Legal Updates: Supreme Court on Cheque Bounce

Showing posts with label Supreme Court on Cheque Bounce. Show all posts

Monday, May 1, 2023

S.138, NI Act, 1881 : Supreme Court Highlights Crucial Legal Aspects

S.138, NI Act, 1881 : Supreme Court Highlights Crucial Legal Aspects

An important Judgment was passed on 25 May 2006.

In D. Vinod Shivappa v Nanda Belliappa [2006] GCtR 3176 (SC) it has been commented thus : -

"If a notice is issued and served upon the drawer of the cheque, no controversy arises. Similarly if the notice is refused by the addressee, it may be presumed to have been served. This is also not disputed. This leaves us with the third situation where the notice could not be served on the addressee for one or the other reason, such as his non-availability at the time of delivery, or premises remaining locked on account of his having gone elsewhere, etc. etc. If in each such case the law is understood to mean that there has been no service of notice, it would completely defeat the very purpose of the Act. It would then be very easy for an unscrupulous and dishonest drawer of a cheque to make himself scarce for some time after issuing the cheque so that the requisite statutory notice can never be served upon him and consequently he can never be prosecuted. There is good authority to support the proposition that once the complainant, the payee of the cheque, issues notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time. Thus, a person who can dodge the postman for about a month or two, or a person who can get a fake endorsement made regarding his non- availability can successfully avoid his prosecution because the payee is bound to issue notice to him within a period of 30 days from the date of receipt of information from the bank regarding the return of the cheque as unpaid. He is, therefore, bound to issue the legal notice which may be returned with an endorsement that the addressee is not available on the given address."
"We cannot also lose sight of the fact that the drawer may by dubious means manage to get an incorrect endorsement made on the envelope that the premises has been found locked or that the addressee was not available at the time when postman went for delivery of the letter. It may be that the address is correct and even the addressee is available but a wrong endorsement is manipulated by the addressee. In such a case, if the facts are proved, it may amount to refusal of the notice. If the complainant is able to prove that the drawer of the cheque knew about the notice and deliberately evaded service and got a false endorsement made only to defeat the process of law, the court shall presume service of notice. This, however, is a matter of evidence and proof. Thus even in a case where the notice is returned with the endorsement that the premises has always been found locked or the addressee was not available at the time of postal delivery, it will be open to the complainant to prove at the trial by evidence that the endorsement is not correct and that the addressee, namely, the drawer of the cheque, with knowledge of the notice had deliberately avoided to receive notice."

Written by

Vishal

Delhi

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Thursday, April 13, 2023

Section 138 of Negotiable Instruments Act, 1881 : Supreme Court's Important Clarification on Provision

Section 138 of Negotiable Instruments Act, 1881 : Supreme Court's Important Clarification on Provision

An important Judgment was passed by Hon'ble Supreme Court on 5 October 2017 in context of S.138 of Negotiable Instruments Act, 1881.

It has emerged from Meters and Instruments Pvt Ltd v Kanchan Mehta [2017] GCtR 602 (SC) the following things : -

(a) The trial of cases relating to Section 138 of the Act must be with nature of Summary Trial unless reasons call for Summons Trial, which is always exceptional.

(b) The evidence of the complainant must be conducted within three months of assigning the case.

(c) Endeavour must be made to conclude the trial within six months from the date of filing of the complaint.

(d) The Trial, as far as practicable, must be held on a day to day basis unless reasons exist to do otherwise.

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 5 October 2017.

Written by

Vishal

Delhi

Saturday, April 8, 2023

Sec. 138 of Negotiable Instruments Act, 1881 : Supreme Court Explains the Legal Position

Sec. 138 of Negotiable Instruments Act, 1881 : Supreme Court Explains the Legal Position

An important Judgment was passed by Hon'ble Supreme Court on 10 October 2007.

In context of Negotiable Instruments Act, 1881, it has been commented in K. Prakashan v P.K. Surenderan [2007] GCtR 3013 (SC) that "the Act raises two presumptions; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in whole or in part any debt or other liability."

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 10 October 2007.

