CRI APL 940-26.DOC

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPLICATION NO. 940 OF 2024

1. Chetan Sunderji Bhanushali, aged adult,

having address at Flat No. 501, Beach

Apartment, Balaram Sahani Road, Opp.

Novotel Hotel, Juhu, Mumbai – 400049.

2. Pravin Girish Chamaria, aged adult,

having address at Flat No. 602, F wing,

Abhishek Apartments, Four Bunglows,

Varsova Link Road, Andheri (W),

Mumbai – 400053

3. Ashapura Edi�ce Pvt. Ltd., a company

incorporated under the Companies Act,

1956, having its address at 901,

Hallmark, Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. ..Applicants

Versus

1. Hema Ramesh Chheda, aged 69 years,

having its address at C/o M/s Malshi

Ghela & co., 213, Narshi Natha Street,

1

st

Floor, Mumbai – 400009.

2. State of Maharashtra

Through Public Prosecutor,

Sessions Court, Mumbai.

3. M/s Arihant Realtors, a Partnership

Concern carrying on its Business at 101,

Hallmark Business Plaza, Opp.

Gurunath Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051.

4. Ashapura Options Pvt. Ltd.

a company incorporated under the

Companies Act 1956, having its address

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at 901, Hallmark Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. …Respondents

WITH

CRIMINAL APPLICATION NO. 946 OF 2024

1. Chetan Sunderji Bhanushali, aged adult,

having address at Flat No. 501, Beach

Apartment, Balaram Sahani Road, Opp.

Novotel Hotel, Juhu, Mumbai – 400049.

2. Pravin Girish Chamaria, aged adult,

having address at Flat No. 602, F wing,

Abhishek Apartments, Four Bunglows,

Varsova Link Road, Andheri (W),

Mumbai – 400053

3. Ashapura Edi�ce Pvt. Ltd., a company

incorporated under the Companies Act,

1956, having its address at 901,

Hallmark, Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. ..Applicants

Versus

1. Nemji Morarji Chheda, aged 68 years,

having its address at C/o M/s Malshi

Ghela & co., 213, Narshi Natha Street,

1

st

Floor, Mumbai – 400009.

2. State of Maharashtra

Through Public Prosecutor,

Sessions Court, Mumbai.

3. M/s Arihant Realtors, a Partnership

Concern carrying on its Business at 101,

Hallmark Business Plaza, Opp.

Gurunath Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051.

4. Ashapura Options Pvt. Ltd.

a company incorporated under the

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Companies Act 1956, having its address

at 901, Hallmark Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. …Respondents

WITH

CRIMINAL APPLICATION NO. 947 OF 2024

1. Chetan Sunderji Bhanushali, aged adult,

having address at Flat No. 501, Beach

Apartment, Balaram Sahani Road, Opp.

Novotel Hotel, Juhu, Mumbai – 400049.

2. Pravin Girish Chamaria, aged adult,

having address at Flat No. 602, F wing,

Abhishek Apartments, Four Bunglows,

Varsova Link Road, Andheri (W),

Mumbai – 400053

3. Ashapura Edi�ce Pvt. Ltd., a company

incorporated under the Companies Act,

1956, having its address at 901,

Hallmark, Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. ..Applicants

Versus

1. Jayvanti Nemji Chheda, aged 68 years,

Indian Inhabitant, having its address at

Plot No. 207-C, Flat No. 403, Bhakti

Residency, Dr. B. A. Road, Matunga (E)

Mumbai – 400019.

2. State of Maharashtra

Through Public Prosecutor,

Sessions Court, Mumbai.

3. M/s Arihant Realtors, a Partnership

Concern carrying on its Business at 101,

Hallmark Business Plaza, Opp.

Gurunath Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051.

4. Ashapura Options Pvt. Ltd.

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a company incorporated under the

Companies Act 1956, having its address

at 901, Hallmark Business Plaza, Opp.

Gurunanak Hospital, Sant Gyaneshwar

Marg, Bandra (E), Mumbai – 400051. …Respondents

Mr. Mahendra Svar i/by Ms. Prachi Patel, for the Applicants in

all.

