Sagnik (Management Trainee) 03 October 2012

Urgent : dishonour of security cheque

Dear All,

Our company had taken a loan from a certain company & had given many post dated cheques to cover the said debt. It had also granted one security cheque to cover the entire due in case there was a default on the part of our company.

Now, our company had paid back almost whole of the debt it had taken & only a fraction of the said due was left which it failed to pay within the prescribed time period. Thereby, the lending company went ahead & deposited the security cheque which was given to cover the whole of the debt & not just the remaining fraction. As a result the said cheque was dishonoured.

As I had earlier mentioned that most of the due was already met by PDC's issued by us & only a fraction of the said debt was left, was the action of the lending company (i.e. to deposit the security cheque which was against the whole debt & not just the remaining amount which was due), legal in the eyes of law & can there be an action under section 138 against such a dishonour ??

Regards,

Sagnik Sanyal

P.S :- Please remember that the cheque was dishonoured against the whole of the debt amount whereas only a fraction of it was due to be paid back. Thank You

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6 Replies

LAXMINARAYAN - Sr Advocate. ( solve problems in criminal cases. lawproblems@gmail.com) 03 October 2012

The provisions of the cheque laws are stringent and the process is short and quick. So you have to move form day one with various steps otherwise the law presumes your liablity.

We however maintain that there are many lapses on part of the complainant and it is easy to win the case.

But while most of the complainant loose due to over confidence that they have bounce cheque while the accused loose due to misconceptions about defense and lousy / lax conducting the defense..

Prasun Chandra Das (Banker) 03 October 2012

The lending Co.was correct in banking the chq. It did not have any option - the chq was of the whole loan amount. Pls note that (1) had the chq got passed, the lending Co.was bound to return the excess amount to your Co., and (2) The lending Co.can issue notice u/s 138, but in the notice they have to clearly mention the amount due/demanded. Therefore, if they demand the unpaid amount, pls pay them. If they demand the whole amount, you can refuse to pay and contest the notice.

Just pay them the small unpaid amount ASAP and save unnecessary trouble.

Pralay Mukhopadhyay (student) 06 October 2012

hi guys can i ask here is section 138 of ni act attracks where the security cheque dishonerd?

THE LAW PROVISIONS OF NEGOTIABLE INSTRUMENTS ACT SEC.138 ARE OFTEN MISUSED BY THE COOPERATIVE SOCIETIES AND CREDITORS AND PRIVATE MONEY LENDERS TO HARASS THE PERSON ISSUING THE CHEQUES.THESE FINANCERS COLLECT IN ADVANCE SIGNED BLANK CHEQUES OR POST DATED CHEQUES FROM THE BORROWERS AS SECURITY FOR LOAN.

the High Court of Delhi in the case of M/s Datt Enterprises ltd. v V.K.Dua and Another after evaluating the evidence presented by the parties held that the security cheque does not attract the provisions of section 138 of the Act. Court observed thatplaintiff made false allegations towards the defendant. The cheques were given as a security cheque as per past practice and pending reconciliation of accounts and not towards discharge of any liability.

LAXMINARAYAN - Sr Advocate. ( solve problems in criminal cases. lawproblems@gmail.com) 06 October 2012

Just by telling that the bounced cheque was security cheque is not sufficient, you have to prove by evidence.

There are no of opportunities prior to hearing to come out of the cheque bounce case.

Cross is most important technique and there are very rare experts for cross.Most of the time the cross is taken against their own case.

Prasun Chandra Das (Banker) 08 October 2012

I stand corrected by Pralay Mukhipadhyay. I was wrong in saying the the lending Co.was correct in banking th chq and that case can be filed u/s 138.

The fact is that "bouncing of chqs given as security to a loan do not attract proceedings u/s 138". Of course the borrowing Co.has to proce that the chq was given as security.

In following cases bouncing of cheques which were given as security for loan amounts were held not to attract provisions of Section 138 of the Negotiable Instruments Act :

1) Anand Urban Cooperative Credit Society V/s. Vipin Lalchand Mehta & Anr., 2008 (2) Bom.C.R. (Cri.) 65 : 2008 ALL M.R. (Cri) 2266.

2) Goa Handicrafts, Rural & Small Scale Industries Development Corporation Ltd., V/s. Samudra Ropes Pvt. Ltd. & Anr., 2005 ALL MR (Cri) 2643 : 2006 (1) Bom.C.R. (Cri) 157.

3) Hanumant R. Naik V/s. Ajit Harmalkar, 2008 (1) Bom.C.R. (Cri) 432 : 2008 ALL MR (Cri) 486.

4) M.S. Narayana Menon Alias Mani V/s. State of Kerala and Anr., (2006) 6 S.C.C.39.

5) Karekar Finance Pvt. Ltd., V/s. Shri M.N. Bashyam & Anr., 2007 ALL MR (Cri) 3073 : 2008

(3) B.C. 98.

6) Jayantilal Parmar V/s. Vaishali Farne (2007) 2 Bom.C.R. (Cri) 403.

7) Om Shri Finance & Investment Corporation V/s. Mohemmed Sheikh (2007) 11 LJSOFT (URC) 24.

8) Ramkrishna Urban Co-operative Credit Society Ltd. v/s Shri. Rajendra Bhagchand Warma—Decision by The Hon’ble High Court of Bombay at its bench at Aurangabad in Criminal Application No.898/2009