Khushi Doshi
Published On: March 1, 2022 at 14:05 IST
The Chief Justice of India-led Bench overturned a Rajasthan High Court order that had halted proceedings against the appellant under Section 138 of the Negotiable Instruments Act of 1881.
The Supreme Court recently ruled that if a Cheque is returned by a bank with the endorsement remark ‘Account Frozen,’ the existence of a bank account can be presumed.
A three-Judge Bench of Chief Justice of India (CJI) NV Ramana, Justices AS Bopanna, and Hima Kohli were hearing an appeal against a Rajasthan High Court order that had set aside proceedings in a case under Section 138 of the Negotiable Instruments Act, 1881 against the respondent.
The Apex Court was astonished to note, after perusing the dishonored cheque received by the appellant from the bank, that while the bank managers had specifically deposed that no such bank account was opened and maintained in their bank, the cheque drawn by the respondent in favor of the appellant was returned with the remark ‘account frozen’ in respect of the same cheque.
“The Bank Account has been mentioned on the Cheque and the endorsement to the effect “Account Frozen” will presuppose that an account existed,” the Court said.
The Respondent adamantly argued before the Supreme Court that there was no reason to continue the trial in the case because the appellant had not made out a case against the respondent under Section 138 of the Negotiable Instruments Act, 1881. Taking note of the issues in the case, the Supreme Court directed the trial court to consider them thoroughly, rather than relying solely on the depositions of bank managers.
“The Parties will have to go through a full-fledged Trial. In any event, it was not a matter the Proceedings could have been quashed,” the Court said.
As a result, the Court overturned the Rajasthan High Court order that had quashed the Section 138 proceedings. The Court also ordered the trial court to reopen the case and hear it again as soon as possible, preferably within six months.
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