Dishonor of Cheques Author : S. Law of dishonour of cheques Author : A. The judicial trend of territorial jurisdiction in India Dishonor of cheques Author : N. The Bhaskaran case has been a precedent in all cases relating to the concerned matter but its ratio had to be diluted by the series of cases which came after it.
It is essential to understand that there is a demarcation between the completion of the offence and the cognizance of the offence for taking it to prosecution. Thus, the cases, after the ordinance definitely favoured the drawee from all the distress, he would go through over cheques being dishonoured on being presented due to further litigation.
There is a definite shift in the territorial jurisdiction as to from the place of the cheque being issued to the place of cheque being collected or presented by the payee in the bank. It also guides through in situations of transfer of cases to the original jurisdiction when there are multiple pending cases. In the present scenario where day to day transactions amongst individuals, besides big business handshakes, are based on this very important negotiable instrument known as cheque.
The NI Act was passed into law more than years ago in Provided that nothing contained in this section shall apply unless— a. The cheque has been presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity, whichever is earlier; b. The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and c.
The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. A cheque should have been issued by the payer for the discharge of a debt or other liability. The cheque should have been presented or deposited by the payee within a period of six months from the date of drawing of the cheque or within the period of validity of the cheque, whichever is earlier.
The payee should have issued a notice in writing to the payer within 30 days of receipt of information regarding the return of the cheque as unpaid from the bank. The payer should have failed to pay the cheque amount within 15 days of receipt of the said notice from the payee.
If the payer has not paid the cheque amount, the payee should have filed a complaint within one month from the date of expiry of the grace period of 15 days. The court may take cognizance of a complaint after the prescribed period if the payee provides a satisfactory reason for the delay.
The key ingredient for registering an offence under Section of the NI Act is a failure of the payer to make payment within 15 days of the service of the notice. If payment is made within the said period, no offence is committed, but in the case of failure, the offence is perpetrated. Even payment a single day after the completion of the notice period will attract prosecution under Section It is very paramount that the dishonor of cheque should have been issued in discharge of any debt or other liability of the drawer to the payee.
Narendar1, the Supreme Court held that by virtue of Section of the Negotiable Instruments Act, the court has to presume that the holder of the cheque received the cheque for discharge of a debt or liability until the contrary is proved. Thennan2 , it was held that arrears of legal fee of an advocate can be classified as legally enforceable debt and complaint under section cannot be quashed. In KC Nedar V. Chenabal MR Simon3, the question was raised for the first time before the court whether a cheque may be presented on any number of times during the period of its validity.
This was the case which propounded the basic theory that a cheque can be presented any number of times during the period if its validity.
Madhvan Sunil Kumar4 that section of the Act does not put any embargo upon the payee to successively present a dishonest cheque during the period of its validity and a fresh right arises with every presentation but cause of action arises only once when the notice is served.
But in another case Modi cements Ltd. A post-dated cheque cannot be presented before the bank and as such question of its return does not arise. It is only when the post dated cheque becomes a cheque with effect from the date shown on the face of the said cheque, Section comes into play. Bank Account Closed The dishonour of cheque on the ground that the account has been closed by the drawer of the cheque constitutes an offence under section Closing of account is one of the modes by which a drawer can render his account inadequate to honour the cheque issued by him, therefore, the closing of the account would not enable the accused to wriggle out of his liability under section of the Act.
Issac Vs Jeeman P. It is the non-payment of dishonored cheque within fifteen days from the receipt of the notice that constitutes an offence. Issuing of a cheque and its dishonor is not an offence. The offence is when the drawer receives a notice from the payee and he fails to pay the dishonored cheque amount within the grace period of 15 days that constitute an offence any demand made after the dishonor of cheque will constitute a notice. The requirement of giving of notice is mandatory. The main problem is the serving of the notice to the accused as accused makes all efforts to avoid the receipt of the notice.
In order to deal with such situations, the courts have evolved a principle called as deemed service of a notice under section b.
The offence would be deemed to have been committed only from the date when the notice period expired. A complaint under section is to be filed within one month of the date on which the cause of action arises. Bhaskaran vs. Shankara 8 , had given jurisdiction to initiate the prosecution at any of the following places. Where cheque is drawn. Where payment had to be made. Where cheque is presented for payment 4.
Where cheque is dishonoured. Where notice is served upto drawer. However, in its recent decision in Dashrath Rupsingh Rathod v. Subsequently, many people had raised difficulties about this judgment. This is so because the payee of the cheque had to file the case at the place where the drawer of the cheque has a bank account. However, now the legal position has completely changed with above new Ordinance, i.
The above Supreme Court judgment is now of no consequence since this Ordinance supersedes it, clarifying jurisdiction related issues for filing cases of offence committed under Sec The jurisdiction of filing cheque dishonour cases under Section of the N.
