Karnataka High Court
M/S Nd Developers Private Ltd vs Ritesh Raushan on 4 March, 2026
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 09.02.2026
Pronounced on : 04.03.2026
R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 04TH DAY OF MARCH, 2026
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.11207 OF 2025
BETWEEN:
1. M/S. ND DEVELOPERS PRIVATE LTD.,
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA
NO.25, 3RD MAIN, 5TH CROSS
DOLLARS COLONY, NS PALYA
BTM 2ND STAGE, BENGALURU
KARNATAKA - 560 076.
2. MOHAMMED KHADAR KHAN DURANI
S/O MOHAMMED SHOUKAT HUSSAIN KHAN DURANI
AGED ABOUT 64 YEARS
MANAGING DIRECTOR
N.D.DEVELOPERS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA
NO.25, 3RD MAIN, 5TH CROSS
DOLLARS COLONY, N S PALYA
BTM 2ND STAGE
BENGALURU, KARNATAKA - 560 076.
3. MOHAMMED YAHYAA KHAN DURANI
S/O MOHAMMED KHADAR KHAN DURANI
2
AGED ABOUT 31 YEARS
DIRECTOR
N.D.DEVELOPERS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA
NO.25, 3RD MAIN
5TH CROSS, DOLLARS COLONY
N S PALYA, BTM 2ND STAGE
BENGALURU, KARNATAKA - 560 076.
4. MOHAMMED ZEESHAN KHAN DURANI
DIRECTOR
S/O MOHAMMED KHADAR KHAN DURANI
AGED ABOUT 32 YEARS
N.D.DEVELOPERS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA, NO.25,
3RD MAIN, 5TH CROSS
DOLLARS COLONY, N.S. PALYA
BTM 2ND STAGE
BENGALURU, KARNATAKA - 560 076.
5. HAJIRA DURANI
DIRECTOR
W/O MUNTHASHEER AHMED KHAN
AGED ABOUT 37 YEARS
N D DEVELOPERS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA, NO.25,
3RD MAIN, 5TH CROSS
DOLLARS COLONY, N.S. PALYA
BTM 2ND STAGE, BENGALURU
KARNATAKA - 560 076.
6. AYESHA SULTANA
DIRECTOR
S/O MOHAMMED KHADAR KHAN DURANI
AGED ABOUT 60 YEARS
3
N D DEVELOPERS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
SRI BALAJI NILAYA, NO.25,
3RD MAIN, 5TH CROSS, DOLLARS COLONY
NS PALYA, BTM 2ND STAGE
BENGALURU, KARNATAKA - 560 076
ALL ARE R/AT NO. 401
8TH MAIN, 8TH CROSS
NEAR UDUPI GARDEN HOTEL
MICO LAYOUT, BTM 2ND STAGE
BENGALURU, KARNATAKA - 560 076.
... PETITIONERS
(BY SMT.SUMATHI PAULINE, ADVOCATE)
AND:
RITESH RAUSHAN
S/O PURNA CHANDRA VARMA
AGED ABOUT 45 YEARS
RESIDING AT VILLA NO.194
RBD STILL WATERS
SILVER COUNTY ROAD
OFF HARALU ROAD
BENGALURU, KARNATAKA - 560 102.
... RESPONDENT
(BY SRI CHINMAY J. MIRJI, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 528 OF
BNSS, 2023, PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN
C.C.NO.1446/2025 PENDING ON THE FILE OF XIII ACJM,
BANGALORE FOR AN OFFENCES U/S 138 OF NEGOTIABLE
INSTRUMENTS ACT.
4
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 09.02.2026, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
The petitioners are before this Court calling in question
proceedings in C.C.No.1446 of 2025 pending before the XIII
Additional Chief Judicial Magistrate, Bengaluru arising out of PCR
11453 of 2024 filed by the complainant alleging offence punishable
under Section 138 of the Negotiable Instruments Act, 1881 ('the
Act' for short).
2. Facts adumbrated are as follows: -
2.1. The petitioners are accused 1 to 6 and respondent is the
complainant. The 1st petitioner is a Private Limited Company
incorporated under the provisions of the Companies Act, 1956. The
2nd petitioner is the Managing Director of the 1st
petitioner/Company and others are Directors of the Company. The
complainant and his wife purchase flat bearing No.G-02, Block E in
5
the 1st petitioner/Company's project named ND Passion Elite. It is
the averment in the complaint that the complainant had availed a
No Pre-EMI Scheme, wherein the Company was obligated to remit
payment of interest on home loan until possession was handed
over. There was a breach in contractual obligation between the two
and the complainant avers that he was compelled to make payment
of ₹41,75,634/- on account of non-handing over of possession.
