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ON
RECENTTRENDSINSECTION138OFTHE
NEGOTIABLEINSTRUMENTSACT.
1]
worldforalongperiodoftimeasoneoftheconvenientmodesfor
transferring money. Development in Banking sector and with the
opening of new branches, cheque become one of the favourite
NegotiableInstruments. WhenchequeswereissuedasaNegotiable
Instruments, there was always possibility of the same being issued
without sufficient amount in the account. With a view to protect
draweeofthechequeneedwasfeltthatdishonourofchequehemade
punishableoffence.WiththatpurposeSec.138to142areinsertedby
Banking Public Financial Institutions and Negotiable Instruments
clause(Amendment)Act,1988.Thiswasdonebymakingthedrawer
liable for penalties in case of bouncing of the cheque due to
insufficiencyoffundswithadequatesafeguardstopreventharassment
ofthehonestdrawer.
1.
2.
3.
OBJECT
TheobjectofthisamendmentActis:
Toregulatethegrowingbusiness,trade,commerceand
Industrialactivities.
Topromotegreatervigilanceinfinancialmatters.
Tosafeguardthefaithofcreditorsindrawerofcheque.
(Krishnavs.Dattatraya2008(4)Mh.L.J.354(Supreme
Court)
2]
inadequate,theprocedureprescribedcumbersomeandthecourtswere
unabletodisposeofthecasesexpeditiouslyandintimeboundmanner.
Hence, the Negotiable Instruments (Amendment and Miscellaneous
provisionsAct2002)waspassed.Theprovisionsofsec.143to147were
newlyinsertedandprovisionsofsection148,141,142wereamended.
INGREDIENTS
3]
The ingredients of the offence as contemplated under
Sec.138oftheActareasunder:
1.
Thechequemusthavebeendrawnfordischargeofexisting
debtorliability.
2.
Chequemustbepresentedwithin6monthsorwithin
validityperiodwhicheverisearlier.
3.
Chequemustbereturnedunpaidduetoinsufficientfunds
oritexceedstheamountarranged.
4.
Factofdishonourbeinformedtothedrawerbynotice
within30days.
5.
Drawerofchequemustfailtomakepaymentwithin15
daysofreceiptofthenotice.
..3..
4]
Amerepresentationofdeliveryofchqeuebytheaccused
wouldnotamounttoacceptanceofanydebtorliability.Complainant
hastoshowthatchequewasissuedforanyexistingdebtorliability.
Thus,ifchequeisissuedbywayofgiftanditgetsdishonouredoffence
u/s.138ofthewillnotbeattracted.
PRESUMPTIONS
5]
NegotiableInstrumentsActinfavourofholderofthecheque.Until
contraryisproved,presumptionisinfavourofholderofchequethatit
wasdrawnfordischargeofdebtorliabilities.However,itisrebutable
oneandaccusedcanrebutitwithoutenteringintowitnessbox,through
crossexaminationof the prosecutionwitnesses. Complainantisnot
absolved from liability to show that cheque was issued for legally
enforceabledebtorliability.Burdenonaccusedinsuchcasewouldnot
beaslightasitisinthecasesundersec.114oftheEvidenceAct.In
caseofGoaPlastPvt.Ltd.vs.ShriChicoUrsulaD'Souza1996(4)
All MR 40 relations between accused and complainant were of
employeeandemployer. Noevidenceledtoshowthataccusedwas
liabletopayanydueorpartthereofandthusliabilitywasnotproved.
Similarly,itwasnotprovedthatthechequewasgiventowardsthose
liabilities.Accusedmuchearliertopresentationofchequestothe
..4..
Bankhadappraisedthecomplainantthatheisnotliabletopayany
amount,andtherefore,stoppedpayment. TheHon'bleBombayHigh
Courthadobservedthatcomplainantfailedtoprovethatthecheque
wasissuedfordischargeoflegalliabilities.
6]
issuedfordischargeofanydebtorotherliability.
7]
datedcheques.Theholderofthechequeentersthedate,andthereafter,
chequesarepresented. TheHon'bleBombayHighCourtincaseof
PurushottamdasGandhivs.ManoharDeshmukh2007(1)Mh.L.J.210
observed that inserting such date does not amount to tampering or
alterationbutbydeliveryofsuchundatedchequethedrawer
authorizestheholdertoinsertdate andtheperiodof6monthsfor
presentation of such cheque to the Bank would start from the date
whichbearsonthecheque.
