Gujarat High Court
Agarval Polysacks Limited vs State Of Gujarat on 27 June, 2025
Author: Nirzar S. Desai
Bench: Nirzar S. Desai
NEUTRAL CITATION
R/CR.MA/24845/2024 ORDER DATED: 27/06/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 24845 of 2024
With
R/CRIMINAL MISC.APPLICATION NO. 24846 of 2024
With
R/CRIMINAL MISC.APPLICATION NO. 25196 of 2024
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AGARVAL POLYSACKS LIMITED & ORS.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR ANVESH V VYAS(5654) for the Applicant(s) No. 1,2,3,4
MR VIRAL M PANDYA(5257) for the Respondent(s) No. 2
MR HARDIK MEHTA, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE NIRZAR S. DESAI
Date : 27/06/2025
COMMON ORAL ORDER
1. Heard learned advocate Mr. Anvesh Vyas for the petitioner and learned APP Mr. Hardik Mehta and learned advocate Mr. Viral M. Pandya for private complainant. As both the learned advocates have agreed that the parties in respect of all the 3 petitions are same and the 3 petitions arise out of same transaction, hence, all 3 matters are taken up together and now being decided together. However, the facts are taken from Criminal Misc. Application No.24845 of 2024 and therefore, the same was treated as a lead matter.
2. By way of this petition, the petitioner has prayed for Page 1 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined quashing and setting aside the complaint filed by respondent No.2 for the offences under Section 138 of Negotiable Instrument Act and all consequential proceedings arise out it qua the applicant i.e. Criminal Case No.3043 of 2019 pending before Court of Learned Chief Judicial Magistrate, Mehsana.
3. The facts of Criminal Misc. Application No.24845 of 2024 is that as per the complainant, the applicant is a proprietary firm and there were business transactions between complainant and the present petitioners and the present petitioner No.1 is a company with whom the complainant was having business relations and petitioners No.2, 3 and 4 are the directors of the petitioner No.1 company. On account of business transactions between the parties, the goods were sent to the petitioners, some part payments were made and some payments were kept outstanding. When the complainant asked for the outstanding amount, the petitioner No.3 has given a cheque drawn on State Bank of Jaipur and Bikaner at Jodhpur for an amount of Rs.5,00,000/- bearing cheque No. 295974 dated 04.02.2019 and the same was sent by petitioner No.1 towards the outstanding and handed over to the complainant.
4. When the aforesaid cheque was deposited, same was returned with an endorsement by the bank on 05.02.2019 to the extent of "fund insufficient". Upon knowing that the cheque has been returned, the petitioner No.3 was called and an assurance was given that upon re-depositing the cheque on 13.03.2019, he will get his money. When again the cheque was deposited, the Page 2 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined same was returned on 13.03.2019 with an endorsement "stop payment by drawer" and therefore the petitioner was given a notice by the complainant on 29.03.2019 which was served upon petitioner on 02.04.2019 and thereafter, the present petitioners replied to the aforesaid notice vide reply dated 28.04.2019 and did not pay the amount, that is how, the complainant was constrained to file complaint under Section 138 of Negotiable Instrument Act being Criminal Complaint No.3042 of 2019, wherein the process was issued and thereafter the present petition is filed for quashing and setting aside the proceedings pending before the Court of Learned Chief Judicial Magistrate, Mehsana.
5. In Criminal Misc. Application No.24846 of 2024, the facts are same. However, the cheque issued by the present petitioner was cheque No.295975 drawn on State Bank of Bikaner and Jaipur to the tune of Rs.5,00,000/-.
6. In respect of the third petition also i.e. Criminal Misc. Application No.25196 of 2024, the facts are same. However, the cheque number was 295976 and the same was drawn to the tune of Rs.7,12,235/-.
7. Learned advocate Mr. Vyas submitted that the cheque which was returned was drawn on State Bank of Bikaner and Jaipur which had merged with State Bank of India at the time when the cheque was presented and, therefore, the cheque was invalid and therefore, the same would not attract provisions Page 3 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined under Section 138 of Negotiable Instrument Act as the cheque itself was invalid. Mr. Vyas relied upon 3 judgments which are as under:
7.1 First decision is by the Learned Single Judge of Allahabad High Court in Application (under Section 482) No. 9536 of 2024 wherein the Allahabad High Court vide decision dated 05.06.2024 in case of Smt. Archana Singh Gautam Vs. State of Uttar Pradesh and Others in Para Nos.9 and 11 observed that a cheque dated 02.06.2023 of Erstwhile Allahabad Bank was presented to the Indian Bank on 21.08.2023 and the same was returned on 25.08.2023 with the endorsement "wrongly delivered not drawn on us" and therefore the cheque in question was invalid on the date of presentation before the Indian Bank and therefore the proceedings were quashed on the ground that in view of merger of the Allahabad Bank with Indian Bank, the cheque was not valid on the date of presentation before the Indian Bank as required by proviso (a) of Section 138 of Negotiable Instrument Act and, therefore, dishonoring the same will not attract any liability under Section 134 of Negotiable Instrument Act.
