In a significant ruling, the Supreme Court of India has held that a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) must be filed at the location where the payee’s bank account is situated, and the accused cannot seek a transfer of the case for personal convenience. The bench comprising Justice J.B. Pardiwala and Justice R Mahadevan delivered the judgment in Transfer Petition (Crl.) No. 608 of 2024, along with connected matters.
Background of the Case
The dispute arose between M/s Shri Sendhur Agro & Oil Industries (Petitioner) and Kotak Mahindra Bank Ltd. (Respondent) regarding a cheque dishonour case under Section 138 of the NI Act. The petitioner, a Coimbatore-based proprietorship, had obtained an overdraft facility from the respondent bank at its Coimbatore branch. However, upon default in repayment, the bank initiated legal proceedings under the NI Act by filing a complaint in Chandigarh, where the bank had presented the dishonoured cheque.
Contesting the jurisdiction, the petitioner sought a transfer of the case from Chandigarh to Coimbatore, arguing that the entire transaction had occurred in Coimbatore and that the complainant bank’s act of presenting the cheque in Chandigarh was arbitrary. The petitioner further cited practical difficulties in defending the case in Chandigarh, including language barriers and travel constraints.
Key Legal Issues
The Supreme Court examined the following critical legal questions:
Jurisdiction in Cheque Dishonour Cases: Whether a complaint under Section 138 of the NI Act should be filed where the cheque is presented or where the drawer maintains an account.
Scope of Transfer under Section 406 CrPC: Whether the accused can seek a transfer of a cheque dishonour case based on personal convenience.
Interpretation of Section 142(2) and 142-A of the NI Act: Whether the bank’s right to choose the jurisdiction under Section 142(2) overrides the accused’s plea for transfer.
Supreme Court’s Ruling
In a well-reasoned judgment, the Supreme Court dismissed the transfer petitions, upholding the jurisdiction of the Chandigarh court where the cheque was presented for collection. The Court held:
“Jurisdiction in cheque dishonour cases is determined by the location of the bank where the payee maintains the account, not where the drawer’s bank is located. The accused cannot claim inconvenience as a ground for transfer under Section 406 of the CrPC.”
The judgment extensively relied on Yogesh Upadhaya v. Atlanta Ltd. (2023 SCC OnLine SC 170), affirming that complaints under Section 138 of the NI Act must be filed where the payee’s bank is located, as clarified by the Negotiable Instruments (Amendment) Act, 2015. The Court further held that Section 142-A was inserted in the NI Act to ensure that multiple complaints arising from dishonoured cheques drawn by the same accused are consolidated in one court for consistency in adjudication.
Rejecting the petitioner’s argument of personal inconvenience, the Court observed:
“While the transfer power under Section 406 CrPC exists, it is to be exercised sparingly. The accused cannot dictate the forum of litigation merely based on inconvenience.”
Arguments by the Parties
Petitioner’s Arguments (M/s Shri Sendhur Agro & Oil Industries):
The cheque was drawn, issued, and dishonoured at Coimbatore, and all previous transactions were conducted there.
The complainant bank deliberately filed the case in Chandigarh to harass the petitioner.
Attending court proceedings in Chandigarh imposes an unreasonable burden, including travel and language barriers.
The SARFAESI proceedings for loan recovery were already pending in Coimbatore, making the Chandigarh case an abuse of process.
Respondent Bank’s Arguments (Kotak Mahindra Bank Ltd.):
The bank was legally entitled to present the cheque at its collection branch in Chandigarh, which determined the jurisdiction.
The petitioner had defaulted on multiple payments, and the complaint was a lawful exercise of rights under the NI Act.
The accused’s personal inconvenience was not a valid ground for transfer under Section 406 CrPC.
Precedents and Legal Reasoning
The Court reinforced its reasoning by citing:
Dashrath Rupsingh Rathod v. State of Maharashtra [(2014) 9 SCC 129]: The jurisdiction for a cheque dishonour case lies where the cheque is presented and dishonoured.
Bridgestone India Pvt. Ltd. v. Inderpal Singh [(2016) 2 SCC 75]: Confirmed the amendments in Section 142(2)(a), restricting jurisdiction to where the payee’s bank is located.
A.E. Premanand v. Escorts Finance Ltd. [(2004) 13 SCC 527]: The Supreme Court upheld that transfer petitions in NI Act cases should be entertained only in extraordinary circumstances.