(AshokBadwevs.SurendraNighojkarA.I.R.2001,S.C.1315)
8]
Thereturnofchequeisitselfanindicationthatfundsare
notforthcoming.Thewordsrefertodraweroraccountclosedare
coveredundertheterminsufficientfunds.Thus,theliabilityofthe
..5..
drawer cannot be avoided if he closes the account and cheque is
dishonoured.Asafeguardhasbeenmadetopreventhastyactionisthat
thepayeeorholderinduecourseofthechequeshallmakeademand
forpaymentofamountcoveredbythechequebygivingnoticein
writingtothedrawerwithin30days.
9]
Offenceu/s.138iscomputedonlywhenpaymentisnot
Consideringtheingredientsofsec.138referredabovethe
Hon'bleApexCourtincaseofK.Bhaskaranvs.ShankaranAIR1999,
SC3762, hadgivenjurisdictiontoinitiatetheprosecutionatanyof
thefollowingplaces.
1.
2.
3.
4.
5.
11]
Wherechequeisdrawn.
Wherepaymenthadtobemade.
Wherechequeispresentedforpayment
Wherechequeisdishonoured.
Wherenoticeisserveduptodrawer.
However,recentlyincaseof DashrathRupsinghRathod
AnoffenceunderSection138oftheNegotiable
InstrumentsAct,1881iscommittednosooneracheque
drawnbytheaccusedonanaccountbeingmaintainedby
himinabankfordischargeofdebt/liabilityisreturned
unpaidforinsufficiencyoffundsorforthereasonthatthe
amountexceedsthearrangementmadewiththebank.
ii)
Cognizanceofanysuchoffenceishoweverforbidden
underSection142oftheActexceptuponacomplaintin
writingmadebythepayeeorholderofthechequeindue
coursewithinaperiodofonemonthfromthedatethe
causeofactionaccruestosuchpayeeorholderunder
clause(c)ofprovisotoSection138.
iii)
Thecauseofactiontofileacomplaintaccruestoa
complainant/payee/holderofachequeinduecourseif,
(a)
thedishonouredchequeispresentedtothedraweebank
withinaperiodofsixmonthsfromthedateofitsissue.
(b)
Ifthecomplainanthasdemandedpaymentofcheque
amountwithinthirtydaysofreceiptofinformationbyhim
fromthebankregardingthedishonourofthechequeand
(c)
Ifthedrawerhasfailedtopaythechequeamountwithin
fifteendaysofreceiptofsuchnotice.
iv)
Thefactsconstitutingcauseofactiondonotconstitutethe
ingredientsoftheoffenceunderSection138oftheAct.
..7..
v)
TheprovisotoSection138simplypostpones/defers
institutionofcriminalproceedingsandtakingof
cognizancebytheCourttillsuchtimecauseofactionin
termsofclause(c)ofprovisoaccruestothecomplainant.
vi)
Oncethecauseofactionaccruestothecomplainant,the
jurisdictionoftheCourttotrythecasewillbedetermined
byreferencetotheplacewherethechequeisdishonoured.
vii)
ThegeneralrulestipulatedunderSection177ofCr.P.C.
appliestocasesunderSection138oftheNegotiable
InstrumentsAct.Prosecutioninsuchcasescan,therefore,
belaunchedagainstthedrawerofthchequeonlybefore
theCourtwithinwhosejurisdictionthedishonourtakes
placeexceptinsituationswheretheoffenceofdishonour
ofthechequepunishableunderSection138iscommitted
alongwithotheroffencesinasingletransactionwithinthe
meaningofSection220(1)readwithSection184ofthe
CodeofCriminalProcedureoriscoveredbythe
provisionsofSection182(1)readwithSections184and
220thereof.
12]
NOTICE
returnedunpaidalsoademandofchqeueamountmustbemadeandit
..8..
should be within 30 days from receipt of information of dishonour.
Whennoticebyregisteredpostreturnedunclaimedthereispresumption
ofservice.
13]
1.
