Banking Law - Case Laws

New Central Hall Vs United Commercial Bank Ltd.

Jogendra Nath Chakrawarti Vs New Bengal Bank Limited

Gyan Chand Kotia Vs Indian Renewable Energy Developement

Agency Ltd.

D Ramamoorthi Vs K J Duraiswamy

Altaf Ahmed Vs Minerals and Metal Trading Corp.

Goaplast Pvt. Ltd. vs. Shri Chico Ursula DSouza and Anr.

Negotiable Instrument Act, 1881-Section 138-Applicability of

To a case in which a person issuing a post-dated cheque-Stops its
payment by issuing instructions to the drawee bank-Before the due
date of payment-Held-Section 138 of the Act will be attracted.

M/s Unique Butyle Tube Industries Pvt. Ltd. Vs. U.P. Financial
Corporation & Ors.

Recovery of Debts Due to Bank and Financial Institutions Act,

1993-Section 34(2)-Proceedings for recovery initiated by U.P.
Financial Corporation-Under the U.P. Public Monies (Recovery of
Dues) Act, 1972 are not maintainable-In view of Section 34(2) of
the Recovery of Debts Due to Bank and Financial Institution Act,
1993.

Bank of India & Ors. Vs. O.P. Swaranakar Etc.

Employees Voluntary Retirement Scheme (VRS)-Nature of-

Held-Not a proposal or an offer-But merely an invitation to treat
and application filed by the employees constituted offer.

Employees Voluntary Retirement Scheme (VRS)- Ex gratia

payment- Acceptance of-Held-A group of employees accepted the ex
gratia payment or any other benefits under the Scheme-They could
not have resiled therefrom.
 Punjab National Bank (Employees) Pension Regulation, 1995-
Regulation 19(4)-Employees Voluntary Retirement Scheme (VRS)-
Validity of-Held-Scheme not ultra vires being violative of said sub-
section-Because Scheme is not a part of statutory regulation-It was
in the realm of the contract-And not necessary for the Central Govt.
to place the same before parliament-Even if the same was
regulation, the laying down rule is merely a directory one and not
mandatory.

Employees Voluntary Retirement Scheme-Clause 10.5-

Constitution of India, 1950-Article 12 read with 226, and 14 and
21-Writ Petitions-Voluntary Retirement Scheme-Question of validity
of Maintainability petitions-Held-Appellants, the State Bank of India
as also the nationalized Banks are States within the meaning of
Article 12 of the Constitution-Question raised by writ petitioners
thus could be raised in proceedings under Article 226 of the
Constitution.

Doctrine of option-Applicability-Held-Applicable only at the instance

of offeror-In the case of Voluntary Retirement Scheme employees
would be offeror.

C. Antony vs. K.G. Raghavan Nair

Negotiable Instrument Act, 1881-Section 138-Cheque

dishonour-Case of respondent that appellant filled up the cheque in
its entirety-Including its signature-But the Court on perusal of
cheque found that the difference in body of cheque as well as in the
signature of appellant-Held-High Court was in error in reversing the
finding of acquittal-Recorded by trial court.

Delhi Development Authority vs. Skipper Construction Co.(Pvt.)

Ltd. and Anr.

Banking Law-Loss suffered by Bank-By reason of malfeasance

and mifeasance of concerned officials-Held-How the responsibility
stands foisted on to one individual rather than a body of persons-
Who had taken upon themselves to sanction the limit-Or for
issuance of ascertainment of quantum of loss central vigilance
commission directed to communicate complete inquiry within 18
months and filed report before Court.

M/s Hira Lall & Sons & Ors. Vs. M/s Lakshmi Commercial Bank

Recovery of Debts Due to Banks and Financial Institutions

Act, 1993-Section 17 and 18-Jurisdiction-When exclusive
Jurisdiction given to Tribunal-Jurisdiction in other courts to
entertain and decide such matters-For recovery of debts due to
banks and financial institutions stood ousted.

