Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Legal notices and the circumstances of issuance are relevant, but the primary consideration is whether the cheque was issued towards a debt or liability, and whether the dishonor was due to insufficient funds or account closure. Even in cases where the account was closed, if the cheque was issued dishonestly, it can still lead to conviction under Section 138. ["kollipara srinivasa rao vs state of telangana - Telangana"], ["R BABU vs M BABU - Karnataka"]
Analysis and Conclusion
References:- ["kollipara srinivasa rao vs state of telangana - Telangana"]- ["HDFC Bank Ltd. VS Mohinder Singh - Punjab and Haryana"]- ["Shatrughan Chiraniya, son of Late Moti Lal Chiraniya VS State of Jharkhand - Jharkhand"]- ["R BABU vs M BABU - Karnataka"]- ["INDC001170"]- ["INDC001354"]- ["INDHC010593062011"]- ["INDHC040133082011"]- ["Lal Mohammad S/o Shri Mohammad Ibrahim Fakeer VS Shushil Kumar S/o Shri Ghirdhari Lal - Rajasthan"]- ["SRI KESHAVAMURTHY vs M/S ARIHANT CLOTHING PVT LTD - Karnataka"]- ["Malabar Chit Funds (P) Ltd. vs Shiju V.K. S/o Sankaran - Kerala"]- ["INDHC010593062011"]
In the world of business transactions, cheques remain a common mode of payment in India. However, when a cheque is dishonored with the endorsement account closed, it raises critical legal questions for both the payee and the drawer. A frequent query arises: can an accused be convicted if cheque is dishonored on ground of account closed? This blog post delves into the legal nuances under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), drawing from landmark judgments and principles to provide clarity.
While this information is for educational purposes and reflects general legal positions, it is not a substitute for professional legal advice. Consult a qualified lawyer for case-specific guidance.
Section 138 of the NI Act punishes the dishonor of a cheque due to insufficient funds or other specified reasons, provided it was issued for the discharge of a legally enforceable debt or liability. The provision aims to instill confidence in negotiable instruments and promote their credibility in commercial dealings. Hashmikant M. Sheth VS State of Gujarat - Dishonour Of Cheque (2004)
Dishonor on grounds like account closed falls squarely within the ambit of Section 138. Courts have consistently held that the offense is triggered upon dishonor, irrespective of the account's status at the time of presentation. The key is whether the cheque was issued to settle a valid debt. S. R. MURALIDHAR VS ASHOK G. Y. - 2001 0 Supreme(Kar) 291P. S. Ganesh VS State of Kerala - Crimes (2012)
A pivotal question is whether the account was closed before or after the cheque's issuance. Contrary to common misconceptions, even if the account was closed prior to issuance, conviction remains possible.
In a significant ruling, the court clarified: Word 'account' mentioned in Section 138 of the Act only related to the fund and not to the ... cheque phrase 'any cheque drawn by a person on an account by him with banker' will have to be construed to mean 'any cheque drawn by a person on an account maintained and closed by him'. Hashmikant M. Sheth VS State of Gujarat - Dishonour Of Cheque (2004)
Further, Offence in terms of Section 138 of the Act would stand committed even if cheque issued after closure of account is dishonoured because the amount of money standing to the credit of 'that account' would be ‘nil’ apart from it being closed. Hashmikant M. Sheth VS State of Gujarat - Dishonour Of Cheque (2004)
This interpretation aligns with the legislative intent to protect payees. Similarly, in P. S. Hareesh Kumar Shetty VS D. Vijayakumar Shetty - 2020 Supreme(Ker) 962, the court upheld prosecution under Section 138 even for cheques issued post-account closure, emphasizing that the dishonor due to account closed validates the complaint when linked to a debt.
Sections 118 and 139 of the NI Act create a rebuttable presumption that every negotiable instrument was issued for consideration and represents a legally enforceable debt. Once the complainant proves issuance, signature, and dishonor, the onus shifts to the accused to rebut this presumption.