Written by

Vishal

Delhi

Friday, April 7, 2023

Section 138 of Negotiable Instruments Act, 1881 : Supreme Court Lays Down Clear Principle

Section 138 of Negotiable Instruments Act, 1881 : Supreme Court Lays Down Clear Principle

An important Judgment was passed by Hon'ble Supreme Court on 17 September 2014.

It has been commented in Vinita S. Rao v Essen Corporate Services Pvt Ltd [2014] GCtR 2979 (SC) thus : -

"Complaint under Section 138 of the NI Act can be filed through the power of attorney holder."

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 17 September 2014.

Written by

Vishal

Delhi

Wednesday, April 5, 2023

Section 138 of NI Act, 1881 : Supreme Court Highlights a Crucial Legal Aspect of the Provision

Section 138 of NI Act, 1881 : Supreme Court Highlights a Crucial Legal Aspect of the Provision

An important Judgment was passed by Hon'ble Supreme Court on 22 November 2012 which dealt with Section 138 of Negotiable Instruments Act, 1881.

It has been commented at page 27 of Indra Kumar Patodia v Reliance Industries Ltd [2012] GCtR 2962 (SC) thus : -

"Complaint under Section 138 of the Act without signature is maintainable when such complaint is verified by the complainant and the process is issued by the Magistrate after due verification."

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 21 August 2009.

Written by

Vishal

Delhi

Sunday, April 2, 2023

S.138, NI Act, 1881 : Supreme Court Unravels the Legal Issue

S.138, NI Act, 1881 : Supreme Court Unravels the Legal Issue

An important Judgment was passed by Hon'ble Supreme Court on 17 November 2008 which deals with Negotiable Instruments Act, 1881.

It has been held in National Small Industries Corporation Ltd v State (NCT of Delhi) & Ors [2008] GCtR 154 (SC) thus : -

"Section 142 NI Act requires a complaint under section 138 of that Act, to be made by the payee (or by the holder in due course). It is thus evident that in a complaint relating to dishonour of a cheque (which has not been endorsed by the payee in favour of anyone), it is the payee alone who can be the complainant. The NI Act only provides that dishonour of a cheque would be an offence and the manner of taking cognizance of offences punishable under section 138 of that Act. However, the procedure relating to initiation of proceedings, trial and disposal of such complaints, is governed by the Code. Section 200 of the Code requires that the Magistrate, on taking cognizance of an offence on complaint, shall examine upon oath the complainant and the witnesses present and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses. The requirement of section 142 of NI Act that payee should be the complainant, is met if the payee is a company, necessarily the complaint should be filed in the name of the company. Section 142 of NI Act does not specify who should represent the company, if a company is the complainant. A company can be represented by an employee or even by a non-employee authorized and empowered to represent the company either by a resolution or by a power of attorney."

"Section 142 only requires that the complaint should be in the name of the payee. Where the complainant is a company, who will represent the company and how the company will be represented in such proceedings, is not governed by the Code but by the relevant law relating to companies. Section 200 of the Code mandatorily requires an examination of the complainant; and where the complainant is an incorporeal body, evidently only an employee or representative can be examined on its behalf. As a result, the company becomes a de jure complainant and its employee or other representative, representing it in the criminal proceedings, becomes the de facto complainant. Thus in every complaint, where the complainant is an incorporeal body, there is a complainant -- de jure, and a complainant -- de facto. Clause (a) of the proviso to section 200 provides that where the complainant is a public servant, it will not be necessary to examine the complainant and his witnesses."

"Where the complainant is an incorporeal body represented by one of its employees, the employee who is a public servant is the de facto complainant and in signing and presenting the complaint, he acts in the discharge of his official duties. Therefore, it follows that in such cases, the exemption under clause (a) of the first proviso to section 200 of the Code [of Criminal Procedure] will be available."
"When in a complaint in regard to dishonour of a cheque issued in favour of a company or corporation, for the purpose of section 142 NI Act, the company will be the complainant, and for purposes of section 200 of the Code, its employee who represents the company or corporation, will be the de facto complainant. In such a complaint, the de jure complainant, namely, the company or corporation will remain the same but the de facto complainant (employee) representing such de jure complainant can change, from time to time."

