Verdict

In Madras High Court, Criminal Judicature
Criminal Original Petition 21268 of 2024
& Criminal Miscellaneous Petitions 12190 & 12191 of 2024

M/s Challani Rank Jewellery 
Mr.  Sumti Challani                
Mrs. Maya Challani . . . . . . . . . . . . . . . . . . . Petitioners   
Vs
M/s Mangalkalash Jewellers   
(Ashok Kumar Jain – Proprietor) . . . . . . . . . . . . . . . . . Respondent

In October 2024 the Madras High Court pronounced a verdict on a petition pertaining to a case of cheque bouncing in a business transaction that has thrown ample light on the scope of criminal liability in such cases.

Facts & Background

1. Petitioners have purchased silver items worth Rs.1,10,35,566 from Respondent on 14th August 2020.
2. Total 36 cheques with dates ranging from 14th August 2020 and 30th September 2020 have been issued by Petitioners to Respondent towards settlement of the amount due against the purchase.
3. All cheques were dishonoured and returned to Respondent by his bank along with the Petitioners bank’s comment “Account blocked situation covered in 2125”.
4. Respondent sent a notice dated 29th Oct’20 to Petitioners demanding settlement of the cheques, which the Petitioners received on 31st Oct’20.
5. Instead of settling the due amount, Petitioners sent a reply notice dated 7th Nov’20 disputing the claim of Respondent based on their own interpretation of the relevant laws.
6. Respondent filed a timely criminal complaint against Petitioners in C2 Elephant Gate Police Station for recovery of the due payment.
7. Petitioners filed an original petition in the Madras High Court seeking quashing of the police complaint.

Issues in the case 

1. Whether a single complaint is valid for a case involving the bouncing of 36 different cheques, under Sections 219 and 220 of Cr P C (BNSS)?
2. Whether the blocking of a bank account by IT Dept or other govt authorities can protect the account holder from liability under Section 138 (Cheque bouncing) of Negotiable Instruments Act?

Analysis and Judgement

The Court while considering decided cases such as
Suryakant V Kanakia –vs- Muthukumaran (MANU/TN/0072/2004) and Manjula –vs- Colgate Palmolive 
(India) Ltd and 2006(5) CTC 303, the Court stated its views on the following issues:

A: Whether a single complaint is valid for a case involving the bouncing of 36 different cheques, under Sections 219 and 220 of Cr P C (BNSS)?

1. Section 219 of Cr P C allows single complaint/trial for total 3 different but similar offenses within 1 year, in this case, cheque bouncing. Section 220 of Cr P C allows single trial for several offenses of different nature but all of them pertaining to same transaction.
2. Based on judgements in preceding cases like the existing petition, Madras HC judge opined that even though there are 36 cheques of different dates, they all pertained to the same transaction. Also, Respondent’s notice to Petitioners and subsequent criminal complaint was common to all the cheques. All 36 cheques were returned by the bank under a single notice of dishonouring. As such, exceeding the limit of 3 offenses under Section 219 does not adversely affect the Respondent’s complaint.
3. While a clear definition of ‘same transaction’ is not provided in Section 220 nor are there any court judgements defining these words, it is generally accepted that (i) proximity of place or time (b) unity of purpose and (iii) design or continuity of action, in respect of a transaction can determine whether the transaction is same or different.

B: Whether the blocking of a bank account by IT Dept or other govt authorities can protect the account holder from liability under Section 138 (Cheque dishonour) of Negotiable Instruments Act?

1. Under Section 138 of NI Act, the two essential requirements that entail punishment to the drawer of a cheque in the event of the cheque being dishonoured, are:
   – The cheque should have been issued in discharge of a liability/debt and not a donation or gift.
   – The funds in drawer’s account should be insufficient to cover the amount of the cheque.
2. “Insufficient Funds in Account” is the fundamental ‘genus’ (genre or category) of the crime, while ‘account blocked’, “stop payment advice’, etc. are only ‘species’ (variations) of the ‘genus’.
3. In the present case, Petitioners contended that there was sufficient money in their account, but the account itself was blocked by IT Department, hence Section 138 could not be applied in this case.  
4. During police investigation, however, it was seen that IT Dept had created a lien on Petitioners and had hence blocked the account, treating it as an NPA. 
5. The amount remaining after providing for IT Dept’s lien became insufficient for the 36 cheques.

On the basis of the above inputs and facts, Madras HC has dismissed the Petitioners’ appeal to quash the criminal complaint made against them by Respondent.

For full text of the judgement:
https://mhc.tn.gov.in/judis/index.php/casestatus/viewpdf/1167163