Towards the said amount, the Company issues a cheque bearing
No.149728 amounting to ₹41,00,000/-. The cheque was yet to be
presented.
2.2. A Police notice comes to be issued to the Branch
Manager, Bank of Maharashtra under Sections 91 and 102 of the
Cr.P.C., which directs debit freezing of the accounts of the 1st
petitioner/Company and the 2nd petitioner/Managing Director in
furtherance of the investigation in Crime No.92 of 2022 registered
for offences punishable under Sections 420 and 506 read with 34 of
the IPC and another crime in Crime No.116 of 2023 registered for
offences punishable under Sections 406 and 420 of the IPC. This is
an admitted fact. The debit freeze of the accounts of the 1st
6
petitioner/Company and the 2nd petitioner/Managing Director
happens on 24-05-2024. The complainant, to whom the cheque on
09-03-2024 had been issued, presents it on 05-06-2024 for
realization. The cheque is dishonored with an endorsement "account
blocked situation covered in 21 25". The complainant then begins
the process of initiating proceedings against the petitioners for
dishonor of the cheque by issuing a notice on 04-07-2024.
2.3. The petitioners sent a reply to the notice, at which point
in time the petitioners were not aware of the fact that the account
of the petitioners was frozen. They come to know of the same on
26-07-2024. The complainant then registers a private complaint
under Section 223 of the BNSS for offence punishable under Section
138 of the Act in PCR No.11453 of 2024. Sworn statement of the
complainant is recorded, cognizance is taken and summons are
issued in C.C.No.1446 of 2025 on 10-01-2025. Issuance of
summons is what has driven the petitioners to this Court in the
subject petition.
7
3. Heard Smt. Sumathi Pauline, learned counsel appearing for
the petitioners and Sri Chinmay J. Mirji, learned counsel appearing
for the respondent.
4. The learned counsel appearing for the petitioner would
vehemently contend that the cheque was not issued against a
legally enforceable debt or as compensation. The cheque was only
issued until completion of the project. The cheque was dishonoured
on account of the endorsement issued of debit freezement, which
would mean that the petitioners cannot be hauled up for the
proceedings, as the account was frozen and the amount could not
be realized by the complainant. The learned counsel would further
contend that the petitioners have reimbursed the entire amount to
the complainant by giving him two additional plots in the project,
which the complainant admits in the complaint and has also entered
into a settlement by executing a settlement deed before RERA on
24-06-2022 itself. Therefore, there is no claim pending against
these petitioners that should be fulfilled to the respondent.
8
5. Per contra, the learned counsel appearing for the
respondent would refute the submissions contending that cheque is
issued in acknowledgment of the debt owed by the Company. The
Company subsequently alienated the flats allotted to the
complainant and sold them to third parties. When the complainant
staged a protest, a post-dated cheque amounting to ₹41,00,000/-
was issued to the complainant. The cheque is issued against a
legally enforceable debt, to settle the liability from the breach of
contractual obligation, under the No Pre-EMI Scheme. He would
contend that the presumption under Sections 118 and 139 of the
Act would operate against the petitioners. Whether the account is
frozen or otherwise is immaterial. He would seek dismissal of the
petition.
6. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record. In furtherance whereof, the only issue that falls
for consideration in the case at hand is:
9
"Whether proceedings could be initiated against the
petitioners on dishonor of cheque when the reason for
dishonor is the account being debit frozen?"
7. The afore-narrated facts, dates and link in the chain of
events are a matter of record. Reiteration of three dates become
necessary. The instrument that is now the subject matter of
proceedings before the concerned Court is the cheque bearing
No.149728 amounting to ₹41/- lakhs issued on 09-03-2024. Two
crimes are registered against the petitioners in Crime No.92 of
2022 and 116 of 2023 for offences punishable under Sections 406,
420, 504 and 506 of the IPC. The Investigating Officer investigating
into the said crimes directs debit freezement of the account of the
Company and its Managing Director, the 2nd petitioner, on
24-05-2024 till the investigation in the said crime would get
completed. The police notice to the Bank requesting debit
freezement reads as follows:
"Date: 24-05-2024
POLICE NOTICE
(Under Section 91 & 102 Cr.P.C)
(Most urgent)
10
To
The Bank Manager,
Maharashtra Bank,
Bangalore City
Sir,
Sub: Request to Debit freeze and furnish the account
details - reg.
