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WHAT IS A CHEQUE
A "cheque" on the other hand is a bill of exchange drawn on a bank by the holder of an account payable on demand. Thus a "cheque" under Section 6 of the NIA is also a bill of exchange but it is drawn on a banker and is payable on demand. It is thus obvious that a bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque.
The postdated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Sec 5 of the NIA.
DEPOSITING A CHEQUE
Godrej has received a cheque say from me My bank account is in ABN Amro Bank, Sakhar Bhawan, Nariman Point, Mumbai Will Godrej send a peon to collect the money from ABN Amro Bank, Sakhar Bhawan, Nariman Point, Mumbai?
ENDORSING A CHEQUE
Godrej has received a cheque Godrej will deposit this cheque into their bank i.e. ICICI Bank, Vikhroli and receive the payment in 23 days if it is a local cheque or about 21 days if it is an outstation cheque (cheques which cannot be drawn on par).
THE PAYEE
A cheque will mostly be paid to the person named as payee Making out a cheque in the name of Mr. Singh is not a good idea. Say Mr. Satbir Singh instead Suppose a payment has to be made to Godrej Soaps Limited. The full name has to be written. Just saying Godrej is not enough.
AMOUNT IN WORDS
Why do you have to write the amount in figures (numerals) and in words? To make it difficult for people to alter the amount
STOP PAYMENT
If the cheque is not already paid, you can ask the bank to stop payment. For doing this, you should issue the instructions in writing. Take an acknowledgement. Some foreign banks also accept the instructions on phone. Take the instructions number.
DISHONOR OF CHEQUES
Section 138 of the NIA provides that the dishonor of a cheque for the reasons a) "insufficiency of funds" or b) the amount covered by the cheque was not arranged for
DRAWING OF A CHEQUE
Cheque should have been drawn by the drawer in payment of a legal liability to discharge the existing debt. The words any debt or any other liability appearing in section 138 make it very clear that it is not in respect of any particular debt or liability. The presumption which the Court will have to make in all such cases is that there was some debt or liability once a cheque is issued
PRESENTATION OF CHEQUE
The presentation of cheque should be within its validity period i.e. six months The question arises as to which bank the cheque should reach within the validity period, is it that of drawers bank or it is enough if the cheque is presented by the payee to his bank before the validity periods.
Case Laws
J. Veeraraghavan v. Lalith Kumar 1995 CRI L J 1882 Any reason for dishonour is an offence. The Marginal Note of S. 138 of the NIA states Dishonour of cheque for insufficiency etc. of funds in accounts" addition of word "etc." cannot be considered to be an accident
NOTICE
It is the non-payment of dishonoured cheque within fifteen days from the receipt of the notice that constitutes an offence. Issuing of a cheque and its dishonour is not an offence. Any demand made after the dishonour of cheque will constitute a notice.
NOTICE Contd
It is not necessary that the notice should be sent by Registered Post alone, it could be sent even by fax. It is not necessary that the notice should be in any particular form or style. It is held by the Supreme Court that while the cheque could be presented at any number of times however there shall be only one Notice.
ISSUE
Whether dishonour of the cheque on each occasion of its presentation gives rise to a fresh cause of action within the meaning of Sec. 142 (b) of NIA? No - A competent court can take cognizance of a written complaint of an offence u/s138 if it is made within 1mth of the date on which the cause of action arises u/s142 (c) gives it is a restrictive meaning. It is the failure to make payment within 15 days from date of receipt of notice which will give rise to cause of action u/s 142 (c) cause of action can arise only once.
ISSUE Contd
Therefore it is essential that the notice should be perfect and in conformity with law. It is common mistake committed by most of the payees that as soon as the cheque is returned unpaid to write a letter to the drawer threatening him that in case he does not pay against the dishonoured cheque legal action will be taken etc. Such letter will also be construed as a notice.
