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Jammu And Kashmir High Court Rules NI Act Complaints Maintainable Even If Cheque Bounces Due To Frozen Account
![Cheque-Bounces Cheque-Bounces](https://www.legaleraonline.com/h-upload/2024/09/10/1354383-cheque-bounces.webp)
Jammu And Kashmir High Court Rules NI Act Complaints Maintainable Even If Cheque Bounces Due To Frozen Account
The High Court of Jammu and Kashmir and Ladakh ruled that complaints under Section 138 of the Negotiable Instruments Act (NI Act) are maintainable even if a cheque bounces due to the drawer's bank account being frozen.
Justice Rajnesh Owsal noted that Section 138 of the NI Act specifies two conditions for filing a cheque bounce complaint: insufficient funds or exceeding the amount arranged to be paid. However, the judge acknowledged that past cases have established that prosecution under Section 138 can occur if a cheque bounces for reasons such as a closed account, stopped payment, or signature mismatch, all of which fall under the first condition of insufficient funds.
The court affirmed that a Section 138 complaint remains valid even if a cheque is dishonored because the drawer’s account is frozen. The ruling came as the court reviewed a plea challenging the dismissal of a cheque bounce complaint.
The dispute originated from a 2014 cheque intended to settle a debt of approximately ₹8.6 lakhs. The cheque bounced as the drawer's account was frozen by investigating agencies. The lender initially filed a complaint before a magistrate, who took cognizance of the matter in August 2014. Despite the complaint being dismissed by the Sessions Court in 2018 as not maintainable, the lender sought relief from the High Court.
The accused argued that the dishonor of the cheque was due to circumstances beyond his control, specifically the freezing of his account. The lender contended that the accused had intentionally frozen his account to avoid repayment and cause undue harm.
The High Court ruled in favor of the lender, holding that once the magistrate had taken cognizance of the case, it was not permissible for the magistrate to retract this decision. The court also emphasized that Section 138 complaints are maintainable regardless of the account being frozen.
Criticizing the revisional court for prematurely halting the proceedings, the High Court stated that such findings should be made only after a full trial. The onus was placed on the accused to demonstrate that he was unaware of the account freeze when the cheque was drawn and that the account had sufficient balance at the time of dishonor.
The High Court directed the matter back to the magistrate for trial, allowing the lender’s plea and ensuring that the proceedings continue.