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NI Act - Cheque returned as account is closed

In K.S. Rajesh Vs. K.M. Basheer, the Kerela High Court held that under NI Act, when cheque is returned by the bank with the endorsement “No account, account closed”, offence is attracted where the bank account is closed prior to the drawal of the cheque.

The Hon'ble court further held that the Apex Court in Laxmi Dyechem v. State of Gujarat and others reported in (2012) 13 SCC 375 has held that even when a cheque is returned for any other reasons such as “account closed, payment stopped, refer to drawer, signature does not match”, etc., in each case Sec.138 of the Negotiable Instruments Act will be attracted and that insufficiency of funds as envisaged in Sec.138 of the NI Act is a genus and dishonour for reason of “accounts closed”, “payment stopped”, “referred to drawer,” etc are only species of that genus, etc. Therefore it appears that the judgment dated 5/7/2016 of a learned Single Judge of this Court in Muralidharan V. v. V.A. Kumaran and Another (2016 (3) KHC 845) has been rendered without taking into account the afore cited decisions of the Division Bench and Single Bench of this Court, on the above said point. So the above said later judgment rendered on 5/07/2016 by the learned Single Judge in Muralidharan’s case reported in 2016 (3) KHC 845 does not reflect the correct legal position, to the limited extent that Sec.138 offence is not attracted, where the bank account is closed prior to the drawal of the cheque, inasmuch as it has not reckoned the earlier judgments of the Division Bench and that of the learned Single Judge referred to hereinabove, on the said point.

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