Open Access Research Article
LIABILITIES OF PARTIES – DISHONOR OF CHEQUES
Published Paper
Article Details
LIABILITIES OF PARTIES – DISHONOR
OF CHEQUES
AUTHORED
BY- TEJAL MILIND GUJAR
Class: LLM II,
Sem: IV, Roll no.- 16
PROGRESSIVE
EDUCATION SOCIETY’S MODERN LAW COLLEGE, PUNE
Abstract
The Negotiable Instruments Act, 1881, provides
a legal framework for regulating various negotiable
instruments, including cheques. Dishonor of a cheque is a serious matter that
can have significant legal
consequences for all parties involved. This abstract aims to explore the
liabilities of parties under the
Act when a cheque is dishonored.Firstly, it delineates the obligations of the drawer, drawee, and payee concerning the
issuance, presentation, and payment of cheques. The Act imposes a duty on the drawer to ensure that there are
sufficient funds in the account to honor the cheque upon presentation. Failure to fulfill
this obligation results
in legal repercussions.Secondly, it discusses the
consequences of dishonor, which may include civil and criminal liabilities. Upon dishonor, the payee has the right to initiate
legal proceedings against
the drawer for recovery of the amount due. Additionally, the drawer may be subjected
to criminal prosecution
under Section 138 of the Act if the dishonored cheque was issued for discharge of a debt or liability and the
drawer fails to make payment within the stipulated period after receiving a notice of demand.Furthermore, the abstract examines
the liabilities of the drawee bank in cases of dishonor. The
drawee bank is obligated to honor a valid cheque drawn upon it, provided the necessary conditions are met.
Failure to do so may render the bank liable for damages to the payee or holder in
due course.Moreover, it highlights the importance of procedural compliance in enforcing liabilities under the Act. Strict adherence
to statutory requirements regarding notice periods,
service of demand notices, and legal remedies is essential for safeguarding the rights
of the aggrieved parties.
Keywords:Negotiable Instruments Act 1881,Dishonor of Cheque,Liability of Parties,Civil Liability,Criminal Liability,Section 138
Introduction
Over the years there have been many important changes
in the way cheques are issued/bounced/dealt
with. Commercial globalisation has resulted in giving a big boost to our country. With the rapid increase in
commerce and trade, use of cheque also increased and so did the cheque bouncing disputes. The object
of Sections 138-142 of the Negotiable Instruments Act, 1881 is to promote
the efficacy of banking operations and to ensure credibility in transacting business through cheques.Section 138 casts
a criminal liability punishable with imprisonment or fine or with both on a person who issues a cheque towards
discharge of a debt or liability as a whole or in part and the cheque is
dishonoured by the bank on presentation.1
Section 138 was enacted to punish unscrupulous drawers of cheques who,
though purport to discharge their
liability by issuing cheque, have no intention of really doing so. Apart from
civil liability, criminal liability
is sought to be imposed by the said provision on such unscrupulous drawers of cheques. However, with a view
to avert unnecessary prosecution of an honest drawer of the cheque and with a view to give an opportunity to him to
make amends, the prosecution under
Section 138 of the Act has been made subject to certain conditions. These
conditions are stipulated in the
proviso to Section 138.In criminal law, commission of offence is one thing and prosecution is quite another. Commission
of offence is governed by Section 138 of the Act. Prosecution is governed by Section 142 of the Act.It is also
noteworthy that Section 138 while making
dishonour of a cheque an offence punishable with imprisonment and fine, also
provides for safeguards to protect drawers
of such instruments where dishonour
may take place for reasons
other than those arising out of dishonest intentions.2
Meaning of the Cheque
A cheque is a negotiable instrument and bill of exchange
which acts as a written
instruction to the bank to pay a certain amount of money
from the drawer’s bank account to the payee to whom the cheque is issued. It is an unconditional and definite
order to the bank, payable on demand and it can be transferred by mere hand delivery. As per the Section 6 of the Negotiable Instruments
Act 1881, “A cheque is a bill of exchange drawn on specific banker and
not expressed to be payable otherwise
than on demand and it includes electronic image of truncated cheque and a cheque in electronic from.” Truncated
cheque is a cheque which is converted into an electronic image by bank or clearing house for the purpose of easier
transmission substituting physical cheque.
