Multiple jurisdictions in financial transactions: Supreme Court Judgment

Introduction

The Supreme Court of India, in M/s Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd., addressed the issue of territorial jurisdiction in cheque dishonor cases under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”). The primary question was whether a complaint could be transferred under Section 406 of the Criminal Procedure Code, 1973 (“CrPC”) on the ground of lack of jurisdiction. This judgment sets an important precedent for cases involving multiple jurisdictions in financial transactions.

Background of the Case

The petitioner, M/s Shri Sendhur Agro & Oil Industries, sought the transfer of a criminal complaint filed under Section 138 NI Act from the Judicial Magistrate in Chandigarh to the Metropolitan Magistrate in Coimbatore, Tamil Nadu. The petitioner argued that the entire transaction, including loan processing, repayments, and collaterals, occurred in Coimbatore, making it the appropriate jurisdiction.

The respondent, Kotak Mahindra Bank Ltd., opposed the transfer, citing that the cheque was presented for collection in its Chandigarh branch, thereby conferring jurisdiction to the Chandigarh court.

Key Legal Issues Considered

1. Jurisdiction under Section 138 NI Act: Whether territorial jurisdiction for a cheque dishonor case is determined by the place of transaction or the location where the cheque is presented for clearance.
2. Application of Section 406 CrPC: Whether the Supreme Court has the authority to transfer a complaint filed under Section 138 NI Act if the complainant bank had multiple jurisdictional options.
3. Interpretation of Section 142 and 142-A of the NI Act: The amendment in 2015 introduced Section 142-A, which mandates that subsequent complaints against the same drawer should be filed in the same jurisdiction as the first complaint.
4. Principle of ‘Ends of Justice’: Whether transfer should be granted to avoid harassment of the accused by requiring appearances in an inconvenient jurisdiction.

Supreme Court’s Observations and Decision

Court’s Analysis of Jurisdiction

The Supreme Court analyzed the scope of Section 138 of the NI Act, stating that the five key components of the offense include:

• Drawing of the cheque
• Presentation of the cheque
• Return of the cheque unpaid
• Issuance of notice of demand
• Failure to make payment within 15 days

Citing K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510, the court noted that jurisdiction lies where any of these elements occur. However, the Dashrath Rupsingh Rathod v. State of Maharashtra case [(2014) 9 SCC 129] had clarified that the place of dishonor (where the drawee bank is located) is the primary jurisdiction.

Application of Section 406 CrPC

The Supreme Court reiterated that Section 406 CrPC allows for transfer of cases if “expedient for the ends of justice.” The power is discretionary and must be exercised sparingly. The Court referenced its earlier ruling in A.E. Premanand v. Escorts Finance Ltd. [(2004) 13 SCC 527], where similar complaints were consolidated for judicial efficiency.

Bank’s Justification for Chandigarh Jurisdiction

Kotak Mahindra Bank argued that its collection account for the cheque was located in Chandigarh. The Court questioned whether this alone justified filing the complaint there when all financial transactions had occurred in Coimbatore.

Key Court Observations

• Misuse of Multiple Jurisdictions: The Court emphasized that financial institutions should not file complaints in jurisdictions unrelated to the core transaction merely for strategic advantage.
• Convenience of the Accused: The Court acknowledged that forcing the petitioner to attend proceedings in Chandigarh would be unduly burdensome.
• Harmonizing Section 142-A NI Act: The Court pointed out that the legislative intent behind Section 142-A was to prevent misuse of jurisdictional choices by complainants.

Final Ruling

The Supreme Court allowed the transfer petition and directed the case to be moved to Coimbatore. It held that the ends of justice warranted transfer since all substantive elements of the transaction were tied to Tamil Nadu.

Conclusion

This judgment reinforces the principle that jurisdiction in cheque dishonor cases must align with the core transaction rather than be arbitrarily chosen. By ruling in favor of transfer, the Court upheld the legislative intent of the NI Act amendments and prevented undue harassment of the accused. The decision serves as a guiding precedent for similar disputes involving multiple jurisdictional claims.

References

1. K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510
2. Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129
3. A.E. Premanand v. Escorts Finance Ltd., (2004) 13 SCC 527
4. Bridgestone India Pvt. Ltd. v. Inderpal Singh, (2016) 2 SCC 75
5. Negotiable Instruments (Amendment) Act, 2015
6. Section 406, Code of Criminal Procedure, 1973
7. Section 138, 142, and 142-A, Negotiable Instruments Act, 1881

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