Non-CTS cheques remain valid negotiable instruments; presentation objections are matters for trial.

In brief

The question

Whether the complaint and proceedings under Section 138 of the Negotiable Instruments Act should be quashed because the cheque was a non-CTS instrument allegedly presented to a bank other than the drawee bank.

The court held

The Court held that the petitioners had not established grounds for quashing the complaint, the cognizance order or the criminal proceedings.

It also directed

It dismissed the petition, leaving the petitioners’ defences open for consideration by the trial court.

01Facts

The respondent filed a private complaint under Sections 200 Cr.P.C. and 138 of the Negotiable Instruments Act, alleging that the petitioners issued a cheque for ₹6 crore towards an existing liability.

¶ 3–4

The cheque was dishonoured, and the complainant produced the cheque, bank endorsement, legal notice and related documents. The Magistrate took cognizance and initiated proceedings in C.C. No. 3471/2019.

¶ 3–4

The petitioners sought quashing under Section 482 Cr.P.C., arguing, among other things, that the cheque was a non-CTS cheque drawn on ICICI Bank but presented to Kotak Bank, that it was not validly presented, and that notices had been exchanged before the cheque date.

¶ 5–10

The respondent disputed the petitioners’ account and contended that the cheque was issued against substantial payments and that the objections could be raised at trial.

¶ 11–14

02Issues

i.Whether the complaint and proceedings under Section 138 of the Negotiable Instruments Act should be quashed because the cheque was a non-CTS instrument allegedly presented to a bank other than the drawee bank.

¶ 5, 15

ii.Whether the alleged prior notices, stop-payment instructions and other disputed circumstances could be decided in a petition under Section 482 Cr.P.C., rather than at trial.

¶ 5, 15–16

03Law Applied

Section 138 of the Negotiable Instruments Act provides the basis for prosecution where a cheque issued towards a legally enforceable liability is dishonoured, subject to the statutory requirements.

¶ 14–16

Section 482 Cr.P.C. confers inherent jurisdiction to prevent abuse of process or secure the ends of justice, but that jurisdiction is exercised sparingly; the High Court should not conduct a mini-trial or resolve disputed factual defences at the quashing stage.

¶ 14–16

The Court noted the Supreme Court’s decision in Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd., (2001) 3 SCC 609, concerning presentation of a cheque to the relevant bank, but observed that the decision predated the RBI guidance relied on in this case.

¶ 7, 15

It also relied on the Karnataka High Court’s decision in Crl.P. No. 4978/2023, which treated non-CTS cheques as continuing to be valid negotiable instruments notwithstanding their discontinuance for CTS processing.

¶ 13, 15

Provisions in the judgment · 4 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 200 Section 482

Negotiable Instruments Act, 1881 Section 72 Section 138

04Reasoning

The complaint, sworn statement and supporting documents were found sufficient at the prima facie stage to support the Magistrate’s decision to take cognizance.

¶ 4, 16

The Court considered the objections about presentation to a different bank, the prior notices and the cheque’s non-CTS status to involve matters that could be tested before the trial court.

¶ 13–16

It declined to determine those matters under Section 482, noting that the cited Karnataka decision had treated non-CTS cheques as valid negotiable instruments and that the High Court should not assess disputed merits as if exercising appellate jurisdiction.

¶ 13–16