Presumption of Insufficient Funds Prevails Despite Validity Concerns Due to Bank Merger, Rules Bombay High Court
The Bombay High Court, on February 10, 2026, delivered a significant judgment in the case of Chetan Sunderji Bhanushali v. Hema Ramesh Chheda, addressing the implications of bank mergers on the validity of cheques under the Negotiable Instruments Act, 1881. The case revolved around the dishonour of cheques drawn on the erstwhile State Bank of Patiala, which had merged with the State Bank of India.
The applicants, Chetan Sunderji Bhanushali and others, challenged the issuance of process against them under Sections 138 and 141 of the Negotiable Instruments Act. They contended that the cheques, presented beyond the stipulated validity period following the bank merger, were invalid, and thus, the basis for the prosecution was flawed.
However, the Bombay High Court, presided over by Justice N. J. Jamadar, upheld the earlier decisions of the Magistrate and the Additional Sessions Judge, which had dismissed the applicants' revision applications. The court emphasized that the presumption of dishonour due to insufficient funds stands unless rebutted by evidence. The cheques were returned with remarks indicating insufficient funds, not invalidity due to the merger, thus invoking the presumption under Section 146 of the N.I. Act.
The court further clarified that the expression "within the period of its validity" in Section 138's proviso can encompass scenarios where validity is affected by external factors such as bank mergers. However, the determination of whether the cheques could have been honoured, despite the merger, necessitates a trial.
In its judgment, the court referenced various case laws, including Bir Singh v. Mukesh Kumar and Kalamani Tex v. P. Balasubramanian, reinforcing the principle that even a blank signed cheque attracts presumption under Section 139 unless rebutted. The court concluded that the matters raised involved disputed facts that must be adjudicated at trial, not at the stage of quashing applications.
This ruling underscores the judiciary's stance on maintaining the integrity of banking operations and the necessity of a trial to address complex factual disputes arising from bank mergers affecting cheque validity.
Bottom Line:
Dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1881 - Cheques drawn on an erstwhile bank that merged with another bank - Presentation of cheque beyond the stipulated validity period - Presumption of dishonour due to insufficient funds prevails unless rebutted by evidence.
Statutory provision(s): Sections 138, 139, 141, 146 of the Negotiable Instruments Act, 1881; Section 482 of the Code of Criminal Procedure, 1973
Chetan Sunderji Bhanushali v. Hema Ramesh Chheda, (Bombay) : Law Finder Doc id # 2851312
