TaxTMI 
TaxTMI 
2026 (9) TMI 1280
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.... Petitioner No.1 - accused No.1 is the firm and petitioner Nos.2 and 3 - accused Nos.2 and 3 are its partners. The respondent is the complainant, a proprietorship concern. The two have a transaction. In furtherance of the said transaction, it is the case of the complainant that a cheque is issued by the petitioners amounting to Rs. 80,30,106/- and the drawee bank of the cheque being Syndicate Bank. The same when presented gets dishonoured not on account of want of sufficient funds but, on account of merger of the drawee bank - Syndicate Bank with the Canara Bank. It was, therefore, returned unpaid with an endorsement in the form of a letter from Union Bank indicating that 'Syndicate Bank is merged with Canara Bank'. The complainant then initiates proceedings as obtaining in law and finally approaches the concerned Court by filing a private complaint under Section 223 of the BNSS. The concerned Court registers PCR No.13298 of 2025 for offences punishable under Sections 138 and 142 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the Act' for short). The matter is pending consideration before the concerned Court. The accused have now knocked at the doors o....
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...., getting merged with another Bank, long after the merger, would be a valid instrument in the eyes of law that could attract liability under Section 138 of the Act? 7. Certain skeletal facts are required to be re-noticed. The transaction between the two is as narrated hereinabove. A private complaint under Section 233 of the BNSS comes to be filed on 19-07-2025. Noticing this complaint is imperative. It reads as follows: "COMPLAINT UNDER SECTION 223 OF THE BHARATIYA NAGARIK SURAKSHA SANHITHA, 2023 READ WITH SECTION 138 & 142 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 The Complainant most humbly submits as follows: 1. The Complainant is the proprietor of a proprietorship concern viz. M/s Sree Rama & Co., and carrying on business in supply of foodgrains, cereals, pulses, spices and various food products since more than 20 years. 2. The Accused No.2 & 3 had introduced themselves by approaching the Complainant that they were the active partners of Accused No.1 firm and that they were in-charge of and responsible to their firm for the conduct of regular day to day business and affairs of their firm, as well as their firm by running a chain of hotels a....
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....nour the said cheque and the cheque was returned unpaid. The details of the cheque being dishonoured are as follows: a. Cheque No: "544041"; b. Date of Cheque: 19-05-2025; c. Drawn on (Accused banker): Syndicate Bank, Vijayanagar Branch; d. Amount of Cheque: Rs. 80,30,106/-; e. Cheque presented at: Union Bank of India, Yeshwanthpur Branch; f. Date of Dishonoured by your banker: 12-06-2025; g. Reason for dishonour: "Bank Merged with Canara Bank" & "returned unpaid". 12. The said dishonour was brought to notice of Accused persons that, the above-said endorsement received would amount to refusal by their banker to honour commitment of Accused persons to Complainant in terms of the said cheque issued by the Accused persons. 13. It is stated that Accused persons knowing that their bank i.e., Syndicate Bank was merged with Canara Bank in the year 2020 and knowing that their cheque would not be honoured, the Accused persons harbouring ulterior motive have deliberately issued a cheque of Syndicate Bank to the Complainant. The said act also amounts to cheating by the Accused persons towards the Complainant. ....
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....ed) Upon registration of the private complaint, cognizance is taken by the concerned Court by a detailed order. It is then the subject petition is preferred which projects the aforesaid legal issue. 8. It is not in dispute that the cheque was drawn on Syndicate Bank. The cheque bearing No.544041 drawn on Syndicate Bank was presented on 19-05-2025. This is an admitted fact. Later, the cheque comes to be presented for encashment before the Union Bank. On presentation, the endorsement issued is that, 'Syndicate Bank is merged with Canara Bank' and, therefore, returned unpaid. The subject cheque presented and the endorsement which is issued in the form of a letter by Union Bank on 12-06-2025, read as follows: 9. Legal notices were then issued and proceedings had commenced. The Syndicate Bank gets merged with Canara Bank on 01-04-2020. The merger document clearly indicates that the last date for presenting cheques of Syndicate Bank for clearance was 30th June, 2021 and after which, those cheques would be held invalid as the old IFSC and MICR codes of Syndicate Bank were permanently disabled after 30th June, 2021. Therefore, it could be safely observed that the last date....
