Delhi High Court: In a petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking to quash summons dated 18-09-2024 and the consequential proceedings arising out of complaint initiated under Section 138 of Negotiable Instruments Act, 1881, Ravinder Dudeja, J., quashed the summoning order as the reason for dishonor as “insufficient funds” was that the petitioners’ account was frozen by the CGST Department, and thus, it could not be said to be “maintained” by them at the relevant time.
The dispute arose from a commercial relationship involving supply of TMT bars, for which the petitioners had issued two post-dated cheques in November and December 2023, each for a sum of ₹2,40,000. The parties allegedly had an understanding that the said cheques would not be presented without the petitioners’ prior consent. However, on 22-01-2024, before the cheques were presented, the petitioners’ bank account was provisionally attached by the CGST Department under Section 83 of the CGST Act, 2017, precluding any debit transactions.
Despite being informed of this development, the respondent presented the cheques for encashment on 08-02-2024. They were dishonoured on 20-02-2024. Although the official reason given by the bank in the return memo was “insufficient funds,” the petitioners contended that this was factually incorrect, as the dishonour was due to the account being frozen. The petitioners received a legal notice on 16-03-2024, responded to it on 27-03-2024 enclosing documents and raising objections, but were nevertheless subjected to a criminal complaint under Section 138 NI Act. The Trial Court issued a summon to them on 18-09-2024.
The petitioners challenged the summoning order on the ground that their account was not “maintained” within the meaning of Section 138 NI Act at the time of cheque presentation, as they were unable to operate it due to the statutory attachment. They relied on the judgment in Deepinder Singh Bedi v. State, Crl. M.C. 5965/2019, decided on 30-09-2024, where the Delhi High Court had held that if an account is frozen by statutory order, it cannot be considered “maintained” for the purpose of prosecuting the drawer under Section 138 NI Act. They also cited Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745 and Ceasefire Industries Ltd. v. State, 2017 SCC OnLine Del 951 to assert that when dishonour arises due to circumstances beyond the drawer’s control, particularly freezing of accounts by statutory authorities, the penal consequences under Section 138 do not follow. The core contention was that the cheque was not dishonoured due to insufficiency of funds or willful default, but due to a statutory bar imposed on the account.
The respondent, however, opposed the petition by arguing that the petitioners had knowledge of the attachment yet continued to issue cheques. They contended that it reflected negligent and culpable conduct, and reliance on Deepinder Singh Bedi (supra) was misplaced because that decision also acknowledged that knowledge of inoperability could attract liability. They maintained that the issuance and dishonour of the cheques, coupled with the statutory notice, fulfilled all essential elements under Section 138 and the summoning order was well-founded.
The Court found that the petitioners had not anticipated the freezing of their account when the cheques were issued. Once they became aware of the CGST Department’s attachment order dated 22-01-2024, they informed the respondent and specifically requested that the cheques not be presented until the account was de-frozen. The attachment was further substantiated by a bank communication dated 03-03-2025, which confirmed that a “STOP” had been marked on the account on 02-02-2024, and no transactions could proceed without departmental clearance.
The Court noted that under Section 138 NI Act, penal liability arises only when a cheque drawn on an account maintained by the drawer is dishonoured due to insufficiency of funds or because the amount exceeds the arrangement with the bank. In this case, the dishonour was directly caused by the attachment under Section 83 of the CGST Act, and not by lack of funds or misuse. The term “maintained,” as interpreted in Vijay Chaudhary v. Gyan Chand Jain, was reaffirmed stating that an account is not “maintained” when the drawer cannot issue binding instructions or operate it due to external legal restraints.
The High Court concluded that the essential ingredients for attracting Section 138 were not satisfied in the present case. As such, the issuance of summons without appreciation of these critical facts and legal principles was erroneous. The summoning order dated 18.09.2024 was thus quashed and the petition allowed.
Thus, the Court quashed the summoning order as dishonour of cheques due to statutory attachment of the account by the CGST Department does not fulfill the requirements of Section 138 NI Act.
[Best Buildwell Pvt. Ltd. v. R.D. Sales, 2025 SCC OnLine Del 4267, decided on 05-06-2025]
Advocates who appeared in this case:
Mr. Bhuvan Mishra, Mr. Yash Maheshwari, Mr. Tanmay Mishra and Mr. Krishna Kanhaiya Kumar, Advocates for petitioner
Mr. Uday Seth and Ms. Puja Dewan, Advs. SI Monu Chauhan (I.O), PS. Crime Branch