An electronic cheque is a cheque that is drawn in electronic form Making
payment through cheque is safe and
convenient. However, cheques are not legal tender and a person can refuse to accept them.3
Following are the Parties to a Cheque
1. Drawer- Drawer is the person who draws the
cheque and promises to pay a certain amount to
another person. Drawer
signs the cheque
and orders the bank to pay the amount to another person
2. Drawee- Drawee is the bank on which a cheque is
drawn by the drawer. The
Drawee is directed by the drawer to pay the amount mentioned in the cheque.
3. Payee- Payee is the beneficiary receiving payment.
4. Endorser- Endorser is the party
who transfers their right to receive payment
to some other party.
5. Endorsee- Endorsee is the party in the favour of whom the right to receive payment is transferred by the endorser.4
Types
of Cheques
1. Bearer Cheque- Bearer Cheque is the cheque that
can be encashed by the person to whom the cheque is issued or by anyone who presents
the cheque in the bank. Bearer cheques
are negotiable in nature and
transferable by mere delivery. Bank does not require any authorisation from the drawer in these cheques.
2. Order Cheque- Order Cheque is the cheque that is
payable only to the person or entity whose name
is written on the cheque. No other has the authority to encash these cheques.
In the Order cheque, the word ‘Or
Bearer’ is cancelled. Authentication of the payee is required in these cheques. The payee can transfer such
cheques to a third party by signing his/her name at the back of it.
3. Crossed Cheque- In crossed cheque amount can
only be transferred into the account of the payee.
Any third party can submit this cheque to the bank on the behalf of the payee.
In Crossed cheque, two parallel
sloping lines along with words ‘A/C Payee’ is written in the top left corner. These cheques can be routed only through
an account and cannot be paid in cash. These are non- negotiable in nature.
4. Uncrossed/Open Cheque- In Open
cheque amount can be payable in cash at the bank counter or can be transferred to the account of the person whose name is
written on the cheque. These cheques
can be transferred from the payee to any third party. It can be both order or
bearer cheque.5
5. Anti-dated Cheque- Anti-dated cheque is a
cheque on which a date prior to the current date is mentioned. Such cheques can be cleared in the bank until three
months to the date mentioned in the cheque.
6. Post-dated Cheque- Post-dated cheque is a
cheque in which a future date is mentioned. These cheques can be submitted any time after their issuance but will
process these cheques according to the date mentioned in the cheque.
7. Stale Cheque- Stale cheque is a cheque that is
not presented in the bank within its validity
period. In India, a cheque is valid up
to three months of the
date mentioned in the cheque.
8. Mutilated Cheque- The mutilated cheque is a
cheque that is torn, spoiled, or damaged, banks often reject these cheques. The banks make payment against such
cheques only after getting confirmation and verification from the drawer.6
9. Blank Cheque- In a blank cheque the amount, name
of the payee, and date are not mentioned. It only has
the signature of the drawer.
The maximum withdrawal limit can be mentioned in these cheques.
10. Self-Cheque- Self cheque is used by the drawer to withdraw money from his/her
own account. In self cheque word ‘Self’ is written in place of the name of
the payee.
11. Pay Yourself Cheque- Pay
yourself cheques are used when the drawer wants his bank to deduct some amount from his account. These
cheques are issued at the time of buying bank
drafts, pay orders, or FDs.7
12. Traveller’s Cheque- Traveller’s cheque is a
cheque of a fixed amount issued by the bank for making payment or to withdraw money in a foreign country. The
bank charges a fee to issue such cheques.
13. Banker’s Cheque- Banker’s cheque is issued by
the bank on behalf of the customer of the bank
for making the payment within the same city. It is also known as pay-order. It
is non- negotiable in nature
and cannot be dishonoured.
