Bank Seal Not Mandatory on Cheque Return Memo for Dishonor Presumption: Chhattisgarh High Court - 2025-04-16

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Chhattisgarh High Court: Bank Seal Not Mandatory on Cheque Return Memo for Dishonor Presumption

Bilaspur, Chhattisgarh – In a significant ruling concerning cheque dishonor cases, the High Court of Chhattisgarh has clarified that a bank's returning memo for a dishonored cheque does not necessarily require a bank seal and signature to be considered valid evidence under Section 146 of the Negotiable Instruments Act, 1881 (NI Act). Justice Narendra KumarVyas presided over the case, setting aside a trial court's order that had dismissed a complaint based on the absence of a bank seal on the return memo.

Background of the Case

The case arose from two appeals (ACQA No. 425 of 2024 and ACQA No. 194 of 2024) filed by Tulshi Steel Traders, represented by proprietor Pushpendra Kesharwani , against Purva Construction , represented by proprietor Mitrabhan Sahu. Tulshi Steel Traders had filed complaints under Section 138 of the NI Act after two cheques issued by Purva Construction were dishonored. The trial court, however, dismissed the complaints, citing that the cheque return memos lacked the seal and signature of a bank officer, thus allegedly violating Section 146 of the NI Act.

Arguments Presented

Appellant (Tulshi Steel Traders) Argument: Advocate Ajay Mishra , representing the appellant, argued that the trial court erred in dismissing the complaint solely on the basis of the missing bank seal and signature on the return memo. He contended that while the trial court correctly found the cheques were issued against a liability, it wrongly concluded that the lack of a seal invalidated the presumption of dishonor.

Respondent ( Purva Construction ) Argument: Advocate Shubham Dwivedi, for the respondent, defended the trial court’s decision, arguing that Section 146 of the NI Act mandates that a bank returning memo must bear the seal and signature of the bank to be considered a valid banking record. He argued that without these, the return memo could be a fabricated document and the complainant had failed to prove their case beyond reasonable doubt.

Court's Reasoning and Reliance on Legal Provisions

Justice Vyas , after examining Section 146 of the NI Act, emphasized that the section aims to presume the dishonor of a cheque upon the production of a bank slip or memo with an official mark indicating dishonor. The court noted that neither Section 138 nor Section 146 of the NI Act prescribes a specific format for a cheque return memo. It is essentially an informational document for the cheque holder.

The High Court referenced judgments from other High Courts, including the Delhi High Court in Guneet Bhasin Vs. State of NCT of Delhi & Anr. and the Allahabad High Court in Mohd. Yunus Malik Vs. State of U.P. and Another , which held similar views. These judgments clarified that the absence of an official bank stamp on a return memo does not render it invalid or illegal.

The judgment quoted Section 146 of the NI Act:

> "Section 146 of the N.I. Act, 1881: '146. Bank's slip prima facie evidence of certain facts.—The Court shall, in respect of every proceeding under this Chapter, on production of Bank's slip or memo having thereon the official mark denoting that the cheque has been dishonoured, presume the fact of dishonour of such cheque, unless and until such fact is disproved.'"

The court underscored that the purpose of the return memo is to inform the holder that the cheque was not encashed. The court stated that even if a return memo lacks an official stamp, it does not invalidate the trial under Section 138 of the NI Act.

Decision and Way Forward

Ultimately, the High Court partly allowed the appeals and remitted the matter back to the trial court. While affirming the trial court's finding that the cheques were indeed issued against a liability (and not as security as claimed by the accused), the High Court set aside the finding regarding the necessity of a bank seal on the return memo.

The case is now sent back to the trial court with directions to allow the complainant to present further evidence by examining a bank officer and producing bank records to definitively prove that the cheques were dishonored due to "insufficient funds."

This judgment provides important clarity on the evidentiary value of cheque return memos in NI Act cases and reduces the emphasis on procedural technicalities, focusing instead on the substantive issue of cheque dishonor and liability. Both parties are directed to appear before the trial court on May 9, 2025, and the trial court is instructed to expedite the proceedings within nine months.