Tag Archives: return of cheque

Dishonour of Cheque – Company to be Arraigned As Accused

In N. Harihara Krishnan v. J. Thomas [N. Harihara Krishnan v. J. Thomas, (2018) 13 SCC 663 adverting to the ingredients of Section 138 of the Negotiable Instruments Act, the Hon’ble Apex Court observed as follows:

“Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are: (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid.”

The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused. Himanshu v. B. Shivamurthy, (2019) 3 SCC 797.

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Dishonour of Cheque – Complaint Must Contain Factual Allegations

The scheme of the prosecution in punishing under Section 138 of the Negotiable Instruments Act  is different from the scheme of Cr.P.C. Section 138 creates an offence and prescribes punishment. No procedure for the investigation of the offence is contemplated. The prosecution is initiated on the basis of a written complaint made by the payee of a cheque. Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of it validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque, the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. It is obvious from the scheme of Section 138 of the Act, that each one of the ingredients flows from a document which evidences the existence of such an ingredient. The only other ingredient which is required to be proved to establish the commission of an offence under section 138 is that inspite of the demand notice referred to above, the drawer of the cheque failed to make the payment within a period of 15 days from the date of the receipt of the demand. A fact which the complainant can only assert but not prove, the burden would essentially be on the drawer of the cheque to prove that he had in fact made the payment pursuant to the demand. N. Harihara Krishnan v. J. Thomas, 2017 (101) ACC 690.

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Offence of Dishonour of Cheque – Ingredients of

A bare perusal of Section 138 of Negotiable Instruments Act shows that to constitute an offence thereunder, following ingredients must be satisfied:
(a) A person must have drawn a cheque on an account maintained by him in a bank.
(b) It must be for payment of certain amount of money to any person out of his account.
(c) The cheque should have been drawn for discharge of any debt or any liability in whole or in part.
(d) The cheque has been presented to Bank within a period of six months from the date on which it was drawn or within a period of it’s validity, whichever is earlier.
(e) The cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement with the bank.
(f) The payee or the holder in due course makes a demand for payment of said amount of money which remained unpaid due to return of cheque by the bank by giving a notice in writing to the drawer
(g) The notive must have been given within thrity days of the receipt of the information from the bank regarding return of the cheque as unpaid.
(h) The drawer of such cheque fails to make payment of aforesaid money to the payee or the holder within 15 days of the receipt of the said notice. Mahipal Singh v. State of U.P., 2014 (84) ACC 462.

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Dishonour of Cheque – Territorial Jurisdiction

The issue of territorial jurisdiction under Section 138 Negotiable Instruments Act was considered by the Hon’ble Supreme Court in K. Bhaskaran v. Shankaran Vaidhyan Balan, (1999) 7 SCC 510. The Hon’ble Supreme Court observed that the following five acts are essential to constitute an offence under Section 138 of the NI Act and if these five different acts were done in five different localities, any one of the Courts exercising jurisdiction in one of the five local areas can become the place of trial for offence under Section 138 of the Act:
“(1) Drawing of the cheque;
(2) Presentation of the Cheque to the Bank;
(3) Return of the Cheque unpaid by the Drawee Bank;
(4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount; and
(5) Failure of the drawer to make payment within 15 days of the receipt of notice.” Ram Chandra Agarwal v. State of U.P., 2013 (82) ACC 886.

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