Cheque doesn’t become invalid after banks merge: Karnataka High Court

Leelavathi Venkatesh Punjali initiated proceedings against Bhadramma under Section 138 of the Negotiable Instruments Act after Bank of Baroda told her it could not honour the cheque because Vijaya Bank no longer existed.

Bhadramma argued in her petition that she had not issued the cheque to Leelavathi, whom she also accused of misusing a cheque she had misplaced.

Further, she argued that she committed no offence because, as per Bank of Baroda, the cheque presented for realisation was from a non-existent bank.

The high court, however, held that the facts that Bhadramma had maintained an account with Vijaya Bank and the cheque was related to it were not disputed.

Cheque dishonour proceedings to continue

The high court thus refused to quash the proceedings against Bhadramma and said the claim that she had misplaced the cheque would have to be proved during trial.

“The bank account maintained by the petitioner with Vijaya Bank gets transferred to the Bank of Baroda, which is the resultant entity on account of the said merger. The Bank of Baroda having taken over the bank accounts, the credit standing in the said accounts and the assets and liabilities of Vijaya Bank, it cannot be said that the account itself has vanished requiring the cheque not to be honoured,” it said.

Observing that neither Vijaya Bank nor Bank of Baroda could have issued such a statement to Leelavathi, the court held, “The bank having been merged, the accounts have been taken over by Bank of Baroda, it was for Bank of Baroda to service the said account holders, which would include the petitioner herein.”