Dishonour of cheque of erstwhile bank not an offence: HC

The dishonor of such cheques will not constitute an offence under Section 138 of the Negotiable Instruments Act, 1881, the court said

The Allahabad high court has ruled that cheques from erstwhile banks (banks which merged with another bank on April 1, 2020) became ‘invalid’ after September 30, 2021. Consequently, the dishonor of such cheques will not constitute an offence under Section 138 of the Negotiable Instruments Act, 1881.

For representation only (HT File Photo)

Justice Arun Kumar Singh Deshwal observed while allowing a petition filed by one Archana Singh Gautam seeking quashing of the entire criminal proceeding, including the impugned summoning order in a Complaint Case under Section 138 NI Act.

“From the perusal of Section 138 of Negotiable Instruments Act, it is clear that if any invalid cheque is presented before the Bank and the same was dishonoured, then no liability under Section 138 N.I. Act would be attracted, and the cheque of Allahabad Bank is invalid after 30.09.2021 after the merging of Allahabad Bank into the Indian Bank on 01.04.2020. Therefore, dishonoring such cheques after 30.09.2021 will not attract liability u/s 138 N.I. Act,” observed the court.

The facts of the case were that a cheque was presented to the ‘Indian Bank’ by the opposite party on August 21, 2023, and the same was returned on August 25, 2023, with the endorsement “wrongly delivered not drawn on us”. The opposite party filed a complaint against the petitioner in the Court of Special Judicial Magistrate-II, Banda.

Before the HC, the counsel for the applicant contended that the bank returned the cheque in question because it was invalid on the date of issuance and presentation. Hence, bouncing such an invalid cheque will not attract liability u/s 138 NI Act.

On the other hand, the counsel for the opposite party and AGA contended that if the applicant was aware that the cheque had been declared invalid due to the merger of Allahabad Bank into Indian Bank, issuing this cheque would constitute an attempt to deceive the opposing party. Hence, the offence under Section 138 NI Act would indeed be applicable.

The Court while allowing the petition clarified that the above analogy would also apply to the cheques of all banks that have merged with other banks.