Nowadays almost every person is
aware of cheque bounce cases. But few
people only know what it is exactly. The
Negotiable Instrument Act was amended giving room to punish people who give
cheque without maintaining balance in their account. Before amending the act if any body give
cheque without balance that is not an offence, but a civil liability. i.e., the person who holds the cheque can sue for recovery of
money. But since the introduction of 138
of Act the Person is liable for punishment.
Lets consider relevent terms in
connection with cheque bounce offences.
1 [
6 “Cheque”. —A “cheque” is a bill of exchange drawn on a specified banker and
not expressed to be payable otherwise than on demand and it includes the
electronic image of a truncated cheque and a cheque in the electronic form.
Explanation I. —For the purposes of this section, the expressions—
“a
cheque in the electronic form” means a cheque which contains the exact mirror
image of a paper cheque, and is generated, written and signed in a secure
system ensuring the minimum safety standards with the use of digital signature
(with or without biometrics signature) and asymmetric crypto system;
“a truncated cheque” 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.
Explanation II. —For the purposes of
this section, the expression “clearing house” means the clearing house managed
by the Reserve Bank of India or a clearing house recognised as such by the
Reserve Bank of India.]
7 “Drawer”, “drawee”. —The maker of a
bill of exchange or cheque is called the “drawer”; the person thereby directed
to pay is called the “drawee”. “drawee in case of need”. —When in the bill or
in any indorsement thereon the name of any person is given in addition to the
drawee to be resorted to in case of need such person is called a “drawee in
case of need”. “acceptor”. —After the drawee of a bill has signed his assent
upon the bill, or, if there are more parts thereof than one, upon one of such
parts, and delivered the same, or given notice of such signing to the holder or
to some person on his behalf, he is called the “acceptor”. “acceptor for
honour”. — 2 [When a bill of exchange has been noted or protested for
non-acceptance or for better security], and any person accepts it supra protest
for honour of the drawer or of any one of the indorsers, such person is called
an “acceptor for honour”. “Payee”. —The person named in the instrument, to whom
or to whose order the money is by the instrument directed to be paid, is called
the “payee”.
8 “Holder”.—The
“holder” of a promissory note, bill of exchange or cheque means any person
entitled in his own name to the possession thereof and to receive or recover
the amount due thereon from the parties thereto. Where the note, bill or cheque
is lost or destroyed, its holder is the person so entitled at the time of such
loss or destruction.
9 “Holder
in due course”.—“Holder in due course” means any person who for consideration
became the possessor of a promissory note, bill of exchange or cheque if
payable to bearer, or the payee or indorsee thereof, if 1[payable to order],
before the amount mentioned in it became payable, and without having sufficient
cause to believe that any defect existed in the title of the person from whom
he derived his title.
These are the terms we often come
across the 138 cases.
The Sec.138 says:
18 [
138 Dishonour of cheque for insufficiency, etc., of funds in the account.
—Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any 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 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 from that account by an agreement made
with that bank, such person shall be deemed to have committed an offence and
shall, without prejudice to any other provisions of this Act, be punished with
imprisonment for 19 [a
term which may be extended to two years], or with fine which may extend to
twice the amount of the cheque, or with both: Provided that nothing contained
in this section shall apply unless—
(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, 20 [within
thirty days] of the receipt of information by him from the bank regarding the
return of the cheque 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.
Explanation.— For the purposes of this
section, “debt or other liability” means a legally enforceable debt or other
liability.]
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
1[ 139 Presumption
in favour of holder.—It shall be presumed, unless the contrary is proved, that
the holder of a cheque received the cheque of the nature referred to in section
138 for the discharge, in whole or in part, of any debt or other liability.]
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
1[140 . Defence
which may not be allowed in any prosecution under section 138.—It shall not be
a defence in a prosecution for an offence under section 138 that the drawer had
no reason to believe when he issued the cheque that the cheque may be dishonoured
on presentment for the reasons stated in that section.]
