Section 138 NI Act - Bank Can't Deny Existence Of Account After Returning Cheque With Remark 'Account Frozen' : Supreme Court

If a cheque is returned by a bank with an endorsement "account frozen", then it presupposes the existence of the account, observed the Supreme Court in a recent case.

The Court expressed surprise at the stand of the bank that the no such account was maintained and operated by it, despite returning the cheque with the remark "account frozen".

In this background, the Supreme Court quashed the order of the Rajasthan High Court, which quashed the proceedings exercising powers under Section 482 CrPC, and restored the trial proceedings. 

A bench comprising Chief Justice of India N V Ramana, Justice AS Bopanna and Justice Hima Kohli passed the order allowing the appeal filed by the complainant against the High Court order quashing the case.

"It is surprising that on the one hand, the bank managers have specifically deposed that no such bank account was opened and maintained in their bank while on the other hand the cheque drawn by the respondent in favour of the appellant, was returned with the remark "account frozen" in respect of the same cheque.The bank account has been mentioned on the cheque and the endorsement to the effect "Account Frozen" will presuppose that an account existed".

The Court rejected the argument that no case was made under Section 138 of the Negotiable Instruments Act against the accused as the bank managers have specifically deposed that no such bank account was opened and maintained in their bank.

"The parties will have to go through a full-fledged trial. In any event, it was not a matter the proceedings could have been quashed. We, accordingly, feel it was premature to quash the complaint filed by the appellant herein, by the high court. The impugned order passed by the high court is, accordingly, set aside," the bench said.

It also directed the trial court to restore and take up the matter and conclude the same in accordance with law expeditiously and preferably within a period of six months.

Case Title : Vikram Singh vs Shyoji Ram

Citation : 2022 LiveLaw (SC) 223

Appearances : For appellants - Mr. Sarad Kr. Singhania, Adv. Ms. Rashmi Singhania, AOR;  For respondents - Mr. Namit Saxena, Adv, Ms. Taruna Ardhendumauli Prasad, AOR

Headnotes

Negotiable Instruments Act, 1881, Section 138 - It is surprising that on the one hand, the bank managers have specifically deposed that no such bank account was opened and maintained in their bank while on the other hand the cheque drawn by the respondent in favour of the appellant, was returned with the remark "account frozen" in respect of the same cheque.The bank account has been mentioned on the cheque and the endorsement to the effect "Account Frozen" will presuppose that an account existed".

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