Cheque Bounce Offences
Legal Framework
Cheque bounce offences are primarily governed by:
Negotiable Instruments Act, 1881
Section 138: Deals with the offence of dishonor of cheque due to insufficient funds or other reasons.
Other related sections:
Section 139: Presumption in favour of holder.
Section 141: Presumption regarding offence by company or firm.
Essentials of Cheque Bounce Offence under Section 138
Cheque drawn on a bank account must be returned unpaid by the bank due to insufficient funds or if it exceeds the amount arranged to be paid.
Cheque must have been issued for discharge of a legally enforceable debt or liability.
The payee or holder in due course must have presented the cheque to the bank within the validity period.
The payee must give notice to the drawer within 30 days of the dishonor.
The drawer must fail to make the payment within 15 days of receiving the notice.
The offence is criminal in nature, punishable with fine or imprisonment or both.
Important Case Laws on Cheque Bounce Offences (Section 138 NI Act)
1. K. Bhaskaran v. Sankaran Vaidhyan Balan, AIR 1999 SC 3763
Facts: The appellant (drawer) issued a cheque to the respondent. The cheque was dishonoured due to insufficient funds. The respondent filed a complaint under Section 138 NI Act.
Issue: Whether the mere issuance of the cheque is enough to presume a legally enforceable debt?
Judgment:
The Supreme Court held that a cheque must be issued for discharge of existing debt or liability.
The court clarified that Section 138 deals with criminal breach of trust and is not a civil remedy for recovery of money.
Mere issuance of cheque without an underlying debt will not attract Section 138.
Significance:
It emphasized that liability must be proven.
Distinguished civil liability from criminal liability in cheque bounce cases.
2. M/s. Green View Tea Estate v. Amal Kumar Ganguly, AIR 1961 SC 101
Facts: A cheque was issued but bounced due to insufficient funds.
Issue: Whether the notice issued by the payee was adequate under Section 138?
Judgment:
The court held that notice requirement is mandatory.
The notice must clearly mention the fact of dishonour and demand payment.
If the drawer does not respond within the stipulated time, prosecution can be initiated.
Significance:
This case underscored the importance of strict compliance with procedural formalities, especially the notice clause.
3. Joginder Singh Arora v. Union of India, AIR 2002 SC 1672
Facts: A cheque was dishonoured and the complainant failed to send the notice within 30 days.
Issue: Whether delay in sending notice vitiates the complaint?
Judgment:
Supreme Court held that delay in sending notice cannot be condoned.
Sending notice within 30 days of cheque dishonour is mandatory for sustaining a complaint.
Procedural strictness is to be maintained to prevent misuse.
Significance:
This case reaffirmed the importance of strict adherence to timelines in cheque bounce cases.
4. G.S. Chopra v. Ramphal Singh, AIR 1986 SC 1580
Facts: A cheque was issued in discharge of a debt and was dishonoured. The accused argued no liability existed.
Issue: Whether presumption of liability under Section 139 can be rebutted?
Judgment:
Supreme Court held that Section 139 creates a presumption of liability on the drawer.
The burden shifts to the accused to prove absence of debt.
The presumption is rebuttable but difficult to overcome.
Significance:
This case is a landmark for establishing the presumption of liability on cheque drawer.
It makes it easier for the complainant to establish prima facie case.
5. Ravinder Pal Singh v. Jasbir Singh, (2013) 11 SCC 178
Facts: The accused issued a cheque for repayment but claimed the amount was never due.
Issue: Can the accused be convicted without proof of debt?
Judgment:
The Supreme Court reiterated that dishonour of cheque presumes existence of debt or liability.
The accused can rebut presumption by showing no debt or liability.
If no such proof is given, conviction under Section 138 is justified.
Significance:
Strengthened the defence possibilities for the accused but maintained the prima facie presumption.
Highlighted the importance of evidence of debt or liability in cheque bounce cases.
Summary: What Courts Look Into in Cheque Bounce Cases?
| Element | Requirement |
|---|---|
| Existence of debt/liability | Must be proven; cheque issued in discharge of same |
| Presentation of cheque | Within validity period (6 months or 3 months as per latest law) |
| Cheque dishonour | Due to insufficient funds or stop payment |
| Notice | Mandatory notice within 30 days of dishonour |
| Response time | Drawer must be given 15 days to pay after notice |
| Burden of proof | Shifts to drawer to rebut presumption of liability |
Conclusion
Section 138 NI Act is a powerful tool for recovering debts through criminal proceedings. However, courts require strict compliance with procedural steps and proof of a legally enforceable debt.
The case laws highlight:
Importance of notice and timeline (Joginder Singh Arora)
Presumption of liability and burden shift (G.S. Chopra)
Difference between civil and criminal liability (K. Bhaskaran)
Strict procedural compliance (M/s. Green View Tea Estate)
Right of defence and burden of proof (Ravinder Pal Singh)
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