Beruflich Dokumente
Kultur Dokumente
(DISHONOUR OF CHEQUES-
A LEGAL STUDY)
2018-19
Under the Guidance of : Submitted By:
Dr.Vimala Changal Rupali Surolia
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CERTIFICATE
This is to certify that “Rupali Surolia“ is a bona fide student of I semester LLM
(ONE YEAR) studying in this institution . She has prepared and submitted a project titled
“Dishonour of cheques” in partial fulfillment for the requirement of Master of Laws of
MJRP University, Jaipur for the academic year 2018-19.
She has worked under my guidance to the best of knowledge and belief. This is his
original work which has not been submitted to other institute/ organization for any degree/
diploma program.
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INDEX
2. Type of cheques 15 - 20
5. Judicial trend 59 - 70
8. Bibliography 80
3
TABLE OF CASES
5
CHAPTER - 1
INTRODUCTION OF CHEQUES DISHONER
Introduction
The beginning of cheques in the market has given a new direction to the
commercial and corporate world. Now people prefer to carry and execute a
small paper called Cheque rather than carrying currency. Dealings in cheques
are indispensable and important not only in the banking sector but also for the
commerce, industry and the economy of the country. But the rise in dealings
with cheques has also led to the rise of the practice of giving cheques without
any intention of honoring them.
If the amount of cheque is given by the bank to the respective payee, the cheque
is considered as honored. If the bank refuses to pay the amount of the cheque,
then the cheque is considered as dishonored. Thus, the dishonored cheque
means refusal by the bank to pay the amount of the cheque to the payee. This
happens when the drawer draws an e-cheque without following the rules and
regulations of issuing a cheque or when he/she draws the cheque exceeding the
bank balance.
Advent of cheques in the market have given a new dimension to the commercial
and corporate world, its time when people have preferred to carry and execute a
small piece of paper called cheque than carrying the currency worth the value of cheque.
Dealings in cheques are vital and important not only for banking purposes but also for the
commerce and industry and the economy of the country. But pursuant to the rise
in dealings with cheques, the practice of giving cheques without any intention of honore
them has also risen. In case a cheque is issued by a person in liquidation of his
debt or liability, and same is dishonoured, then it not only creates a bad taste, but can
also result in harassment and can cause damages to the person to whom the cheque may
have been issued.
Since business activities have increased, the attempt to commit crimes and
indulgeina c t i v i t i es f o r ma k i n g e a s y mo n e y h a v e a l s o i n c r e a s e d . Th u s b e s i
d e s c i v i l l a w , a n important development both in internal and external trade
is the growth of crimes and it has been found that the banking transactions and
banking business is every day being confronted with criminal actions and this has led
to an increase in the number of criminal cases relating to or concerned with the banking
transactions.
HISTORICAL BACKGROUND
The cheque system in India is of British parentage. It is common knowledge that the
London Goldsmiths were the first bankers in England and the system of payment of cash
through cheques dates back to 17th century[1]. Gradually, the cheque became widely and
popularly accepted as negotiable instrument in settlement of trade and commerce
transactions. Advent of cheques in the market has given a new dimension to the
commercial and corporate world. Its time when people have preferred to carry and execute
a small piece of paper called cheque than carrying the currency worth the value of cheque.
Dealings in cheques are vital not only for banking purposes but also for the commerce and
industry and the economy of the country. Rhetorically therefore a truncated cheque system
is injurious to the economic health of the country as the system of cheques is a matter, a
subject that concerns everybody whether he is a man on the street, a layman, a business
magnate, an industrialist, a banker or a member of bench or bar.
One of the biggest problems, which we are facing in the smooth functioning of the cheque
system, is Dishonour of cheques, which threatens the credibility of this negotiable
instrument. The problem is becoming bigger with the passage of time. It is hindering
smooth business transactions. The great hardship is caused to a person if a cheque issued
in his favour is dishonoured due to insufficiency of funds in the account of the drawer of
the cheque. To discourage this, the dishonour of certain cheques has been made an offence
by an amendment of the Negotiable Instruments Act, 1881 by the Banking Public
Financial Institutions and Negotiable Instrument Laws (Amendment) Act, 1988. After this
amendment, a new chapter consisting of section 138 to 142 has been inserted in the
Negotiable Instruments Act, 1881 . Prior to the year 1988, the act of dishonour of cheque
was treated as an offence under Indian Penal Code. Other remedy was to file a suit for
recovery which was civil in nature and was dilatory. To ensure promptitude in remedy
against defaulters and to ensure credibility of the holders of the negotiable instrument a
criminal remedy of penalty was inserted in Negotiable Instruments Act, 1881. [2]
The history of the present Act is a long one. The Act was originally drafted in 1866 by the
3rd India Law Commission and introduced in December, 1867 in the Council and it was
referred to a Select Committee. Objections were raised by the mercantile community to the
numerous deviations from the English Law which it contained. The Bill had to be
redrafted in 1877. After the lapse of a sufficient period for criticism by the Local
Governments, the High Courts and the chambers of commerce, the Bill was revised by a
Select Committee. In spite of this Bill could not reach the final stage. In 1880 by the Order
of the Secretary of State, the Bill had to be referred to a new Law Commission. On the
recommendation of the new Law Commission the Bill was re-drafted and again it was sent
to a Select Committee which adopted most of the additions recommended by the new Law
Commission.
1.Shantilal jain cause of action Cr LJ 2006
2.Section 138 to 142 introduced to the Ni act 1881
They represent the oldest surviving form of credit instrument. These were used in trade
and credit transactions; they were used as remittance instruments for the purpose of
transfer of funds from one place to another. In Modern era Hundi served as traveller's
cheques.
According to Section 13 of the Negotiable Instruments Act, "A negotiable
instrument means a promissory note, bill of exchange or cheque payable either to order or
to bearer.' But in Section 1, it is also described that Local extent, Saving of usage relating
to hundis, etc., Commencement. -It extends to the whole of India but nothing herein
contained affects the Indian Paper Currency Act, 1871, Section 2, or affects any local
usage relating to any instrument in an oriental language. Provided that such usages may be
excluded by any words in the body of the instrument, which indicate and intention that the
legal relations of the parties thereto shall be governed by this Act.
What is a cheque?
The first type is a cheque in an electric form. It is an exact image of a paper cheque, and it
is generated, written and signed in a very secure system and minimum protection is
provided for the use of digital signature.
The second type is a cheque in truncated form. It means a cheque which is truncated
during the course of a clearing cycle, either by the clearing house or by the bank whether
paying or receiving payment, immediately on generation of an electronic image for
transmission, substituting the further physical movement of the cheque in writing.
Cheques are a very important component of our lives as they are used in almost all
transactions such as repayment of the loan, payment of bill, fees, salary, etc. A huge
number of cheques are processed and cleared by banks all over the world on daily basis.
Cheque are issued for securing proof of payment. Nevertheless, cheques are a reliable
method of payment for a large number of people. A cheque is a negotiable instrument.
Crossed and account payee cheques are not negotiable by anyone than the payee. The
cheques need to be deposited into the bank account of the payee. Legally, the author of the
cheque is called “drawer,” the person in whose favor, the cheque is drawn is called as
“payee” and the bank who is directed to pay the amount is known as “drawee”.[3]
When a cheque gets dishonored, the drawee immediately issues a “Cheque Return Memo”
to the banker of the payee mentioning the reason for non-payment of the particular
transaction. The payee’s banker has to give the memo and the dishonored cheque to the
payee. The payee can resubmit the cheque within three months of the date mentioned on it
if he truly believes that it will be honored this time. However, if the cheque issuer fails to
make the payment, then the payee has the right to prosecute the drawer legally.
The payee can legally prosecute the “defaulter” for dishonor of the cheque only if the
amount mentioned in the said cheque is discharged towards the payment of a debt or any
other kind liability of the defaulter towards the payee. If the cheque was issued in the form
of a gift or towards lending a loan or for any unlawful purpose, then the drawer cannot be
prosecuted in such a case.
Black’s Law Dictionary defines the term "Dishonour" as" to refuse to accept or pay a
draft or to pay a promissory note when duly presented. An instrument is
dishonored when a necessary or optional presentment is duly made and due acceptance or
payment is refused, or cannot be obtained within the prescribed time, or in case of bank
collections, the instrument is reasonably returned by the midnight deadline; Reference to
the term 'dishonour' has been made in Section 91 and Section 92 of the
Negotiable Instruments Act, 1881.Section 91 - Dishonor by non-acceptance" A bill of
exchange is said to be dishonored by non-acceptance when the drawee, or one o f b eing
To constitute an offence under Section 138 of the Negotiable Instruments Act the
following ingredients are required to be fulfilled:
1) Cheque should have been issued for the discharge, in whole or in part, of any debt or
liability.
2) The cheque should have been presented within the period of three months or within the
period of its validity, whichever is earlier.
3) The payee or the holder in due course should have issued a notice in writing to the
drawer within thirty days of the receipt of information by him from the bank regarding the
return of the cheque as unpaid.
4) After the receipt of the said notice by the payee or the holder in due course, the drawer
should have failed to pay the cheque amount within fifteen days of the receipt of the said
notice.
5) On non-payment by the drawer, the complaint should have been filed within one month
from the date of expiry of the grace time of fifteen days, before a Metropolitan Magistrate
or not below the rank of a Judicial Magistrate of first class.
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i) Issuance of Cheque for Discharge of any Debt or Other Liability:
It is essential that the dishonoured cheque should have been issued in discharge, wholly or
partly, of any debt or other liability of the drawer to the payee. The expression ‘debt or
other liability’ means a legally enforceable debt or other liability. If a cheque is given by
way of gift or present and it is dishonoured by the bank, the maker of the cheque is not
liable for prosecution.
In Local extent, Saving of usage relating to hundis, etc., Commencement., the Supreme
Court held that by virtue of Section 139 of the Negotiable Instruments Act, the court has to
presume that the holder of the cheque received the cheque for discharge of a debt or
liability until the contrary is proved.
In Tamil Nadu Retrenched Census Employees Association Vs K Thennan,[4] it was
held that arrears of legal fee of an advocate can be classified as legally enforceable debt
and complaint under section 138 cannot be quashed.
Legally a cheque can be presented for payment repeatedly any number of times within
three months from the date of drawing of the cheque or within the period of its validity
which is earlier.
In K C Nadar Vs Chenabal MR Simon[5 ]the question was raised for the first time before
the court whether a cheque may be presented on any number of times during the period of
its validity. This was the case which propounded the basic theory that a cheque can be
presented any number of times during the period if its validity. Further, the Supreme Court
held in Sadanandan Bhadran Vs Madhvan Sunil Kumar that section 138 of the Act
does not put any embargo upon the payee to successively present a dishonest cheque
during the period of its validity and a fresh right arises with every presentation but cause
of action arises only once when the notice is served.
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REASONS FOR DISHONOUR OF CHEQUES.
a) Stop Payment
In Electronics Trade and technology development Corporation India Vs Indian
Technologies and Engineers (Electronics) Pvt.Ltd[6] The Supreme court of India
observed that if, before presentation of a cheque, notice is issued by the drawer to the
payee or holder in due course not to present the cheque for payment
and it is still presented and, on the drawer’s instructions, dishonoured, Section 138 is not
attracted. But in another case Modi cements Ltd. Vs Kuchil Kumar Nandi,[7] the
Supreme Court disapproved its own observations in earlier case and held that even if a
cheque is dishonoured because of “Stop Payment” instruction to the bank, section 138
would get attracted. It was further affirmed in M/s M. M. T. C. Ltd. Vs M/s Medchl
Chemicals and Pharma (P) Ltd.
CONSEQUENCES OF DISHONOUR
There are two points relating to the consequences of the dishonour of the cheques. The
first is that by dishonour of the cheque the negotiability of a cheque is lost. In Sukanraja
Khimraja, a firm of Merchants, Bombay v. N. Rajagopalan[9] the facts were that after
the dishonouring of a cheque, the payee (M) endorsed it to (R) for valuable consideration.
(R) Demanded payment of the amount as per the cheque from defendants,( namely the
firm which issued the cheque and its partners), and they having neglected to pay, the suit
was filed. The Trial Court decreed the suit and it was affirmed on appeal. In the Letter
Patent Appeal it was contended for the appellants- defendants 1 and 2 ,that the crucial
point involved was, whether the alleged cheque was negotiable after being dishonoured,
and whether the endorsee (M) who filed the suit could be a holder in due course as defined
in Section 9 of the Negotiable Instruments Act.
It was held that the plaintiff as the brother of (M), was fully aware that the
cheque had been dishonoured, and the endorsement in his favour was only after the Bank
returned it. Therefore, Ex. A-l had lost its negotiability. Hence, he cannot be a holder in
due course. This essential characteristics having not been comprehended and more so,
when the cheque had never been thereafter presented to the Bank for encashment, the suit
as laid, could not have been decreed at all.The second aspect is relating to the question of
limitation. In the case it was held that in the event of a post dated cheque given on the date
of loan in repayment of debt, being dishonoured, there is no payment at all either on the
part of the debt or the whole of it with the result that the debt in question continues to exist
and hence, limitation could not be counted from the date when the cheque was
dishonoured but from the date of the loan.
9.1989 LW401
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CHAPTER – 2
TYPES OF CHEQUES
There are three parties in Cheque Transaction – Drawer, Drawee and Payee.
• Drawer (Maker of Cheque) – The person who issue the cheque or hold the
account with bank.
• Drawee – The Person who is directed to make the payment against cheque. In
case of cheque, it is bank.
• Payee – A person whose name is mentioned in the cheque or to whom the
drawee makes payment. If drawer has drawn the cheque in favour of self then
drawer is payee.
There may be different types of Cheques depending on how the drawer has issued the
Cheque.
Order Cheque:
A cheque which is payable to a particular person or his order is called an order cheque.
• This is a cheque whereby the printed word “Bearer” on the cheque is cancelled.
The cancellation of the word “Bearer” automatically makes the cheque an “order”
cheque.
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• An order cheque can be paid to the named payee across the bank’s account if so
presented.
• Identification must be insisted on by the bank when encashing the order cheque
for the presenter. The ID number and the named payee’s signature will be asked
for on the back of the cheque.
Bearer Cheque :
• The cheque sometimes can be made payable to “Cash” or bearer or made payable
to a specific name, for example, “bujjisekhar or Bearer”.
• This cheque is payable by the drawee bank over the counter to the Bearer or
presenter of the cheque.
• A Bearer cheque can be negotiated or pass to another person by mere delivery. In
other words, the holder (or the Transferer), when giving it to another person need
not endorse the cheque.
• No identification is needed when a bearer cheque is presented for encashment.
However, in normal banking practice, where the amount of the cheque is
substantial, the identity of the an casher is insisted on.
• A bearer cheque can be collected by the bank for the credit of anyone’s account
• In banking practice, the need for the an casher’s signature on the back of the
cheque is merely to evidence that the an casher has received the money from the
bank.
Blank Cheque:
A cheque on which the drawer puts his signature and leaves all other columns blank is
called a blank cheque.
1. A check that is signed by the payer but with no specific amount indicated, leaving
this determination up to the drawee.
2. More generally, a term used for any situation in which an usually high level of
trust is afforded by one party to another.
“My wife must have a high level of trust for her sister, because when she asked to borrow
some money my wife gave her a blank check”.
Counter cheque:
Blank cheque was also commonly used as a synonym for counter cheque. requiring that
cheque be MICR encoded in order to be handled by their clearing houses, it was fairly
common for banks, especially in small towns, to issue cheque to customers which were not
personalized other than the name of the bank.
