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IN THE HIGH COURT OF ALLAHABAD
Arun Kumar Singh Deshwal, J.
Smt. Archana Singh Gautam - Applicant
Vs.
State of Uttar Pradesh and Another - Opposite Party
Application U/S 482 No. - 9536 of 2024
Decided On : 05-06-2024
N.I. Act - Dishonour of Cheque - Section 138, Section 118(b) - The court discussed the provisions of Section 138 of the Negotiable Instruments Act, 1881, which outlines the conditions under which a cheque dishonoured due to insufficient funds or invalidity can lead to criminal liability. The court interpreted that a cheque must be valid at the time of presentation to attract liability under Section 138. It emphasized that the cheque issued from an account of a bank that had merged and was declared invalid post-merger could not lead to prosecution under this section.
Fact of the Case:
The applicant sought to quash the criminal proceedings initiated against him under Section 138 of the N.I. Act for a cheque issued from an account of the erstwhile Allahabad Bank, which had merged into Indian Bank. The cheque was presented after the validity period had expired, leading to its dishonour.
Finding of the Court:
The court found that the cheque was invalid at the time of its presentation as it was issued from an account of a bank that had merged, and thus, the dishonour did not attract liability under Section 138 of the N.I. Act.
Issues: Whether a cheque issued from an account of a bank that has merged and declared invalid can attract liability under Section 138 of the N.I. Act upon dishonour.
Ratio Decidendi: The court held that for liability under Section 138 to arise, the cheque must be valid at the time of presentation. An invalid cheque cannot lead to prosecution under this section, regardless of the reasons for its dishonour.
Final Decision: The application was allowed, and the proceedings under Complaint Case No. 712 of 2023 were quashed.
Key Points: - The cheque must be valid at the time of presentation to attract liability under Section 138 NI Act; invalid cheques issued from a merged bank cannot lead to liability (!) (!) - Allahabad Bank merged with Indian Bank on 01.04.2020; cheques issued from Allahabad Bank were valid only until 30.09.2021; post-30.09.2021 such cheques are invalid for honour (!) (!) - In the present case, a cheque dated 02.06.2023 issued from the erstwhile Allahabad Bank and presented on 21.08.2023 was invalid; therefore, no liability under Section 138 NI Act arises (!) (!) - Proviso (a) to Section 138 requires the cheque to be presented within six months from drawing or within its period of validity; if invalid, liability does not attach (!) - The court quashed the proceedings under Section 138 NI Act against the cheque drawn on the account of the merged bank (!) - The reasoning distinguishes validity of the cheque (proviso) from mere insufficiency of funds, emphasizing cheque validity at presentation as the determinant for liability (!) - The decision applies to cheques of all banks that have merged with other banks, not just Allahabad Bank/Indian Bank (!)
JUDGMENT :
Arun Kumar Singh Deshwal, J.
1. Heard learned counsel for the applicant, learned counsel for the opposite party no. 2 and Sri Brijesh Kumar Dwivedi, learned AGA for the State.
2. The present application has been filed for quashing the entire criminal proceeding, including the impugned summoning order dated 15.02.2024 passed by the learned Special Judicial Magistrate-II, Banda in Complaint Case No. 712 of 2023 (Brajesh Kumar Singh Vs. Smt. Archana Singh Gautam and others), under Section 138 N.I. Act, 1881, P.S. Kotwali Nagar, District Banda, pending in the Court of learned Special Judicial Magistrate-II, Banda.
3. The counsel for the applicant contends that the Bank returned the cheque in question because the cheque was invalid as the cheque in question was issued from the account maintained in Allahabad Bank on 02.06.2023, though the Allahabad Bank had already merged into the Indian Bank on 01.04.2020, and the cheque of the Allahabad Bank was valid till 30.09.2021; therefore, on the date of issuance as well as presentation of the cheque, it was invalid. Therefore, bouncing, of such the invalid cheque will not attract the liability u/s 138 N.I. Act.
4. Per contra, learned counsel for the opposite party no. 2 has relied upon the judgment of Hon’ble Apex Court in the case of NEPC Micon Ltd. V. Magma Leasing Ltd ( 1999) 4 SCC 253 in the judgment the Apex Court observed in paragraph no. 7 that the expression “insufficient to honour the cheque is a genus of which the expression” that account being” is species and paragraph no. 9 of the above judgment the Hon'ble Apex Court has observed that “the interpretation which sought for, were given, then it would only encourage dishonest persons” should be avoided. On relying on the above judgment, the counsel for the opposite party no. 2 has submitted that the invalid cheque issued by a person is also covered u/s 138 N.I. Act. He also relied upon the judgment of Delhi High Court in the case of Sri Premanand Prusty Vs. Smt. Sita Devi passed in CRL.M.C. No. 1566 of 2023, in that case the Delhi High Court had observed that once the signature on the cheque is not disputed then the cheque if returned on the ground of its validity then the prima facie the offence u/s 138 N.I. Act will be attracted.
5. Learned AGA has also adopted the argument of counsel for the opposite party no. 2 and submitted that if the applicant was aware that the cheque in question has been declared invalid as the Allahabad Bank has already been merged into Indian Bank then just to cheat the opposite party no. 2, he had issued this cheque; therefore, the offence u/s 138 N.I. Act, will be attracted.
6. After hearing the rival submission of the counsel for the parties and perused the record, it is clear that the Allahabad Bank had merged into the Indian Bank on 01.04.2020. Thereafter, a wide circular was made by the Indian Bank in newspapers mentioning the fact that all the cheques issued by Allahabad Bank can be exchanged with the cheques of Indian Bank by 30.09.2021, and the cheque from Allahabad Bank will be honoured by 30.09.2021.
Therefore, the cheque issued by the Allahabad Bank was valid till 30.09.2021, and all the cheques of Allahabad Bank which were presented before the Indian Bank till 30.09.2021, were honoured by the Indian Bank, and after 30.09.2021, cheques issued from the account maintained by the erstwhile Allahabad Bank were declared invalid for honouring. Section 138 N.I. Act prescribes the condition for initiation of proceeding on bouncing the cheque in the proviso (a) of Section 138 N.I. Act. As per the proviso (a) of Section 138 N.I. Act, cheque must be presented to the Bank during its validity. Section 138 N.I. Act is being quoted as under:-
An invalid cheque, due to bank merger, does not attract liability under Section 138 of the Negotiable Instruments Act; courts can quash proceedings lacking legal enforceability.
Cheques post-bank merger returned 'Funds Insufficient' attract Section 146 presumption; validity expiry defence triable at trial, not quashable under Section 482 CrPC despite potential non-compliance....
The legal presumption under Section 139 of the NI Act favors the complainant, and factual disputes must be resolved at trial, not pre-trial.
Cheques drawn on a non-existent bank are legally invalid and cannot attract liability under Section 138 of the Negotiable Instruments Act.
The court clarified that under Section 311 Cr.P.C., summoning a witness at a belated stage to delay proceedings is not permissible, especially when the evidence is not essential for the case's resolu....
A cheque returned with the endorsement 'account closed' constitutes dishonour under Section 138 of the N.I. Act, and the statutory presumption of liability under Section 139 applies unless rebutted b....
Cheques drawn on a non-existent bank are invalid, and dishonour of such cheques does not result in liability under Section 138 of the Negotiable Instruments Act.
Cheques drawn on a defunct bank do not attract liability under Section 138 of the Negotiable Instruments Act.
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