Facts

The appellant, Prakash Chimanlal Sheth, alleged that one Keyur Lalitbhai Rajpopat had borrowed a sum of ₹38,50,000/- from him. The respondent, Jagruti Keyur Rajpopat, wife of the borrower, had stood as a guarantor for the repayment of the said loan. In addition, she had also availed independent financial assistance from the appellant. In September 2023, the respondent issued four cheques towards the discharge of both her husband’s liability and her own. These cheques were deposited by the appellant at the Kotak Mahindra Bank, Opera House Branch, Mumbai, with instructions to credit the proceeds to his account.

The cheques were dishonoured on the ground of insufficiency of funds, and the appellant received intimation of such dishonour on 15.09.2023. Consequently, he filed four complaints under Section 200 Cr.P.C. read with Section 138 of the Negotiable Instruments Act, 1881, before the Judicial Magistrate First Class, Fifth Court, Mangalore, which were numbered as C.C. Nos. 1258, 1259, 1260, and 1261 of 2023.

On 12.12.2023, the learned Magistrate returned the complaints holding that the drawee bank was situated at Mumbai, and therefore, his Court lacked territorial jurisdiction. The appellant challenged this order before the High Court of Karnataka, Bengaluru, by filing Criminal Petition Nos. 1237, 1720, 1769, and 1770 of 2024 under Section 482 Cr.P.C. The High Court, by order dated 05.03.2024, dismissed the petitions and upheld the Magistrate’s reasoning, assuming that the appellant’s account was maintained at the Mumbai branch.

Before the Supreme Court, the appellant asserted that his account was, in fact, maintained at the Bendurwell Branch, Mangalore, and that the deposit at the Mumbai branch was only for the purpose of crediting the proceeds to his Mangalore account. The respondent’s own counter-affidavit confirmed that the appellant’s account number, 0412108431, pertained to the Mangalore branch. The bank also issued a certification to this effect. The respondent’s counsel admitted that while the appellant earlier held an account in Mumbai, the account had been subsequently transferred to Mangalore.

Issues

The principal question before the Supreme Court was:

Whether the Judicial Magistrate at Mangalore had territorial jurisdiction to entertain complaints under Section 138 of the Negotiable Instruments Act when the appellant’s bank account was at Kotak Mahindra Bank, Bendurwell Branch, Mangalore, but the cheques were physically deposited at the Mumbai branch.

Law

The Court examined Section 142(2)(a) of the Negotiable Instruments Act, 1881, as amended in 2015. This provision mandates that an offence under Section 138 shall be inquired into and tried only by a court within whose local jurisdiction—if the cheque is delivered for collection through an account—the branch of the bank where the payee or holder in due course maintains the account is situated.

The Court referred to the precedent in Bridgestone India Pvt. Ltd. v. Inderpal Singh, (2016) 2 SCC 75, where it was held that jurisdiction for an offence under Section 138 lies with the court where the payee’s bank branch is situated, irrespective of where the cheque is physically presented. The emphasis is on the location of the branch where the payee maintains the account, not the branch of deposit or the drawee bank’s branch.

Application of Law to Facts

Applying Section 142(2)(a) and the principle from Bridgestone India, the Supreme Court observed that at the time of presentation of the cheques, the appellant’s account was maintained at the Kotak Mahindra Bank, Bendurwell Branch, Mangalore. The fact that the cheques were physically deposited at the Mumbai branch did not alter the position, as the Mumbai branch acted merely as the point of receipt for onward credit to the Mangalore account.

Therefore, the territorial jurisdiction for initiating proceedings under Section 138 vested in the court at Mangalore. The Magistrate’s order returning the complaints for want of jurisdiction was contrary to the statutory mandate of Section 142(2)(a). The High Court’s confirmation of this order was also erroneous as it was based on a mistaken factual assumption that the appellant’s account was in Mumbai.

The Court held that both the Magistrate and the High Court had committed a jurisdictional error by overlooking the clear legal position and by failing to appreciate the undisputed fact that the appellant’s account was in Mangalore at the relevant time.

Conclusion

The Supreme Court allowed the appeals, setting aside both the High Court’s order dated 05.03.2024 and the Magistrate’s order dated 12.12.2023. It directed the Judicial Magistrate First Class, Fifth Court, Mangalore to entertain and expeditiously adjudicate the complaints in accordance with law. All pending applications were disposed of.

The decision reinforces the principle that jurisdiction in Section 138 N.I. Act cases is determined by the location of the payee’s bank branch where the account is maintained, and not by the place of physical deposit or the location of the drawee bank. 

Amid the escalating tide of cyber fraud, Indian enforcement agencies have adopted an increasingly draconian measure, unilaterally freezing bank accounts that receive ostensibly suspicious or unexplained funds. While such actions are ostensibly geared toward dismantling financial crime networks, they simultaneously imperil foundational constitutional doctrines, particularly the inviolable right to due process.

Article 21 of the Indian Constitution enshrines the right to life and personal liberty. This right implicitly mandates a fair hearing prior to the imposition of any coercive or punitive state action. The indiscriminate freezing of individual bank accounts, often without prior notice, substantiation, or recourse, constitutes a flagrant subversion of natural justice. To equate the passive receipt of funds with culpability is to erode the bedrock of jurisprudence: Innocent until proven guilty.

The repercussions are far-reaching and profoundly disruptive. Salaried employees are rendered financially incapacitated, students are cut off from educational sustenance, and small enterprises find themselves immobilised, often for no fault of their own. Cybersecurity enforcement must be incisive, but not indiscriminate. Legal architecture must evolve to embed urgency with equity, swift action paired with procedural fairness. In a digital republic, the sanctity of civil liberties must remain non-negotiable. Justice, in its truest form, must be both rigorously applied and visibly upheld.

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