TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 662
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.... 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. 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 thr....
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....ssued by the Government of India, and the communication dated 28th March, 2017 addressed by the RBI to 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 another[2024 SCC OnLine All 4599], and a judgment of the Andhra Pradesh High Court in the case of Ganta Kavitha Devi and others Vs. State of Andhra Pradesh and another [2024 SCC OnLine AP 5115]. 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 C....
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.... judgments of Punjab and Haryana High Court in the cases of Surjit Kumar Vs. Sunil Kumar Dalmia [CRM-M/51125/2023], M/s. K. K. Tractors and Ors. Vs. M/s. Mahindra and Mahindra Limited [CRM-M/17555/2022], Balkour Singh Vs. State of Punjab and others [CRM-M/36565/2019], of the Allahabad High Court in the case of Maksud Ashraf Khan Vs. State of U.P. and others [Application/ 3871/2023], of Uttarakhand High Court in the case of Rohit Goyal Vs. Amarjeet Singh [Crl. Misc. Apl Nos. 298/2024, 310/2024 & 306/2024], and of Gujarat High Court in the case of Bhikhabhai Laljibhai Patel Vs. State of Gujarat and others [Crl. Misc. Apl No. 307/2014], 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 th....
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.... 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 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 ch....
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....rting 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. 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 retur....
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.... 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 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....
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....insufficiency of funds". 35. In my considered view, therefore, in a situation of the present nature, where the cheques have been returned with the 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 w....