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E-CHEQUE
Electronic cheque (e-cheque) is the image of a normal paper cheque generated, written and
signed in a secure system using digital signature and asymmetric crypto system. Simply said an
electronic cheque is nothing more than an ordinary cheque produced on a computer system and
instead of signing it in ink, it is signed using the digital equivalent of ink. After the coming into
force of The Negotiable Instruments (Amendment And Miscellaneous Provisions) Act, 2002,
legal recognition has been accorded to e-cheques and they have been brought at par with the
normal cheques. Now, a cheque includes an e-cheque.
an agreement made with that bank, 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 term which may extend to two years, or with fine which may extend to twice
the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless(a) the cheque has been, presented to the bank within a period of six months from the
date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course. of the cheque as the case may be, makes a
demand for the payment of the said amount of money by giving a notice, in writing, to
the drawer of the cheque, within thirty days of the receipt of information by him from the bank
regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to
the payee or, as the case may be, to the holder in due course of the cheque, within
fifteen days of the receipt of the said notice.
Explanation.-For the purposes of this section, debt or other liability means a legally
enforceable debt or other liability.
The amount of money standing to the credit of the account of the drawer on which the cheque is
drawn is insufficient to honour the cheque, or
1. The cheque amount exceeds the amount that can be paid by the bank under an
arrangement entered into between the bank and the drawer of the cheque.
However, besides the above, the Courts have also accepted some other heads which though
expressly do not say insufficient funds but are implied to mean the same and a cheque
dishonoured on any of these grounds can be used for the purpose of prosecution under section
138 Negotiable Instruments Act. Some of theses grounds are:
1. Account Closed: It is an offence under section 138 of the Act Closure of account would
be an eventuality after the entire amount in the account is withdrawn It means that there was
no amount in the credit of that account on the relevant date when the cheque was presented for
honouring the same
This has been held by the Honble Supreme Court of India inNEPS MICON LTD. AND OTHERS VS. MAGMA LEASING LTD.
1999 ISJ (BANKING) 0433; 1999 (1) APEX C.J. 0624; 1999 AIR (SCW) 1637
2.
Once the cheque has been drawn and issued to the payee and the payee has presented the
cheque, stop payment instructions will amount to dishonour of cheque.
MAHENDR S. DADIA VS. STATE OF MAHARASHTRA
I (1999) BANKING CASES (BC) 133 (17/03/1998)
3.
Refer to drawer:
.. makes out a case under section 138 of the Negotiable Instruments Act, 1881 which
expression means that there were not sufficient funds with the bank in the account of the
respondent
LILY HIRE PURCHASE LTD. VS. DARSHAN LAL,
(1997) 89 COMPANY CASES 663 (10/01/1997)
4.
Cheque returned with endorsement not a clearing member. To attract the provisions of section
138 NI Act, the cheque should be presented with the bank on which it I drawn- If the cheque is
not presented to the bank on which it is drawn, then provisions of sec 138 would not be attracted.
If bank on which the cheque is drawn is not a clearing member of the Reserve Bank of India
unpaid return of the cheque would not attract section 138.
CHAIRMAN, JAWAHAR COOPERATIVE URBAN BANK LTD. AND OTHERS VS.
RAMANJANEYA ENTERPRISES, HYD. AND ANOTHER
2005 (5) CRIMINAL REPORTED JUDGEMENTS (CRJ) 0591;
2005 (2) DISHONOUR OF CHEQUE REPORTER (DCR) 0169
5.
It has been repeatedly held by courts that manifest dishonest intention of the drawer resulting in
dishonour of the cheque would lead to prosecution under section 138 Negotiable Instruments Act
regardless of the actual ground of dishonour.
(a)company means any body corporate and includes a firm or other association of
individuals; and
(b) director, in relation to a firm, means a partner in the firm.
The Honble Supreme Court has held that merely being a director of a company is not sufficient
to make a person liable under section 141 of the Act. A director in a company cannot be deemed
to be in charge of and responsible to the company for the conduct of its business. The
requirement of section 141 is that the person sought to be made liable should be in charge of and
responsible for the conduct of the business of the company at the relevant time. This has to be
averred as a fact and there is no deemed liability of a director in such cases. AIR 2005 (SCW)
4740; AIR 2005 SC 3512, AIR 2007 SC 1682
Supreme Court has also held that for the directors of the company to be made liable for an
offence under sec 138, the complaint must contain specific allegations against directors as to how
directors are in charge and responsible for conduct of business of company. Mere allegation in
complaint that accused persons are directors and responsible officers of the company is not
sufficient. AIR 2007 SC 1454
COMPLAINT AGAINST PARTNERS
Averment in a complaint that accused (partners) at relevant time were in charge of and
responsible to the partnership firm for conduct of its business are necessary to initiate process
against them for an offence under sec 138 NI Act. In absence of requisite averments in
complaint, the offence against accused / partners could not be made out.
AIR 2004 SUPREME COURT 4274.
DEBT OR LIABILITY
Explanation to section 138 makes it clear that debt or other liability as mentioned in sec 138
mean a legally enforceable debt or other liability.
Various High courts and the Supreme Court have explained this many a time.
