Dishonour of Cheques and Negotiable Instruments


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Angu Parameswari textiles (P) ltd v. Sri Rajam & Co, (2001) 105 Comp Cas 186. Canara Bank v. Canara Sales Corporation and ors, AIR 1987 SC 1603. D. Chandra Reddy v. Gowrisetty Prabhakar Rao, (1996) 6 Andh LD 281 (AP). jagjivan Mavji v. Ranchhodas Maghaji, AIR 1954 SC 554. OPTS Marketing Pvt. Ltd v. State of A.P., (2001) 105 Comp Cas 794. Padmini Polymers Ltd v. Unit Trust of India, (2002) 101 Delhi LT 376. S.V.Muzumdar and Ors v. Gujarat State Fertilizers Co. Ltd and Anr, MANU/SC/0318/2005. Sharda Aggarwal v. Additional Chief Metropolitan Magistrate, (1993) 78 Comp Cas 123. V.Raja Kumari v. P.Subbarama Naidu and Anr, MANU/SC/0937/2004.

English Cases

Flemming v. Bank of New Zealand (1990) AC 577.

Table of Statutes

Before 1988 there being no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision to punish them in the vent of such cheque not being honoured by their bankers and returned unpaid. the researcher has tried to understand as to what is meant by dishonour. who will be liable to the holder of the cheque. The Negotiable Instruments Act. 1988 which were further modified by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act. Of course on dishonour of cheques there is a civil liability accrued. Indian Penal Code. 1881 in form of the Banking. who will be liable upon such dishonouer and related questions and issues. 1988. But pursuant to the rise in dealings with cheques also rises the practice of giving cheques without any intention of honouring them. Many issues arise under this section such as what happens in case of default. its time when people have preferred to carry and execute a small piece of paper called Cheque than carrying the currency worth the value of cheque. Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act. 1881. This article attempts to elucidate the penal provision in the light of the amendments and the judicial interpretations. Indian Contract Act. what are the procedures involved to make the case adept in the eyes of the magistrate. Dealings in cheques are vital and important not only for banking purposes but also for the commerce and industry and the economy of the country. However in reality the processes to seek civil justice becomes a long drawn process and recovery by way of a civil suit takes an inordinately long time. . INTRODUCTION Advent of cheques in the market have given a new dimension to the commercial and corporate world.     Banking. RESEARCH METHODOLOGY AIMS AND OBJECTIVES: Through this paper the researcher aims at understanding the concept of dishonour cheques as it appears in a new chapter inserted into the Negotiable Instruments Act. in this paper the researcher has attempted to look at all these issues comprehensively and analyse them with sufficient illustrations. 1988 General Clauses Act. Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act. etc. To ensure prompt remedy against defaulters and to ensure credibility of the holders of the negotiable instrument a criminal remedy of penalty was inserted in Negotiable Instruments Act. 2002.

RESEARCH QUESTIONS:     how has the amendment to S. Chapter 2: this chapter deals with the penalties and liabilities under S. CHAPTERIZATION:   Chapter 1: this chapter deals with the shift of bouncing of cheques from a purely criminal approach to a quasi criminal quasi civil approach. This includes comparing the ingredients under criminal and civil law regarding the topic.138. as before the amendment dishonour of cheques was a purely criminal law issue. The researcher has also relied on case law. . SOURCES OF DATA : The researcher has used secondary sources in order to obtain sufficient data for this project. to get an indepth understanding of the topic. changed position of dishonour of cheques in law? What is meant by dishonour and who will be principally liable upon such dishonour? Are companies treated in the same manner as persons when a dishonour of cheque occurs? What is the procedure which needs to be followed in order to prosecute the offender? SCOPE AND LIMITATIONS: The scope of this research paper is understand the concept of dishonour of cheques as it appears under the Negotiable Instruments Act. books.138 and also looks at the position of companies in this regard. also looking at how the position of dishonour of cheques has been altered in law. METHOD OF WRITING: The researcher has used both a descriptive and analytical method of writing in order to understand the issues better. articles and the internet. namely. The researcher has limited herself to discussing the substantial law aspects of the paper which are connected with Banking law and has kept the discussion of the procedural aspects at a minimum.Also the objective of this paper is to see the interface between criminal law and civil law. however now it has been brought out of that purview. MODE OF CITATION: A uniform mode of citation has been followed throughout this project.

