Section
138 of Negotiable Instruments Act Complaint: Territorial Jurisdiction
Ever
since Section 138 of Negotiable Instruments Act 1881 (In short “NI” Act) has
been inserted in the statute book in 1988, there has been successive amendments
in the NI Act, consequently, issues of jurisdiction remained vexed. It was more
so, after the judgment rendered by the hon’ble Supor4eme Court in a matter
reported as Dasrath Rup Singh Rathore Vs State Of Maharashtra &Anr (AIR 2014 SC 3519)
wherein, contrary to the prevailing practices, it was held that the territorial
jurisdiction shall be vested in the courts within whose jurisdictional limit,
the banker of the accused was located, resultantly, large number of cases were
to be transferred from the existing courts to such courts where the accused had
location of their banker. In the face of the above and resultant difficulty
felt by the litigants in this regard, the Negotiable Instruments (Amendment)
Act 2015 was passed and therein it has been prescribed, categorically, that the
territorial jurisdiction shall be vested only in the courts, where the banker
of the payee (complainant) was located. Though, even then, some ambiguity
remained in the minds of many, in as much as, if the cheque was deposited for
encashment in the collection branch of a different city or location, whereas,
the account was maintained by the complainant in some other branch and
location, where the complaint was to be lodged? Whether in the location of the
collection branch or where the complainant maintained their account? The
ambiguity was so pervasive, that diverse judgments were being pronounced by the
Courts. In order to set that right the Supreme Court has conclusively settled
the issue in a matter reported as Prakash Chimanlal Sheth Vs Jagruti
Keyur Rajpopat 2025 INSC 897 (Criminal Appeal arising out of SLP (Crl)
Nos. 5540-5543 of 2024)
Shorn
of unnecessary details, the cheques were issued by the accused for discharge of
liability and the complainant had deposited the cheques for collection in their
banker, namely, Kotak Mahindra Bank, Opera House Branch, Mumbai, when it was
dishonoured due to “insufficiency of funds”. The complaints were thus
filed before the learned Judicial Magistrate First Class, Fifth Court,
Mangalore.
Before
the Supreme Court, it was asserted by the appellant/complainant 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. It was 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 learned Magistrate,
returning the complaint cases on the ground of territorial jurisdiction, which
is ex facie erroneous.
Per
contra, the respondent disputed the assertion of
appellant/complainant, however, it was admitted that the appellant earlier
maintained his bank account with the Opera House Branch of the Kotak Mahindra
Bank at Mumbai but, thereafter, he got it transferred to the Bendurwell,
Mangalore Branch. Thus, what is not in dispute is that the appellant maintains
his bank account with the Bendurwell, Mangalore Branch, of the Kotak Mahindra
Bank and had merely deposited the respondent’s cheques at its Mumbai Branch for
the purpose of crediting his account in Mangalore.
It
was thus held by Supreme Court as under:
7.
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, was considered in Bridgestone India Private Limited vs. Inderpal Singh
(2016)
2 SCC 75 and this Court affirmed that Section 142(2)(a) of the Negotiable
Instruments Act vests jurisdiction apropos an offence under Section 138 thereof
in the Court where the cheque is delivered for collection, that is, through an
account in the Branch of the Bank where the payee maintains that account”.
8.
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
appeals in Prakash Chimanlal Sheth (Supra) were
therefore allowed.
For
the sake of elucidating the details it is worthwhile to mention relevant
paragraphs of Bridgestone India Private Limited vs. Inderpal Singh (2016)
2 SCC 75
"13.
A perusal of the amended Section 142 (2), extracted above, leaves no room
for any doubt, especially in view of the Explanation thereunder, that with
reference to an offence under Section138 of the Negotiable
Instruments Act, 1881, the place where a cheque is delivered for collection
i.e. the branch of the bank of the payee or holder in due course, where the
drawee maintains an account, would be determinative of the place of territorial
jurisdiction.
14.
It is, however, imperative for the present controversy, that the appellant
overcomes the legal position declared by this Court, as well as, the provisions
of the Code of Criminal Procedure. Insofar as the instant aspect of the
matter is concerned, a reference may be made to Section 4 of the
Negotiable Instruments (Amendment) Second Ordinance, 2015, whereby Section
142-A was inserted into the Negotiable Instruments Act. A perusal of
sub-section (1) thereof leaves no room for any doubt, that insofar as the
offence under Section 138 of the Negotiable Instruments Act is
concerned, on the issue of jurisdiction, the provisions of the Code of
Civil Procedure, 1973, would have to give way to the provisions of the instant
enactment on account of the non obstante clause in sub-section (1)
of Section 142-A. Likewise, any judgment, decree, order or direction
issued by a court would have no effect insofar as the territorial jurisdiction
for initiating proceedings under Section 138 of the Negotiable
Instruments Act is concerned. In the above view of the matter, we are
satisfied that the judgment rendered by this Court in Dashrath Rupsingh
Rathod case would also not non-suit the appellant for the relief claimed.
15.
We are in complete agreement with the contention advanced at the hands of the
learned counsel for the appellant. We are satisfied, that Section 142 (2)
(a), amended through the Negotiable Instruments (Amendment) Second Ordinance,
2015, vests jurisdiction for initiating proceedings for the offence under Section
138 of the Negotiable Instruments Act, inter alia, in the territorial
jurisdiction of the court, where the cheque is delivered for collection
(through an account of the branch of the bank where the payee or holder in due
course maintains an account). We are also satisfied, based on Section
142-A (1) to the effect, that the judgment rendered by this Court in Dashrath
Rupsingh Rathod Vs State Of Maharashtra &Anr (AIR 2014 SC 3519),
would not stand in the way of the appellant, insofar as the territorial
jurisdiction for initiating proceedings emerging from the dishonour of the
cheque in the present case arises."
In
view of the above discussion there cannot be any ambiguity as regards the
territorial limits of jurisdiction of court where the complaint u/s 138 of
Negotiable Instruments Act has to be instated. It is beyond any pale of doubt
that the complaint by the complainant shall have to be filed only in such place
where the complainant maintains his bank account and mere deposit for
collection in same other location of the same bank shall not alter the
situation.
------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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