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Guest (n/a)     14 December 2008

Case laws on dishonour of cheques

CASE LAW ON DISHONOUR OF CHEQUES





1. Account closed : Account closed was held to be the offence u/s.138 of N.I. Act (AIR 1999 SC 1952). The cheque returned on the ground of close of account is an offence (1998 (2) Law Summary 461). Where the cheque was dishonoured on ground of account closed, the accused cannot escape from liability of the offence (1998 (2) ALD (Crl.) 286 Kar).





2. Issuance of post-dated cheque and closing account : Where the accused issued the post-dated cheque and had also closed his account in the bank, in such a case he is liable to be prosecuted under Sec.138 (1998 (2) ALD (Crl.) 177 Bom).





3. Incomplete Signature : Dishnour of cheque because of incomplete signature on cheque of drawer. Held: did not attract sec. 138 - (2002 (7) SCC 531).





4. Cheque issued by partner : Complaint u/s.138 of N.I. Act against firm and its partners. No allegation in the complaint that the partner was in-charge of and was responsible to the affairs of the firm – held: not maintainable against the partner (2002 ( 7) SCC 655).





5. Offences committed by a company : Where an offence is committed by a company, either company can be prosecuted or the person-in-charge of the company can be prosecuted or both of them can be prosecuted (1998 (2) Crimes 409).





6. Discharge of father’s debt : Father of the accused, but not the accused owes debt to complainant. Complainant obtained cheque from the accused by force. Cheque was not issued in discharge of father’s debt. Accused cannot be prosecuted (2003 (6) ALD (NOC) 64).





7. Cause of Action: Once notice is issued under Sec.138, failure to initiate prosecution would forfeit the right to prosecute ( 1998 (7) Supreme 20).





8. Object of issuing notice : The object and purpose of issuing notice to the drawer is to give information to the person who had issued the cheque that it was dishonoured and give him an opportunity to make good the amount within 15 days of the receipt of the information (1997 (88) Company cases 433).





9. Notice once issued, Chq. cannot be presented for collection : It is settled that the payee is free to present the cheque repeatedly within its period of validity any number of times, but once notice has been issued the drawee to avail the cause of action arising thereupon and file the complaint within the stipulated period (2002 (1) ALD (Crl.) 397 (AP) (1998 SCC (Crl.) 1471 followed).





10. Notice by fax and Regd. post : Notice can be sent by fax and mode of sending notice not to be restricted to post or messenger (AIR 1999 SC 1609).





11. Omission of Chq. No. in notice : The number on the cheque has no relevance in a proceeding u/s.138 of N.I. Act. Sec.5 and Sec.6 of the Act does not specify that, the cheque or bill of exchange should bear a number. There is also nothing in Sec.138 of the Act to show that the number of the dishonoured cheque also should be mentioned in statutory notice or in complaint (2004 Cr. LJ 712 AP).





12. Advocate did not sign notice: The mere fact that the advocate for complainant did not sign the notice, may not make it invalid 1996 Crl. LJ 2264 Kar).





13. Issue of second notice : Cheque issued by the respondent was dishonoured – presented again – again dishonoured. The notice issued by the complainant at the time of first dishonour was not served on respondent/accused, but the fact remains that the notice has been issued for second time. Therefore, cause of action stood terminated (2003 (117) Company Cases (
Madras).





14. Accused refused to receive notice : Where accused have refused to receive notice, even then complaint to be filed after expiry of 15 days from the date of receipt of notice (1997 (3) crimes 445). In case of refusal to receive the notice, it amounts to acceptance of notice and date of refusal to receive such notice shall be treated as the date of receipt of such notice. In such case the period of fifteen days has to be computed from the date of refusal (AIR 1996 SC 330; AIR 1989 SC 630)





15. Evading notice : Where accused had evaded service of notice relating to dishonour, it will amount to constructive notice (2001 (2) ALD (Crl.) (Mad) 137).





16. Postal endorsement ‘not found’ : Notice was duly given but the same was returned unserved with postal endorsement ‘not found’. If a registered letter addressed to a person at his residential address does not get served in the normal course and is returned it can only be attributed to the addressee’s own conduct (1998 (1) CCR 111). Once the letter is delivered to the post office he has no control over it. It is then presumed to have been delivered to the addressee under Sec.27 of the General Clauses Act (AIR 1989 SC 630).





17. Civil Suit & Criminal Complaint : Filing of civil suit and filing of criminal complaint are not alternative remedies and they are different types of rights ( 1994 Criminal Law Journal 887). The mere pendency of a civil dispute will not oust the jurisdiction of a Criminal Court from taking cognizance of an offence on a complaint under Sec.138 of N.I. Act (1998 Crl. LJ 559 = 1998 (2) ALD (Crl.) 300 Guj).





18. Stay of suits : Pending of criminal matters would not be an impediment to proceed with the civil suits. On the other hand, the courts are rarely stay the criminal cases on only when the compelling circumstances require the exercise of power (1996 SCC (Crl.) 466) = 1996 (3) SCC 87).





19. Sec. 138 of N.I. Act & Sec. 420 of I.P.C. : When the cheque was dishonoured for insufficient funds, such person issuing a cheque is liable for offence of Sec. 138 of N.I. Act but not u/s. 420 of IPC (1989
Cuttack Law Times 719).





