Chequ bouncing

1. DISHONOUR OF CHEQUES APURVA AGRAWAL GODREJ & BOYCE MFG. CO. LTD. September 26, 2004

2. WHAT IS A BILL OF EXCHANGE A "Bill of Exchange" is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at a designated future date or on demand.

3. WHAT IS A CHEQUE A "cheque" on the other hand is a bill of exchange drawn on a bank by the holder of an account payable on demand. Thus a "cheque" under Section 6 of the NIA is also a bill of exchange but it is drawn on a banker and is payable on demand. It is thus obvious that a bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque.

28. Case Laws J. Veeraraghavan v. Lalith Kumar 1995 CRI L J 1882 Any reason for dishonour is an offence. The Marginal Note of S. 138 of the NIA states Dishonour of cheque for insufficiency etc. of funds in accounts" addition of word "etc." cannot be considered to be an accident

29. Case Laws … Contd Modi Cements v. Shri Kunchil Kumar Nandi (1998 2 JT SC 198) Even if notice is issued stopping payment before the payee deposited the cheque in his bank, offence is complete.

30. Case Laws … Contd Nepc Micon Ltd. And Others, Appellants V. Magma Leasing Ltd. Respondent. 1999-(086)-AIR -1952 –SC When the cheque is returned by a bank with an endorsement “account closed", it would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in s. 138 of the Act"

31. Case Laws … Contd If the cheque is dishonoured because of “stop payment" instruction to the bank, Section 138 would get attracted. It also amounts to dishonour of the cheque within the meaning of Section 138 when it is returned by the bank with the endorsement like (i) in this case, "referred to the drawer" (ii) "instructions for stoppage of payment" and stamped (iii) "exceeds arrangement".

32. Case Laws … Contd Sasseriyil Joseph v. Devassia [2001 Cri. L. J (Ker)] A cheque issued for the time barred debt, if dishonoured, the drawer cannot be convicted under Section 138 of NIA as debt was not legally recoverable

33. Case Laws … Contd Shri Sai Steel v. State [2002 Cri. L. J 3193 (AP)] The cheques were issued by “X” in favour of “Y”. Y discounted the cheques with a Bank. The cheques when deposited were dishonoured. The Bank, holder in due course cannot file complaint against “X”.

41. 3. If the drawer does not pay the amount of dishonoured cheque within the grace period of fifteen days, a complaint thereafter should be filed within one month in the relevant court of Metropolitan Magistrate/Judicial Magistrate as the case may be, having jurisdiction. LIMITATION.. Contd

42. Saketh India Ltd. v. India Securities Ltd. 1999 Cri LJ 1822 (SC) Limitation for filing complaint limit defined as from a particular day - first day to be excluded. Period of 15 days from the date of receipt of notice ending on 14-10-1995 - 30 days period begins on 15-10-1995 Complaint filed on 15-11-1995 - within time. Case Laws

43. Case Laws… Contd Haru Das Gupta v. St. of West Bengal 1972 (1) SCC 639 Held on the facts, that the period of limitation of 15 days expired on 14-10-1995. So the cause of action for filing the complaint would arise from 15-10-1995. That day (15 Oct) was to be excluded for counting the period of one month - The Complaint filed on 15-11-1995 was in time)

44. Case Laws … Contd Amit Desai v. Shine Enterprises [2000 Cri. L. J. 2386 (AP)] Legal proceedings under section 138 of NIA filed by an unregistered Partnership firm is liable to be quashed as and when there is a bar of filing a suit by unregistered Partnership firm

46. 3. Where the cheque was returned unpaid by drawee bank. 4. Where notice in writing was given to drawer of cheque demanding payment. 5. Where drawer of cheque failed to make payment within 15 days of receipt of notice. JURISDICTION… Contd

54. CIVIL & CRIMINAL CASES… Contd Medchl Chemicals and Pharma Pvt. Ltd. v. Biological E. Ltd. 2000 Cri.L.J. 1487 (SUPREME COURT) In fact, many a cheatings were committed in the course of commercial and also money transactions; --- the fact that there is a remedy provided for beach of contract, that does not by itself clothe the Court to come to a conclusion that civil remedy is the only remedy available

55. CIVIL & CRIMINAL CASES… Contd Both criminal law and civil law remedy can be pursued in diverse situations. As a matter of fact they are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life

56. CIVIL & CRIMINAL CASES… Contd This does not, however, affect civil remedies at all for suing the wrongdoer in case like arson, accidents etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred.

57. CONCLUSION Recap CONCLUSION Recap a) Any number of times till NO Legal Notice of Dishonour and Demand of Cheque amount is made. Number of times a Cheque can be presented for encashment in bank (in Case of dishonour) 2 Six (6) English Calendar Months from the date mentioned on the Cheque (includes post-dated Cheques). Time Period of Presentation of Cheque to banks for encashment: 1

58. CONCLUSION Recap…Contd Thirty (30) days from date of intimation of dishonour of Cheque by bank to the customer. Time Period for issuance of Legal Notice of Dishonour of Cheque and Demand 3 (b) Once a Legal Notice about dishonour of cheque & demand of cheque amount is made, the cheque cannot be presented again (if you intent to file a case).

59. CONCLUSION Recap…Contd Fifteen (15) days from Date of Receipt of Legal Notice of Demand. Time Period for Payment of Dishonored Cheque amount by Drawer 4 It would be in your interest to engage Lawyer for issuance of Notice – A large number of Cases fail in Court because of defects and mistakes in legal Notice.

60. CONCLUSION Recap…Contd Criminal Complaint can be filed before Court After Fifteen (15) days but within forty-five (45) days [i.e., between 15th day to 45th day] from Date of Receipt of Legal Notice of Demand by the Drawer if no payment of Cheque amount is made by him. Time Period for filing Criminal Complaint before Court: 5

61. CONCLUSION Recap…Contd Suit can be filed before Court within Three (3) years from the date mentioned on the Cheque (includes post-dated cheques). Time Period for filing Suit before Court: 6

63. Any questions ? ? ?