Mr. Jatin Karia (Shah) a/w Ms. Snehankita Munj, Ms.

Shraddha Kamble & Ms. Dipti J. Karia, for the

Respondent.

CORAM :N. J. JAMADAR, J.

RESERVED ON :22

nd

JANUARY 2026

PRONOUNCED ON :10

th

FEBRUARY 2026

JUDGMENT:

1.By these applications under Section 482 of the Code of

Criminal Procedure, 1973 (“the Code, 1973), the applicants take

exception to the orders passed by the learned Additiona l

Sessions Judge, Greater Bombay, in Criminal Revision

Applications, whereby the revision applications preferred by the

applicants against the order passed by the Magistrate, issuing

process against the applicants for an offence punishable under

Section 138 r/w Section 141 of the Negotiable Instruments Act,

1881 (“the N. I. Act, 1881), came to 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.

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3.The Respondent No. 1 – original complainant, in each of

the applications, �led 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 �rm; 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 ‘Insuf�cient Funds’. The

accused failed to pay the amount covered by the subje ct

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 three

complaints.

5.Being aggrieved, the applicants preferred revision

applications before the learned Sessions Judge. By the

impugned order the learned Sessions Judge dismissed the

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revision applications recording that, the order of issuance of

process did not warrant interference in exercise of revisional

jurisdiction.

6.Being further aggrieved, the applicants have approached

this Court invoking its inherent jurisdiction.

7.I have heard Mr. Mahendra Svar, the learned Counsel for

the Applicants, and Mr. Jatin Karia, the learned Counsel for the

Respondent No. 1, at some length. With the assistance of the

learned Counsel for the parties, I have perused the material on

record.

8.Mr. Svar, the learned Counsel for the applicants,

submitted that, though, multiple grounds were raised before the

Revisional Court, the applicants restrict the challenge to the

order of issuance of process to the non-compliance of clause (a)

of the proviso to Section 138 of the N. I. Act, 1881, as the subject

cheques were invalid on the day they were presented fo r

encashment.

9.Amplifying the submission, Mr. Svar would urge that, in

the complaints it is categorically mentioned that, the accused

No. 1 had drawn the cheque on State Bank of Patiala, payable

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on 17

th

March, 2021. However, in view of the amalgamation of

the State Bank of Patiala with the State Bank of India, with

effect from 01

st

April, 2017, pursuant to Acquisition of State

Bank of Patiala Order 2017, the cheques drawn on State Bank of

Patiala, became invalid after 31

st

December, 2017. Therefore, the

subject cheques were invalid on the date, they were presented

for encashment with the payee’s banker. In such circumstances,

the cheques could not have been returned unencashed on

account of alleged “insuf�ciency of funds”. As the cheques had

become invalid, the drawee bank could not have honoured the

cheques.

10.Thus, as the subject cheques were not presented with the

drawee bank before the 31

st

December, 2017, there was a clear

non-compliance of clause (a) of the proviso to Section 138 of the

N. I. Act. Resultantly, the very basis of the prosecution for the

offence punishable under Section 138 of the N. I. Act, 1881 gets

dismantled, submitted Mr. Svar.

11.To buttress the aforesaid submission, Mr. Svar invited the

attention of the Court to ‘Acquisition of State Bank of Patiala

Order 2017’ issued by the Government of India, and the

communication dated 28

th

March, 2017 addressed by the RBI to

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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

31

st

December, 2017. As the subject cheques were not valid on

28

th

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

1

, 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

2

.

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 Central

Government and Reserve Bank of India, which are the basis of

the submissions sought to be canvassed by Mr. Svar, were not

1 2024 SCC OnLine All 4599

2 2024 SCC OnLine AP 5115

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tendered either before the trial Court or the revisional Court. In

these circumstances, the plea for quashment of the proceedings

on the basis of material, which is for the �rst time produced

before this Court, cannot be countenanced.

