In a recent decision, the Supreme Court of India clarified a crucial jurisdictional issue related to cheque bounce cases under Section 138 of the Negotiable Instruments Act, 1881. The bench comprising Justice Sanjay Kumar and Justice Satish Chandra Sharma allowed an appeal filed by Prakash Chimanlal Sheth against an earlier High Court order that had dismissed his complaint on grounds of territorial jurisdiction.
Background of the Case
The dispute began when the appellant, Prakash Chimanlal Sheth, alleged that Keyur Lalitbhai Rajpopat borrowed ₹38.5 lakhs from him. Jagruti Keyur Rajpopat, wife of the borrower and the respondent in the case, stood as guarantor and also took some financial help from the appellant herself. In September 2023, she issued four cheques to settle both her and her husband’s liabilities.
These cheques were deposited by the appellant at Kotak Mahindra Bank’s Opera House Branch in Mumbai. However, they were dishonored due to insufficient funds, as informed on 15.09.2023. The appellant then filed four complaint cases in the Court of Judicial Magistrate First Class, Fifth Court, Mangalore.
On 12.12.2023, the learned Magistrate returned the complaints, holding that his court lacked jurisdiction since the drawee bank was in Mumbai. The Karnataka High Court also agreed with this reasoning and dismissed the appellant’s challenge on 05.03.2024.
“The High Court proceeded on the erroneous assumption that the appellant maintained his bank account at the Opera House Branch in Mumbai,” – Supreme Court
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Supreme Court’s Observation
The appellant clarified that although the cheques were submitted at Mumbai’s branch, they were meant to be credited into his account at Kotak Mahindra Bank’s Bendurwell Branch in Mangalore. He also submitted bank documents showing that his account number (0412108431) was indeed in the Mangalore branch.
The respondent also acknowledged that the account had been transferred from Mumbai to Mangalore, confirming the appellant’s position.
“As matters stand, it is not in dispute that the appellant maintains his bank account with the Bendurwell, Mangalore Branch.” – Supreme Court
The court relied on Section 142(2)(a) of the Negotiable Instruments Act, which clearly states that jurisdiction in cheque dishonor cases lies with the court in whose area the payee’s bank account branch is situated—where the cheque is submitted for collection through an account.
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The Supreme Court also cited its earlier decision in Bridgestone India Pvt. Ltd. vs Inderpal Singh (2016), which held that the place where the payee's bank branch is located (for collection) determines jurisdiction.
The apex court held that since the appellant had his account in Mangalore at the time of cheque presentation, he was right in filing the cases there.
“The understanding to the contrary by the learned Magistrate was erroneous and completely opposed to the clear mandate of Section 142(2)(a) of the N.I. Act.” – Supreme Court
Case Name: Prakash Chimanlal Sheth vs. Jagruti Keyur Rajpopat (@ S.L.P. (Crl.) Nos. 5540–5543 of 2024)