marathiCases under section 138 of Negotiable Instrument Act.
THE law relating to Negotiable Instruments is the law of the commercial world which was enacted to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. In the absence of such instruments, the trade and commerce activities were likely to be adversely affected as it was not practicable for the trading community to carry on with it the bulk of the currency in force. The introduction of negotiable instruments owes its origin to the bartering system prevalent in the primitive society. The negotiable instruments are, in fact, the instruments of credit being convertible on account of the legality of being negotiated and thus easily passable from one hand to another. The source of Indian law relating to such instruments is admittedly the English Common Law. The main object of the Act is to legalise the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. The purpose of the Act was to present an orderly and authoritative statement of the leading rules of law relating to the negotiable instruments. The Act intends to legalise the system under which claims upon mercantile instruments could be equated with ordinary goods passing from hand to hand. To achieve the objective of the Act, the Legislature in its wisdom thought it proper to make provision in the Act for conferring such privileges to the mercantile instruments contemplated under it and provide special procedure in case the obligation under the instrument was not discharged.
SECTION 138 of the Act was brought on statute by central Act 66 of 1988 w.e.f.
OFFICE of the Judge is, to make such construction as will suppress the mischief, and advance the remedy, and to suppress all evasions for the continuance of the mischief. To carry out effectively the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, to an indirect or circuitous manner that which it has prohibited or enjoyed.
THE manner of construction has two aspects. One is that the courts, mindful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its purview to escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outside the Act. When the Courts find an attempt at concealment, they will, in the words of Wilmot, C.J., 'brush away the cobwed varnish, and shew the transaction in their true light."
BEFORE going into the main subject it is necessary to understand following few things which plays important roles in Negotiable Instruments.
Promissory note :- A "promissory note " is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
Bill of exchange :- A " bill of exchange" is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
Cheque :- A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Drawer/drawee :- The maker of a bill of exchange or cheque is called the "drawer "; the person thereby directed to pay is called the "drawee".
Holder :- The "holder" of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.
Holder in due course : “Holder in due course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorse thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.
AN offence to be made out under the substantive provisions of Section 138 of the Act it is mandatory that the cheque is presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. It is the cheque drawn which has to be presented to the bank within the periods specified therein. When a postdated cheque is written or drawn it is only a bill of exchange and as such the provisions of Section 138(a) are not applicable to the said instrument. The postdated cheque becomes a cheque under the Act on the date which is written on the said cheque and the six months period has to be reckoned for the purposes of Section 138(a) from the said date.
ONE of the main ingredients of the offence under Section 138 of the Act is, the return of the cheque by the bank unpaid. Till the time the cheque is returned by the bank unpaid, no offence under Section 138 is made out. A postdated cheque cannot be presented before the bank and as such the question of its return would not arise. It is only when the postdated cheque becomes a "cheque", with effect from the date shown on the face of the said cheque, the provisions of Section 138 come into play. The net result is that a postdated cheque remains a bill of exchange till the date written on it. With effect from the date shown on the face of the said cheque it becomes a "cheque" under the Act and the provisions of Section 138(a) would squarely be attracted. As per section 4, 5 and 6 a pay order is nothing but a cheque.
ON a careful analysis of the above section, it is seen that its main part creates an offence when a cheque is returned by the bank unpaid for any of the reasons mentioned therein. The significant fact, however, is that the proviso lays down three conditions precedent to the applicability of the above section and, for that matter, creation of such offence and the conditions are:
(i) the cheque should have been presented to the bank within six months of its issue or within the period of its validity, whichever is earlier;
(ii) the payee should have made a demand for payment by registered notice after the cheque is returned unpaid; and
(iii) that the drawer should have failed to pay the amount within 15 days of the receipt of the notice.
IT is only when all the above three conditions are satisfied that a prosecution can be launched for the offence under Section 138. So far as the first condition is concerned, clause (a) of the proviso to Section 138 does not put any embargo upon the payee to successively present a dishonoured cheque during the period of its validity.
