A cheque invalidated by bank merger cannot attract liability under Section 138 of the NI Act.

The petitioners comprised M/s. B.S. Enterprises, a partnership firm, and its two partners, arrayed as accused Nos.1 to 3.

The respondent, a proprietorship concern, alleged that the petitioners purchased groceries on credit and issued Cheque No.544041 dated 19 May 2025 for ₹80,30,106 towards discharge of the alleged liability.

The cheque was drawn on Syndicate Bank, which had merged with Canara Bank with effect from 1 April 2020.

When presented through Union Bank on 19 May 2025, it was returned unpaid on 12 June 2025 with the endorsement that Syndicate Bank had merged with Canara Bank.

The complainant issued a statutory demand notice on 19 June 2025, which was served on the petitioners.

Following their failure to pay within fifteen days, the complainant filed a private complaint under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023, invoking Sections 138 and 142 of the Negotiable Instruments Act, 1881.

The XII Additional Chief Judicial Magistrate, Bengaluru, registered PCR No.13298 of 2025, took cognizance, and proceedings were numbered C.C.No.40325 of 2025.

The petitioners approached the High Court under Section 482 of the Cr.P.C./Section 528 of the BNSS seeking quashing of the proceedings, principally on the ground that the cheque was invalid on the date of presentation.

1. Whether a cheque drawn on Syndicate Bank, presented after the bank’s merger with Canara Bank and after the expiry of the permitted validity period for such cheques, constitutes a valid instrument capable of attracting liability under Section 138 of the Negotiable Instruments Act?

2. Whether continuation of the proceedings under Sections 138 and 142 of the Negotiable Instruments Act, on the basis of such an invalid cheque, amounts to an abuse of the process of law warranting exercise of the High Court’s inherent jurisdiction?

Section 138 of the Negotiable Instruments Act, 1881, applies only where a cheque drawn on an account is returned unpaid in the circumstances contemplated by the provision and is presented within six months from its date or within its period of validity, whichever is earlier; an invalid cheque cannot attract Section 138 liability.

Section 142 governs cognizance of offences under Section 138.

The Court applied the inherent jurisdiction under Section 482 Cr.P.C./Section 528 BNSS to prevent abuse of process and secure the ends of justice.

Relying on Shrikant v. Laxman, Criminal Petition No.101615 of 2023, decided on 6 February 2025, and Smt. Archana Singh Gautam v. State of U.P., 2024 SCC OnLine All 4599, together with Ganta Kavitha Devi v. State of Andhra Pradesh, 2024 SCC OnLine AP 5115, the Court held that cheques issued on banks that had merged and presented after the notified validity period were invalid, and their dishonour did not attract Section 138.

Syndicate Bank merged with Canara Bank on 1 April 2020, and the merger-related directions permitted presentation of Syndicate Bank cheques only up to 30 June 2021; thereafter, the old IFSC and MICR particulars were disabled and such cheques became invalid.

The cheque in question was presented only on 19 May 2025—nearly four years after the final permitted date—and was returned specifically because Syndicate Bank had merged with Canara Bank.

Since presentation of a valid cheque within its validity period is a foundational requirement under the proviso to Section 138, the Court held that dishonour of this instrument did not satisfy the statutory ingredients of the offence.

Although the complainant alleged that the petitioners deliberately issued the cheque in 2025 despite knowing of the merger, the Court considered continuation of the prosecution on an admittedly invalid instrument to be an abuse of process.

It also observed that, for a 2025 transaction, the complainant could have obtained a fresh cheque.

The criminal petition was allowed, and proceedings in C.C.No.40325 of 2025 before the XII Additional Chief Judicial Magistrate, Bengaluru, were quashed.

The complainant was granted liberty to pursue any other remedy available in law, excluding the remedy under Section 138 based on the cheque in question.

I.A.No.1 of 2026 was disposed of consequentially.