For instance, in cases where the accused admits the cheque belongs to their account and bears their signature, failure to prove discharge of debt leads to conviction. Aravind S/o Siddanagouda Haranal vs Gurunath S/o Bheemappa Hugar - 2025 Supreme(Online)(Kar) 21857 The court noted: the presumption arises upon such admission, and the accused's inability to rebut it results in liability. Abdul Husain Vanak S/o. Shri Kutubuddin Vanak VS Jeeshan Ahmed S/o. Saleem Ahmed - 2024 Supreme(Chh) 243
Trial courts sometimes err by demanding the complainant prove financial capacity or debt existence upfront, ignoring these presumptions. Appellate courts have overturned acquittals on this basis, convicting accused for cheque dishonor due to insufficient funds or closed accounts. Vishwanath Reddy M.S. vs Ratan Hanamant Gosavi - 2025 Supreme(Online)(Kar) 23095
Accused often claim:- The cheque was issued as security or blank.- The debt was already discharged.- Account closure was unrelated to the transaction.
However, these require probative evidence. Mere assertions fail. In P. S. Ganesh VS State of Kerala - Dishonour Of Cheque (2012), the burden lies on the accused to substantiate payment or non-liability. Without it, the presumption holds.
Exceptions may apply if the accused proves misuse of a blank cheque or material alterations, as seen where convictions were set aside due to variations in ink or handwriting, indicating improper execution. E. Dhanuskodi VS D. Sreedhar - 2018 Supreme(Mad) 4002S. R. David VS D. Sreedhar - 2018 Supreme(Mad) 4001
Dishonor for signatures do not match or similar reasons also attracts Section 138 liability, akin to account closed. Subir Sarkar VS Sk. Anisur Rahaman - 2023 Supreme(Cal) 435
Multiple judgments affirm convictions despite closed accounts:- Jaspal Singh Bedi VS State Of Punjab - 2004 Supreme(P&H) 1217 Overturned an appellate acquittal, holding that a cheque on a previously closed account still constitutes an offense under Section 138 if drawn for a debt.- SRI. HARISH. M. S. vs SRI. N. R. RAMACHANDRA - 2024 Supreme(Online)(Kar) 41646: Dishonor with account closed endorsement led to proceedings, rejecting claims of cheque misuse without proof.- K. Chathukutty VS Prasanna Venkitesan - 2006 Supreme(Ker) 754: Upheld complaints where cheques were dishonored post-closure, stressing notice compliance.
In Veenashri VS Shankar - 2022 Supreme(Kar) 1210, liability requires the accused to be a signatory; non-signatories (e.g., family members) escape unless covered under Section 141 for companies/firms.
These cases underscore that the focus remains on the cheque's purpose, not account status.
In conclusion, Indian courts prioritize the credibility of cheques, holding drawers accountable for dishonors due to closed accounts. Businesses and individuals should exercise diligence in payments to avoid penal consequences. Stay informed, but seek tailored legal counsel for your situation.
#ChequeBounce, #NIAct138, #AccountClosed
cheque return memo on 31.10.2014 vide endorsement “account closed”. ... The complainant presented both the cheques in her account at ICICI Bank, Chaitanyapuri Branch for encashment on 29.10.2014, but the cheque for Rs.50,000/- was dishonored under cheque return memo vide endorsement “funds insufficient” on the same day and the cheque for Rs.5,00,000/- was dishonored under ... The accused assured that the cheques wi....
Apart from this, the bank memo Ex.C2 reveal that cheque was dishonored for insufficient funds in the account of the accused and not that the cheque issued from the account of the accused, did not bear his signatures. 13. In “L.C. ... 2,25,658.08 Ex.C1 from his account maintained in Bank of Punjab Ltd., Ambala Cantt, which has been dishonored on account of insufficient funds in his account. He fail....
but the cheque was dishonored on account of the account being closed. ... the inevitable consequence of its dishonor on the ground ‘account closed’? ... Further, in the aforesaid case the accused was ultimately convicted under section 417 IPC by virtue of attending evidences on record demonstrating the presence of the element of deception, right at the time of issuance of cheque from a c....
Just as dishonor of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that the specimen signatures do ... The contention of the company that issued the cheque was that Section 138 being a penal provision ought to be strictly construed and when so interpreted, dishonor of a chequ....
