Cheques drawn on a non-existent bank are legally invalid and cannot attract liability under Section 138 of the Negotiable Instruments Act.

ORDER :

1. The petitioner is the accused in S.T. Nos.894, 895, 896, 897, 898, 899, 900 and 901 of 2021 pending on the files of the Special Judicial Magistrate of First Class (NI Act Cases), Kozhikode. The cases originated from complaints filed by the 1^st respondents alleging commission of the offence punishable under Section 138 of the Negotiable Instruments Act (“the N.I. Act” for short) by the petitioner. Briefly stated, the allegations are to the following effect; The accused borrowed a total amount of Rs.1,12,25,000/- from the complainants in tranches and towards discharge of that liability, issued 19 cheques. The cheques, on presentation through the complainants’ Bank, viz; the Punjab National Bank, were returned dishonoured for insufficiency of funds in the account of the accused. Although notices demanding payment of the amounts covered by the cheques were issued and served on the accused, instead of paying the amount, the accused sent replies denying the liability.

2. On receipt of summons, the petitioner entered appearance and thereafter filed petitions under Sections 204 and 461 of the Code of Criminal Procedure with the prayer to drop the proceedings, since the averments in the complaints did not disclose the offence under Section 138 of the N.I.Act. The learned Magistrate found that the petition for dropping the proceedings is not maintainable, since cognisance is taken based on private complaints. Having thus found the petition to be not maintainable, the Magistrate proceeded to consider and dismiss them on merits. Aggrieved, the Crl.M.Cs are filed.

3. Heard Adv.Veena Hari for the petitioner, Senior Advocate Lakshminarayanan and Adv.Sharan Shahier for the 1^st respondents. Adv.P.Gopal, the learned Amicus Curiae also made detailed submissions.

4. Learned Counsel for the petitioner contended that the impugned orders are ex facie illegal since, after finding the petitions to be not maintainable, the court below should not have decided those petitions on merits. It is submitted that, out of 19 cheques issued, 18 cheques were of the year 2021 and drawn on the State Bank of Travancore, which had ceased to exist on acquisition by the State Bank of India. By reason of the acquisition made with the sanction of the Central Government as per Order No.GSR 160(E) dated 22.02.2017, the business of the subsidiary bank is carried out by the State Bank of India in accordance with the State Bank of India Act, 1955 with effect from the 1^st day of April, 2017. It is contended that upon acquisition, the State Bank of Travancore ceased to exist and the acquiring Bank, the State Bank of India, had fixed the validity of cheques of the erstwhile subsidiary bank only upto 31.03.2018. Being so, the cheques drawn on the State Bank of Travancore in the year 2021 had no legal validity.

5. It is then contended that as per Section 6 of the Negotiable Instruments Act, 'a cheque’ is a Bill of Exchange drawn on a specified banker. The State Bank of Travancore, on which the subject cheques were drawn was not a specified Banker in 2021, the bank itself having ceased to exist. It is the submission of the learned counsel that the Punjab National Bank had committed gross illegality by returning the cheques along with dishonour memos bearing the endorsement 'funds insufficient'. Referring to the decision in Archana Singh Gautam v. State of U.P. and Another , 2024 SCC OnLine All 4599, it is pointed out that under identical circumstances, the Allahabad High Court had quashed the complaint filed under Section 138 of the N.I.Act.

6. Learned Counsel for the complainants argued that the endorsement ‘funds insufficient’ in the dishonour