A city-based complainant can file a cheque-bouncing case with a metropolitan magistrate in Mumbai even if the transaction took place in another state and the cheque issued is of another city.
Justice J.H. Bhatia ruled that a metropolitan court can hear the case filed under section 138 of the Negotiable Instrument Act for cheque bouncing, if the complainant is from Mumbai.
Ruchi Soya Industries Ltd (RSIL) had entered into a transaction with Madan Oil & Fat Pvt Ltd (MOFPL), a Rajasthan based company, in 2004. RSIL used to purchase mustard oil and packing material and then give to MOFPL at Alwar, Rajasthan, for packaging.
MOFPL in turn took packing charges and give the packed material to RSIL.
In January 2004, MOFPL did not pack and return some of the oil. They then had to pay the price of the remaining oil and packing material.
The company’s Delhi-based directors, issued a cheque of Rs 15.63 lakh drawn on State Bank of Bikaner and Jaipur, Delhi branch. RSIL deposited the cheque with its bank in Mumbai, which bounced with a note saying, “insufficient funds”. RSIL filed a compliant with the metropolitan court.
MOFPL filed an application before the magistrate stating that the transaction took place in Rajasthan, the cheque issued was of Delhi and so a Mumbai court cannot conduct the trial.
On February 8, 2008, the magistrate allowed the application and asked RSIL to file a compliant in the appropriate court. RSIL challenged this order in the high court.
Shyam Marwadi, RSIL's advocate, argued that the payee can lodge a compliant with the court where he is residing or carrying on business. Although the transaction did not take place in Mumbai, RSIL has its registered office in Mumbai and hence Mumbai court can conduct trial, argued Marwadi. Agreeing with the argument, Justice Bhatia observed:
“I find that the Metropolitan Magistrate at Mumbai has jurisdiction to entertain the complaint under Section 138 of the Negotiable Instruments Act.”