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TMI Blog2024 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ked or freezed is species. It is not so material whether the drawer of the cheque aware or not aware of the fact about his account freeze at the time of issuing cheque. If with knowledge that the account is freezed nevertheless he issue the cheque from the account freezed, the intention to cheat is manifestly seen. From the facts and circumstances of the instant case, obviously on the date of cheque (08/11/2019) fund in the account was not sufficient to honour. Thus, the first contingency to attract section 138 of NI Act gets satisfied. The account being freezed, the petitioner company had a opportunity to pay the cheque amount within 15 days from the date of receipt of the statutory notice. In this case, the petitioner company had disputed the liability and not paid the cheque amount. Hence, the question whether the Bank which has freezed the account can initiate the complaint for dishonor of the cheque due to account freeze and the dispute regarding liability to discharge enforceable debt, it is necessary to consider the plea of the petitioners regarding the circumstances the subject cheque purportedly given to the complainant Bank. This Criminal Original Petition stands dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner company as per its sanction letter dated 01/10/2015. The first petitioner and its Directors on 15/10/2015, for availing credit facilities from the complainant bank gave two undated signed cheques bearing Number 000010 and 000011 as security. The complainant Bank without intimation to the petitioners and without authorization had freezed the Account of the petitioners on 04/06/2016. This was objected by the petitioners as unreasonable and unwarranted since it caused huge business loss to the first petitioner company as well as other LLP s run by its directors. Under these circumstances, on 22/08/2016 the Complainant Bank unilaterally came forward to sanction fresh cash credit facility of Rs.3,00,00,000/- ( Rupees Three Crores only) on certain terms which were not accepted and there was no disbursement of funds consequent to the proposal letter 22/08/2016. In spite of request to defreeze the account, the complainant bank refused to defreeze and justified its arbitrary action as a precautionary measure to safeguard its interest. 6. The cheque which is the subject matter of the criminal complaint was entrusted to the complainant Bank on 15/10/2015 as security. The bank officials ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 138 of NI Act ? (ii) The complainant is the Bank which freezed the account due to the default of loan by the account holder. While so, whether the presentation of the cheque for collection and consequential complaint amounts to malicious prosecution ? 12. Reading of Section 138 of Negotiable Instruments Act, 1881, apparently say that dishonour of a cheque would constitute an offence only in one of the two contingencies envisaged. That is, the amount of money standing in the account must be insufficient to honour the cheque or it exceeds the amount arranged to be paid. For the sake of convenient the relevant portion of the section is extracted below : - 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 exceeds the amount arranged to be paid from that account by an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing Ltd. [(1999) 4 SCC 253], the cheques issued by the appellantcompany in discharge of its liability were retuned by the company with the comments account closed . The question was whether a dishonour on that ground for that reason was culpable under Section 138 of the Negotiable Instruments Act. The contention of the company that issued the cheque was that Section 138 being a penal provision ought to be strictly construed and when so interpreted, dishonour of a cheque on ground that the account was closed was not punishable as the same did not fall in any of the two contingencies referred to in Section 138. This Court noticed the prevalent cleavage in the judicial opinion, expressed by different High Courts in the country and rejected the contention that Section 138 must be interpreted strictly or in disregard of the object sought to be achieved by the statute. Relying upon the decision of this Court in Kanwar Singh v. Delhi Administration (AIR 1965 SC 871), and Swantraj v. State of Maharashtra (1975) 3 SCC 322 this Court held that a narrow interpretation of Section 138 as suggested by the drawer of the cheque would defeat the legislative intent underlying the provision. 11. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. 14. The clarification of the Hon ble Supreme Court makes clear that, account block or freezed are a species. Insufficient fund is one of the two contingencies mentioned in section 138 of the NI Act. If the issuance of cheque without sufficient fund which is the genus, same will give cause of action to prosecute. The test is whether the fund in the account not sufficient or exceed the limit arranged. Account blocked or freezed is species. It is not so material whether the drawer of the cheque aware or not aware of the fact about his account freeze at the time of issuing cheque. If with knowledge that the account is freezed nevertheless he issue the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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