Ref: Shivanagara PS cr.No.92/2022 u/s 420, 506 r/w 34
IPC, and 116/2023 u/s 406, 420 IPC.
*****
With reference to the above subject, the brief facts of the
case are that the complaint Cr.No.92/2022 u/s 420, 506 r/w 34
IPC, and 116/2023 u/s 406, 420 IPC and the same is under
investigation.
Accordingly, you are hereby requested to Debit Freeze
the below Maharashtra Bank account and furnish the following
particulars of the following account Nos. at the earliest:
Sl. No. Account No.
1 60322483326
2 60321377613
1. Kindly given confirmation letter for Debit Freezing the above
account numbers and provide the current balance."
Therefore, it is an admitted fact that the account over which the
cheque was issued was debit frozen after issuance of the cheque in
issue. The complainant then presents the cheque for realization.
The cheque gets dishonored and the Bank issues the following
endorsement:
"ICICI BANK
11
June 5,2024
RITESH RAUSHAN
VILLA NO.194 RBD STILLWATERS,
SILVER COUNTY ROAD, OFF HARLUR ROAD
BANGALORE - 560 102 KARNATKA
Mob: 919686944553
Cheque return for your ICICI Bank Account xxxx7143
Dear Customer,
We value your relationship with ICICI Bank
We write to inform you that the enclosed Cheque 149728 for
₹4,100,000.00 deposited in your account is returned
unrealized in clearing on June 5, 2024 due to reason:
Account blocked situation covered in 2125
The applicable charges will be debited to your account.
For any clarification or more information, you can call our
Customer Care or visit the nearest ICICI Bank Branch.
Sincerely,
Sd/-
Team ICICI Bank."
The endorsement is 'account blocked situation covered in 2125'.
The subject endorsement is said to be inability of the accused to
clear the cheque if the account is blocked. The complainant then
issues a notice to the accused as obtaining under the Act. The
notice is replied by the petitioners. At the time when the reply was
rendered by the petitioners, the petitioners were not aware of the
12
fact of debit freezement of the account. They come to know of it
only on 26-07-2024, when the Bank communicates to the
petitioners about debit freezement. The mail trail is indicative of
the said fact. The debit freeze order is attached to the mail. The
communications and debit freezement are as follows:
"Wed., Jul 24, 2024 at 2.47 p.m.
Dear Sir/Madam,
As regards to the above subject, I am bringing to your notice
that I am not able to do any withdrawal from the bank accounts.
Please rectify explain the problem as soon as possible and share
the supportive details.
Saving Bank and Current Account details as mentioned below
for your information.
1. Name: MOHAMMED KHADERKHAN DURANI
A/c No. 60321377613
Bank: Bank of Maharashtra.
2. Name: N.D. DEVELOPERS PVT.LTD.
A/c No. 60322483326
Bank: Bank of Maharashtra.
.... .... ....
Fri.Jul.26, 2024 at 9.50 AM
Dear Sir/Madam,
As regards to the above subject, I am bringing to your notice
that I am not able to do any withdrawal from the bank accounts.
Please rectify, explain the problem as soon as possible and
share the supportive details."
.... .... ....
13
"Debit freeze order. Pdf.
366K"
Therefore, the freezement comes to the notice of the petitioners on
26-07-2024, after the reply to the statutory notice was issued on
15-07-2024. The complainant registers the complaint under Section
223 of the BNSS on 17-08-2024. The issue would be, whether the
proceedings under Section 138 of the Act can be permitted to
continue on account of dishonor of cheque due to blockage of the
account or debit freezing of the account owing to different crimes
registered against the petitioners.
8. Several High Courts have considered this issue and
therefore, I deem it appropriate to notice the judicial landscape
concerning the issue.
8.1. The High Court of Delhi in the case of VIJAY
CHAUDHARY v. GYAN CHAND JAIN1, holds as follows:
".... .... ....
