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CHEQUE BOUNCE (Accused in cheque bounce can be convicted and money be recovered .PROSECUTE PROPERLY. chequebounce1@gmail.com)     01 December 2012

Cheque bounce for variety of reasons is offense= sc

SUPREME COURT IN VERY RECENT JUDGMENT HAS HELD THAT CHEQUES BOUNCED BY 1) ac closed 2) signature difference 3) authorised signatory left will constiture offense under NI 138.

The court has further observed that in such situations the accused has opportunity to make payment after reciept of notice which not done than it will attract NI 138. 

Below are important portion of the JUDGEMENT OF SUPREME COURT.

 

 

 

CRIMINAL APPEAL NOS. 1870-1909 OF 2012

New Delhi; November 27, 2012

 

 

expression “amount of money …………. is insufficient” appearing in Section 138 of the Act is a genus and dishonour for reasons such “as account closed”, “payment stopped”, “referred to the drawer” are

only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not

found”, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act. This Court has in the decisions referred to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them.

This Court has in the decisions referred to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them. For instance this Court has held that if after issue of the cheque the drawer closes the account it

must be presumed that the amount in the account was nil hence insufficient to meet the demand of the cheque. A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company by the company changing the mandate of those authorised to sign the cheques on its behalf. Such changes or alteration in the mandate may be dishonest or fraudulent and that would inevitably result in dishonour of all cheques signed by the previously authorised signatories. There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer

when the drawer never intended to invite such a dishonour.

 

 We are also conscious of the fact that an authorised signatory may in the ordinary course of business be replaced by a new signatory ending the earlier mandate to the bank. Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called upon and has the opportunity to arrange the payment of the amount covered by the cheque.

 

 It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable.

 

 

 

 

 



Learning

 22 Replies

V R SHROFF (Sr. ADVOCATE Bombay High Court Mob: 9892432152)     02 December 2012

Notice to pay within 15 days is for that purpose only. So it attract 138 n.i.

Now ieven after court summon, if accused  pay amt, compounding the matter is allowed freely in majority of court. 

 

If a Law direct that old issued cheques  cannot attract 138, it will reduce cases, as in many Money Lenders cases, they use old cheques and file 138, The cheque issued before 6 months cannot be poroved. 

CHEQUE BOUNCE (Accused in cheque bounce can be convicted and money be recovered .PROSECUTE PROPERLY. chequebounce1@gmail.com)     02 December 2012

People have issued cheques and should not be allowed to get away may be even to a money lender. While borrowing money the accused should have settled terms properly.

 

The recent Judgement of the SUPREME COURT has closed many loop holes such as-

1) Signature mismatch.

2) Account closed.

3) Person left from co who issued cheque.

4) change in constitution of firm or co after issue of cheque.

 

THE COURT HAS HELD THAT THE LAW IS GENUS AND ALL THESE VARIATIONS OR SPECIES. SO PERSON WHO HAS ISSUED CHEQUE MUST BE MADE TO PAY OR FACE CONVICATION.

annonymous (na)     02 December 2012

138 ni act is already being   misused by moneylenders and often poor  /needy people are dragged  in court   against blank cheques they have issued  to unregistered lenders 

banks often mail cheque books by courier /post (most banks  follow this procedure) ..So  if it misdelievered  to someone else  , he can  ask  someone to sign on those checks and drag  the  account holden in the court ...........

The judgement  offers wide scope of  misuse of  138 ni act .   

 

madhu mittal (director)     03 December 2012

Respected Sir,

Why in our judicial system, in the name of poor, all benefites are being provided to wrongdoer, in the name of justice, wrongdoer, after taking loan from financial institution, does not want to pay the loan, forcing for litigation and in our jucidial system, in spite of section 30,80,82c and 117 in NIAct and section 357 in crpc, it is seldom that payee is compensated fully, that is why the wrongdoer getting benefits of delay tactics, and in the bank like ICICI had to take the help of  Musclemen (as per sc ruling), I am not supporting the view that help of muscle men should be taken. But our jucidicial system to be such that a wrongdoer should not be allowed to have the benefit of his wrongs. Litigation in our judicial is for that wrong doer is not being properly punished. Take example of cases u/s 138, when one year sentenced proved inadequate, it was enhanced to two years, but rarely a drawer of cheque punished with imprisonment even of one year as well as as rarely an amount due on cheques are being ordered ie. face value of cheque+ 18% p.a.yearly interest thereon as per section 80 of N I Act. Hardly any reimbursement for attending the court hearing by leaving aside his other job as well as lawyer fees are made payable even after conviction. This position embolds to wrongdoer after taking loan,  not to repay untill and unless drawee succumbed to his will and forced to compromise the matter after taking whatever the drawer/wrongdoer gives him for saving himself(payee) from attending more court hearing.  Bail is granted to drawer/wrongdoer again and again, without taking judicial notice, that the wrongdoer wants to only drag the matter and our police is already overburdon in takling offence under IPC etc. If all of us wants to be live in the country where rule of law/justice should be prevailed, the wrongdoer whether drawer of the cheque for legally enforcebale liablity or payee of the blank cheque for not legally enforceable liability should be dealt with stern hand of law.

