Legal Reference Library

In RITVI VIRAT SHAH Versus STATE OF GUJARAT, the Hon'ble Gujarat High Court held that "under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque. 23. We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no a...

The Supreme Court on Monday held the dishonour of a post-dated cheque given for repayment of loan installment, which is also described as “security” in the loan agreement, is covered by Section 138 of the Negotiable Instruments Act, 1881. The Division Bench of Justice Dipak Mishra and Justice A.K. Goel has dismissed an appeal filed by the director of a company against the order of the Delhi High Court by which the court dismissed his petition to quash criminal complaints filed under Section 138 of the Negotiable Instrument Act, against him and the company. Vide the loan agreement dated 15th March, 2001, the respondent agreed to advance loan of Rs 11.50 crore for setting up of 4.00-MW biomass-based power project in Andhra Pradesh. The agreement recorded that post-dated cheque leaves towards payment of installment of loan (principal and interest) were given by way of security. The cheque leaves carried different dates depending on the dates when the installments were due and upon dishono...

A Division Bench of Bombay High Court has held that the expression “suit or other proceedings” in Section 446(1) under chapter II of Part VII of Companies Act, 1956, does not include criminal complaints filed under Section 138 of the Negotiable Instruments Act, 1881 The Bench comprising of Justices Dr.Shalini Phansalkar Joshi and Dharmadhikari was answering a reference from a Single Judge to resolve a conflict between two views recorded in two Single Judges’ Judgments of Bombay High Court. Before the Single Judge, two decisions of Coordinate Benches of High Court were placed taking divergent views on the application of Section 446(1) of the Act to the proceedings under Section 138 of the N.I. Act, viz. (i) in the matter of Firth (India) Vs. Steel Co. Ltd. (In Liqn.), decided on 4th September 1998 [Coram : F.I. Rebello, J.], reported in AIR 1999 Bombay 75, taking a view that Section 446(1) of the Companies Act is not applicable to proceeding under Section 138 of N.I. Act; and (ii) unrep...

The Supreme Court in  MSR Leathers Vs. S. Palaniappan  has  held that prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. The present case overrules  Sadanandan Bhadran v. Madhavan Sunil Kumar (1998) 6 SCC 514  which laid down that cause of action under Section 138 arose only once and  if the concept of successive causes of action were to be accepted the same would make the limitation under Section 142(b) otiose. In  Sadanandan Bhadran v. Madhavan Sunil Kumar  (1998) 6 SCC 514, this Court was dealing with a case under Section 138 of the Negotiable Instrument Act, 1881 (hereinafter referred to as ‘the Act’) in which the complainant had, after dishonour of a cheque issued in his favour, taken steps to serve upon the accused-drawer of the cheque a notice under clause (b) of proviso to...

The Supreme Court has stated that procedural defects and irregularities, which can be cured, should not stand in the way of justice, in a case of cheque bouncing. In this case, Haryana State Coop Supply and Marketing vs Jayam Textiles, the federation supplied cotton bales to the company. The four cheques in payment for the purchase bounced for want of sufficient funds. The federation filed a complaint under the Negotiable Instruments Act. The magistrate dismissed it on the ground that the federation had not produced the authorisation of its board of directors to the official who filed the complaint. The federation appealed to the Madras High Court, but it dismissed the appeal again on the ground that the person who filed the complaint had no proper power of attorney. On appeal, the Supreme Court held that the courts below were wrong for insisting on technicalities. It remitted the case to the trial court where the federation can show the authorisation which it had failed to do earlie...

What are the changes brought in by virtue of Negotiable Instruments (Amendment) Act, 2015  relating to the Territorial Jurisdiction to file Complaints of Dishonour of Cheques? Gujarat High Court has explained the principles relating to it in a recent Judgment in Brijendra Enterprise v. State of Gujarat and another with illustrations. The Judgment was delivered by Justice J.B.Pardiwala in an application under Section 482 of Cr.P.C for quashing a Criminal Complaint filed under Section 138 of NI Act on the ground of lack of territorial Jurisdiction for the Magistrate to try the Case. It is held that “The Negotiable Instruments (Amendment) Bill [Act], 2015, inter alia, provides for the following, namely : (i) cases relating to dishonor of cheques under section 138 of the said Act to be inquired and tried only by a court within whose local jurisdiction the branch of the bank, where the payee or the holder in due course maintains the account, is situated; (ii) cases under section 138 pen...

