Supreme Court Clarifies Territorial Jurisdiction under NI Act: Complaint Maintainable Where Payee Holds Bank Account
- REEDLAW
- Aug 2
- 3 min read
Updated: Aug 12
REEDLAW Legal News Network reports that the Supreme Court has clarified that complaints under Section 138 of the Negotiable Instruments Act are maintainable where the payee maintains the account into which the dishonoured cheque was deposited.
The Supreme Court Bench comprising Justice Sanjay Kumar and Justice Satish Chandra Sharma, while adjudicating a batch of criminal appeals involving a common question, recently held that under Section 142(2)(a) of the Negotiable Instruments Act, 1881, the territorial jurisdiction for filing a complaint under Section 138 lies with the court within whose jurisdiction the payee maintains the bank account into which the dishonoured cheque is deposited for collection. Since the appellant maintained his account at the Mangalore branch of the bank, the Magistrate at Mangalore had the proper jurisdiction to entertain and try the complaints.
The Supreme Court set aside the orders of the High Court of Karnataka and the Judicial Magistrate, Mangalore, which had returned the appellant’s complaints under Section 138 of the Negotiable Instruments Act, 1881, for want of territorial jurisdiction. The appellant had filed complaints in Mangalore on the dishonour of four cheques issued by the respondent, who stood guarantor for a loan taken by her husband. Although the cheques were presented at the Opera House Branch of Kotak Mahindra Bank in Mumbai, the appellant maintained his bank account at the Bendurwell Branch of the same bank in Mangalore, into which the cheques were to be credited.
The Magistrate had erroneously concluded that Mumbai had territorial jurisdiction since the cheques were deposited there, and the High Court confirmed this conclusion under a mistaken assumption that the appellant maintained an account at the Mumbai branch. However, both parties admitted that the appellant’s account was held at Mangalore at the time of the deposit. The Supreme Court observed that under Section 142(2)(a) of the N.I. Act, the place where the payee maintains the account used for presenting the cheque for collection determines the jurisdiction for filing a complaint under Section 138.
Relying on the decision in Bridgestone India Private Limited v. Inderpal Singh, REEDLAW 2015 SC 11001, the Court held that jurisdiction clearly vested with the Mangalore Court. Consequently, the Supreme Court allowed the appeals, restored the complaints, and directed the Mangalore Magistrate to adjudicate the cases expeditiously.
Mr. Anantha Narayana M.G., Senior Advocate, represented the Appellant.
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