Under such circumstances, only on the ground that cheque has been dishonored with an endorsement that on the ground of ‘Account Closed’ cannot absolve the liability of the accused as is found in Section 138 of Negotiable Instruments Act and therefore, learned Trial Judge was justified in convicting the ... Bank Ltd., Rajajinagar Branch, Bengaluru, which on presentation came to be dishonored with an endorsement that “Account #HL_STAR....
The said cheque got dishonored due to insufficient funds in the account (Ex. P/2), information of which was given to the accused/respondent by the complainant in the prescribed time (Ex. P/ 3) but the accused/respondent did not pay the amount. 3. ... The said cheque was deposited in Kotak Bank, Branch Bilaspur, by the complainant for encashment, which was dishonored on account of insufficient fund and However the said cheque was dis....
Act have been initiated against the petitioner and two other accused. However, it is seen that accused is not a signatory to the cheque and it is the specifically averred that it is not a joint account also. ... On the ground that the petitioner - accused No.2 along with her husband and mother-in-law owed certain sum of money to the respondent -complainant and in discharge of the legally enforceable debt, a cheque was issued in favour of the respondent and the same wa....
The accused agreed to repay the same and later issued a cheque for Rs.12,00,000/- on 15.02.2018. When the said cheque was presented for encashment, the same was dishonored as there was insufficient fund in the account of the accused. ... It is the specific contention of the complainant that he is a businessmen and had lent in all Rs.14,00,000/- to the accused. Towards repayment of the same, the accused issued the cheque as per Ex.P1....
Despite repeated demands, the accused failed to repay the said amount and ultimately passed on a cheque bearing No.305032 dated 30.08.2017 drawn on Corporation Bank, Koppa Branch. The said cheque on presentation came to be dishonored with an endorsement 'Account Closed'. ... He also pointed out that the cheque is dishonored with 'Account Closed' which clearly shows that an old cheque has been misu....
He stated on oath that Ex.P-1 is the cheque belonging to the bank account of the accused and it bears his signature. In the entire cross-examination of PW-1, this fact was never disputed rather the accused admitted that the cheque Ex.P-1 belongs to his bank account and bears his signature. ... When the cheque was presented for encashment, the same was dishonoured as there was insufficient fund in the account of the accused. Legal no....
The cheque on presentment was dishonoured on the ground that account owned by the accused was closed. No reply was sent and therefore, after waiting for the prescribed period of time fixed by the statute, complaint under Section 138 of the N.I. 2. The prosecution case is that accused borrowed an amount of Rs.1,90,000/- on 26.01.2006 from complainant at his house in Mangalapuram and issued to the complainant Ext.P1 cheque post dated to 27.04.2006 drawn on Canara Bank, Urva Market, Mangalore Branch. Later, a demand notice calling upon the accused to discharge the debt was sen....
Accordingly as per respondent’s instruction the cheque was presented for encashment. However, the cheque remained dishonored with an endorsement account closed. Even then as there was no payment made by the respondent, the above complaint in C.C.No.191 of 2008 came to be lodged by the appellant for an offence punishable under section 138 of N.I. Thereupon a legal notice was issued to the respondent calling upon him to repay the amount.
However the cheque remained dishonored with an endorsement account closed. Even then as there was no payment made by the respondent, the above complaint in C.C.No.141 of 2008 came to be lodged by the appellant for an offence punishable under section 138 of N.I. Accordingly as per respondent’s instruction the cheque was presented for encashment. Thereupon a legal notice was issued to the respondent calling upon him to repay the amount.
Cheque was dishonored with an endorsement that the account was closed. Appellant presented the cheque for collection on 19-5-1995 through Mambaram Branch of the Syndicate Bank. It was also alleged that respondent had no sufficient funds also in the account maintained by him with the bank. Notice was issued demanding repayment of the amount covered by Ext.P-1 cheque.
However, if the account had been closed before the cheque was issued, it could not be said that the cheque had been drawn on an account maintained by the accused. Reliance had been placed by the appellate court on the case titled S. Prasanna V/s. Consequently, the Court held that if a person had already closed the account and then issued a cheque, it could not be said that the cheque had been drawn on an account maintained by him, therefore, offence under Sec.138 of the Act could not be said to have been committed. Learned appellate Court was of the view that a person could....
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