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Businesses would have pads of counter cheque which did not even have the bank specified
on them – the customer had to not only fill in the value of the cheque, the date, and their
signature, but also had to designate the bank on which funds were to be drawn.
Stale Cheque:
Check presented at the paying bank after a certain period (typically six months) of its
payment date. A stale check is not an invalid check, but it may be deemed an ‘irregular’
bill of exchange. A bank may refuse to honor it unless its drawer reconfirms it payment
either by inserting a new payment date or by issuing a new check. Also called stale dated
check.
*NOW __The cheque which is more than three months old is a stale cheque.
Eg. If Mr.CooL issues cheque to Miss. Bujji, if Mr. CooL has issued cheque from his SBI
A/c then SBI is a drawee bank.
The banking regulation Act has not define specific period after which the instrument
(cheque) becomes stale. Some of the banks write specific instruction on the cheque where
the validity period is mentioned. In such case the cheque will become stale after expiry of
the period from the date of issue (date on the instrument)
Multilated Cheque:
If a cheque is torn into two or more pieces such cheque is Mutilated Cheque. If it
presented for payment, such a cheque the bank will not make payment against such a
cheque without getting confirmation of the drawer. In case, if a cheque is torn at the
corners and no material fact is erased or cancelled, the bank may make payment against
such a cheque.
If the payee is clear, signature and the MICR line intact – they can process it. There are
sealable plastic carriers used to put such cheques through the high speed transports used in
Clearing.
Any check or draft that has a future date written upon it by the user. The amount of the
check will not be drawn from the account until the date written on the check. For example,
a check written on the 14th of the month but dated for the 28th will not be cashed for
another two weeks.
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Open Cheque:
• A cheque that is not a crossed cheque. The person whose name appears on the
cheque can write the name of another person on it, and the money will be paid to
them.
• An open cheque is a cheque that is not crossed on the left corner and payable at
the drawee bank on presentation of the cheque.
• The words ‘OPEN’ should not be struck off and the person issuing the cheque
should sign on the reverse of the cheque also before giving it to another person;
otherwise the bank may refuse payment. The latter can collect the money from
any branch of the bank nowadays, depending on the bank. S/he should also sign at
the back of the cheque while receiving the amount.
Crossed Cheque
A crossed cheque is one which has two short parallel lines marked across its face.
• A cheque which carries too parallel transverse lines across the face of the cheque
with or without the words “I and co”, is said to be crossed.
• Crossed cheques are of two types. By simply crossing a cheque or with the words
”& Co”, by the payer, the payee can either deposit it in his/her account or endorse
it in favour of another person on the reverse. This practice is nowadays not
accepted by the banks.
• The advantage of crossing is that it reduces the danger of unauthorised persons
getting possession of a cheque and cashing it. A crossed cheque can only be
cashed through a bank of which the payee of the cheque is a customer.
• A cheque crossed generally will be paid to any bank through which it is
presented.
• A cheque crossed specially will be paid only when it is presented for collection by
the bank named between the parallel lines. Such crossing affords a greater
measure of protection against loss.
Gift Cheques
Gift cheque, it is a cheque forirtedin decorative form issued for a small extra charge by the
banks for use by customers who wish to give presents of money on special occasions.
Gift cheques may be purchased in unlimited numbers from every branch of the ‘X’ Bank.
• Birthday Gift
• Wedding Gift
• Honour Gift
• EASI SMART Gift
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Gift cheques are used for offering presentations on occasions like birthday, weddings and
such other situations. It is available in various denominations.
• Convenient
• Pre-denominated
• Elegant – Improve promotional impact with packaging customization and
personalization options
• Flexible – Provide redemption flexibility by offering the reward with no
expiration date
• Replaceable – Protect your investment and offer Reward Earners increased
security and peace of mind with lost and stolen Cheque protection
• Simple – Order and administer rewards easily for timely reinforcement
• Reliable – Feel at ease with the American Express brand name — it conveys
reliability, security and prestige
Traveller’s Cheques:
It is an instrument issued by a bank for remittance of money from one place to another.
Travelers Cheques are accepted almost everywhere and are available in many
denominations. Plus, the no-expiration feature allows you to cash in leftover cheques or
retain them for the next time you travel.
benefits
• Convenience : Easy to use. Secured to protect your money when on the move.
• Choice : Available in United States Dollars (USD), Great Britain Pounds (GBP),
EURO, Japanese Yen (JPY), Australian Dollars (AUD) and Canadian dollars
(CAD).
• Acceptance : Accepted worldwide in over 400,000 locations spread across 200
countries. TCs can be encashed or used at Exchange bureaus, Banks, Hotels
Shops, Restaurants and other establishments.
• Security : Signature based security. If your cheques are lost or stolen, the 24 hour
Call Centre is just a phone call away. Replacement of lost TCs is attended to on
priority across the world.
• Buy-Back : When you return back to India, you can encash any unused TCs
issued by us, at any of the Axis Bank Branches.
• Expiry : Valid forever! You can save any unused Travellers Cheques for future
trips.
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Self cheques:
A self cheque is written by the account holder as pay self to receive the money in the
physical form from the branch where he holds his account.
If your friend wants to pay YOU the amount of 10000/-, he/she should have written
YOUR NAME in the space provided for payee on the cheque. If he/she has written SELF
in that area, it is supposed to be used by him (or the bearer as written on the cheque) and
whoever possess that cheque can go to the same branch and bank of the account holder to
cash the cheque.
Some banks may honour cheques in their other branches than the account holder branch.
However, this cannot be encashed in any other BANK.
You can either encash it by visitng the bank and the branch of your friend’s account or
should return or tear this cheque off (If lost, the person who finds it can get it cashed from
the bank and branch mentioned on the cheque) and ask for another cheque in your name
that you can deposit in your account.
Bankers Cheque:
The banker’s cheque is an instrument issued by the bank on behalf of customer containing
an order to pay a certain sum to a specified person within the city. The validity period of
the Banker’s cheque is 3 months, however it can be re-validated subject to some legal
formalities.
• In Banker’s cheque the chances of dishonor is not possible because it is always
prepaid. It is always pre-printed with the words ‘not negotiable’ which means it
cannot be further negotiated.
• Banker’s Cheque or Payment Order is a cheque issued for making payments
within the same city.
• Banker’s cheque is valid up to 3 months from the date of issue.
• All banker’s cheque are pre-printed with “NOT NEGOTIABLE”.
• It can be cleared in any branch of the same city.
Outstanding cheque:
A cheque which has been written and therefore has been entered in the company’s ledgers,
but which has not been presented for payment and so has not been debited from the
company’s bank account.
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CHAPTER – 3
LAW RELATINEG TO CHEQUES
With the advancement and progress of society and the increase of commerce and various
activities of trade, the transaction of money between human beings became complex and
the ancient law gives were also forced by the circumstances to evolve new rules and
regulations to regulate the transaction of money. The present day economies of the world
which are functioning beyond the international boundaries are relying to a very great
extent on the mechanism of the Negotiable Instruments such as cheques and bank drafts
and also the oriental bill of exchange prevalent in India and known as Hundies. Since
business activities have increased, the attempt to commit crimes and indulge in activities
for making easy money has also increased. Thus besides civil law, an important
development both, in internal and external trade is the growth of crimes and we find that
banking transactions and banking business is every day being confronted with criminal
actions and this has led to an increase in the number of criminal cases relating to or
concerned with the Banking transactions.
Whenever a cheque is dishonoured, the legal machinery relating to the dishonour of a
cheque comes into motion. What is dishonour has first to be considered and for this we
have to refer to Section 92 and 93 of the Negotiable Instruments Act, 1881. Section 92
reads as under:
Thus if on presentation the banker does not pay then dishonour takes place and the holder
acquires at once the right of recourse against the drawer and the other parties on the
cheque.
There are some reasons of dishonour of cheques, which are being discussed
below: -
A.Refer to Drawer –
In Thomson’s Dictionary of Banking it is stated that the answer put upon a cheque by the
drawee banker when dishonouring a cheque in certain circumstances. The most usual
circumstance is where the drawer has no available funds for payment or has exceeded any
arrangement for accommodation. The use of the phrase is not confined to this case,
however, it is the proper answer to put on a cheque which is being returned on account of
service of a garnishee order; it is likewise properly used where a cheque is returned on
account of the drawer being involved in bankruptcy proceedings. Although London Joint
Stock Bank v. Macmillan & Arthur, it was suggested by Lord Shaw that “Refer to
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drawer” could be used in cases where there were any reasonable grounds for suspecting
that the cheque had been tampered with, such an answer would rarely be given in practice
for any reasons other than those given above.
In Flach v. London & South Western Bank Ltd.[10] Mr. Justice Scrutoon said that the
words:
“Refer to Drawer” in their ordinary meaning amounted to a statement by the bank: “We
are not paying; go back to the drawer and ask why” or else “go back to the drawer and ask
him to pay”. It is doubtful whether the unjustified use of the phrase, however, will involve
a banker in an action for libel, in addition to that for breach of contract. Where a
nontrading customer is concerned he has to prove loss to get more than nominal damages
for breach of contract, but not for libel. A trading customer can obtain substantial damages
without proving specific damages, although by doing so he can increase the amount
awarded.
In Frost v. London Joint Stock Bank, the general rule was laid down that where words
are not obviously defamatory it is not what they might convey to a particular class of
persons that is the test, but what they would naturally suggest to person of average
intelligence. The better view is that the words “Refer to Drawer”are not libellous. This is
still the law although doubts have been expressed in the light of evidence likely to be
tendered.
Thus, it generally means to convey to the holder that he should refer to the drawer for
payment, that is the bank has not sufficient funds at drawer’s disposal to honour of cheque.
According to A Dictionary of International Banking by Dr. S. Ramalingam the drawee
bank uses the words when it returns a cheque because the drawer has insufficient funds in
his account to meet it.
A reference to Cheques in Law and Practice by M.S. Parthasarathy, 3 rd Edition, shows that
in banking parlance the reason “refer to drawer” when cheques are returned unpaid is used
generally for returning the cheques for want of funds in the drawer’s account or because of
service of garnishee order.
In Plunkett v. Barclays Bank Ltd,[11] it has been held that the words “Refer to Drawer”
were not libellous Scrutton J., saying on this point that in his opinion the words in their
ordinary meaning amounted to a statement by the bank, “We are not paying; go back to
the drawer and ask why”, or else, “Go back to the drawer and ask him to pay”. In leading
cases in the Law of Banking by Chorley & Smart it is further said that in Plunkett’s case
(supra) Du Parcq J. adopted the view of Scrutton J. as to the libel issue before him, but as
time passed it became increasingly unrealistic to expect contemporary opinion to agree
and by 1950 the decisions of the Irish
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Supreme Court (not binding on English courts, but to be treated with respect) was not
unexpected. Three cheques were wrongly dishonoured with the answer, “Refer to
Drawer”, two of the cheques bearing also the word “re-present”. A jury awarded
£1damages for breach of contract and £400 for libel, and this verdict was affirmed in the
Supreme Court, where although two of the judges accepted the bank’s argument that the
words were incapable of a defamatory meaning, the other two rejected it, and
distinguished the Flach v. London & South Western Bank Ltd, decision on the
grounds that there the dishonour was not in fact wrongful. So far as the position of Indian
is concerned, we can safely say that the question of damages will arise only when the
dishonour was wrongful and not otherwise. In his book Banking Law, Clive Hamblin has
stated that where a cheque is returned by a bank marked “R.D.” or “Refer to Drawer” and
the cheque was drawn on an account which had sufficient funds to meet it, the bank may
also be liable to an action in damages for libel, although this point has not been finally
settled.
In the Dictionary of Banking by Perry and Ryder, 11th Edition “Refer to drawer” is
described as under: -
“Refer to drawer”: The answer put upon a cheque by the drawer banker when
dishonouring a cheque in certain circumstances. The most usual circumstance is where the
drawer has no available funds for payment or has exceeded any arrangement for
accommodation.
The use of the phrase is not confined to this case, however, it is the proper answer to put
on a cheque which is being returned on account of the service of a Garnishee Order, and it
is likewise properly used when a cheque is returned on account of the drawer being
involved in bankruptcy proceedings.”
“The offence under section 138 of the Negotiable Instruments Act will be attracted only if
the cheque is returned by the Bank unpaid either because of the amount of money standing
to the credit of that account is insufficient to honour the cheque or that it exceeds the
amount arranged to be paid for from the account by an agreement made with the bank. On
facts, since the cheque had been returnedwith an endorsement “refer to drawer”, the return
was not either due to insufficient funds in the account to honour the cheque or because the
amount shown in the cheque exceeded the arrangement and, therefore, even on this
ground, no offence was made out.”
Some times it is also suggested that the reasons, “Exceeds Arrangement” or “Not arranged
for”
12.1990 LW Cri
13. 3.66
23
may lead to an unwarranted disclosure of the customer’s account and may amount to a
libel. For this reason the term “Refer to Drawer” should ben preferred.
Thus, on one hand the banks are to watch the interest of their customers and to ensure that
the honest bank customers are not being harassed and on the other hand there must be a
change in the attitude of the people towards the cheques, which should be given an
increased acceptability. How can there be an increased acceptability without an honest
intention on the part of the drawers that the cheque issued should be honoured on
presentation. It should not be regarded as a “Scrap of Paper”. Its dishonour should be
regarded as an economic offence and as the Scheme of the Act is, there is a sufficient
corrective machinery and opportunity is given to the drawer to honour his commitments
by a two fold action i.e. payment within the notice period. In fact full 60 days are given by
the Act as corrective machinery. So far the amended Negotiable Instruments Act is
concerned, the words “Refer to Drawer” have been interpreted by the various High Courts.
It was held by the Andhra Pradesh High Court that from the endorsement “Refer to
Drawer” the complainant couldn’t draw an inference that the cheque was issued without
funds and that in such a case offence under section 138 was not made.
In case a cheque is returned with the remarks “Refer to Drawer” then the proceeding
cannot be quashed threshold without evidence. By the use of the phraseology the banker
euphemistically by way of courtesy to his customer informs him that his bank account is
not credit with money sufficient to honour the cheque and that it exceeds the amount
arranged to be paid from that A/C by an arrangement made to the bank. This is to convey
the reason in a most civilised manner and in a courteous way without hurting his feelings.
In other case Jaya Lakshmi v. Rashida, the Court held that the endorsement refer to
drawer is a euphemistic way of informing the payee that the drawer of the cheque has got
no amount to his credit to honour the cheque.
Similarly in Manohar v.I oMahalingam,[14] Justice Padmini Jesudurai has held that the
answer “Refer to Drawer” after adopted by the bankers’ could mean anything from
shortage of funds to death or insolvency of the drawer and could also include insufficiency
of funds. It is seen therefore, that the nomenclature of the return by itself would not be
decisive of the cause of return. Reference may also be made to M.M.Malik v. Prem
Kumar Goyal,[15] decided by Punjab and Haryana High Court. We can refer to the case
M.Shreemulu Reddy v. N.C. Ramasamy,[16]in which it was held that whether
endorsement “Refer to Drawer” made out an offence was a question of fact to be
established on evidence and to establish that return of the cheque implied insufficiency of
funds in the account. There had to be the appreciation of evidence. We can also refer to the
case V.S.Krishnan v. Narayanan, where it was held that in banking parlance the reasons
“Refer to Drawer” when cheques are returned unpaid is used generally for returning the
cheque for want of funds in the drawer’s account or because of service of a garnishee
order. This again is a matter of evidence.
24
The bank would be able to justify before the Court the reasons for which the cheque was
returned. Reference can also be made to a number of other cases such as Dynamatic
Forging India v. Nagarjuna Investments Trusts Ltd., of the Andhra Pradesh High Court
and Voltas Ltd. v. Hiralal Agarvvalla, wherein it was held that the endorsement “Refer
to Drawer” is used by the Banks when the cheques are returned unpaid for want of funds
in the drawer’s account.