The Bombay High Court has held that relevant period for deciding the vicarious liability of the Director for the act committed by the Company is not only when the cheque was dishonoured, but also when the disputed transaction was entered into, and from time to time thereafter like at the time of issuance of the cheque in question, presentation of said cheque in Bank etc. Justice Dr. Shalini Phansalkar Joshi made this observation in Mrs. Lata Pramod Dave vs. M/s. Mode Export Private Limited, wherein the petitioner had approached the High Court to quash the process under Section 138 Negotiable Instrument Act issued against her on the ground that, on the date when the cheque in question was presented to the Bank and came to be dishonoured, she was no more the Director of the Company as she has already resigned from the Company. According to Petitioner, she has tendered her resignation on 1st January 2013 and it was received by the Company on the same date. The resignation date seriously d...

The Gujarat High Court has held that when a complaint under Section 138 Negotiable Instruments Act, does not name the Partnership firm as accused, but only the partners, Section 319 of the Code of Criminal Procedure cannot be invoked to implead the Partnership firm as the accused, to save such a serious infirmity in the complaint. Justice J.B. Pardiwala observed that when a complaint under Section 138 of the Act has the initial defect in its sustainability, such a defect cannot be cured by amending the proceedings by virtue of an application under Section 319 of the Cr. P.C. Background In a Section 138 complaint, the complainant named six individuals as accused being partners of a partnership firm running in the name of ‘Swastik Construction’, but the partnership firm, as a legal entity or juristic person, was not arraigned as an accused. The Chief Judicial Magistrate took cognizance upon the said complaint and ordered issue of process against all the six partners named as accused in t...

If part payments or settlements made after the issuance of a Cheque, Can the Complainant issue a demand for a lesser amount? Whether in such circumstances the criminal prosecution for Dishonour of a Cheque under Section 138 of Negotiable Instruments Act, for higher amount is legally sustainable or not? These two interesting questions arose in a case before Supreme Court which were not answered by the bench as the parties arrived at an amicable settlement. The Apex Court Bench comprising of Justices Dipak Misra and Shiva Kirti Singh in M/s. Moser Baer Photo Voltaic Ltd. Vs. M/s. Photon Energy Systems Ltd. & Ors said that the above questions of law is left open for adjudication in any other appropriate case. The Respondents in the Appeal had issued a cheque of Rs. Rs.3,21,53,903/- to the Appellant. There were some disputes between both the parties which were settled through a mutual meeting, the net payable amount by respondent was reduced and settled at Rs.2,87,09,640/-. The cheque ...

SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 838 OF 2008 [Arising out of SLP (Crl.) No. 2094 of 2007] Aneeta Hada ...Appellant Versus M/s. Godfather Travels and Tours Pvt. Ltd. ...Respondent WITH CRIMINAL APPEAL NO. 842 OF 2008 [Arising out of SLP (Crl.) No. 2117 of 2007] JUDGMENT S.B. SINHA, J : Aneeta Hada vs M/S Godfather Travels & Tours ... on 8 May, 2008 2. Appellant is said to be an authorised signatory of M/s. Intel Travels Ltd (Company). The said Company as also the respondent company had business transactions. Appellant on behalf of the company issued a cheque dated 17.1.2001 for a sum of Rs.5,10,000/- in favour of respondent which was dishonoured. Respondent filed a complaint petition against the appellant under Section 138 of the Negotiable Instruments Act, 1881 ('the Act' for short). The Company which is a juristic person was not arrayed as an accused. The learned Magistrate took cognizance of the offence against her....

2015 STPL(Web) 1602 SC [2015(5) SCALE 16] SUPREME COURT OF INDIA (SUDHANSU JYOTI MUKHOPADHAYA AND N.V. RAMANA, JJ.) CHARANJIT PAL JINDAL Appellant VERSUS L.N. METALICS Respondent Criminal Appeal No.402 of 2015 (Arising out of SLP (Crl.) No. 1001 of 2013)-Decided on 24-2-2015. Negotiable Instruments Act, 1881, Sections 138, 141 – Dishonour of Cheque – Company not Made Accused - Offence by company – Arraigning director only and company not arraigned – Held that for maintaining the prosecution u/s 141 of the Act, arraigning a company as an accused is imperative - Appellant only was impleaded as an accused complaint with respect to the offence u/s 138 read with 141 of the Act was not maintainable -Judgment dated 17.4.2010 passed by the Trial Court, order dated 27.5.2011 passed by the Appellate Court and the impugned judgment dated 09.11.2012 passed by the High Court liable to be set aside and the appellant liable to be acquitted. (Paras 11 and 12) Cases Referred : Aneeta Hada v. M/s. ...

