[Cites 20, Cited by 0]
Bombay High Court
Chetan Sunderji Bhanushali And Ors vs Hema Ramesh Chheda And Ors on 10 February, 2026
Author: N. J. Jamadar
Bench: N. J. Jamadar
2026:BHC-AS:6948
CRI APL 940-26.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO. 940 OF 2024
1. Chetan Sunderji Bhanushali, aged adult,
having address at Flat No. 501, Beach
Apartment, Balaram Sahani Road, Opp.
Novotel Hotel, Juhu, Mumbai - 400049.
2. Pravin Girish Chamaria, aged adult,
having address at Flat No. 602, F wing,
Abhishek Apartments, Four Bunglows,
Varsova Link Road, Andheri (W),
Mumbai - 400053
3. Ashapura Edifice Pvt. Ltd., a company
incorporated under the Companies Act,
1956, having its address at 901,
Hallmark, Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ..Applicants
Versus
1. Hema Ramesh Chheda, aged 69 years,
having its address at C/o M/s Malshi
Ghela & co., 213, Narshi Natha Street,
1st Floor, Mumbai - 400009.
2. State of Maharashtra
Through Public Prosecutor,
Sessions Court, Mumbai.
3. M/s Arihant Realtors, a Partnership
Concern carrying on its Business at 101,
Hallmark Business Plaza, Opp.
Gurunath Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051.
4. Ashapura Options Pvt. Ltd.
a company incorporated under the
Companies Act 1956, having its address
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CRI APL 940-26.DOC
at 901, Hallmark Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ...Respondents
WITH
CRIMINAL APPLICATION NO. 946 OF 2024
1. Chetan Sunderji Bhanushali, aged adult,
having address at Flat No. 501, Beach
Apartment, Balaram Sahani Road, Opp.
Novotel Hotel, Juhu, Mumbai - 400049.
2. Pravin Girish Chamaria, aged adult,
having address at Flat No. 602, F wing,
Abhishek Apartments, Four Bunglows,
Varsova Link Road, Andheri (W),
Mumbai - 400053
3. Ashapura Edifice Pvt. Ltd., a company
incorporated under the Companies Act,
1956, having its address at 901,
Hallmark, Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ..Applicants
Versus
1. Nemji Morarji Chheda, aged 68 years,
having its address at C/o M/s Malshi
Ghela & co., 213, Narshi Natha Street,
1st Floor, Mumbai - 400009.
2. State of Maharashtra
Through Public Prosecutor,
Sessions Court, Mumbai.
3. M/s Arihant Realtors, a Partnership
Concern carrying on its Business at 101,
Hallmark Business Plaza, Opp.
Gurunath Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051.
4. Ashapura Options Pvt. Ltd.
a company incorporated under the
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CRI APL 940-26.DOC
Companies Act 1956, having its address
at 901, Hallmark Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ...Respondents
WITH
CRIMINAL APPLICATION NO. 947 OF 2024
1. Chetan Sunderji Bhanushali, aged adult,
having address at Flat No. 501, Beach
Apartment, Balaram Sahani Road, Opp.
Novotel Hotel, Juhu, Mumbai - 400049.
2. Pravin Girish Chamaria, aged adult,
having address at Flat No. 602, F wing,
Abhishek Apartments, Four Bunglows,
Varsova Link Road, Andheri (W),
Mumbai - 400053
3. Ashapura Edifice Pvt. Ltd., a company
incorporated under the Companies Act,
1956, having its address at 901,
Hallmark, Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ..Applicants
Versus
1. Jayvanti Nemji Chheda, aged 68 years,
Indian Inhabitant, having its address at
Plot No. 207-C, Flat No. 403, Bhakti
Residency, Dr. B. A. Road, Matunga (E)
Mumbai - 400019.
2. State of Maharashtra
Through Public Prosecutor,
Sessions Court, Mumbai.
3. M/s Arihant Realtors, a Partnership
Concern carrying on its Business at 101,
Hallmark Business Plaza, Opp.
Gurunath Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051.
4. Ashapura Options Pvt. Ltd.
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CRI APL 940-26.DOC
a company incorporated under the
Companies Act 1956, having its address
at 901, Hallmark Business Plaza, Opp.
