This petition is filed to quash the proceedings in C.C.No. 870 of 2007 on the file of the I Additional Chief Metropolitan Magistrate, Hyderabad.

2. The case of the petitioner is that the second respondent herein filed a private complaint against her under Section 138 of the Negotiable Instruments Act (for brevity 'the Act') claiming that the petitioner had issued cheque dated 2.8.2007 for Rs.15.00 Lakhs in favour of the second respondent drawn on First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, which on presentation for encashment through the State Bank of Hyderabad, was returned with endorsement "not a clearing member the complainant got issued a notice and then filed the present complaint.

3. The contention of the learned counsel for the petitioner is that the allegations are false; the cheque in question was fabricated; the second respondent scrumptiously obtained signed cheque leaf belonging to petitioner, as he was working with the husband of the petitioner and had access to the records; the cheque was never presented to First City Cooperative Urban Bank Ltd., King Koti, Hyderabad; but was presented at State Bank of Hyderabad and as the drawee bank was not a member of the clearing house, the State Bank of Hyderabad did not present the cheque on the drawee bank; but returned to the presenter and in the circumstances the cheque was never presented on the concerned banker and for constituting an offence under Section 138 of the Act, the cheque must have been presented to the drawee bank and if that cheque is returned with an endorsement "insufficient funds" then only the offence would be constituted. Under section 64 of the Act, presentation of the cheque on the drawee bank is mandatory.

4. Though several pleas are raised in this petition, the main contention of the petitioner is that the cheque was not returned for want of sufficient funds; but it was returned by the State Bank of Hyderabad through whom it was presented stating that First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, on whom the cheque was issued was not a member of the clearing house and as such no offence is constituted. In support of his contention, the learned counsel relied on a decision of this Court in Chairman, Jawahar Co-operative Urban Bank Ltd. v. Ramanjaneya Enterprises' .

5. The contention of the learned counsel for the second respondent-complainant is that the license of the First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, was cancelled by the Reserve Bank of India on 5.4.2002; on 27.8.2002 a Liquidator was appointed and since then the bank was not at all functioning and the disputed cheque was issued on 2.8.2007, almost, five years after the bank stopped functioning and as such issuing of a cheque on a bank which is not functioning amounts to an offence under Section 138 of the Act.

6. Now the point that arises for consideration is whether there are any grounds for quashing the proceedings pending against the petitioner.

7. In the case Chairman, Jawahar Cooperative Urban Bank Ltd.,', the complaint was filed against the Chairman, Vice Chairman and some of the Directors of the Jawahar Cooperative Urban Bank Ltd. In that case, the cheques which were issued on the name of Jawahar Cooperative Urban Bank Ltd., were presented for collection through State Bank of India, returned with an endorsement "not a clearing member” a notice was issued to the Chairman, Vice-Chairman and directors of the Bank, degrading payment of the amounts covered by the cheques but they did not pay the amounts. Then the complaint under Section 138 of the Act was filed. The accused contended that "no Cooperative Urban Bank Ltd.," can be a clearing member of the Reserve Bank of India directly and such cooperative urban bank should take sub-membership with any nationalized bank and that the Jawahar Cooperative Urban Bank Ltd., had taken sub membership with Union Bank of India and on a letter given by the Union Bank of India, the Reserve