“Old Cheque” Dishonour Post-Bank Merger: Not a Threshold Bar to Section 138 NI Act Prosecution

1. Introduction

In JASMER SINGH v. SUNITA (Himachal Pradesh High Court, decided on 03.07.2026), the accused (Jasmer Singh) invoked the High Court’s inherent jurisdiction under Section 528 of the Bharatiya Nagrik Suraksha Sanhita, 2023 (the successor to Section 482 CrPC) seeking quashing of a pending complaint under Section 138 of the Negotiable Instruments Act.

The complaint alleged a loan of Rs. 1,30,000 and issuance of a cheque of the same amount. The cheque was returned unpaid with the bank remark “88–Old Cheque” (in the context of the Oriental Bank of Commerce’s merger with Punjab National Bank). The accused argued that Section 138 is attracted only when dishonour is for insufficient funds (or exceeding arrangement), and that “old cheque” is outside the statutory text—rendering the complaint not maintainable.

The core issue before the High Court was therefore a threshold maintainability question: whether a Section 138 prosecution can be quashed at inception when the return memo reads “old cheque”, especially where the accused admits issuance/signature and the “old cheque” endorsement arises in a merger-transition context.

2. Summary of the Judgment

The High Court dismissed the quashing petition. It held that:

  • The High Court’s power under Section 528 BNSS (Section 482 CrPC equivalent) is wide but must be used sparingly, particularly where the matter involves disputed questions of fact.
  • In light of M/s Laxmi Dyechem V. State of Gujarat and Ors, (2012) 13 SCC 375, the phrase “insufficient funds” in Section 138 cannot be read narrowly; it is a genus and other reasons of dishonour may fall within its ambit depending on the factual matrix and the object of the statute.
  • Whether the accused had sufficient funds at the material time, and whether the merger/cheque validity issues affect liability, are matters that must be adjudicated at trial.
  • The complainant cannot be non-suited at the threshold merely because the endorsement is “old cheque”, particularly when the cheque was admittedly issued and the accused’s account continued despite merger.

3. Analysis

3.1 Precedents Cited (and Their Influence)

A. Quashing / inherent powers jurisprudence

The Court grounded its approach to Section 528 BNSS in the settled Supreme Court framework on quashing:

B. Section 138 NI Act: scope of “insufficient funds” and dishonour reasons

  • M/s Laxmi Dyechem V. State of Gujarat and Ors, (2012) 13 SCC 375: This was the decisive authority. The High Court relied heavily on Laxmi Dyechem’s holding that the phrase “amount of money…is insufficient” is a genus and dishonour reasons such as “account closed”, “payment stopped”, “referred to the drawer”, “signature do not match” or “image not found” are species within the genus. It also relied on Laxmi Dyechem’s emphasis that Section 138 should not be read with a narrow literalism that defeats its object.
  • M.M.T.C. Ltd. and Anr v. Medchl Chemical and Pharma (P) Ltd. And Anr., (2002) 1 SCC 234 (as quoted in Laxmi Dyechem): Strengthens the idea that even “stop payment” dishonour can attract Section 138, subject to rebuttal; the burden shifts to the accused to show sufficient funds and a valid cause. The High Court used this logic to justify that “old cheque” dishonour cannot be a per se bar—defences must be tested at trial.
  • Vinod Tanna & Anr. Vs. Zaher Siddiqui & Ors. (2002) 7 SCC 541: Cited by the accused to argue that reasons other than insufficiency do not attract Section 138. The High Court noted that Laxmi Dyechem took note of Vinod Tanna and “virtually differed” from that earlier view, signalling that Vinod Tanna cannot be used to compel a narrow exclusion at the threshold.

C. High Court decisions on merger/invalid cheque-leaf scenarios

Although not binding Supreme Court precedent, the Court used Punjab & Haryana High Court decisions as persuasive support that “merger/invalid cheque” contentions generally raise trial issues, not quashing issues:

  • Surjit Kumar Vs. Sunil Kumar Dalmia (CRM-M No.51125/2023, decided on 09.10.2023): Held that where issuance/signature and liability are not seriously disputed, “merger/cheque not acceptable” and “misuse” are matters for trial; Section 139 presumption supports summoning.
  • Balkour Singh Vs. State of Punjab and others (CRM-M No.36565/2019): Treated merger-related invalidation as disputed fact; also relied on NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253 for “account closed” dishonour being within Section 138; and drew on In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. (2008) 13 SCC 678 to caution against deciding plausible defences under Section 482 at the pre-trial stage.
  • M/s K.K. Tractors and Ors. Vs. M/s Mahindra and Mahindra Limited (CRM-M No.17555 of 2022): Reiterated that annexures in Section 482 petitions are not “evidence” unless proved; relied on State of Madhya Pradesh v. Awadh Kishore Gupta 2004(1) RCR (Criminal) 233 and Chand Dhawan (Smt.) v. JawaharLal and Ors. (1992(3) SCC 317) to resist quashing based on unproved material.