Constitution of India, 1950-Article 139-A-Transfer of

proceedings-From Debts Recovery Tribunal to High Court-Article
139-A of Constitution is not attracted-Where transfer of case not
from one High Court to another High Court.

Raj Lakshi Mills vs. Shakti Bhankoo

 Negotiable Instrument Act, 1881-Section 138-Criminal
Procedure Code, 1973-Section 482-Dishonour of cheque-Issued by
firm-Complaint-Against partner-Held-At the stage of summoning
when evidence was yet to be led by the parties-High Court could not
on an assumption of facts come to a finding of fact-That respondent
was npot responsible for the conduct of business.

Smt. Katta Sujatha vs. Chemicals Travancore Ltd.

Negotiable Instrument Act, 1881-Section 138 and 141-Cheque

dishonoured-Issued on behalf of firm-Proceedings against
appellants-Held-A partner of firm is liable to be convicted for an
offence committed by the firm-If such partner was in charge of-And
was responsible to the firm for the conduct of business-Or that
such offence was committed with his consent or connivance.

K.L. Kunjappan vs. Rafeeque & Anr.

Negotiable Instrument Act, 1881-Section 138-Sentence-

Dishonour of cheque-Due money received by respondent-Sentence
reduced to already undergone.

Syndicate Bank vs. R. Veeranna & Ors.

Banking Law-Rate of Interest-Acknowledgements made by

defendants and agreements indicate that the defendants
acknowledged their liability of amount due-And amount had been
calculated on basis of enhanced rate of interest-Rate of interest
enhanced-Held-No question of taking separate consent from
defendants again.

Natural justice-Principle of- It cant be read into the express

terms of contract.

Banking law-Agreement-Instructions given by the Head Office

to branches-At any rate cannot alter the terms of agreement
between the parties.

Maruti Udyog Ltd. v. Narendar, JT 1998 (9) SC 411 : 1999 SCC

1 p.113 (24/7/1998)

Sections 138 and 139 -Scope of the sections and the nature of
presumption must be drawn that the holder of the cheque received
the cheque for discharge of any debt or other liability unless the
contrary is proved.

K.Bhaskaran v. Sankaran Vaidhyan Balan, 1999 (6) SCALE 272 :

MLJ Vol. XXXVIII 2000 (1) Page 193 : 1999 SCC (7) 510 : 1999
SCW (0) 3809 (08/01/2000).

The question of jurisdition under Section 138 of the Negotiable

Instruments Act, 1881-Tests for determination. A complaint can be
filed at any of the places where any of the following acts took place :
(1) drawing of the cheque; (2) presentation of the cheque to the
Bank; (3) returning the unpaid cheque by the drawee bank; (4)
giving notice in writing to the drawer of the cheque demanding
payment of the cheque amount; (5) failure of the drawer to make
payment within 15 days of the receipt of the notice.

The Associated Cement Co. Ltd. vs. Keshavanand, JT 1997 (10)

SC 165 : (1998) 91 Comp Case 361 (16/12/1997)

Application of Section 247 of the Cr.P.C.-Section 247 of the old

Cr.P.C. (or Section 256 of the new Cr.P.C.) is applicable in case
where the complainant is a company or any other jurisdiction
person. What is included in the Section is the absence of the
corporeal person representing the incorporeal complainant.

Major General A.S. Gauraya vs. S.N. Thakur, 1988 (1) RCR (SC)
3: AIR 1986 SC 1440.

Applicability of Article 141 of the Constitution of India Once

the complaint is dismissed for non-appearance of the complainant
it is a final order The Magistrate has no inherent power to restore
the same Article 141 of the Constitution of India is applicable to
pendente lite proceedings with retrospective effect.

Sadanandan Bhadran vs. Madhavan Sunil Kumar, JT 1998 (6)

SC 48: AIR 1998 SC 3043 (28/02/1998)
 Successive presentation of the cheque The payee can without
taking preemptory action, present the cheque any number of times
before he gives a notice. Once the notice is given under proviso to
Clause (b) of Section 138, he forfeit such right and in case of failure
of the drawer to pay the money within the stipulated time he would
be liable for the offence.