Gurunanak Hospital, Sant Gyaneshwar
Marg, Bandra (E), Mumbai - 400051. ...Respondents
Mr. Mahendra Svar i/by Ms. Prachi Patel, for the Applicants in
all.
Mr. Jatin Karia (Shah) a/w Ms. Snehankita Munj, Ms.
Shraddha Kamble & Ms. Dipti J. Karia, for the
Respondent.
CORAM : N. J. JAMADAR, J.
RESERVED ON : 22nd JANUARY 2026
PRONOUNCED ON : 10th FEBRUARY 2026
JUDGMENT:
1. By these applications under Section 482 of the Code of
Criminal Procedure, 1973 ("the Code, 1973), the applicants take
exception to the orders passed by the learned Additional
Sessions Judge, Greater Bombay, in Criminal Revision
Applications, whereby the revision applications preferred by the
applicants against the order passed by the Magistrate, issuing
process against the applicants for an offence punishable under
Section 138 r/w Section 141 of the Negotiable Instruments Act,
1881 ("the N. I. Act, 1881), came to be dismissed.
2. As a common question of law arises for determination in
an almost identical fact - situation, all these applications were
heard together and are being decided by this common judgment.
CRI APL 940-26.DOC
3. The Respondent No. 1 - original complainant, in each of
the applications, filed a complaint for an offence punishable
under Section 138 r/w Section 141 of the N. I. Act, 1881, with
the assertion that, believing the representations of the
applicants and the co-accused, the complainant had advanced
varying amounts by way of loan, by cheques drawn in favour of
M/s. Arihant Realtors (A1), a partnership firm; of which the
applicants are the partners. Towards the discharge of the said
liability, the accused had drawn the cheques on State Bank of
Patiala, Bandra Branch, Mumbai. The said cheques were
returned unencashed with the remarks 'Insufficient Funds'. The
accused failed to pay the amount covered by the subject
cheques despite service of the demand notice, within the
stipulated period.
4. The learned Magistrate ordered the issuance of process
against the applicants for an offence punishable under Section
138 r/w Section 141 of the N. I. Act, 1881, in each of the three
complaints.
5. Being aggrieved, the applicants preferred revision
applications before the learned Sessions Judge. By the
impugned order the learned Sessions Judge dismissed the
CRI APL 940-26.DOC
revision applications recording that, the order of issuance of
process did not warrant interference in exercise of revisional
jurisdiction.
6. Being further aggrieved, the applicants have approached
this Court invoking its inherent jurisdiction.
7. I have heard Mr. Mahendra Svar, the learned Counsel for
the Applicants, and Mr. Jatin Karia, the learned Counsel for the
Respondent No. 1, at some length. With the assistance of the
learned Counsel for the parties, I have perused the material on
record.
8. Mr. Svar, the learned Counsel for the applicants,
submitted that, though, multiple grounds were raised before the
Revisional Court, the applicants restrict the challenge to the
order of issuance of process to the non-compliance of clause (a)
of the proviso to Section 138 of the N. I. Act, 1881, as the subject
cheques were invalid on the day they were presented for
encashment.
9. Amplifying the submission, Mr. Svar would urge that, in
the complaints it is categorically mentioned that, the accused
No. 1 had drawn the cheque on State Bank of Patiala, payable
CRI APL 940-26.DOC
on 17th March, 2021. However, in view of the amalgamation of
the State Bank of Patiala with the State Bank of India, with
effect from 01st April, 2017, pursuant to Acquisition of State
Bank of Patiala Order 2017, the cheques drawn on State Bank of
Patiala, became invalid after 31st December, 2017. Therefore, the
subject cheques were invalid on the date, they were presented
for encashment with the payee's banker. In such circumstances,
the cheques could not have been returned unencashed on
account of alleged "insufficiency of funds". As the cheques had
become invalid, the drawee bank could not have honoured the
cheques.
10. Thus, as the subject cheques were not presented with the
drawee bank before the 31st December, 2017, there was a clear
non-compliance of clause (a) of the proviso to Section 138 of the
N. I. Act. Resultantly, the very basis of the prosecution for the
offence punishable under Section 138 of the N. I. Act, 1881 gets
dismantled, submitted Mr. Svar.