1
2008 SCC OnLine Del. 554
14
10. From the aforesaid, it appears that to rope in
the drawer of the cheque within the ambit of Section 138
of the Act, when the cheque is dishonoured for ostensible
reasons different from those specifically provided under
the Act, it is necessary to establish that the ostensible
reason is one attributable to a voluntary act/omission of
the drawer, and that the same is merely a ruse to avoid
payment of the cheque and the real reason is the
insufficiency of funds in the account, or that the amount
of the cheque exceeds the arrangement that the drawer
has with the bank under an agreement.
... ... ...
22. A perusal of the above extract shows that the
Supreme Court consciously used the words "which was
demonstrated by the fact that there was no sufficient balance in
the account to discharge their liability". This observation of the
Supreme Court also reaffirms my view that whatever be the
reason for dishonour of the cheque, it has to be co-
related to the insufficiency of funds in the account or to
the lack of arrangement made by the drawer with his
bank under an agreement.
23. Turning to the facts of the present case, one finds
that the attachment by an order of the Court in this case was
after the alleged issuance of the cheque, but prior to its
presentation for encashment. The attachment of the bank
account of the petitioner had the effect of disabling the
petitioner from operating or maintaining the said
account. The petitioner could not exercise his right either
to deposit into or withdraw from the said account. Even if
it were to be assumed for the sake of argument, that the
cheque was in fact issued in discharge of the petitioner's liability
owed to the respondent, and that at the time of issuance of the
cheque, he did not have sufficient balance in the account, or an
arrangement with his banker, in case the bank account had not
been attached under the orders of a Court, nothing prevented
the petitioner from either depositing money in his account or
entering into an agreement with his bank to arrange for
sufficient funds in the account, to be able to honour the cheque
in question by the date when the said cheque could have been
presented for payment at the earliest. This is so because there
was sufficient time gap i.e of nearly one year and eight months
15
between the date of alleged issue of cheque and the date of its
presentation. As held by the Hon'ble Supreme Court in Modi
Cements (supra), the issuance of the cheque without having
sufficient balance in the account of the drawer does not by itself
tantamount to the commission of an offence u/s 138 of the Act.
However, in the facts of this case, the petitioner could not
have, even if he would have so desired, either deposited
funds in his account or otherwise made arrangements for
the payment of the cheque upon its presentation by
entering into an agreement with the bank, since there
was a Court attachment on the bank account of the
drawer. This Court attachment was by a Court ceased of
the case arising out of FIR No. 283/2005 u/s
406/420/467/468/471 & 120-B IPC registered with P.S.
Connaught Place. The act of attachment of the bank
account of the drawer/petitioner cannot be said to be a
voluntary act of the drawer. It cannot be said that the
petitioner contrived to have the account attached only for
the purpose of warding of the penal consequences u/s
138 of the Act. It also cannot be said that after the
attachment of the bank account, the same was being
maintained by the petitioner. For an account to be
maintained by an account holder, it is essential that he is
in a position to operate the said account by either
depositing monies therein or by withdrawing money
therefrom. He should be in a position to give effective
instructions to his banker with whom the account is
maintained. However, in the present case, once the
account has been attached by an order of the Court, the
said account could not be operated by the petitioner. He
could not have issue any binding instructions to his
banker, and the banker was not obliged to honour any of
his instructions in relation to the said account, so long as
the attachment under the court orders continued."
16
8.2. The High Court of Punjab and Haryana in RAJESH
MEENA v. STATE OF HARYANA2, has held as follows:
".... .... ....
20. A careful analysis of section 138 of the NI Act
reveals that the first and foremost requirement to
maintain the complaint under section 138 of the NI Act is
that the cheque issued by the account holder must be
from the account maintained by account holder with the
drawer-bank for discharge in whole or in part of any debt
or other liability.
21. The expression "account maintained by him" as
appearing in section 138 of the NI Act carries great
significance and meaning. The dictionary meaning of
"maintain" (as contained in Oxford Dictionary) is defined
as : the act of making the state or situation continue.
Therefore, the said expression "account maintained by
him" cannot be construed narrowly to mean that if the
account belongs to the accused, the necessary ingredient
would be complete. This expression "account maintained
by him" must necessarily include that the said account is
not only alive and operative, but the account holder is
capable of executing command to govern the financial
transactions which include the clearance of cheques, etc.
