The Supreme Court on Thursday came down heavily on financial institutions and banks for what it described as the routine “misuse of law” to harass small borrowers by filing cheque-bounce complaints in far-off cities, despite all underlying transactions having occurred elsewhere. The Court said it would examine the issue in detail and “settle the law” to prevent such practices.
A bench of Justices Surya Kant and Joymalya Bagchi made the remarks while hearing a transfer petition filed by Golla Naraesh Kumar Yadav, who challenged a cheque-bounce case lodged by Kotak Mahindra Bank before the Chief Judicial Magistrate in Chandigarh. Yadav sought that the case be shifted to Adoni in Kurnool district, Andhra Pradesh, where the entire loan transaction had taken place.
Appearing for Yadav, advocate P. Mohith Rao said the bank had initiated proceedings in Chandigarh even though all dealings, loan sanctions, and repayments occurred in Andhra Pradesh. Yadav, a guarantor to the loan, had regularly paid instalments and defaulted only marginally, the counsel said.
The bench immediately questioned the bank’s reasoning.
When the bank’s counsel argued that Kotak Mahindra had an office in Chandigarh that handled the loan account, Justice Surya Kant retorted:
“Just because you have an office in Chandigarh, you will lodge a complaint there? This is unfair and harassment of small-time borrowers.”
The judge pressed further:
“What makes you think you will not get justice in Andhra Pradesh? Chandigarh courts are not sitting idle.”
Advocate Rao informed the Court that this was not an isolated instance. Borrowers across the country, often with limited means, were being forced to file transfer petitions because banks were choosing distant venues such as Delhi, Chandigarh or Kolkata for filing cheque-bounce cases.
Justice Kant responded sharply:
“You are like an octopus. You have offices everywhere, so does it mean you will file cases here and there? We are opening courts everywhere, but you still file cases at distant places just to harass borrowers. Where is the access to justice?”
The bank attempted to justify its action by citing the 2015 amendment to the Negotiable Instruments Act. But the bench was unconvinced.
Justice Bagchi noted that while territorial jurisdiction rules exist, transfer petitions are fundamentally about the convenience of parties. Justice Kant added:
“Just because you can file a complaint anywhere in the country where you have a collection centre does not mean you will harass small-time traders or borrowers.”
The Court warned that such practices distort the purpose of the law:
“It means if transactions took place in Srinagar, you will file a complaint in Kanyakumari or Coimbatore. This was not the intent of the legislation. It is misuse of the law. We will examine this issue and pass orders and set the law.”
Allowing Yadav’s plea, the Supreme Court transferred the complaint from Chandigarh to the competent court in Adoni, Andhra Pradesh.
The bench also directed advocate Rao to gather information on how many similar complaints the bank has filed in Chandigarh, which courts are handling them, and their status.
The matter concerns a cotton trading company based in Andhra Pradesh that availed credit facilities — including overdraft limits — from Kotak Mahindra Bank’s Adoni branch in 2021. Yadav had stood as a guarantor for the loan.
In April 2023, the bank issued a recall notice alleging default in interest instalments and repayment. This triggered a series of legal battles between the borrower and the bank across various forums, including the Debt Recovery Tribunal.
With the Supreme Court expressing clear displeasure at the pattern of distant-venue filings, the matter is likely to evolve into a broader ruling that could impact how banks initiate cheque-bounce proceedings nationwide.
The Court’s intervention signals an upcoming clarification on balancing statutory provisions with access to justice — especially for small borrowers who often lack the resources to defend cases filed thousands of kilometres away.