11. To buttress the aforesaid submission, Mr. Svar invited the
attention of the Court to 'Acquisition of State Bank of Patiala
Order 2017' issued by the Government of India, and the
communication dated 28th March, 2017 addressed by the RBI to
CRI APL 940-26.DOC
inter alia all the braches of the State Bank of Patiala. It was
submitted that, the initial period of validity of the cheques
drawn on the State Bank of Patiala was eventually extended till
31st December, 2017. As the subject cheques were not valid on
28th March, 2021, when they were allegedly returned unpaid, the
provisions contained in Section 138 of the N. I. Act, would not
be attracted, urged Mr. Svar.
12. To lend support to these submissions, Mr. Svar placed a
very strong reliance on a judgment of the Allahabad High Court
in the case of Archana Singh Gautam Vs. State of U.P. and
another1, and a judgment of the Andhra Pradesh High Court in
the case of Ganta Kavitha Devi and others Vs. State of Andhra
Pradesh and another2.
13. Per contra, Mr. Jatin Karia, the learned Counsel for the
Respondent No. 1, would urge that, the prayer for quashing the
order of issue of process does not deserve to be entertained, as
it is based on documents, which were not part of the record of
the Trial Court. Moreover, the orders issued by the Central
Government and Reserve Bank of India, which are the basis of
the submissions sought to be canvassed by Mr. Svar, were not
1 2024 SCC OnLine All 4599
2 2024 SCC OnLine AP 5115
CRI APL 940-26.DOC
tendered either before the trial Court or the revisional Court. In
these circumstances, the plea for quashment of the proceedings
on the basis of material, which is for the first time produced
before this Court, cannot be countenanced.
14. Secondly, Mr. Karia would urge, the applications raise
disputed questions of facts which cannot be determined in
exercise of the inherent jurisdiction under Section 482 of the
Code, 1973. Those questions can be legitimately adjudicated by
the Trial Court only post appraisal of evidence. Thirdly, since
the plea of the accused has been recorded and the trial has
commenced, at this stage, this Court may not entertain the
prayer for quashment of the proceedings.
15. On the merits of the ground of alleged invalidity of the
subject cheques, Mr. Karia submitted that, the cheques have
been returned by the drawee bank with the remarks, 'Funds
Insufficient' and not on account of alleged invalidity of the
cheques. It implies that, the drawee bank has not treated the
cheques to be invalid and, consequently, the statutory
presumption contained in Section 146 of the N. I. Act, 1881 that,
the bank's slip indicating that the cheque has been dishonored,
operates and the Court is enjoined to hold that, the cheque has
CRI APL 940-26.DOC
indeed been dishonoured, unless and until the said fact is
disproved. In the face of the bank's memo that the cheques have
been dishonoured on account of insufficiency of funds, the onus
shifts on the applicants to show to the contrary, and that can
only be done at the stage of trial.
16. Mr. Karia would further submit that, the accused have not
disputed the factum of the issuance and dishonour of the
cheques. Nor the accused gave any reply to the statutory
demand notice. The stand taken by the accused is false and
dishonest, and, the accused cannot be permitted to take
advantage of their own wrong. Since the question as to whether
the subject cheques had become invalid is a matter which
requires adjudication at the trial, in the light of the statutory
presumptions, the complaints under Section 138 of the N. I. Act,
1881, cannot be interdicted, at this stage, was the thrust of the
submission of Mr. Karia.
17. To bolster up these submissions, Mr. Karia placed reliance
on the judgments of Punjab and Haryana High Court in the
cases of Surjit Kumar Vs. Sunil Kumar Dalmia 3, M/s. K. K.
Tractors and Ors. Vs. M/s. Mahindra and Mahindra Limited 4,
3 CRM-M/51125/2023
4 CRM-M/17555/2022
CRI APL 940-26.DOC
Balkour Singh Vs. State of Punjab and others 5, of the Allahabad
High Court in the case of Maksud Ashraf Khan Vs. State of U.P.
and others6, of Uttarakhand High Court in the case of Rohit
Goyal Vs. Amarjeet Singh7, and of Gujarat High Court in the
case of Bhikhabhai Laljibhai Patel Vs. State of Gujarat and
others8, wherein the defences based on the invalidity of the
cheque on account of acquisition and merger of the drawee bank
with another bank, came to be repelled.