D. The accused’s reliance on strict construction

  • Balaji Traders Vs. State of Uttar Pradesh & Anr. (2025) 10 Supreme Court Cases 638: Invoked to argue against expanding statutory text absent compelling language. The High Court distinguished it as contextually different and held that, on Section 138 specifically, Laxmi Dyechem controls and requires a wider, object-consistent reading.

3.2 Legal Reasoning

  1. Admitted issuance/signature narrowed the controversy: The Court noted there was no specific denial as to issuance of the cheque and signatures. In Section 138 litigation, this typically triggers statutory presumptions (notably under Section 139, as discussed through Laxmi Dyechem/MMTC).
  2. “Old cheque” dishonour cannot automatically negate Section 138 at inception: The Court accepted that Section 138 text speaks of insufficiency/exceeding arrangement, but held that the controlling interpretive approach is that the insufficiency limb is a genus (per Laxmi Dyechem), and dishonour reasons that operationally defeat payment may still be prosecuted, subject to trial safeguards (notice, opportunity to pay, rebuttable presumption, and proof of legally enforceable debt).
  3. Merger-driven “old cheque” concerns raise mixed questions of fact and law: The Court emphasised that:
    • the complainant cannot reasonably be expected to know the technical/legal consequences of bank amalgamation;
    • questions about whether the merged bank was obliged to honour the cheque, and what merger terms govern the cheque-leaf validity, require evidence;
    • the relevant inquiry—whether the drawer had sufficient funds and whether the dishonour was effectively attributable to drawer conduct—cannot be conclusively decided in a quashing petition.
  4. Quashing jurisdiction is not a substitute for trial: The Court treated the accused’s argument as a defence that must be tested on evidence. In particular, “old cheque” could reflect mere technicality, bank practice, or drawer strategy; the court refused to determine these without a full evidentiary record.
  5. Object of Sections 138–142: preventing abuse via cheque dishonour: Echoing the policy dimension highlighted in Laxmi Dyechem, the Court refused to allow “old cheque” to become a ready-made escape route where the drawer’s account continued and the cheque was admittedly issued for liability.

3.3 Impact

This decision is likely to influence Section 138 litigation in at least four ways:

  • Bank-merger dishonour memos (“old cheque”) will rarely justify quashing at the threshold: Accused persons may still raise merger/validity defences, but courts are likely to treat them as trial issues unless the record makes the prosecution inherently untenable.
  • Functional approach to dishonour reasons: The endorsement text on the return memo will not be treated as conclusive of maintainability; courts may look at whether the dishonour fits within the broader genus contemplated by Section 138 as interpreted in Laxmi Dyechem.
  • Reinforcement of Section 528 BNSS continuity with Section 482 CrPC: The judgment operationally confirms that the doctrinal constraints and categories developed under Section 482 CrPC remain central under Section 528 BNSS.
  • Compliance and risk allocation post-merger: Drawers who knowingly issue outdated cheque leaves from merged banks may find it harder to argue maintainability objections at the outset; conversely, banks’ endorsement practices may come under scrutiny at trial where obligations under merger schemes are contested.

4. Complex Concepts Simplified

Section 528 BNSS (earlier Section 482 CrPC) “inherent powers”
A high court’s limited supervisory power to stop criminal proceedings at an early stage, but only in exceptional cases— typically where the complaint is absurd on its face, legally barred, or clearly an abuse of process. It is not meant to decide disputed facts.
Section 138 NI Act: “insufficient funds” as “genus”
A “genus” is a broad category. Under Laxmi Dyechem, “insufficient funds” is treated as a broad category that can include certain dishonours that, in substance, defeat payment in a manner akin to insufficiency (e.g., “account closed”, “stop payment”), provided statutory safeguards (notice and opportunity to pay) are respected and defences remain available.
Section 139 NI Act presumption (rebuttable)
Once issuance/signature is established, the law presumes the cheque was issued for a legally enforceable debt/liability. The accused may rebut it by leading evidence (for example, showing no debt existed, or that funds were sufficient and dishonour occurred for a valid reason not attracting Section 138).
“Disputed questions of fact”
Questions that cannot be resolved merely by reading the complaint/return memo (e.g., whether funds existed, whether the bank was obliged to honour an “old” cheque after merger, whether the drawer acted strategically). Courts usually require trial evidence to decide these.

5. Conclusion

JASMER SINGH v. SUNITA confirms that a Section 138 complaint is not liable to be quashed merely because the return memo states “88–Old Cheque”, particularly where cheque issuance/signature is not disputed and the “old cheque” endorsement arises in a bank-merger setting. Guided by M/s Laxmi Dyechem V. State of Gujarat and Ors, (2012) 13 SCC 375, the High Court rejected a narrow literal approach at the quashing stage and treated merger/validity and sufficiency-of-funds issues as matters for trial.

The broader significance lies in the judgment’s message that technical banking endorsements—especially in transitional merger contexts—should not become automatic immunity shields from Section 138 prosecution; instead, courts will generally prefer a fact-led adjudication consistent with the statute’s anti-abuse purpose and the rebuttable-presumption framework.