therefore conviction of offence under one provision does not bar prosecution under the other.138 is constituted. The ingredients which are to be satisfied for making out a case under S.[6] Thus S.420 IPC is maintainable if dishonest intention at the time of the issuance of the cheque is established. Also another problem arising under criminal law is the necessity to prove the dishonest intention beyond reasonable doubt. This means that the cheque must have been drawn for payment of money to a person other than the drawer for the full or partial discharge[8] of any legally enforceable . notwithstanding the intention of the person issuing the cheque.138 of the Act.138 of the Negotiable instruments Act? What we see is that under criminal law for a crime of dishonour of cheque to be made out there is need for the prosecution to first establish dishonest intention on the part of the drawer from the inception of the instrument.[5] What then is the advantage of S. he impliedly represents to the payee that in the ordinary course of events.138 of the Act has created a contractual breach as an offence and the legislative purpose to promote efficacy in banking and of ensuring that in commercial or contractual transactions cheques cheques are not dishonoured and credibility in transacting business through cheques is maintained. Thus failure of the prosecution to prove this element of deception usually led the court to hold that the matter was of civil nature. [7] Ingredient of Liability under S. The crime of cheating cannot be constituted if the cheque is dishonoured by itself. the offence under S. The offence under S.138 does away with this formalistic rigour of criminal law.420 of the Indian Penal Code[3]. even with the introduction of S. the cheque on its presentation to the bank would be met.138 of the Act and S. However.138: The object of bringing in this section as mentioned above is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instrument.[2] Prior to the introduction of this chapter. If a cheque is dishonoured for paucity of fund.138 of the Act are: 1. even today prosecution under the general for the offence of „cheating‟ is maintainable. it makes a civil transaction to be an offence under law. In such a circumstance. CHAPTER 1: DISHONOUR OF CHEQUES Amendment to the Act: an interface with criminal law S. The cheque is drawn on a bank for the discharge of any legally enforceable debt or other liability. prosecution under S. Chapter 3: this chapter deals with the procedure which is required to be followed in order to file complaint for dishonour of cheques.420 of the IPC are different in nature. the drawer of a dishonoured cheque could be criminally prosecuted under S.[4] The full bench of the Andhra Pradesh High court has held that when a person issues a cheque or a post-dated cheque. 138 creates a penal liability.[1] The court has noted that S.

then a suit cannot be filed upon that and S. Also to bring it under the ambit of this section. CHAPTER 2: PENALTIES AND LIABILITIES FOR DISHONOUR Dishonouring of a cheque: .138 will not be attracted. The cheque is returned unpaid because the amount available in the drawer‟s account is insufficient for paying the cheque. when he issued the cheque.[9] The cheque is returned by the bank unpaid. a cheque should have presumably been issued and not merely drawn for payment in discharge of a debt.[10] The drawer has failed to pay within 15 days from the date of the receipt of notice.[12]ing Having thus touched just the basic aspects of dishonouring of cheques. 8.‟ The returning of a cheque by a bank either because the amount of the money standing to the credit of the drawer is insufficient or the amount covered by the cheque is in excess of the amount arranged to be paid from the account by an agreement with the bank are two necessary conditions creating strict liability which will be discussed in the subsequent section.138 excludes Mens Rea by creating strict liability and this is explicit from the words „such person shall be deemed to have committed an offence. The payee has given a notice to the drawer claiming the amount within 15 days of the receipt of the information from the bank. It is only the failure of the drawer to avail of this opportunity and meet the demand for the amount of the cheque that becomes the cause of action under the S. whichever is earlier. Thus what we see here is that if a cheque was given merely as a security. debt or liability.138. 7. 3. 6. Sri Vishnu Trading Co. This position was laid down in Mahalakshmi Enterprises v. that it maybe dishonoured on presentment for the reasons stated in S. 5. the exclusion of mens rea as a necessary ingredient to this section is thus clarified here. The researcher will now deal with the offence that is prescribed under the Section and dealing with the various circumstances that could attract this section. Mens Rea: S. The offence under this section is not complete till a statutory opportunity is offered to the drawer of the cheque for making the default good within 15 days of the receipt of notice to that effect.[11] and has been deemed to be one of the essential ingredients of this section. The payee has a limitation period of 30 days. S.138. 4. within which he can file a complaint. The cheque so dishonoured must have been presented to the drawee/ bank within a period of six months from the date on which it is drawn or within the period of its validity.140 excludes the defence that the drawer had no reason to believe. and laying down its place in the Act.2.

