Jurisdiction in Section 138 NI Act cases lies where cheque is presented for payment through payee's bank account

The HC held that jurisdiction in a Section 138 NI Act cheque dishonour case lies with the Court within whose local jurisdiction the cheque was presented for realization through the payee's bank account. Since the cheque was drawn on the respondent's account in Surat and presented through the petitioner's account in Mumbai, the complaint should have been filed either in the Magistrate's Court at Mumbai or Surat. The petition challenging the Magistrate's order returning the complaint for lack of territorial jurisdiction was dismissed, affirming that the Magistrate acted correctly in rejecting jurisdiction.

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ISSUES:

Whether a Magistrate's Court has territorial jurisdiction to entertain a complaint under Section 138 of the Negotiable Instruments Act when the complainant maintains an account in a different branch of the bank than the one where the cheque was presented.Interpretation and applicability of Section 142(2)(a) of the Negotiable Instruments Act regarding jurisdiction based on the branch of the bank where the payee or holder in due course maintains the account.Whether the Explanation to Section 142(2)(a) applies when the cheque is presented at a branch different from where the payee maintains the account.Validity of the Magistrate's order returning the complaint for lack of territorial jurisdiction under Section 138 proceedings.

RULINGS / HOLDINGS:

The Court held that "the offence punishable under Section 138 of the N. I. Act shall be inquired into and tried only by a Court within whose local jurisdiction the cheque in question... was presented for realization by the complainant through his account maintained in the Bank which is within the local jurisdiction of the Court."The Court ruled that since the cheque was drawn on the respondent's account maintained at Surat, Gujarat, and presented through the complainant's account at Kotak Mahindra Bank, Opera House, Mumbai, the complaint was maintainable only in the jurisdiction of either the Mumbai branch or the Surat branch, not the Mangaluru branch.The Explanation to Section 142(2)(a) is applicable "only in a case where the cheque is presented in a branch of the bank where the payee or holder in due course does not maintain an account," and thus was not applicable here as the complainant maintained an account at the Mumbai branch where the cheque was presented.The Court found no illegality or irregularity in the Magistrate's order returning the complaint on the ground of territorial jurisdiction and dismissed the petitions accordingly.

RATIONALE:

The Court applied Section 142 of the Negotiable Instruments Act, 1881, which governs the cognizance and jurisdiction for offences under Section 138.The Court relied on the statutory language of Section 142(2)(a) and its Explanation to determine territorial jurisdiction based on the location of the bank branch where the payee maintains the account and where the cheque is presented.The Court referenced the Supreme Court's decision clarifying that the Explanation to Section 142(2)(a) applies only when the cheque is presented at a branch different from that of the payee's account.The Court distinguished prior case law cited by the petitioner as not applicable on the facts, reinforcing a strict territorial jurisdiction approach under Section 138 proceedings.

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