21 [
141 Offences by companies. —
(1) If
the person committing an offence under section 138 is a company, 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, as
well as the company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly: Provided that nothing
contained in this sub-section shall render any person liable to punishment if
he proves that the offence was committed without his knowledge, or that he had
exercised all due diligence to prevent the commission of such offence: 22 [Provided
further that where a person is nominated as a Director of a company by virtue
of his holding any office or employment in the Central Government or State
Government or a financial corporation owned or controlled by the Central
Government or the State Government, as the case may be, he shall not be liable
for prosecution under this Chapter.]
(2) Notwithstanding
anything contained in sub-section (1), where any offence under this Act has
been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to, any neglect
on the part of, any director, manager, secretary or other officer of the
company, such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be proceeded against
and punished accordingly. Explanation.— For the purposes of this section,—
(a) “company”
means any body corporate and includes a firm or other association of
individuals; and
(b) “director”,
in relation to a firm, means a partner in the firm.]
23 [
142 Cognizance of offences. —Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974)—
(a) no
court shall take cognizance of any offence punishable under section 138 except
upon a complaint, in writing, made by the payee or, as the case may be, the
holder in due course of the cheque;
(b) such
complaint is made within one month of the date on which the cause of action arises
under clause (c) of the proviso to section 138: 24 [Provided
that the cognizance of a complaint may be taken by the Court after the
prescribed period, if the complainant satisfies the Court that he had
sufficient cause for not making a complaint within such period.]
(c) no
court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of
the first class shall try any offence punishable under section 138.] COMMENTS
(i) Consequent
upon the failure of the drawer to pay the money within the period of 15 days as
envisaged under clause (c) of the proviso to section 138, the liability of the
drawer for being prosecuted for the offence he has committed, arises, and the
period of one month for filing the complaint under section 142 is to be
reckoned accordingly; Sadanandan Bhadran v. Madhavan Sunil Kumar, AIR 1998 SC
3043.
(ii) A
manager or any other person authorised by the company can represent it during
the course of legal proceedings before the court and file a complaint; Salar
Solvent Extractions Ltd. v. South India Viscose Ltd., (1994) 3 Crimes 295
(Mad).
(iii) The
Magistrate while taking cognizance has to look into the question whether the
ingredients of an offence have been made out or not; M/s. Pearey Lal Rajendra
Kumar Pvt. Ltd. v. State of Rajasthan, (1994) 3 Crimes 308 (Raj).
(iv) The
cause of action for filing complaint would arise after the completion of 15
days from the date the drawer receives the notice and fails to pay the amount
within that period; V.N. Samant v. M/s. K.G.N. Traders, (1994) 3 Crimes 725
(Karn).
(v) The
payee cannot lodge a complaint after the completion of one month from the date
on which the cause of action arose as there is a bar under clause (b) of
section 142; V.N. Samant v. M/s. K.G.N. Traders, (1994) 3 Crimes 725 (Karn).
(vi) So
long as the period of notice does not expire there can be no cause of action
with the payee to make the drawer liable criminally; T.K. Khungar v. Sanjay
Ghai, (1994) 3 Crimes 802 (P & H).
(vii) It
is well settled that it is not necessary for the Magistrate to specifically
state that he is taking cognizance of the offence. If he takes steps as
provided under section 200, of the Code of Criminal Procedure then it
necessarily means that he has taken cognizance of the offence; R. Rajendra
Reddy v. M/s. Sujaya Feeds, (1994) 3 Crimes 692 (Karn).
(viii) The
complainant must allege in his complaint that the cheque was dishonoured due to
want of sufficient amount in the account, even if the payment was stopped;
Ballakrishna Pillai v. Abdullakutty, (1994) 2 Crimes 327 (Ker).
(ix) Once
a cause of action has arisen, the limitation will begun to run and it could not
be stopped by presenting the cheque again so as to have a fresh cause of action
and fresh limitation; M/s. Chahal Engineering and Construction Ltd. v. M/s.
Verma Plywood Co., (1994) 1 Crimes 845 (P & H).
(x) The
criminal prosecution has to be launched within one month of the expiry of 15
days' period from the issuance of notice as provided by section 142(b) of the
Act; M/s. Chahal Engineering and Construction Ltd. v. M/s. Verma Plywood Co.,
(1994) 1 Crimes 845 (P & H).