18. Before adverting to deal with the aforesaid rival
submissions, forcefully canvassed across the bar, it may be
appropriate to note the uncontroverted facts. The alleged loan
transaction between the complainant and the accused took
place in the year, 2014. The complainant claimed, the accused
paid interest till the year, 2019. Eventually, the accused had
drawn the cheques towards discharge of the liability, on State
Bank of Patiala, Bandra Branch, payable on 17 th March, 2021,
(in complaint No. 1630/SS/2021, the subject matter of Criminal
Revision Application No. 940/2024) (in complaint No.
1231/SS/2021, the subject matter of Criminal Application No.
5 CRM-M/36565/2019
6 Application/ 3871/2023
7 Crl. Misc. Apl Nos. 298/2024, 310/2024 & 306/2024
CRI APL 940-26.DOC
946/2024) and (in complaint No. 1634/SS/2021, the subject
matter of Criminal Application No. 947/2024). The said cheques
were presented for encashment on 28th March, 2021, with the
Complainant/banker - Union Bank of India. Those cheques were
returned unencashed vide cheque return memo, dated 28 th
March, 2021, with the remarks, "Funds Insufficient". The
complainant claimed to have issued demand notices on 30 th
March, 2021. Alleging non-compliance of the demands within
the statutory period, the complaints came to be lodged.
19. An offence punishable under Section 138 of the N. I. Act,
1881, can be said to have been committed upon proof of
concomitant factors. One of the conditions to be satisfied before
an offence under Section 138 of the N. I. Act, 1881, can be said
to have been committed is the presentation of the cheque within
the stipulated period under clause (a) of the proviso. It reads as
under:
"138. Dishonour of cheque for insufficiency, etc., of funds in
the account. - Where any cheque drawn by a person on an
account maintained by him with a banker for payment of
any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt or
other liability, is returned by the bank unpaid, either
because of the amount of money standing to the credit of
that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account
CRI APL 940-26.DOC
by an agreement made with that bank, such person shall be
deemed to have committed an offence and shall, without
prejudice to any other provision of this Act, be punished
with imprisonment for [a term which may be extended to
two years], or with fine which may extend to twice the
amount of the cheque, or with both:
Provided that nothing contained in this section shall
apply unless -
(a) the cheque has been presented to the bank within a
period of six months* from the date on which it is drawn
or within the period of its validity, whichever is earlier;"
..........
20. On its plain reading, the fulfillment of the condition of
valid presentation of the cheque for encashment hinges upon
the two factors. One, presentation of the cheque within the
period of its validity and, two, if the cheque does not contain
any validity period, then within a period of six months from the
date on which it is drawn. The Parliament has addressed a
situation where the validity period of the cheque is less than the
period of six months. Thus, by using the expression 'whichever
is earlier', the Parliament has mandated that, the presentation
shall be within the period of validity of cheque, if it is less than
six months from the date on which the cheque is drawn. Often,
the cheques contain an endorsement to the effect, "valid for
specified period of months". In that event, the cheque must be
CRI APL 940-26.DOC
presented for encashment within the said period from the date
it is drawn.
21. The question that wrenches to the fore is, whether the
expression, "within the period of its validity" is elastic enough to
cover a situation where the cheque is rendered invalid, even
though the period of validity, expressly mentioned on the
cheque, has yet not expired? Since the Parliament has, in the
first part of the clause (a) of the proviso, fixed the period within
which the cheque shall be presented for encashment to the
drawee bank, the expression 'within the period of its validity'
used in the later part of the proviso, need not be only in
reference to the duration of time specified on the cheque. The
period of validity may also be determined with reference to an
incident which renders the cheque invalid, even though the
period of validity, expressly specified on the cheque, is yet to
expire. The word 'period' may not govern the word 'validity'. In
the later part of the clause (a) of the proviso, it is the validity of
the cheque on which there is more emphasis, than the 'period'.
To put it in other words, the expression 'period of validity' does
not seem to be restricted to the specified 'term' of validity, and
the question of invalidity of the cheque may arise on account of
CRI APL 940-26.DOC
the circumstances, which may curtail the express specified
'term' of validity.
