Civil Procedure Code (CPC)

Threating u/s. 138 of Negotiable Act,1881

This query is : Resolved 

Online (Querist)
01 December 2010

Sir my father has got notice u/s.138(b) stating that a cheque has been issued dated 10/10/2010 for settlement with bank amounting to roughly Rs.61,835 & that cheque has been bounced because of insufficiency of funds, & they are asking 4 payment within 15 days & threating to file suit u/s.138 of Negotiable Instrument Act,1881 in fact my father never gave such cheque.. it was only in d begginning that he gave cheques during sanction i.e at the time of taking Personal loan of Rs.40,000/-.Further details of notice cheque bounced date was 14/10/2010 & the client who issued notice came to know about bouncing of cheque on 01/11/2010 & notice date is 27/11/ my father is jobless he is unable to pay even if any1 could help me in this situation!!

Khaleel Ahmed (Expert)
02 December 2010

Let them file a case against your father. Dfend the case. However your father have to pay the cheque amount or face imprisonment.

Rajeev kulshreshtha (Expert)
02 December 2010

As you are defaulter in paying loan amount the better way is go and try to make settlement with bank.If there is no settlement you have to face the consequences of proceeding being filed by the bank.

Harsh KataraOnline (Querist)
02 December 2010

Thanks 4 replying... further according to them the cheque is of ahmdabad br. but my father's a/c is in Surat's br. then sir hw lawful is this case?

This was reported in "Times of India, dated 20 February'2010, Mumbai edition, page 01".
(read article, as reproduced below)
1. N.I.Act is not applicable to Blank or Post-Dated cheques.

2. N.I.Act is not applicable to third-party cheques given towards debt repayment of the original debt of another person.

Collateral cheques can’t bounce: HC
(reported in "Times of India, dated 20 February'2010, Mumbai edition, page 01")

As my father has not issue any new cheque 4 settlement so the cheque must b collateral 1..

I'm also attaching word file & according 2 me this section does not apply to us as time period for demanding payment has been plz guide me further

malipeddi jaggaraoOnline (Expert)
02 December 2010

It can not be so that the cheque is of Ahmedabad branch and your fther's account is with Surat Branch. Please verify. The printed name might be Ahmedabad Branch but replaced by rubber stamp of Surat Branch.

It is true that this section is not applicable to the blank or post-dated cheques. You are misunderstanding. Post-dated cheque means as on the date of presentation it is post-dated. But accepting the post-dated cheques for consideration and presenting them on the due dates (or within 6 months of such date) is valid.

It is also true that these provisions are not applicable to third party cheques. In this case, your father borrowed personal loans and gave the cheques at the time of sanction. He is not third party.

Collateral cheques can not bounce means any cheque given as collateral security for securing a loan can not be returned unpaid. If bounced,it will attract the penal provisions of section 138 of NI Act. You are not understanding properly.

Your father need not give fresh cheques. The post dated cheques given at the time of securing loan are sufficient.

Hence as advised by Expert mr.Rajiv, you better settle the matter with the Bank.

vijayan (Expert)
02 December 2010

your father is in liability to repay loan amount.Signed cheque is with the Bank. Bank taken steps to recover the loan amount in an easiest way. Please note, Bank has complied with all legal formalities before sending the legal notice. it is not a threaten. date of bouncing of cheque and date of getting information about bouncing would be different, if the collection bank is different from payers bank. Try to settle the matter before pronouncing judgment.You have no strong defense to contest the matter.

Sri Vijayan.AOnline (Expert)
02 December 2010

1. From ur question, it is inferrd that u r trying to avoind the loan amount.
2. To support that u r finding ways
3.The financier/ bank has done all formalities legally.
4. The non-earning status of ur father is not an execuse.
5.The news what u have pasted is here is correct and legal but this is not applicable to ur case.
So kindly find the way to settle the loan instead of finding way to avoid it
Thank u

Harsh KataraOnline (Querist)
03 December 2010

THAKS 4 REPLY all experts above..
Sir but blank cheque was issued at time of sanction so as per N.I.act this section does not apply..
& further my father is 56+ he is jobless right now & we asked 4 help 4m some1 but will take time, my father wants to settle, he was regular payer but due to circumstances he is currently unable to pay..
also in notice it is written that client i.e the financial institute 4m where loan has been taken has got informed of cheque bounced on 1/11/2010 & they demanded payment frm us after expiry of limit mentioned u/s.138 of N.I i.e 15 days then hw can this section apply to us?
& also we have given of surat br cheque & nt ahd br..that's y i feel the case is invalid & required guidiance frm u all.
& further my father is not avoiding loan he wants to pay as soon as he can 4 which he is considering 4 even sale of house provided no help is recived but problem is he is not earning so from where 2 py rent??+ he is nt getting job 2..we live in SMC quaters..
& if u culd guide me further plz guide>>>
thanks again...

Harsh KataraOnline (Querist)
03 December 2010

Sir i also quote below a CASE LAW::

(reported in "Times of India, dated 20 February'2010, Mumbai edition, page 01")

Mumbai: The Bombay high court has ruled that banks cannot prosecute borrowers under the stringent anti-cheque bouncing laws if blank post-dated cheques issued by them as collateral security are dishonoured.

“It is doubtful if the provisions of Section 138 of the Negotiable Instruments Act can apply to a case in which a blank or post-dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amounts as security for the loan,’’ said Justice P R Borkar. The order is likely to come as a huge setback to lending agencies who ask borrowers to deposit blank post-dated cheques as security.

“Law-makers must not have intended or imagined that money lenders or banks would obtain blank or post-dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors/borrowers repay the loan under threat of prosecution and punishment (under the cheque-bouncing law),’’ added the judge.

The court upheld the acquittal of Ahmednagar resident Rajendra Warma, who was prosecuted after a blank cheque issued by him for a loan was dishonoured.

‘Law is not meant for speedy loan recovery’

Mumbai: The Bombay high court has upheld the all-clear to Ahmednagar resident R a j e n d r a Warma in a blank cheque bouncing case. Ramkrishna Urban Cooperative Credit Society (RUCCS) had given a loan of Rs 2 lakh to Warma in 2000. Warma had issued 10 blank post-dated cheques at that time as security. One of these cheques, dated January 2008, bounced, following which RUCCS lodged a criminal complaint against Warma. The magistrate’s court held that Warma was not guilty under the Negotiable Instruments Act and acquitted him. It also held that while Warma had receipts to prove that he had repaid the entire loan amount in 2005, the bank failed to produce records after 2003.

The object of the law was “to encourage all major transactions, including commercial or business transactions through cheques, and to enforce credibility and acceptability of cheques in settlement of liability in general’’, the court said, adding: “The object was not to provide effective and speedy remedy for recovery of loans.’’

thak u

Advocate. Arunagiri (Expert)
03 December 2010

Your only defense available is, accept the civil liability, but, don't accept the criminal offense. Because the at the time of issuing the cheque there is no liability. No offense u/s 138 of the NI act is made out.

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