14. Cancelled Cheque- Cancelled cheque acts as a
proof that person holds an account with the given
bank. In cancelled cheque, two parallel lines are drawn across the cheque and
the word ‘cancelled’ is written
between them. It is used in various bank processes like withdrawal of EPF funds,
the opening of another bank account, KYC process,
etc.8
Liability of a Drawer of a Dishonoured Cheque
1. Civil Liability –Where a cheque is
dishonoured, the legal position of the drawer of the cheque becomes that of a principal debtor to the
holder. The holder can bring civil suit just like any creditor to recover
the amount from the drawer making
him liable as principal debtor.9
2. Criminal Liability -
A drawer of a cheque is deemed to have committed
a criminal offence when the cheque drawn by him is dishonoured by the drawee on account of insufficiency
of funds.
The criminal
liability of a drawer in case of dishonour of cheque is dealt in section 138 to Section
142 of Negotiable Instrument Act 1881.10
Notice
Before taking any action, a legal notice for check dishonour is required.
This Act stipulates that, if a cheque has been dishonoured, the drawer must be notified
(by registered A.D.) within 30 days of receiptof the memo from the drawee
bank that the cheque has been dishonoured.
The following
points should be included in the legal notice for cheque dishonour: 1.The
issued check was presented to the
bank for payment;
2.The check was
then dishonoured for the reason stated by the drawee bank. 3.Requesting payment of a sum
written on a cheque within 15
days of receipt of notice.
4.The next action should be conducted after sending the legal notice for
cheque dishonour.11
Filing of complaint
When the drawer of the cheque fails to make the payment within fifteen
days after receiving the notification,
the cause of action for beginning proceedings is complete, according to Section
138 of the Act and its
proviso.
Only from the moment the notice period expired would the offence be
considered committed. A section 138
complaint must be filed within one month of the occurrence of the cause of
action. The day on which the cause of
action arises is excluded from the calculation of the limitation period for filing a complaint under Section 138 of the Act.12
Maximum Punishment
The maximum punishment for such an offence is imprisonment upto 2 years
or fine upto twice the amount of cheque or both.
Where the cheque is drawn by a company, a firm, or association of
individuals, the punishment can be
awarded to every person who was in-charge of and was responsible for its
conduct of business and also to the company.13
Liability of Parties – Cheque
The provisions relating to the liability of parties to negotiable
instruments are under section 30 to 32 and 35
to 42 of the Negotiable Instrument Act, 1881.
The Liability of parties
is as follows:
1. Liability of Drawer (Section 30) -
Drawer means a person who signs a cheque or a bill of exchange ordering
his or her bank to pay the amount to the payee.
In case of dishonour of cheque or bill of exchange by the drawee or the
acceptor, the drawer of such cheque
or bill of exchange needs to compensate the holder such amount. But, the drawer needs to
receive due notice of dishonour.
So, the nature of the drawer’s
liability on drawing a bill
is:
(i) On due presentation:-
It should be accepted and paid accordingly.
(ii)
In the case of dishonour:- Drawer needs to compensate the holder such amount, only when he receives
a notice of dishonour by the
drawee.14
2. Liability of the
Drawee of Cheque (Section
31) -
The person who draws a cheque i.e drawer having sufficient funds of the
drawer in his hands properly
applicable to the payment of such cheque must pay the cheque when duly required
to do so and, or in default of such
payment, he shall compensate the drawer for any loss or damage caused
by such default.
The drawee of a cheque will always be a banker. As a cheque is a bill of
exchange, drawn on a specified banker
by the drawer, the banker is bound to pay the cheque of the drawer, i.e., the customer.
For the following conditions are need to be satisfied:
(i)
Sufficient amount of funds to the credit
of customer’s account
should be there with the banker.
(ii)
Such funds are required to be properly
applied against the payment of such cheque, e.g., the funds
are not under any kind of lien etc.
(iii)
The cheque is duly required
to be paid, during banking
hours and on or after the date on which
it is made payable.