22. In the case of Archana Singh Gautam (supra), on which
reliance was placed by Mr. Svar, the cheque was drawn on an
account maintained with Allahabad Bank, payable on 02 nd
June, 2023, though the Allahabad Bank had already merged
with the Indian Bank on 01st April, 2020, and the cheques
drawn on Allahabad Bank were valid upto 30 th September, 2021,
only. In that context, a learned Single judge of the Allahabad
High Court held that, if any invalid cheque was presented to the
drawee bank and the same was dishonoured, no liability under
Section 138 of the N. I. Act would be attracted. Since the cheque
drawn on Allahabad Bank was valid, up to 30 th September, 2021
only, dishonourment of such cheque after 30 th September, 2021
would not attract the penal liability under Section 138 of the
N.I. Act, as the cheque was not valid on the date of presentation
as mandated by the clause (a) of the proviso to Section 138 of
the N. I. Act.
23. In the case of Gantha Kavitha Devi (supra), the cheque in
question was drawn on State Bank of Hyderabad, payable on
20th September, 2021. The said cheque was returned unpaid
CRI APL 940-26.DOC
with an endorsement, "invalid cheque (SBH)", as the earstwhile
State Bank of Hyderabad stood merged with State Bank of India
and the cheques drawn on earstwhile State Bank of Hyderabad
were valid only till 31st March, 2018. In the light of the aforesaid
facts, a learned Single Judge of the Andhra Pradesh High Court
after adverting to clause (a) of the proviso to Section 138 of the
N. I. Act, 1881, enunciated that, it is clear that if any invalid
cheque is presented to the drawee bank and the same is
dishonoured, it can be said that, there is no liability under
Section 138 of the N. I. Act. The subject cheque was not a valid
cheque on the date of its presentation, as required by clause (a)
of the proviso and, hence, dishonourment of the same would not
attract the liability under Section 138 of the N. I. Act.
24. Mr. Svar, would urge, the decision in the case of Gantha
Kavitha Devi (supra), fully governs to the facts of the case at
hand, as the State Bank of Hyderabad was also an Associate
Bank which came to be merged with the State Bank of India like
State Bank of Patiala. And the cheques therein were presented
for encashment after its validity period as stipulated by the RBI,
like the case in hand.
CRI APL 940-26.DOC
25. It is pertinent to note that, in the case of Archana Singh
Gautam (supra), as well as Gantha Kavitha Devi (supra), the
cheques were returned by the drawee bank by making an
endorsement which reflected upon the validity of the cheque. In
the case of Archana Singh Gautam (supra), the cheque was
returned with the remarks, "wrongly delivered not drawn on us"
by the Indian Bank, into which the Allahabad Bank had
merged. Whereas, in the case of Ganta Kavitha Devi (supra), the
cheque was returned with the remarks, "invalid cheque (SBH)".
Yet, the process for an offence punishable under Section 138 of
the N. I. Act, 1881 was issued in those cases.
26. The object of Section 138 of the N.I. Act, 1881 is to
inculcate faith in the efficacy of banking operations and ensure
credibility in transacting business through cheques. The
Supreme Court has thus delineated the approach in the case of
Dalmiya Cement (Bharat) Ltd. Vs. Galaxy Traders & Agencies
Ltd. & Ors9., that efforts to defeat the objectives of law by
resorting to innovative measures and methods are to be
discouraged, lest it may affect the commercial and mercantile
activities in a smooth and healthy manner, ultimately affecting
the economy of the country.
9 (2001) 6 SCC 463
CRI APL 940-26.DOC
27. In the case of NEPC Micon Ltd. & Ors. Vs. Magma Leasing
Limited10, following the three-Judge Bench judgment in the case
of Modi Cements Ltd. V. Kuchil Kumar Nandi11, wherein it was
enunciated that, return of the cheque on account of stop
payment instruction will not preclude an action under Section
138 of the N. I. Act, 1881, the Supreme Court held that, when
the cheque is returned by a bank with an endorsement
"account closed", it would amount to returning the cheque
unpaid because "the amount of money standing to the credit of
that account is insufficient to honour the cheque" as envisaged
in Section 138 of the N. I. Act, 1881.
28. The position in law is that, it is the dishonour of the
cheque that assumes importance and the reason for dishonour,
especially "stop payment", "refer to drawer", "account closed",
"exceeds agreement" and the like, are not of decisive
significance. This factor also deserves to be kept in view.
