Introduction
An interesting legal question often arises in cases involving a dishonored cheque: where do you file the complaint? The Supreme Court of India recently addressed this very issue in a case that highlights the importance of understanding a specific provision of the Negotiable Instruments Act, 1881 (N.I. Act). The case, Prakash Chimanlal Sheth vs. Jagruti Keyur Rajpopat1, serves as a crucial reminder for anyone involved in such a legal dispute. It clarifies that the decisive factor for territorial jurisdiction is not where the cheque was physically presented, but rather the location of the bank branch where the payee maintains their account. This judgment provides a clear roadmap for complainants seeking legal recourse under Section 138 of the N.I. Act.
The case originated from a financial transaction where Appellant lent a sum of ₹38,50,000 to Respondent, who is his wife, acting as a guarantor. To settle these debts, she issued four cheques. Appellant deposited these cheques at the Kotak Mahindra Bank, Opera House Branch, Mumbai. However, the cheques were dishonored due to insufficient funds. Following the dishonour, Appellant filed four complaints in the Judicial Magistrate First Class, Fifth Court, Mangalore. This is where the legal quagmire began. The Magistrate returned the complaints, citing a lack of territorial jurisdiction, arguing that since the drawee bank was in Mumbai, the court in Mangalore had no authority to hear the case. This decision was subsequently upheld by the High Court of Karnataka. The matter then escalated to the Supreme Court.
Justice Restored: The Supreme Court Corrects a Jurisdictional Error
The heart of the matter lay in the correct interpretation of the law governing territorial jurisdiction for cheque dishonor cases. The appellant pointed out a critical factual error made by the lower courts. He clarified that while he had presented the cheques at the Mumbai branch, his bank account was actually at the Kotak Mahindra Bank’s Bendurwell, Mangalore Branch. The respondent’s counsel also fairly conceded this point. The Supreme Court referenced Section 142(2)(a) of the N.I. Act, which explicitly states that an offence under Section 138 should be tried by a court within whose local jurisdiction the branch of the bank where the payee maintains the account is situated.
The court’s interpretation was also supported by a previous judgment in Bridgestone India Private Limited vs. Inderpal Singh2: This Supreme Court judgment is the foundational precedent for the interpretation of Section 142(2)(a) of the N.I. Act. In this case, the court held that the jurisdiction for a cheque dishonor complaint is vested in the court within whose local limits the payee’s bank branch is situated. The rationale was that the place where a cheque is “delivered for collection” is the bank branch where the payee maintains their account, not the physical location where the cheque may have been deposited. This ruling effectively settled the jurisdictional ambiguity that had existed prior to the 2015 amendment to the N.I. Act.
Dashrath Rupsingh Rathod vs. State of Maharashtra3: This is a crucial case to understand the context of the amendment. Before the 2015 amendment, the Supreme Court in this case held that jurisdiction lay where the drawee bank was located, as that is where the offence of dishonor was technically completed.
Jurisdictional Change: A Shift from Judicial to Statutory Law
The legal scenario for territorial jurisdiction in cheque dishonor cases underwent a significant transformation following the 2015 amendment.
Pre-2015 Amendment: Before the amendment, the Supreme Court’s ruling in Dashrath Rupsingh Rathod vs. State of Maharashtra (Supra) dictated the law. The Court held that the correct place to file a complaint was where the drawee bank was located. This was because the offence was considered to have been “completed” at the point of dishonour at the drawee bank. This created a major challenge for complainants, who were often forced to travel long distances to file and pursue cases in a court that had jurisdiction over the accused’s bank.
Post-2015 Amendment: The Negotiable Instruments (Amendment) Act, 2015, was a legislative response to the Dashrath ruling. It introduced Section 142(2)(a), which fundamentally changed the jurisdictional rule. The current law, as affirmed in the present case of Prakash Chimanlal Sheth, clarifies that a complaint can be filed in a court within whose local jurisdiction the payee’s bank account is located. This effectively reverses the pre-amendment position, ensuring that justice is more accessible and convenient for complainants by allowing them to file a case in their own local area.
Based on these legal principles and the factual correction about the location of the appellant’s bank account, the Supreme Court ruled in favor of Appellant. The Court found that the Magistrate’s understanding of the law was erroneous and that the High Court’s decision was based on a flawed premise. The appeals were therefore allowed, and the orders of both the High Court and the Magistrate were set aside. The Supreme Court directed the Judicial Magistrate First Class, Fifth Court, Mangalore, to entertain and expeditiously adjudicate the complaint cases in accordance with the law. The verdict underscores a key legal principle: for a complaint under Section 138 of the N.I. Act, the correct court is determined by the location of the complainant’s own bank branch, not the branch where the cheque was physically deposited. This judgment provides essential clarity and prevents similar jurisdictional disputes from stalling justice in the future.
Conclusion
The Supreme Court’s verdict in the present case marks a definitive moment in the jurisprudence of cheque dishonor cases. This judgment is not merely a resolution to a specific dispute, but a powerful affirmation of the legislative intent behind the Negotiable Instruments (Amendment) Act, 2015. The ruling effectively puts to rest the ambiguity that arose from the pre-amendment era, particularly the principle laid down in the Dashrath Rupsingh Rathod case. While Dashrath had anchored jurisdiction to the drawee bank’s location, the 2015 amendment and the subsequent judicial support in Bridgestone India and the present Sheth case has firmly shifted the legal landscape. The decisive factor is now the location of the complainant’s own bank branch, where their account is maintained and the cheque is “delivered for collection.”
By setting aside the erroneous orders of the lower courts, the Supreme Court has provided a clear, consistent, and logical framework for filing complaints under Section 138 of the N.I. Act. This not only restores justice for the appellant in this case but also serves as a crucial precedent. It empowers complainants with a definitive roadmap, streamlining the legal process and preventing similar jurisdictional disputes from causing unnecessary delays in the pursuit of justice. The judgment reinforces the principle that the law must evolve to meet modern banking realities, ensuring that legal recourse is both accessible and predictable.
Citations
- Prakash Chimanlal Sheth vs. Jagruti Keyur Rajpopat (2025 INSC 897)
- Bridgestone India Private Limited vs. Inderpal Singh (2016) 2 SCC 75)
- Dashrath Rupsingh Rathod vs. State of Maharashtra (AIR 2014 SUPREME COURT 3519)
Expositor(s): Adv. Archana Shukla