R Trivedi (advocate.dma@gmail.com)     04 December 2012

The problem is moneylender treats BLANK CHEQUE as collateral security, which is not correct.

 

Banks or Moneylender while giving loan must ensure proper mortgage, if they are not doing so then they are to blame not the person who takes the loan. By what stretch of imagination a blank cheque leaf can become a security ?? Take away S.138 and its a dud piece of paper. Despite clear order from Supreme Court regarding non applicability of S.138 on security cheques, trial courts summon the drawer, mainly because complainant lies about the cheque. For example:

 

Will the court accept if I say:

 

In year 2003 while giving loan of Rs. 1.0 Lac I tool a blank cheque as security, subsequently when I did not get my money back,  I filled up an amount of Rs. 1.0 Lac in the cheque on 03.11.2012, which got dishonored and hence XYZ committed an offence punishable under S.138.

 

It is not that I am defending drawers, but if one is giving money he should ensure that he has sufficient mortgagable value from the person. A blank cheque is not a mortgagable security.

madhu mittal (director)     05 December 2012

Respected Sirs,

What I mean is that wrongdoer should not be allowed to have benefits of his own wrong due to anything. Our judicial system should be so full proof that a person/victim/payee in case of  dishonoured cheques should be provided justice withing rule of law, not only on papers, but also in real sense. So psyche of fear should be in wrongdoer, that if matter goes to court, he will be suferer in real sense, not in the  victim/payee. If matter relate to monetary, all expenses and interest should be borne by the defaulters, and if matter related to offence u/s IPC, he should be suitably punished, matter should not be allowed to drag only for one excuse or other in the name of justice causing unjustice in real sense. Take the example relating to dishonour of cheques, there are other laws also by which case of wrong payee could be got dismissed whether he has valid authority to lend, whether he lent through a/c payee cheque if amount is more than Rs.20000/- etc. but telling that a person who took loan Rs. 1 lac in 2003 and did not pay even upto till 2012, he should not be made to pay through blank cheque and he should be allowed to unjust enrichment on the cost of fund of bank, while all of us know in banks also it is public money. Think what will happen when most of the defulted persons do not pay, how bank will repay to its depositors. And in another words, when bank could not recover its dues from the defualters, cost is born by the good borrower by paying higher rate of interest, if they are able to take the loan from institutions like banks. If they are not able to take loan from bank like recognised institution/firm etc, they have to take loan from the unauthorised persons who even does not want any security or even blank cheques, but they are depend on their muscle power and there is no proper authentic data about them. So if bank like institution are reluctant to give the loan to the needy persons, one of reasons is in our judicial system, it is not easy to recover loan. There are a lot of decrees in favour of lenders, but execution part is also not easy, Why ?

So please think all person who wants that rule of law should prevail in our country whether he is lawyer, justice or politician, lender or borrower or from anywalk of life, one should ensure and its everybody's duty also  that by any method, wrongdoer should not be allowed to get benefit of its own wrongs. All efforts at all level should be made to expedite the trial, if a person as per law should not be held guilty, he should be exonerated at once. But a person in any way should not be allowed to drag the proceeding, knowing by everyone that he has taken money, but not paying it by giving execuses that it should not be come u/s 138 or any other law, he should be made to pay if he has taken money. Otherwise our whole economic system will be failed. The persons who are taking loans are not poor, because loan is given by appraisal, they only want to get benefit in the name of poor, dragging the proceeding by one name or another, they have properties in lacs, enjoying  car etc, getting educated their children in private school by paying hefty fees and getting medical treatment also at private hospitals hiring even private rooms, but at the time of payment of debt, they are poor taking the benefits of loopholes in our judicial system.

R Trivedi (advocate.dma@gmail.com)     05 December 2012

Please do not mix up many things:

 

1. Banks as a rule do not give cash loan without proper collateral security, so instead of using blank cheque they must initiate the process to recover through this collateral.

 

2. Private people who charge exorbitant rate of interest thrive because they require lesser paper work and get satisfied with the Blank cheque as security ? So prima facie they are negligent in their business model.