20. Time barred debt : Where cheque itself was issued for a time barred debt, there cannot be conviction under provisions ( 1997 (2) Crimes 658). Where the loan was taken in 1985 and cheque was issued in 1990 and the loan is barred by limitation, drawer of cheque cannot be prosecuted (1997 (1) ALT (Cri.) 509





21. Payment after receipt of notice : Where accused made tender of amount after receiving notice, cannot be visited with any consequences for non-payment (1994 Crl. Law Journal 2768).





22. Refer to drawer : The bank endorsement “refer to drawer” also may fall within the ambit of the provisions of Sec. 138 of N.I. Act . - 1994 Crl. LJ 2874; 1995 Crl. LJ 3828; 1994 (1) Crimes 606; 1995 Crl. LJ 3098.





23. Request not to present the cheque : When after issuance of a cheque and before presentation for encashment, a request was made by the husband of the accused not to present the cheque. In spite of the same it was presented and a return. Complaint is not maintainable ( 1997 (1) Crimes 55); 1996 (3) Crimes 385 (Mad) = 1996 (4) CCR 92 (Mad).









24. Dismissal of complaint for default : Dismissal of complaint not proper (2002 (7) SCC 726).





25. Dismissal of complaint for default and restoration : Where the complaint is dismissed for default, in restoration application, the complainant must assign a valid reason as to what prevented him from coming to the court by the time when the case was called (1998 BC 63 (AP). For securing the ends of justice, the Magistrate is empowered to restore the complaint filed under Sec.138 of the Act (2001 Crl. LJ 2821 Kant). However, contrary view prevail. The order of dismissal of a complaint by a criminal court due to the absence of the complainant is a proper order (AIR 1986 SC 1440). A second complaint is permissible in law if it could be brought within the limitation imposed by the Supreme Court in the case reported in AIR 1962 SC 876.





26. Dismissal of complaint and appeal thereof : Dismissing complaint due to non-appearance of complainant resulting in acquittal of accused. Revison is not maintainable and only appeal lies to High Court u/s.378 (4) of Cr. P.C. ( II 2003 CCR 387 HP).





27. Default of fine u/s.138 of N.I. Act. : Sentence of imprisonment in default of payment of fine – Imposition of imprisonment and challenge thereof. Sec.138 does not provide for such sentence. Hence, sentence in default of fine set aside ( 2006 (9) SCC 784.



Learning

 26 Replies

Shree. ( Advocate.)     14 December 2008

Dear Guest,


Thanks for your input...


 

AEJAZ AHMED (Legal Consultant/Lawyer)     14 December 2008

Helpful Rulings & Citation for Lawyers whose area of Practice is 138 of Negotiable Instrument Act

N.K.Assumi (Advocate)     15 December 2008

Dear Guest, I really appreciate your work.

Srinivas.B.S.S.T ( Advocate)     17 December 2008

 Very valuable information my friend. Thank you very much for sharing the same with us. 

Sushil Kumar Bhatia (Advocate)     19 December 2008

Good collections

roshan (business)     19 December 2008

sir,


is there any case law on the follo? if yes pls send me , urgent.


creditor partnership firm had borrowed some money from debtor and the 3rd part "x" stood as guarantor towards the loan. there was a default n then the guarantor started forcing for money, now the guarantor did now make any payment till date to the debtor. creditor firm issued cheque to guarantor instead of debtor. cheque bounced. is the complaint filed by the guarantor "x" maintainable?

RAKHI BUDHIRAJA ADVOCATE (LAWYER AT BUDHIRAJA & ASSOCIATES SUPREME COURT OF INDIA)     21 December 2008

Good collections


Very valuable information my friend. Thanx a lot.

Sachin Bhatia (Advocate)     27 December 2008

Thx sir, these are very help ful rulings for us.

Anil Agrawal (Retired)     01 January 2009

 A loan was taken in 1995. The Director resigned in 1996. The cheque dishonoured in 1998. Is he liable under NI Act. Is it still a legally enforceable debt if the lender did not obtain licence under the Bombay Money Lenders Act, 1946?

PALNITKAR V.V. (Lawyer)     02 January 2009

If the director had already resigned at the time of issuance of cheque he would not be liable u/s 138. Similarly, a simple and single loan transaction for example hand loan, would not attaract Money Lenders Act

Ganapatheeswaran (Advocate)     09 January 2009

 GOOD WORK MR. RAMPAL. YOUR INPUTS ARE VERY INFORMATIVE TO US. CONGRATS

Anil Agrawal (Retired)     10 January 2009

 If the company is in the business of lending money and accepting deposits, is it still exempted from Money Lenders Act?

Anil Agrawal (Retired)     10 January 2009

 How the issuance of the cheque becomes relevant? The offence starts when the 1 month notice period demanding payment of the cheque ends. There is a wide gap between the date of transaction and date of resignation of the director. In this way, all past directors who retired/resigned long ago will be hauled up because cheques were issued when they were directors. What is the sanctity of retirement/resignation?

Jithendra.H.J (Lawyer)     19 March 2009

thank you very much Rampal


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