Complaint U/S 138 NI Act Is Maintainable Even When Account Is Blocked/Frozen If Insufficient Funds Are Proved: Madras HC
The Madras High Court has observed that a complaint under Section 138 of the NI Act is maintainable in cases of a blocked or frozen account, provided the complainant prima facie satisfies that there were insufficient funds in the account to honour the cheque.
The Court dismissed the petition filed by the accused to quash the criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) holding that the complaint was maintainable, even though the accused had argued that, although the account held sufficient funds to honour the cheque, it was dishonoured since the Income Tax Department (IT Dept.) and the Enforcement Directorate (ED) had blocked the account.
A Single Bench of Justice G. Jayachandran stated, “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.”
Advocate S. Ramesh Kumar appeared for the petitioners, while Advocate J. Ranjith Kumar represented the respondent.
The High Court had to determine whether an account blocked by the ED or the IT Dept. would protect the drawer from prosecution under Section 138 of the NI Act.
The Court clarified that though an account being blocked was not specifically mentioned as a reason for dishonour to attract Section 138 of the NI Act, the judicial pronouncements made it clear that the two contingencies mentioned in Section 138 of the NI Act were the “genus, the reasons like account closed, stop payment, signature differs etc., are species.”
The Bench reiterated the Supreme Court’s decision in Laxmi Dyechem v. State of Gujarat (2012) which observed that “the expression ‘amount of money … is insufficient’ appearing in Section 138 of the Act is a genus and dishonour for reasons such as account closed…are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the signatures do not match or that the image is not found, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act.”
Consequently, the Court held that the complaint under Section 138 of the NI Act was maintainable.
Accordingly, the High Court dismissed the petition.
Cause Title: M/s Challani Rank Jewellery & Ors. v. Ashok Kumar Jain