If the banker unjustifiably refuses to honour
the cheque of its customer, it shall be liable for damages.15
3. Liability of Acceptor of Bill and Maker of
Note (Section 32) -
As per section 32 of negotiable instrument
act, in the absence of a contract to the contrary, the maker of a promissory note
and the acceptor before the maturity of a bill of exchange are under the liability to pay the amount thereof at maturity.
They need to pay the amount according
to the apparent tenor of the note or acceptance respectively. The
acceptor of a bill of exchange at or after maturity is liable to pay the amount thereof
to the holder on demand.
The liability of the acceptor of a bill or the maker of a note is
absolute and unconditional but is subject to a contract
to the contrary and may be excluded
or modified by a collateral agreement.16
4. Liability of Endorser (Section 35) -
An endorser is the one who endorses and delivers a negotiable instrument
before maturity. Every endorser has a liability to the parties that
are subsequent to him.
Also, he is bound thereby to every subsequent holder in case of dishonour
of the instrument by the drawee,
acceptor or maker, to compensate such holder of any loss or damage caused to
him by such dishonour. However, he is
to compensate only after the fulfilment of the following conditions:
(i) There is no
contract to the contrary
(ii)
The Endorser has not expressly excluded, limited or
made conditional his own liability (iii)And,
such endorser shall receive due notice
of dishonour17
5. Liability of Prior
Parties (Section 36) -
Until the instrument is duly satisfied, every prior party to a negotiable
instrument has a liability towards
the holder in due course. The prior parties include the maker or drawer, the
acceptor and all the intervening
endorsers. Also, there liability to a holder in due course is joint and
several. In the case of dishonour,
the holder in
due course may declare any or all prior parties liable for the amount.
6. Liability Inter-se
-
Every liable party has a different footing or stand with respect to
the nature of
liability of each one of them.
7. Liability of Acceptor when Endorsersement is Forged
(Section 41) -
An acceptor of a bill of exchange who had already endorsed the bill is
not relieved from liability even if
such endorsement is
forged. This is so even if he knew or had reason to believe that the endorsement was forged when he accepted the bill.18
8. Acceptor’s Liability
when Bill is drawn in a Fictitious Name -
An acceptor of a bill of exchange
who draws a bill in a fictitious name, payable to the drawer’s order will
be liable to pay any holder in due course. He or she will not be relieved from such liability by reason
that such name is fictitious.19
Dishonor Of Cheque
According to Section 6. of the Negotiable Instruments Act, the check is
defined as the bill of exchange
issued on a particular banker & expressed
to be payable other than on demand.
Includes the electronic image of the truncated check & a
check in the electronic form. In
the banking scenario, the honored cheque indicates the successful transaction
of the amt. cited on the check to the beneficiary concerned i.e. payee. Conversely, if the Bank refuses to dispense
the cheque sum to the beneficiary, it will be treated as a dishonored
cheque so, it refers to a scenario
where the Bank refuses to
dispense the check amount to the payee.20
A.Reference to the term
'dishonor' made in Section 91 & 92 of the Negotiable Instruments Act, 1881.
S. 91. Dishonor
by non-acceptance- A
bill of exchange is stated or deemed to be dishonoured
,only if the drawee or one of the multiple drawees .not being the
partners refuses to accept it , defaults
on an acceptance after being duly obliged to accept the bill, or when
presentment is excused & bill
isn't accepted.so in other words it can be said that the bill can said to be or considered as dishonored If the drawee is unable to contract
or when the acceptance is qualified.21
Section 92: Dishonor by Non-Payment
A bill or a cheque is said to be dishonored by non-acceptance only If
maker of the'note' /the acceptor of
the bill/ the drawee of the cheque defaults on payment after duly required to
pay the same.
