Sanchayita Lahkar

The High Court of Delhi Single Bench of Justice Ravinder Dudeja has quashed the summoning order issued in a cheque dishonour case initiated under Section 138 of the Negotiable Instruments Act, 1881. The Bench held that the essential condition for prosecuting an offence under the said provision was not met, given the petitioners’ bank account had been frozen due to a statutory attachment by the CGST Department. The court noted that under such circumstances, the account could not be considered as “maintained” by the drawer, as there was no ability to operate it or issue valid instructions. Consequently, the issuance of cheques from the attached account and their subsequent dishonour could not trigger penal liability under Section 138.

The Court allowed the petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, and set aside the summoning order dated 18.09.2024, along with all consequential proceedings. The directive was passed in light of the statutory materials, communication records, and relevant judicial precedents that supported the petitioner’s claim of account inoperability due to prior attachment.

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The petition was filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of the summons dated 18.09.2024 and all consequential proceedings arising out of Complaint Case No. 4878/2024. The background of the case involves longstanding business relations between the petitioners and the respondent, culminating in a commercial transaction concerning the sale of TMT bars during November–December 2023.

As part of the agreed payment mechanism, the petitioners issued two cheques dated 10.11.2023 and 11.12.2023, each amounting to Rs. 2,40,000/-. These cheques were issued under a mutual understanding that they would not be presented without prior consent. On 22.01.2024, the petitioners’ bank account was provisionally attached by the CGST Department under Section 83 of the CGST Act, 2017. This attachment order prohibited all debit transactions.

The petitioners claimed to have communicated this development to the respondent in January 2024, requesting that the cheques not be presented until the account was de-freezed. However, despite this communication, the cheques were presented on 08.02.2024 and dishonoured on 20.02.2024. The dishonour memo cited the reason as ‘insufficient funds,’ though the petitioners maintained that the dishonour was actually due to the prior statutory attachment.

Following this, a legal notice dated 16.03.2024 was issued to the petitioners, which was received by them on 18.03.2024. The petitioners responded on 27.03.2024, enclosing documentary evidence and raising legal objections. Despite this, the respondent filed Complaint Case No. 4878/2024 under Section 138 NI Act on 18.04.2024. This led to the issuance of the contested summoning order on 18.09.2024 by the Trial Court.

The petitioners’ counsel argued that the issuance of the cheques from a frozen account rendered the fundamental requirement of Section 138 unfulfilled. Citing the definition of a “maintained account,” it was contended that an account must be operable to fall within the ambit of the provision. The petitioners relied on judgments such as Deepinder Singh Bedi v. State and Anr. (Crl. M.C. 5965/2019) and Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. [(2000) 2 SCC 745] to support the claim that an account frozen by statutory action negates the penal liability under Section 138.

Additional reliance was placed on Sachin Jain v. Rajesh Jain [CRL.L. P 91/2022] and Ceasefire Industries Ltd. v. State & Ors. [2017 SCC OnLine Del 951], which reaffirm the principle that dishonour of cheques due to factors beyond the drawer’s control—such as statutory freezing—do not fulfil the requisite conditions for an offence under Section 138.

The respondent’s counsel contested the petition, asserting that the petitioners were aware of the account’s frozen status when the cheques were issued. They argued that such conduct demonstrated negligence and misuse of the cheque mechanism. It was also submitted that the mere attachment does not absolve the drawer from responsibility if the cheques were issued with knowledge of account inoperability.

The Court examined the legislative intent and statutory framework surrounding Section 138 of the Negotiable Instruments Act. It recorded the following:

"Section 138 of the Negotiable Instruments Act, 1881, makes it clear that a cheque’s dishonour does not automatically lead to prosecution under the Act." The Bench stated that the condition precedent includes dishonour "due to insufficient funds in the account or because the cheque exceeds the amount arranged to be paid from the account by an agreement between the account holder and the bank."

The Court referred to the communication dated 22.01.2024 from the CGST Delhi South Commissionerate which instructed the State Bank of India to provisionally attach the petitioners' account under Section 83 of the CGST Act, thereby prohibiting any debit transactions. The bank later confirmed this action via its letter dated 03.03.2025, stating that a STOP had been marked on the account.

It was observed: "The same was confirmed by the bank’s letter dated 03.03.2025, stating that a 'STOP' had been marked on Account No. 41070762619 on 02.02.2024 pursuant to the CGST attachment order dated 22.01.2024, and that no transactions could be permitted until further instructions were received from the department."

Further examination of the reply to the legal notice revealed that the petitioners had clearly informed the respondent that their account had been frozen and that cheques should not be presented. The Court recorded: "They clearly communicated that the bank account had been frozen and no debits could be made without departmental approval."

The Court concluded: "Since the petitioners were unable to operate the account or issue valid instructions to the bank due to the attachment, the essential ingredients of Section 138 are not fulfilled." Even if there were insufficient funds at the time of dishonour, the account status prevented the petitioner from ensuring its maintenance.

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Reliance was placed on Vijay Chaudhary v. Gyan Chand Jain [2008 SCC OnLine Del 554] where the Court held: "For an account to be maintained by an account holder, it is essential that he is in a position to operate the said account by either depositing monies therein or by withdrawing money therefrom. He should be in a position to give effective instructions to his banker... However, in the present case, once the account has been attached... the said account could not be operated by the petitioner."

The Court issued the following directive: "In view of the above facts and circumstances, the petition is allowed and the summoning order dated 18.09.2024 arising out of the CC no. 4878/2024 titled as 'R.D. Sales v. M/S Best Buildwell Pvt. Ltd. And ors' is quashed."

Advocates Representing the Parties:

For the Petitioners: Mr. Bhuvan Mishra, Mr. Yash Maheshwari, Mr. Tanmay Mishra, and Mr. Krishna Kanhaiya Kumar, Advocates

For the Respondents: Mr. Uday Seth and Ms. Puja Dewan, Advocates

Case Title: M/S Best Buildwell Pvt. Ltd. & Ors. v. M/S R.D. Sales

Neutral Citation: 2025: DHC:4898

Case Number: CRL.M.C. 1326/2025

Bench: Justice Ravinder Dudeja

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