RBI-Directed Account Closure No Defence In Cheque Dishonour Cases With Low Funds: Delhi High Court

The Delhi High Court on 30 October held that an accused cannot escape liability under Section 138 of the Negotiable Instruments Act, 1881, merely because the bank closed the account on the Reserve Bank of India's (RBI) instructions, when the account lacked sufficient funds to honour the cheques.

Justice Mini Pushkarna dismissed petitions filed by CH Lekh Raj Educational and Charitable Trust and others challenging a Trial Court order rejecting their application to summon bank officials as defence witnesses in cheque dishonour proceedings. The Bench observed:

“Accordingly, it is clear that even if the account was closed on the instructions of the bank, the petitioners did not have sufficient amounts in their account.”

S.A. Infotech Private Limited had filed multiple complaints under Section 138 of the NI Act, alleging that the petitioners had issued cheques that were returned with the remark 'Account Closed'. The respondent claimed that the petitioners had issued 30 cheques, leading to 29 complaints, and owed approximately Rs. 2.5 crore.

The petitioners contended that they had not voluntarily closed their bank account with the State Bank of India's Yamuna Nagar Branch in Haryana. They claimed that the bank had closed the account pursuant to RBI instructions and circulars.

They also relied on a letter that they claimed to have traced recently to establish the circumstances surrounding the closure. They sought to summon the concerned bank officials and produce relevant bank records to show that the bank had closed the account under directions from a competent authority.

The Judicial Magistrate rejected their application. The petitioners then approached the High Court, seeking to challenge the order.

The Court noted that the petitioners had sought to reopen their defence evidence only after the matter had reached the stage of judgment before the Trial Court. It also noted that the Trial Court had recorded a balance of only Rs. 8,383 in the account when the bank closed it, which was grossly insufficient to honour the cheques.

Distinguishing the judgments relied upon by the petitioners, the Bench observed that those cases did not involve circumstances where the account balance was grossly insufficient to honour the cheques. It added:

“...even if it were to be taken that the accounts were not closed by the petitioners, but under the instructions of the RBI, no benefit would accrue in favour of the petitioners”.

Accordingly, the High Court dismissed the petitions, finding no infirmity in the Trial Court's order.

For Petitioners: Advocates Anjaneya Mishra and Nidish Gupta

For Respondent: Advocates Ashish Kr.Gupta, Anuj Kumar, Sachin and Pooja