A Division Bench of the Kerala High Court has held that such endorsements as “Refer to
Drawer”, “Account Closed” and “Payment has been stopped” etc. have the effect of
proving that the cheque has been bounced and if the bouncing was on account of
insufficiency of funds, then an offence under Section 138 of the Negotiable Instruments
Act has been made out. Similarly in A.D. Circle Pvt. v. Sri Shanker, Hon’ble Mr. Justice
Mohd. Shamim of the Delhi High Court has held that the remark
“Refer to Drawer” is not a ground for dismissing the complaint. In this case the.
complainant had examined the clerk of Indian Overseas Bank who had stated in
unequivocal terms that in a sum of Rs. 527.43 only was in the account of the company,
which was not sufficient to honour the cheque drawn by the company.
There are a number of other cases as well to which a reference can be made and which
clearly establish that “Refer to Drawer” means insufficiency of funds. “Refer to Drawer”
is only a courteous way normally adopted by Banker to show its inability to honour the
cheque for want of funds. If the Petitioner Company had the arrangement or credit in its
account with the bank, he can show this fact to the Trial Court, in the absence of which
“Refer to Drawer” means “Insufficiency of funds”. Refer to Drawer in their ordinary
meaning amounted to a statement by the Bank- “We are not paying, go back to the drawer
and ask him why”. Refer to Drawer means cheque has been returned for want of funds.
Similarly the Trial Court had dismissed the complaint on the ground that the
term “Refer to Drawer” is vague and does not disclose insufficiency of funds. The High
Court held that the Learned Magistrate should have given the Petitioner to lead pre-charge
evidence to prove that cheque was returned for paucity of funds. In Dada Silk Mils and
others v. Indian Overseas Bank and another,[20]it has been held by Gujarat High Court
that the endorsement refer to drawer, necessarily in banking parlance means that “the
cheque has been returned for want of funds in the account of the drawer of the cheque.”
B. Exceeds arrangement –
It is generally meant to convey that the drawer has credit limit but the amount
exceeds the drawing power. Not arranged means no overdraft facility exceeding the limit
already sanctioned or overdraft facility not sanctioned.
It is generally meant to convey that the drawer has paid the cheques or bills, which are in
course of collection but their proceeds are not available for meeting the cheque.
According to A Dictionary of Bank by F.E. Perry, the total of cheques collected for a
customer, which is credited to his account on the day he pays them in. The proceeds
remain uncleared for three days, or five if a week end intervenes. During this time the
bank is presenting the cheques to the paying banks through the clearinghouse. If they are
unpaid they should be received back through the post on the morning of the forth (or sixth)
day. (Town clearing cheques are cleared more quickly.) Whether or not the customer is
allowed to draw against the proceeds of these cheques before they are cleared is a question
of fact in each case, but the banker does not have to pay against uncleared effects unless he
so wishes. If he does so, however, he may encourage the customer to think that similar
concessions may be made on future occasions, and an implied permission may be
construed.
It is generally meant to convey adequate funds to honour the cheque or has not given
adequate security to cover the over draft which might be created by paying the cheque.
26
E. Not Provided for –
An answer sometimes written by a banker on a cheque, which is being returned unpaid for
the reason that the drawer has failed to provide funds to meet it. A better answer in these
circumstances is “Refer to Drawer”.
F. Not Sufficient-
When the funds in a customer’s account are insufficient to meet a cheque, which has been
presented to the banker through the clearing or otherwise, the cheque, on being returned
unpaid, is sometimes marked with the words “not sufficient”, or“not sufficient funds”. The
answer “Refer to drawer” is preferable.
G. Present Again –
One of the reasons on account of which the Banker can refuse to make the payment of a
cheque is that the drawer has stopped the payment. The customer has the right to give
notice his Bankers to stop payment of a cheque which he has issued. The notice should be
in writing and should give accurate particulars of the cheque and should be signed by the
drawer. According to Thomson Dictionary of Banking, in case a Bank passes a cheque
after a ‘Stop Order’ has been received, he shall be liable for so doing. It is necessary,
therefore, to warn each Branch where the cheque may be presented, of the notice, which
has been received. A notice should be placed in the Customer Account in the ledger, so
that any one referring to the account may at once observed particulars of the ‘Stop Order’.
A red colour slip may be inserted in the ledger, so that there is no mistake.
23.1958 NZ LR 907
27
As for different branches of a bank, in case notice is given to one branch, it shall not be
deemed a notice to the other branches as well.
London Provincial South Western Bank Ltd. v. Buszard, it was held by the Court that
notice to one branch was not notice to the other branch. The question arises as to who
should give such notice. Usually, it is the drawer of a cheque who is the only person who
is authorised to stop payment of it but very often the Bankers receives notice from a payee
of a cheque that it has been lost or stolen. Where notice is received from the payee, he
should be requested to inform the drawer at once, so that the latter may instruct the
Bankers to stop payment. If the cheque is presented before such instructions are at hand,
the Banker will exercise its discretion before honouring it. Similarly, in those cases where
a cheque is signed by several person and is lost, a notice to one of them, i.e. one executor,
one trustee, secretary, etc., is usually acted upon by a bank. Where the account is in
several names and the lost cheque is signed by only one of the account holders or by one
partner, a notice from any of the holder or partner is a sufficient authority to a Bank as
justification to stop payment of the cheque. In case the drawer so lies, at a later stage, he
can cancel his order to stop payment but it should be done in writing and be signed by
him.
The discussion relating to stop payment has assumed importance in view of the
amendment to the Negotiable Instruments Law (Amendment) Act, 1988 (66 of 1988) and
the Negotiable Instruments (Amendment and Miscellaneous Provisions Bill, 2002(Bill No.
55 of 2002).
We have already seen that by the fact that the dishonour of the cheque can result in penal
consequences in case the cheque is returned on account of the reasons that it exceeds
arrangement made by the drawer with the Bank. Section 138 of the Amended Act deals
with such cases. In Abdul Samod v. Satya Narayana Mahavir,[24]a complaint had been
filed under Section 138 and the case of the respondent was that he had stopped the
payment of the cheque on account of civil litigation pending between the parties. Hon’ble
Mr. Justice A.P.Chowdhry analysed Section 138 of the Negotiable Instruments Act and he
stated that there were 5 ingredients of the section which must be fulfilled, which are as
under: -
i) the cheque is drawn on a bank for the discharge of any legally enforceable debt or other
liability;
iii) the cheque is returned unpaid because the amount available in that accounts
insufficient for making the payment of the cheque;
iv) the payee gives a notice to the drawer claiming the amount within 15 days (now 30
days as per Amendment 2002) of the receipt of the information by the bank; and
24. 1990(2)269
28
v) the drawer fails to make payment within 15 days (now 30 days- as per Amendment
2002) of the receipt of notice.
In this particular case, the contention of the respondent was that the cheque had been
returned on account of stop payment instructions and not on account of insufficiency of
funds and thus all the ingredients of the section were not available. According to Section
138 it was only when the cheque had bounced on account of inadequate balance in the
account that a complaint was maintainable if the said ground was not available, then the
complaint was not maintainable and the
Hon’ble High Court held that there was no justification to let the proceedings continue.
After the passing of the Banking, the Negotiable Instruments Law (Amendment) Act, 1988
(66 of 1988) and the Negotiable Instruments (Amendment and Miscellaneous Provisions
Bill, 2002 (Bill No. 55 of 2002) the people who issue cheques knowingly well that cheque
is not going to be honoured on presentation, try to create circumstances in which the banks
return the cheque with such endorsements as “Stop payment”, “Refer to Drawer” and “A/c
closed”.
This is with a view to escape from the criminal liability. The question arises whether the
offence under the Act shall be committed in case the cheque issued by a person bounces
on account of such reasons. There have been decisions of the various High Courts and the
preponderance of the view of the said judicial decisions in that in case a cheque is retuned
dishonoured with such remarks and if it can be proved that there was also the insufficiency
of funds in the account or that the amount of the cheque issued by drawer of the cheque
had exceeded the arrangement made, then irrespective of such action of the drawer, it
would constitute an offence under the Amended Act.
The necessary condition, however, is that there must be an averment in the petitioner to
the effect that the cheque had bounced on account of insufficiency of funds and on account
of the amount of the cheque having exceeded the arrangement made by the drawer. The
Kerala High Court in Calcutta Sanitary Waters v. Jacob[25] has held that in case the
payment was countermanded, then it was without an offence.
Similarly, in Mrs. R. JayalakShmi v. Mrs. Rashida,26]it was held that if a cheque was
returned with an endorsement “Refer to Drawer” and “payment countermanded by the
drawer”
then it was not an offence. In Mrs. Rama Gupta v. Brakeman’s Home Products Limited
Patiala,38 it has been held that if a cheque is returned with the remarks “Payment stopped”
then there is no offence.
There are a number of other cases as well, in which it is stated that as the payments of the
cheques were stopped, there was no question of commission of any offence and no offence
was involved in the matter.
29
We can also refer to the decision of a single Judge in which reliance was placed on the
decision of the Karnataka High Court it was held that when the payment of the cheques in
question was stopped by the respondent, there was no question of facts constituting an
offence punishable under Section 138 of the Negotiable Instruments Act.
All these judgements have been examined in judgement of the High Court of Judicature of
Bombay at Aurangabad in Criminal Application No. 1073 to 1076 of 1992 in Shri Prithvi
Raj S/o Amba Lai Patel v. Sh. Bhupendra S/o Shri Jasu Bahi Patel. In these four
appeals Hon’ble Mr. Justice M.S. Vaidya in his judgement dated 06.01.94 examined all
the important judgements relating to the stop payment instructions and also referred to the
Division Bench Judgement of the Bombay High Court.
A reference also made to the judgement42 in which it was held that the offence under the
section cannot depend on the endorsement made by the banker while returning the cheque.
Irrespective of the endorsement made by the banker, if it is established that in fact the
cheque was returned unpaid either because of the account of the money to honour the
cheque or that it exceeds the amount arranged to be paid from that account by an
agreement made with the bank, the offence will be established. The endorsement made by
the banker while returning the cheque cannot be the decisive factor.
In both the judgements it was contended that what was relevant for the purpose of
determining whether or not an offence under Section 138 of the Negotiable Instruments
Act was disclosed and whether or not the drawer of the cheque had arranged for payment
or had made the payment of the amount covered by the cheque within the period of 15
days prescribed under the said section and not the reason for which the cheques were
dishonoured by the Bank.
The Bombay High Court held that judgement given by the single in the judgement of Om
Parkash Bhojraj Maniyar v. Swati Girish Bhide,[27]
in which the case of G.F. Hunasi Katti Math v. State of Karnataka,[28] and the decision
in case of Mrs. R. Jayalakshmi v. Mrs. Rashida, provided to honour an interpretation
which was narrow and deserved to be set aside. It was a construction of the section where
the judges had failed to take into accounts the objects and reasons behind the amendment.
The decision of division bench of the Kerala High Court was specific in observing that
where the cheque issued by the drawer was dishonoured by the bank and returned to the
drawer with the endorsement that “Payment stopped” by the drawer and in the complaint
the complainant had specifically stated that the accused had no amount in his account with
the bank for honouring cheque and that mischievously and maliciously issued an
instruction to the bankers to stop the payment, the complaint for an offence under section
138 of the Negotiable Instruments Act cannot be quashed on the ground that the amount of
money standing to the credit of the account of the drawer was insufficient to honour
the cheque or that it exceeds the account arranged to be paid from that account by an
agreement made with the bank.
The object of the legislature while introducing Chapter XVII in the Act cannot be allowed
to be frustrated. Similarly we can refer to another case decided by the Madras High Court
in V.Armugham v. M.K.Ponnusamy, it was held that where a cheque issued by the
petitioner was returned unpaid with endorsement.
I Account closed –
In Om Parkash Maniyar v. Swati Girish Bhide held that the endorsement ‘Account
Closed’ cannot afford a ground for taking penal action under the Act.
Except the two ground i.e. the insufficiency of the funds or, because the cheque exceeds
the amount arranged to be paid there is no third eventuality contemplate under the Act.
The maxim ‘Expresum Facit Sessari Licitum' means that express mention of one thing
implies the exclusion of the other.
Hon’ble Mr. Justice K.T. Thomas of Kerala High Court observed in Japahari v. Priya,
held that the contention for attracting penal liability for the offence under Section 138 of
the Act the account must have been alive at the time of presentation of the cheque is
unsound. If the contention gains acceptance it could open a safe escape route for those
who fraudulently issue cheques and close the account immediately There after to deprive
the payees of the cheque proceeds. It would thus defeat the very object of innovation made
through Act No. 66 of 1988 by which Section 138 and its allied provisions were inserted
in the Act. Closing the account is one the modes by which a drawer can render his account
inadequate to honour the cheque issued by him. I am of the view that the drawer of the
cheque who closes his account with the bank before the cheque reaches the bank for
presentation, is actually causing in sufficiency of money ‘standing to the credit of that
account.
31
J Signatures do not match
In a recent case of M/s Laxmi Dychem v. State of Gujarat, Two-Judge Bench of the
Supreme Court was confronted with the question whether signature mismatch by drawer
of cheque would tantamount to cheque dishonor under Section 138 of the Act. The Court
held in the affirmative and opined “signatures do not match” or that the “image is not
found”, which too implies that the specimen signatures do not match the signatures on the
cheque would constitute a dishonour within the meaning of Section 138 of the Act.
Signature mismatch on account of change in specimen signature or change of authorized
signatory of a company In Laxmi Dychem case (supra), the Court also deliberated on the
aspect whether an offence under Section 138 of the Act would be made out in case the
drawer changes his specimen signature given to the bank or in the case of a company by
the company changing the mandate of those authorised to sign the cheques on its behalf?
In this context, the Court stated that so long as the change is brought about with a view to
preventing the cheque being honoured the dishonour would become an offence
under Section 138 of the Act subject to other conditions prescribed being satisfied. Court
further observed that there may indeed be situations where a mismatch between the
signatories on the cheque drawn by the drawer and the specimen available with the bank
may result in dishonour of the cheque even when the drawer never intended to invite such
a dishonour. We are also conscious of the fact that an authorised signatory may in the
ordinary course of business be replaced by a new signatory ending the earlier mandate to
the bank.
Dishonour on account of such changes that may occur in the course of ordinary business
of a company, partnership or an individual may not constitute an offence by itself because
such a dishonour in order to qualify for prosecution under Section 138 of the Act. Court
stated that in such cases shall have to be preceded by a statutory notice where the drawer is
called upon and has the opportunity to arrange the payment of the amount covered by the
cheque. It is only when the drawer despite receipt of such a notice and despite the
opportunity to make the payment within the time stipulated under the statute does not pay
the amount that the dishonour would be considered a dishonour constituting an offence,
hence punishable.
The obiter dicta pronounced by the Indian Judiciary in aforesaid cases indicate that the
Court has been liberal while interpreting law relating to dishonor of cheque and legislative
intent behind enactment of Section 138 to 142 of Negotiable Instruments Act i.e. to
inculcate faith in the efficacy of banking operations and giving credibility to negotiable
instruments in business and day to day transactions by making dishonour of such
instruments an offence has been kept intact.
Other settled legal position is that Section 138 of the Act cannot be applied in isolation and
ignoring Section 139 of the Act which envisages a right of rebuttal before an offence could
be made out under Section 138 of the Act.
32
INGREDIENTS OF LIABILITY UNDER SECTION 138 OF NEGOTIABLE
INSTRUMENTS ACT,1881
(a) The cheque has been presented to the bank within a period of six months
from the date on which it is drawn or within the period of its validity, whichever is
earlier.
