2. A Cheque is said to be dishonoured If the bank refuses to pay the
amount to the payee, against that cheque.
E.G A (Payer) issued the cheque with amount of Rs 2,00,000/- to B
(Payee) and the payee i.e.B has presented the same with his Bank
(where he has maintained their Account) and the Drwaee bank has
returned the same cheque to B wihtout making the payment with
regard to any reason. It is to be known as cheque Dishonour.
Whenever the cheque is dishonoured, the drawee bank instantly
issues a ‘Cheque Return Memo’ to the payee specifying the reasons
for dishonour.
Dishonour of Cheque?
3.
Some Common Reasons for Dishonour of cheque
are;
Insufficiency of Funds in payer;s bank account.
Exceed the limit of overdraft.
Stop payments.
Account closed.
Grounds
4.
Signature Mismatched or incomplete.
Cheque presented after its validity i.e. 3 Months.
Cheque itself is defective or overwritting.
Cont..
5.
Acc. to Sec. 138 Dishonour of the Cheque is
amounted to an Offence. By nature it is Quasi-
Criminal offence and is Compoundable. Mean to say
compromise can be taken place between the parties
as regard to payment of the amount of cheque.
Section 138 NI Act
6. 1. Drawing of the cheque by Drawer to Drawee.
2. Cheque Shuold be drawn in Discharge of some Existing Debts or
Liability.
In Somnath vs. Mukesh Kumar, 2015(4) Law Herald 3629 (P&H) it
was held by Hon'ble High Court the complaint under Section 138 is
not maintainable when the cheque in question had been issued qua
a time barred debt.
3. Returning the cheque unpaid by the drawee bank,
4. Legal/Demand Notice in writing to the drawer for cheque
amount.
5. Failure of the drawer to make payment within 15 days of the
receipt of the notice.
Steps to Constitute an offence
under Sec. 138 of N I Act.
7.
U/S 138 of NI Act; A Dishonored Cheque is that if it is not
credited by the Bank for following numerous reasons:
Cheque must be presented within 3 months from the
date of its issuance.
Cheque must be returned unpaid due to insufficient
funds
Stop payment on Cheque.
Application of Sec. 138 NIAct
8.
Exceed the overdraft limit.
Account closed.
Signatrure Mismatched or Incomplete.
Cont…
9.
To whom You will Apply the Complaint.
Himalaya Self Farming Group Vs. Goyal Feed Suppliers
(Supreme Court of India) Supreme Court states that as per
section 142(2)(a) of the Negotiable Instrument Act,
the court within whose jurisdiction the branch of the bank
where the payee maintains the account is situated, will
have jurisdiction to try the offence, if the cheque is
delivered for collection through an Account.
Jurisdictions to file complaint
10.
means offence is not made out in the following cases according
to Sec 138.
1. When cheque returned as defective one (Babulal vs. Khilji 1998
(3) Mh L.J. 762 )
2. When no notice is given to company and cheque is drawn by
company ( P. Raja Rathinalm Vs. State of Maharashtra 1999 (1)
Mh.L.J. 815)
3. Cheque is given as a gift.
4. Complainant was not a payee.
5. Signature of drawer on the cheque is incomplete.
Sec. 138 is not applicable
11.
Status of premature complaint
In ‘Yogendra Pratap Singh v Savitri Pandey’, the Hon’ble
Supreme Court held that no cause of action is said to have arisen
until the period of 15 days elapsed. Therefore the Court is barred
from taking cognizance of a complaint made before the expiry of
15 days.
Successive presentation of cheques
In ‘MSR Leathers v. S. Palaniappan’, it was observed that the
payee can present a cheque many times for its encashment before
the expiry of 3 months from the date on which it was drawn or
within its validity, whichever is earlier.
Some Important Judgments
12.
Who can file a complaint?
Section 142 of the act mandates that the complaint must be filed
by the payee or holder in due course of the cheque. Where a
payee is a natural person he can file a complaint and when the
payee is a firm or company or a juristic person, it must be
represented by a natural person. [Sankar Finance and Investment
v. State of A.P. & Others]
Death of the complainant
In ‘Chand Devi Daga & Ors. v. Manju K. Humatani & Ors’ it was
held that the legal heirs of the complainant can move an
application under Section 302 of CrPC.
Cont..
13.
Account Already Closed.
In Rajan Singhal Vs. State of U.T. Chandigarh and Ors.,
2015(4) RCR (Criminal) 809 (P&H) it was held by the
Hon'ble High Court that when accused issues a cheque
drawn on an account which is already closed, mala fide
intention was clear in the case. Both offences of cheating
under Section 420 IPC and Section 138 of NIT Act are made
out and accused can prosecuted for both the offences.
Cont..
14.
Undated or Post dated Cheques
Many a times cheques are issued bearing no date or post dated
cheques. Holder of cheque enters the date, and thereafter cheques
are presented to banks. Hon'ble Bombay High Court in case of
Purushottamdas Gandhi vs. Manohar Deshmukh 2007 (1) Mh.L.J.
210 has observed that inserting such date does not amount to
tampering or alteration but by delivery of such undated cheque
drawer authorizes holder to insert date. Period of 3 months for
presentation of such cheque to the Bank would start from the date
mentioned on cheque.
Cont..
15.
‘‘143A. (1) recognize the provision of Interim
Compensation, the Court trying an offence under section
138 may order the drawer of the cheque to pay interim
compensation to the complainant—
Upon framing of charge if the accused pleads not guilty.
(2) The interim compensation under sub-section (1) shall
not exceed twenty per cent. of the amount of the cheque.
THE NEGOTIABLE INSTRUMENTS (AMENDMENT) ACT,
2018
16.
(3) The interim compensation shall be paid within sixty days
from the date of the order under sub-section (1)
(4) If the drawer of the cheque is acquitted, the Court shall direct
the complainant to repay to the drawer the amount of interim
compensation, with interest at the bank rate as published by the
Reserve Bank of India, prevalent at the beginning of the relevant
financial year, within sixty days from the date of the order,
Cont..
17. A person convicted for an offence under Section 138 of the
Negotiable Instrument Act, 1881 shall be punished with
imprisonment for a term which may extend to 2 years or with a
fine which may extend to twice the amount of the cheque, or with
both. The provisions from Section 138 to 142 were introduced with
an object to increase the credibility of a cheque for easy settlement
of liabilities. Though the Act is primarily a civil law to ensure
smooth functioning of any transaction penal punishments were
added.
Punishment U/S 138