Cheque dishonour disputes over bank merger and validity generally require trial when the return memo states "Funds Insufficient".

A cheque presented after a bank merger may still raise a question under Section 138 of the Negotiable Instruments Act if its legal validity is disputed, but where the return memo records dishonour as "Funds Insufficient," the statutory presumption under Section 146 applies. In that situation, whether the cheque had become invalid and whether dishonour was actually due to insufficiency of funds becomes a factual issue for trial. The High Court's inherent power under Section 482 of the Code of Criminal Procedure is not ordinarily used to resolve such disputed factual questions, so quashing of the complaints was refused and the prosecutions were permitted to continue.

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Issues: Whether complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed under Section 482 of the Code of Criminal Procedure, 1973 on the basis that cheques drawn on a bank merged with another bank had become invalid and were presented after expiry of their validity period, despite their return being reflected as "Funds Insufficient".

Analysis: The condition in clause (a) of the proviso to Section 138 requires presentation of the cheque within the period of validity. The expression "within the period of its validity" is not confined only to the period printed on the cheque and may also be affected by circumstances that render the cheque invalid, including merger or acquisition of the drawee bank. However, where the bank return memo records dishonour as "Funds Insufficient" and not as invalidity of the cheque, the statutory presumption under Section 146 operates and the issue whether the cheque had in fact become invalid and whether the dishonour was really on account of insufficiency of funds becomes a matter for trial. In such a situation, the Court would not undertake factual adjudication in exercise of inherent jurisdiction under Section 482.

Conclusion: The plea for quashing was not accepted and the complaints were allowed to proceed.

Ratio Decidendi: Where a cheque returned with the endorsement "Funds Insufficient" is challenged on the ground of later invalidity due to merger or acquisition of the drawee bank, the question whether the cheque was presented within its legal validity and whether the dishonour attracts Section 138 is ordinarily a disputed factual issue to be decided at trial, not in a petition under Section 482.

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