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Prasun Chandra Das (Banker)     06 July 2013

Sec 138 - some doubts

Sec 138 of NI Act: "Where any chq drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid either because of the amount of money standing to the credit of that account is insufficient to honour the chq or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the chq, or with both, provided that nothing contained ....."

Query-1: If (a) A & B have a joint account (mode of operation "any one"), (b) A is a Debtor, (c) Creditor receives a chq signed by B, which is returned unpaid due to insufficiency of funds. Is it correct to infer that only B can be proceeded against u/s 138, and not A?

Query-2: If (a) A is an account holder, B is a Power of Attorney holder in the account, (b) A is a Debtor, (c) Creditor receives a chq signed by B, which is returned unpaid due to insufficiency of funds. Is it correct to infer that only B can be proceeded against u/s 138, and not A?

Query-3: "Where any chq drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account FOR THE DISCHARGE, IN WHOLE OR IN PART, OF ANY DEBT OR OTHER LIABILITY...". Is it correct to infer that the drawer of the chq should be "aware" that the chq is being issued for the discharge of a debt or liablility?

Sec 138 (b) of NI Act: "Provided that nothing contained in this section shall apply unless (a) ..., (b) the payee or the holder in due course of the chq as the case maybe, makes a demand for the said amount of money by giving a notice, in writing, to the drawer of the chq, within 15 days (within 30 days presently as amended in 2002) of the receipt of information by him from the bank regarding the return of the chq as unpaid; and (c).."

Query-4: "..for the said amount of money..". Is it correct to infer that demand should be made for the chq amount, and not the amount of liability?

Query-5: "..by giving a notice, in writing, to the drawer of the chq .. ". What can be the valid forms of this notice - can it be a letter sent by courier/regd.post/normal post? Can it be a letter sent by fax? Can it be a notice by email (containing no signature)? 

 

 



 6 Replies

Jayendra Sevada (Advocate)     07 July 2013

Query-1:

 

If (a) A & B have a joint account (mode of operation "any one"), (b) A is a Debtor, (c) Creditor receives a chq signed by B, which is returned unpaid due to insufficiency of funds. Is it correct to infer that only B can be proceeded against u/s 138, and not A?

 

--- Yes

 

Query-2: If (a) A is an account holder, B is a Power of Attorney holder in the account, (b) A is a Debtor, (c) Creditor receives a chq signed by B, which is returned unpaid due to insufficiency of funds. Is it correct to infer that only B can be proceeded against u/s 138, and not A?

 

--- Yes

 

Query-3: "Where any chq drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account FOR THE DISCHARGE, IN WHOLE OR IN PART, OF ANY DEBT OR OTHER LIABILITY...". Is it correct to infer that the drawer of the chq should be "aware" that the chq is being issued for the discharge of a debt or liablility?

 

--- Yes

 

Sec 138 (b) of NI Act: "Provided that nothing contained in this section shall apply unless (a) ..., (b) the payee or the holder in due course of the chq as the case maybe, makes a demand for the said amount of money by giving a notice, in writing, to the drawer of the chq, within 15 days (within 30 days presently as amended in 2002) of the receipt of information by him from the bank regarding the return of the chq as unpaid; and (c).."

Query-4: "..for the said amount of money..". Is it correct to infer that demand should be made for the chq amount, and not the amount of liability?

 

--- Yes

 

Query-5: "..by giving a notice, in writing, to the drawer of the chq .. ". What can be the valid forms of this notice - can it be a letter sent by courier/regd.post/normal post? Can it be a letter sent by fax? Can it be a notice by email (containing no signature)? 

 

--- Registered A.D. Post + Registered Speed Post (File the consignment tracking report along with the complaint)

1 Like

Prasun Chandra Das (Banker)     07 July 2013

Thank you, Adv Sevada, for your replies.

 

I request a lillte more explanation to my Query-5 on the manner of notice, on which you write "--- Registered A.D. Post + Registered Speed Post (File the consignment tracking report along with the complaint)". Do you mean that any notice except when sent by regd post/speed post with a/d, renders the notice illegal. Sec 138 only says "a notice in writing". So, shouldn't a written notice sent by postcard/courier/fax be equally valid? Receipt of notice is possible in case of courier/fax, so for all practical purposes, shouldn't they be treated at par with notices sent by Registered A.D. Post + Registered Speed Post?

Adv k . mahesh (advocate)     08 July 2013

query 5

any type of notice sent in the process should show some sort of proof that the post is delivered to the concerned person that acknolwedgement shows it that it reached to that particular person 

R Trivedi (advocate.dma@gmail.com)     10 July 2013

Q2 : Account is of A, debt is also of A, B is only the GPA holder and acting on behlaf of A to clear the debt of A from A's account.  "A" is fully responsible as far as civil liability is concerned, and even though I do not have any case citation but S.138 against A also cannot be ruled out. 

 

Q3. Drawer has to come forward and prove that it was not meant for any debt or liability or liability  failed.

Prasun Chandra Das (Banker)     14 July 2013

Query-2: I tend to disagree (now, after a week !) with Adv.Sevada and agree with Adv.Trivedi. I think B as a POA  is acting on behalf of A only, and is merely the hand which signs the chq. A clever 'A' will write a POA in foolish B's favour just to avoid prosecution. I think A needs to be mandatorily prosecuted, with/without proceeding against B.

 

Query-3: It is one thing to fight on the point "whether this chq is issued against any legal liability, or for any other purpose (say, as a security chq)". But I asked this query not on admission/contest on this point, but on "awareness" of this point. In the case of A (debtor) and B (drawer of chq), if chq bounces and B is proceeded against, can it be B's defence that "Irrespective of whether this chq was issued for A's legal liability or not, I was not 'aware' while drawing the chq that it was for a legal liability. Since sec 138 says 'Where any chq drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account FOR THE DISCHARGE, IN WHOLE OR IN PART, OF ANY DEBT OR OTHER LIABILITY..", it implies (as Adv.Sevada opines) that I (B) must have been aware that I am drawing this chq for discharge of a legal liability. Since I was not aware, I cannot be prosecuted against u/s 138".

 

I will be obliged if I get advices and opinions on the above.

R Trivedi (advocate.dma@gmail.com)     15 July 2013

1. If A is company etc as per S.141 NI Act, this question is easy to answer.

 

2. If A is an individual, and B is the drawer on behalf of A with some kind of mandate or GPA, then also I feel that life is tough for both A & B.

 

for eaxmple: If A is residing abroad, then A can come out at least from the criminal liability if he proves that he is not involved in day today activity. Similarly if B can prove that this cheque was signed by him on clear instruction from A to settle A's personal liability and this was not the part of his contract with A. Nonetheless both are atleast stuck in prosecution.

 

Since you have raised this post, for understanding purpose" What is this presumption under S.139, about what" ?? all experts requested to throw some light on this.


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