ISSUE Contd
As stated already that non-payment of cheque amount within the grace period of fifteen days from the date of receipt of the notice constitutes an offence and therefore liable to prosecuted for the criminal offence so committed
LIMITATION
NIA is a special legislation hence the time limits that have been laid down has to be strictly followed. Any lapse in adhering to the schedule, shall take away a cause of action under Sec. 138. The time limits placed cannot be condoned by the Courts.
LIMITATION.. Contd
The time limits are 1. Cheque should be presented to the bank for encashment within its validity period i.e. 6 mths 2. Within 30 days from the receipt of return memo indicating reason of dishonour, a notice should be sent demanding the amt of dishonoured cheque to be paid within 15 days of the receipt of the notice
LIMITATION.. Contd
3. If the drawer does not pay the amount of dishonoured cheque within the grace period of fifteen days, a complaint thereafter should be filed within one month in the relevant court of Metropolitan Magistrate/Judicial Magistrate as the case may be, having jurisdiction.
Case Laws
Saketh India Ltd. v. India Securities Ltd. 1999 Cri LJ 1822 (SC) Limitation for filing complaint limit defined as from a particular day - first day to be excluded. Period of 15 days from the date of receipt of notice ending on 14-10-1995 30 days period begins on 15-10-1995 Complaint filed on 15-11-1995 - within time.
JURISDICTION
Refer: K. Bhaskaran v. Sankaran Vaidhyan Balan 1999 (6) SCALE 272 (Judgment dated Sept.29,1999) Complaint can be filed at any of the place: 1.Where the cheque was drawn. 2.Where the cheque was presented for encashment.
JURISDICTION Contd
3. Where the cheque was returned unpaid by drawee bank. 4. Where notice in writing was given to drawer of cheque demanding payment. 5. Where drawer of cheque failed to make payment within 15 days of receipt of notice.
JURISDICTION Contd
Each of the five acts constituting offence could be done at 5 different localities. Hence one of the Courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under sec. 138 of the NIA.
PENALTY
The drawer may be punished with imprisonment for a term which may extend to two years, or Fine which may extend to twice the amount of the cheque, or With both
PENALTY Contd
The magistrate can make liberal use of Sec. 357(3) of the Code. A Magistrate can award any sum as compensation to alleviate the grievance of the complainant by making resort to Sec. 357(3) of the Code.
ISSUE
Who is liable in case a cheque issued by a company is dishonoured? Every person who, was responsible to the company, for the conduct of the business of the company, as well as the company itself
ISSUE Contd
If the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence.
ISSUE Contd
The burden will lie on that person to prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
CONCLUSION RecapContd
(b) Once a Legal Notice about dishonour of cheque & demand of cheque amount is made, the cheque cannot be presented again (if you intent to
file a case).
Time Period for issuance of Legal Notice of Dishonour of Cheque and Demand
Thirty (30) days from date of intimation of dishonour of Cheque by bank to the customer.
CONCLUSION RecapContd
It would be in your interest to engage Lawyer for issuance of Notice A large number of Cases fail in Court because of defects and mistakes in legal Notice. 4 Time Period for Fifteen (15) days from Date Payment of Dishonored of Receipt of Legal Notice of Cheque amount by Demand. Drawer
CONCLUSION RecapContd
5 Time Period for filing Criminal Complaint can be Criminal Complaint filed before Court After before Court: Fifteen (15) days but within forty-five (45) days [i.e., between 15th day to 45th day] from Date of Receipt of Legal Notice of Demand by the Drawer if no payment of Cheque amount is made by him.
CONCLUSION RecapContd
6 Time Period for filing Suit can be filed before Court Suit before Court: within Three (3) years from the date mentioned on the Cheque (includes post-dated cheques).
CONCLUSION RecapContd
It is not necessary to file both the Cases (Criminal Complaint & Money Suit), however, it is always advisable to file both the Cases together. Further Criminal Complaint and Money Suit can be filed on the same day/date or on different days/ dates, however, they have to be within their limitation period.
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