Court dismisses plea to quash proceedings, affirms validity of cheques despite bank mergers.
In a notable judgment, the Karnataka High Court, presided over by Justice Suraj Govindaraj, has reiterated the liability of cheque issuers post the merger of banks. The court dismissed the criminal petition filed by Smt. Bhadramma seeking to quash proceedings related to a dishonoured cheque issued on the erstwhile Vijaya Bank, which merged with Bank of Baroda.
The case, filed under Section 138 of the Negotiable Instruments Act, revolved around a cheque issued by Bhadramma which was dishonoured with the endorsement "no such bank," following the merger of Vijaya Bank with Bank of Baroda. The petitioner argued that the merger invalidated the cheque and thus, no offence was committed. However, the High Court opined that such mergers do not automatically nullify the validity of previously issued cheques.
The court differentiated between bank mergers and liquidation, explaining that in a merger, the successor bank assumes the assets, liabilities, and customer accounts of the erstwhile bank, thus maintaining the validity of cheques. The court highlighted that holding otherwise would unjustly disadvantage the payee, who has no control over the merger.
Justice Govindaraj emphasized that while the petitioner can raise defenses regarding the alleged misuse or non-issuance of the cheque during trial, the merger itself does not provide grounds for quashing proceedings. The court maintained that the inherent liability of the cheque issuer remains unless proven otherwise in trial.
This judgment reinforces the principle that bank mergers do not extinguish the responsibilities of cheque issuers and safeguards the rights of payees in financial transactions.
Bottom Line :
Negotiable Instruments Act, 1881 Section 138 Mere merger of drawee bank with another bank does not by itself invalidate cheque already issued by drawer and does not extinguish drawer's liability - Disputed defence that cheque was lost or misused cannot be examined in quashing proceedings under Section 528 BNSS.
Statutory provision(s): Negotiable Instruments Act, 1881 Section 138, Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528
Smt. Bhadramma v. State of Karnataka, (Karnataka) : Law Finder Doc id # 2989444
