Cheques Of Erstwhile 'Allahabad Bank' Invalid After Sept 30 2021, Their 'Dishonor' Won't Attract Offence U/S 138 NI Act: Allahabad HC

The Allahabad High Court has ruled that cheques from the erstwhile 'Allahabad Bank' (which merged with 'Indian Bank' on April 1, 2020) became 'invalid' after September 30, 2021. Consequently, the dishonour of such cheques will not constitute an offence under Section 138 of the Negotiable Instruments Act. A bench of Justice Arun Kumar Singh Deshwal observed thus in light of the mandate of Section 138 NI Act, the proviso (a) of which states that a cheque must be presented to the Bank 'during its validity'. “From the perusal of Section 138 N.I. Act, it is clear that if any invalid cheque is presented before the Bank and the same was dishonoured, then there is no liability under Section 138 N.I. Act would be attracted, and the cheque of Allahabad Bank is invalid after 30.09.2021 after merging the Allahabad Bank into the Indian Bank on 01.04.2020. Therefore, dishonouring such cheques after 30.09.2021 will not attract liability u/s 138 N.I. Act,” the Court said. The Court made these observations while ALLOWING an application filed by one Archana Singh Gautam seeking quashing of the entire criminal proceeding, including the impugned summoning order in a Complaint Case under Section 138 NI Act. The case in brief Essentially, the applicant-accused issued a cheque (dated June 2, 2023) to opposite no. 2 from the account maintained in erstwhile 'Allahabad Bank'. Significantly, the 'Allahabad Bank' had already merged into the 'Indian Bank' on April 01, 2020, and as per a circular issued by the 'Indian Bank, the cheques of 'Allahabad Bank' were to remain valid only till September 30, 2021. The cheque was presented to the 'Indian Bank' by opposite party no. 2 on August 21, 2023, and the same was returned on August 25, 2023, with the endorsement “wrongly delivered not drawn on us”. The opposite party, no. 2, filed a complaint against the petitioner in the Court of Special Judicial Magistrate-II, Banda. Before the HC, the counsel for the applicant contended that the Bank returned the cheque in question because it was invalid on the date of issuance and presentation. Hence, bouncing such an invalid cheque will not attract liability u/s 138 NI Act. On the other hand, the counsel for the opposite party no. 2 and AGA contended that if the applicant was aware that the cheque had been declared invalid due to the merger of Allahabad Bank into Indian Bank, issuing this cheque would constitute an attempt to deceive the opposing party No. 2. Hence, the offence under Section 138 NI Act would indeed be applicable.High Court's observations After hearing the rival submission of the counsel for the parties and perusing the record, the Court observed that the cheques issued by the Allahabad Bank were valid until September 30, 2021. After that date, such cheques would be deemed invalid. The Court further noted that as per proviso (a) of Section 138 of the NI Act, the cheque must be presented to the Bank during its validity. Hence, if an invalid cheque is presented before the Bank and the same is dishonoured, there is no liability under Section 138 of the NI Act. “In view of the above analysis, the cheque in question, which was issued from the account maintained in erstwhile Allahabad 4 of 5 Bank after its merger with Indian Bank, was not the valid cheque on the date of presentation before the Indian Bank as required by proviso (a) of Section 138 of N.I. Act; therefore, dishonouring the same will not attract the liability u/s 138 N.I. Act,” the Court said while quashing the complaint case. The Court clarified that the above analogy would also apply to the cheques of all banks that have merged with other banks.Case title - Archana Singh Gautam vs. State of U.P. and Another 2024 LiveLaw (AB) 384Case citation: 2024 LiveLaw (AB) 384Download Order

Cheques Of Erstwhile 'Allahabad Bank' Invalid After Sept 30 2021, Their 'Dishonor' Won't Attract Offence U/S 138 NI Act: Allahabad HC

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