Therefore, if at the presentation the banker does not pay, then there is
dishonor and the bearer immediately
acquires the right of recourse against the drawer& against the other parts
of the cheque.22
Section 138 Negotiable Instruments Act 1881
The Negotiable Instruments (Amendment And Miscellaneous Provisions) Act,
2002, has made the following changes to Section
138. of the Negotiable Instruments
Act:
138. Cheque dishonour due to 'insufficient funds' in the account:
If a cheque drawn by a person on an account maintained by him with a
banker is returned by the bank unpaid
for payment of any amount of money to another person from that account for the discharge, in whole or in part, of any
debt or other liability, 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 period of not
less than one year if the amount of money standing to the credit of that account is insufficient to
honour the cheque or if it exceeds the amt. arranged to be paid from
that account, by an agreement made with that particular bank.
Provided provided in this
section, nothing in this section shall apply unless:
the cheque has been handed to the bank within six months of the date on
which it was drawn, or during the validity term of the cheque,
whichever comes first;
within thirty days after receiving information from the bank regarding
the return of the cheque as unpaid,
the payee or holder of the cheque, as the case may be, makes a claim for
payment of the specified amount of money by giving a notice in writing to the
drawer of the cheque; and
within 'fifteen days' of
receiving the said notice, the drawer of such cheque fails to make payment of the said sum of money to the
payee or to the
holder, in due course.23
Scope of S.138 of NI
act , 1881( Negotiable Instruments Act,1881):
Section 138 makes it as statutory offence dishonour cheques because there
are insufficient funds in a person's
bank account with the banker, and the amount arranged to be paid from that
account by an agreement made with
that bank is greater than the amount arranged to be paid from that account
by an agreement made with that bank as specified in the
act.
However, there are a number of reasons for cheque dishonour, such as
signature mismatch, payment stopped by the drawer, account
closed by the drawer, and so on.
Whenever a cheque for the discharge of any legally
enforceable debt or other liability
is dishonoured by the bank for lack of funds and payment
is not made by the drawer inspite
of a
legal notice of demand, it shall be considered a criminal offence. The
Act considers cheque dishonour to be a criminal offence, but it is only enforcing
a civil right in a summary manner.24
Ingredients of offence:
The essential ingredients of sec138
are:
1. Drawing a check
by a person on an account
of any debt or other liability.
2. Presentation
of the check to the bank within a period of six months from the date of its
drawing or within the period of its
validity.
3. Return of the
unpaid check by the drawee bank.
4. Written
notice to the cheque drawer within 30 days of receipt of information relating
to the return of the cheque as unpaid in the form of an advance debit
or return memo.
5. Non-payment by the
drawer within fifteen days of receipt of the notice.25
The High Court of Maharashtra held in Vishnu S/O Amthalal Patel v. State of Maharashtra & Anr.that the accused's cheque could
not be regarded a legally enforceable debt or liability. The evidence fell short of establishing that
the applicant/accused owes a legally enforceable debt or liability for which the cheque was given. As a result, the
applicant/accused has met his or her burden and refuted the presumption based on the
aforementioned provisions of the Act.26
Reasons for Dishonour Of Cheque
1. Stop payment:
In case of Electronics Trade and Technology Development Corporation India Vs Indian Technologies
and Engineers (Electronics) Pvt. Ltd. It was held by hon'ble court that if the
drawer issues a notice to the payee or holder in due course not to present the cheque for payment, and
the cheque is still presented and dishonoured on the drawer's
instructions, Section 138 ii applies. However,
in another case, Modi Cement Ltd. vs Kuchil Kumar Nandi, the Supreme Court reversed its earlier findings and stated that section 138 would
apply even if a cheque was dishonoured due to
a "Stop Payment" instructions to the bank.27
2. Bank Account
Closed:
The dishonour of a cheque on the grounds that the drawer of the cheque
has closed the account is a violation of S.138. Account Closed means that :
Despite the fact that the account was active at the time the cheque was
issued, the account has since been closed.It
indicates that the drawer has no intention of paying.