(b) The payee or the holder in due course of the cheque, as the case may be,
makes a demand for the payment of the said amount of money by giving a
notice, in writing, to the drawer, of the cheque, within thirty days of the receipt of
information by him from the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount of money to
the payee or, as the case may be, to the holder in due course of the cheque, within fifteen
days of the receipt of the said notice".
For committing an offence under Section 138 of the Act "mens rea" is not an
essential ingredient Section 138 of the Negotiable Instruments Act, 1881, exclude mens
rea by creating strict l i a b i l i t y a n d t h i s i s e x p l ic i t f r o m t h e wo r d s
' s u c h p e r s o n s h a l l b e d e e me d t o h a v e committed an offence'. The returning of the
cheque by the bank either because he amount of money standing to the credit of the drawer
of the cheque is insufficient or the amount c o v e r e d b y t h e c h e q u e i s i n t h e
e x c e s s o f t h e a mo u n t a r r a n g e d t o b e p a i d f r o m t h a t account by an
agreement with the bank are the two necessary conditions creating strict liability.
The cheque unpaid by the bank must have been issued in discharge of a debt or
other liability wholly or in part. Where a cheque is issued not for the purposes of
discharge of any debt or other liability, the maker of the cheque is not liable for
prosecution under section 138 of the Act. A cheque given as a gift or for any
other reasons and not for the satisfaction of any debt or other liability, partly or
wholly, even if it is returned unpaid will not meet the penal consequences. If
the above conditions are fulfilled, irrespective of the mental conditions of
the drawer he shall be deemed to have committed an offence, provided the other
four requisites are fulfilled:
a)Presentation of the cheque within six months or within the period of its validity
The cheque must have been presented to the bank within a period of six months from the
date on which it is drawn or its period of validity, whichever is earlier. Thus if a cheque is
valid for three months and is presented to the bank within a period of six
months the provisions of this section shall not be attracted. However if the
period of validity of the cheque is not specified or prescribed the cheque is presented
within six months from the date the cause of action can arise. The six months are taken
from the date the cheque was drawn.
34
b) Return of the cheque unpaid for reason of insufficiency of funds
T h e c h e q u e mu s t b e r e t u r n e d e i t h e r b e c a u s e t h e mo n e y s t a n d i n g t o t h e
c r e d i t o f t h a t account is insufficient to honour the cheque or that it exceeds the
arrangement made to be paid from that account by an agreement with the bank.
c) Issue of the notice of dishonour demanding payment within thirty days of receipt of
information as to dishonour of the cheque.
T h e p a ye e o r t h e h o l d e r i n d u e c o u r s e o f t h e c h e q u e h a s t o g i v e a n o t i c e
i n w r i t i n g making a demand for payment of the said amount of money to the drawer of
the cheque. Such notice must be given within 30 days of information from the
bank regarding the return of cheque as unpaid.
d) Failure of the drawer to make the payment within fifteen days of the receipt of the
payment
After the receipt of the above notice the drawer of the cheque has to make
payment of said amount of money to the payee or to the holder in due course of the
cheque within 15days of the receipt of the notice. If the payment is not made after the
receipt of the notice within stipulated time, a cause of action for initiating
criminal proceedings under this section will arise.
the Banking Laws (Amendment) Act, 1985 (81 of 1985), the various provisions of which
were brought into force on different dates in 1985 and 1986 but The Negotiable
Instruments Act, 1881 was further amended by the Banking, Public Financial Institutions
and Negotiable Instruments Laws (Amendment) Act, 1988 wherein the new Chapter No.
XVII relating to The Banking Laws was incorporated specifically with a view to
encourage the culture of use of cheques and enhancing the acceptability of cheques in
settled of liabilities by making the drawer liable for penalties in case of bouncing of
cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the
arrangements made by the drawer, with adequate safeguards to prevent harassment of
honest drawers.
35
Further, the main object of Section 138 was to inculcate faith in the efficacy of banking
operations and credibility in transacting business on negotiable instruments. Despite civil
remedy, Section 138 intended to prevent dishonesty on the part of the drawer of negotiable
instrument to draw a cheque without sufficient funds in his account maintained by him in a
bank and induces the payee or holder in due course to act upon it. Section 138 draws
presumption that one commits the offence if the issues the cheque dishonestly. Once such
a cheque against insufficient funds has been drawn and issued to the payee and the payee
has presented the cheque and thereafter, if any instructions are issued to the bank for non-
payment amounts to dishonour of cheque and it comes within the meaning of Section 138.
If, after the cheque is issued to the payee or to the holder in due course and before it is
presented for encashment and yet the payee or holder in due course presents the cheque to
the bank for payment and when it is returned on instructions, Section 138 does not attract
the banking laws were last amended through the Banking Laws (Amendment) Act, 1985
(81 of 1985), the various provisions of which were brought into force on different dates in
1985 and 1986. Since then, in the course of administering various laws relating to banks
and public financial institutions, a need has arisen for some further amendments to the
Negotiable Instruments Act, 1881, to achieve the following objectives :
i) “to revise the rate of interest from the present level of the six per cent to eighteen per
cent annum payable on a negotiable instrument from the due date in case no rate of interest
is specified, or payable to an endorser from the date of payment on a negotiable instrument
on its dishonour with a view to discouraging the withholding of payment on negotiable
instruments on due dates;
ii) to enhance the acceptability of cheques in settlement of liabilities by making the drawer
liable for penalties in case of bouncing of cheques due to insufficiency of funds in the
accounts or for the reason that it exceeds the arrangements made by the drawer, with
adequate safeguards to prevent harassment of honest drawers.
The Supreme Court and Bombay High Court have observed as follows-
“The object of Section 138 to inculcate faith in the efficacy of banking operations and
credibility in transacting business on negotiable instruments. Despite civil remedy, Section
138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to
draw a cheque without sufficient funds in his account maintained by him in a bank and
induces the payee or holder in due course to act upon it. Section 138 draws presumption
that one commits the offence if the issues the cheque dishonestly. Once such a cheque
against insufficient funds has been drawn and issued to the payee and the payee has
presented the cheque and cheque is returned to the payee with such an endorsement, it
amounts to dishonour of cheque and it comes within the meaning of Section 138. If, after
the cheque is issued to the payee or to the holder in due course presents the cheque to the
bank for payment and when it is returned on instructions, Section 138 does not attract.”
36
The ingredients of liability under the section have been stated in terms of the following
points:
A) the cheque is drawn on a bank for the discharge of any legally enforceable debt or other
liability.
C) The cheque is returned unpaid because the amount available in the drawer’s account is
insufficient for paying the cheque.
D) The payee has given a notice to the drawer claiming the amount within 15 days of the
receipt of the information by the bank.
E) The drawer has failed to pay within 15 days from the date of receipt of notice.
The validity of section of 138 of the Negotiable Instruments was challenged before the
Maharashtra High Court contending therein that the provisions of this section are violative
of Article of 14 of the Constitution of India. The Court examined the matter in detail
taking into consideration the facts of the case and various articles of the Indian
Constitution and observed that the importance of banking section in the developing
economy could not be under-rated. It is not necessary for the purpose of this case to peep
into the history of the development of law, whether it is the Bills of Exchange Act of
England of the year 1882, the Cheque Act, 1957, and various other statutory exercises.
Further, it is the larger public interest that commercial transaction maintain the speed and
tempo and that a swift sale or a prompt purpose, is not unduly impeded by suspicions
always hovering round that part of promise to be performed in future. The issue of a.
cheque carries with it assumptions which could regulate the normal functioning of an
honest citizen. At a period of time when multitudinous persons and institutions press into
services, devices and facilities available under the Negotiable Instruments Act, it may be
necessary to ensure that those who issue such vital documents, do not adopt a casual or
careless attitude which could block the free flow of trade. It is in the light of the
experience, which the State had, that the enactment has been attempted. Court is unable to
detect any legal infirmity or constitutional incompetence.
Furthermore, no attempt has been made out as to show how Article 20 of the Constitution
can be attracted to such a situation. The statute, therefore, cannot be struck down, merely
because the petitioners desire to see its collapse. Entry Nos 45 and 46 respectively, refer to
banking. Bills of Exchange, Promissory Notes and other instruments. The impugned
provisions, would come well within the larger ambit of the entries. It is connected with
negotiable instrument, which clearly come with the aforesaid entries dealing with
legislative power.
37
Court is unable to see any provision in arbitrariness or infraction of Article 14 of the
Constitution. Those who deal in negotiable instruments are not to resort to sharp practices.
A time consuming civil litigation may not give immediate or adequate remedy to the
victims of an illegal act or a dishonest move. The Parliament could then make a provision
with sufficient teeth, as to strongly deal with the ruffians in the. trading area, or the
unscrupulous elements who play foul with negotiable instrument.
Following this, the Bombay High Court held subsequently in Mayri Pulse Mills v. Union
of IndiaandTarun Kumar Bose v. Union of India as follows[30]
“We have no hesitation in holding that Parliament had power and competence to enact
Chapter XVI under Entries 45 and 46 of List I in the 7th Schedule of the Constitution.”
The court also observed that the mere fact that the new sections impose absolute liability
dispensing with the doctrine of mens rea does not render the provisions invalid. The
provision in Section 140 that it would not be a defence to show that the drawer had no
reason to believe when he issued the cheque that it would be dishonoured was held to be
valid.
The raising of the presumption that the drawer of the cheque is guilty till he proves the
contrary is also not arbitrary because the presumption arises only after the basic
requirements for the presumption to arise are proved.
The offence is not the drawing of the cheque. The offence takes places when a cheque is
returned unpaid on the twin grounds as contained in Section 138 of the Negotiable
Instruments Act, 1881. Thus, there is a retrospective operation. The Madras High Court
has held that laws made justly and for the benefit of individuals and for the community as
a whole may relate to time antecedent to their commencement.
The conclusion would be that such prosecution is not hit by Article 20 (1) of the
Constitution which provides that “no person shall be convicted of any offence except for
violation of the law in force at the time of the commission of act charged as an offence;
nor be subjected to a penalty greater than that which might have been inflicted under the
law in force at the time of the commission of the offence.
The amendment had been introduced to enhance the acceptability of cheques in settlement
of liabilities by making the drawer liable for penalties in case of bouncing of cheques due
to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements
made by the drawer, with adequate safeguards to prevent harassment of honest drawers.
30.IBID \
38
The offence under Section 138 of the Act is a non-cognizable offence by virtue of Section
142 of the Act on account of the non obstante clause as comprised in Section 142 of the
Act, the Magistrate receiving the complaint has to proceed straightway to take cognizance
of the offence of a complaint being made to him in writing and that he cannot sent the
same for investigation to the police.
It was held by the Court that in a complaint case alleging commission of a noncognisable
offence made in writing to a Magistrate or received in his Court, under Section 192 of the
Code, it is incumbent upon him to immediately take cognizance and proceed to examine
upon oath the complainant and his witnesses, if any, and a Magistrate cannot straightaway
such a procedure is not warranted by law. In the present case, therefore, it has to be held
that the concerned Magistrate erred in sending the copy of the complaint to the SHO for
further investigation or enquiry and in not straightaway taking cognizance of the complaint
and his witnesses.
In case a cheque issued by a Company is returned for the reasons mentioned in Section
138, the Company is responsible for the offence. Such person may be director, manager,
secretary or other person of the company. However, according to the proviso in case such
a person says that the offence was committed without his knowledge or that he exercised
the due diligence he will not be liable for any punishment. To punish any person under this
section it is necessary that the offence was committed with the consent or convenience of
or due to the neglect of the director, the manager, secretary or other officer of the
company. It may be a private or public company and according to the Explanation, it
means that it may be body corporate and also include a firm and other association of
person. Thus, the definition
This an enlarged definition and legislature has tried to widen the scope of the definition.
The term body corporate will include all companies incorporated in India or abroad, Other
foreign bodies corporate, public financial institutions, nationalised banks, cooperative
societies formed and registered under various Cooperative Societies Acts of the States.
Whereas the term association of individuals will include club, trust, H.U.F., etc. Not only
the person who is in charge of and responsible to the company and drew the cheque which
ultimately returned but the company also liable for the offence. We know that company
cannot be punished with sentence of imprisonment but it is liable to financial indictment
and the officer is liable to both. In this connection Buckley’s Company Act 14th Edition
can be referred:
“A Company can be guilty of acting with intent to deceive and making a statement which
it knows to be false or to be indicted for conspiracy to defraud. It can also be guilty of and
be fixed for contempt of court. Notwithstanding its impersonal nature, it may sue for an
injury done to its reputation in the way of its business by a libel, or a slander or by an
imputation of insolvency, and may be sued for malicious prosecution, maintenance,
39
infringement of copyright, molesting a person in the exercise of his calling or negligence
and may be guilty of malicious libel.”
On account of the complex business attitude and the complicated position of law, in case a
cheque is dishonoured, and a single, Director, issues such a cheque such a conduct without
the backing of the position of Board of Directors cannot be regarded as an act of the
Company. The law has not been changed. The only safeguard that has been taken in the
Act is that any person who is liable to punishment shall not be liable in case he proves that
the offence was committed without his knowledge and the onus to prove lies on the person
in charge of and responsible to the Company who drew the cheque. He should prove either
of the two circumstances namely that offence was committed without his knowledge or in
the alternative that he exercised all the due diligence to prevent the commission of such an
offence. The words used in the Section 141(1) are qualified by the words in the Section
141(2) and it is decided that in case it is proved that the offence has been committed with
the consent or connivance of or is attributable to any neglect of the person as mentioned
in the section the such person shall be liable to be proceeded against and punished
accordingly.
Clause (a) of the Explanation provides that the company means anybody corporate and
includes firm or other associations of individuals and clause (b) says that a director in
relation to a firm means a partner in the firm. The section has been added to provide a
wider scope and to include the other persons as well who may be responsible for the
affairs of the company and who may be designated by other names in the Memorandum of
Association of the Company. The term ‘other officer’ is a term of wider connotation that
any person who is regularly employed as part of their business or occupation in conducting
the affairs of the company may ‘Officer of the company’.
40
Hence, company is the complainant and not the representative. In a case where the
Managing Director of a Company issued his personal cheque to meet the liability of the
company, which was dishonoured, then it was held that an offence had been committed by
the company. Where the Director of the Company wanted the quashment of complaint
against him on the ground that he was not in charge of business of the company and had
not issued the cheque and the absence of a notice under section 138 to him, the complaint
is bad in law. In the complaint the complaint had not even raised a little finger against a
petitioner accused and as such complaint was not maintainable against him. When specific
allegations have been due to the neglect of the accused, a complaint cannot be quashed.
The Calcutta High Court followed the decision of Shekar Gupta v. Subhas Chandra
Mondal,[32]
In Smt. Sarda Agarwal v. Addl. Chief Metropolitan Magistrate,[33] it has been held that
the Directors along with Managing Director were summoned for offence. There was no
allegation in the complaint that the applicant Directors were in charge of and responsible
to the company. The cheque was issued by the. Managing Director and it was held by the
High Court that the complaint cannot be said to have made out an offence against the
Directors if during the trail of the case the applicants were found in charge of or
responsible to the company, the court would be at liberty to proceed against the said
Directors. Thus we have to be guided by the specific provisions as laid down in the Act. In
Sharda Agarwal’s case so far as Directors of the company were concerned, the
appointment letter creating the relationship between the complainant and company was
signed by the Managing Director. The cheques were issued by the Managing Director and
the bank draft had been prepared in the name of the company. The applicants had nothing
to do with the dishonour of the cheques and there was no allegation in the complaint that
the Directors i.e. applicants were in charge of and responsible for the conduct of the
business of the company.