The authority and control of the account holder upon the
account must exist on the effective date, i. e., when the
cheque becomes valid for presentation in the bank. It is
settled law that mere issuance of a cheque is not an offence, but
it becomes punishable when the said cheque is dishonoured.
Mere fact that the record of the drawer bank shows a
particular name as account holder would not be sufficient
to establish that account is being maintained by the
account holder, unless the said account holder holds the
authority and control over the said account. In other
words, if an account holder is deprived of his authority,
control and dominion over the bank account, it cannot be
2
2019 SCC OnLine P & H 6256
17
said that the account is being maintained by the said
account holder.
22. Now while adverting to the facts of this case, it is
evident that the proceedings against the company were initiated
under the provisions of the I and B Code, 2016 and the order in
terms of section 14 of the I and B Code was passed on July 21,
2017. The provisions of the I and B Code, 2016 makes it
absolutely clear that whenever a corporate debtor is
facing the proceedings before the Adjudicating Authority
(National Company Law Tribunal), then the control and
management of the said corporate debtor can be vested
with the interim resolution professional.
23. It is also not disputed by learned counsel for the
parties that Shri Virender Singh already stands appointed as
interim resolution professional who is seized of the management
and operation of the corporate debtor (accused No. 1).
Admittedly, the post dated cheques were given
containing the dates as June 27, 2017 and July 27, 2017
but prior to the effective dates the said account was
blocked, which cannot at all be attributed to the account
holder, as it was a result of the order passed by the
National Company Law Tribunal, New Delhi and therefore,
by virtue of the said order, the authority and control of
the account holder over the account ceased to exist.
24. At this stage, it will be necessary to note the
pleadings in the impugned complaint relating to the legal notice
served by the complainant and the reply sent by the accused.
The relevant pleadings of the complaint reads as under:
"10. That upon receipt of written intimation of
dishonour of cheques of the aforesaid cheques from the
banker of accused, the complainant got served legal
notice dated October 4, 2017 under sections 138, 141
and 142 of the NI Act. Vide this notice, the accused
persons were called upon to make payment of above
said dishonoured cheques to the complainant within a
period of 15 days from the date of receipt of this notice.
The said legal notice was dispatched vide registered
acknowledgment due post dated October 6, 2017 on last
known and correct addresses of the accused persons.
The said legal notice was duly served upon the accused
18
persons on October 9, 2017 in the ordinary course of
postal delivery. The accused persons instead making
payment got issued false and frivolous reply dated
October 16, 2017 through their counsel. The alleged
provision of law as cited in false and frivolous reply
dated October 16, 2017 is not applicable and false
defence has been put forth to evade legitimate payment
of the complainant."
25. A perusal of the above makes it clear that the
complainant did not disclose the contents of the reply dated
October 16, 2017 and drew a veil over this important aspect of
the case.
26. The said reply dated October 16, 2017 (annexure P4)
clearly revealed that because of prohibitory orders by the
National Company Law Tribunal, New Delhi, the account in
question stood blocked and therefore, the request was made to
the complainant to withdraw the legal notice. It was further
requested that as and when the accused would get the
permission to operate the account of the company, the payment
in respect of the cheques in question would be made to the
complainant. It is also relevant to note that the said reply also
contains a specific averment that intervention by the company-
National Company Law Tribunal was conveyed to the
complainant even before the presentation of the cheque and
request was made to the complainant to not to present the
cheque. The reply dated October 16, 2017 (annexure P4) is
reproduced below:
"1. That paragraph No. 1 of your legal notice is
admitted hence needs no reply.
2. That paragraph No. 2 of your legal notice is
correct and admitted.
3. That paragraph No. 3 of your legal notice is
correct and admitted.
4. That paragraph No. 4 of your legal notice is
correct and admitted.
5. That paragraph No. 5 of your legal notice it is
submitted that my client intimated you not to present
the above said cheques because the hon'ble National
19
Company Law Tribunal, New Delhi vide order dated July
21, 2017 have blocked the account as well as moveable
and immovable properties of my client under section 7
of the Insolvency and Bankruptcy Code, 2016 read with
rule 4 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016. The copy of the
order dated July 21, 2017 is attached herewith.
6. That in reply to paragraph No. 6 of your legal
notice it is submitted that my client has replied above in
detail in paragraph No. 5 of the reply.
7. That paragraph No. 7 of your legal notice is
wrong and denied. My client had not guilty intention
from the inception and my client dishonestly with a view
to cause wrongful loss to your client.