A negotiable instrument is said to be dishonoured by non-payment when the drawee of a cheque makes default in payment upon being duly required to pay the same. (x) insolvency.In order to begin a discussion on the issue of dishonour under the Act. etc. When a drawer wishes to stop payment he must give notice to the Bank. however a payee can give a notice to the banker that the cheque is stolen or lost. however presentment for acceptance is required only in the case of a bill of exchange.[19] Insufficiency of funds: When there are no funds to meet the cheque or the account of the drawer does not hold sufficient funds to meet the whole credit amount of the cheque.91 and S. Dishonour by non-payment is said to be dishonoured. the researcher will proceed to deal with only few of these instances. it is important to first consider the meaning of the term dishonour and what does it constitute.[15] and thus it is only this bill of exchange which can be dishonoured by nonacceptance and not a cheque as in the case of a cheque no acceptance is required to be taken to the banker and cheques are mainly instruments payable at sight . What we see from this definition is a condition of presentment of the negotiable instrument. (iv) improper presentation. Dishonour by non-acceptance. This finds mention in S.[17] A drawee can dishonour a cheque Thus it is well established that cheques are always dishonoured only for the reason of nonpayment and not non-acceptance.[18] It must be noted here that any payment by the bank after such notice will not be considered as good payment.92 of the Act. (iii) non-applicability of funds. Apart from the broad heads mentioned above. Usually acceptance and payment go together and this usually happens in case an instrument is payable after sight. the banker is then justified in refusing the . (viii) stale cheques. this is known as countermand of cheques by the drawer. In such a case the banker must inform the drawer.91[14] of the Act speaks of dishonour by non-acceptance. (v) notice of death of account holder. Dishonour of negotiable instruments may be of two kinds: 1. 2. thus often it is difficult to distinguish the two because dishonour by non-payment is usually dishonour by nonacceptance.[13] S. though it is usually the drawer who gives such notice. (i) payment countermanded. (ix) lunacy. (ii) insufficiency of funds. the bank then stands revoked from making payment on that cheque. Payment countermanded: When the drawer of the cheques issues instructions to the bank not to make any payment of a particular cheque issued by him. (vii) post-dated cheques. is that of dishonour by non-payment. so that the latter can give necessary instructions. cheques can be dishonoured by the banker for several reasons.[16] The second kind of dishonour. (vi) court‟s order prohibiting payment.

Another situation might be where the funds in the account of the drawer is meant for a trust and a cheque is drawn in breach of a trust. Non-applicability of funds: Under S. A cheque when dishonoured for the purpose of insufficiency of funds.[21] Effects of dishonour of cheque: Firstly.31 of the Act it is the banker‟s duty to honour the cheque when funds which are lying in the account of the drawer are applicable for the purpose. However where the account has sufficient funds. there has been a sort consensus on the point and courts have often said that refer to drawer meant nothing but that the drawer lacked sufficient funds in his account and therefore S. is that whether a cheque returned by the banker endorsed with the words “refer to drawer” would amount to a dishonour under S. Thus when the funds in the account are lying for other purposes. However there maybe an agreement to the contrary whereby the banker has undertaken to meet the customer‟s cheques even though there may not be sufficient funds in his account.138. under S. taking of legal action. but he can prosecute the drawer only once. the drawer of such cheque is liable to penal consequences as under S.138.payment of such a cheque. Thirdly. on the dishonouring of a cheque. The payee/holder can take action against the drawer of such a bill may take action on the exact time of dishonouring of the bill. when a cheque is said to be dishonoured it loses its basic characteristic of negotiability with immediate effect.171 of the Indian Contract Act.[23] The payee or holder of a cheque has the right to present the cheque for payment for any number of times and he may have it repeatedly dishonoured.[22] Secondly. after a number of decisions on the point. An example of such a situation is when the banker may have a lien over the funds lying in the account of the drawer under S. then in such a case the banker is bound to honour the cheque failing which the banker would be liable by way of breach of contract for an overdraft facility[20] and the necessary legal consequences will ensue.138 would be attracted in certain circumstances. Lastly. nothing prevents the holder thereof to present it again particularly on being asked by the drawer of the cheque. the banker is under an obligation to its customer of honouring the cheque presented to it. Thus the holder need not wait for the bill to mature and then to take action for dishonouring the same.[24] Post dated cheques: Would the above aspects apply to a post dated cheques? A post-dated cheque represents a mere promise by the drawer to pay at some future date and it represents the holding out of a hope . the will necessarily dishonour the cheque presented before it for payment. One issue that arises here and has been under constant debate. 138 of the Act. mere dishonouring of cheques does not give rise to a cause of action in favour of the complainant but it accrues only after the issue of demand notice and failure of the drawer to make the payment.