Modi Cements Limited (M/s.) Vs. Kuchil Kumar Nandi, JT 1998

(2) SC 198 : I (1998) BC 421 (SC) (02/03/1998)

Applicability of Section 138-In case a person draws a cheque

with no sufficient funds, but makes the arrangement before the
cheque is put in the bank by the drawee and the cheque is
honoured, there cannot be presumption of dishonesty Section 138
gets attracted only when the cheque is dishonoured.

Karandeep Singh vs. Jagdish Goyal, II (1999) BC 521

(07/05/1997)

Restoration of the complaint In view of the provisions of

Section 256 of the Cr. P.C. - he Magistrate has no power to restore
A complaint dismissed in default Reference can also be made to
Major General A.S. Gauraya vs. S.N. Thakur, 1988 (1) RCR (SC) 3.

Bilakchand Gyanchand Co. vs. A. Chinnaswami, AIR 1999 SC

2182
 Effect of the notice to the Managing Director A notice to the
Managing Director of the Company is a sufficient compliance with
legal requirements under section 138 and whether the complaint is
liable to be quashed on this ground. The Supreme Court held that
there is no infirmity or illegality in proceedings on the basis of such
notice.

Anil Hada vs. Indian Acrylic Ltd., AIR 2000 SC 145

(26/11/1999)

Prosecution of the Directors The prosecution against the

directors is maintainable even when the prosecution against the
company is dropped because of the winding up of the company.

SIL Import (M/s.), USA v. M/s Exim Aides Silk Exporters,

Bangalore, AIR 1999 SC (First Supplement) 1609

Notice by fax Negotiable Instruments Act, 1881 Section 138

Proviso Clause (b) Dishonour of cheque A notice of demand
can be sent by Fax The mode of sending notice can be restricted
to post or messenger.

D.Ramaswamy v. P. Mohan Babu, 1999 ISJ (Banking) 668

(04/03/1999)

Service of Notice In case the accused was in town and

managed to send bank the notice It was a sufficient service of
notice Effect of the judgment in Madan and Co. (M/s.) v. Wazir
Jaivir Chand, AIR 1989 SC 630. This also follows as a result of
Section 27 of the General Clauses Act, 1897.

Anil Kumar Sawhney v. Gulshan Rai, 1993 SCC 424 : 1993 JT

286 : (1993) SCC 424 : 1993 JT 286 : (1993) 2 Bank CLR 699
(11/10/1993)

Dishonour of a Post dated Cheque A post dated cheque

remains only a bill of exchange till the date on its face and only
from that date it becomes a cheque on being payable on demand.

Electronics Trade & Technology Development Corpn. Ltd.,

Secuderabad v, Indian Technologists & Engineers (Electronics)
(P) Ltd., AIR 1996 SC 2339 : 1996 SCC 739 : JT 1996 (1) SC
643 : 1997 (3) Bank LJ V.33, p. 364 (22/01/1996)

Applicability of Section 138 In case before presentation of the

cheque to the bank, the drawer issues a notice to the payee not to
present the same for encashment and he still presents it then in
case of dishonour of a cheque, section 138 is not attracted on
account of the drawer not having sufficient funds to his credit.

K.K. Sidharthan v. T.P. Praveena Chandran, 1996 SC (6) 369 :

1997 ISJ (Banking) 117: [1996] 87 Comp Cas 685 SC : Bank LJ
(Supp) V. 34, p. 95 (08/10/1996)

Presentment of cheque after drawers Stop Payment

instruction The presentment of the cheque after drawer had
instructed the bank to stop payment, will not make out a case
under Section 138.

M.M.T.C. Ltd. v. Medical Chemicals and Pharma (P) Ltd., (2002)

1 SCC 234.

Complaint must be by the payee or holder in due course The

respondent company issued two cheques on dated 31st October,
1994 and 10th November, 1994 respectively in favour of appellant
company. Both the cheques were dishonored and returned on the
ground that payment stopped by drawer.