(xi) When
the cheque stood issued in favour of a company, a complaint under section 138
of the Act can be filed by its Manager, Partner, Director or any person authorised
by the company; M/s. Ruby Leather Exports v. K. Venu, (1994) 1 Crimes 820
(Mad).
(xii) There
is no ambiguity in clause (a) of section 142 of the Act, which prohibits or
excludes complaints being initiated by Power of Attorney, agents of the payee
or the holder in due course. A Power of Attorney, will be competent to initiate
a private complaint by stepping into the shoes of the payee or the holder in
due course; M/s. Ruby Leather Exports v. K. Venu, (1994) 1 Crimes 820 (Mad).
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
(1) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all
offences under this Chapter shall be tried by a Judicial Magistrate of the
first class or by a Metropolitan Magistrate and the provisions of sections 262
to 265 (both inclusive) of the said Code shall, as far as may be, apply to such
trials: Provided that in the case of any conviction in a summary trial under
this section, it shall be lawful for the Magistrate to pass a sentence of
imprisonment for a term not exceeding one year and an amount of fine exceeding
five thousand rupees: Provided further that when at the commencement of, or in
the course of, a summary trial under this section, it appears to the Magistrate
that the nature of the case is such that a sentence of imprisonment for a term
exceeding one year may have to be passed or that it is, for any other reason,
undesirable to try the case summarily, the Magistrate shall after hearing the
parties, record an order to that effect and thereafter recall any witness who
may have been examined and proceed to hear or rehear the case in the manner
provided by the said Code.
(2) The
trial of a case under this section shall, so far as practicable, consistently
with the interests of justice, be continued from day to day until its
conclusion, unless the Court finds the adjournment of the trial beyond the
following day to be necessary for reasons to be recorded in writing.
(3) Every
trial under this section shall be conducted as expeditiously as possible and an
endeavour shall be made to conclude the trial within six months from the date
of filing of the complaint.
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
(1) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), and for
the purposes of this Chapter, a Magistrate issuing a summons to an accused or a
witness may direct a copy of summons to be served at the place where such accused
or witness ordinarily resides or carries on business or personally works; for
gain, by speed post or by such courier services as are approved by a Court of
Session.
(2) Where
an acknowledgment purporting to be signed by the accused or the witness or an
endorsement purported to be made by any person authorised by the postal
department or the courier services that the accused or the witness refused to
take delivery of summons has been received, the Court issuing the summons may
declare that the summons has been duly served.
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
(1) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the
evidence of the complainant may be given by him on affidavit and may, subject
to all just exceptions be read in evidence in any enquiry, trial or other
proceeding under the said Code.
(2) The
Court may, if it thinks fit, and shall, on the application of the prosecution
or the accused, summon and examine any person giving evidence on affidavit as
to the facts contained therein.
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
146. Bank’s
slip prima facie evidence of certain facts.—The Court shall, in respect of
every proceeding under this Chapter, on production of bank’s slip or memo
having thereon the official mark denoting that the cheque has been dishonoured,
presume the fact of dishonour of such cheque, unless and until such fact is
disproved.
THE NEGOTIABLE
INSTRUMENTS ACT, 1881
146. Bank’s
slip prima facie evidence of certain facts.—The Court shall, in respect of
every proceeding under this Chapter, on production of bank’s slip or memo
having thereon the official mark denoting that the cheque has been dishonoured,
presume the fact of dishonour of such cheque, unless and until such fact is
disproved.
147 Offences to be compoundable.
—Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2
of 1974), every offence punishable under this Act shall be compoundable.
THE NEGOTIABLE
INSTRUMENTS ACT, 1881 SCHEDULE.—Enactment repealed.—[Rep. by the Amending Act,
1891 (12 of 1891), sec. 2 and Sch. I.]
1. Subs. by Act 55 of 2002, sec. 2, for
“A “cheque” is a bill of exchange drawn on a specified banker and not expressed
to be payable otherwise than on demand" (w.e.f. 6-2-2003).
