Recently, the Supreme Court clarified that complaints under Section 138 of the Negotiable Instruments Act must be filed where the payee maintains their bank account, not where the cheque is physically deposited. The Court held that the Mangalore Magistrate had wrongly declined jurisdiction, emphasizing that Section 142(2)(a) clearly vests territorial jurisdiction based on the payee's account location.
Brief Facts:
The case involved a financial dispute between the appellant and the respondent, Jagruti Keyur Rajpopat. The appellant alleged that Jagruti, wife of one Keyur Rajpopat, stood as guarantor for a ₹38.5 lakh loan. To discharge the debt, she issued four cheques in September 2023. These were deposited by the appellant at Kotak Mahindra Bank’s Opera House Branch in Mumbai, but were dishonoured for insufficient funds on 15.09.2023.
Subsequently, the appellant filed four criminal complaints under Section 138 of the N.I. Act before the Judicial Magistrate, First Class, Fifth Court, Mangalore. However, the Magistrate returned the complaints on the ground of lack of territorial jurisdiction, asserting that the drawee bank was located in Mumbai.
Contentions of the Appellant:
The appellant contended that although the cheques were physically deposited in Mumbai, his bank account was held at Kotak Mahindra Bank’s Bendurwell Branch in Mangalore. Therefore, under Section 142(2)(a) of the N.I. Act, the appropriate jurisdiction was Mangalore, where his account was located and the cheque was intended to be credited.
Contentions of the Respondent:
The respondent, in her counter-affidavit, submitted the appellant’s account number as appearing in her bank records. The appellant produced a certificate from Kotak Mahindra Bank confirming the account’s location in Mangalore. The respondent’s counsel fairly conceded that while the appellant initially maintained an account in Mumbai, it had since been transferred to Mangalore.
Observations of the Court:
The Apex Court reiterated the legal position laid down in Bridgestone India Private Limited v. Inderpal Singh, which interpreted Section 142(2)(a) of the N.I. Act. The provision mandates that territorial jurisdiction lies with the court where the payee maintains their account if the cheque is deposited through that account.
The Court held, “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 bench further noted that the High Court of Karnataka, in confirming the Magistrate’s order, had proceeded on a mistaken assumption that the appellant's account was located in Mumbai. This led to a clear misapplication of the law.
The decision of the Court:
Setting aside both the High Court’s and the Magistrate’s orders, the Top Court allowed the appeals. It directed the Judicial Magistrate, First Class, Fifth Court, Mangalore, to accept and expeditiously adjudicate the complaints filed by the appellant in accordance with law. “The understanding to the contrary… was erroneous and completely opposed to the clear mandate of Section 142(2)(a) of the N.I. Act,” the Court concluded.
Case Title: Prakash Chimanlal Sheth vs. Jagruti Keyur Rajpopat
Case No.: S.L.P.(Crl.) Nos. 5540-5543 of 2024
Coram: Justice Sanjay Kumar, Justice Satish Chandra Sharma
Advocate for Petitioner: Adv. Shailesh Madiyal (Sr. Adv.), Anantha Narayana M.G (AOR), Shakeer Abbas, M.L. Gopalakrishna, V.C. Shukla, Divija Mahajan
Advocate for Respondent: Adv. Pulkit Prakash (AOR), Mudit Makhijani, Eeshan Pandey, Arjun Mohan, Arushi Sharma, Ankita Sinha, Saimon Farooqui
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