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Issues: (i) Whether dishonour of a cheque drawn on an account that had been frozen attracts an offence under Section 138 of the Negotiable Instruments Act, 1881. (ii) Whether the complaint was liable to be quashed on the ground that the cheque had been presented by the bank that froze the account and the prosecution was malicious.
Issue (i): Whether dishonour of a cheque drawn on an account that had been frozen attracts an offence under Section 138 of the Negotiable Instruments Act, 1881.
Analysis: Section 138 is attracted when a cheque issued for discharge of a debt or liability is returned unpaid for insufficiency of funds or because the amount arranged to be paid exceeds the arrangement. The expression relating to insufficiency of funds is not to be given a narrow meaning. Dishonour caused by freezing or blocking of the account falls within the same genus as dishonour for insufficient funds. If the drawer issues a cheque from such an account and does not make payment after receipt of statutory notice, the statutory ingredients are satisfied.
Conclusion: Yes. Dishonour of a cheque returned unpaid because the account was frozen can attract Section 138, subject to satisfaction of the other statutory requirements.
Issue (ii): Whether the complaint was liable to be quashed on the ground that the cheque had been presented by the bank that froze the account and the prosecution was malicious.
Analysis: The plea that the cheque was a security cheque and that the account freeze made the complaint malicious involved disputed questions of fact, including the nature of the cheque and the existence of liability. Such issues require trial and cannot be conclusively decided in a petition for quash. The court also noted that the petitioners had not discharged the cheque amount after notice.
Conclusion: No. The complaint was not liable to be quashed on the ground of malicious prosecution.
Final Conclusion: The petition for quashing was rejected and the prosecution under Section 138 was permitted to proceed.
Ratio Decidendi: Dishonour of a cheque due to freezing of the account may fall within Section 138 of the Negotiable Instruments Act, 1881, and disputed facts concerning the nature of the cheque or liability cannot be adjudicated in quash proceedings under Section 482 of the Code of Criminal Procedure, 1973.
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