In the said averment is not made against a person then he can be said to have committed
an offence. It has been held that when an offence is committed by a company every person
who at the time the offence was committed, was in charge and responsible to the company
for the conduct of the business shall be liable to be proceed against and
punished along with the company.
If a person committing an offence under section 138 is a company every person who, at
the time of the offence, was in charge of and was responsible to the company for the
conduct of the business of the company as well as the company, shall be deemed to be
guilty of the offence accordingly.Similarly, it is a must that the company is also made an
accused under Section 138 because unless the company is made an accused under section
138, the person who is in charge of and responsible to the company for the conduct of the
business of the company, cannot be made an accused.
In case company is not prosecuted and prosecution proceedings start against person in
charge or the office in charge, according to the ruling last reported by us a complaint
against the company shall not be maintainable.
The Calcutta High in Dalip Kumar Jaiswal v. DebapriyaBanerjee[34]held that the notice
served upon the company is sufficient as the Director is not drawer of the cheque. It was
also held that no separate notice is required to be served upon to the petitioner- Director
for prosecuting him along with company for the offence alleged to be committed by the
company under Section 138 of the Negotiable Instruments Act. Whereas madras High
Court in its judgement has held that unless the company made accused the person who is
in charge of and responsible for the conduct of the business of the company cannot be held
responsible.
Kerala High Court has held that prosecution proceedings against the person in charge or
the officer in charge are maintainable instead of the company not being prosecuted against
as an accused and further it held that either the company can be prosecuted or the person
mentioned in sub-section (1) can be prosecuted or both can be prosecuted together in the
same proceedings.
(i) The accused persons cannot be prosecuted without the leave of the appropriate court
and there is only vicarious liability and for which the company cannot be prosecuted
without the leave of the court under section 446 of the Companies Act;
42
(ii) Even if the Criminal proceeding is initiated without the leave of the appropriate court,
there is no bar under the law to obtain leave subsequently; and
(iii) Leave will be necessary, however, the appointment made by the court place the
appointee in a position of an officer of a court for any particular purpose of a delegate of
the Court for' the purpose of managing or dealing with an affair brought or placed under
the control and supervision of the court making such appointment.
Punjab and Haryana High Court has held that complaint can proceed against Director
without company being impleaded. The proof that the Director was In Charge and
responsible to the company for conduct of its business is not dependent on oral evidence
alone, documentary evidence may also have to be furnished and such evidence may be
supplied only at the trial. In an another case the same High Court held that whether in fact,
petitioners directors were responsible to company for conduct of its business is a question
of fact to be determined after evidence is led to that effect by parties.
Section 141 of the Amended Negotiable Instruments Act provides for the offence by the
companies. In clause (a) of the Explanation it is stated that the company means. anybody
corporate and includes a firm or other association of individuals. Clause (b) states that the
director in relation to a firm means a partner in the firm. The question now arises as to
what is the position of the firm in the matter ofthe Negotiable Instruments Act specially
when the cheque is signed by the partner of a firm. There are a series of decided cases on
the subject and one of them is being referred here in which it was held that where a cheque
is issued on behalf of a firm by a partner of the firm and the cheque is dishonoured and
notice in terms of clause (b) of the proviso to Section 138 of the Act is issued to the firm,
the firm is the drawer of the cheque and there is no question of issuing the notices to all
the partners.
It is sufficient that there is an averment in the complaint that all the partners of the firm
were taking part in the running of the business of firm and all the partners are liable to be
prosecuted against by virtue of sub-clause (1) of Section 141 of the Negotiable
Instruments Act, 1881.
Similarly in ESSB Food Specialties v. Kapoor Brothers,[35]it was held that in the case of
an offence by a company or a firm in case a Managing Partner alone is issuing cheques on
behalf of the firm and there is no allegation then the other partner cannot be made liable.
Punjab and Haryana High Court held that action under section 138 cannot be taken against
a person who is a sleeping partner and who has not been shown to be in charge of business
or affairs of the firm.
35.1992CRI739
43
Whereas the Madras High Court had held that there is a basic and fundamental difference
between a firm and proprietary concern. The complaint filed under section 138 against a
proprietary concern is not maintainable in view of section 141 of the Negotiable
Instruments Act.
In P.M. Muthuraman v. M/s Shree Padmavathi Finance.[36]it was held that the sole
proprietary concern is outside the purview of Explanation to section 141 i.e. it is not a
company within the meaning of company as defined under Explanation to Section 141 of
the Negotiable Instruments Act, thus, sole proprietary concern could not be made a party
in the complaint apart from the sole proprietor.
INTRODUCTION
The Negotiable Instruments Act, 1881 ("the Act") was enacted to characterize and define
the law relating to authoritative records like Promissory Notes, Bills of Exchange and
Cheques. Over the years, the Act has undergone amendments to deal with the changing
times, keeping in view the common goal of rapid disposal of cases identifying with the
offence of dishonour of cheques. However, the pendency ratio of cheque dishonour cases
still remains a critical issue and adversely affects the cash flows of businesses particularly
Small & Medium sized Enterprises.
It is observed that one of the main reasons that plagues the system, roots down to the mala
fide strategies of corrupt drawers of dishonoured cheques towards evading and abusing the
process of law, eventually harming the innocent payees of the dishonoured cheques.
With a view to curb such practices, the Lok Sabha passed Negotiable Instruments
(Amendment) Bill, 2017 on July 23, 2018, Rajya Sabya passed the Bill on July 26, 2018
and subsequently the Negotiable Instruments (Amendment) Act, 2018 ("Amendment
Act") was notified on August 02, 2018. The amended provisions introduced are likely to
contribute towards reducing the number of cheque bounce cases pending in the courts.
This will provide immediate relief to the payees of dishonoured cheques, the disposal of
which consumes considerable time and resources.
• Section 143A has been inserted which essentially empowers the court trying the
offence under Section 138 of the Act, to direct the drawer of the cheque to pay
interim compensation to the Payee in situations of a summary trial or summons case
wherein the drawer pleads to be "not guilty". This new provision seeks to cap
interim compensation to 20% of the cheque amount.
36.1994Comp656
44
• Another provision introduced as Section 148 specifies that in case the drawer files
an appeal against his/her conviction, the Appellate court has the power to direct the
drawer to deposit a minimum amount of 20% of the fine or compensation that was
awarded by the Trial court. The Appellate Court may direct to release the amount
deposited by the appellant to the complainant at any time during the pendency of the
appeal. This amount shall be in addition to the compensation paid at the trial stage.
• The interim compensation at the trial as well as the deposit amount at the appellate
stage (as the case may be) shall be paid within 60 days from the date of the order by
the court trying the offence or the appeal. The concerned court may further extend
this period by an additional time of 30 days' subject to the sufficient reasons being
shown.
• In case of acquittal of the drawer/ appellant by the Trial Court or the Appellate
Court, (as the case may be) the payee/complainant shall be directed to repay the
interim compensation or amount deposited (as maybe applicable), to the
drawer/appellant along with such interest as may be fixed by Reserve Bank of India
at the beginning of the relevant financial year. This amount shall be repaid within 60
days of the court's order and this period may be further extended by another 30 days'
subject to sufficient reasons being shown.
45
CHAPTER – 4
Section 138 of the Negotiable Instruments Act, 1881(for short “NI Act” or “the said Act”)
makes dishonor of cheques for insufficiency of funds in the account a criminal offence.
Section 141 of the said Act, in case of offence by Company, provides for vicarious
liability on every person who, at the time the offence was committed, was in charge of,
and was responsible to the Company for the conduct of the business of the Company.
In P.M. Muthuraman v. M/s Shree Padmavathi Finance.[38] referred to Section 138 and
141 of the Act and Sections 203 and 204 of Cr.P.C. and observed that complaint must
contain material to enable the Magistrate to make up his mind for issuing process. What is
required is that the persons who are sought to be criminally liable u/s 141 should be, at the
time the offence was committed, in charge of and responsible to the Company for the
conduct of the business of the Company. Every person connected with the Company shall
not fall within the ambit of the provision. The liability arises from being in charge of and
responsible for the conduct of the business of the Company at the relevant time when the
offence was committed and not on the basis of merely holding a designation or office in a
Company. Section 141 (2) of the Act envisages direct involvement of any Director,
Manager, Secretary or other Officer of the Company in the commission of the offence. It
is because a person who is in charge of and responsible for the conduct of the business of
the Company would naturally know why a cheque in question was issued and why it got
dishonoured.
Thereafter there have been various Judgments on the point that the complaint should
contain that at the time the offence was committed, the person Accused was in charge of,
and responsible for the conduct of the business of the Company. The Courts have further
held that this averment is an essential requirement of Section 141 and has to be made in
the complaint. Without this averment being made in the complaint, the requirements of
Section 141 cannot be said to be satisfied. In this regard a passage from Sabitha
Ramamurthy v. R.B.S. Channabasavaradhya which reads:
“7. A bare perusal of the complaint petitions demonstrates that the statutory requirements
contained in Section 141 of the Negotiable Instruments Act had not been complied with. It
may be true that it is not necessary for the complainant to specifically reproduce the
wordings of the section but what is required is a clear statement of fact so as to enable the
court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141
raises a legal fiction. By reason of the said provision, a person although is not personally
liable for commission of such an offence would be vicariously liable therefor. Such
vicarious liability can be inferred so far as a company registered or incorporated under the
Companies Act, 1956 is concerned only if the requisite statements, which are required to
be averred in the complaint petition, are made so as to make the accused therein
vicariously liable for the offence committed by the company. Before a person can be made
vicariously liable, strict compliance with the statutory requirements would be insisted.”
The Hon’ble Supreme Court in K.K. Ahuja v. V.K. Vora &Anr. explaining the position
u/s 141 of the Act has stated thus:
“The position under Section 141 of the Act can be summarized thus:
1 If the accused is the Managing Director or a Joint Managing Director, it is not necessary
to make an averment in the complaint that he is in charge of, and is responsible to the
company, for the conduct of the business of the company. It is sufficient if an averment is
made that the accused was the Managing Director or Joint Managing Director at the
relevant time. This is because the prefix “Managing” to the word “Director” makes it clear
that they were in charge of and are responsible to the company, for the conduct of the
business of the company.
1 (ii) In the case of a Director or an officer of the company who signed the cheque
on behalf of the company, there is no need to make a specific averment that he
was in charge of and was responsible to the company, for the conduct of the
business of the company or make any specific allegation about consent
connivance or negligence. The very fact that the dishonoured cheque was signed
by him on behalf of the company, would give rise to responsibility under sub-
section (2) of Section 141.
47
2 (iii) In the case of a Director, secretary or manager [as defined in Section 2(24)
of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of
Companies Act, an averment in the complaint that he was in charge of, and was
responsible to the company, for the conduct of the business of the company is
necessary to bring the case under Section 141(1) of the Act. No further averment
would be necessary in the complaint, though some particulars will be desirable.
They can also be made liable under Section 141(2) by making necessary
averments relating to consent and connivance or negligence, in the complaint, to
bring the matter under that sub-section.
3 (iv) Other officers of a company cannot be made liable under sub-section (1) of
Section 141. Other officers of a company can be made liable only under sub-
section (2) of Section 141, by averring in the complaint their position and duties
in the company and their role in regard to the issue and dishonour of the cheque,
disclosing consent, connivance or negligence.”
There are various other Judgments which reiterate what is stated above. In order to get
process issued against other persons on the ground that they are vicariously liable, the
averments in the complaint should clearly meet the requisite test. In a recent Judgment the
Hon’ble Supreme Court in Standard Chartered Bank v. State of Maharashtra
&Ors. has gone extensively into the various Judgement spertaining to vicarious liability
and has held that when there is specific averments in the complaint as to the role of every
person in the commission of the offence, the process cannot be quashed.
A s s t a t e d b y t he S u p r e me C o u r t o n c e t h e o f f e n c e i s c o mmi t t e d , a n y
p a yme n t ma d e s u b s e q u e n t t h e r e t o wi l l n o t a b s o l v e t h e a c c u s e d o f t h e
l i a b i l i t y o f c r i mi n a l o f f e n c e , though in the matter of awarding of sentence, it may
have some effect on the court trying the offence. But by no stretch of imagination, a
criminal proceeding could be quashed on a c c o u n t o f d e p o s i t o f m o n e y i n t h e
c o u r t o r t h a t a n o r d e r o f q u a s h i n g o f c r i m i n a l proceeding, which is
otherwise unsustainable in law, could be sustained because of the deposit of
money in this court. The deposit of money by the drawer, therefore, during the trial is of
no consequence.
Death of Drawer
The criminal liability can not be fastened to the heirs and the legal representatives of
the person who is said to have been guilty of the offence in question. The
cheque presented for realization by the complainant was returned on the ground of
insufficient funds. The notice sent was returned with postal endorsement 'party
expired'. Wife and daughters of the drawer of the cheque cannot be prosecuted
for the offence under Section 138 of the A c t f o r t h e a l l e g e d f a i l u r e o f t h e
d r a w e r i n me e t i n g t h e l i a b i l i t y t o p a y t h e a mo u n t c o v e r e d b y t h e c h e q u e
w h i c h wa s d i s h on o u r e d i n r e s p o ns e t o t h e n o t i c e s e n t b y t h e complainant.
The drawer cannot escape from the criminal liability by putting forward he plea that he is
not bound to discharge the l i a b i l i t y me n t i o ne d i n t h e
c o mp l a i n t a s h e w a s a l r e a d y declared as an insolvent, especially when there
is section 139 permitting the court to p r e s u me t h a t t h e r e i s a n e x i s t i n g
l i a b i l i t y a n d t h e i s s u a n c e o f t h e c h e q u e w a s ma d e towards the discharge of
the said liability.
49
When there is the relationship of banker and customer between the parties, the banker is
under an obligation to pay cheques when a mandate to pay is received from the customer
,or when a cheque is issued.
However, there may be a number of circumstances when the bank
h a s n o o t h e r alternative but to return the cheque and in all such cases the
bank is fully justified in returning the cheque. These are the cases which may be
termed as a countermand from the customer which means an order to revoke the
former instructions and annulling the f o r me r ma n d a t e g i v e n b y t h e c usto me r
t o t h e b a n k t o h o n o u r t h e c h e q u e s a n d i t a l s o means the situations
resulting from the closure of account by the customer, prohibitory 'garnishees'
orders having been received from the court or orders for payment having been
received from the court or orders for payment having been received under
Section226 (3) of the Income-Tax Act, 1961 and similarly it also means the situation
when there i s a r e s t r a i n e d o r d e r f r o m t h e c o u r t , n o t i c e o f d e a t h o f t h e
c u s t o me r , l u n a c y o f t h e customer, notice of loss of cheque or forged signatures on
the cheque.
In case all the conditions which are necessary for the payment of a cheque are present and
have been fulfilled then if the bank dishonours a cheque it will amount to a
breach of contract for which the banker is liable to pay damages.The liability of
drawee of cheque in case of a wrongful dishonour has been dealt with under
Section 31 of the Negotiable Instruments Act, 1881. Section 31 states as follows:" t h e
d r a w e e o f a c h e q u e h a v i n g s u f f i c i e n t f u n d s o f t h e d r a we r i n h i s h a n d s
p r o p e r l y applicable to the payment of such cheque must pay the cheque when duly
required so to do, and, in default of such payment, must compensate the drawer for any
loss or damage caused by such default".
The position of law has also been made clear in a number of authorities.
Reference may be made to the following:
In ESSB Food Specialties v. Kapoor Brothers,it was held that
in the case of an offence by a company or a firm in case a Managing Partner alone is
issuing cheques on behalf of the firm and there is no allegation then the other partner
cannot be made liable.
