Negotiable instruments have long been utilised in the commercial world as one of the most expedient methods of moving money. Prior to 1988, there was no effective legal framework to prevent persons from issuing cheques without adequate cash in their account, nor was there any harsh measure to penalise them. Of course, a legal responsibility arose as a result of cheque dishonour. To safeguard the drawee of the cheque, it was thought that cheque dishonour should be deemed a criminal offence. Banking, Public Financial Institutions, and Negotiable Instruments Laws (Amendment) Act, 1988 added Sections 138 to 142 to that effect.
The Supreme Court said in the case of Kusum Ingots and Alloys Ltd vs Pennar Peterson Securities Ltd, (2000) 2 SCC 745, that the basic components of the crime as envisioned by Sec.138 of the Act are as follows:
- a person must have written a cheque on a bank account held by him for payment of a specific amount of money to another person from that account in order to discharge any debt or other responsibility;
- the cheque was delivered to the bank within six months of the date on which it was drawn, or during the validity term of the cheque, whichever is sooner;
According to RBI rules, the validity term of Cheques, Demand Drafts, Pay Orders, and Banker’s Cheques has been lowered from six months to three months, beginning on April 1, 2012.
- the bank returns the unpaid check. either because the quantity of money in the account is inadequate to honour the check or because it exceeds the amount scheduled to be paid from that account by an arrangement signed with the bank;
- the payee or holder of the cheque makes a claim for payment of the specified amount of money in due course of the cheque by submitting written notice to the drawer of the cheque within 30 days of receiving information from the bank about the return of the cheque as unpaid;
- the drawer of such cheque fails to make payment of the stated amount of money to the payee or holder in accordance with the terms of the cheque within 15 days of receipt of the said notification.
Sections 118 and 139 of the Negotiable Instruments Act provide for presumptions in favour of the holder of the check that it was written to discharge debts or liabilities. It is, however, rebuttable, and the accused can rebut it without entering the witness box through cross-examination. The complainant is not excused from proving that the cheque was issued for a lawfully enforceable obligation or duty. The burden on the accused in such a case would not be as light as it is in situations governed by Section 114 of the Evidence Act.
Section 27 of the General Clauses Act of 1897 and Section 114 of the Evidence Act of 1872 make it plain that once notice is sent by registered mail to the right address of the drawer of the cheque, service of notice is presumed to have occurred. However, the drawer is free to refute this assumption. 5 SCC 737, N. Parameswaran Unni v. G. Kannan.
The Supreme Court has addressed the issue of if the addressee refuses to receive the notice in a series of cases, holding that when a notice is sent by registered post and is returned with a postal endorsement “refused” or “not available in the house” or “house locked” or “shop closed” or “addressee not in station” or “intimation served, addressee absent”, due service must be presumed. 5 SCC 737, N. Parameswaran Unni v. G. Kannan.
Section 139 provides a presumption that the bearer of a cheque gets the cheque in discharge, in whole or in part, of any debt or other responsibility once the execution of the cheque is allowed, Basalingappa v. Mudibassapa, 2019 SCC OnLine SC 491.
Checks with no date or post-dated cheques are often issued. In Bir Singh v. Mukesh Kumar (2019) 4 SCC 197, the Supreme Court decided that if a signed blank cheque is willingly given over to a payee for any payment, the payee may fill in the amount and other particulars. This would not invalidate the check in and of itself. In the matter of Purushottamdas Gandhi vs. Manohar Deshmukh 2007 (1) Mh.L.J. 210, the Hon’ble Bombay High Court held that introducing such a date does not constitute tampering or modification.
Recent Development
The Central Government published modifications to the NI Act by integrating numerous new sections in The Negotiable Instrument (Amendment) Act, 2018, which took effect on September 1, 2018. The rules now allow the Court trying an offence connected to cheque bouncing to compel the drawer to pay interim compensation to the complainant in an amount not exceeding 20% of the cheque amount within 60 days of the trial court’s decision to pay such compensation. This interim compensation may be given in a summary trial or a summons case when the drawer pleads ‘not guilty’ to the accusation contained in the complaint, or upon the filing of a charge in any other case.
The legal position surrounding the geographical jurisdiction of the courts in cases of cheque dishonour has totally altered with the new changes, namely the Negotiable Instrument (Amendment) Act, 2015, which went into effect retroactively on July 15, 2015. Section 142 (2) has been added to Section 142, which specifies provisions for the local jurisdiction of the court where the offence under Section 138 shall be investigated and tried, and a new subsection 142A has been inserted into the Act, which specifies provisions for validation for transfer of pending cases.
Procedure for filing of Complaint
After adhering with all of the deadlines specified in Section 138 of the NI Act, the Compliant must be submitted to the Concerned Magistrate within 30 days of the day on which the drawer’s 15-day term for payment of money expires. The complaint must be signed by the complainant himself or by a properly authorised Power of Attorney holder, or in the event of a corporation, by any person or director duly authorised by the board in this regard.
In the instance of more than one cheque as part payment of a single transaction, a single complaint may be filed for up to four (4) cheques if all cheques are linked to the same transaction. [2019(4) Civ. CC 508 All.]
On the day the complaint is presented, if it is accompanied by the complainant’s affidavit, the concerned magistrate shall scrutinise the complaint and documents and, if an offence has been committed, take cognizance and direct the issuance of summons to the accused against whom the case is made out. This order is sometimes referred to as the Summoning Order. Summonses will be issued to the accused in line with Section 144 of the Act, as previously indicated.
If a summons is given on the accused and he appears in court, the court will require him to produce a bail bond to assure his presence during the trial (since the offence under Section 138 is a bailable offence) and a notice will be issued to the accused in accordance with Section 251 of the Cr.PC. The investigation into the case then begins.
Documents to be annexed with the Complaint:
1. One pager Performa as prescribed under the NI Act to be appended as the cover note on the Complaint;
2. Original Cheque;
3. Original Cheque Return Memo issued by the Bank;
4. Copy of Legal Notice
5. Original Postal Receipt;
6. Copy of Acknowledgement of due service (if any) [Track report may be attached] ;
7. Proof of lawful debt or liability (if any);
8. Authorisation letter / Power of Attorney / Board Resolution (in case of Company or Partnership Firm)
9. An affidavit in support of the compliant verifying its particulars;
10. An Evidence Affidavit under Section 200 of Code of Criminal Procedure of complainant.
Conclusion
Finally, in light of increasing business transactions, the importance of speedy and timely disposition of cheque bounce cases is one of the major concerns before the judiciary, as the purpose of timely payment of money to payee and enacting the remedy for him would fail if accused succeeded in prolonging these cases. The legislature has already made significant changes to the statute by including sections 143-A and 148, which provide for the deposition of up to 20% interim compensation by the Drawer/Accused if he pleads not guilty.
– Vaibhavjeet Singh