31 of the Act where the drawee must pay if there is sufficient funds in the account of the drawer.30 of the Act lays down that the drawer is bound to compensate the payee/ holder in case of dishonour by the acceptor/ drawee. be met.rather than the representation of a present fact and thus a broken promise is not a criminal offence though it may amount in certain business relations to discreditable behaviour on the part of the drawer.[26] Liability of dishonouring of cheque: Dishonouring of cheques can be rightfully done or wrongfully done depending on the nature of the action taken upon the cheque. Liability of the banker to the drawer: The drawee of a cheque is usually a banker and the legal relation between him and the drawer.[27] Thus what we see here is that the liability of the drawee/ bank is the primary liability and only when the bank fails to honour the cheque. nor any trust created so as to make the payee a beneficiary thereunder.[25] However the English law on this issue is different and more logical. Ranchhodas Maghaji. that is to say. the payee cannot enforce any obligation upon it.[29] The idea was laid down clearly in jagjivan Mavji v. with the exception of S.[31] It must be noticed that the liability of the drawee however is conditional upon his having in his hands funds of the drawer sufficient to pay the cheque amount. This is simply because there is no privity of contract between the drawee and the payee and The Act only provides for the liability of the drawee in favour of the drawer of the cheque as he is an account holder of the drawer and thus there exists a contract inter se. Thus what we see here is that the drawee‟s liability is towards the drawer and not the payee. The banker who is holding the money of his customer owes a debt to him to the extent lying in the customer‟s account and the drawee/banker is therefore under an obligation to honour the cheques of the customer so long as he can meet them from such funds as exist in the customer‟s account. Here we shall see the various entities which may fall liable upon the dishonour of a cheque subject to it being a rightful dishonour or a wrongful one: Liability of the drawer to the payee: S. According to them the drawer impliedly represents that the existing facts at the date when he gives the cheque to the payee or his agent is such that in the ordinary course the cheque will. The bank is under a legal obligation to honour the cheque as long as the drawer has sufficient funds lying in his account in the bank. the holder can then proceed against the drawer. the party in breach of the contract must pay damages which flow from such breach. between the banker and the customer is that of a creditor and a debtor.[30] which says that there is no provision as such which makes the drawee liable on the instrument.[28] However it must be noted that in the event of non-compliance by the bank. this is because there is no privity of contract between them. Such a liability arises out of breach of contract in between the banker and the customer and in the case of wrongful dishonouring of the cheque. on presentation on or after the date specified in the cheque.[32] Apart from this there are .