Punjab and Haryana High Court held that action under section 138 cannot be
taken against a person who is a sleeping partner and who has not been shown to be in
charge of business or affairs of the firm.
Whereas the Madras High Court had held that there is a basic and fundamental
difference between a firm and proprietary concern. The complaint filed under section
138 against a proprietary concern is not maintainable in view of section 141 of the
Negotiable Instruments Act.
50
In P.M. Muthuraman v. M/s Shree Padmavathi Finance., it was held, "where
the banker, being bound to honour his customer’s cheque, has failed to do so, he
will be liable in damages. If, special damage, naturally ensuing from the dishonour, is
proved, it wi l l b e p r o p e r l y t a k e n i n t o a c c o u n t i n a s s e s s i n g t h e a mo u n t o f
t h e d a ma g e s . I f t h e customer be a trader, the court may properly award substantial
damages, in the absence of proof of special damages. In other cases the customer will be
entitled to such damages as will reasonably compensate him for the injury which, from the
nature of the case, he has sustained. All loss flowing naturally from the dishonour
of a cheque may be taken into account in estimating the damages.
General r u l e f o l l o we d b y t h e
c o u r t s i n a w a r d i n g d a ma g e s i s t h a t d a ma g e s a r e awarded for foreseeable
and actual loss suffered and the quantum of damages is usually based on the
principle of ‘restitutio in intgegram’ i.e. restoring the person to the position he would have
been in if he had not suffered a damage. But in case of trade man’s cheque t h e d a mages
a wa r d e d a r e i nv e r s e l y p r o p o r t i o n a l t o t h e a mo u n t o n t h e c h e q u e .
T h u s , smaller the amount of the dishonoured cheque, greater are the damages paid. The
reason behind this rule is, businessman’s loss of reputation or status or goodwill
is once again inversely proportional to the amount of the cheque
The Vicarious liability of a person for being prosecuted for commission of an offence by
the company arises if at the time when the offence is alleged to have been committed, he
was in charge of and was responsible to the company for the conduct of its business. It is
necessary that there have to be averments in the complaints that the petitioners
were in charge of and were also responsible to the company for the conduct of its
business of the company.
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Thus, we can conclude that three categories of persons can be discerned from
the said provision who are brought within the purview of the penal liability
through the legal fiction envisaged in the section. They are:
(1) The company, the principal offender, which committed the offence;
(2) Everyone who was in charge of and was responsible for the b u s i n e s s of the
c o mp a n y;
( 3 ) An y o t h e r p e r s o n wh o i s a d i r e c t o r o r a ma n a g e r o r a secretary or
officer of the company, with whose connivance or due to whose neglect the
company has committed the offence.
However, in case an employee of the company proves that the offence was
committed without his knowledge or that he had exercised all due diligence,
then he may not be prosecuted under the Act. In case he proves that after due diligence
he could not prevent the commission of the offence, it may provide a valid defence. Only
the person can be set free but not the company because the scope is limited to
Section 141(1) only. This is because under Section 138 the company is a drawer.
A c o mp a n y c a n no t e s c a p e f r o m a p e n a l l i a b i l i t y u n d e r s e c t i o n 1 3 8 o f
t h e Ac t o n t h e p r e mi s e t h a t a p e t i t i o n f o r wi n d i ng u p o f t h e c o mp a n y
h a s b e e n p r e s e n te d a n d wa s pending during the relevant time. The Company
cannot avert its liability on the mere ground that the winding petition was presented
prior to the company being called upon by a notice to pay the amount of the cheque.
There is no provision in the Companies Act, 1956 which prohibits enforcement
of the debt due from the company. When a company goes into liquidation, enforcement
of debt due from the company is only made subject to the conditions prescribed therein.
But that does not mean that the debt has become unenforceable altogether.
The question that arises is whether a drawer who stops the payment having
insufficient funds in his account can be held liable under Section 138 of the
Negotiable Instruments Act? In this regard various judgments of High Courts and the
Supreme Court have been reviewed in order to find out a solution to the abovementioned
issue.Views taken by various High Courts
In A b d u l S a m o d v . S a t y a N a r a y a n M a h a v i r
H i g h C o u r t o f P u n j a b a n d H a r y a n a thoroughly analyed section 138 of the
Act. Hon’ble Mr. Justice A.P. Chowdhury stated that there are five ingredients,
which must be fulfilled.
1 .Th e c h e q u e i s d r a wn o n a b a n k f o r t h e d i s c h a r g e o f a l e g a l l y
e n f o r c e a b l e d e b t o r other liability.
2 .Th e c h e q u e h a s r e t u r n e d b y t h e b a n k u n p a i d .
3 .Th e c h e q u e i s r e t u r n e d u n p a i d b e c a u s e t h e a mo u n t a v a i l a b l e i n t h a t
a c c o u n t i s insufficient for making the payment of the cheques.
4.The payee gives a notice to the drawer claiming the amount within 15 days of
of the information by the Bank and
5.The drawer fails to make payment within 15 days of the receipt of notice.
In this case the respondent filed a complaint with the allegations that the
accused had inter alia; i s s u e d a c h e q u e d a t e d J u n e 9 , 1 9 8 9 , f o r R s . 2 2 ,0 0 0
54
i n c o n n e c t i o n wi t h a n amount which had become due on account of purchase of
some raw material by him. The c h e q u e wa s r e t u r n e d u np a i d b y t h e b a n k wi t h
t h e r e ma r k s " P a y me n t s t o p p e d b y t h e drawer". The complainant sent the
requisite notice, but the accused failed to make the payment.It was stated by the
Hon’ble Justice B.M. Thue asidas that:
"The allegations in the complaints, in my view, do make out a prima facie case
against the petitioners. Before filing the complaints, the respondent had taken care to
abide by there levant legal provisions. Indeed, it is not the case of the petitioners that no
amount is due to the respondent.
The issuance of cheques and their dishonour, followed by notices of demand and
failure to pay are not matters which had been challenged. That the payment was
countermanded by a stop memo is of no consequence. That hardly affects the right of the
respondent to initiate proceedings under the Act. It has the same effect as closing the
account as far as he is concerned. The object of the provision cannot be allowed
to by such ingenuous action".
Similarly, in Mrs. R. Jayalaxmi v. Mrs. Rashida and as per the Punjab and Haryana
Courtin Mrs. Rama Gupta v. Bakesman’s Home Product Limited Patiala
, it has been held that if a cheque was returned with an endorsement “refer to
drawer” and "payment counter-manded by the drawer" then it was not an offence.
Thus relying on this it was held that when the respondent stopped the payment
of the cheques in question, there was no question of facts constituting an
offence punishable under section 138 of the Negotiable Instruments Act.
However, it is significant to note, what is relevant for the purpose of
determining an offence under section 138 of the Negotiable Instruments Act is whether
the drawer of the cheque had arranged for payment or had made the payment of the
amount covered by the cheque within the period of 15 days prescribed under said section
and not the reason for which cheques were dishonored by the Bank.
The above laid proposition has been supported by various High Courts. Kerala
High C o u r t i n t h e c a s e o f Ca l c u t t a S a n i t a r y W a r e s v . C. T . J a c o b ,
w h e r e t h e c o u r t w a s considering a situation whereby the cheque was
initially dishonoured on the basis of a stop-payment memo. The court held that "the
object of the provision cannot be allowed to b e d e f e a t e d b y s u c h i n g e n i o u s
a c t i o n " . Th e c o u r t t o o k t h e v i e w t h a t d i s h o n ou r p r e - supposes non-
payment as the funds in question were not forthcoming and that in these
circumstances also, the failure to pay the amount within 15 days of the notice of demand
would still constitute an offence as any other view would defeat the specific provisions
of section 138.The Punjab and Haryana High Court in the case of M. M. Malik v.
Prem Kumar Goyal analysed the aforesaid sections and held that the cause of
action will be complete when the drawer of the cheque fails to make payment within
15 days of the receipt of the notice contemplated by proviso (b) and that the offence shall.
Hon’ble Supreme Court has narrated four key Judgments where the drawer was
held liable for Stop payment of cheques. However there is only one judgment
which deals with the above laid preposition.
However, after the recent judgments of the Supreme Court, the burden has now
shifted to the drawer and a presumption has to be drawn in favour of theholder of the
cheque.As explained earlier, a plain reading of section 138 of the Negotiable
Instruments Act makes it clear that the words "either because of the amount standing to
the credit of thataccount is sufficient or that it exceeds the amount ..." have been
specifically used. It would, therefore, mean that only two contingencies are
contemplated and as such, the words "... either .... or" have been used. It is,
therefore, clear that the cheque should be dishonoured either for the insufficiency of
the amount or, because it exceeds the amount a r r a n g e d t o b e p a i d f r o m t h at
account.
T h i r d contingency other than what is mentioned in the section itself. It need not be
stated that acheque can be dishonoured for so many reasons and there may be
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so many event ualitiesin which the payee is denied payment by the bank. For
example, mentioning the date incorrectly or some corrections not initialled or
the difference in between the amount mentioned in figures and words are certain
other contingencies in which the cheque will be certainly dishonoured and would be
returned as unpaid.
It is not in respect of any of these contingencies that the dishonour of a cheque
has been made penal under section138 of the said Act. Section 138 of the
Negotiable Instruments Act is a penal provision wherein if a person d r a ws a
c h e q u e o n a n a c c o u n t ma i n t a i n e d b y h i m wi t h a b a n k e r f o r p a yme n t o f
a n y amount of money to another person from out of that account for
the discharge, in whole or in part of any debt or other liability, is returned by
a m o u n t o f m o n e y s t a n d i n g t o t h e c r e d i t o f t h a t a c c o u n t i s insufficie
nt to honour the cheque or that it exceeds the amount arranged to be paid from
that account by an agreement made with that bank, such person shall be deemed
to have committed an offence.
However with regard to "Payment stopped by the drawer" this section does not
mention anything specifically. Whatever may be ground or reason on the basis of which
the cheque is dishonoured by a bank, whether it may "stopped payment by drawer"
or "signature differ" or any other ground, an offence under the section is made out and
the drawee has full right to initiate proceedings u/s 482 CrPC. It is also important
that the time restriction given in Section1 3 8 ( c ) a l s o g e t a t t r a c t e d i n c a s e o f
s t o p p a yme n t wh e n a n o t i c e a s r e q u i r e d b y t h e provision is sent to the drawer.
It is seen that there are manifold reasons for the dishonor of cheques by banks but there is
statutory mandate upon the payee under Section 13 (b) of Negotiable Instruments Act
for giving a notice demanding the payment of the amount of said cheque, within
15 days from the date of the information as to bouncing of the said cheque from the
drawer of the cheque and upon failure to make payment of the amount by the
drawer within 15 days, offence under section 138 is deemed to have been
committed.
Moreover the decision of the Supreme Court in Electronics Trade & Technology
Development Corporation Ltd is explicit and has decided all sorts of controversies
in relation to bouncing of the cheque due to payment stopped by the drawer. It
has expressly held that if on issuance of the notice by the payee or the holder in due
course after dishonour, to the drawer demanding payment within 15 days from the
date of the receipt of such a notice, if he does not pay the same, the statutory
presumption of dishonest intention, subject to any other liability, stands satisfied.
It can be concluded that whatever may be the ground or reason on the basis of which the
c h e q u e i s d i s h o no u r e d b y a b a n k , w h e t h e r i t ma y " s t o p p e d p a yme n t b y
d r a w e r " o r "signature differ" or any other ground the offence under the section
is made out and the drawee has full right to initiate proceedings and while deciding the
case the Court should see that whether payment has been made by the drawer within 15
days of notice issued by the drawee after the dishonour of cheque.
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CHAPTER - 5
JUDICIAL TREND
Section 138 of the Negotiable Instrument Act, 1881 draws criminal implications in the
event of dishonor of cheque (commonly referred to as ‘cheque bounce’) for insufficiency
of funds etc. of funds in the account. In common parlance, it is believed that criminal
proceedings under Section 138 of the Act would be attracted only when:
• The cheque is returned by the bank unpaid either because the amount of money
standing to the credit of the account is insufficient; or
• That it exceeds the amount arranged to be paid from that account by an
agreement made with the bank
And in the aforesaid cases, the person by whom the cheque has been drawn is liable for
criminal proceedings under Section 138 of the Act.
Here it would be relevant to reproduce relevant extract of Section 138 of the Act:
Thus, from the above, it is manifest that a dishonour would constitute an offence only if
the cheque is retuned by the bank ‘unpaid’ either because the amount of money standing to
the credit of the drawer’s account is insufficient to honour the cheque or that the amount
exceeds the amount arranged to be paid from that account by an agreement with that bank.
However, the judicial dictum has time and again expounded that the aforesaid are not the
only contingencies which attract criminal proceedings under Section 138 of the Act.
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A fair reading of Section 138 of the Act together with its proviso will make it clear the
cause of action for initiating proceedings would complete when the drawer of the cheque
fails to make the payment within fifteen days of receipt of the notice. The offence would
be deemed to have been committed only from the date when the notice period expired. A
complaint under section 138 is to be filed within one month of the date on which the cause
of action arises. The day on which cause of action occurs is to be excluded for reckoning
the period of limitation for filing a complaint U/s 138 of the Act.
JURISDICTION
Hon'ble Apex Court in case of K. Bhaskaran vs. Shankara , had given jurisdiction to
initiate the prosecution at any of the following places. 1. Where cheque is drawn. 2. Where
payment had to be made. 3. Where cheque is presented for payment 4. Where cheque is
dishonoured. 5. Where notice is served upto drawer. However, in its recent decision in
DashrathRupsingh Rathod v. State of Maharashtra &Anr. , the Supreme court held that in
cases of dishonour of cheque, only those courts within whose territorial limits the drawee
bank is situated would have the jurisdiction to try the case. Subsequently, many people
had raised difficulties about this judgment. This is so because the payee of the cheque had
to file the case at the place where the drawer of the cheque has a bank account. However,
now the legal position has completely changed with above new Ordinance, i.e., the
Negotiable Instruments (Amendment) Ordinance, 2015, which has been promulgated by
the President on 15 June 2015, and which has immediately come into force with effect
from 15 June 2015. The above Supreme Court judgment is now of no consequence since
this Ordinance supersedes it, clarifying jurisdiction related issues for filing cases of
offence committed under Sec 138.The main amendment included in this is the stipulation
that the offence of rejection/return of cheque u/s 138 of NI Act will be enquired into and
tried only by a Court within whose local jurisdiction the bank branch of the payee, where
the payee presents the cheque for payment is situated. The jurisdiction of filing cheque
dishonour cases under Section 138 of the N.I. Act is now changed by the above Ordinance
as under:
Now a cheque bouncing case can be filed only in the court at the place where the bank
in which the payee has account is located.
Secondly, once a cheque bounce case has been filed in one particular court at a place in
this manner, subsequently if there is any other cheque of the same party (drawer) which
has also bounced, then all such subsequent cheque bounce cases against the same drawer
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will also have to filed in the same court (even if the payee present them in some bank in
some other city or area). This will ensure that the drawer of cheques is not harassed by
filing multiple cheque bounce cases at different locations. So, even multiple cheque
bounce cases against the same party can be filed only in one court even if payee presents
the cheques in different banks at different locations.