THE following facts are required to be proved to successfully prosecute the drawer for an offence under Section 138 of the Act :-
(a) that the cheque was drawn for payment of an amount of money for discharge of a debt/liability and the cheque was dishonoured;
(b) that the cheque was presented within the prescribed period;
(c) that the payee made a demand for payment of the money by giving a notice in writing to the drawer within the stipulated period; and
(d) that the drawer failed to make the payment within 15 days of the receipt of the notice
. UNDER section 139 the presumption lies in favour of the holder. It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability. The burden of proving that the cheque was not issued for a debt or liability is on the accused i.e. drawer
A cheque can be presented any number of times during the period of its validity by payee. But the point is in which bank a cheque can be presented during the period of its validity – a payee bank or – a drawee bank. "The bank" referred to in clause (a) to the proviso to Section 138 of the Act would mean the drawee-bank on which the cheque is drawn and not all banks where the cheque is presented for collection including the bank of the payee, in whose favour the cheque is issued. The use of the words "a bank" and "the bank" in the Section is indicator of the intention of the Legislature. The former is indirect article and the latter is pre-fixed by direct article. If the Legislature intended to have the same meanings for "a bank" and "the bank", there was no cause or occasion for mentioning it distinctly and differently by using two different articles. It is worth noticing that the word "banker" in Section 3 of the Act is pre-fixed by the indefinite article "a" and the word "bank" where the cheque is intended to be presented under Section 138 is pre-fixed by the definite article "the". The same Section permits a person to issue a cheque on an account maintained by him with "a bank" and makes him liable for criminal prosecution if it is returned by "the bank" unpaid. The payment of the cheque is contemplated by "the bank" meaning thereby where the person issuing the cheque has an account. "The" is the word used before nouns, with a specifying of particularising effect opposed to the indefinite or generalising force of "a" or "an". It determines what particular thing is meant; that is, what particular thing we are to assume to be meant. "The" is always mentioned to denote particular thing or a person. "The" would, therefore, refer implicitly to a specified bank and not any bank.
IN other words a cheque issued by (A) in favour of (B) drawn in a bank named (C) where the drawer has an account can be presented by the payee to the bank upon which it is drawn i.e. (C) bank within a period of six months or present it to any other bank for collection of the cheque amount provided such other bank including the collecting bank presents the cheque for collection to the (C) bank. The non-presentation of the cheque to the drawee-bank within the period specified in the Section would absolve the person issuing the cheque of his criminal liability under Section 138 of the Act, who shall otherwise may be liable to pay the cheque amount to the payee in a civil action initiated under the law. A combined reading of Sections 2, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable. Such presentation is necessarily to be made within six months at the bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee.
NOW once the cheque is issued it has to be honoured. Any mischief played by the drawer in order to dishonour it so as to deprive the payee would constitute an offence punshible under section 138 of the Act.
DRAWER giving notice to the payee or holder in due course prior to presentation of the cheque wherein the payee or holder in due course was advised not to present the same for encashment and he does present it and the cheque is returned as per the stop payment instructions then section 138 is attracted.
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 Section 138 of the Act.
IF the cheque is returned by a bank with an endorsement “insufficiency of funds”, “exceeds arrangement”, “referred to drawer”, would clearly constitutes an offence and section 138 is attracted. Cheque returned unpaid on the grounds that cheque was not honoured due to incomplete signature – would not fall u/s 138 of the Act.
NOW after the dishonour of the cheque, it is the turn of the payee to take proper steps to fulfill the ingredients which are the pre-requisites to file the complaint against the drawer. The most important pre-requisite is to issue demand notice to the drawer within the time prescribed in the Act.
NORMALLY a cheque can be presented for any number of times during the period of its validity by payee. On each presentation of cheque and dishonour, a fresh right and not cause of action, accrues in his favour. But, once he gives a notice under clause (b) of section 138 he forfeits such right, for, in case of failure of the drawer to pay the money within the stipulated time he would be liable for the offence and the cause of action for filing the complaint will arise and the payee is prevented from presenting the cheque in his bank for encashment for second time once he issues notice under clause (b) of the section 138 of the Act. He has to file the complaint.
IF the notice envisaged in clause (b) of the proviso to Section 138 was transmitted by fax it would be compliance with the legal requirement. The only intention behind it to facilitate the drawer to make the payment of an amount of dishonoured cheque to the payee within 15 days from the date of receipt of notice.
"WHERE the offence consists of several acts done in different local areas, it may be inquired into or tried by a court having jurisdiction over any of such local areas." The complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done.
FOLLOWING are the acts which are components of the said offence :-
1 Drawing of the cheque,
2 Presentation of the cheque to the bank,
3 Returning the cheque unpaid by the drawee bank,
4 Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount,
5 Failure of the drawer to make payment within 15 days of the receipt of the notice.
IT is, therefore, clear that "giving notice" in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment. It is for the payee to perform the former process by sending the notice to the drawer in the correct address.
WHEN a notice is returned by the sendee as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in clause (d) to the proviso of Section 138 of the Act. Of course such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address.
THE notice returned with postal remarks "not available in the house", "house locked" and "shop closed" respectively. In that view, it must be deemed that the notices have been served on the respondents in view of the section 27 of General Clauses Act and section 114 (f) of Indian Evidence Act.
THUS after receipt of notice the drawer failed to make the payment within 15 days then the cause of action for filing complaint is arise. Now who is empowered to file the complaint. The complaint can be filed by payee or holder in due course or by a power of attorney holder of payee or holder in due course.
IN criminal law, it is well settled that any person can set the criminal law in motion and, as such, a complaint regarding an offence, can be filed by any person who knows about the commission of the offence. Nevertheless, Section 142 of the said Act lays down that no cognizance of the offence under Section 138 of the said Act shall be taken, except on a complaint of payee or holder in due course. Section 142 of the said Act does not contemplate that the complaint should be personally filed by the complainant. The complainant can appoint a Power of Attorney for filing the complaint in view of Section 142 of the said Act.