Unless issuance of cheque is pleaded and proved to discharge a legally enforceable liability,
dishonour is no default entailing criminal proceedings. Complaint in respect of such a cheque
issued as a gift, is not maintainable. 1995 Andh LT 468, 1997 Cr LJ 4237 AP; 1998 (3) Bank
LJ 279;
It is only debts alive at the time when the cheque dishonoured are issued. Any subsequent
claims in favour of the complainant cannot be made the subject of dispute under section 138 NI
Act 1997 VI AD DELHI 585
Supreme Court has held:
When it is a legally enforceable debt or a liability only then section 138 applies and relationship
of the parties is not at all a factor germane to the proceedings
2004 (1) APEX C.J. 0273; 2004 (1) CR.C.C. 0693
DEATH OF ACCUSED
Dishonour of cheque Proceedings in the complaint alleging offence under section 138 cannot
be initiated against legal heirs of the person who had issued the cheque.
AIR 2007 (DOC) 58 (P&H) ; 2006 (3) BANK J 327 (P&H)
lightly.
AIR 2007 (DOC) 264 DELHI is an illustration of such cases.
The Delhi High Court has also held that if during the pendency of a dispute under sec 138 NI
Act the parties enter into a settlement, it should be respected by the courts as proceedings under
sec 138 are quasi criminal in nature.
AIR 2007 (DOC) 264 (DEL.)
Respondent issued a blank cheque without mentioning the date and amount and sent it with a
letter requesting complainant to present it after a month Act of complainant in filling up
amount portion and date was a material change and it could not be enforced even though it was
issued for a legal liability Alteration without the consent of the party who issued the cheque
rendered cheque invalid.
2004 (1) CRIMES 567 (AP)
Every alteration is not material alteration Only such alteration which would adversely affect
interest of the other side could be called material alteration.
AIR 2007 (NOC) 1082 BOM. ; 2007 (2) AIR BOM R 442
Date altered by adding 1 before 2 in the month to make it appear that cheque was issued on
25.12.1993 so as to bring the cheque within validity period. These are material alterations.
Accused liable to be acquitted in such cases.
2005 (2) ISJ (BANKING) 115; 2005 (2) DCR 37
DEMAND NOTICE
Proviso to Section 138 NI Act provides as follows:
Provided that nothing contained in this section shall apply unless(a) the cheque has been, presented to the bank within a period of six months from the date on
which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course. of the cheque as the case may be, makes a demand
for the payment of the said amount of money by giving a notice, in writing, to the
drawer of the cheque, within thirty days of the receipt of information by him from the bank
regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the
payee or, as the case may be, to the holder in due course of the cheque, within fifteen
days of the receipt of the said notice.
Explanation.-For the purposes of this section, debt or other liability means a legally
enforceable debt or other liability.
Supreme Court has held time and again that a cause of action for filing a complaint under section
138 accrues to the drawee of a cheque only after a notice is issued to the drawer within the
prescribed period after receipt of information by him regarding the dishonour of cheque and the
subsequent failure of the drawer to make the cheque payment within the prescribed time, i.e. 15
days from the receipt of notice by him.
AIR 1998 SUPREME COURT 3043
Demand notice Sent under certificate of posting returned with endorsement not claimed Is
deemed to be served
AIR 2007 (NOC) 942 (KAR); 2007 (2) AIR KAR R 199
Demand notice Giving of notice in some address is not enough for complying with statutory
requirement of notice Notice should be given in the correct address Further, mere giving of
notice will not be sufficient when notice is returned stating that it was reserved because it is not
the correct address or door is locked in redirected address Return of acknowledgement card
with such endorsement Notice is not served.
AIR 2007 (DOC) 131 (KER) ; 2007 (1) KLJ 10
Demand notice Service of Can be proved only by submitting postal receipt or by calling
record of post office In absence of postal receipt no presumption can be drawn in favour of
applicant for sending said notice through registered post Acknowledgement due receipt without
any letter number or postal receipt number mentioned in it Not having any seal of post office
either at the time of sending to addressee or at the time of returning to the sender, cannot be
accepted as compliance with provisions of sec 138 (b) of the Act.
AIR 2007 (DOC) 253 (M.P.); 2007 (51) AIC 239
BLANK CHEQUE
Respondent issued a blank cheque without mentioning the date and amount and sent it with a
letter requesting complainant to present it after a month Question whether blank cheque will
come within the definition of cheque? If the cheque is not drawn for a specified amount it
would not fall within a definition of bill of exchange Act of complainant in filling up amount
portion and date was a material change and it could not be enforced even though it was issued for
a legal liability Alteration without the consent of the party who issued the cheque rendered
cheque invalid.
2004 (1) CRIMES 567 (AP)
Admission of signature on the cheque is not equivalent with admission of execution Right of
the accused to contend that a blank signed cheque was mis-utilised by the payee cannot be taken
away by such mere admission of signature.
AIR 2007 (DOC) 195 (KER.); 2007 (1) KLT 525 (KER)
Accused entered into security arrangement with complainant for sale of its product Accused
issued blank cheques as security to security agency agreement No debt or liability existed
when cheques were handed over to drawee complainant Complaint based on blank cheque
issued towards security is not maintainable.
AIR 2007 (DOC) 269 (DEL); 2 (2007) B C 69
It shall be presumed, unless the contrary is proved, that the holder of a cheque received the
cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt
or other liability.
The effect of these presumptions is to place the evidential burden on the accused of proving that
the cheque was not received by the complainant towards the discharge of any liability. Because
both sections 138 and 139 require that the court shall presume the liability of the drawer of the
cheques for the amounts for which the cheques are drawnit is obligatory on the courts to raise
this presumption in every case where the factual basis for the raising of this presumption had
been established. It introduced an exception to the general rule as to the burden of proof in
criminal cases and shifts the onus on to the accused.
AIR 2001 SUPREME COURT 3897