Thirdly, all cheque bounce cases which are pending as on 15 June 2015 in different
courts in India, will be transferred to the court which has jurisdiction to try such case in the
manner mentioned above, i.e., such pending cases will be transferred to the court which
has jurisdiction over the place where the bank of the payee is located. If there are multiple
cheque bounce cases pending between the same parties as on 15 June 2015, then all such
multiple cases will be transferred to the court where the first case has jurisdiction as per
above principle. Thus, this new Ordinance now introduces some clarity and uniformity in
the matter of cheque dishonour cases. This Ordinance takes care of the interests of the
payee of the cheque while at the same time also taking care that the drawer of the multiple
cheques is not harassed by filing multiple litigations at different locations to harass him (if
more than one cheque has bounced). This Ordinance supersedes the Supreme Court
decision dated 1 August 2014 [DashrathRupsingh Rathod v. State of Maharashtra,
(2014) 9 SCC 129] or any other judgment / decision of any court (Supreme Court or High
Courts) on this issue.
To avail the benefits of Section 138, the payee should ensure that the following
conditions are fulfilled:
• The drawer must have drawn the cheque on a bank account maintained by
him/her.
• The cheque should have been issued in discharge, in whole or in part, of any debt
or other liability.
• The cheque should have been presented to the bank within its validity period.
• The cheque should have been returned by the bank as unpaid, either because of
insufficiency of funds and no other reason.
• The payee makes a demand for payment (cheque dishonour notice) within 30 days
from the dishonor of the cheque.
• The drawer had failed to make payment of the cheque amount within 15 days of
the receipt of the said notice.
• The complaint should have been filed within one month from the expiry of 15
days mentioned in the demand notice for reminder of payment.
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Some points to be considered:
• In case the payee is not able to file a complaint under Section 138, under the
above mentioned reasons, then the person can file a civil suit for recovery of
money. However, the limitation for filing a civil suit for recovery of money is 3
years.
• Even if the cheque is returned on the ground of “closure of the account”, it will be
an offence under Section 138
• If the cheque is returned unpaid with the advice from bank that “account
operation jointly, other Director’s/joint holders signature required”, then this
amounts to dishonor of the cheque within the meaning of Section 138
• If a cheque is returned unpaid due to stoppage of payment by the drawer, then the
drawer has to prove that he had sufficient funds in his account at the time of
return of cheque and the stoppage was for some other justifiable reason.
The steps to be taken by the payee for recovery of the cheque amount are as under:
The payee should have the following documents ready for recovery of the cheque
amount:
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• Agreement/contract between the drawer and the payee including invoices, bills,
etc, against which the dishonored cheque was issued.
• Acknowledgement, if any, of goods or services received by the drawer (In case of
contracts for supply of goods and services)
• Dishonoured cheque.
• Cheque return memo from bank stating reason for dishonor of cheque
• Copy of the demand notice sent to the drawer and proof of dispatch of the demand
notice (if any)
• Postal acknowledgment for delivery of demand notice to the drawer
If the case is proved against the drawer of the dishonoured cheque, then the magistrate
can levy a fine on the drawer, which may be up to twice the amount of the dishonoured
cheque and/or imprisonment for a period up to two years. Also if the drawer repeats the
offence more than once then the drawee bank has a right to stop the cheque facility to the
drawer and close his account for an indefinite period.
Bouncing of a cheque invites criminal prosecution under section 138 of the Negotiable
Instruments Act, 1881. Punishment for the offence under Section 138 of NI Act is
imprisonment up to two years or fine which may extend to twice the cheque amount or
both. The offence is bailable, compoundable and non-cognizable.
If drawer is found guilty in the light of evidence provided in front of MM, he/she is
empowered to pass a sentence of imprisonment from 1 year to 2 years or fine exceeding
from Rs.5000/-. Even the cheque issuing bank has the right to restrain him/her from
availing cheque book facility and also to freeze/close the account in context to repetitive
commission of Cheque bouncing offence under the said Act.
To avail the legal remedies provided for bounced cheque in case of being an account
payee cheque or otherwise the following important things are to kept in mind:
• Complaint has to be filed within 30 days from the receipt of reply to cheque bounce
legal notice or within 30 days after the expiry of 15 days from the date the notice
was sent if no reply is received from the drawer of cheque.
• The failure to comply with the timeframe of 30 days may be excused by
Metropolitan Magistrate in the exceptional circumstances.
• Section 138 of negotiable instrument act also covers the dishonour of cheque if the
payment of the cheque has been stopped by the drawer of cheque.
• If after the receipt of cheque bounce legal notice, drawer of cheque asks the issuer
of cheque to present the cheque again and if the cheque gets dishonored again it
does not extend the timeline of the drawer as provided in the notice.
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• For the applicability of Section 138 of Negotiable Instrument Act it is necessary that
the cheque has been issued as a legal obligation. It simply means that a cheque
given as a gift, donation or any other non-legal obligation are not covered under the
cheque bounce law or cheque bounce act.
• A cheque expires after three months from the date of its issuance.
The word 'offence' is not defined in the Negotiable Instruments Act, 1881. According to
section 3(38) of the General Clauses Act it means any act or omission made
punishable by any law for the time being in force. As noticed in the previous topic,
what is made an offence is not the drawing of cheque alone. It must have been
drawn in discharge, in whole or in part, of a legally enforceable debt or other liability.
It must have been duly presented in time and dishonoured. There must be a
written demand for the amount within a specified time, followed by failure to make
payment within another specified time. It becomes an offence only on such failure which
is an illegal omission.
It is the person who draws and issues a cheque that falls within the ambit of Section 138of
the Negotiable Instruments Act, 1881. The maker of cheque (who signs the cheque) is
called the `drawer'.When a person is aware of the fact that there are no funds in
one's bank account if he i s s u e s c h e q u e t o a t r a d e r f o r g o o d s p u r c h ased, the
b a n k wi l l r e t u r n t h e c h e q u e f o r insufficiency of funds. By issuing a cheque under
such circumstance, drawer commits an offence under Section 138 of the Negotiable
Instruments Act On the cheque being dishonoured, the payee in terms of Section
138 of the Act can call upon the guilty to pay the money covered by the returned
cheque within 30 days from the date of return, only after serving a notice of
dishonour to the drawer. If the drawer does not pay the amount despite the notice
within 15 days from the receipt thereof, the drawer commits an offence under Section 138
of the Negotiable Instruments Act, 1881.
Notice of Dishonour
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T h e d e ma n d n o t i c e e n v i s a g e d i n s e c t i o n 1 3 8 i s i n e f f e c t a n o t i c e o f
d i s h o n o u r t o t h e drawer combined with a demand on him to pay the amount of
the dishonoured cheque within the time allowed by the statute. It serves as a
warning to the person to whom the notice is given that he could now be made liable.
If the holder fails to give this notice to the drawer, except in cases when notice of
dishonour may be excused, all prior parties liable thereon are discharged of their
liability.
Cause of Action
Cause of action for prosecution under section 138 of the Negotiable Instruments Act does
not arise by mere presentation of the cheque in bank and by its dishonour.A division
bench of the Kerala High Court, after considering the ambit and scope
of Sections 138 and 142 of the Negotiable Instruments Act, has held that the prosecution
for such an offence would only be maintainable when the period of 15 days from the
receipt o f t h e n o t i c e b y t h e d r a we r o f t h e c h e q u e h a s e l a p s e d . Th e c o u rt
o b s e r v e d t h a t t h e dishonour of he cheque by itself does not give rise to a cause of
action because payment can be made on receipt of the notice of demand contemplated in
clause (b) of Section 138and in that event, there is no offence, nor any attempt to
commit the offence nor even a p r e p a r a t i o n t o c o mmi t t h e o f f e n c e . F a i l u r e
t o p a y t h e a mo u nt wi t h i n f i f t e e n d a ys o f receipt of notice alone is the cause of
action that would permit a prosecution and nothing else.
Written Complaint
A c o mp l a i n t i s r e q u i r e d t o b e f i l e d b y t h e p a ye e o r t h e h o l d e r i n d u e
c o u r s e o f t h e dishonoured cheque ,S e c t i o n 1 4 2 ( a ) o f t h e N e g o t ia b l e
I n s t r u me n t s Ac t , ma k e s i t c l e a r t h a t o n l y u p o n a complaint in writing
made by the payee or the holder in due course of the cheque, the court can take
cognizance of the offence. If the payee or the holder in due course does not file a
complaint, the drawer cannot be prosecuted.
Cognizance of Offence
In terms of Section 142 of the Negotiable Instruments Act, 1881, no court shall
take cognizance of any offence punishable under section 138 except upon a written
complaint made by the payee or the holder in due course of the dishonoured cheque and
filed within one month of the date on which the cause of action arose.
Section 142 states that the cognizance of an offence can be taken under Section 138 upon
a complaint in writing which must be made within one month by the payee or
holder in d u e c o ur s e f r o m t h e d a t e o n wh i c h t h e c a u s e o f a c t i o n a r i s e s
u n d e r c l a u s e ( c ) o f t h e proviso to section 138.
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In substance we can say that when a drawer, served with a notice within 30 days from the
date on which the payee or the holder in due course has come to k n o w a b o u t t h e
r e t u r n o f t h e c h e q u e a n d t h e d r a we r d o e s n o t ma k e t h e p a yme n t a s
demanded, the complaint shall have to be filed within 30 days from the date on which
the15 days time expires.
Prior to the incorporation of chapter XVII in the Negotiable Instruments Act in 1988, to
deter and penalize the issue of worthless cheques, it was only under the provisions of the
Indian penal Code 1860 (IPC) that the drawer of a cheque could be criminally prosecute it
c o u l d b e s h o wn t h a t h e c h e a t e d s o me o n e b y i s s u i n g t h e c h e q u e . E v e n
a f t e r t h e introduction of the specific provisions in the Negotiable Instruments Act, a
drawer can be prosecuted under IPC for cheating, but he cannot be prosecuted
and punished for the s a me o f f e n c e u n d e r b o t h t h e e n a c t me n t s . M e n s r e a
o r d i s h o n e s t i n t e n t i o n mu s t b e e s t a b l i s h e d t o p r ov e c h e a t i n g , b u t i t i s
n o t a n e s s e n t i a l e l e me n t o f a n o f f e n c e u n d e r section 138 of the Negotiable
Instruments Act.
C h a p t e r X VI I i n s e r t e d b y t h e B a n k i n g , P u b l i c F i n a n c i a l I n s t i t u t i o n s a n d
N e g o t i a b l e Instruments Laws (Amendment) Act, 1988 provides for penalties in case of
dishonour of c e r t a i n c h e q u e s f o r i n s u f f i c i e n c y o f f u n d s i n t h e a c c o un t s o r
f o r t h e r e a s o n t ha t t h e amount exceeds the arrangement made by the drawer. A s
p e r t h e p e n a l p r o v i s i o n s u n d e r t h e Ac t , t h e dr a w e r , c o m mi t t in g a n
o f f e n c e u n d e r Section 138, is liable to be punished with imprisonment for
a term which may extend to two years, or fine which may extend to twice the amount
of the cheque or both.
When a cheque is dishonoured, the holder or payee of the cheque can sue the
drawer or endorser for the recovery of amount along with interest. Besides a civil suit for
recovery of the amount, proceeding in a summary manner can be initiated under
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C i v i l P r o c e d u r e C o d e i s t h a t t h e d e f e n d a n t i s n o t a l l o we d i n s u c h c a s e s
t o d e f e n d t h e s u i t without leave obtained from Court and it is provided further
that a decree passed under the said Order, may be executed forthwith. If no such leave
is applied for or granted, the allegations in the plaint shall be deemed to be
admitted, and the plaintiff is entitled to a decree for the principal sum and also the
interest as calculated under Section 9 and 80 of the Negotiable Instruments Act,
1881.Criminal prosecution under section 138 does not bar a civil action against the drawer
on the dishonoured cheque.
to bring the case within the definition of Cheating under section 415 of the IPC, it has to
be shown by the prosecution that there was some inducement on the part of the accused
persons and the said inducement was made fraudulently or dishonestly with a
view to deceive the complainant. It is further to be shown by the prosecution that due to
deception practiced by the accused persons, the person so deceived had
delivered the property to the accused persons or had given consent that the accused
person shall retain that property. To hold a person guilty of the offence of cheating
it has to be shown that his intention was dishonest at the time of making the promise.
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Whenever a cheque issued with dishonest intentions is dishonoured, the drawer
of the cheque can be proceeded against under sections 417 & 420 of the IPC by
the payee or holder in due course of the cheque.
(a) that the drawer has an account with the bank in question;
(b) that he has authority to draw on it for the amount shown on the cheque;
(c) that the cheque as drawn, is valid order for the payment of the amount, or
that the present state of affairs is such that in the ordinary course of events, the
cheque will on future presentment be dishonoured.
Drawing of a cheque does not imply a representation that the drawer already had the
money in the bank to the amount shown on the cheque, for he may either have
authority to overdraw, or have an honest intention of paying in the necessary money for
before cheque can be presented. Thus mere dishonour for lack of funds does not
amount to cheating; for cheating to be established a mental element to deceive is
necessary.
Cheating by Personation
FORGERY
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Punishment for Forgery
Whoever commits forgery shall be punished with the imprisonment of either for
a term which may extend to two years or with fie or with both.
Relationship between a banker and his customer is that of a debtor and creditor. When a
c h e q u e wi t h a f o r g e d s i g n a t u r e i s p r e s e n t e d , t h e b a n k e r h a s n o a u t h o r i t y
t o ma k e payments on it, and if he does make such payment he would be acting contrary
to the law and would be liable to the customer for the said amount. A bank in such cases
can escape liability only if it can show that the customer is not entitled to make a claim on
account of adoption, estoppel or ratification. The rule of law in this regard can be stated as
follows:
When a cheque duly signed by a customer is presented before a bank with
whom he has a n a c c o u n t t h e r e i s a ma n d a t e o n t h e b a n k t o p a y t h e
a mo u n t c o v e r e d b y t h e c h e q u e . However, if the signature on the cheque is
not genuine, there is no mandate on the bank to pay. The bank when makes
payment on such a cheque, cannot resist the claims of the customer with the
defence of negligence on its part, such as leaving the cheque book carelessly so
that the third parties could easily get hold of it. This is because a document in cheque
form, on which the customers name as drawer is forged, is a mere nullity. The bank can
succeed only when it establishes adoption or estoppel.
Civil Action
The payee may also initiate money recovery procedure in a jurisdictional civil court apart
from prosecuting the drawer for criminal offence.
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CHAPTER – 6
A cheque may be drawn in one country and payable in another country and in such cases,
Sections 134 to 137 of the Negotiable Instruments Act provide the legal rules, which are
discussed below.
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By English Law, days of grace are allowed on bills payable after date, but
by French law, they are not allowed. So, when a bill was drawn in England payable
in Paris three months after date, and when by the law of France the maturity of all the bills
was postponed for a month it was held that it will be governed by the law of France where
it was payable. The proper time for payment and for the notice of dishonour is
that fixed by the law of the country where the payment is to have been made.
Though the present section refers only to dishonour and notice of dishonour,
demand at the proper time by the holder is necessary in order to constitute dishonour.
Thus, it is to be inferred that the time when a bill becomes payable is to be determined by
the law of the place of payment.
The law of the place where a bill is made payable determines what constitutes
dishonour and what n o t i c e o f d i s ho n o u r wi l l b e s u f f i c i e n t . Th e s e c t i o n
a p p l i e s o n l y t o a c a s e wh e r e t h e instrument is made payable at a place different
from that in which it is made, but the rule is the same in the case of instrument payable in
the same place where it is made, because that place itself being the place of payment, the
law of that place determines the incidents r e l a t i n g t o d i s h o no u r .
S i n c e t h e d r a we r o f a b i l l o f e x c h a n g e a r e s u r e t i e s f o r t h e
d u e performance of the obligations incurred by the acceptor or maker, the law
of the place where the bill is payable indirectly affects their obligation also. This is
the reason why the necessity and sufficiency of a demand or a notice of dishonour
in order to charge any other party is to be determined by the law of the place
of performance.
