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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Rakesh Kainthla, J.
Prem Lal - Petitioner
Vs.
State of Himachal Pradesh & Anr. - Respondent
Cr.MMO No. 65 of 2023
Decided On : 12-01-2024
Invalid Cheque - Negotiable Instruments Act - 138 - Summary: The court discussed the validity of a non-CTS cheque and its acceptance as a negotiable instrument. It referred to RBI notifications and previous judgments to establish that non-CTS cheques remain valid and can be the basis for a complaint under Section 138 of the NI Act. The court held that the complaint cannot be quashed as the cheque was dishonoured due to insufficient funds, not because it was a non-CTS cheque.
Fact of the Case:
The complainant bank sanctioned a loan to the accused's wife, who defaulted on repayment. The accused, as a guarantor, issued a cheque for the amount, which was dishonoured due to insufficient funds. The accused sought to quash the summoning order and complaint based on the invalidity of the cheque.
Finding of the Court:
The court found that the complaint prima facie discloses the commission of an offence punishable under Section 138 of the NI Act and cannot be quashed.
Issues: Validity of non-CTS cheque as a negotiable instrument, grounds for dishonour of the cheque, and the maintainability of the complaint under Section 138 of the NI Act.
Ratio Decidendi: The court relied on RBI notifications and previous judgments to establish that non-CTS cheques remain valid and can be the basis for a complaint under Section 138 of the NI Act. It held that the complaint cannot be quashed as the cheque was dishonoured due to insufficient funds, not because it was a non-CTS cheque.
Final Decision: The court dismissed the petition and held that the complaint cannot be quashed in the exercise of the inherent powers of the Court.
JUDGMENT :
Rakesh Kainthla, J.
Respondent No.2 (complainant before learned Trial Court) filed a complaint (Annexure P-2) against the petitioner (accused before learned Trial Court) for the commission of an offence punishable under Sections 138 of the Negotiable Instruments Act (in short ‘NI Act’). (Parties shall hereinafter be referred to in the same manner as they were referred before the learned Trial Court for convenience).
2. It was asserted that the complainant bank is a Corporate Body constituted under the Regional Rural Bank Act, 1976 having its Head Office at Jawahar Nagar, District Mandi, H.P. It carries out banking business throughout Himachal Pradesh and has one branch office situated at main market Tehsil Sadar, District Bilaspur, H.P. The complainant sanctioned cash credit limit facility of Rs. 5,00,000/- for running the business of Auto Bulb on 30.07.2008 in favour of Achharlata Rao, wife of the accused. The accused stood as guarantor for the repayment of the loan. The borrower and the accused executed documents in favour of the bank on 30.07.2008. The amount was to be paid annually with interest @14.5% per annum subject to variation as per the RBI guidelines from time to time. The borrower defaulted on the repayment of the loan. The borrower and guarantor issued a cheque for Rs. 7,57,000/-for discharging their liabilities. The cheque was presented before the bank but it was returned with the remarks ‘insufficient funds’. The bank sent a notice demanding the payment of the money; however, the money was not paid. Hence, the complaint was filed to take action against the accused.
3. Learned Trial Court found sufficient reasons to summon the accused.
4. Being aggrieved from the order passed by the learned Trial Court for summoning the accused, the petitioner has approached this Court to quash the order passed by the learned Trial Court for summoning the accused as well as the complaint pending before the learned Trial Court. It was asserted that the Reserve Bank of India has issued a communication dated 18.03.2013 for standardization and enhancement of security features in cheque forms/migrating to CTS 2010 standards. As per the notification, the old cheques are not acceptable in any of the nationalized banks and only the CTS cheques are acceptable. The complainant presented the old cheque on 28.12.2013. Such cheque was withdrawn by the Reserve Bank of India on 18.03.2013. The complaint is not maintainable and is liable to be quashed; hence, it was prayed that the present petition be allowed and the summoning order and complaint be quashed.
5. A reply was filed making preliminary submissions regarding the lack of maintainability. The contents of the petition were denied on merits. It was asserted that the cheque was not made invalid but only the processing of CTS cheques was limited to particular days. RBI directed all the banks to withdraw non-CTS cheques in circulation to replace them with CTS 2010 standard cheques on 03.09.2012. RBI issued a notification dated 18.03.2013, stating that all residual non-CTS cheques with customers would continue to be valid and accepted for some more period. Non-CTS cheques have not become invalid and the number of days were reduced for their processing. The non-CTS cheques were discontinued w.e.f. December 31, 2018. The banks have been advised to withdraw all non-CTS cheques from customers; however, they remain valid as negotiable instruments. The plea that a valid cheque was not presented is not acceptable; thus, it was prayed that the present petition be dismissed.
6. A rejoinder denying the contents of the reply and affirming those of the petition was filed.
7. I have heard Mr. R.L. Chaudhary, learned counsel for the petitioner, Mr. Prashant Sen, learned Deputy Advocate General, for respondent No.1 and Mr. K.B. Khajuria, learned counsel for respondent No.2.
8. Mr. R.L. Chaudhary, learned counsel for the petitioner submitted that the Reserve Bank of India has withdrawn all the non-CTS che
AI
Non-CTS cheques remain valid as negotiable instruments and can be the basis for a complaint under Section 138 of the NI Act.
The court reiterated that issues around cheque liability under Section 138 NI Act must be decided at trial, underscoring the necessity for allegations in complaints to be accepted as true at the quas....
Dishonour of cheque – Consequences of scuttling criminal process at a pre-trial stage can be grave and irreparable.
Liability under Section 141 of the NI Act requires being in charge and responsible for the company's affairs. The court's decision was influenced by the interpretation of this legal provision.
(1) Dishonour of cheques – Legal presumption of cheque having been issued in discharge of liability must also receive due weightage.(2) To non-suit complainant, at the stage of summoning order, when ....
Point of Law : Inherent jurisdiction under Section 482 Cr.P.C. though wide, has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specificall....
The issuance of a cheque implies liability under the NI Act, and courts should not quash complaints based on disputed facts without trial.
A cheque returned with the endorsement 'Refer to Drawer' due to it being non-CTS does not attract the offence under Section 138 of the Negotiable Instruments Act if it was not issued for a legally en....
The power under Section 482 of Cr.P.C. can be exercised to prevent the abuse of process or secure the ends of justice. The Court can quash the F.I.R. if the allegations do not constitute an offence o....
Even a blank cheque leaf, voluntarily signed and handed over by accused, which is towards some payment, would attract presumption under Section 139 of Negotiable Instruments Act.
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