Author: Ms. Somya Gupta, Vivekananda Institute of Professional Studies affiliated to GGSIPU
Citation: 2025 INSC 328
Court: Supreme Court of India
Decision Date: 06-03-2025
Bench: Justices J.B. Pardiwala and R. Mahadevan.
List of Laws: Code of Criminal Procedure, 1973; The Negotiable Instruments Act, 1881; Banking Regulation Act, 1949; General Principles of Law
To the Point
This landmark ruling of 2025 redefined how jurisdiction and transfer petitions are interpreted in cheque bounce cases under Section 138 of the Negotiable Instruments Act (NI Act), 1881, especially in the backdrop of financial recovery proceedings under the SARFAESI Act.
The Court upheld the contractual sanctity between a borrower and a bank, ruled that the place of cheque presentation determines jurisdiction, and clarified that transfer of criminal cases under Section 406 CrPC cannot be sought merely for convenience or distance.
It strikes a decisive balance between banking enforceability and fair trial rights, setting a precedent that will guide both commercial banks and litigants across India.
Use of Legal Jargon
Jurisdictional Competence: Refers to the legal authority of a court to entertain a case based on the locus of transaction or presentation of cheque.
Ratio Decidendi: The cheque dishonour complaint is maintainable where the cheque was presented for collection, as per Section 142(2)(a) NI Act, introduced by the 2015 amendment.
Causa Causans: The immediate cause of the offence under Section 138 is the presentation and dishonour of cheque, not the location of the original loan transaction.
Doctrine of Fair Trial: A transfer under Section 406 CrPC can be invoked only if justice is endangered — not to accommodate convenience or location preferences.
Quasi-Criminal Liability: Cheque dishonour under Section 138 imposes strict liability — mental intent (mens rea) is immaterial once the statutory ingredients are met.
SARFAESI Compliance: Banks’ right to recover secured debts must align with procedural safeguards under Sections 13 and 17 of the SARFAESI Act and RBI prudential norms.
The Proof
Facts of the case
Parties:
Petitioner: Shri Sendhur Agro & Oil Industries (a Coimbatore-based agro-processing firm).
Respondent: Kotak Mahindra Bank Ltd.
Shri Sendhur Agro & Oil Industries, a company based in Coimbatore engaged in the manufacturing and trading of agro-based products, availed an overdraft facility from Kotak Mahindra Bank’s branch in Coimbatore
The loan was granted against the mortgage of properties located in Coimbatore, and all related formalities and transactions were carried out at the Coimbatore branch.
To secure the facility, the borrower issued blank cheques and set up repayments using the ECS (Electronic Clearing Service), but eventually defaulted on payments around 2018, resulting in the loan being classified as a non-performing asset (NPA).
Kotak Mahindra Bank initiated recovery proceedings under the SARFAESI Act and sold mortgaged assets to recover dues. The borrower challenged these proceedings before the Debt Recovery Tribunal in Coimbatore.
Parallelly, the bank presented one of the issued cheques at its Chandigarh branch, where it was dishonoured due to insufficient funds, leading to a criminal complaint under Section 138 of the Negotiable Instruments Act being filed in Chandigarh.
Shri Sendhur Agro argued that since all substantive transactions—loan initiation, disbursal, mortgage, default, and even earlier litigation—occurred in Coimbatore, criminal proceedings ought to be tried there, not Chandigarh. They alleged abuse of process due to forum shopping by the bank, delay in issuing summons (three years), and overlapping civil and criminal recoveries.
The borrower sought a transfer of the criminal case from Chandigarh to Coimbatore, claiming the Chandigarh forum had no real connection to the loan except for cheque presentation.
Petitioner’s Arguments
Territorial Jurisdiction: The entire loan transaction, sanction, and disbursement took place in Coimbatore. Filing a complaint in Chandigarh amounts to harassment and forum shopping.
Fair Trial Concerns: The distance between Tamil Nadu and Chandigarh would cause hardship to the petitioner’s witnesses and defence.
Violation of Natural Justice: The choice of forum was intended to pressure the borrower and misuse the criminal process for civil recovery.
RBI Directions: The bank’s recovery practices violated RBI’s fair lending norms and were coercive.
Respondent Bank’s Arguments
Statutory Jurisdiction: Under Section 142(2)(a) of the NI Act, the place where the cheque is presented for collection determines jurisdiction. Since the cheque was deposited in Chandigarh, the complaint was rightly filed there.
No Grounds for Transfer: There was no proof of bias, prejudice, or security concerns that could justify invoking Section 406 CrPC.
Contractual Enforcement: The borrower had acknowledged his liabilities in writing, and the bank was lawfully enforcing recovery.
Good Faith: The bank followed all procedural requirements under the SARFAESI Act and RBI guidelines.
