Cheque Bounce Complaint Maintainable Despite Freezing Of Account By ED/ IT Dept If Complainant Establishes 'Insufficiency Of Funds': Madras HC

Justice G Jayachandran observed that the drawer of the cheque, in such cases could take a defence that the account was blocked or frozen. The court relied upon the Supreme Court's decision in Laxmi Dyechem v. State of Gujarat (2012) and held that issuing a cheque without sufficient fund to honour it is the genus of the crime and the complaint would be maintainable.

“It is amply clear that in cases of 'account block' or 'account freezed' complaint under Section 138 of NI Act is maintainable, if the complainant prima facie satisfies that in the account there was no sufficient fund to honour. As supreme court has held, the genus of the crime is any one of the contingencies envisaged under Section 138 of NI Act. If the complaint discloses that dehors of account block or account freeze and even otherwise, the cheque could not been passed due to want of fund in the account, the drawer of the cheque cannot take umbrage under the fact that his account is blocked or freezed. Issuing the cheque without sufficient fund to honour is the genus of the crime,” the court observed.

The court also observed that a single complaint under Section 138 of the Negotiable Instruments Act was maintainable when all the cheques were presented on the same day and were returned on the same day relying on the earlier decision of the Madras High Court in Suryakant V Kanakia v. Muthukumaran and Manjula v. Colgate Palmolive (India) Ltd.

“Therefore, the single complaint under Section 138 of NI Act for dishonour of 36 cheques is maintainable in view of the convergence of the events by presenting the cheques on same day, return of the cheques on same day besides causing single notice common to all the cheques,” the court said.

The court was hearing a petition filed by M/s Challani Rank Jewellery to quash a criminal complaint filed under Section 138 of the Negotiable Instruments Act for dishonour of 36 cheques that it had issued to the respondent Ashok Kumar Jain to discharge the legally enforceable debt/liability for purchase of silver articles.

The petitioner argued that a single complaint could not be filed in respect of dishonour of 36 cheques bearing different dates as the same was not maintainable under Section 219 of CrPC. The petitioner further argued that its account had sufficient fund to dishonour the cheque but the cheques were not honoured since the account was blocked per an order of the Income Tax Department and the ED. Thus, contending that the facts of the case did not fall under any of the contingencies under Section 138 of the Act, the petitioner sought to quash the proceedings.

The court noted that in Suryakanth's case, a single judge of the Madras High Court had observed that though it was desirable to file separate complaints, there was nothing illegal in filing a single complaint for dishonour of 9 cheques drawn on various dates but presented together on the same day and returned on the same day. Further, the court noted that in Manjula's case, another single judge had noted that Section 219(1) CrPC permitted joinder of all charges if they are offences of the same kind and the number of transactions between the parties which culminated into the issuance of statutory notice is no ground to urge that the prosecution under Section 219 was not maintainable.

The court further noted that though the petitioner claimed to have sufficient funds on the date of the cheques, the statement was factually incorrect as a lien of around 53 lakh was created as per an Income Tax order. Further, the court noted that the petitioner's account had become NPA due to failure to replay loan and there was a debt of more than 10 crore. Thus, the court noted that on the date of issuance of cheque, there was no credit in the account.

Thus, holding that the proceedings under Section 138 of NI Act was valid, the court dismissed the plea.

Counsel for the Petitioner: Mr.S.Ramesh Kumar

Counsel for the Respondent: Mr.J.Ranjith Kumar for M/s Surana @ Surana

Citation: 2024 LiveLaw (Mad) 405

Case Title: M/s Challani Rank Jewellery and Others v Ashok Kumar Jain

Case No: Crl.O.P.No.21268 of 2024