Disputed Reason for Cheque Dishonour Must Be Proven at Trial: Himachal High Court Upholds Section 138 NI Act Proceedings - 2026-03-24

Trial, Not Quashing: Himachal HC Clarifies Dishonoured Cheque Disputes

In a significant ruling, the High Court of Himachal Pradesh has underscored that the underlying reasons for a cheque's dishonour—specifically whether it resulted from "insufficient funds" or an "account freeze"—are matters of evidence that must be adjudicated through a full trial. The court’s decision in Arvind Verma v. Dhian Singh reaffirms that high courts will not prematurely intervene in Section 138 NI Act proceedings when the veracity of bank documents is in question.

The Conflict: A Question of Procedure

The petitioner, Arvind Verma, sought to quash a long-standing complaint filed by Dhian Singh under Section 138 of the Negotiable Instruments Act. The petitioner’s core contention was that his cheque for Rs. 10 Lakh had not been dishonoured due to a lack of funds, but rather because his bank, HDFC Bank, had frozen the account. He argued that since the cheque did not bounce for technical non-payment per the statute’s specific language, the complaint was legally untenable and an abuse of court process.

Arguments from the Bar

The petitioner’s counsel urged the court to invoke its powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita ( BNSS ) to quash the complaint, arguing that a bank-issued return memo confirming a "frozen" status provided prima facie evidence that no criminal case was maintainable.

Conversely, the respondent’s counsel countered that the petition was premature. He argued that the validity of the return memo could not be assumed as fact simply because it was filed in court; its authenticity had to be established through the formal leading of evidence during a trial.

Key Observations

Justice Sandeep Sharma, presiding, noted the limitations of the court in deciding disputed facts during a quashing petition:

• "Correctness and genuineness of the return memo placed on record of instant file, cannot be gone into in instant proceedings, rather same is required to be proved in accordance with law."
• "While exercising power... for quashing of FIR as well as complaint, though court concerned may sift the evidence for the purpose of inferring prima-facie case, but certainly, it cannot appreciate the evidence adduced on record."
• "Whether cheque... was sent back on account of 'insufficient funds' or on account of freezing of account... is a matter of trial, which shall be decided on the basis of pleadings as well as material adduced on record."

The Court’s Verdict

The High Court dismissed the petition, ruling that the determination of whether the cheque was dishonoured under the terms of Section 138 requires a trial where both parties have the opportunity to lead and test evidence.

By refusing to quash the complaint, the court has signaled that petitioners cannot bypass the trial process by producing standalone documents that claim to invalidate the complainant's case. Instead, the burden lies on the accused to prove their defense in the court where the trial is actively pending. This decision reinforces the judiciary's commitment to allowing factual determinations to unfold through the crucible of cross-examination and formal evidence, rather than at the stage of preliminary hearings.