Closing an account is one of the ways a drawer can make his account
insufficient to honour a cheque he
has issued; thus, closing an account would not allow the accused to avoid his
liability under section 138 of the
Act.' In N. A. Issac vs. Jeeman P. Abraham & Anrol, it was held by hon'ble court that if a cheque
is issued after an account
has been closed, Section 138 will apply.28
3. Refer to the
Drawer:
In the usual sense, "refer to drawer" refers to a bank
statement, as in we are not paying, go back to
the drawer and ask why,or go back to the drawer and ask him to pay.The words
implies that' the cheque has been
returned due to a lack of funds in the drawer's account, as is 'customary in banking'. It's a polite approach for a
bank to indicate that it won't be able to honour the cheque due to
a lack of funds.
In
the case of M/s Electronic Trade &
Technology Development Corporation Ltd. v. M/s
Indian Technologist & Engineer (Electronic) Pvt. Ltd.It was held
by the hon'ble court that that
if a cheque is returned with the endorsement "Refer to drawer"
or "Instructions for stoppage of payment" or exceeds the arrangement,
it constitutes cheque dishonour.29
4. Post Dated Cheque:
A post dated cheque is a bill of exchange,
when it's written or drawn, it becomes
a cheque when it is payable
on demand. Because a post-dated cheque cannot be presented to the bank, the
issue of its return does not arise.
S.138 of NI Act, comes into action, only when a post-dated cheque becomes a cheque having effect from
the date displayed on the face of the said cheque.30
Circumstances in which a Banker is Justified in
Dishonouring Customers Cheque
1. Payment Countermanded by the Drawer
When the cheque drawer of the cheque countermands the payment, that is it
issues the instruction to the bank
not to make the payment. On receipt of a valid stop payment order, the cheque
must be returned unpaid with the remark
“payment countermanded by drawer”
2. Notice of Drawers Death
On receipt of the confirmed news of death of account holder, cheques
signed by him should be returned unpaid with the remark “Drawer deceased”.
3. Notice of Customers Insanity
Where the account holder is certified as insane by a recognised medical
practitioner then the cheques signed
by him should be signed by him should be returned unpaid.
4. Notice of Customers Insolvency
Where a customer is adjudged insolvent, the banker must refuse to pay
cheques drawn by the customer.
5. Liquidation of Company
When a bank receives notice from the liquidator in accordance with the
provisions of Companies Act, requiring to pay the balance to liquidator’s account
, all the cheques
by the companies should be returned unpaid.31
Offence by Company
A juristic person like incorporated companies and partnership firms are
also made liable for the offence of dishonour of cheque described under section 138.
Under Section 141 –
·
If the person committing an offence under section 138
is a company , every person who, at
the time the offence was committed, was in charge of, and was responsible to
the company for the conduct of the
business of the company ,as well as the company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded
against and punished accordingly.
Provided that nothing
contained in this sub-section shall render any person liable to punishment
if he proves that the offence was committed without his knowledge, or
that he had exercised all due diligence
to prevent the commission of
such offence
Provided further that where a person is nominated as a Director of a Company
by virtue of his holding any office
or employment in the central Government or State Government or a financial corporation owned or controlled by the
Central Government as the case may be, he shall not be liable for prosecution under this chapter.
·
Not withstanding anything contained in sub-section
(1), where any offence under this Act has
been committed by a company and it is proved that the offence has been
committed with the consent or
connivance of or is attributable to, any neglect on the part of, any director, manager, secretary, or other
officer and shall also be deemed to be guilty
of that offence and shall
be liable to be proceeded against and
punished accordingly.
Explanation- For the purpose of this section –
1. “Company” means any body corporate and includes a firm or other association of individuals; and
2. “Director” in relation
to a firm, means a partner in the firm.
Section 141 covers 3 categories of person liable for offence
under Section 138-
1. The company
as principal offender
2. Persons who were
in charge and were responsible for the business of company
3. Any other person who is director or a manager or secretary or officer of the company
There must be a specific accusation against each of the persons alleged
as accused that such person was in charge of
and responsible for the conduct of the business of the company or the firm at the relevant time when the
alleged offence was committed by the company or the firm.32
In the case
SMS Pharmaceuticals v. Neeta Bhalla
The Supreme Court has categorically held that there has to be specific
averment in the complaint to the
effect that such a person was not only in charge of and responsible to the
company for the conduct of its
business but it was also required to be stated as to how and in what manner he
was so responsible.