Directors of companies and partners of firms have been fastened with stricter onus by the Supreme Court in cheque bouncing cases. It ruled last week that notice of dishonour of cheques to the company is sufficient, and there is no need to serve separate notices on the directors. The directors are supposed to know about the dishonour when the company gets the notice. There is sufficient time, nearly 75 days, to find which directors are responsible for the fault and therefore, there is no need to prolong the process by serving notices on each director or partner. The Supreme Court overruled the Bombay High Court which had maintained that separate notices were essential. Allowing the appeal case, Kirshna Texport & Capital Markets Ltd vs Ila Agrawal, the court asked the high court to reconsider its view regarding the trial of two directors. Analysing Sections 138 and 141 of the Negotiable Instruments Act, the court said: "There is nothing in Section 138 which may even remotely sug...

Case Referred: 1. Dashrath Rupsingh Rathod vs. State of Maharashtra and Another, 2014 (9) Supreme Court Cases 129. Facility to en cash cheque at any bank branch - Held: Mere presentation of cheque in a CBS branch does not give rise a cause of action and confirm territorial jurisdiction to Court of that area - . On bare reading of provisions contained in Section 138 read with Section 142 of NI Act and the view taken by the Apex Court in Dashrath Rupsingh Rathod (supra), there is no scope of confusion that complaint under Section 138 of NI Act will be maintainable only at the place where the cheque stands dishonoured. In other words, the prosecution for the offence under Section 138 of NI Act would only lie at the place where the drawee bank is situated. 2015 STPL(Web) 482 DEL [2015 (1) DCR 169] DELHI HIGH COURT (MR. VED PRAKASH VAISH, J.) GOYAL MG GASES PVT. LTD. Petitioner VERSUS STATE & ORS. Respondent ...................... 7. Learned counsel for t...

1) Suryalakshmi Cotton Mills Limited v. Rajvir Industries Limited and others 2) Rallis India Limited v. Poduru Vidya Bhushan and others 3) Pulsive Technologies P. Ltd. vs. State of Gujarat 4) Modi Cements Ltd. vs. Kuchil Kumar Nandi IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 471 OF 2015 (Arising out of SLP (Crl) No. 5295 OF 2014) HMT Watches Ltd. ... Appellant Versus M.A. Abida & Anr. … Respondents A high court cannot go into the factual aspects of a dispute over stop-payment of cheques and they should be tested during the trial, the Supreme Court stated in the judgment, HMT Watches Ltd vs M A Abida. The latter was a re-distribution stockist of the firm and she issued 57 cheques which bounced. The company filed complaints under the Negotiable Instruments Act. She argued that the cheques were given as security and therefore there was no liability, the main ingredient in Section 138 of the Act. Moreover, the cheques...

2014 STPL(Web) 1670 KERALA [2014(3) CIVIL COURT CASES 110] KERALA HIGH COURT (THOMAS P.JOSEPH, J.) P.J. THOMAS Appellant VERSUS VIJAYKUMARI Respondent Crl. Rev. Pet. No.61 of 2012-Decided on 27-3-2014. (A) Negotiable Instruments Act, 1881 - Section 138 - Dishonour of Cheque - Date of receipt of information of dishonour - Issue and service of notice are proved - Payee can give notice of dishonour to drawer only if payee gets that information - He could not be compelled or expected to do something which is not possible of him - Therefore, it is open to payee to present cheque through his bank and if it is to be taken that date for reckoning period of 15 days is date on which collecting bank received information, it would mean that even before information regarding dishonour has reached payee, he is required to issue a notice intimating that dishonour and demanding payment. [Para 17] (B) Negotiable Instruments Act, 1881 - Section 138(b) - Dishonour of Cheque - Expression ’t...