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 17 November 2008.

Written by

Vishal

Delhi

Saturday, April 1, 2023

S.138, NI Act, 1881 : Supreme Court Sheds Light on the Provision

S.138, NI Act, 1881 : Supreme Court Sheds Light on the Provision

An important Judgment was passed by Hon'ble Supreme Court on 19 September 2016.

In context of Negotiable Instruments Act, 1881, in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited [2016] GCtR 2933 (SC), earlier one of M/s. Indus Airways Pvt. Ltd. & Ors. v M/s. Magnum Aviation Pvt. Ltd. & Anr [2014] GCtR 2931 (SC) was considered. In Sampelly, the appellant was the Director of a company which was engaged in power generation, while the respondent was a government enterprise engaged in renewable energy. The respondent agreed to advance a loan for setting up a power project and the agreement envisaged that post-dated cheques towards payment of installments of the loans would be given by way of security. The cheques having been dishonored, complaints were instituted under Section 138 which led to quashing petitions filed before the High Court.

The submission which was urged was that dishonor of the post-dated cheques given by way of security did not amount to a legally enforceable debt or liability under Section 138 in presentia.

After adverting to the decision in Indus Airways, it was held that if on the date of the cheque, a liability or debt exists or the amount has become enforceable, Section 138 would stand attracted and not otherwise.

The decision in Indus Airways was distinguished in Sampelly on the ground that in that case, the cheque had not been issued for discharge of a liability but as advance for a purchase order which was cancelled. On the other hand, in Sampelly, the cheque was for the repayment of a loan installment which had fallen due. It was noted that though the deposit of cheques towards the repayment of installments was described as a security in the loan agreement, the true test was whether the cheque was in discharge of an existing enforceable debt or liability or whether it was towards an advance payment without there being a subsisting debt or liability.

Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://main.sci.gov.in/judgments

Then entering the date of Judgment, for example, as 19 September 2016.

Written by

Vishal

Delhi

S.138, NI Act, 1881 : Supreme Court Explains the Law

An important Judgment was passed on 7 April 2014.

In Indus Airways Private Limited v. Magnum Aviation Private Limited [2014] GCtR 2931 (SC), the issue was whether dishonour of post-dated cheques which were issued by the purchasers towards ‘advance payment’ would be covered by Section 138 of the Negotiable Instruments Act if the purchase order was cancelled subsequently. It was held that Section 138 would only be applicable where there is a legally enforceable debt subsisting on the date when the cheque is drawn.

Kindly note that full text Judgments of Hon'ble Delhi High Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://delhihighcourt.nic.in/judgment

Then entering the date of Judgment, for example, as 7 April 2014.

Written by

Vishal

Delhi

S.138 of NI Act, 1881 : Supreme Court Lays Down Clear Principle

S.138 of NI Act, 1881 : Supreme Court Lays Down Clear Principle

An important Judgment was passed by Hon'ble Supreme Court on 11 October 2022.

In context of Negotiable Instruments Act, 1881, it has been commented in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel [2022] GCtR 1504 (SC) thus: -

"Under Section 56 read with Section 15 of the Act, an endorsement may be made by recording the part-payment of the debt in the cheque or in a note appended to the cheque. When such an endorsement is made, the instrument could still be used to negotiate the balance amount. If the endorsed cheque when presented for encashment of the balance amount is dishonoured, then the drawee can take recourse to the provisions of Section 138. Thus, when a part-payment of the debt is made after the cheque was drawn but before the cheque is encashed, such payment must be endorsed on the cheque under Section 56 of the Act. The cheque cannot be presented for encashment without recording the part-payment. If the unendorsed cheque is dishonoured on presentation, the offence under Section 138 would not be attracted since the cheque does not represent a legally enforceable debt at the time of encashment."

Kindly note that full text Judgments of Hon'ble Delhi High Court can be downloaded absolutely free of cost (without any charges except internet data) from the official website at the link

https://delhihighcourt.nic.in/judgment

Then entering the date of Judgment, for example, as 11 October 2022.

Written by

Vishal

Delhi