29. In a case of the present nature, however, the reason for the
return of the cheque assumes significance. If the cheque is not
returned with a specific endorsement that, the cheque is invalid,
10 (1999) 4 SCC 253
11 (1998) 3 SCC 249
CRI APL 940-26.DOC
but on account of insufficiency of funds, then as rightly
submitted by Mr. Karia, the presumption contained in Section
146 of the N. I. Act, 1881, comes into play and the onus would
shift on the drawer to rebut the presumption that, the
dishonour of the cheque was not on account of insufficiency of
funds. The presumption contained in Section 146 of the N. I.
Act, is also a presumption of law and the Court is enjoined to
presume the said fact, as it is a mandatory and not a permissive
presumption.
30. It is true, the Acquisition order issued by the Central
Government and the order/circular issued by the RBI, cannot
be brushed aside lightly. However, when the cheque is returned
with the remarks, "Insufficient Funds", the presumption
contained in Section 146 of the N. I. Act, 1881, would be
required to be rebutted by demonstrating that, the drawee bank
could not have honoured the cheque in question as its period of
validity had expired.
31. There is another facet which the Court cannot lose sight
of. The drawer of the cheque may deliver a signed blank cheque
to the payee, or the drawer of cheque may himself draw a post
dated cheque. In the intervening period, on account of
CRI APL 940-26.DOC
acquisition or merger of the drawee bank, the validity period of
the cheque may expire. If the payee after a lapse of time fills in
the date on the cheque and presents the cheque for
encashment, should the drawer be permitted to wriggle out of
the situation by taking a stand that, in the intervening period
the cheque has been rendered invalid on account of acquisition
or merger of 'the bank'?
32. The legal position has crystallized to the effect that, even if
a blank signed cheque leaf is delivered to the payee, towards
debt or liability, and the payee fills in the particulars, the
cheque is not rendered invalid and the presumption contained
in Section 139 of the N. I. Act, 1881 is attracted. In the case of
Bir Singh Vs. Mukesh Kumar12, after adverting to the settled
line of precedent, the Supreme Court enunciated the law as
under:-
"33. A meaningful reading of the provisions of the
Negotiable Instruments Act including, in particular,
Sections 20, 87 and 139, makes it amply clear that a
person who signs a cheque and makes it over to the
payee remains liable unless he adduces evidence to
rebut the presumption that the cheque had been issued
for payment of a debit or in discharge of a liability. It is
immaterial that the cheque may have been filled in by
any person other than the drawer, if the cheque is duly
signed by the drawer. If the cheque is otherwise valid,
the penal provisions of Section 138 would be attracted.
34.If a signed blank cheque is voluntarily presented to a
12 (2019) 4 SCC 197
CRI APL 940-26.DOC
payee, towards some payment, the payee may fill up the
amount and other particulars. This in itself would not
invalidate the cheque. The onus would still be on the
accused to prove that the cheque was not in discharge
of a debt or liability by adducing evidence.
..........
36. Even a blank cheque leaf, voluntarily signed and
handed over by the accused, which is towards some
payment, would attract presumption under Section 139
of the Negotiable Instruments Act, in the absence of any
cogent evidence to show that the cheque was not issued
in discharge of a debt."
33. The aforesaid pronouncement was approved by a three-
Judge Bench of the Supreme Court in the case of Kalamani Tex
and Another Vs. P. Balasubramanian13.
34. Consistent with the object of the penal provisions
incorporated in Section 138 of the N. I. Act, 1881, a dishonest
drawee cannot be permitted to take benefit of such a situation
and defeat the rights of a payee who alters his position on the
basis of the sanctity of the cheque as a negotiable instrument,
especially when such cheque is returned unencashed with the
remarks "insufficiency of funds".
35. In my considered view, therefore, in a situation of the
present nature, where the cheques have been returned with the
13 (2021) 5 SCC 283
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remarks, "funds insufficient", and not on account of alleged
invalidity of the cheques, the question as to whether, the
cheques were dishonoured for insufficiency of funds becomes a
tribal issue and must be adjudicated at the trial. Different High
Courts have also adopted similar approach in a variety of fact-
situations.
36. In the case of Surjit Kumar (supra), where the cheque was
returned unencashed with the remark that, 'State Bank of
Patiala cheques are not acceptable at State Bank of India due to
the merger of State Bank of Patiala in State Bank of India', a
learned Single Judge of Punjab and Haryana High Court held
that, whether the custody of the cheque has been misused by
the complainant or not, was a question of trial which could be
adjudicated only after the parties lead evidence and, thus,
declined to quash the complaint.