[36] The court held that whenever a cheque purporting to be by a customer is presented before a bank it carries a mandate to the bank to pay. can be prosecuted under S.[34] There remains a possibility that the cheque presented for payment is not the customer‟s cheque at all but a forgery. made. and merely because company is not made an accused in the proceedings is no ground to quash it. [33] In almost every case the drawer can recover substantial damages from the drawee on the basis of the above factors of loss of credit. (ii) and the person who makes. thus in doing so if he finds that the signature is inconsistent . then the bank should not honour the cheque. or signed without his authorization. If the cheque is forged then there is no such mandate. whether a natural person or a body corporate or even a firm. draws. The bank can escape liability only if it can prove knowledge on the part of the customer. In case of wrongful dishonor the customer can sue for damages. fall into the following categories: . A banker paying a cheque under these circumstances is not entitled prima facie. Prosecution of the company is not sine qua non for the prosecution of the directors. Thus we see the civil remedies available in case of dishonouring of cheques. however such civil remedies do not exclude criminal action as is laid down in the amended chapter of the Act. This is important because dishonour of a cheque impacts largely the reputation and integrity of a person. to debit the customer‟s account.. etc. or that this signature is forged. endorses or accepts the instrument must have the authority given to him by the company on their behalf. Company/Firm: The drawer of a cheque. the paying banker will thus have no statutory protection if he pays a cheque on which the customer‟s signature is forged. In order that a company may be bound by a negotiable instrument purporting to have been issued on its behalf two conditions must be satisfied: (i) the instrument must be drawn. however it maybe difficult to award pecuniary damages in such a situation.141[37] of the Act.[35] The law is that a cheque with the drawer‟s signature forged is a mere nullity. Canara Sales Corporation and ors. accepted or endorsed in the name of or by or on behalf of or account of the company. A landmark case which lays down the law in India is Canara Bank v. The bank has the specimen signature of his customer and it is the duty of the bank to compare the signatures. Thus the in a decided case the Supreme Court held that officers of the company who may be held liable falling under S. Liability in case of forgery: A banker/drawee has no obligation to pay if the signatures of the customer on the cheque are forged and has a right to dishonour the cheque on this ground. However quantification of damages depends largely on the creditworthiness of the customer.various other situations whereby the banker can rightfully dishonour the cheque and if he dishonours the cheque for these reasons liability will not fall upon him. more so if the customer is a well known trader.141 other than the directors. Thus keeping in view the fact that the banker is bound to know his customer‟s signature and compare the same.

the MD of a company on behalf of whom the dishonoured cheque has been issued. However a person who proves that the offence was committed without his knowledge and that he had exercised due diligence in the conduct of his business is exempted from becoming liable by operation of the proviso to Sub-section (1). it shall be deemed to be notice to the firm. etc of the company. and (2) persons other that those falling in the above category. by definition the MD is supposed to be in-charge of managing the company. The section being penal has to be strictly construed.[42] Firm: In the case of a firm. manager or secretary. cannot plead that he did not participate in the day to day administration of the company and therefore is not criminally liable because normally.138. CHAPTER 3 PROCEDURE AND PRACTICE: . In the absence of basic facts being pleaded in the complaint. then the payee goes through a series of procedural aspects so as to claim his money back and if all else fails then the payee will finally file a complaint against the drawer. if the receipt of the notice is by one partner who is habitually acting for the business of the firm. (3) Any other person who is a director or a manager or a secretary or officer of the company with whose connivance or due to whose neglect the company has committed the offence. The burden in this regard will have to be discharged by the accused. Neither can an MD pass the blame onto the directors of the company.(1) those who are in charge of[38] the company and responsible for the conduct of its business. imputing liability onto the directors for a dishonoured cheque issued by the MD is a matter of facts and evidence. Once the drawee establishes to the payee that there has occurred a dishonour to the cheque. the researcher will now discuss the procedural aspects in the subsequent chapter. who is a mere director.[41] Lastly.[43] Having understood the substantive aspects of dishounour of a cheque. (2) there should be his consent and connivance for which there should be averments in complaint or prima facie proof of it. a managing director can only be sued in his official capacity and not as an individual. vicarious liability cannot be imputed.[40] in case of an action under S. [39] The managing director may also be attached with liability and the essentials for such action is: (1) he has to be incharge and responsible in case.