Cognizable of Offence
Section 142 of Negotiable Instrument
Act of 1881 deals with cognizance of offences.
Condition Essential for Cognizance
For initiating proceedings against the drawer of dishonoured cheque drawee has to fulfil following conditions –
1. The payee
or the holder in due course has to file
a written complaint.
2. The complaint
is to be made within one month of the date on which the cause of action arose
under clause (c) of the
proviso to Section 138.
3. Only the court of Metropolitan Magistrate or a Judicial
Magistrate of First
Class is empowered to try the offence defined
under the provision of Section
138.33
Jurisdiction
Dashrath Rupsingh Rathod v State of Maharashtra & Anr:
The Supreme Court's recent landmark decision has altered the essential
criteria for initiating criminal
complaints for cheque dishonour under Section 138 of the Negotiable Instruments
Act. Previously, the holder of the cheque could file a case under Section 138 at his place of business
or residence.
However, the Hon'ble Supreme Court has ruled that the complaint must be
filed in the location where the bank
branch on which the cheque was drawn is located, and that the judgement will apply retrospectively, that is, lakhs of
cases pending in various Courts across the country will see an interstate transfer of cheque bouncing
cases.34
Case Laws
1. John K. Abraham v. Simon C. Abraham, (2014) 2 SCC 236
The SC held in this case where the cheque was issued to repay the loan
advanced by the complainant, the
burden of proof was on the complainant to draw a presumption under section 119 read with section 139 of NI Act. The
complainant should have proved that he had requisite funds for the advancement of the Rs.1,50,000/- to the accused,
that the accused issued the cheque to repay that loan,
and that the accused had agreed towards
such an arrangement. However, in the present case the complainant could not prove the date and place
of the advancement and
made contradictory statements in cross-examination as to who wrote the
cheque. The accused was therefore acquitted.35
2. Kaushalya Devi Massand v. Roopkishore Khore, (2011) 4 SCC 593
Held the gravity of complaint under NI
Act cannot be equated with an offence
under the provisions of the Penal Code, 1860 or other
criminal offences.36
3. Vijay v. Laxman, (2013) 3 SCC 86It was held
in this case by the Supreme Court that the standard
of proof necessary to rebut the assumptions of section 118 and 139 is not as
high as that required of the
prosecution. Doctrine of preponderance of probabilities applies.37
4. Nishant Aggarwal v. Kailash Kumar Sharma,
(2013) 10 SCC 72
The SC held that issuance of notice alone was not sufficient and that
communication of the same was
mandatory. Also, only after the notice has been served and there has been a
failure of payment within the next 15 days, can the offence under section 138 be said to
be completed.38
Conclusion
The law related to Negotiable Instruments is a law of commercial world
that was enacted to facilitate trade and commerce
by providing for the sanctification of a credit instrument that would be deemed convertible into money and
easily transferable from one person to another. In absence such instruments, trade and commerce activities were
expected to affected, as it was not practical for the
trading community to continue using the bulk of the currency
in force.
The Act's key objective is to legalize the manner by which the
instruments covered by it can be passed
from hand to hand through negotiation, just like any other good. Though the
penal provisions have served to reduce the issue of
cheques in a lighthearted or
playful manner, or with a dishonest
intention, the trading community today feels more comfortable in receiving
payment by cheques.
However, because there is no provision for recovering the amount covered
by the dishonoured cheque, if an
accused is convicted under section 138 and has served his or her sentence, but
is unable to deposit the fine then it
is the complainant's sole choice is to file a civil suit.However, the process of seeking civil justice is
notoriously slow, and recovering damages through a civil suit can take an inordinate amount of time. If the Government of
India could establish a tribunal to
deal with cheque dishonour and the liability that arises from it, the process
of recovering damages for the aggrieved party could be accelerated.
Article Information
LIABILITIES OF PARTIES – DISHONOR OF CHEQUES
Authors: TEJAL MILIND GUJAR
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/03/29
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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