Dishonour marked “account blocked” due to the account holder’s death does not attract Section 138 NI Act.

Shree Vinayaka Traders, a partnership firm, was constituted on 20 June 2011 with Accused Nos. 2 and 3 as partners.

The complainant supplied fertilizers and pesticides to the firm and obtained signed blank cheques, which were allegedly to be used on the instructions of Accused No. 2.

Accused No. 2, who was managing the business, died on 21 May 2017.

The complainant thereafter took back the remaining stock from the firm and acknowledged the transaction on 6 June 2017.

Subsequently, the complainant presented one of the blank cheques, bearing the date 28 March 2018, for encashment.

The cheque was returned with the endorsement “account blocked (situation covered in Sl. No. 21–25),” indicating that withdrawal had been stopped owing to the death of the account holder.

The complainant issued statutory notices to the firm and the accused.

The notice to Accused No. 2 was returned with the endorsement that he had died, while Accused No. 3 replied to the notice.

Despite this, the complainant initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881, in C.C. No. 25126/2018 before the XLII Additional Chief Metropolitan Magistrate, Bengaluru.

The petitioner sought quashing of those proceedings under Section 482 of the Code of Criminal Procedure.

Whether the Trial Court erred in taking cognizance under Section 138 of the Negotiable Instruments Act when the cheque was dishonoured with the endorsement “account blocked,” allegedly because of the death of one of the partners.

Whether the proceedings were otherwise unsustainable because the cheque was dated and presented nearly ten months after the death of the partner who had managed the firm and had allegedly issued or signed the cheque.

Section 138 of the Negotiable Instruments Act applies where a cheque is dishonoured for insufficiency of funds or circumstances legally equivalent to it; dishonour solely because the account is blocked due to the death of the account holder does not, according to the Court, satisfy the essential ingredient of the offence.

Under Sections 42(c) and 31 of the Partnership Act, 1932, where a partnership consists of only two partners, the death of one partner brings the partnership to an end unless a legally effective new partnership is constituted; the Court relied on Commissioner of Income Tax v. Seth Govindram Sugar Mills, AIR 1966 SC 24, for this principle.

Section 25 of the Partnership Act may impose joint liability upon partners for acts of the firm, but it does not dispense with proof of the statutory ingredients of an offence under Section 138 of the Negotiable Instruments Act.

The Court also relied on Farhad Suri v. Praveen Choudhary, the Punjab and Haryana High Court decision in Arvinderjit Kaur v. State of Haryana, and its own earlier decision in Crl.P. No. 11207/2025, which held that dishonour marked “account blocked” does not attract Section 138 where the dishonour is not attributable to insufficiency of funds.

The Court found that Accused No. 2 had died on 21 May 2017, a fact supported by the death certificate and not disputed by the complainant.

The complainant had knowledge of the death, having taken back the stock shortly thereafter and having received the returned notice stating that Accused No. 2 was no more.

Nevertheless, it presented a cheque dated 28 March 2018—approximately ten months after the death—which had originally been obtained as a signed blank cheque.

Since the account was blocked because of the partner’s death and not because of insufficient funds, the essential statutory condition for Section 138 was absent.

Further, applying Seth Govindram Sugar Mills, the Court held that the death of one of the two partners brought the original partnership to an end, and there was no material showing the constitution of a valid new partnership or authority to issue the cheque after the partner’s death.

The respondent’s reliance on Section 25 of the Partnership Act and Dhanasingh Prabhu v. Chandrasekar was rejected because that principle concerned the liability of partners for acts of the firm and did not address dishonour specifically endorsed as “account blocked”.

The Court additionally noted that the cheque, being dated well after the death and having been presented beyond the applicable validity period, could not sustain the prosecution.

The cheque was also found to have been presented on a date subsequent to the death of the relevant partner and without material establishing a continuing or newly constituted partnership.

Accordingly, the petition under Section 482 Cr.P.C. was allowed, and the proceedings under Section 138 of the Negotiable Instruments Act in C.C. No. 25126/2018 were quashed.