Supreme Court’s Findings
The Supreme Court dismissed the transfer petition and held that mere inconvenience or alleged lack of territorial nexus is not a ground to transfer a Section 138 NI Act complaint under Section 406 CrPC; transfers are reserved for exceptional situations where it is expedient for the ends of justice to secure a fair trial.
The Court refused to transfer Kotak Mahindra Bank’s cheque dishonour complaint from Chandigarh to Coimbatore, reiterating that Section 406 CrPC is to be exercised sparingly and only to ensure a fair and impartial trial, not to remedy alleged territorial defects or reduce travel hardship.
Lack of territorial jurisdiction, by itself, cannot justify transfer under Section 406; in cheque bounce cases, the complaint can be instituted at the place of the drawee bank where the cheque is presented, consistent with Section 142 NI Act and the 2015 regime.
The petitions in a batch were analogously decided and dismissed, with the Court issuing a common reportable judgment (Neutral Citation: 2025 INSC 328; Judgment date: 6 March 2025).
Reasoning
Transfer power must be used cautiously and only when expedient for the ends of justice; valid factors include credible apprehension of bias, collusion of prosecution, threats or hostility affecting witnesses, or circumstances undermining trial credibility.
Comparative inconvenience of parties and witnesses may be considered but cannot eclipse the primary consideration of fair trial; mere travel hardship is insufficient.
Where the chosen court has territorial jurisdiction per NI Act rules, transfer should not be used to re-seat the case absent compelling fair-trial concerns.
Transfer Petition (Crl.) No. 608 of 2024 and connected petitions were dismissed; the Court declined to move the case from Chandigarh to Coimbatore.
Subsequent transfer petitions in other matters were dismissed relying on this precedent, with the Supreme Court suggesting accused may seek exemption from personal appearance or virtual participation, and courts may explore mediation.
Abstract
The judgment harmonizes commercial certainty with procedural justice. It fortifies the jurisdictional clarity under Section 138 NI Act, confirming that the place of cheque presentation determines venue. It simultaneously curtails misuse of transfer petitions under Section 406 CrPC to prevent forum shopping and delay tactics.
By balancing the rights of creditors and debtors, the Court reinforced legal predictability in banking litigation. The ruling aligns statutory interpretation with commercial realities, ensuring that recovery mechanisms remain efficient while preserving fairness in criminal adjudication.
Case Laws Referred
K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510: Laid down the five components of the Section 138 offence.
Dashrath Rupsingh Rathod v. State of Maharashtra (2014) 9 SCC 129: Restricted jurisdiction to the place of drawee bank; later modified by legislative amendment.
Leela Hotels Ltd v. State of Maharashtra (2021) 8 SCC 537: Transfer under Section 406 CrPC permissible only in rare cases to secure fair trial.
ICDS Ltd v. Beena Shabeer (2002) 6 SCC 426: Affirmed the statutory liability in cheque dishonour cases.
State Bank of India v. S.N. Goyal (2008) 8 SCC 92: Recognized banks’ right to recover dues through lawful procedures.
P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC 258: Clarified the civil-criminal interplay in Section 138 proceedings during insolvency.
Conclusion
The Supreme Court’s ruling in Shri Sendhur Agro & Oil Industries v. Kotak Mahindra Bank Ltd is a cornerstone in financial jurisprudence. It:
Reinforces binding nature of banking contracts.
Clarifies jurisdiction under the NI Act post-2015 amendment.
Limits transfer petitions to genuine cases involving fairness, not convenience.
Encourages structured settlement and pre-litigation resolution between banks and borrowers.
This judgment ensures that commercial litigation remains efficient, geographically rational, and legally disciplined, closing the door on forum shopping and procedural misuse.
It will likely serve as a reference point in all future Section 138 NI Act disputes and banking recovery litigations, reaffirming that the law protects genuine creditors while balancing fairness for debtors.
FAQs
Q1. What was the central issue in this case?
Whether the Chandigarh court had jurisdiction to try the cheque bounce case and whether the case should be transferred to Coimbatore for convenience and fairness.
Q2. What legal principle governs jurisdiction under Section 138 NI Act after 2015?
Jurisdiction lies where the cheque is presented for collection and dishonoured — not where the underlying transaction occurred.
Q3. When can a criminal case be transferred under Section 406 CrPC?
Only when there is credible apprehension of bias or threat to justice — not due to distance or inconvenience.
Q4. What did the Court say about banking recovery?
Banks can lawfully enforce loan contracts if they comply with RBI norms and statutory safeguards under SARFAESI; borrowers cannot use jurisdictional objections as a shield against default.
Q5. What precedent value does this case hold?
It cements the post-amendment NI Act jurisdictional rule, strengthens contract enforcement, and discourages forum shopping through transfer petitions.
Q6. Does this judgment affect future cheque bounce cases?
Yes. It streamlines jurisdictional determination, ensuring that complaints filed at the place of cheque presentation are legally sustainable and immune to transfer challenges.