14.Secondly, Mr. Karia would urge, the applications raise

disputed questions of facts which cannot be determined in

exercise of the inherent jurisdiction under Section 482 of the

Code, 1973. Those questions can be legitimately adjudicated by

the Trial Court only post appraisal of evidence. Thirdly, since

the plea of the accused has been recorded and the tr ial has

commenced, at this stage, this Court may not enterta in the

prayer for quashment of the proceedings.

15.On the merits of the ground of alleged invalidity of the

subject cheques, Mr. Karia submitted that, the cheques have

been returned by the drawee bank with the remarks, ‘ Funds

Insuf�cient’ and not on account of alleged invalidity of the

cheques. It implies that, the drawee bank has not treated the

cheques to be invalid and, consequently, the statutory

presumption contained in Section 146 of the N. I. Act, 1881 that,

the bank’s slip indicating that the cheque has been dishonored,

operates and the Court is enjoined to hold that, the cheque has

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indeed been dishonoured, unless and until the said fact is

disproved. In the face of the bank’s memo that the cheques have

been dishonoured on account of insuf�ciency of funds, the onus

shifts on the applicants to show to the contrary, and that can

only be done at the stage of trial.

16.Mr. Karia would further submit that, the accused have not

disputed the factum of the issuance and dishonour of the

cheques. Nor the accused gave any reply to the statu tory

demand notice. The stand taken by the accused is false and

dishonest, and, the accused cannot be permitted to ta ke

advantage of their own wrong. Since the question as to whether

the subject cheques had become invalid is a matter which

requires adjudication at the trial, in the light of the statutory

presumptions, the complaints under Section 138 of the N. I. Act,

1881, cannot be interdicted, at this stage, was the thrust of the

submission of Mr. Karia.

17.To bolster up these submissions, Mr. Karia placed reliance

on the judgments of Punjab and Haryana High Court in the

cases of Surjit Kumar Vs. Sunil Kumar Dalmia

3

, M/s. K. K.

Tractors and Ors. Vs. M/s. Mahindra and Mahindra Limited

4

,

3 CRM-M/51125/2023

4 CRM-M/17555/2022

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Balkour Singh Vs. State of Punjab and others

5

, of the Allahabad

High Court in the case of Maksud Ashraf Khan Vs. State of U.P.

and others

6

, of Uttarakhand High Court in the case of Rohit

Goyal Vs. Amarjeet Singh

7

, and of Gujarat High Court in the

case of Bhikhabhai Laljibhai Patel Vs. State of Gujarat and

others

8

, 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 to ok

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 the liability, on State

Bank of Patiala, Bandra Branch, payable on 17

th

March, 2021,

(in complaint No. 1630/SS/2021, the subject matter of Criminal

Revision Application No. 940/2024) (in complaint No.

1231/SS/2021, the subject matter of Criminal Application No.

5 CRM-M/36565/2019

6 Application/ 3871/2023

7 Crl. Misc. Apl Nos. 298/2024, 310/2024 & 306/2024

8 Crl. Misc. Apl No. 307/2014

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946/2024) and (in complaint No. 1634/SS/2021, the subject

matter of Criminal Application No. 947/2024). The said cheques

were presented for encashment on 28

th

March, 2021, with the

Complainant/banker - Union Bank of India. Those cheques were

returned unencashed vide cheque return memo, dated 2 8

th

March, 2021, with the remarks, “Funds Insuf�cient”. The

complainant claimed to have issued demand notices on 30

th

March, 2021. Alleging non-compliance of the demands within

the statutory period, the complaints came to be lodged.

19.An offence punishable under Section 138 of the N. I. Act,

1881, can be said to have been committed upon proof of

concomitant factors. One of the conditions to be satis�ed before

an offence under Section 138 of the N. I. Act, 1881, can be said

to have been committed is the presentation of the cheque within

the stipulated period under clause (a) of the proviso. It reads as

under:

“138.Dishonour of cheque for insuf�ciency, 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 insuf�cient to honour the cheque or that it

exceeds the amount arranged to be paid from that account

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by an agreement made with that bank, such person shall be

deemed to have committed an offence and shall, without

prejudice to any other provision of this Act, be punished

with imprisonment for [a term which may be extended to

two years], or with �ne which may extend to twice the

amount of the cheque, or with both:

Provided that nothing contained in this section shall

apply unless -

(a) the cheque has been presented to the bank within a

period of six months* from the date on which it is drawn

or within the period of its validity, whichever is earlier;”

……….