Giving is the process of which receipt is the .[45] it has been held that a notice is must and mandatory.142 of the Act on account of the non-obstante clause as comprised in section 142 of the Act. In the case of V.[44] As regards liability of dishonour of cheques it is essential to prima facie show that after 15 days of receipt of notice.138 of the Act. So far as the question of giving notice is concerned.138. but he cannot by giving notice make a person liable who is not otherwise liable under law. while another drawer who stays on and accepts the notice would subject himself to prosecution. any communication between the parties insisting for making the payment cannot be termed as notice under S. In the case of Padmini Polymers Ltd v. For a complaint however. Notice has to be sent to the drawer within 30 days of the receipt of information from the bank about the dishonour. But the holder may give notice to such parties as he desires to charge. then the drawer can easily preempt action against him by deliberately staying away from his premises and the likes.. but „receipt of the notice‟.Subbarama Naidu and Anr[47] the question that came up was what is meant by a proper notice and if there is no proper would the complaint be quashed. The period for cause of action is to be counted from the date of receipt of notice by the accused. This affords clear indication that „giving notice‟ in the context is not the same as receipt of notice. it opens itself for prosecution. first a statutory notice must be sent to the drawer and if the drawer does not reply accordingly within 15 days. Unless and until the intention is clear on the part of the part of the person giving notice that the payment by the drawer of the cheque should be made within 15 days of receipt thereof. “In Clause (c) of the proviso the drawer of the cheque is given fifteen days from the date of receipt of said notice for making payment.[46] Serving the notice: An important question that arises here is that when is a notice deemed to be served and upon who is the burden of proving service? The problem that arises is that the section does not only say delivery of notice. the magistrate must proceed immediately on complaint. Unit Trust of India.g. e. P.Raja Kumari v. postulates actually delivery.The offence under S. such wordings in the section can be put to numerous interpretations. It would be inequitable that such a person be let off the hook. drawee in the case of dishonour of cheques.138 is a non-cognizable offence by virtue of S. it is stated that every person who becomes liable upon an action for dishonour of the instrument and only by such dishonour either the holder thereof or some party thereto who remains liable thereon may give notice to such parties as entitled to immediate notice. Notice: A notice is one of the essential characteristic of S. Otherwise the purpose of presenting the cheque time and again during the period of validity would have no meaning. the accused failed to pay the amount. The question is if „receipt of notice.

if receipt or even tender of notice is indispensable for giving the notice in the context envisaged in Clause (b) an evader would successfully keep the postal article at bay at least till the period of fifteen days expires. a civil suit will lie.138 will cease and and for recovery of additional costs.[48] However if apart from the “said amount” other amounts by way of interest.27 of the General Clauses Act Ingredients: Though no form of notice is prescribed. though seems essential so that the drawer should know of which cheque the notice relates to.[49] Burden of proof: Under this law all presumptions are made against the drawer of such cheques and thus the onus of proof is left on the accused rather than the prosecutor. it must demand the “said amount” i. Thus if the cheque amount is paid within the statutory period or before a complaint is filed the legal liability under S. Hence the realistic interpretation for the expression „giving notice‟ in the present context is that. If no such demand is made the notice falls short of legal requirement. Law shall not help the wrong doer to take advantage of his tactics. if the payee has dispatched notice in the correct address of drawer reasonably ahead of the expiry of fifteen days. depending on the facts and circumstances. then reading S. The payee has to perform the former process by sending the notice to the drawer in his correct address.e. Secondly when a notice is served. the drawer of the cheque will be liable for conviction if the demand is not met within 15days of the receipt. such a notice would be a valid notice under the Section. The legislative intent of the Section is quite clear. etc is mentioned. However this is a rebuttable presumption and its for the complainant to prove that the notice was served and that the person either refused to accept the notice or was unavailable. Though this is the popular position yet. costs.138 does not lay down any such condition and if the cheque number is absent or wrong.accomplishment. Also the stating of the cheque number. the cheque amount in it. the notice will deemed good or bad in law. the requirement is that the notice shall be given in writing within fifteen days (now thirty with the amendment). it can be regarded that he made the demand by giving notice within the statutory period. many courts differ in opinion and it has been held that where the delivery is done by post. CONCLUSION Though insertion of the penal provisions have helped to curtail the issue of cheque arising out of its dishonour either honestly or with dishonest intention and the trading community now feels .” Thus from here we see that there can be deemed notice even where actual notice has not been given. yet it has been held that S.138 with S. Any other interpretation is likely to frustrate the purpose for providing such a notice.

