Talk about the Crimes and what’s in the Highlights “The Banks”, besides the Bank Frauds and Scams, one of the popular Criminal Offense related to the Banks all over the world is BOUNCING OF CHEQUE. Bouncing of a ball is a fun, but bouncing of a cheque is a criminal offence! As specified under section 138 of Negotiable Instrument Act, 1881, Cheque Bouncing revolves majorly around insufficiency of funds in a person’s bank account.
Negotiable Instrument is one, which when transferred by delivery or by endorsement and delivery, passes to the transferee a good title to payment according to its tenor and irrespective of the title of the transferor, provided he is bona fide holder for value without notice of any defect attaching to the instrument or in the title of the transferor; in other words, the principle “nemo dat quod non habit” does not apply, It is the element of negotiability that make a contract founded upon paper thus adopted for circulation different in many particulars from other contracts known to law. In simple terms, Negotiable Instrument is a quality paper which delivers right to a person for transfer of valid currency within two persons or more.
Firstly, after the Cheque has been bounced, the drawer is given an opportunity to immediately rectify the offense by paying the specified amount from an account which has sufficiency of funds. After due reminders, when the drawer continues the same behavior, one can start with the Legal Proceedings, as under Section 138 of Negotiable Instrument Act, 1881 as amended up to date, the payee is eligible to send a legal notice to the drawer for repayment of the amount due within 30 days from the date of receiving Cheque return Memo.
Every cheque can’t be termed under Section 138 of NI Act. To categorize a cheque as dishonored under Section 138, certain conditions has to be fulfilled:
- The cheque should have been drawn by the drawer on an account maintained by him.
- It should have been returned 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 made with that bank.
- Cheque must have been issued towards discharge of a debt or legal liability.
If the cheque is termed as dishonored, i.e. the aforesaid conditions are fulfilled, he shall be liable for the criminal offense and shall also be punished with a fine which may extend to twice the amount of the cheque or imprisonment for a term which may be extended to two years or both, as the case may be.
Cases for Dishonor of Cheque can be filled in Civil Courts as “Suit for Recovery” as well, but shall be originally deemed under Criminal Offense as per the Laws. The Cr.P.C. clearly states that the offence should be tried where it occurred. Therefore, in Section 138 cases, the jurisdiction of the court to try the offence should be based on where the cheque was dis-honoured and not where the notice was issued as it would not be the location of the offence;
Since now many cases under the Dis-honour/Bouncing of Cheque has come up in the Courts of India, few are stated for relevance, as follows:
- Dashrath Roop Singh Rathod vs. State of Maharashtra & Anr.
In this case of Hon’ble Supreme Court of India, a major change has taken place stating that the all the cases for bouncing of cheque shall be provided jurisdiction of the bank branch where the actual dishonor took place rather than the place of the business/residence of the holder.
- Harman Electronics Pvt. Ltd. v. National Panasonic India Pvt. Ltd.
In this case Hon’ble Supreme Court examined the question of jurisdiction yet again under Section 138 of the Act. It was held that a cause of action will not be triggered by issue of statutory notice but only acceptance of notice does. A sole issue of notice or presentation of cheque can’t give or provide the court with territorial jurisdiction to try offences under section 138 or it will unreasonably harass the drawer.
- Bhaskar Sen vs State Of Maharashtra And Ors.
This case had many consequences, as per the judgment the cheque bouncing cases could be filed either as per location of the bank or as per the payee’s convenience which sometimes are deliberately issued by the same person to same payee but at different locations, for such a situation, case can be filed under Sec 138 on all the locations covered.
