How to deal with false cases of Cheque Bounce

Ubi jus ibi remedium means 'where there is a right there is a remedy' clearly justifies the essence of the intention of the legislature. In recent days, people use their right as a weapon to get their malafide intention accomplish. These days, every second person is surrounded by a greed of money and to get over it uses the law as a tool to get wrongful gain. Indian courts are flooded with the cases of Cheque bounce i.e. under section 138 of Negotiable Instrument Act, 1881 and the irony is that about more than half of these cases are false. The false complaint is filed just to harass innocent person and make him a prey of his greed.

Objective Behind Negotiable Instrument Act, 1881  

Negotiable Instrument Act, 1881 is enacted to facilitate the commercial activities in terms of credit to avoid confusion and to prevent fraud. Negotiable Instrument includes promissory note, bills of exchange or cheque. Its object is to prevent fraudulent activities in day to day life in terms of exchange of negotiable instruments and regulates the activities in the process of exchange of Negotiable Instruments.

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. As the cheque is bill of exchange, the provisions of Order 37, of Civil Code of Procedure shall also apply. In N.I. Act, 1881 section – 138 to 142 deals with dishonour of cheques. All grounds of dishonour of cheques does not attracts section 138 of N.I. Act, 1881.

The N.I. 138 Act, 1881 shall apply unless:-

  1. 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.
  2. The holder in due course of the cheque, makes a demand of the said amount of money by giving a notice in writing to the drawer of the cheque within a period of thirty days from the receipt of information regarding dishonour of cheque by bank.
  3. If within fifteen days of receipt of the said notice by the drawer, fails to make the payment of the said amount.
  4. The payment made to drawer shall be, as debt or other liability.

Limitations 

Appeal under N.I. 138, does not maintainable in case of acquittal of an accused. As the provision of appeal is given under section 372 of Cr.P.C. which mention word 'victim' and complainant cannot be a victim. But it doesn't mean that complainant cannot have any remedy in this situation, he have to approach an Hon'ble High Court and asked for special leave to appeal under section 378(4) of Cr.P.C. read with clause 5 of Cr.P.C..

Influence of N.I. 138 on society

Now a days, people take cheque as a security of payment of certain amount of money, one made to other as friendly loan or for credit purposes for conducting trade activities. But due to their greed towards more money they use that cheque as a weapon of extortion and gets the said cheque enchashed at bank by filling more amount that led the cheque to dishonoured on the grounds that attracts N.I. 138.  Indian Courts also scrutinize the cases of N.I. 138 duly with more care to preserve the principle of the constitution that 'Let hundred accused be escaped but one innocent can't be punished'.  

In recent judgement Satishchandra Ratanlal Shah V. State of Gujarat and Anr.; 2019 the Hon'ble Supreme Court held that-

In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mensrea. Admittedly the appellant was trapped in economic crisis and therefore, he had approached the respondent no. 2 to ameliorate the situation of crisis. Further in order to recover the amount, respondent no. 2 instituted the suit. The bench said that mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown.

Before this judgement, complainant uses the section 420 in their complaint to cause mental agony to the one without considering the aspect of mensrea which sometimes led to innocent to suffer. 

Various Judgments where Court finds no ground to convict an accused

  1. In Credential Leasing & Credits Ltd. v. Shruti Investments & Anr., 2015, Bench held that there is no merit in the legal submission of the respondent accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, the complaint under section 138 of the NI Act would not be maintainable. At the same time, I may add that it would need examination on a case to case basis as to whether, on the date of presentation of the dishonoured cheque the ascertained and crystallized debt or other liability did not exist. The onus to raise a probable defense would lie on the accused, as the law raises presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability.
  2. In Arise India Ltd. v. Arun Mittal, High Court of Delhi, 2015 held that petitioner is failed to satisfactorily explain as to why respondent would agree to pay entire amount to petitioner in respect allegedly partially supplied lift, there was no obligation for petitioner to return the supplied equipment, at the time of dispute existed between the parties.
  3. In Micson Finance v. Sampath Sekhar & Anr., High Court of Madras, 2018 held that complainant failed to prove the liability of respondent towards issuance of cheques and respondents had probabilised their case.
  4. In Hariskishan v. Ranjeet, High Court of Delhi, 2015 held that there is clear acknowledgement of the complainant regarding no payment due towards him.
  5. In Vijay v. Laxman, 2013, the Hon'ble Supreme Court held that when the case set up by the holder of the cheque was dubious, initial presumption under section 118 & 139 NI Act itself comes to an end.
  6. In Raj Kumar & Associate Pvt. Ltd. v. Hansraj, High Court of Delhi 2015, held that the highly belated endeavor of the complainant to now seek to explain its accounting procedure appears to be an afterthought.
  7. In Soni Impex v. Taurain Overseas & Anr., High Court of Delhi 2015, held that the accused was clearly able to raise a serious doubt about the claim of the petitioner complainant that no amount was due from the accused to the complainant on account of supply of any equipment. As discussed in the impugned judgment, all these banks clearly shows that the accused was able to set up a probable defense which certainly cannot be said to be perverse or as suffering from misappreciation of evidence.

The author can also be reached at Advocate.kapilc@gmail.com

 

Kapil Chandna 
on 06 March 2019
Published in Criminal Law
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