Dishonour of Cheque Presented Beyond Statutory Validity Period Cannot Sustain Prosecution Under Section 138 NI Act

The Petitioner (Proprietor of a cotton unit) allegedly borrowed a friendly loan of Rs. 10,00,000 from Respondent No. 1 based on mutual trust.

In discharge of this liability, the Petitioner issued Cheque No. 099956 dated 25.09.2019.

The Respondent presented the cheque on 23.12.2019, but it was returned unpaid on 28.07.2020 via a return memo citing that the instrument had expired and was post-dated/invalid.

Despite the expiry of the three-month validity period, the Respondent filed a complaint under Section 138 of the Negotiable Instruments (NI) Act (SCNIA No. 32 of 2021) before the Judicial Magistrate First Class, Chachoda.

The Trial Court took cognizance on 25.02.2021.

The Petitioner moved the High Court under Section 528 of the BNSS seeking quashment of these proceedings.

1. Whether the presentation of a cheque within its statutory validity period is a mandatory condition precedent for attracting criminal liability under Section 138 of the Negotiable Instruments Act.

2. Whether the dishonour of a cheque solely due to its expiry (delayed presentation by the complainant) can constitute an offence under the Act.

The court applied Section 138 of the Negotiable Instruments Act, 1881, emphasizing that the penal provision requires the cheque to be presented to the bank within a period of three months from the date on which it is drawn.

It relied on RBI Notification No. DBOD.AML BC No. 47/14.01.001/2011-12, which mandates a three-month validity period for cheques.

The court further applied the principle of strict construction of penal statutes, asserting that criminal liability cannot be fastened if the statutory ingredients—specifically presentation within the validity period—are not met.

The Court reasoned that for an offence under Section 138 of the NI Act to be made out, the cheque must be valid at the time of presentation.

In this case, the cheque dated 25.09.2019 was processed for dishonour only on 28.07.2020, well beyond the three-month window prescribed by the RBI.

The Court observed that the bank's return memo specifically cited the "expiry of the instrument" rather than "insufficiency of funds".

The Court found that since the complainant failed to present the instrument within the stipulated time, the instrument ceased to be a "negotiable instrument" in the eyes of the law.

Consequently, the Trial Court erred in taking cognizance because the foundational jurisdictional facts—specifically the timely presentation of the cheque—were absent.

Continuing the proceedings would constitute an abuse of process as the complainant cannot benefit from their own lapse in delaying presentation.

Since the cheque had expired before the cause of action allegedly arose, the complaint was held to be legally untenable.

The High Court allowed the petition and quashed Criminal Complaint No. SCNIA 32 of 2021 and all consequential proceedings pending before the Judicial Magistrate First Class, Chachoda.