Cheque Bounce, S.138 of Negotiable Instruments Act, 1881 and Effect of Frozen Bank Accounts : Explained in a Recent Judgment

Cheque Bounce, S.138 of Negotiable Instruments Act, 1881 and Effect of Frozen Bank Accounts : Explained in a Recent Judgment

Best Buildwell Pvt Ltd v. R.D. Sales [2025] GCtR 1409 (Delhi) has held that under Section 138 of the Negotiable Instruments Act, 1881 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.