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....Line All 4599) holds as follows: ".... .... .... 6. After hearing the rival submission of the counsel for the parties and perused the record, it is clear that the Allahabad Bank had merged into the Indian Bank on 01.04.2020. Thereafter, a wide circular was made by the Indian Bank in newspapers mentioning the fact that all the cheques issued by Allahabad Bank can be exchanged with the cheques of Indian Bank by 30.09.2021, and the cheque from Allahabad Bank will be honoured by 30.09.2021. Therefore, the cheque issued by the Allahabad Bank was valid till 30.09.2021, and all the cheques of Allahabad Bank which were presented before the Indian Bank till 30.09.2021, were honoured by the Indian Bank, and after 30.09.2021, cheques issued from the account maintained by the erstwhile Allahabad Bank were declared invalid for honouring. Section 138 N.I. Act prescribes the condition for initiation of proceeding on bouncing the cheque in the proviso (a) of Section 138 N.I. Act. As per the proviso (a) of Section 138 N.I. Act, cheque must be presented to the Bank during its validity. Section 138 N.I. Act is being quoted as under:- "138. Dishonour of cheque for insuffi....
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...., and the same was returned on 25.08.2023 with the endorsement "wrongly delivered not drawn on us". Therefore, the cheque in question was invalid on the date of presentation before the Indian Bank. 10. So far as the judgment of NEPC Micon Ltd. (Supra) relied upon by the counsel for the opposite party No. 2 is concerned, that judgment relates to the different kinds of reasons for dishonouring the cheque that would come under the category of insufficient funds, but in the present case, the question is not simply the reason for dishonouring the cheque, but the question is validity of the cheque as mentioned in proviso (a) of Section 138 of N.I. Act because if the cheque itself is invalid, then the Bank is bound to dishonour the same. So far as the judgment of the Delhi High Court in Sri Premanand Prusty (Supra) relied upon the counsel for the opposite party no. 2 is concerned, this Court is of the view that this judgment has not been correctly decided. 11. In view of the above analysis, the cheque in question, which was issued from the account maintained in erstwhile Allahabad Bank after its merger with Indian Bank, was not the valid cheque on the date of presentatio....
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....prudence. 7. In the case on hand, it is the contention of the Petitioner/Accused that the subject cheque was drawn on State Bank of Hyderabad, whereas, State Bank of Hyderabad was merged with State Bank of India w.e.f., 01.04.2017 and the cheques of State Bank of Hyderabad were valid till 31.03.2018 and from 01.04.2018, the cheques of said Bank became invalid. Since the subject cheque was given on 20.09.2021, the same is invalid. As such, it cannot be said that the Petitioner had issued a negotiable instrument and therefore, the ingredients of Sect. 138 of N.I. Act do not attract to the present case. 8. At this stage, it is beneficial to extract Section 138 (a) of NI Act, which reads as follows: "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 exce....
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....ereby quashed." (Emphasis supplied at each instance) The coordinate Bench of this Court and the High Courts of Allahabad and Andhra Pradesh in the afore-quoted judgments have consistently held that, cheques presented after the merger of banks would be invalid cheques and therefore would not attract liability under Section 138 of the Act. 11. Therefore, if the facts obtaining in the case at hand are considered on the touchstone of the principles laid down in the afore-quoted judgments, what would unmistakably emerge is that, the instrument before the concerned Court does not create any liability for the offence punishable under Section 138 of the Act. 12. The cheque admittedly was invalid as on the date of presentation for realization. The primary ingredients of Section 138 of the Act are that the cheque should be dishonoured for want of sufficient funds and the cheque should be valid as on the date of its presentation. The cheque admittedly is rendered invalid due to delayed presentation on the merger of the Banks. The merger did not happen two days prior to the presentation of the cheque but, after 3 years 10 months and 19 days after the last date for presentation i.e.....