8. That paragraph No. 8 of your legal notice is
matter of record.
I through this legal notice all upon you to
advise your client to withdraw the above said legal
notice because my client will pay the amount of
cheques as and when my client do the work and
the hon'ble National Company Law Tribunal, New
Delhi give permission to operate the account of the
company."
27. The above averment in the present petition is not
refuted either by way of filing the reply or by way of oral
arguments. The only stand adopted by the respondent is
that since the cheque is dishonoured, therefore, the
prosecution of the petitioner accused is inevitable. In the
given facts, this court has no hesitation in holding that on
the date when the cheques were presented by the
complainant to the drawee-bank, the account holder was
not maintaining the said account. Resultantly, in the
absence of this material condition it cannot be said that
the offence punishable under section 138 of the NI Act
would be made out.
28. It is true that in one of the cases, i. e., CRM-M
No. 15771 of 2018, the impugned complaint does not
contain the pleading regarding reply to the legal notice
20
but at the same time, it is established that the cheque in
the said complaint was for a date which was subsequent
to the other cheques, and therefore, the response of the
accused was well within the knowledge of the
complainant. Even otherwise, there is no conflict between
the parties regarding the material facts including the
proceedings before the National Company Law Tribunal
and its consequences."
8.3. The High Court of Delhi, again in BEST BUILDWELL
PVT. LTD., v. R.D.SALES3, following the judgment of VIJAY
CHAUDHARY supra holds as follows:
".... .... ....
10. Section 138 of the Negotiable Instruments Act, 1881,
makes it clear that a cheque's dishonour does not automatically
lead to prosecution under the Act. For prosecution to be
initiated, the dishonoured cheque must have been returned
unpaid either due to insufficient funds in the account or because
the cheque exceeds the amount arranged to be paid from the
account by an agreement between the account holder and the
bank. In this context, the dishonour must result from the
account holder's failure to maintain the necessary balance or
limit. This principle has been upheld in the case of Standard
Chartered Bank v. State, 2007 SCC OnLine Del 1105.
11. Perusal of the record indicates that on 18.01.2024,
the Commissioner of the CGST Delhi South Commissionerate
issued a communication to the State Bank of India, provisionally
attaching the petitioner's bank account under Section 83 of
the CGST Act, 2017, and prohibiting any debits without prior
departmental approval (Annexure P3). This order effectively
froze the account and restricted all transactions. The same was
confirmed by the bank's letter dated 03.03.2025, stating that a
"STOP" had been marked on Account No. 41070762619 on
02.02.2024 pursuant to the CGST attachment order dated
3
2025 SCC OnLine Del. 4267
21
22.01.2024, and that no transactions could be permitted until
further instructions were received from the department.
12. Perusal of the reply sent by the petitioner to the legal
notice sent by the respondent indicates further that in January
2024, the respondents approached the petitioners seeking prior
consent as per their mutual understanding regarding the
presentation of the cheques. At that time, the petitioners
informed the respondents about the provisional attachment
order issued by the CGST Department. They clearly
communicated that the bank account had been frozen and no
debits could be made without departmental approval.
13. The Court finds that when the petitioners gave
the cheques to the respondent, they were not aware that
their bank account would be frozen. As soon as they got
the information about the account being attached by the
CGST Department, they informed the respondent to avoid
any trouble for either side.
14. Under Section 138 of the NI Act, an offence is
committed when a cheque is drawn from an account maintained
by the drawer and it is returned unpaid due to insufficient funds.
Even though the cheque return memo may mention its
reason for dishonor as "insufficient funds", the fact
remains that, the petitioners' account was frozen by the
CGST Department, and thus, it could not be said to be
"maintained" by them at the relevant time. Since the
petitioners were unable to operate the account or issue
valid instructions to the bank due to the attachment, the
essential ingredients of Section 138 are not fulfilled. Even
if the funds in the account were insufficient at the time of
presentation of the cheques, the account having been
frozen by the CGST, it would not have been possible for
the petitioner to maintain sufficiency of funds in his
account for the cheques to be honoured. This position
finds support in Vijay Chaudhary v. Gyan Chand
Jain, 2008 SCC OnLine Del 554, where it was inter
alia held as under;
"xxx
22
23. ... For an account to be maintained by an
account holder, it is essential that he is in a
position to operate the said account by either
depositing monies therein or by withdrawing
money therefrom. He should be in a position to
give effective instructions to his banker with
whom the account is maintained. However, in the
present case, once the account has been attached
by an order of the Court, the said account could
not be operated by the petitioner. He could not
have issued any binding instructions to his banker,
and the banker was not obliged to honour any of
his instructions in relation to the said account, so
long as the attachment under the court orders
continued."."
