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Kiran Kumar (Lawyer)     06 August 2009

Important Judgment on NI Act

Hon'ble SC has delivered a very important judgment on applicability of S.138 of NI Act.

Raj Kumar Khurana v/s State of (NCT of Delhi) and anr.

Criminal Appeal no. 913 of 2009 decided on 5.5.2009

 

SC says offence under the aforsaid sec is made out only when the cheque is returned by bank unpaid for the following reasons:-

1.) amount of money standing to the credit of that account is insufficient to honour the cheque.

2.) If exceeds the amount arranged to be paid from that account by an agreement made with that bank.

 

this is an important judgment, this issue was ealier raised by one of our members Mr. Vinod Bansal.

 

this judgment is going to have big implications and thus in cases of stop payment or cheque loss complaints the offence under above said Section will not be made out.

 

Even finance companies taking post dated cheques might be in a bit of difficulty now.

 

Larger issue, lets discuss its implications.



Learning

 105 Replies

jayaveladvocate (Lawyer)     06 August 2009

Sir the interetation by the court is perfectly right, normaly when stop payment of cheque the bankers simply intimate stop payment, but when we attach the copy of the FIR then alone they will make notings like this, but nothing contained in this judgement  would prevent the drawee of the cheque from pursuing the matter under Section 420/430 if deserves so

1 Like

Dharmesh Manjeshwar (Advocate/Lawyer)     06 August 2009

Good judgement for the hoodwinkers ...... issue cheque/s and then instruct the Bank to stop payment ....... is this is going to be the usual custom ??? what is the poor drawee of the cheque going to do to recover his payment ..... civil suit or criminal case ??? I mean there could be good reasons to stop payment but majority are going to misuse this freedom.

1 Like

saumit joshi (advocate)     06 August 2009

Good judgement-for those who gave the cheques as security.

1 Like

Y V Vishweshwar Rao (Advocate )     06 August 2009

Thank You Mr Kiran

it is very goof information and  I  have saved  it  in my Community !

There will be reconsideration before filing  a Case U/s 138 NI Act ! 

 

1 Like

Deekshitulu.V.S.R (B.Sc, B.L)     07 August 2009

Mr Kiran

A good decisions for those who wants to cheat the promisee. A good New way out for culprits

So Section 138 is almost dead, and the drawer can make his plans after issuing the cheques

Any how thanks for you judgment

I will go through and get back to you

Deekshitulu.V.S.R (B.Sc, B.L)     07 August 2009

Mr Kiran

I have gone through the comploete judgment and the way it was rendered is in quite spirit with the essentials of Sec. 138

But my agony is if this is the right interpretaion, then what about thousandsof judgments rendered by different high courts where they said bouncing on cheque on other tha those mentioned in the seciton also attaracts the offence.

Alas, People are now in soup. Any how thank U

jatin sharma (LAWYER)     08 August 2009

thanks kiran g

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     08 August 2009

Dear All,
The SC judgement (quoted by Adv.Kiran Kumar) Raj Kumar Khurana v/s State of (NCT of Delhi) and anr.

Quote :  "amount of money standing to the credit of that account is insufficient to honour the cheque""

Logical thoughts to be introspected : eg.

1. ABC issues a cheque to XYZ for sum of 500,000/-.   AND then issues stop instructions for said cheque.  Bank returns cheque with memo "payment stopped by drawer"


2.  XYZ, obtains Bank statement of ABC, which shows that account has only 400,000/- balance on date of clearning / return of cheque.  which technically means  "amount of money standing to the credit of that account is insufficient to honour the cheque."
 

3.  Bank Account statement of ABC, is "conclusive proof",  as to "insufficient funds".  AND Bank memo becomes "invalid evidence", in the face of the Bank a/c statement of ABC.  Bank to be called in for cross & evidence.
 

4.  Here XYZ can be easily prosecuted for "insufficient funds" ....  EVEN IF the bank memo says "payment stopped by drawer"  or whatever or otherwise.
 

5.  So in other words, effectively, with proper twist of evidences,  the drawer can still be perfectly prosecuted within the guidelines of the SC judgement.

SO IN MY PERCEPTION,   "STOP PAYMENT"  is false and no justification for non-prosecution,  if drawee can prove that drawer (ABC) had "insufficient balance" in account,  which in fact is sufficient for prosecution within the parameter / order of the SC.

