness, her counsel acknowledged the current Mangalore bank account and conceded that the cheque was presented in Mumbai only for the purpose of crediting that account. Her counsel did not contest the correctness of the appellant’s account details.
Analysis of the Law
The Supreme Court analyzed Section 142(2)(a) of the Negotiable Instruments Act, which was introduced by way of amendment in 2015. This provision specifies that when a cheque is delivered for collection through an account, jurisdiction lies with the court within whose local limits the branch of the bank where the payee maintains the account is situated.
The Court emphasized that the use of the words “through an account” and “branch of the bank where the payee maintains the account” made it abundantly clear that the place of actual deposit (such as a collection center or another branch) was irrelevant. The focus is on the location of the payee’s operative bank account.
Precedent Analysis
The Court relied on its earlier judgment in:
- Bridgestone India Private Limited v. Inderpal Singh, (2016) 2 SCC 75: The Supreme Court held that jurisdiction under Section 138 read with Section 142(2)(a) of the Negotiable Instruments Act lies where the payee maintains their account through which the cheque was presented.
This precedent was squarely applicable to the facts of the case and was determinative in resolving the jurisdictional question.
Court’s Reasoning
The Court found that the High Court and the Magistrate had proceeded on an incorrect assumption regarding the location of the appellant’s bank account. It held that once it was established that the appellant maintained his bank account in Mangalore, the mere presentation of cheques at a Mumbai branch for collection did not alter the jurisdictional position.
The Court ruled that the clear language of Section 142(2)(a) conferred jurisdiction on the Mangalore court. It held that both the lower courts erred in law in declining to entertain the complaints.
Conclusion
The Supreme Court allowed the appeals, quashed the orders of the Karnataka High Court and the Mangalore Magistrate, and directed that the complaints be entertained and adjudicated by the Judicial Magistrate First Class, Fifth Court, Mangalore, in accordance with law. All pending applications were disposed of.
Implications
This judgment is significant in reaffirming the jurisdictional principles governing cheque dishonour cases. It removes ambiguity for complainants by clarifying that jurisdiction lies not at the location of deposit but where the payee maintains their account. The decision ensures uniformity and predictability in procedural aspects of Section 138 complaints, especially in the context of digital and multi-branch banking practices.
Judgments Referred and Their Significance
- Bridgestone India Pvt. Ltd. v. Inderpal Singh, (2016) 2 SCC 75
The Supreme Court held that territorial jurisdiction for cheque dishonour cases under Section 138 read with Section 142(2)(a) lies at the place where the payee’s bank account is maintained. This case was directly applied to resolve the issue in the present matter.
FAQs
1. Where should a cheque bounce complaint be filed under Section 138 of the Negotiable Instruments Act?
It should be filed in the court within whose jurisdiction the payee maintains the bank account through which the cheque is presented for collection.
2. Does it matter if the cheque was deposited at another branch?
No. What matters is where the payee maintains the account. Deposit location is irrelevant for territorial jurisdiction.
3. Can a Magistrate return a complaint solely based on the cheque being deposited in another city?
No. If the payee’s account is not in that city, jurisdiction lies where the account is maintained, not where the deposit was made.