Rahulvs.ArihantFertilizers2008(4)Mh.L.J.365(SC)
2.
K.Bhaskaranvs.ShankaranVidhyabalan1999AIR
SCW,3809.
Initially,itwasheldbyvariousHighCourtsand Apex
Thepayeeisnotpreventedfromcombingthecausesof
actionbycoveringmultipleinstancesofdishonourofchequesinsingle
notice,insuchacaseallthetransactionscoveredbynoticewouldbe
..9..
regardedasasingletransactionpermittingasingletrial.However,ina
case where cheques were issued on different dates, presented on
differentdatesandseparatenoticesareissuedinrespectofeachdefault.
Thetransactionscannotbeheldtobeasingletransaction.Section219
ofCr.P.C.willnotbeattractedtosuchcases. RajendraVs.Stateof
Mah.2007,(1)MhL.J.370.
15]
2000(1)Mh.L.J.193 observedthatgivingnoticeisnotthesameas
receipt of notice. Giving is a process of which receipt is
accomplishment. It is for the payee to perform formal process by
sendingnoticetothedraweratcorrectaddress......thepayeecansend
noticefordoinghispartofgivingthenotice.Onceitisdispatched,his
partisoverandnextdependsonwhatsendeedoes.Itiswellsettledthat
noticerefusedtobeacceptedbyaddresseecanbepresumedtohave
beenservedonhim.Wherenoticeisreturnedasunclaimedandnotas
arefused,itcanbedeemedtohavebeenservedonsendeeunlesshe
proves that it was not really served and that he was not really
responsibleforsuchnonservice.
16]
TheHon'bleSupremeCourtincaseofSaketIndiaLtd.vs.
norpostalcoverisreceivedbackbypayeethepresumptionisthat
noticeisserved.(CentralBankofIndiavs.SaxenaPharma,AIR
1999SC3607.)
17]
WHOCANFILECOMPLAINT
Payeeorholderinduecourseisacompetentpersontofile
Itisfurtherobservedintheabovecasethatacomplaint
whichismadeinthenameandbehalfofcompanycanbemadebyany
officer of that company and that the section does not require that
complaintmustbesignedandpresentedonlybyauthorizedagentora
person empowered under the Articles of association or by any
resolutionoftheBoardofDirectors.
..11..
LIABILITYOFDIRECTORS/PARTNERS
19]
Section141ofNegotiableInstrumentsActshowsthat
personwhoisinchargeorresponsibletothecompanyis ipsofacto
liableanddeemedtobeguilty.Onlyifoffenceiscommittedwithhis
consentconnivanceorduetoanyneglectonhispart. Similaristhe
ItisprimarydutyoftheMagistratetofindoutwhetherthe
complainant has shown that accused persons falls into one of the
categoriesofpersonsenvisagedinsec.141. Whatisrequiredisthe
specificaccusation againsteachDirector of theroleplayedbyhim.
Onusisonthecomplainanttomakeoutprimafaciecasei.e.toshow
thataccusedwasatthetimeofcommissionoftheoffence,inchargeof
andresponsibletothecompany.SuchpersonneednotbeaDirector,
Manager,Secretaryorotherofficerofthecompany.Incaseof A.K.
Singhaniavs.GujratStateFertilizersCompanyLtd.2014,Cr.L.J.340
..12..
(SC).Theapexcourtfurtherobservedthatitisnotnecessarythat
complaintshouldcontainavermentsastowhowereinchargeand
responsibleforconductofthebusinessofcompany.Courtheldthatit
is sufficient if reading of complaint shows substance of accusation
disclosingnecessaryaverments.
21]
Incaseof K.ShrikantSinghvs.NorthEastSecurityLtd.
andothers,J.T.2007(9)SC449. TheHon'bleApexcourtobserved
that vicariousliabilityonthepartofapersonmustbepleadedand
provedandnotinferred.
22]
IncaseofAparnaAShahavs.ShethDevelopersPvt.Ltd.
2014(1)MhL.J.TheapexcourttookaviewthatJointAccountholder
cannotbeprosecutedunlesschequeissignedbyeachandeveryperson
whoisJointAccountholder.Inthiscasethechequewassignedby
husband of the appellant. The apex court quashed the proceeding
againsttheappellant. Courtobservedthatasanaturalcorollaryeach
andeveryjointaccountholdermustsignthechequebeforetheyare
consideredforcriminalactionundersec.138oftheN.I.Act.
