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TMI BlogDISHONOR OF CHEQUE DUE TO THE FROZEN BANK ACCOUNT – COMPLAINT MAINTAINABLE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT, 1881X X X X Extracts X X X X X X X X Extracts X X X X ..... DISHONOR OF CHEQUE DUE TO THE FROZEN BANK ACCOUNT – COMPLAINT MAINTAINABLE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT, 1881 - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 9-10-2024 - In SHEIKH OWAIS TARIQ VERSUS SATVIR SINGH S/O. JOGINDER SINGH - 2024 (10) TMI 210 - JAMMU KASHMIR AND LADAKH HIGH COURT , the respondent owed a sum of Rs.8,69,700/- to the petitioner. The respondent, for the discharge of the said amount, issued a cheque of Axis Bank to the petitioner on 01.07.2014 in favor of the petitioner. The petitioner presented the cheque in the bank. The same was dishonored. A memo of dishonor was issued by the bank on 14.07.2014 with the remarks ACCOUNT FROZEN. The petitioner issued a notice to the respondent informing the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shonor of cheque and requested him to pay the amount to him. No reply has been sent to the petitioner by the respondent. Further he did not pay the dues of the petitioner. Therefore, the petitioner filed a criminal complaint against the respondent under Section 138 of the Negotiable Instruments Act, 1881 ( Act for short). The Trial Court recorded the statement of the petitioner and one witness issued process against the respondent. The respondent filed an application before the Trial Court with the prayer dropping the proceedings on the ground that the dishonor was due to the frozen of his bank account. Therefore, his case will not fall under the Act. The petitioner, in response to the application filed by the respondent, submitted the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing before the Trial Court- The Trial Court has no jurisdiction to drop the proceedings. The petitioner issued the cheque despite the fact that no funds was lying in the account of the petitioner or on the date of presentation of cheque by the respondent. The petitioner, on his own got the bank account frozen to get huge gain and loss to the respondent. The Trial court dismissed the above said application on the ground that as the court had already taken a cognizance, the application for dropping of proceedings was not maintainable. The said order was issued on 04.11.2014 and 23.08.2014 in which process has been issued. The respondent filed a revision petition in the Revisionary Court. The said Court, vide their order dated 09.05.2018 set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside the above said orders and also dismissed the complaint filed by the petitioner. The petitioner filed the present writ petition before the High Court. The High Court framed the following issues for its consideration- Whether the learned revisional court is right in returning a finding that the learned Magistrate has wrongly dismissed the application for dropping of proceedings? Whether the complaint for dishonor of cheque due to the reason account frozen is maintainable under section 138 of the Act? First issue The High Court observed that the Revisionary court wrongly dismissed the application for dropping of the proceedings against the respondent. This order is contrary to the well settled proposition of law that once the Magistrate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes the cognizance and issues the process against the accused, then the Magistrate cannot put the clock back and drop the proceedings at the behest of the accused because there is no such provision in the Code of Criminal Procedure, permitting the Magistrate to recall his order, whereby he has taken the cognizance and issued process against the accused. The High Court relied on the judgment of Supreme Court in Adalat Prasad v. Roopal Jindal (2004) 7 SCC 338 in which the Supreme Court held that in the absence of review power or inherent power with the subordinate criminal courts, the remedy lies in invoking Section 482 of the Criminal Procedure Code. The High Court held that the Revisional Court was not right in returning the finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trial court had wrongly dismissed the application for dropping of the proceedings filed by the respondent herein. Second issue The High Court observed that Section 138 of the Act provides two conditions are to be fulfilled to initiate criminal proceedings for cheque dishonor against the issuer of the cheque. When the amount lying in the account of accused is insufficient to honor the cheque; It exceeds the amount arranged to be paid from the account by an agreement made with that bank. In some cases, proceedings have been initiated against the accused for closure of account, stop payment instruction, signature mismatch etc. The High Court relied on the judgment of Supreme Court in M/S LAXMI DYECHEM VERSUS STATE OF GUJARAT ORS. - 2012 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12) TMI 106 - SUPREME COURT in which the Supreme Court held that Section 138 of the Act is a genus and dishonor for reasons such as account closed , payment stopped , referred to the drawer are only species of that genus. Just as dishonor of a cheque on the ground that the account has been closed is a dishonor falling in the first contingency referred to in Section 138 , so also dishonor on the ground that the signatures do not match or that the image is not found , which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonor within the meaning of Section 138 of the Act. So long as the change is brought about with a view to preventing the cheque being honored the dishonor would become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an offence under Section 138 subject to other conditions prescribed being satisfied. The High Court observed that, in the present case, the respondent (petitioner in the present petition) had nowhere pleaded in his application for dropping of proceedings that he was having sufficient amount in the bank account and that he was not having the knowledge of freezing of account at the time of issuance of cheque. In the absence of any such material, the Revisionary Court could not have put the onus upon the complainant by observing that there was no argument on the part of the respondent therein i.e. the petitioner herein that besides being the account frozen, there were insufficient funds in the account of the respondent/accused to meet his liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility. The cheque was issued on 01.07.2014 and the same was dishonored on 14.07.2014 and in absence of any finding as to when the account was frozen i.e. whether the account was frozen prior to the issuance of the cheque or after the issuance of the cheque and further as to whether the accounts of the respondent was having sufficient amount to honor the cheque at the time of issuance of cheque or not and rightly so because there was no material before the Revisional Court to return any such finding, the petitioner herein could not have been knocked out of the court at the threshold. It is the onus would be on the respondent to prove that he was not aware about the freezing of the account when the cheque was drawn, the account was frozen due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reasons beyond his control and the account was having sufficient balance when the cheque was dishonored. The High Court held that the complaint under section 138 of the Act is maintainable even if the cheque is dishonored due to reason Account frozen . The High Court allowed the petition and set aside the order of Revisionary Authority and restore the order of the Trial Court. - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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