20.On its plain reading, the ful�llment of the condition of

valid presentation of the cheque 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

speci�ed period of months”. In that event, the cheque must be

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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

�rst part of the clause (a) of the proviso, �xed the period within

which the cheque shall be presented for encashment to the

drawee bank, the expression ‘within the period of its validity’

used in the later part of the proviso, need not be on ly in

reference to the duration of time speci�ed on the cheque. The

period of validity may also be determined with reference to an

incident which renders the cheque invalid, even though th e

period of validity, expressly speci�ed on the cheque, is yet to

expire. The word ‘period’ may not govern the word ‘validity’. In

the later part of the clause (a) of the proviso, it is the validity of

the cheque on which there is more emphasis, than the ‘period’.

To put it in other words, the expression ‘period of validity’ does

not seem to be restricted to the speci�ed ‘term’ of validity, and

the question of invalidity of the cheque may arise on account of

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the circumstances, which may curtail the express speci�ed

‘term’ of validity.

22.In the case of Archana Singh Gautam (supra), on which

reliance was placed by Mr. Svar, the cheque was drawn on an

account maintained with Allahabad Bank, payable on 02

nd

June, 2023, though the Allahabad Bank had already mer ged

with the Indian Bank on 01

st

April, 2020, and the cheques

drawn on Allahabad Bank were valid upto 30

th

September, 2021,

only. In that context, a learned Single judge of the Allahabad

High Court held that, if any invalid cheque was presented to the

drawee bank and the same was dishonoured, no liability under

Section 138 of the N. I. Act would be attracted. Since the cheque

drawn on Allahabad Bank was valid, up to 30

th

September, 2021

only, dishonourment of such cheque after 30

th

September, 2021

would not attract the penal liability under Section 138 of the

N.I. Act, as the cheque was not valid on the date of presentation

as mandated by the clause (a) of the proviso to Section 138 of

the N. I. Act.

23.In the case of Gantha Kavitha Devi (supra), the cheque in

question was drawn on State Bank of Hyderabad, payable on

20

th

September, 2021. The said cheque was returned unpa id

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with an endorsement, “invalid cheque (SBH)”, as the earstwhile

State Bank of Hyderabad stood merged with State Bank of India

and the cheques drawn on earstwhile State Bank of Hyderabad

were valid only till 31

st

March, 2018. In the light of the aforesaid

facts, a learned Single Judge of the Andhra Pradesh High Court

after adverting 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 Asso ciate

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.

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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 re�ected upon the validity of the cheque. In

the case of Archana Singh Gautam (supra), the cheque was

returned with the remarks, “wrongly delivered not drawn on us”

by the Indian Bank, into which the Allahabad Bank had

merged. Whereas, in the case of Ganta Kavitha Devi (supra), the

cheque was returned with the remarks, “invalid cheque (SBH)”.

Yet, the process for an offence punishable under Section 138 of

the N. I. Act, 1881 was issued in those cases.

26.The object of Section 138 of the N.I. Act, 1881 is t o

inculcate faith in the ef�cacy of banking operations and ensure

credibility in transacting business through cheques. The

Supreme Court has thus delineated the approach in the case of

Dalmiya Cement (Bharat) Ltd. Vs. Galaxy Traders & Agencies

Ltd. & Ors

9

., that efforts to defeat the objectives of law by

resorting to innovative measures and methods are to be

discouraged, lest it may affect the commercial and mercantile

activities in a smooth and healthy manner, ultimately affecting

the economy of the country.

