Will old cheques remain valid after a bank merger? High Court delivers a major verdict

Do cheques issued to customers remain valid after two banks merge? The Karnataka High Court recently delivered a significant ruling on this matter, clarifying whether or not such a cheque would be considered invalid.

Are cheques held by customers valid following the merger of two banks? Has this question ever crossed your mind? If so, the Karnataka High Court has recently provided the answer. The court heard a case involving this very issue and ruled that if a bank merges with another, a cheque previously issued by the former does not become invalid simply because of the merger. Following a merger, the assets, liabilities, and customer accounts of the old bank are transferred to the new banking entity.

This case pertains to the merger of Vijaya Bank and Bank of Baroda, which took place in 2019. Subsequently, a woman presented a cheque issued from a Vijaya Bank account to Bank of Baroda, but it was not accepted for payment.

What is the full story?

A woman had issued a Vijaya Bank cheque to another woman, but Bank of Baroda refused to honor it, deeming it invalid. The matter was then brought before the Karnataka High Court. Justice Govindaraj, who heard the case, ruled in favor of the woman who held the cheque.

Cheque was not given to the complainant

The woman who issued the cheque argued in court that she had not given it to the complainant. She claimed the cheque had been lost and subsequently misused. She further argued that since Vijaya Bank no longer exists, a cheque issued by it should not be considered valid.

High Court rejected the argument

The Karnataka High Court did not accept this argument. The Court noted that there is no dispute regarding the fact that the woman held an account with Vijaya Bank and that the cheque in question was linked to that account; following the bank's merger, the responsibility for that account had passed to the Bank of Baroda.

The Court further observed that the issue of whether the woman had actually issued the cheque or if it had been lost and subsequently misused would be determined by the trial court based on evidence. Consequently, the High Court refused to quash the legal proceedings pending against her.