8.4. Again in FARHAD SURI v. PRAVEEN CHOUDHARY4,
the High Court of Delhi holds as follows:
".... .... ....
Whether Dishonour of Cheques due to "ACCOUNT
BLOCKED", would Constitute an Offence Under Section
138 NI Act?:
74. The next aspect which needs to be considered
is whether the cheque dishonoured for the reason Account
Blocked would be covered in the term insufficiency of funds,
as mandated in Section 138 NI Act.
75. To constitute an offence under Section 138 NI Act,
mere issuance of a cheque is not sufficient; it becomes
punishable only when the cheque is dishonoured for the reason
insufficiency of funds. Likewise, merely showing that the
holder of an account with the particular bank would also
not sufficient to show that it is being maintained by the
account holder, unless he has the authority and control
over the said account. If the holder is deprived of his
4
2025 SCC OnLine Del 9198
23
authority and control over the bank account, it cannot be
said that the account was being maintained by him.
76. In the case of Ceasefire Industries
Ltd. v. State, 2017 SCC OnLine Del 8280, Co-ordinate
Bench of this Court observed that it is not every return of
a cheque unpaid which leads to prosecution of an offence
under Section 138 NI Act. It has to be taken into account
that even if the reason given for dishonour of the cheque
is "Account Closed" or "Payment Stopped" it can fall
under Section 138 NI Act, if it is shown that there was
insufficiency of funds in the account of the holder at the
time of presentation of the cheque. The reason for
dishonour of the cheque in the present case is "Account
blocked". Where the dishonour of cheque was for the
reason that the account had been frozen in terms of some
statutory authority, the offence as envisaged in Section
138 NI Act, would not be made out.
77. This aspect was specifically discussed in Rajesh
Meena v. State of Haryana, CRM-M-14537-2018 decided on
01.07.2019 by Punjab & Haryana High Court, wherein it was
noted that the expression "account maintained by him" as
appearing in Section 138 N.I. Act, carries great significance.
The Oxford dictionary meaning of "maintain" is an act of making
the state or situation continue. Therefore, the expression
"account maintained by him" cannot be construed narrowly to
mean that if the account belongs to the accused, the necessary
ingredient would be complete. This expression "account
maintained by him" must necessarily include that the said
account is not only alive and operative, but the account
holder is capable of executing a command to govern the
financial transactions which include the clearance of
cheques etc.. The authority and control of the account
holder upon the account must exist on the effective date
i.e. when the cheque becomes valid for presentation in
the bank. It was thus, held that the term "account
blocked" for the reasons not attributable to the account
holder would not bring the case under Section 138 NI
Act.
78. The impact of NCLT proceedings in the context
of Section 138 NI Act, was examined by the Apex Court in
24
the case of Vishnoo Mittal v. Shakti Trading, (2025) 9 SCC
417, in 2018, wherein the moratorium was imposed and
management of the Corporate Debtor was taken over by
the IRP as per Section 17 IBC (Management of Affairs of
Corporate Debtor by Interim Resolution Professional).
When the Notice was issued to the Appellant in the
Complaint under Section 138 NI Act, he was not in charge
of the Corporate Debtor as he was suspended from his
position as the Director of the Corporate Debtor as soon
as IRP was appointed in 2018. It was thus, held that all
the bank accounts of the Corporate Debtor were
operating under the instructions of the IRP, hence, it was
not possible for the Appellant to repay the amount in
light of Section 17.
79. In the present case as well, the cheques
presented in 2020, were dishonoured with remarks of
"ACCOUNT BLOCKED". The dishonour occurred not due to
insufficiency of funds, but due to statutory prohibition on
payments during winding-up proceedings and
appointment of IRP. This circumstance falls squarely
outside the ambit of Section 138, as the essential
ingredient of dishonour due to inadequate funds, remains
unestablished. Thus, the necessary ingredient to bring
home the offence under Section 138 NI has not been
proved.
