SUPREME COURT CLARIFIES TERRITORIAL JURISDICTION IN CHEQUE DISHONOUR CASES: REINSTATES COMPLAINTS FILED AT MANGALORE
In a decisive judgment delivered on July 25, 2025, the Supreme Court of India resolved a frequently contested issue about where cheque dishonour complaints must be filed under Section 138 of the Negotiable Instruments Act, 1881 (“N.I. Act”). In ‘Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat and Anr. (SLP (Crl.) Nos. 5540-5543 of 2024), the Court reversed the orders of both the Magistrate and the High Court, reinstating the complaints that were filed in Mangalore.
BACKGROUND OF THE CASE
The dispute originated from a loan transaction involving Prakash Chimanlal Sheth (the appellant), who had extended a sum of ₹38,50,000 to Keyur Lalitbhai Rajpopat. To secure this amount, Jagruti Keyur Rajpopat (Keyur’s wife and the Respondent in this case) not only stood as a guarantor but also availed additional financial assistance herself. In September 2023, Jagruti issued four cheques in discharge of both her husband’s liability and her own.
These cheques were presented by the Appellant at the Kotak Mahindra Bank Opera House Branch in Mumbai, aiming for credit to his own account held at the Bendurwell Branch, Mangalore. The cheques bounced owing to insufficient funds, leading the Appellant to file 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, doubting jurisdiction since the cheques were deposited in Mumbai. This position was upheld by the Karnataka High Court, reinforcing confusion regarding proper territorial jurisdiction in cheque dishonour cases.
SUPREME COURT’S ANALYSIS AND FINDINGS
The bench, led by Justice Sanjay Kumar, delved deeply into the statute and the facts at hand, underlining key principles for determining jurisdiction:
- Clarifying the Jurisdictional Law: The Court extensively interpreted Section 142(2)(a) of the Negotiable Instruments Act, as amended in 2015. It held that the law is explicit: if a cheque is delivered for collection through an account, the court having jurisdiction is that in whose locale the branch of the bank where the payee (i.e., the complainant) maintains the account is situated.
- Factual Correction: Upon reviewing bank records and documents, the Supreme Court found no dispute about the Appellant’s account location—the account was with Kotak Mahindra Bank, Bendurwell Branch, Mangalore. The Court recognized that simply presenting the cheques at the Opera House Branch in Mumbai for eventual credit does not affect jurisdiction, as the essential account for collection is in Mangalore.
The High Court’s confirmation of the Magistrate’s order was based on an incorrect assumption regarding the account’s location. The Supreme Court corrected this error.
- Precedents and Legislative intent: Relying on the precedent set in Bridgestone India Private Limited v. Inderpal Singh (2016) 2 SCC 75, the Court reaffirmed the legislative intent to simplify and ensure clarity in cheque dishonour cases. It stressed that jurisdiction is tied to the payee’s account, removing needless technical hurdles for complainants and preventing forum shopping.
- Ensuring expeditious justice: The Supreme Court also emphasized the importance of timely resolution of such complaints, ordering the Mangalore Court to entertain and adjudicate the Appellant’s cases promptly.
GUIDELINES AND SYSTEMATIC IMPLICATIONS
While the judgement resolves the immediate dispute, it also offers broader guidance:
- Strict adherence to Statutory Jurisdiction: Courts must rely on the location of the payee’s account and not simply the place of cheque presentation or the branch where dishonour occurs.
- Accurate factual Inquiry: Courts must closely verify where the complainant’s account is maintained, as assumptions can lead to unnecessary delays or miscarriage of justice.
- Simplification for Litigants: The decision aims to prevent unnecessary transfers and technical dismissals, streamlining processes for complainants seeking redress.
KEY TAKEAWAYS FROM THE RULING
- Jurisdiction tied to payee’s Bank Branch: Offences under Section 138 N.I. Act must be tried in courts where the complainant’s bank branch is located, ensuring convenience and fairness.
- Presentation location is secondary: Merely depositing a cheque at a different branch does not confer jurisdiction; primary consideration is where the payee maintains his account.
- Importance of Due Diligence: Magistrates and High Courts must thoroughly examine factual records before dismissing complaints for lack of jurisdiction.
- Prompt judicial process for commercial disputes: The Supreme Court’s directive for expeditious adjudication signals its concern for swift resolution in cheque dishonour matters.
CONCLUSION
The verdict in ‘Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat’ is a timely clarification of procedural law regarding cheque dishonour, restoring certainty and simplicity to litigants. By grounding jurisdiction in the complainant’s bank branch, the Supreme Court not only corrected a local error but set a clear standard for courts across India, protecting the integrity and efficiency of commercial dispute resolution. The decision ensures that parties are not ensnared by avoidable technicalities and that judicial processes remain anchored in statutory clarity and practical fairness.
Contributed By:
Soumen Dash
(Associate)
The Indian Lawyer & Allied Services
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