Bharat Law House Pvt. Law of Dishonour of Cheques. Dishonour of Cheques (Law &Practise). However there being no provision for recovery of the amount covered under the dishonoured cheque. however there is no denying that this provision has done away with the rigorous and time consuming methods of criminal law. Ltd. Avtar Singh.K. 1991). Ltd.6th ed ( Allahabad.Krishnamurthi Aiyar‟s Law relating to the Negotiable Instruments Act. Rajesh Gupta.Parthasarathy. In support of this we can see that the section also provides for summary proceedings. Cheques in law and Practise. Universal Law Publishing Co.S.B. Pvt. S. unable to deposit amount of fine. M. 2003). Negotiable Instruments. Mr. 2003). 1st ed ( New Delhi. 1997). Law of Dishonour of Cheques: Forgery and Cheating (Pune. 1995). BIBLIOGRAPHY Articles:  K. Universal Book Traders. Oct (1) 1999.Saha. making the issue penalty a lot simpler. Websites: . Justice S. 1993). in a case where accused is convicted under section 138 and the accused has served the sentence but. S.Srivinasan. The provisions of the Act do not permit any other alternative method of realization of the amount due to the complainant on the cheque being dishonored for the reasons of “insufficient fund” in the drawer‟s account. The proper course to be adopted by the complainant in such a situation should be by filing a suit before the competent civil court.N. Books:         OP‟Faizi‟.” Corporate Law Adviser. 4th ed ( Lucknow. Lexis Nexis. Malik (ed). CTJ Publications. 6th ed (Delhi. 1st ed ( New Delhi.more secured in receiving the payment through cheques. Vol 35. 2005).Awasthi. S. A.Gupta. Thus what we see is that the section is not full proof. because if a cheque gets dishonoured today and proceedings go on as usual. The University Book Agency. “Bouncing of cheques issued in companies. the only option left with the complainant is to file civil suit. Khergamvala on the Negotiable Instruments Act. 1996). 19th ed ( New Delhi. then the person may only get relief after say three or four years. for realization/ recovery of the amount due to him for the reason of dishonoured cheque which the complainant is at liberty to avail of if so advised in accordance with law.N. Orient Publishing Company. Eastern Book Company. this defeats the purpose of a cheque which is meant for immediate acceptance and distribution of cheque amount. Dishonour of Cheques: Liability Civil and Criminal ( Delhi.

Sunday. [10] further (i) such notice should specifically make the allegation of the dishonouring of the cheque for reason of insufficiency of funds. Ltd. Sunday.Krishnamurthi. [4] Supra note 3. (ii) The notice should contain the date. 1996) at 47. 19th ed ( New Delhi. “ Dishonour of g251. Bharat Law House Pvt. “SC ruling on dishonour of cheques. This was held in Angu Parameswari textiles (P) ltd v. (iii) note. at 4.2001http://www. the amount for which the same is drawn and the date of the issue of the cheque in case of the post-dated cheque or the antidated cheque.   Anonymous.” The Hindu. (2001) 105 Comp Cas 186. Lexis Nexis.htm [1] OP‟Faizi‟. 2003) at 379. Thursday. Dishonour of Cheques (Law &Practise). 23rd December 2001. [5] OPTS Marketing Pvt.htm State of A.thehindubusinessline.htm. 1st ed ( New Delhi. Orient Publishing Company.Saha.however it has often been held that such an omission will not be fatal to the prosecution of the case.P. (2001) 105 Comp Cas 794. “when cheques get dishonoured. Law of Dishonour of Cheques.2002 www. [6] A. Ltd v.blonnet.How criminal liability arises. [2] Ibid.N. It should also contain the number the cheque is bearing. then if it appears that the cheque is for an amount more than the debt or liability. [3] Herein after referred to as IPC. [8] Since a cheque must be for the full or partial discharge of the debt. [9] Rajesh Gupta.” The Hindu. at 381. www. 1995) at 3. 1st ed ( New Delhi.krishnamurthy. K. the name of the banker the cheque is drawn upon. the section will not be attracted. Sri Rajam & Co.. at 47. [7] Ibid. at 382.” The Hindu. Khergamvala on the Negotiable Instruments Act. 29th July. The notice should make specific demand of the amount of the cheque. 15th See. Supra .hinduonnet.