23]
IncaseofShushatnaJ.Sarkar&othervStateofMah.
2014(1)MhLJ214complaintwasnotshowingastowhatroleplayed
bypetitionerDirectorsintheallegedoffence. Theallegationswere
vagueandwerenotspecifyingroleofeachofthepetitioners.Itwas
observedthatavermentsincomplaintwerenotsufficientenoughto
..13..
make them vicariously liable for offence u/s 138. It was further
observedthat 'Itisnecessaryforthecomplainanttomakespecific
avermentsdisclosingroleofDirectorsintheallegedoffence.Criminal
offence, Criminalliabilitycanbefastenedonlyonthosewhoatthe
timeofcommissionofoffencewereinchargeofandwereresponsible
forconductofbusinessofcompany.......Itisobligatoryonthepartof
complainant to state in brief as to how and in what manner the
directors,whoaresoughttobemadeaccusedwereresponsibleforthe
conductofbusinessofcompanyatrelevanttime.
24]
Earlieritwasobservedthatprosecutionofthecompanyis
Ithasbeenheldinvariousothercasesthatoffenceisnot
madeout
1.
Whenchequereturnedasdefectiveone(Babulalvs.
Khilji1998(3)MhL.J.762)
2.
Whennonoticeisgiventocompanyandchequeis
drawnbycompany(P.RajaRathinalmvs.Stateof
Maharashtra1999(1)Mh.L.J.815)
3.
Chequeisgivenasagift.
4.
Complainantwasnotapayee.
5.
Signatureofdraweronthechequeisincomplete.(Vinod
vs.Jahir2003(1)MhL.J.456.)
PUNISHMENT
26]
Aftertheamendmentof2002theimprisonmentthatmay
beimposedmayextendtotwoyears,whilefinemayextendtotwicethe
amountofcheque. However,thetrialisconductedinsummaryway,
thenMagistratecanpasssentenceofimprisonmentnotexceedingone
yearandamountoffineexceedingRs.5,000/. Thereisnolimitation
forawardingcompensation.
..15..
27]
Thesentenceshouldbesuchthatitgivespropereffectto
28]
PROCEDURE
cognizanceoftheoffenceu/s.138oftheN.I.Actexceptupon
..16..
complaintinwritingbypayeeorholderinduecourse.Complaintmay
beinstitutedbyPowerofAttorneyHolder. However,iftheholderof
thePowerofAttorneyhasmerelylodgedthecomplaintwithoutbeing
awareofthefacts,thenrecordingthestatementofthepayeebecomes
imperative.
29]
evidenceofcomplainantonaffidavit. Evenevidenceofaccusedand
witnessescanberecordedonaffidavit.Thiswasforexpeditedisposal
of the cases. The bank slips are held as a primary evidence and
admissibledirectly.
31]
Theaccusedaregiveneffectiveopportunitytodefendthe
..17..
case.Consideringpresumptionsundersec.118and139oftheN.I.Act
effectiveopportunityistobegiventotheaccusedtocrossexaminethe
witnesses.
32]
Itiscommonexperiencethatincasesu/s138ofN.I.Act
33]
ThoughtheprovisioncontainedinSec.143ofthe N.I.Act
providesthatcasesu/s.138aretobetriedinsummaryway,theyshould
be triedasaregularsummonscases. IfitappearstotheMagistrate
thatnatureofcaseissuchthatsentenceofimprisonmentforaterm
exceedingoneyearmayhavetobepassed,orthatitisforanyother
reasonsundesirabletotrythecasesummarily,Magistrateshallafter
hearingthepartiesrecordandordertothateffectandtrythecaseasa
regularsummonscase.
..18..
34]
RecentlyincaseofIndianBankAssociationandothersvs.
UnionofIndia&othersreportedinAIR2014SupremeCourt2528,
generaldirectionshavebeengivenbytheApexcourt.Thedirections
areworthquotingandtheyareasunder:
1.