Act is now changed by the above Ordinance as under: Now a cheque bouncing case can be filed only in the court at the place where the bank in which the payee has account is located. Secondly, once a cheque bounce case has been filed in one particular court at a place in this manner, subsequently if there is any other cheque of the same party drawer which has also bounced, then all such subsequent cheque bounce cases against the same drawer will also have to filed in the same court even if the payee present them in some bank in some other city or area.
This will ensure that the drawer of cheques is not harassed by filing multiple cheque bounce cases at different locations. So, even multiple cheque bounce cases against the same party can be filed only in one court even if payee presents the cheques in different banks at different locations. Thirdly, all cheque bounce cases which are pending as on 15 June in different courts in India, will be transferred to the court which has jurisdiction to try such case in the manner mentioned above, i.
If there are multiple cheque bounce cases pending between the same parties as on 15 June , then all such multiple cases will be transferred to the court where the first case has jurisdiction as per above principle. Thus, this new Ordinance now introduces some clarity and uniformity in the matter of cheque dishonour cases.
This Ordinance takes care of the interests of the payee of the cheque while at the same time also taking care that the drawer of the multiple cheques is not harassed by filing multiple litigations at different locations to harass him if more than one cheque has bounced.
Punishment for the offence under Section of NI Act is imprisonment up to two years or fine which may extend to twice the cheque amount or both. The offence is bailable, compoundable and non-cognizable.
Before sec. The civil remedy for a dishonored cheque, entails filing a case for the enforcement of a contract. As is the case with separate criminal remedies, Section does not preclude the institution of a civil suit and civil remedies are still available to the payee. ADR methods can also be used for the resolution of cheque bounce cases. Criminal liability of the payer of a dishonored cheque also exists outside the NI Act. Other remedies based in criminal law are to initiate proceedings against the payer under Sections criminal breach of trust and cheating of the Indian Penal Code IPC , It is possible to carry on proceedings under the IPC and the NI Act in parallel without falling under the double jeopardy rule defined in Article 20 2 of the Constitution of India.
According to the Law Commission of India, the reason for the amendment and insertion of Section was the rampant dishonor of cheques, which had rendered cheque transactions extremely problematic and complex to deal with. Some of the issues with cash transaction included, counterfeit notes, corruption, and large amounts of untraceable and untenable money.
It was against this humongous background that the provisions criminalizing the dishonor of cheques were inserted into the NI Act, with the intent of giving cheques credibility and people a method to solve related disputes. What sets Section apart from existing criminal provisions is that there is no need to prove mens rea or the intent of the payer to not pay the promised amount. However, offences under Sections and of the IPC are treated as cognizable and non-bailable, unlike offences under Section For instance, in Avon Organics V.
He sent it with a letter requesting the complainant to present the blank cheque in the bank after a month. Issue raised in this case was whether the blank cheque will come within the definition of cheque to be covered under Section of The Negotiable Instrument Act, It was observed by the High Court that if the cheque is not drawn for a stated amount it would not be covered within the definition of bill of exchange. An act of complainant in writing the amount and date was a material change and it could not be enforced.
It was further held that alteration without the knowledge of the person who issued the cheque rendered the cheque invalid. In yet another case, Bindu V. Sreekantan Naira11, it was unequivocally that admission of signature on a cheque does not tantamount to confirmation of execution. The right of the accused to oppose that the blank cheque was misused by the complainant is not defeated by such mere admission of signature. Slight development pertaining to dishonor of a blank cheque was made by the High Court of Madras, in E.
Dhanuskodi V. Sreedhar, acquittal of respondent accused was upheld by Madras High Court for an offence punishable under Section of Negotiable Instruments Act, The court held that different pen, ink, and manipulation of the amount showed that the complainant had failed to demonstrate due execution of the cheque.
Facts of the case are that the respondent accused borrowed a sum of Rs 1,50, from the appellant complainant and issued a cheque to the appellant towards his liability to repay the same. However, the cheque was dishonoured. Thereafter, the appellant initiated the process under Section of The Negotiable Instruments Act, , and the trial court convicted the respondent holding him guilty.
However, the Additional District Judge on appeal reversed the decision of the trial court and acquitted the respondent. Thus, an appeal was filed in Madras High Court by the appellant. It was observed that execution of the cheque does not mean the mere handing over a blank cheque, but it means that the cheque is given in the full form. It was held that the appellant complainant cannot be justified in doing material alteration beyond the knowledge of the accused and it would be certainly unlawful if a complainant is allowed to fill up details of cheque such as date and amount in a blank cheque beyond the knowledge of the accused.
Thus, the petition in the present case was dismissed and the acquittal of the respondent was upheld.
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