Cheque Dishonoured As 'Old Cheque' After Bank Merger Can Still Attract Section 138 NI Act: Himachal Pradesh High Court

The Himachal Pradesh High Court has refused to quash a cheque dishonour complaint under Section 138 of the Negotiable Instruments Act merely because the cheque was returned with the endorsement "88–Old Cheque" following the merger of Oriental Bank of Commerce with Punjab National Bank.

The Court held that the expression "insufficient funds" under Section 138 is not to be construed narrowly and whether the drawer had sufficient funds in the account at the relevant time is a matter requiring trial. 

Justice Sandeep Sharma remarked that: "Accused cannot be permitted to take advantage of the situation that cheque issued by bank, which ultimately merged into some other bank, had become old, especially when it is not in dispute that account of the accused... remained same with new Bank i.e. Punjab National Bank."

Background:

The complainant alleged that he had advanced a loan of ₹1.30 lakh to the accused, who issued a cheque drawn on Oriental Bank of Commerce towards repayment. When presented for encashment after the bank had merged with Punjab National Bank, the cheque was dishonoured with the remark "88–Old Cheque". After the accused failed to make payment despite receiving the statutory notice, the complainant instituted proceedings under Section 138 of the Negotiable Instruments Act. 

The accused sought quashing of the complaint, contending that Section 138 is attracted only where a cheque is dishonoured due to "insufficient funds" or because it exceeds the arrangement with the bank. Since the cheque had been returned as an "Old Cheque", it was argued that no offence under Section 138 was made out.

The High Court rejected the contention, relying extensively on the Supreme Court's decision in M/s Laxmi Dyechem v. State of Gujarat. It observed that the expression "insufficient funds" under Section 138 is a genus and that several reasons for dishonour—including "account closed", "payment stopped", "referred to drawer", and similar situations—have been recognised as species falling within its ambit.

The Court held that the expression cannot be given a narrow or literal interpretation and must instead receive a purposive construction consistent with the object of Chapter XVII of the Negotiable Instruments Act. 

Significantly, the Court noted that the accused had admittedly issued the cheque and had not disputed either its issuance or his signatures. His sole defence was that the cheque had not been dishonoured on account of insufficient funds.

The Court observed that although Oriental Bank of Commerce had merged into Punjab National Bank, the accused's account continued to exist. Merely because he issued an old cheque book after the merger could not, at the threshold, absolve him of liability under Section 138.

It held that the crucial issue was whether sufficient funds existed in the accused's account when the cheque was presented. That question, the Court said, could only be determined after evidence was led before the trial court and could not be decided while exercising inherent jurisdiction to quash criminal proceedings. 

The Court further observed that a payee cannot reasonably be expected to know the legal consequences of a bank merger, including whether cheques issued by the erstwhile bank remained valid or whether the successor bank was obliged to honour them. Those questions involve disputed issues of fact and law requiring adjudication during trial. 

Thus, the High Court dismissed the petition.

Case Name: Jasmer Singh v. Smt. Sunita

Case No.: Cr. MMO No. 971 of 2024

Decision Date: 03.07.2026

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