7.2 Another decision relied upon by learned advocate Mr. Anvesh Vyas is by High Court of Andhra Pradesh at Amravati in Criminal Petition No.8827 of 2022 wherein also relying upon the decision in case of Smt. Archana Singh Gautam(Supra), the Andhra Pradesh High Court took a similar view and quashed and set aside the complaint.Page 4 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025
NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined 7.3 Lastly, learned advocate Mr. Anvesh Vyas relied upon a decision of High Court of Delhi at New Delhi in case of M/S Best Buildwell Private Limited and others Vs. M/s R D Sales in CRL.M.C. 1326/2025 & CRL.M.C. 5870/2025 and there also relying upon paragraph No.14 of the aforesaid decision, learned advocate Mr. Vyas submitted that though in the instant case, the cheque of the petitioner was dishonored on ground of "insufficient fund" the Court considers that the petitioner's 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 instrument to the bank, due to the attachment, the essential ingredient to Section 138 are not fulfilled.
8. By relying upon aforesaid three decisions, learned advocate Mr. Vyas prayed for quashing and setting aside the Criminal Complaint in respect all three cheques which are referred by three different petitions.
9. Except above submissions, no other submissions were made by learned advocate Mr. Vyas nor any other judgment was relied upon learned advocate by Mr. Vyas.
10. Learned advocate Mr. Viral Pandya for the respondent vehemently opposed the present petition and submitted that there is a difference between invalid cheque and a valid cheque which is not accepted by the bank on the ground of invalid cheque and insufficient fund. He submitted that when an invalid Page 5 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined cheque is presented, the bank which it is drawn returns the cheque with an endorsement of invalid cheque without even verifying whether the account on which the cheque is drawn has sufficient fund or not, whether the cheque is stopped for payment or not and all other reasons for which the cheque which may be valid could be returned. He submitted that in the instant case, the cheque has been returned with an endorsement "insufficient fund" would mean that the cheque was considered to be valid. It is on account of insufficiency of fund that the cheque was returned. Mr. Pandya submitted that not only when the cheque was presented again, the same was returned with an endorsement "payment stopped by the drawer" which would indicate that the prima facie intention of the present petitioner was not to repay the amount and the cheque was not held to be invalid because had the cheque been invalid, then the bank would not have carried out the exercise of reaching upto account of the petitioner and verify that whether the amount for which the cheque is drawn, contains that much amount or not. In the first instance, the cheque returned with "insufficient fund" and on the second occasion, the same was returned with an endorsement "stopped payment by drawer" would indicate the prima facie intention of the petitioner of not to pay the legitimate dues of the present complainant and therefore the aforesaid judgments relied upon by learned advocate Mr. Vyas would not be applicable in the facts of the case as the reason for dishonoring the cheque was different in both the matters.
11. I have heard learned advocates for the parties and perused Page 6 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined the record. I have also considered that learned advocate Mr. Vyas has built up his entire argument only on one submission that the date on which the cheque was presented, the said cheque was invalid and therefore there should not be any proceedings under Section 138 of Negotiable Instrument Act against the present petitioners.
12. In all three petitions, the cheques were returned with the endorsements "insufficient fund" and in the third petition that is in Criminal Misc. Application No.25196 of 2024 as it seems from record, the same was not deposited second time. So the facts in all three cases are same and therefore the Court has to examine that whether when a merger has taken place and if the cheque is not returned by bank on the ground of "cheque invalid" and returned the cheque with an endorsement of "fund insufficient"
or "payment stopped by drawer", in that case, in view of judgment relied upon by leaned advocate Mr. Vyas, can the proceedings under section 138 of Negotiable Instrument Act be said to be valid or not.
13. In case of Smt. Archana Singh Gautam Vs. State of Uttar Pradesh and Others, the High Court of Judicature at Allahabad in its decision dated 05.06.2024 in para No.9, observed as under:
"9. In the present case, a cheque dated 02.06.2023 of erstwhile Allahabad Bank was presented to the Indian Bank on 21.08.2023, and the same was returned on 25.08.2023 with the endorsement "wrongly delivered not drawn on us". Therefore, the cheque in question was invalid on the date of Page 7 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined presentation before the Indian Bank."
14. The aforesaid decision was followed in decision in case of Mrs. Ghatna Kavitha Devi Vs. the State of Andhra Pradesh in petition No.8827 of 2022 by the High Court of Andhra Pradesh at Amaravati. The third decision which was relied upon by the learned advocate Mr. Vyas was in the case of M/S Best Buildwell Private Limited (Supra), the Delhi High Court in para No. 14, though the fact was different, the Court had observed that even though cheque return memo may mention its reason for dishonor as "insufficient funds", the fact remains that the petitioner's account was frozen by the CGST Department and thus it could not be said to be maintained by them at the relevant point of time and as the petitioner was unable to operate his account, all issue valid instrument valid to the bank due to attachment, the essential ingredients of Section 138 of Negotiable Instrument Act are not fulfilled and therefore, in all these three decisions, the complaints were quashed.