acceptor of the bill or drawee of the cheque makes default in payment upon being duly registered to pay the same. the bill maybe treated as dishonoured.” [18] Supra note 9 at 30. [20] Flemming v. [23] Supra note 9. Bank of New Zealand (1990) AC 577. Negotiable Instruments. (1942) 2 All ER 694. or where the presentment is excused and the bill is not accepted. it was held that the limitation would begin from 9th September 1989 and the complaint was within time.Gupta. [19] S. at 29. [16] Supra note 9. at 28. Pvt.” A promissory note.Parthasarathy. In this case the accused received a statutory notice on 24th August 1989 and the complaint was filed on 5th September 1989. It states as follows. Universal Law Publishing Co. 6th ed (Delhi. Cheques in law and Practise. 1991) at 14. Ranchoddas. bill of exchange or cheque is said to have been dishonoured by non-payment when the maker of the note. at [26] Supra note 24. [25] Supra note 9. Ltd. [21] Supra note 9. the drawer had till 8th September 1989 to pay the amount. makes default in acceptance upon being duly required to accept the bill. 2003) at [13] Supra note 9. [14] S. AIR 1954 SC 554. at 370. or the acceptance is qualified. or one of the several drawees not being partners. [24] Avtar Singh.91.“ a bill of exchange is said to be dishonoured by non-acceptance when the drawee.S.” [15] Jagivan v. [17] S. Hambros Banks.[11] (1993) 77 Comp Cas 249. at 30. this is one of the essential ingredients of the section. [12] M. In this case. see also Rayner&Co v. Universal Book Traders. 4th ed ( Lucknow. Where the drawee is incompetent to contract.138 ( c) that the cause of action arises only if the drawer fails to make payment within 15 days of the notice. Dishonour of Cheques: Liability Civil and Criminal ( Delhi. It would however appear from the clear wordings of S.N. at 31 [22] Supra note 10 at 29.92 of the Act. Eastern Book Company. . 2005) at 364.

was in charge of. provided due notice of dishonour has been given to or received by.. properly applicable to the payment of such cheque.(accused No. [34] Ibid.” [39] S.V.Muzumdar and Ors v. at the time the offence was committed. [36] AIR 1987 SC 1603. at 6. in case of dishonour by the drawee or acceptor thereof. Summons was issued .respondent No. [38] S. at 33. The accounts were audited by the Chartered Accountant and the banks contention was that. [31] Supra note 9. to compensate the holder. [33] Ibid. Gujarat State Fertilizers Co. “ the drawer of a bill of exchange or cheque is bound. at 22. There were 14 accused persons including the company named in the complaint. [35] iBid. where contentns were not checked by him and merely accepted. as well as the company. at 23. [37] S. Payments were not made even after legal notices.30 of the Act says.141(1) – “if the persom committing an offence under S. must compensate the drawer for any loss or damage caused by such default. During this period the customer would confirm the status of his accounts at the end of every half year. at 34.138 is a company. the facts of the case are as follows. MANU/SC/0318/2005.offences by companies. 14). Cheques issued by the company were not honoured by the drawee bank on the ground of insufficient funds.31 of the Act.” [28] S. shall be deemed to be guilty of the offence ans shall be liable to be prosecuted against and punished accordingly….[27] S. Some of the accused persons were Directors and while others were employees.“ the drawee of a cheque having sufficient funds of the drawer in his hands. and in default of such payment. at 34. had there been any misappropriation upto 3 lacs from the account the same would have been detected it.141. [30] AIR 1954 SC 544. In the case. 1/complainant supplied goods on credit to M/s Garware Nylons Ltd. [32] Supra note 19. must pay the cheque when duly required to do so. and was responsible to the company for the conduct of the business the company.” [29] Supra note 10. every person who. the drawer as hereinafter provided. in this case the question was whether the bank was liable for payment of cheque of a customer over the forged signature despite rendition of withdrawal sheets and month deposits. Ltd and Anr. 42 cheques with forged signatures were presented on various dates between 1957 and 1961.

[46] Supra note 19. (1993) 78 Comp Cas 123. The said common judgment and order was challenged before the High all the accused persons for facing trial for alleged commission of offences punishable under Section 138 of the Act read with Sections 420 and 114 of the IPC. at 388. at 389. Chandra Reddy v. [49] Khergamwala. The challenge before the High Court was primarily on the ground that there was no material to show that the accused persons at the time of offence as allegedly committed were in charge and/or responsible to the company for the conduct of the business as required under Section 141(1) of the Act. [40] Khergamvala. at 7. [47] MANU/SC/0937/2004. avtar singh. Additional Chief Metropolitan Magistrate. at 408. at 435. Gowrisetty Prabhakar Rao. Cf. (1996) 6 Andh LD 281 (AP). .138 (b) proviso. [41] Sharda Aggarwal v. [44] S. [45] (2002) 101 Delhi LT 376. [42] D. It was also submitted that the deeming provision under Sub-section (2) of Section 141 which covers persons with whose consent or connivance or any attributable negligence for commission of the offence by the company was also not applicable. [48] Supra note 24. at442. [43] Supra note 24.

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