The appellant company lodged two complaints through the

manager of the Regional Office. The respondent company filed two
petitions for quashing of the said complaints. The High Court held
that complaints were not maintainable on the ground that the
manager and deputy manager are paid up employees and not
authorised by the Board of Directors of company and in the
complaint there was no specific allegation of existence of debt or
liability.

The only eligibility criterion under section 142 of the

Negotiable Instruments Act, 1881 for maintaining a complaint
under section 138 is that the complaint must be by the payee or the
holder in due course. This criterion is satisfied as the complaint is
in the name and on behalf of the appellant company therefore even
presuming that initially there was no authority, still the company
can at any stage, rectify that defect at a subsequent stage, the
company can send a person who is competent to represent the
company. The complaints could thus not have been quashed on
that ground. The judgment of the High Court was set aside.

K.N. Beena v. Muniyappan, (2001) 107 Comp Cas 459 (SC)

The Court has to presume that the cheque had been issued for
a liability or debt The appellant filed a complaint under section
138 of the Negotiable Instruments Act of 1881 as the cheque dated
6th April, 1993 amounting to Rs.63,720 issued by the first
respondent in favour of the appellant on Central Bank had been
dishonoured with the remarks of insufficient funds. The appellant
issued a legal notice on 28th April, 1993. A reply to such notice was
sent by the first respondent but no payment followed. After a trial
the judicial Magistrate-II, Kumbakonam, convicted the first
respondent under section 138 of Negotiable Instrument Act and
directed a payment of a fine Rs.65,000, in default to suffer
imprisonment of one year. The first respondent file an appeal in
Session Judge Court and the same was dismissed and the first
respondent filed a criminal appeal in the High Court of Madras and
his conviction was set aside.

Under section 139 of the Negotiable Instrument Act, 1881 the

court has to presume, unless the contrary was proved that the
holder of the cheque received the cheque for discharge, in whole or
in part, of a dept or liability. Thus a complaint under section 138,
the court has to presume that the cheque had been issued for a
debt or liability. The presumption is rebuttable. Hence the first
respondent not having led any evidence could not be said to have
discharged the burden cast on him. And the conviction awarded by
the magistrate was correct and the High Court erroneously set aside
the conviction.
A.V. Murthy v. B.S. Naga Basavanna, (2002) 2 SCC 642

Cheque drawn in respect of liability or debt which is illegal

The cheque issued was dishonored by the bank on the ground of
account closed. The respondent had issued such cheque in favour
of appellant in respect to sum advanced to the respondent four
years ago. Hence the appellant filed the complaint under section
138 of Negotiable Instruments Act of 1881. The magistrate issued
summons to the respondent. In a criminal revision filed by the
respondent the Sessions Court quashed the entire proceedings on
the ground that the borrowing barred by the limitation. The High
Court also upheld the decision.

The Sessions Court and High Court erred in quashing the

complaint proceedings. Because this is not the case where the
cheque was drawn in respect of a debt or liability which is
completely barred from being enforced at law. But the cheque
drawn by the respondent was in respect of a debt or liability which
was not legally enforceable, was clearly illegal and erroneous.

Suganthi Suresh Kumar v. Jadgeeshan, (2002) 2 SCC 420

Both parties should be heard Two cheques amounting to

Rs.4,50,000 were drawn by the respondent in favour of the
appellant, were dishonoured by the bank. The magistrate trying the
case convicted the respondent under section138 of Negotiable
Instruments Act, 1881 only to undergo imprisonment till rising of
court and a fine of Rs.5000 for both the cheques. On the appeal the
High Court did not interfere on such sentence.

The case was remitted back to the trial court that the trial
magistrate shall hear both sides once again in the matter of
sentence and pass a sentence which is condign. Therefore the
sentence passed on the respondent is set aside.