Cheque Bounce Top 10 Judgments NI 138 Matter

The Negotiable Instruments Act was formulated in the year 1881. Over the years there have been many important changes in the way cheques are issued/bounced/dealt with. Section 138 to 142 of chapter XVI of the Negotiable Instruments Act, 1881 deals with dishonoring of cheque. Prior to insertion of 138 of NI, a dishonored cheque left the person aggrieved with the only remedy of filing a claim.Section 138 has converted civil liability into criminal offence. Section 138 of Negotiable Instruments Act, 1881 Act is a useful tool against white collar criminals. The courts have been quite active in dealing with such cases and set up a strong precedent in many cases. Some of the landmark judgements pronounced are mentioned below.

• Subramani v. K. Damodara Naidu (2015 1 SCC 99)

In this case, the accused borrowed a loan from the complainant and issued a post-dated cheque. The complainant presented the cheque for encashment to his banker and it was dishonored cheque with an endorsement ‘fund insufficient’ and the complainant issued a legal notice.The apex court held in this case that when it is proved that Complainant has no source of income to lend the amount to accused, accused is entitled to acquittal. As the complainant was not able to establish his financial capacity to lend money, the accused was acquitted.

• Dalmia Cement (Bharat) Ltd v. Galaxy Traders and Agencies Limited

 In this case the Supreme Court stressed on the object behind enactment of Section 138 of Negotiable Instruments Act, 1881. The court held that the provision was incorporated in the Act with a specified object so that a special provision could be made by incorporating a strict liability as far as cheque as a negotiable instrument is concerned.

• Prem Chand Vijay Kumar v. Yashpal Singh ((2004) 137 PLR 636)

In this case appellant alleged respondent had issued a cheque for amount payable to the appellant for supply of goods to a partnership firm of which respondents are partners.The cheque was dishonored due to inadequacy of funds in the account.Notice was issued by the appellant demanding payment by lawyer’s notice. The apex court held that upon a notice under Section 138 of NI Act being issued, a subsequent presentation of cheque and its dishonor would not create another cause of motion’ which could set the section 138 machinery into motion.

• Bhaskaran v. Sarkaran Vaidhyan Balan ((1999) 7 SCC 510)

In this case, the Two-Judge Bench of the Supreme Court had held that the offence under Section 138 of NI Act can be completed only with the concatenation of a number of acts. These acts are-

• Drawing of the cheque
• Presentation of the cheque to the bank,
• Returning the cheque unpaid by the drawee bank,
• Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,
• Failure of the drawer to make payment within 15 days of the receipt of the notice.

It is to be noted that that concatenation of all the above five constituents are a sine qua non for the completion of the offence under Section 138 of NI Act.

• Jayalakshmi Nataraj v. Jeena and Co. ((1996) 86 Comp Case 265)

In this case a managing director of a company was accused of dishonoring of cheque under Section 138 of Negotiable Instruments Act, 1881. She was held guilty notwithstanding her plea that she did not participate in the day to day administration of the company and she was just an employ and not aware of its affairs. The director was held liable under the principle of vicarious liability.

• Dayawati v. Yogesh Kumar Gosain (2017 Scc Online Del 11032)

In this case the court discussed about the avenue of mediation for offence under Section 138 of Negotiable Instruments Act, 1881. Delhi High Court in this judgment has drawn a distinction between orthodox criminal cases and offences under Section 138. Court held that it is legal to refer a criminal compoundable case under section 138 for mediation. Court also expressly provided for the procedure to be followed in mediation of such cases.

• M/s Meters and Instruments Private Ltd and Anr. V. Kanchan Mehta (2018(1) SCC 560)

The Respondent filed complaint dated alleging that the appellants were to pay a monthly amount to her under an agreement. Cheque was given in discharge of legal liability but the same was returned unpaid for want of sufficient funds. In this case, Two-Judge Bench of Supreme Court made some key observations regarding dishonor of cheque cases and also issued directions for speedy disposal of cheque cases under Section 138 of NI Act. The court noted that use of modern technology needs to be considered not only for paperless Courts but also to reduce overcrowding of Courts and atleast some number of Section 138 cases can be decided online

• Asha Baldwa v. Ram Gopal (S.B. Criminal Misc(Pet.) No. 2726 / 2014)

In the case, it was alleged that the dishonored cheque was handed over to the present respondent by the petitioner and, therefore, she was consenting party to the act of giving the cheque and hence responsible for any proceedings in consequence of giving the cheque. Court held that only handing over of dishonored cheque does not attract offence under Section 138 of NI Act. Court expressed that That the significance of the special law under the Negotiable Instrument Act is to ensure that the promise to pay is abided by the person so promising. The provision under Section 139 of the NI Act is that it shall be presumed that the holder of a cheque received the cheque of the nature referred to in Section 138 of NI Act for the discharge, in whole or in part, of any debt or other liability.

• Uttam Ram v. Devinder Singh Hudan (2019 INSC 0875)

The respondent had procured packing material on credit from the appellant, Uttam Ram, to carry apple crop brought from various growers. It was found that the respondent owed money   for which a cheque was issued. The cheque, however, bounced and the appellant filed a complaint. Supreme Court held that the burden of proving the due amount should not be on the complainant as if he has to prove a debt before a civil court. Rather, the burden to rebut the presumption of debt in cheque bounce case under Section 138 of   Negotiable Instruments Act is on the accused.

• Kishan Rao v. Shankargouda ((2018) 8 SCC 165)

In this case the Apex Court discussed its view on two legal propositions. Firstly, about the revisional jurisdiction of the High Court where the Apex Court held that High Court in exercise of revisional jurisdiction shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. Secondly, presumption in favour of holder of cheque under Section 139 of NI Act where court held that the accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose.

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