80. It is also relevant to note that vide Reply dated
11.12.2020 to the demand notice, the fact regarding liquidation
of the Company had been specifically brought to the notice of
the Complainant. Despite this, the Complaints were filed and the
Ld. MM took cognizance without examining these crucial aspect.
81. To conclude, the dishonour of the cheques on
the ground of "ACCOUNT BLOCKED" due to proceedings
under NCLT and Accounts being taken over by
IRP/Liquidator, precludes liability under Section 138 NI
Act as it cannot be said that he is maintaining the
Account. Therefore, the offence under Section 138 NI Act,
would not be made out."
(Emphasis supplied at each instance)
25
The High Court of Delhi in VIJAY CHAUDHARY supra has in
unequivocal terms held that when the account is attached and
frozen by a Court order, the accused drawer could not have
operated his account. The ostensible reason for dishonouring of the
cheque has to be a voluntary act in the control of the accused and if
the cheque has been dishonoured for being debit frozen it cannot
be the voluntary act of the accused. The accused should be capable
of executing the command to govern financial transaction which
include clearance of cheques. Again, in the case of BEST
BUILDWELL supra, the High Court of Delhi reiterates this issue,
while considering the fact that GST authorities had debit frozen the
account of the accused therein. In RAJESH MEENA supra, the
Punjab and Haryana High Court was considering the issue of the
account being blocked due to the declaration of moratorium under
Section 14 of the Insolvency and Bankruptcy Code, 2016 and the
taking over of the company by the Interim Resolution Professional.
In the case of FARHAD SURI supra, the High Court of Delhi
reiterates RAJESH MEENA supra.
26
9. The learned counsel for the respondent/complainant has
also relied on several judgments of the Apex Court or different High
Courts, all of them were rendered on facts obtaining in those cases.
Most of the cases relied on were on stop payment by the accused or
when payments are stopped by a Court order. The complaint, in a
few cases, was held to be maintainable when cheque was
dishonoured, as it was for the accused to demonstrate that he was
not aware of the freezing of the account when the cheque was
drawn and the account had sufficient balance. The Madras High
Court also in CHALLANI RANK JEWELLERY v. ASHOK KUMAR
JAIN - 2024 SCC OnLine Mad. 10675, considers this issue.
Therefore, the jurisprudence is replete on both quashment of the
proceedings and refusing to quash the proceedings.
10. The judgments quoted hereinabove qua quashment of
proceedings would become applicable to the facts of the case as the
petitioners have demonstrated that, at the time when they issued
the cheque, the account was active and there was sufficient balance
in the account and it is only two months after issuance of the
cheque, the account was debit frozen, which the petitioners were
27
not aware. This is also demonstrated by the reply to the notice
issued by the complainant. In the reply, the petitioners do not aver
about debit freezement, as they were not aware and they became
aware of it only on 26-07-2024, when the communication is
received from the Bank attaching a debit freeze order.
11. With all these dates and the dates connecting the dots,
the very registration of crime against the petitioners would be
rendered unsustainable, as the cheque is dishonoured for stop
payment not for want of sufficient funds, but account block
situation covered in 2125. The Model List of Objections in
ANNEXURE D of the Reserve Bank of India Uniform Regulations and
Rules for Bankers' Clearing Houses, issued on 17-05-2012,
encompasses the various reasons for the return of a dishonoured
cheque. As per the said guidelines, a situation covered under
21 would mean, that the payment is stopped by an
attachment order and covered under 25 would mean, that
withdrawal is stopped in lieu of insolvency of the account
holder. Therefore, it is a situation where the drawer of the cheque
has no control or authority over the account in the case of debit
28
freezement. In order to become liable for offence under Section 138
of the Act, the accused is required to have control over the account
when the cheque becomes due for presentation/realization.
12. In the light of jurisprudence being replete with the
judgments quoted hereinabove, the proceedings cannot be
permitted to be continued. Exercising my jurisdiction under Section
482 of the Cr.P.C., I deem it appropriate to obliterate the
proceedings, failing which, it would result in miscarriage of justice.
13. For the aforesaid reasons, the following:
ORDER
(i) Criminal Petition is allowed.
(ii) Entire proceedings in C.C.No.1446 of 2025 pending
before XIII Additional Chief Judicial Magistrate,
Bengaluru stands quashed.
Sd/-
(M.NAGAPRASANNA)
JUDGE
Bkp
CT:MJ