Allahabad High Court rules that prosecution under Section 138 NI Act fails if cheque was stolen.
The Allahabad High Court quashed criminal proceedings under Section 138 of the Negotiable Instruments Act against an accused where the cheque in question was reported stolen and used without authorization.
The Court ruled that the foundation of a Section 138 case lies in a legally enforceable debt and the drawer’s voluntary issuance of the instrument. A stolen cheque lacks these elements and cannot form the basis for prosecution.
The use of a stolen cheque does not create liability under Section 138 unless the holder establishes that it was issued for a lawful consideration and with consent.The decision protects individuals from misuse of banking instruments and aligns with the Banker’s Book Evidence Act and principles of negotiable instrument law.