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Presumption as to Foreign Law
( b ) B y o r a l t e s t imo n y o f e x p e r t . B u t t h e e v i d e n c e g i v e n mu s t b e t h a t
o f a p e r s o n specially skilled in such foreign law. The evidence of a person
who has merely studied foreign law is not permissible, because the word
'skilled' shows that he must have had some practice in the application of the
principles of that foreign law.
(c)By the opinion of foreign courts. By the Statute of 24 Vict, Ch II, Courts in
His Majesty’s dominions are empowered to state a special case to a superior court of any
country in order to ascertain the law of that country and the certified copy of the opinion
of the foreign court upon the case submitted to it shall be admitted to prove the foreign
law.
Section 69 of Cheques and Payment Orders Act 1986 defines dishonour as" A cheque is
dishonoured if the cheque is duly presented for payment and payment is refused
by the drawee bank, being a refusal that is communicated by the drawee bank to the holder
or the person who presented the cheque on the holder's behalf. "Section 70 of Cheques
and Payment Orders Act 1986 provides for the liability of then drawer or
indorser for dishonour of cheque. "A person who is the drawer or an indorser of
a cheque that has been dishonoured is liable on the cheque whether or not the person is
given notice by any person of the dishonour."As p e r s e c t i o n 7 1 , s u b je c t t o s u b -
s e c t i o n 1 7 ( 1 ) , s e c t i o n 5 9 a n d s u b - s e c t i o n 6 0 ( 1 ) o f Cheques and Payment
Orders Act 1986, the drawer of a cheque, by drawing the cheque, undertakes-
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(a) that, on due presentment for payment, the cheque will be paid according to its tenor as
drawn; and
(b) that-
( i ) i f t h e c h e q u e i s d i s h o n o u r e d wh e n d u l y p r e s e n t e d f o r p a yme n t ; o r
( i i ) i f presentment of the cheque for payment is dispensed with by virtue of paragraph
59(a) and the cheque is unpaid after its date has arrived, the drawer will
compensate the holder or an indorser who is compelled to pay the cheque.
The Bills of Exchange Act 1882 codifies for the United Kingdom the law relating to bills
of exchange, promissory notes and cheques. A cheque" is a bill of exchange drawn on
a banker payable on demand".
For the most p a r t t h e r u l e s o f l a w a p p l i c a b l e t o b i l ls p a ya b l e o n d e ma n d
a p p l y i n t h e i r e n t i r e t y t o cheques. But there are certain peculiar rules relating to the
latter which arise from the fact that the relationship of banker and customer subsists
between the drawer and drawee of a cheque. For example, when a person has an
account at a bank he is, as an inference of law, entitled to draw on it by means of
cheques.
The holder of a bill has special duties which he must fulfil in order to preserve his rights
against the drawers and indorsers. They are not absolute duties; they are duties
to use reasonable diligence. When a bill is payable after sight, presentment for
acceptance is necessary in order to fix the maturity of the bill.
Accordingly the bill must be presented for acceptance within a reasonable time.
When a bill is payable on demand it must be presented for payment within a
reasonable time. When it is payable at a future time it must be presented on the day
that it is due.
If the bill is dishonoured the holder must notify promptly the fact of dishonour
to any drawer and indorser he wishes to charge. If, for example, the holder only gives
notice of dishonour to the last indorser, he could not sue the drawer unless the
last indorser or s o m e o t h e r p a r t y l i a b l e h a s d u l y s e n t n o t i c e t o t h e
drawer.
W h e n a f o r e i g n b i l l i s dishonoured the holder must cause it to be protested by a
notary public. The bill must be noted for protest on the day of its dishonour. If this
be duly done, the protest, i.e. the formal notarial certificate attesting
the dishonour, can be drawn up at any time as of the date of the noting. A
dishonoured inland bill may be noted, and the holder can recover the expenses of noting,
but no legal consequences attach thereto.
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however,notingi s u s u a l l y a c c e p t e d a s s h o w i n g t h a t a b i l l h a s b e e n d u
l y p r e s e n t e d a n d h a s b e e n dishonoured. Sometimes the drawer or indorser has
reason to expect that the bill may be dishonoured by the drawee. In that case he may
insert the name of a "referee in case of need." But whether he does so or not,
when a bill has been duly noted for protest, any person may, with the consent of
the holder, intervene for the honour of any party liable on the bill. If the bill has
been dishonoured by non-acceptance it may be "accepted for honour supra
protest".
If it has been dishonoured by non-payment it may be "paid supra protest". When a
bill is thus paid and the proper formalities are complied with, the person who pays
becomes invested with the rights and duties of the holder so far as regards the party for
whose honour he has paid the bill, and all parties antecedent to him.
The Bills of Exchange Act 1908 codifies for the New Zealand laws relating to
bills of exchange, promissory notes and cheques. In this Act, the provisions relating to
dishonour of cheques are not separately dealt with under the chapter related to
cheques in the Act and therefore it can be assumed that the provisions of
dishonour of bills only apply in case of dishonour of cheques.
Section 42 of the Bills of Exchange Act 1908 deals with dishonoured by non-acceptance -
"Where a bill is duly presented for acceptance and is not accepted within the
customary time, the person presenting it must treat it as dishonoured by non-acceptance.
If he does not, the holder shall lose his right of recourse against the drawer and indorsers".
Section 43 of the Bills of Exchange Act 1908 further deals with the
consequences of dishonour by non-acceptance -"A bill is dishonoured by non-
acceptance-
(a) Where it is duly presented for acceptance, and such an acceptance as is prescribed by
this Act is refused, or cannot be obtained; or
(b) Where presentment for acceptance is excused and the bill is not accepted.
our must be given to the drawer and each indorser, and any drawer or indorser to whom
such notice is not given is discharged:
Provided that-
(a) Where a bill is dishonoured by non-acceptance and notice of dishonour
is not given, the rights of a holder in due course subsequent to the omission shall not be
prejudiced by the omission:
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(b) Where a bill is dishonoured by non-acceptance and due notice of dishonour is given ,it
shall not be necessary to give notice of a subsequent dishonour by non-payment unless the
bill has in the meantime been accepted.
S e c t i o n 5 5 o f t h e B i l l s o f Ex c h a n g e A c t 1 9 0 8 d e a l s wi t h t h e l i a b i l i t y o f
d r a w e r o r indorser.
(a) Engages that on due presentation it shall be accepted and paid according
to its ten or,a n d t h a t i f i t i s d i s h on o u r e d h e wi l l c o mp e n s a t e t h e ho l d e r
o r my i n d o r s e r w h o i s c o mp e l l e d t o p a y i t , p r o vi d e d t h a t t h e r e q u i s i t e
p r o c e e d i n g s o n d i s h o n o u r u n t i l d u l y taken;
(b) Is precluded from denying to a holder in due course the existence of the payee and his
then capacity to indorse.
(c) Engages that on due presentment it shall be accepted and paid according
to its tenor,and that if it is dishonoured he will compensate the holder or a subsequent
indorser who is compelled to pay it, provided that the requisite proceedings on
dishonour are duly taken;
(d) Is precluded from denying to a holder in due course the genuineness and regularity in
all respects of the drawer's signature and all previous indorsements:
(e) Is precluded from denying to his immediate or a subsequent indorsee that the bill was
at the time of his indorsement a valid and subsisting bill. and that he had then a good title
thereto.
A comparative analysis of Indian laws and laws of the countries mentioned above,
on liability for dishonour of cheques.
Australian Laws
The laws of other countries relating to the dishonour of cheques and the liability
arising therefrom are more or less similar to the laws laid down in the Negotiable
Instruments Act, 1881. However there are certain variations in laws of these
countries relating to dishonour of cheques and are discussed below.
As per Australian laws Section 70 of Cheques and Payment Orders Act 1986, in case
of dishonour of a cheque a person who is the drawer or an indorser, of such cheque, is
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liable on the cheque whether or not the person is given notice by any person of the
dishonour.
In India demand notice is mandatory. Sub-section (b) of Section 138 of the
Negotiable Instruments Act requires the payee or the holder in due course to issue a
notice in writing to the drawer of the cheque within 15 days of the receipt of the
information by him from the bank regarding the return of the cheque as unpaid.
This implies that unlike required in the Negotiable Instruments Act, 1881 there is no need
f o r t h e i s s u e o f d e ma n d n o t i c e t o t h e d r a we r a n d t h e l i a b i l i t y o f t h e
d r a w e r o r t h e indorser, as the case may be, shall arise as soon as the cheque
has been dishonoured by the bank.
UK Laws
Indian Laws and the UK Laws are very similar with respect to the provisions relating
tot h e d i s h o n o u r o f c h e q u e s a n d t he l i a b i l i t y a r i s i ng t h e r e f r o m. As r e q u i r
ed under the N e g o t i a b l e I n s t r u m e n t s A c t , 1 8 8 1 f o r e s t a b l i s h i n g t h
e l i a b i l i t y o f t h e d r a w e r f o r dishonour of cheque, the holder must notify the
drawer, of that fact of such dishonour of c h e q u e . S i mi l a r l y i n
U K La ws , u n d e r B i l l s o f Ex c h a n g e Ac t , 1 8 8 2 , i f a c h e q u e i s dishonoured,
the holder is required to notify the fact of dishonour to the drawer.
Under the Bills of Exchange Act 1908 Section 42 requires that when a cheque is
duly p r e s e n t e d f o r a c c e p t a n c e a n d i s n o t a c c e p t e d w i t h i n t h e c u s t o ma r y
t i me , t h e p e r s o n presenting it must treat it as dishonoured by non-acceptance.
However, if he does not, the holder will lose his right of recourse against the drawer and
indorsers.
Further, Section 48 of the Bills of Exchange Act 1908 deals with notice of
dishonour.The section states that if a cheque has been dishonoured by non-
acceptance or by non- payment, notice of dishonour must be given to the drawer
and each indorser. However,any drawer or indorser to whom such notice is not
given shall be discharged from his liability.
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CHAPTER – 7
The law relating to Negotiable instruments is the law of the commercial world which was
enacted to facilitate the activities in trade and commerce, making provision of
giving sanctity to the instrument of credit which would be deemed convertible
into money and easily passable from one person to another. In the absence of such
instruments, the trade and commerce activities were likely to be adversely affected
as it was not practical for the trading community to carry on with it the bulk of
currency in force.
The main object of the Act is to legalise the system by which instruments contemplated by
it could pass from hand to hand by negotiation like any other goods. C h a p t e r X V I I
w a s i n s e r t e d i n t h e Ac t 1 9 8 8 w i t h a v i e w t o p r o mo t e t h e e f f i c a c y
o f banking operations and to ensure credibility in transacting business through
cheques. However the chapter is not comprehensive and lacks to cover the
various aspects of the commercial transactions especially in view of the emerging ways
of payment through the Internet and other electronic means. Section 138 also does
not specifically cover the aspects such as where the payment has been stopped by the
drawer or where the account has been closed prior to the endorsement of
the cheque. These provisions no doubt have served their purpose but they could
be more elaborate in solving the dispute rather than merely relying on the Court
judgments.
Though insertion of the penal provisions have helped to curtail the
issue of cheque light h e a r t e d l y o r i n a pl a yf u l ma n n e r
o r wi t h a d i s h o n es t i n t e n t i o n a n d t h e t r a d i n g community now feels more
secured in receiving the payment through cheques.
However t h e r e b e i n g n o p r o v i s i o n f o r r e c o v e r y o f t h e a mo u n t c o v e r e d
u n d e r t h e d i s h on o u r e d c h e q u e , i n a c a s e wh e r e a c c u s e d i s c o n v i c t e d
u n d e r s e c t i o n 1 38 a n d t h e a c c u s e d h a s served the sentence but, unable to
deposit amount of fine, the only option left with the c o mp l a i n a n t i s t o f i le
civil suit
T h e p r o v i s i o n s o f t h e Ac t d o n o t p e r mi t a n y o t h e r alternative method of
realization of the amount due to the complainant on the cheque being dishonored
for the reasons of "insufficient fund" in the drawer’s account. However, the processes to
seek civil justice is notoriously dilatory and recover by way of a civil suit may take
inordinately long time therefore if the Government of
Indiacoulde s t a b l i sh a t r i b u n a l t o d e a l wi t h t h e d i s h on o u r o f c h e q u e s a n d
t h e l i a b i l i t y a r i s i n g there from, it could make the process of recovery of
damages faster for the aggrieved p a r t y .
For example, the Debts Recovery Tribunals have been establishe
d b y t h e Go v e r n me n t o f I n d i a u n d e r a n A c t o f P a r l i a me n t ( Ac t 5 1 of
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1 9 9 3 ) f o r e x p e d i t i o u s adjudication and recovery of debts due to banks and financial
institutions. Establishment of a similar tribunal to deal with the cases of dishonour of
cheques could perhaps provide a faster relief to the aggrieved party.
The people who issue cheques knowingly well that cheque is not going to be honoured on
presentation, try to create circumstances in which the banks return the cheque with such
endorsements as “Stop payment”, “Refer to Drawer” and “A/c closed”. This is with a view
to escape from the criminal liability. ‘Account Closed’ cannot afford a ground for taking
penal action under the Act. Except the two ground i.e. the insufficiency of the funds or,
because the cheque exceeds the amount arranged to be paid there is no third eventuality
contemplated under the Act. Further, the main object of Section 138 was to inculcate faith
in the efficacy of banking operations and credibility in transacting business on negotiable
instruments.
Despite civil remedy,The present day economies of the world which are functioning
beyond the international boundaries are relying to a very great extent on the mechanism of
the Negotiable Instruments such as cheques and bank drafts and also the oriental bill of
exchange as the business activities have increased, the attempt to commit crimes and
indulge in activities for making easy money has also increased. Thus besides civil law, an
important development both, in internal and external trade is the growth of crimes and we
find that banking transactions and banking business is every day being confronted with
criminal actions and this has led to an increase in the number of criminal cases relating to
or concerned with the Banking transactions.
Whenever a cheque is dishonoured, the legal machinery relating to the dishonour of a
cheque comes into motion. It is in the larger public interest that commercial transaction
maintains the speed and tempo and that a swift sale or a prompt purpose, is not unduly
impeded by suspicions always hovering round that part of promise to be performed in
future. The issue of a cheque carries with it assumptions which could regulate the normal
functioning of an honest citizen.
Bounced cheques are one of the most common offences plaguing the financing world.
According to the Supreme Court, there are over 40 lakhs such pending cases in the
country. Although, there have been a few amendments in the Act which has made the Act,
a self contained statute, wherein provisions have been made to check the delays and to
ensure speedy justice with more deterrent punishment, yet the problem of cheque
bouncing is not decreasing. Moreover, the law is unnecessarily complicated and there is
lack of provisions for forcing the appearance of the accused in the court. Though the
amendments to the Negotiable Instruments Act, 1881 are helpful in dealing with the
offence of bouncing of cheque, they are not fully proved successful in stopping the
offence.
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BIBLIOGRAPHY
3.Rajesh Gupta, Dishonour of cheques – Law and Practice, Bharat Law House
Pvt Ltd, New Delhi;
5 .S .K . A wa s t h i , L a w o f Di s h o n o ur o f c h e q u e s – F o r g e r y a n d C h e a t i n g ,
C TJ Publications, Pune;
6 .R . S wa r o o p , C a s e s o n Di s h o n o u r o f c h e q u e s ( Un d e r S e c t i o n 1 3 8
t o S e c t i o n 142 of the Negotiable Instruments Act), Law Aid Publications.
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