15. In the instant case, the record indicates that the petitioner's cheque was never returned on the basis of fact that the cheque was found to be invalid on account of merger or otherwise. On the contrary, in all three complaints, the cheque was again presented upon an assurance given by the petitioner that the cheque would be accepted and cleared on second occasion and again, when the cheque was presented, the same was returned with an endorsement "drawer has stopped payment" which also would indicate the intention of the present Page 8 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined petitioner. Considering the fact that, except for the fact that the petitioner has pleaded that the State Bank of Bikaner and Jaipur has merged with State bank of India, there is no other material on record to indicate that the date, on which the cheque was presented, the same was invalid and more particularly when the same was presented second time, then also, the cheque was not only accepted but it was found that for the aforesaid cheque, stop payment was made by the drawer of the cheque, which would indicate that on both the occasions, the bank did not find on account of merger between State Bank of Bikaner and Jaipur and State of India, the cheque issued by State Bank of Bikaner and Jaipur have become invalid after particular period. Accordingly, when the cheques are returned with an endorsement "fund insufficient" and "payment stopped by drawer", I do not see any reason to consider that fact that on account of merger between State Bank of Bikaner and Jaipur, the petitioner's cheque deposited by the complainant has become invalid. There is no material on record to indicate that, beyond a particular date, the cheque would become invalid and also to the fact that the cheque was issued by the petitioner after the aforesaid date and therefore, when prima facie case is made out that there was a business transactions between petitioner and complainant for which the petitioner has given three different cheques towards the final payment of the goods purchased by him and though the cheques were deposited twice, the same was not returned with an endorsement of "cheque invalid". I have reason to believe that no case is made out for interference with the ongoing trail. In view of discussion above, as the cheque was Page 9 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined returned on the ground of "fund insufficient" on first occasion and on second occasion, on the ground of "stopped payment by drawer", I'm not in a position to accept the submission made by learned advocate Mr, Anvesh Vyas that the cheque was invalid at the relevant point of time and therefore, the complaint under Section 138 of Negotiable Instrument Act would not be maintainable and therefore, the same may be quashed and set aside.
16. Learned advocate Mr. Viral Pandya relied upon the decision of this Court in case of Bhikhaji Laljibhai Patel Vs. State of Gujarat, dated 28.04.2023 in Criminal Misc. Application No. 307 of 2014 and by relying upon Para 8 of the aforesaid decision, submitted that to decide the contentions raised by the petitioner which are identical in nature as compared to the aforesaid decision, are disputed question of facts and same can be considered only at the stage of trial and therefore, the petition may be required to be dismissed. Even otherwise, the Co- ordinate Bench of this Court in case of Bhikhabhai Laljibhai Patel (Supra) in Para 8 observed as under:
"8. Undisputedly, all the contentions raised by the petitioner herein above are disputed issues and there the question of fact would be determined by the learned trial Court after recording evidence. Whether Khedbrahma Nagrik Sahkari Bank Limited in which the petitioner has maintained his account was merged with Janta Sahkari Bank Limited and the clearing house was not aware of the said aspect or whether the cheque has not been returned for the purpose of Fund Insufficient are all disputed questions of fact and can be decided after recording the evidence. When the learned trial Court has issued process, before the Page 10 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025 NEUTRAL CITATION R/CR.MA/24845/2024 ORDER DATED: 27/06/2025 undefined learned trial Court it was on bank return memo, which was indicated that the cheque in question was returned unpaid due to Fund Insufficient and upon such, the learned trial Court has issued process against the petitioner accused. In this given facts and circumstances, this Court cannot come to the conclusion that prima facie case is not made out and that too under extraordinary jurisdiction vested in section 482 of the Code."
17. Similar view is expressed by the Delhi High Court in CRL.M.C. No.1566 of 2023 and CRL.M.A. Nos. 5958 and 12000 of 2023 in case of Shri Premanand Prusty Vs. Smt. Sita Devi vide its decision dated 17.11.2023.
18. In view of above, as the petitioner's cheque can be said to be valid or invalid, it is a matter of evidence which can be decided at the stage of trial. I do not see any reason to interfere with the process of ongoing trial. Therefore, all these petitions are required to be dismissed and the same are dismissed. Notice stands discharged. No order as to cost. Interim relief granted earlier, if any, stands vacated.
(NIRZAR S. DESAI,J) AHS Page 11 of 11 Uploaded by MR.AMIT HEMANTKUMAR SONAGARA(HCD0079) on Mon Jul 07 2025 Downloaded on : Fri Jul 11 22:23:08 IST 2025