The Substance Of Transaction Is Determinative: Kerala High Court Refuses To Quash NI Act Complaint Instituted On Basis Of Withdrawal Slip Of Co-Operative Society
An accused booked in a case registered under the Negotiable Instruments Act had approached the Kerala High Court.
Justice CS Dias, Kerala High Court
While refusing to quash proceedings in a cheque bounce case instituted on the basis of a withdrawal slip of a co-operative society, the Kerala High Court has held that if an instrument operates as a mandate for payment drawn on an account maintained with an institution carrying on banking functions, it would fall within the ambit of the Negotiable Instruments Act.
The petitioner, an accused in a case registered under Section 138 of the Negotiable Instruments Act, 1881, had approached the High Court seeking quashing of a complaint.
The Single Bench of Justice C.S. Dias held, “In the light of the authoritative pronouncements in the above-referred decisions, the contention advanced by the petitioner that the Society is not a “banker” and that the instrument in question cannot be treated as a cheque is devoid of any merit. The substance of the transaction, and not its form or nomenclature, is determinative. If the instrument operates as a mandate for payment drawn on an account maintained with an institution carrying on banking functions, it would fall within the ambit of the N.I. Act.”
Advocate C.S. Bissimon represented the Petitioner while Advocate Jacob Sebastian represented the Respondent.
Arguments
It was the case of the petitioner that the document produced along with the complaint was not a cheque, but a withdrawal slip of the Kanjirapally Central Service Co-operative Bank Ltd. (Society). According to the petitioner, the respondent had surreptitiously taken possession of the said withdrawal slip, manipulated it into a cheque, presented it for encashment, and, upon its dishonour, filed the present complaint.
Reasoning
The Bench, at the outset, referred to the judgment in Upendra Kumar v. Don Finance Corporation, Mangalore (2009)wherein it has been held that cooperative societies carrying on banking business, notwithstanding the absence of a profit motive or formal licensing under the Regulation Act, would fall within the ambit of a “banker” for the purposes of the N.I. Act. Consequently, instruments drawn on such institutions, including withdrawal slips operating as payment mandates, cannot be excluded from the sweep of the Act merely on technical nomenclature.
The Bench thus rejected the contention advanced by the petitioner that the Society is not a “banker” and that the instrument in question cannot be treated as a cheque. It further held that if the instrument operates as a mandate for payment drawn on an account maintained with an institution carrying on banking functions, it would fall within the ambit of the N.I. Act.
Thus, dismissing the Petition, the Bench stated, “However, it is made clear that the petitioner would be at liberty to raise all other legally permissible defences before the Trial Court.”
Cause Title: Clara Dominic v. Tomy Eapen (Neutral Citation: 2026:KER:26925)
Appearance
Petitioner: Advocate C.S. Bissimon
Respondent: Advocates Jacob Sebastian, Shamseera. C. Ashraf, Winston K.V, Anu Jacob, Anjana Krishnan, Vincent C. J.