Cheque Dishonour Not an Offence if Account Blocked Due to Insolvency: Delhi High Court

The Delhi High Court held that dishonour of a cheque does not constitute an offence under Section 138 of the Negotiable Instruments Act when the drawer’s bank account is blocked due to insolvency proceedings.

The Court observed that once insolvency proceedings commence, the account holder loses authority and control over the bank account.

In such a situation, the account cannot be said to be “maintained” by the drawer, which is a mandatory requirement under Section 138.

Accordingly, the Court ruled that criminal liability cannot arise where non-payment results from statutory restrictions imposed during insolvency proceedings.

[Farhad Suri v. Praveen Choudhary]