HOWEVER, neither Code of Criminal Procedure nor the said Act contemplates that anyone can depose for and on behalf of the complainant. In such complaint, the Power of Attorney is entitled to appear as a witness and depose in respect of facts which are within his knowledge and on the basis of record on which reliance is placed.
RECENTLY drastic amendments were incorporated in the section 138 of the Negotiable Instrument Act, by The Negotiable Instruments (Amendment And Miscellaneous Provisions) Act, 2002 (55 of 2002) w.e.f. 06.02.2003. In these amendments a payee has to make a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, prior to the amendment this period was for 15 days only.
SIMILARLY if the drawer of such cheque fails to make the payment of the said amount of money to the payee or to the holder in due course of the cheque, within fifteen days of the receipt of the said notice then the payee has to file the complaint within 30 days from the expiry of fifteen days of receipt of such notice. Now by virtue of the amendment a payee can file the complaint after the prescribed period, if he had sufficient cause for not making a complaint within such period.
THE cognizance of such offence punishable under section 138 of the Act can be taken by a Metropolitan Magistrate or a Judicial Magistrate of the first class as envisaged in section 142 of the Act. Thus the cognizance of such offence can be taken only on the complaint in writing, made by the payee or, the holder in due course of the cheques.
ACCORDING to section 143 of the Act all offences under this Chapter shall be tried in a summary way and the provisions of sections 262 to 265 (both inclusive) of the Code of Criminal Procedure, shall, as far as may be, apply to such trials. In Chapter XXI of the Code of Criminal Procedure cases are tried summarily under section 260 wherein notes of evidence is taken. In all of the summary trials, the entire proceedings are taken up in one stroke which includes particulars of offence, plea of accused, notes of evidence of the evidence produced by the witnesses, statement of accused under section 313 of Code of Criminal Procedure, evidence of accused and judgment with reasons. In Code of Criminal Procedure under section 262 (2) there is a procedural restriction for imposing the punishment exceeding 3 months. Negotiable Instrument Act being a special enactment has overriding effect over the provisions of Code of Criminal Procedure in respect of trial. Section 143 of the Act starts with Non-obstante clause. It further provides that in the case of any conviction in a summary trial under this section, it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not exceeding one year and an amount of fine exceeding five thousand rupees. Section 145 of the Act allows the complainant to give his evidence on affidavit and may, subject to all just exceptions be read in evidence in any enquiry, trial or other proceeding under the said Code. Similarly on the application of the prosecution or the accused, the complainant and the accused may summon and examine any person giving evidence on affidavit as to the facts contained therein.
SECTION 138 of the Act envisaged that, a magistrate convicting an accused can imposed punishment for a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both. But section 143 of the act further provides that in the case of any conviction in a summary trial under this section, it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not exceeding one year and an amount of fine exceeding five thousand rupees:
A Magistrate can not imposed fine sentence exceeding the limits given under section 29 of Code of Criminal procedure i.e. Rs.5,000/-. "HOWEVER the Magistrate in such cases can alleviate the grievance of the complainant by making resort to section 357(3) of the Code. No limit is mentioned in the sub-section and therefore, a Magistrate can award any sum as compensation. Of course while fixing the quantum of such compensation the Magistrate has to consider what would be the reasonable amount of compensation payable to the complainant. Thus, even if the trial was before a Court of Magistrate of the first class in respect of a cheque which covers an amount exceeding Rs. 5000.00 the Court has power to award compensation to be paid to the complainant."
IN view of Section 357 of Criminal Procedure Code besides imprisonment a fine can be awarded by itself or compensation can be awarded by itself but if fine and compensation are both awarded, then the compensation can be awarded only out of the fine amount. But both fine and compensation cannot be separately imposed on an accused person. If only compensation is awarded then the sentence of default to pay compensation has to passed without which the operative order cannot be completed. Such default sentence can be given in view of section 30 of Code of Criminal Procedure which is in addition to a substantive sentence of imprisonment for the maximum term awardable by the Magistrate under section 29.
FINALLY the offence punishable under section 138 are made compoundable offence in view of the section 147 of the act.
WHILE summing up it is, always to be kept in mind that Section 138 of The Act creates an offence and the law relating to the penal provisions has to be interpreted strictly so that non-one can ingeniously or insidiously or guilefully or strategically be prosecuted.
Sir,
ReplyDeleteHello
Check bounced of a partnership firm.
After bounced check Notice served in 30 days.party not paid in 15 days.
But notice served the name of firm,
then we file case in court name of firm or partners who signed a check ?
please guide me.
Thanks & Regards
AFTER bounced a cheque of a partnership firm( againest lone rs.) , Notice served in thirty days .
ReplyDeleteBut notice served the NAME OF FIRM .
Sir we can file a case ? & which name Firm or partners name who signed a cheque ?
Please Guide Me.
Thanks & Regards