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...

In Hazi Jahangir Molla Vs. Md. Alim Mallick, the Hon'ble Calcutta High Court decided that Part payment cannot defeat the entire cause of action. Further Even if one person who has no money lending licence cannot be debarred from granting any accommodation loan to his friend or other person on him he has confidence. The opposite party took the accommodation loan and he cannot take the shelter of the money lenders’ act to defraud the person who accommodated him. Taking into consideration the factual aspects of this case this revisional application is to be decided on the following points. (1) Whether the demand notice was defective as because a part payment to the tune of Rs. 1,00,000/- was accepted and that is the departure from the cause of action itself? (2) Whether the complaint is barred by limitation? (3) Whether the cheque was issued in discharge of existing liability? (4) Whether the part payment of cheque is enough to defeat the entire cause of action? (5) W...

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...

The Calcutta High Court, in M.K. Products vs. Blue Ocean Exports (P) Ltd. & Ors., has said that a complainant cannot challenge the order of acquittal before the Sessions Court under the proviso to Section 372 of the Code of Criminal Procedure, in a case under Section 138 of the Negotiable Instruments Act. The judgement delivered by Justice Sankar Acharyya dealt with the question of whether an acquittal in a case of dishonour of cheque, instituted on a complaint, could be challenged at Sessions Court without the grant of special leave by the High Court. Relying on the Kerala High Court decision in Omana Jose vs. State of Kerala and Others (which in turn discusses the principles in case Subhash Chand vs. State (Delhi Administration), the court reached the decision to uphold the impugned order. The relevant observations from the Kerala High Court’s judgement in that matter which the Calcutta High Court relied upon were: After the introduction of the definition of ‘victim’ in Secti...

The Madras High Court bench has refused to interfere in a cheque bounce case, saying private complainants cannot prefer appeals against acquittal of the accused directly before it without approaching the sessions court concerned. Justice P Devadoss dismissed the appeal by one K Sudhakar against acquittal of the accused, by a judicial magistrate in Tiruchirapalli, saying the criminal appeal against the acquittal of the proprietor of a Chennai-based company was not maintainable. He said a Full Bench (comprising three judges) had laid down norms relating to the rights of victims and complainants on the issue of preferring appeals and also procedures to be adopted in cases where the complainant was also the victim. A victim of the crime, who had prosecuted an accused, had the right of appeal before the court before which such appeal would normally lie under the Criminal Procedure Act, he said. In a private complaint, even if the victim was not a complainant, he had a right to appea...

A 3 Judge Bench of the Supreme Court in Econ Antri Ltd. Vs. Rom Industries Ltd. & Anr. has recently answered a reference whether for calculating the period of one month which is prescribed under Section 142(b) of the Negotiable Instruments Act, the period has to be reckoned by excluding the date on which the cause of action arose?. While answering the reference, the Supreme Court held as under: On 13/10/2006, while granting leave in Special Leave Petition (Criminal) No.211 of 2005, this Court passed the following order: “In our view, the judgment relied upon by the counsel for the appellant in the case of Saketh India Ltd. & Ors. v. India Securities Ltd. (1999) 3 SCC 1 requires reconsideration. Orders of the Hon’ble the Chief Justice may be obtained for placing this matter before a larger Bench.” Pursuant to the above order, this appeal is placed before us. 2. Since the referral order states that the judgment of this Court in Saketh India Ltd. & Ors. v. India Securiti...

The Supreme Court in Standard Chartered Bank vs. State of Maharashtra has reiterated that a Director cannot get a Section 138 Negotiable Instruments Act complaint against him quashed under Section 482 of Code of Criminal Procedure, merely on the ground that apart from the basic averment no particulars are given in the complaint about his role In this case, the High Court had quashed the summons issued to director and other officials of a company, which had issued cheques to the bank which were dishonoured, singularly on the ground that there are no allegations against them connecting them with the affairs of the Company. The Bank preferred the appeal before Apex court. Apex Court referred to Gunmala Sales Pvt. Ltd. v. Anu Mehta and Ors. wherein it was held “ When in view of the basic averment process is issued the complaint must proceed against the Directors. But, if any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only ...

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...

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 ...

The question whether cheques that bounced were issued in discharge of a debt/liability or it was only a security resurfaced in the Supreme Court in its judgment, Don Ayengia vs State of Assam. In this case, two parties agreed on building a multi-storied tower but later terminated the project. Don had given Rs 10 lakh to the other partner and he wanted it back. The partner issued a promissory note offering to pay the amount in a month. He also issued five cheques as 'security'. The payment was not made on time and the cheques were tendered to the bank, which rejected them due to 'insufficiency of funds'. Don prosecuted his partner and the trial court sentenced him to one year simple imprisonment and imposed compensation of Rs 12 lakh. On appeal, the district court changed the order to a fine of Rs 2,000 and payment of Rs 12 lakh. The Gauhati high court set aside all these orders maintaining that the payment was as security. Therefore, Don appealed to the Supreme Court. I...

A Two Judge Bench of the Supreme Court comprising of Justices J.S.Khehar and R.Banumati has held that, in view of the Amended Section 142(2) of Negotiable Instruments (Amendment) Second Ordinance 2015, the place where a cheque is delivered for collection i.e., the branch of the bank of the payee or holder in due course, where the drawee maintains an account, would be the determinative of the place of territorial jurisdiction for filing Complaint under the NI Act. The Bench was hearing an Appeal from an order dated 5.5. 2011 of Madhya Pradesh High Court in which it is held that the Jurisdiction to file a Complaint under NI Act lay only before the Court where-in the original drawee bank was located. The High Court relied on the Three Judge Bench Judgment of the Supreme Court in Dashrath Rupsingh Rathod vs. State of Maharashtra. Criminal Appeal No. 1557 of 2015 (Arising out of SLP (Crl.) No. 7850 of 2011), Criminal Appeal No. 1562 of 2015 (Arising out of SLP (Crl.) No. 9758 of 2011), Cr...

Arising out of SLP (Crl.) No. 6134-6135 of 2005] WITH CRIMINAL APPEAL NO. 951 OF 2006 [Arising out of SLP (Crl.) No. 6252 of 2005] S.B. SINHA, J : Sabitha Ramamurthy & Anr vs R.B.S. Channabasavaradhya on 13 September, 2006 Section 138 of the Negotiable Instruments Act provides that where a cheque drawn by a person is returned by the bank unpaid on the grounds specified therein, the person who had drawn the said cheque shall be deemed to have committed an offence thereunder. Section 139 provides for a presumption in favour of a holder of a negotiable instrument. Section 141 of the Act provides for offences by a company. Sub-section (1) of Section 141 reads as under: "141. Offences by companies.(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be...

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....

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...