 

3. PSU or private Banks, generally take Blank cheques against Car Loan etc, now the Car remains hypothecated in the name of Bank, so they must ensure proper recovery procedure under law, but they also feel that easiest way is by filing case against drawer under S.138, which is not correct.

 

4. Moreover our law is that a person is innocent till proven guilty, and S.138 also does not fully take away this benefit to accused, he has all the rights under the law to defend himself.

 

Half the cases will go away if a small change in the law is made that is in case, the complainant looses the case on account of failed liability (liability not proved), then he will have to pay 100% amount of the cheque along with harrassment cost to accused, and if accused looses the case he will have to mandatorily go to jail for atleast 6 months. This is very fair because the entire S.138 is about honesty of drawer, what about honesty of holder ??

madhu mittal (director)     06 December 2012

Respected Sir,

I agree with you fully the dishonest whether payee/holder of cheque or drawer should be punished, here also jail sentence should not be mandory, but in default also may serve purpose, but the dishonest holder should be punished as per your view.

kapoorsatish (n/a)     12 December 2012

Cheque given on 28/12/2007, loan given on 05/1/2008

account closed on 29/05/2008 by accused and wound up business due to losses.

cheque presented on 31/05/2010 by money lender, which bounced, as account closed, notice issued by money lender, not received by accused.

MM has asked complainant to give citation that case is made u/s 138 of NI act and accused that case does not fall u/s 138 of NI act.

Can some person give citations

I got following from one of discussions

 

17. As per the Negotiable Instruments Act, limitation has been prescribed and as such, though a signed cheque would lead to the presumption of authorising the drawee to fill it up, and present it for payment, the limitation of six months prescribed under the Act, cannot be altered by way of an undated cheque being filled up after one year and six months. In this case, it has been proved that the undated cheque was handed over on 09.09.1998 to one year and six months prior to the date available in the cheque, and therefore, it cannot be legally presumed that the revision petitioner had authorised the respondent to fill it up and present it at any time even after the statutory period of limitation, according to his convenience. This Court is of the considered view that filling up an undated cheque against the limitation prescribed under the Negotiable Instruments Act would be against the legislative mandate of the said Act and would create an anomalous situation likely to be misused by unscrupulous litigants. Therefore, I am of the view that the undated cheque issued and handed over on 09.09.1998 would not create the presumption that the revision petitioner had authorised the respondent to fill up the date as 28.03.2000, one and half years after the same was handed over to be presented for payment, and therefore, the alleged cause of action based on Ex.P.3 is not sustainable to maintain the criminal complaint against the revision petitioner.

Can some body please give case reference of above

thanks and regards

R Trivedi (advocate.dma@gmail.com)     12 December 2012

Madras High Court

Ramakannan vs Chettiar And Co on 23 November, 2006

 Crl.R.C.No.1439 OF 2004

CHEQUE BOUNCE (Accused in cheque bounce can be convicted and money be recovered .PROSECUTE PROPERLY. chequebounce1@gmail.com)     13 December 2012

1) Madras High court judgement is 2004 citation , now SUPREME COURT in 2012 has given clear direction that cheque bounce due to any reason will result in conviction if not paid after notice.

2) There is defference between blank cheque and POST DATED CHEQUE once the complainant proves it was post dated cheque no citation is applicable. The accused should pay or face judgement against.

 

It is job of an expert defense advocate to prove in the court that the cheque given was blank. If the accused can not prove that cheque given was balnk than no remedy except to make the payment to avoid convication.

R Trivedi (advocate.dma@gmail.com)     13 December 2012

Above order of High Court is not overruled.

 

- Supreme Court also in recent order brought the PDCs consclusively under S.138, but it does not mean that drawer would be convicted. The order of Supreme Court clearly states that if drawer can adduce reasonable cause for stop payment like defective material etc.. then drawer cannot be convicted.

kapoorsatish (n/a)     13 December 2012

Can handwriting on cheque for amount, drawer's name etc prove that cheque given was blank?

the bank statement will show that cheque was given at the time of signing loan agreement

cheque presented two years after closing of account, will it cover u/s 138 which says it should be presented within 6 months of date drawn OR its validity

Validity of cheque expired

CHEQUE BOUNCE (Accused in cheque bounce can be convicted and money be recovered .PROSECUTE PROPERLY. chequebounce1@gmail.com)     14 December 2012

Trivedi who ever you are but you are always criticising the COURT JUDGEMENS.

 

Now the problem in this case is that the accused has to prove that cheque was blank so please suggest exact method how he or she can adduce evidence.


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