Offence U/s. 138 NI Act Should Be Tried By Court Where Cheque Is Delivered For Collection Through Branch Of Payee's Bank: Supreme Court Reiterates

The Supreme Court has reiterated that an offence under Section 138 of the Negotiable Instruments Act can be inquired into and tried only by a local Court in jurisdiction of which the cheque is delivered for collection through an account in the Branch of the Bank where the payee maintains that account.

The Court was considering a Petition for Special Leave to Appeal against an order of the High Court affirming the Magistrate Court's order returning cases registered for cheque dishonour on the grounds of lack of jurisdiction to entertain the complaint cases.

The Bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma held, "As regards territorial jurisdiction for instituting a complaint in relation to dishonor of a cheque, Section 142(2)(a) of the N.I. Act makes it clear that an offence under Section 138 thereof should be inquired into and tried only by a Court within whose local jurisdiction, if the cheque is delivered for collection through an account, the branch of the bank where the payee maintains the account is situated. This provision, as it stands after its amendment in 2015...."

The Petitioner was represented by Senior Advocate Shailesh Madiyal while the Respondent was represented by Advocate-on-Record Pulkit Prakash.

Facts of the Case

The Appellant’s case was that the husband of the Respondent borrowed a sum of Rs.38,50,000/- from him and she stood as a guarantor for the repayment of the loan. She also availed financial assistance from the Appellant and four cheques came to be issued by her during September, 2023, in discharge of her husband’s liability and her own liability. These cheques were deposited by the Appellant at Kotak Mahindra Bank, Opera House Branch, Mumbai. However, they were dishonored due to insufficiency of funds, as was intimated to the Appellant. Thereupon, he filed four complaint cases under Section 200 Cr.P.C. read with Section 138 of the N.I. Act before the Judicial Magistrate First Class. However, the Magistrate returned the complaint cases for presentation before the jurisdictional Court, stating that the drawee bank was Kotak Mahindra Bank at Mumbai and, therefore, his Court had no territorial jurisdiction to entertain the complaint cases. Later, the High Court confirmed the order in Appeal.

Senior Counsel for the Appellant asserted that the Appellant maintains his bank account with the Kotak Mahindra Bank at its Bendurwell, Mangalore Branch, and that he had merely presented the cheques issued by the Respondent at the Bank’s Branch at Opera House, Mumbai, to be credited to the said account. He contended that the High Court proceeded on the erroneous assumption that the Appellant maintained his bank account at the Opera House Branch of Kotak Mahindra Bank in Mumbai and on the strength of this wrong premise, the High Court confirmed the order of the Magistrate, returning the complaint cases on the ground of territorial jurisdiction.

Reasoning By Court

The Court at the outset observed that it is not in dispute that the Appellant maintains his bank account with the Bendurwell, Mangalore Branch, of the Kotak Mahindra Bank and merely deposited the Respondent’s cheques at its Mumbai Branch for the purpose of crediting his account in Mangalore.

It asserted that an offence under Section 138 of the Negotiable Instrument Act can be inquired into and tried only by a local Court in jurisdiction of which the cheque is delivered for collection, that is, through an account in the Branch of the Bank where the payee maintains that account. The same was affirmed in Supreme Court's decision in Bridgestone India Private Limited vs. Inderpal Singh.

"Therefore, once it is established that, at the time of presentation of the cheques in question, the appellant maintained his account with the Kotak Mahindra Bank at its Bendurwell, Mangalore Branch, he was fully justified in filing his complaint cases before the jurisdictional Court at Mangalore. 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. The High Court proceeded to confirm the erroneous order passed by the learned Magistrate under the wrong impression that the appellant maintained his bank account at the Opera House Branch of the Kotak Mahindra Bank at Mumbai," the Court held.

The Appeals were accordingly allowed.

Cause Title: Prakash Chimanlal Sheth vs. Jagruti Keyur Rajpopat

Appearances:

Petitioner- Senior Advocate Shailesh Madiyal, Advocate-on-Record Anantha Narayana M.G., Advocate Shakeer Abbas, Advocate M.L. Gopalakrishna, Advocate V.C. Shukla, Advocate Divija Mahajan, Advocate Rakhi Madiyal

Respondent- Advocate-on-Record Pulkit Prakash, Advocate Mudit Makhijani, Advocate Eeshan Pandey, Advocate Arjun Mohan, Advocate Arushi Sharma, Advocate Ankita Sinha

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