9 (2001) 6 SCC 463

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27.In the case of NEPC Micon Ltd. & Ors. Vs. Magma Leasing

Limited

10

, following the three-Judge Bench judgment in the case

of Modi Cements Ltd. V. Kuchil Kumar Nandi

11

, wherein it was

enunciated that, return of the cheque on account of stop

payment instruction will not preclude an action under Section

138 of the N. I. Act, 1881, the Supreme Court held that, when

the cheque is returned by a bank with an endorsement

“account closed”, it would amount to returning the chequ e

unpaid because “the amount of money standing to the credit of

that account is insuf�cient to honour the cheque” as envisaged

in Section 138 of the N. I. Act, 1881.

28.The position in law is that, it is the dishonour of the

cheque that assumes importance and the reason for dishonour,

especially “stop payment”, “refer to drawer”, “account closed”,

“exceeds agreement” and the like, are not of decisive

signi�cance. This factor also deserves to be kept in view.

29.In a case of the present nature, however, the reason for the

return of the cheque assumes signi�cance. If the cheque is not

returned with a speci�c endorsement that, the cheque is invalid,

10 (1999) 4 SCC 253

11 (1998) 3 SCC 249

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but on account of insuf�ciency of funds, then as rightly

submitted by Mr. Karia, the presumption contained in Section

146 of the N. I. Act, 1881, comes into play and the onus would

shift on the drawer to rebut the presumption that, th e

dishonour of the cheque was not on account of insuf�ciency 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, “Insuf�cient 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 o f

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acquisition or merger of the drawee bank, the validity period of

the cheque may expire. If the payee after a lapse of time �lls 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 the intervening period

the cheque has been rendered invalid on account of acquisition

or merger of ‘the bank’?

32.The legal position has crystallized to the effect that, even if

a blank signed cheque leaf is delivered to the payee, towards

debt or liability, and the payee �lls in the particulars, the

cheque is not rendered invalid and the presumption contained

in Section 139 of the N. I. Act, 1881 is attracted. In the case of

Bir Singh Vs. Mukesh Kumar

12

, after adverting to the settled

line of precedent, the Supreme Court enunciated the law as

under:-

“33. A meaningful reading of the provisions of the

Negotiable Instruments Act including, in particular,

Sections 20, 87 and 139, makes it amply clear that a

person who signs a cheque and makes it over to the

payee remains liable unless he adduces evidence to

rebut the presumption that the cheque had been issued

for payment of a debit or in discharge of a liability. It is

immaterial that the cheque may have been �lled in by

any person other than the drawer, if the cheque is duly

signed by the drawer. If the cheque is otherwise valid,

the penal provisions of Section 138 would be attracted.

34.If a signed blank cheque is voluntarily presented to a

12(2019) 4 SCC 197

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payee, towards some payment, the payee may �ll up the

amount and other particulars. This in itself would not

invalidate the cheque. The onus would still be on the

accused to prove that the cheque was not in discharge

of a debt or liability by adducing evidence.

……….

36. Even a blank cheque leaf, voluntarily signed and

handed over by the accused, which is towards some

payment, would attract presumption under Section 139

of the Negotiable Instruments Act, in the absence of any

cogent evidence to show that the cheque was not issued

in discharge of a debt.”

33.The aforesaid pronouncement was approved by a three-

Judge Bench of the Supreme Court in the case of Kalamani Tex

and Another Vs. P. Balasubramanian

13.

34.Consistent with the object of the penal provisions

incorporated in Section 138 of the N. I. Act, 1881, a dishonest

drawee cannot be permitted to take bene�t of such a situation

and defeat the rights of a payee who alters his position on the

basis of the sanctity of the cheque as a negotiable instrument,

especially when such cheque is returned unencashed with the

remarks “insuf�ciency of funds”.

35.In my considered view, therefore, in a situation of the

present nature, where the cheques have been returned with the

13 (2021) 5 SCC 283

SAINATH 21/26

CRI APL 940-26.DOC

remarks, “funds insuf�cient”, and not on account of alleged

invalidity of the cheques, the question as to whether, t he

cheques were dishonoured for insuf�ciency 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 Ban k 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, th us,

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, beyon d the

stipulated period after the merger of the SBI’s Associate Bank

with State Bank of India, a learned Single Judge declined to

quash the complaint opining that, the noti�cations and

documents annexed to the applications under Section 48 2 of

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CRI APL 940-26.DOC

the Code, cannot be considered as evidence so as to quash the

complaint in exercise of inherent power.

