Stages of Cheque Bounce case - U/s 138 Negotiable Instruments Act

(Brief Flow Chart & Notes)

Notes:       

Drawer or Issuer is a person who gives a cheque.

Drawee or Payee or Holder-in-due-course This refers to the person who is supposed to receive the payment when the cheque is cleared

Many a times cheques are issued bearing no date or post dated cheques. Holder of cheque enters the date, and thereafter cheques are presented to banks. Hon'ble Bombay High Court in case of Purushottamdas Gandhi vs. Manohar Deshmukh 2007 (1) Mh.L.J. 210 has observed that inserting such date does not amount to tampering or alteration but by delivery of such undated cheque drawer authorizes holder to insert date. Period of 6 months for presentation of such cheque to the Bank would start from the date mentioned on cheque. ( Ashok Badwe vs. Surendra Nighojkar A.I.R. 2001, S.C. 1315)

Ref to Point 2* Notice must be in writing informing that cheque has been returned unpaid also a demand of chqeue amount must be made and it should be within 30 days from receipt of information of dishonour.

Ref to Point 3 * The words “refer to drawer” or “account closed” are covered under the term “insufficient funds”

Ref to Point 6 *However, in case of MSR Leathers vs. Palaniappan and others 2013, Cr.L.J. S.C. 1112. Apex court held that failure to prosecute on basis of first default in payment does not result in forfeiture of right of holder/ payee to prosecute. Nothing in N.I. Act that prohibits holder / payee of cheque from issuing fresh demand notice and then launching prosecution. Limitation of one month from accrual of cause of action for taking cognizance u/s. 142 does not militate against accrual of successive cause of action

Ref to Point 6: Hon'ble Supreme Court in case of Saket India Ltd. vs. India Securities Ltd. AIR 1999, SC 1090 held that the period of one month is to be reckoned according to British Calender as defined in the General Clauses Act and the date on which cause of action arose must be excluded for this purpose. When neither postal acknowledgement nor postal cover is received back by payee the presumption is that notice is served. (Central Bank of India vs. Saxena Pharma, AIR 1999 SC 3607.)

Ref to Point 6: Payee or holder in due course is a competent person to file complaint. Complaint must be by corporal person capable of making physical appearance in court. In case of company and firm natural person should represent it. In Vinita S. Rao vs. M/s Essen Corporate Services Pvt. Ltd. And another, 2015 AIR (SC) 882 it was held by the Hon'ble Supreme Court that complaint can be filed by the complainant through his Power of Attorney but the power of attorney must have knowledge about the relevant transactions.

Ref to Point 6: Section 142 of the N. I. Act creates bar against taking cognizance of the offence u/s. 138 of the N. I. Act except upon complaint in writing by payee or holder in due course. Complaint may be instituted by Power of Attorney Holder.

Ref to Point 7: Section 145 (1) of the Act permits the recording of evidence of complainant on affidavit. Even evidence of accused and witnesses can be recorded on affidavit

Ref to Point 7: Indian Bank Association and others vs. Union of India & others reported in AIR 2014 Supreme Court 2528: Metropolitan Magistrate/ Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinize the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons

Ref to Point 11: By applying provisions of Sections 262 to 265 CrPC it enables a Judicial Magistrate or Magistrate of the First Class to conduct the trial. Then it contemplates summary trial and provides for continuous day-to-day hearing of the case till its conclusion and further stipulates that the trial is to be completed within 6 months from the date of filing of the complaint. It further empowers the Magistrate to pass a sentence for imprisonment for a term not exceeding one year or a fine not exceeding twice the amount of the cheque notwithstanding anything contained to the contrary in CrPC.

Ref to A81Pointt 11: **The provisions of Section 146 similarly depart from the principles of the Indian Evidence Act. Section 143 makes it possible for the complaints under Section 138 of the Act to be tried in the summary manner, except, of course, for the relatively small number of cases where the Magistrate feels that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily.