Allahabad High Court: In an application under Section 482 of the Code of Criminal Procedure, 1973 (‘CrPC’) seeking to quash criminal proceedings initiated against her, filed under Section 138 of the Negotiable Instruments Act, 1881 (‘NI Act’), pertaining to the dishonour of a cheque, Arun Kumar Singh Deshwal, J., held that a cheque issued by Allahabad Bank would be deemed to be invalid after 30-09-2021, after merging of the Allahabad Bank with the Indian Bank on 01-04-2020, and that dishonouring such cheques after 30-09-2021 would not attract liability under Section 138 of the NI Act.
Background
The applicant issued a cheque dated 02-06-2023 from an account maintained with the erstwhile Allahabad Bank, which had merged into Indian Bank on 01-04-2020. The cheque was presented to the Indian Bank on 21-08-2023 and was returned unpaid on 25-08-2023 with the endorsement “wrongly delivered not drawn on us”. The contention raised by the applicant was that the cheque was invalid as the cheques of Allahabad Bank were only valid until 30-09-2021 post the merger, as per the circular issued by Indian Bank, and further argued that the dishonouring of such an invalid cheque could not attract liability under Section 138 of the NI Act.
Decision and Analysis
The Court, after hearing the arguments from both sides, dealt with the specifics of Section 138 of the NI Act, which deals with the dishonour of cheques for insufficiency of funds or exceeding the arrangement made with the bank, and noted that a critical provision under Section 138 is that the cheque must be presented to the bank within its validity period.
The Court further noted that Allahabad Bank merged with Indian Bank on 01-04-2020, and a public notice had been issued indicating that cheques of Allahabad Bank would only be valid until 30-09-2021, and that any cheque from Allahabad Bank presented after this date would be considered invalid.
In its analysis, the Court differentiated between reasons for dishonour due to insufficiency of funds and the presentation of an invalid cheque, observing that Section 138 explicitly requires the cheque to be valid at the time of presentation, and since the cheque in question was issued from an account in Allahabad Bank post its merger and past the validity date, it was deemed invalid.
The Court, while dealing with the case laws relied upon by the opposite party said that the said judgments would not apply to the present case as they only dealt with cheque dishonour, whereas, in the present case the issue at hand was the validity of the cheque itself.
Consequently, the Court decided that the invalidity of the cheque at the time of its presentation meant that the dishonour did not attract liability under Section 138 of the NI Act. The Court held that the cheque’s invalid status, due to the merger and subsequent invalidation date set by Indian Bank, was a crucial factor.
In light of the above, the Court allowed the application and quashed the proceedings against the applicant.
[Archana Singh Gautam v. State of U.P., Application u/s 482 No. – 9536 of 2024, Decided on 05-06-2024]
Advocates who appeared in this case :
Advocates for the Applicant: Diwakar Tiwari, Gyanendra Singh, Advocates
Advocates for the State: Ashish Pandey, G.A., Vivek Kumar, Advocate
Buy Code of Criminal Procedure, 1973 HERE
This is applicable on all merge bank