Case Note & Summary
The dispute arose from a criminal petition filed by Petitioners and its directors seeking to quash proceedings under Section 138 of the Negotiable Instruments Act, 1881. The complainant, Respondent, had purchased a flat in the petitioners' project under a No Pre-EMI Scheme. Due to alleged breach of contractual obligation, the company issued a cheque for ₹41,00,000 on 09-03-2024. However, the police investigating crimes registered against the petitioners under Sections 406, 420, 504, and 506 of the Indian Penal Code issued a debit freeze order on the company's bank accounts on 24-05-2024. The complainant presented the cheque on 05-06-2024, which was dishonoured with the endorsement 'account blocked situation covered in 2125'. The complainant then issued a statutory notice and filed a private complaint under Section 223 of the BNSS, leading to cognizance and summons in C.C.No.1446/2025. The petitioners contended that the dishonour was due to the account freeze, not insufficiency of funds, and that they had reimbursed the complainant through settlement. The respondent argued that the cheque was issued against a legally enforceable debt and that presumptions under Sections 118 and 139 of the Negotiable Instruments Act applied. The court framed the issue as whether proceedings could be initiated when dishonour was due to account freeze. Analyzing the facts, the court noted that the freeze was an external police action post-dating the cheque issuance, and the petitioners were unaware of it when replying to the notice. Referring to precedents, including Vijay Chaudhary v. Gyan Chand Jain, the court held that for Section 138 to apply, dishonour must be due to insufficiency of funds or exceeding arrangement, attributable to the drawer's voluntary act. Since the dishonour here resulted from a debit freeze order unrelated to the drawer's actions, the essential ingredient of the offence was missing. Consequently, the court allowed the petition and quashed the proceedings, preventing abuse of process.
Headnote
A) Criminal Law - Cheque Dishonour - Section 138 Negotiable Instruments Act, 1881 - Quashing of Proceedings - Dishonour due to account freeze by police investigation - Held that proceedings under Section 138 cannot be sustained when dishonour is solely due to external debit freeze order, not attributable to drawer's voluntary act or insufficiency of funds, as the essential ingredient of the offence is missing (Paras 6-9). B) Criminal Procedure - Quashing of Proceedings - Section 528 BNSS, 2023 - Inherent Powers - High Court quashed proceedings in C.C.No.1446/2025 pending before XIII ACJM, Bangalore, as continuation would amount to abuse of process of law when dishonour was due to police freeze, not drawer's fault (Paras 1-4).
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Issue of Consideration: Whether proceedings could be initiated against the petitioners on dishonour of cheque when the reason for dishonour is the account being debit frozen?
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Final Decision
Petition allowed. Entire proceedings in C.C.No.1446/2025 pending on the file of XIII ACJM, Bangalore are quashed.