MetropolitanMagistrate/JudicialMagistrate(MM/JM),on
thedaywhenthecomplaintunderSection138oftheAct
ispresented,shallscrutinizethecomplaintand,ifthe
complaintisaccompaniedbytheaffidavit,andthe
affidavitandthedocuments,ifany,arefoundtobein
order,takecognizanceanddirectissuanceofsummons.
2.
MM/JMshouldadoptapragmaticandrealisticapproach
whileissuingsummons.Summonsmustbeproperly
addressedandsentbypostaswellasbyemailaddressgot
fromthecomplainant.Courtinappropriatecases,may
taketheassistanceofthepoliceorthenearbycourtto
servenoticetotheaccused.Fornoticeofappearance,a
shortdatebefixed.Ifthesummonsisreceivedbackun
served,immediatefollowupactionbetaken.
3.
Courtmayindicateinthesummonsthatiftheaccused
makesanapplicationforcompoundingofoffencesatthe
firsthearingofthecaseand,ifsuchanapplicationis
made,Courtmaypassappropriateordersattheearliest.
..19..
4.
Courtshoulddirecttheaccused,whenheappearsto
furnishabailbond,theensurehisappearanceduringtrial
andaskhimtotakenoticeunderSection251,Cr.P.C.to
enablehimtoenterhispleaofdefenceandfixthecasefor
defenceevidence,unlessanapplicationismadebythe
accusedunderSection145(2)forrecallingawitnessfor
crossexamination.
5.
Thecourtconcernedmustensurethatexaminationin
chief,crossexaminationandreexaminationofthe
complainantmustbeconductedwithintreemonthsof
assigningthecase.Thecourthasoptionofaccepting
affidavitsofthewitnesses,insteadofexaminingthemin
Court.Witnessestothecomplainantandaccusedmustbe
availableforcrossexaminationasandwhenthereis
directiontothiseffectbytheCourt.
SomeimportantprincipleslaiddownbytheHon'bleHigh
CourtsandApexCourtareasunder:
1.
Chequetopaytimebarreddebtisenforceablebyvirtueof
section25(3)ofContractAct,(Kadirvs.Dattatraya2005
(3)MhL.J.1076)
2.
Legalheirsofcomplainantcancontinuethecomplaint
(ReviSelvalvs.Navin2000(2)BombayCri.Cases,23.)
..20..
3.
However,legalrepresentativesofaccusedcannotbe
madetofacetrial.(Smt.Dropadi@MayaShippivs.State
ofRajasthan2000(3)Crimes6045.)
4.
Partpaymentmadedoesnotabsolvetothedrawerfrom
liability(RamnarayanMadanlalKhandelwarvs.
ProprietorDaulatEnterprise,2005(4)MhL.J.796)
5.
Chequeissuedasasecurityareindischargeofliabilityas
aguarantorattractsSec.138(ICBSLtd.vs.BeenaShabeer
2002AIRSCW3358)
6.
Anyliabilitydoesnotincludeanyother'sliabilityunless
thereisagreementbetweendrawerandoriginaldebtor
(HintenSagarandanothervs.IMCLtd.Andanother2001
(3)MhL.J.659)
7.
Demandingchequeamountinterest,damages,separately
inthenoticewouldnotinvalidatethenotice(Suman
Shettyvs.AjayA.ChudiwalAIR2000(SC)828.)
8.
Asinglecomplaintinrespectofdishonouredchequesis
maintenablethoughconsolidatedsinglenoticeissentand
singlecomplaintismaintenable.(CharashniKumar
Talwanivs.M/s.MalhotraPoultries2014Cr.L.J.2908)
(P.M.Dunedar)
DistrictJudge1and
Addl.SessionsJudge,Gadchiroli.
(P.M.Dunedar)
DistrictJudge1and
Addl.SessionsJudge,Gadchiroli.
O.W.No./2014.
DistrictCourt,Gadchiroli.
Date2.11.2014.
To,
The
Subject: Submissionofreportforprematurereleaseunderthe14
Year
RuleofPrisonersservinglifesentence.
Ref'nce:Yourletters
Sir,
Withreferencetothesubjectreferredabovetherequired
informationandopinionissubmittedasunder.
Hencesubmitted.
Yours,
Gadchiroli,
Date.10.2014.
(P.M.Dunedar)
DistrictJudge1and
Addl.SessionsJudge,Gadchiroli.