2. Ins. by Act 5 of 1914, sec. 2.
3. Ins. by Act 5 of 1914, sec. 2.
4. Added by Act 5 of 1914, sec. 3.
5. Added by Act 5 of 1914, sec. 3.
6. Subs. by the A.O. 1937, for “Local
Government”.
7. Ins. by Act 2 of 1885, sec. 4.
8. Subs. by Act 12 of 1921, sec. 3, for
“for payment”.
9. Subs. by Act 66 of 1988, sec. 2, for
“six per centum” (w.e.f. 30-12-1988).
10. Ins. by Act 55 of 2002, sec. 4 (w.e.f.
6-2-2003 ).
11. Ins. by Act 17 of 1934, sec. 2.
12. Ins. by Act 55 of 2002, sec. 5
(w.e.f. 6-2-2003 ).
13. The words “and such declaration
must be recorded by the notary in his register” omitted by Act 2 of 1885, sec.
8.
14. Subs. by Act 66 of 1988, sec. 3,
for “six per centum” (w.e.f. 30-12-1988).
15. Explanation re-numbered as
Explanation I thereof by Act 55 of 2002, sec. 6 (w.e.f. 6-2-2003).
16. The words “law of British India”
were successively amended by A.O. 1948, the A.O. 1950 and Act 3 of 1951, sec. 3
and Sch. to read as above.
17. Subs. by Act 3 of 1951, sec. 3 and
Sch., for “the States”.
18. sections 138 ins. by Act 66 of
1988, sec. 4 (w.e.f. 1-4-1989 ).
19. Subs. by Act 55 of 2002, sec. 7,
for "a term which may be extended to one year" (w.e.f. 6-2-2003 ).
20. Subs. by Act 55 of 2002, sec. 7,
for "within fifteen days" (w.e.f. 6-2-2003 ).
21. Ins. by Act 66 of 1988, sec. 4
(w.e.f. 1-4-1989).
22. Ins. by Act 55 of 2002, sec. 8
(w.e.f. 6-2-2003).
23. Ins. by Act 55 of 2002, sec. 9
(w.e.f. 6-2-2003).
24. Ins. by Act 55 of 2002, sec. 9 (w.e.f.
6-2-2003).
As we observed above the litigation
pertaining to the cheque bounces are becoming a major litigation in the
country.
Since the giving of cheque without
balance in account is an offence and the cases are easy to file and less time
in comparable with civil cases are taken, besides that no court fee is payable
people are opting to file 138 NI Act cases.
It is not out of place to say that many un authorised money lenders and private
chit fund owners are also taking advantage of this easy tryl. Day after day many people are suffering for
the following:
The private money lender by lending
small amount taking a cheque of heavy amount and filing criminal cases. The accused could not place any defence of the
same before the courts and ultimately they have to suffer criminal punishment i.e.,
sentence to Jail. In some cases the
accused to safe guard their skin are going to compromise with the complainant
by paying more and more money to them by facing many trebles.
Nowadays Bankers are also taking
advantage of this procedure. Inspite of
filing a civil case they also opting to file criminal case under 138 NI act.
I saw several cases wherein innocent
people were became subject for harassment of 138 NI Act.
I think it is high time to amend the
act in the following way.
If any debt is given to any person that
should be only by way of crossed cheque and on the basis of cheque only promissory note
should be executed. If any transaction
is not by way of cheque or Demand Draft was not made at the time of lending
money that should not attract 138 NI act.
More over if a person who is not a professional moneylender than only
cheque bounce cases strictly should attract.
At the time of filing of a complaint the
complainant should declare that the present case is only a transaction of
lending money which does not attract professional
money lenders act, he further declare that except the present case he was not
filed any more 138 NI Act cases and also should undertake that he will not file
any more cases.every transaction should be shown in income tax returns.
I request the state to incorporate
these points in future amendments so as to curtail false, fake and unfair
litigation. So that only real people
will come to the court.
As far as Bank transactions are
concerned sec.138 completely made not
applicable for Bank transactions.
If anybody having any doubt with regarding these cases can contact the author.
If anybody having any doubt with regarding these cases can contact the author.