38.Similar view was expressed in the case of Balkaur Singh

(supra), by another learned Single Judge of Punjab and Haryana

High Court. It was observed that, invalidation of cheque on

account of merger with another bank would be a dispute d

question of fact and would be a probable defence that the

petitioner is free to take before the trial Court. The Court cannot

negate the complainant’s case without allowing the complainant

to lead evidence while exercising its discretionary power under

Section 482 of the Code, 1973.

39.In the case of Bhikhabhai Laljibhai Patel (supra), wherein

the drawee bank had merged with the another bank and the

cheque was returned unencashed with the remarks “fund s

insuf�cient”, a learned Single Judge of Gujarat High Court

declined to exercise the power under Section 482 of the Code,

observing

inter alia as under:

“8. Undisputedly, all the contentions raised by the petitioner

herein above are disputes issues and there the question of

fact would be determined by the learned trial Court after

recording evidence. Whether Khedbrahma Nagrik Sahkari

Bank Limited in which the petitioner has maintained his

account was merged with Janta Sahkari Bank Limited and

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the clearing house was not aware of the said aspect or

whether the cheque has not been returned for the purpose of

“Fund Insuf�cient” are all disputed questions of fact and can

be decided after recording the evidence. When the learned

trial court has issued process, before the learned trial Court

it was on bank return memo, which was indicated that th e

cheque in question was returned unpaid due to “fund

Insuf�cient” and upon such, the learned Trial Court has

issued process against the petitioner accused. In this given

facts and circumstances, this Court cannot come to th e

conclusion that prima facie case is not made out and that too

under extraordinary jurisdiction vested in Section 482 of the

Code.”

40.The conspectus of aforesaid consideration is that, though

the expression ‘within the period of its validity’ used in the later

part of the clause (a) of the proviso to Section 138 of the N. I.

Act, 1881, is elastic enough to cover in its fold a case where the

validity of the cheque, is affected by the factors like acquisition

by or merger with another bank, despite the validity per iod

speci�cally mentioned on the cheque not having come to an end,

yet, the attendant circumstances bear upon the quest ion

whether the cheque has been presented within its validity

period. In cases where despite the original drawee bank having

ceased to be ‘the bank’ within the meaning of clause (a) of the

said proviso the cheque is returned unencashed with t he

remarks “insuf�ciency of funds” and the like, the investigation

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CRI APL 940-26.DOC

into facts becomes necessary, and the question whethe r the

drawee bank could have honoured the cheque as it was

rendered invalid, would warrant adjudication at the trial.

Whereas, in cases where the cheque has been returned with the

remarks, ‘invalid’ or ‘presented on the successor bank after the

period of the validity of the cheque’ and the like, compliance of

clause (a) of the proviso to Section 138 of the N. I. Act, 1881, in

the matter of presentation of the cheque within the v alidity

period, could be examined by the Court, in the light of the

attendant facts and circumstances of the case. No st raight-

jacket formula that, since the cheque appeared to have been

presented after expiry of the period of validity of the cheque

drawn on the earstwhile drawee bank, no offence punis hable

under Section 138of the N. I. Act, is made out, can be adopted.

41.The facts of the case at hand appear to fall in the category

of cases where on account of the return of the cheque with the

remarks, “Funds Insuf�cient”, the question as to whether the

cheque was presented beyond its validity period warrants

adjudication at the trial. Resultantly, the prayer of the

applicants to quash the complaints for the offence punishable

under Section 138 r/w 141 of the N. I. Act, 1881, cannot be

countenanced.

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42.Hence, the applications stand dismissed.

43.No Costs.

[N. J. JAMADAR, J.]

SAINATH 26/26

SANTOSH

SUBHASH

KULKARNI

Digitally signed

by SANTOSH

SUBHASH

KULKARNI

Date: 2026.02.10

21:23:01 +0530