Bank loan recovery by using cheques deposited as a security


One Criminal case is filed against one of my friend under section 138 of Negotiable Instruments Act for recovery of balance loan amount.

In nutshell, the story is that he has purchased a 4-wheeler by taking finance from the co-operative bank.
 For a period of around 2-years out of term of 3-years, he repaid the installment of the bank loan properly, but due to some reasons, could not pay the balance amount of installment to the banker.

In the meantime, the bank has ceased the vehicle and re-sold the said vehicle to a prospective buyer. As per calculation of the Accused, by utilizing the payment made for initial 2-years + the resale value of the vehicle, it is more then sufficient to meet the obligations of the loan taken from the co-operative bank.

Accused have no ceasing letter of the financer. After one year, the co-operative bank has filld a random amount in the cheque, presented the said before the Banker, as expected it was bounced and by operating procedure of law, it has filed the criminal complaint under section 138 of NI.Act for recovery of the bank loan stating that Accused has issued the said cheque for discharge of loan liability.  Actually he has given blank 10-cheques to the banker at the time of disbursement of vehicle finance loan which has been mis-used by the banker.

What stand should we take now.  The case is pending before the JMFC. Court as a Summary Trial.

Regards

M.Sayeed

 
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if amount and date have been filled in by the bank it amounts to material lateration of cheque . no cheque bouncing case is maintanable . have you retained xerox copy of balnk cheques given by you to bank . it will help you in proving your case . bank has to show that amount and date has been filled in with your consent . contact a local lawyer


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I disagree with Ajay Sethi's atatement that "if amount and date have been filled in by the bank it amounts to material lateration of cheque". A chq is not materially altered if the payee/3rd party fills in the details. A chq is materially altered if there is overwriting on date/amount etc or deletion of a/c payee crossing, etc on the chq, regardless of whoever fills in the details on the chq.

 

Further, I think the onus lies with the accused to prove that the chq(s) were given as "security" chqs and therefore should not attract sec 138. However, I cannot say for sure on this part - I would accept Mr Sethi's opinion since he is a Lawyer.

 
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Sir, in support of your say that if the bank (complainant) at its own filled the amount and date, it amounts to material alteration to the instrument, if you have any citations or source information from the act or commentary, please quote to enable me to proceed further for filing application for dismissal of the present criminal complaint on those grounds.
 
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POWER OF DEFENSE IS IMMENSE

Accused get confused by citations of blank and security cheque judgments.

 

All those citations have not come on the word of accused but accued advocate could get congent evidence and  also admission from the complainant in the cross.

 

So all accused should remember that unless you can produce evidence other than word of the accused than only you can proceed on this theory otherwise not..

 

You will have many other fronts to contest the case.

 
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Lets first look at Circumstantial evidence to strengthen the case in favour of accused.

(1) When the vehicle was ceased, was it done with the consent of accused? If not, did the accused file any complaint of theft/coercian against the bank? (documentary proof required)

(2) Veh the vehicle was sold (actually auctioned) off by the bank, was it done unilaterally by the bank or was done with the consent of accused? If not then what recourse did the accused take? Any written correspondence done between the accused and the bank? Did, at this stage, accused ask for return of his (erstwhile) blank cheques?

(3) You have said "As per calculation of the Accused, by utilizing the payment made for initial 2-years + the resale value of the vehicle, it is more then sufficient to meet the obligations of the loan taken from the co-operative bank." If this is true then there should be a valid documentary proof of same. If yes, then there is no liability of accused towards the bank.

A case under s 138 of NI Act is sustainable only if the cheque is dishonoured against an exisitng liability.

 

Other aspects as mentioned by other members are also valid. We need to go into all this  and more. 

 
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POWER OF DEFENSE IS IMMENSE

1) Once process is issued case can not be dismissed.

2) Very recent SC citation says once cheque is there the liability is presumed. It is the duty of the accused to rebutt this presumption by congent evidence.

3) You should get the statement of account and details of sale value and do the actual calculation of exact accounts.

4) Case has to be contested properly since it is not for recovery of money but for punishment due to issue of dud cheque.

5) So moving for dismissal will not work but you have to contest with proper tacticts and this case and so any other cheque bounce can be we won.

 

 
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