37. In the case of M/s. K. K. Tractors & Ors. (supra) , again in
the context of the presentation of the cheque, beyond the
stipulated period after the merger of the SBI's Associate Bank
with State Bank of India, a learned Single Judge declined to
quash the complaint opining that, the notifications and
documents annexed to the applications under Section 482 of
CRI APL 940-26.DOC
the Code, cannot be considered as evidence so as to quash the
complaint in exercise of inherent power.
38. Similar view was expressed in the case of Balkaur Singh
(supra), by another learned Single Judge of Punjab and Haryana
High Court. It was observed that, invalidation of cheque on
account of merger with another bank would be a disputed
question of fact and would be a probable defence that the
petitioner is free to take before the trial Court. The Court cannot
negate the complainant's case without allowing the complainant
to lead evidence while exercising its discretionary power under
Section 482 of the Code, 1973.
39. In the case of Bhikhabhai Laljibhai Patel (supra), wherein
the drawee bank had merged with the another bank and the
cheque was returned unencashed with the remarks "funds
insufficient", a learned Single Judge of Gujarat High Court
declined to exercise the power under Section 482 of the Code,
observing inter alia as under:
"8. Undisputedly, all the contentions raised by the petitioner
herein above are disputes issues and there the question of
fact would be determined by the learned trial Court after
recording evidence. Whether Khedbrahma Nagrik Sahkari
Bank Limited in which the petitioner has maintained his
account was merged with Janta Sahkari Bank Limited and
CRI APL 940-26.DOC
the clearing house was not aware of the said aspect or
whether the cheque has not been returned for the purpose of
"Fund Insufficient" are all disputed questions of fact and can
be decided after recording the evidence. When the learned
trial court has issued process, before the learned trial Court
it was on bank return memo, which was indicated that the
cheque in question was returned unpaid due to "fund
Insufficient" and upon such, the learned Trial Court has
issued process against the petitioner accused. In this given
facts and circumstances, this Court cannot come to the
conclusion that prima facie case is not made out and that too
under extraordinary jurisdiction vested in Section 482 of the
Code."
40. The conspectus of aforesaid consideration is that, though
the expression 'within the period of its validity' used in the later
part of the clause (a) of the proviso to Section 138 of the N. I.
Act, 1881, is elastic enough to cover in its fold a case where the
validity of the cheque, is affected by the factors like acquisition
by or merger with another bank, despite the validity period
specifically mentioned on the cheque not having come to an end,
yet, the attendant circumstances bear upon the question
whether the cheque has been presented within its validity
period. In cases where despite the original drawee bank having
ceased to be 'the bank' within the meaning of clause (a) of the
said proviso the cheque is returned unencashed with the
remarks "insufficiency of funds" and the like, the investigation
CRI APL 940-26.DOC
into facts becomes necessary, and the question whether the
drawee bank could have honoured the cheque as it was
rendered invalid, would warrant adjudication at the trial.
Whereas, in cases where the cheque has been returned with the
remarks, 'invalid' or 'presented on the successor bank after the
period of the validity of the cheque' and the like, compliance of
clause (a) of the proviso to Section 138 of the N. I. Act, 1881, in
the matter of presentation of the cheque within the validity
period, could be examined by the Court, in the light of the
attendant facts and circumstances of the case. No straight-
jacket formula that, since the cheque appeared to have been
presented after expiry of the period of validity of the cheque
drawn on the earstwhile drawee bank, no offence punishable
under Section 138of the N. I. Act, is made out, can be adopted.
41. The facts of the case at hand appear to fall in the category
of cases where on account of the return of the cheque with the
remarks, "Funds Insufficient", the question as to whether the
cheque was presented beyond its validity period warrants
adjudication at the trial. Resultantly, the prayer of the
applicants to quash the complaints for the offence punishable
under Section 138 r/w 141 of the N. I. Act, 1881, cannot be
countenanced.
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42. Hence, the applications stand dismissed.
43. No Costs.
[N. J. JAMADAR, J.]
SANTOSH by SANTOSH
SUBHASH
SUBHASH KULKARNI
KULKARNI Date: 2026.02.10
21:23:01 +0530