SO effectively,  Like other forum members expressed,   "S.138 is not dead,  Hoodwinkers cannot escape, drawers cannot cheat, complaint cannot be made out,  etc...,"  if the prosecution lawyer, does a little more homework and accumulates evidences, conviction can be obtained..

IF DEAR FORUM members, wish to counter the above argument, please do so with proper justifications and reasonings.

till then,
Keep Smiling .... Hemant Agarwal

 

3 Like

Dharmesh Manjeshwar (Advocate/Lawyer)     10 August 2009

Dear Hemant,

People who opt for the stop payment option, already make up their minds to put forward any dispute/s as to the transaction for which they have issued the cheque. If one has issued stop payment instructions to his Bank on some disputed issue, how does the question of balance in his Bank relevant ?? Stop Payments are done with pre-meditated mind of disputing the transaction and gaining time and/or frustrating the payee.

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     11 August 2009

THIS IS HOW I SEE THINGS :

 

1.  Prosecution under N.I.Act, is not presumed BUt based on "Dishonour of Cheque" and "Insufficient Funds"  and  "Presumption in favour of holder". and "legally enforceable debt" among other things.

 

2.  If the complainant can justify his complaint and fulfillment of the above factors with appropriate documentary evidences (should be conclusive proof),  then the plea of the accused as to "stop payment" or "account closed" or "disputed transaction" and other pre-mediated tactics won't work.

 

3.  If the Complainant can successfully and conclusively prove that the dishonoured cheque was an "legally enforceable debt" AND that there was no sufficient balance in the drawers account,  then there is no justification that remains for  "any disputed transaction" or otherwise.

 

4.  If the Accused accepts that there was a "legally enforceable debt",  BUT then due to certain reasons (whatever) he issued "stop payment" instructions to his banker, when in fact there is  "insufficient balance" in his account,  THEN THERE BECOMES NO QUESTION of "stopping payment"  in lieu of the fact that the "cheque honouring action" by the Bank would automatically be stopped since the Bank could not have cleared the cheque due to "insufficient funds" and not because of any other reason.   (IPC 420 gets attracted due to deliberate and pre-mediated intention)
 

THIS particular  "EVENT"  should be capitalised by the complainant and the complaintant should obtain the drawer's bank account statement of the date on which the cheque is dishonoured, to show the "insufficient fund" component, even if the bank has returned the cheque for any other reason.

 

5.  "Disputed issue" is not the jurisdiction of the "N.I.Act",  IF the accused accepts that there was a "legally enforceable debt".  The Accused has to "restrain"  the complainant to deposit the cheque by issuing approriate legal notices and justifications raising the  "disputed issue"   BUT all this should be done well before the cheque has been deposited in the bank by the complainant.

 

anyway,
Keep Smiling .... HemantAgarwal

Dharmesh Manjeshwar (Advocate/Lawyer)     12 August 2009

I do not understand what Mr. Hemant is driving at .... Mr. Kiran ji Do U get him .... Please throw some light on the issue please .....

Deekshitulu.V.S.R (B.Sc, B.L)     13 August 2009

Let there be an end for the discussions

Each cse depends on it's facts. So by experience we have to twist the facts, and some how see that the judgment of SC will not be attaracted in our case.

Here the SC was saying about the reason of bouncing of cheque, and confining to the wording of the Section. We have to see the "REASON" for bouncing given by the Banker , but not the mind of the drawer for issuing the cheque. The later is not possible to be proved in a court of law easily, since intention is the mind of the drawer, which cannot be gathered unless there are strongest circumstances sourrounding the case.

Kiran Kumar (Lawyer)     15 August 2009

Dharmesh Ji, m also not in agreement with Mr. Hemant . and Mr. V.S.R.

 

with due respect to both of them they are givin some hypothetical thought.

 

cases are not be contested on mere presumptions, it can not be concluded that if the payment has been stopped, it was only because of the reason of insufficient funds....there can be number of other reasons.

 

What the Hon'ble SC has done is that they have given strict interpretation to the provisions of S.138 of NI, Act.

 

Mr. VSR please dont be in hurry....this is important discussion and u ll c the opinion expressed by the Hon'ble SC being applied as it is.

prabhakar shetty (Advocate-9448840083)     04 September 2009

Colleagues, I am an ex-banker and presently a lawyer/ advocate. The Banks have a rule that in case of returning a cheque where the drawer has stopped payment of a cheque, there should be 'sufficient' balance in the account. Otherwise, the Bank cites both the reasons, ' insufficient funds' as well as 'payment stopped by drawer' , and the remedy of Sec. 138 are available.

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