Legal Reference Library

The Supreme Court in Kumaran Vs State of Kerala & Anr. has held that compensation ordered by the court would be  recoverable even though a default sentence has been suffered. A bench comprising Justice RF Nariman and Justice Navin Sinha upheld a Kerala High Court decision that had approved the order of magistrate by invoking Section 421 CrPC issuing a distress warrant against the accused for realising compensation ordered in a cheque bounce case but for different reasoning. The order of the high court was assailed before the apex court on the ground that compensation under Section 357(3) would be covered by the proviso if the accused has undergone the default sentence awarded and special reasons in writing would have to be recorded before action under Section 421 can be initiated. The court observed that the objective of the legal fiction created by Section 431 is to extend for the purpose of recovery of compensation until such recovery is completed – and this would not o...

The Gujarat High Court, in Harshad Manubhai Malavaiya vs State Of Gujarat, held that husband is not liable for a cheque issued by the wife in her personal capacity. In the instant matter, Justice JB Pardiwala examined the question whether the petitioner can be made vicariously liable under Section 138 for the cheque dishonoured which were issued by his wife in personal capacity. Relying on the Supreme Court’s judgment in the matter of M/s Aparna A Shah vs M/s Sheth Developers Pvt Ltd  and considering the language used in Section 138 and taking note of background agreement pursuant to which a cheque is issued by more than one person, this court held that it is only the “drawer” of the cheque who can be made liable for the penal action under the provisions of the NI Act. The normal rule in the cases involving criminal liability is against vicarious liability. To put it clear, no one is to be held criminally liable for an act of another. In the above judgment, the Supreme Court ...

Cheque; Sarafudheen Vs. T. Muhammed Ashraf [Kerala High Court, 15-07-2016]  Case Law Section 138 of the Negotiable Instruments Act Michael Kuruvilla v. Joseph J. Kondody, 1998 (1) KLT 384 Babu Lal v. Kewal Chand, 2008 (1) Crimes 147 (MP) Negotiable Instruments Act, 1881 – Ss. 9 & 138 – ‘self cheque’ – holder in due course – cheque was issued in the form of a “self cheque” – at the same time, it is a bearer cheque also, since the terms “or bearer” has not been scored off – therefore, cheque could be treated as a “bearer cheque” – therefore, when cheque is a “bearer cheque”, the possessor of the cheque for consideration can be termed as a “holder in due course”. Negotiable Instruments Act, 1881 – Ss. 9 & 118 (g) – holder of the cheque – when it is admitted that the complainant is the holder of the cheque, the presumption under Section 118(g) of the N.I.Act is available to the complainant. It shall be presumed that the complainant being the holder of the cheque is the ...

The Supreme Court, in N Paraeswaran Unni vs G Kannan, has held that a reminder notice to the drawer of the cheque cannot be construed as an admission of non-service of the first notice by the complainant. In the instant case, the complainant had issued a notice to the complainant within15 days of the cheque bouncing, but it was returned with an endorsement ‘intimation served, addressee absent’. He again sent a notice, wherein it was returned with postal endorsement “Refused, returned to sender”. The trial court allowed his complaint, which was later upheld by the first appellate court. However, the high court set aside these concurrent findings on the ground that that the statutory notice was beyond the prescribed limitation period as mentioned under Section 138 of the NI Act. On appeal, the apex court bench comprising Justice NV Ramana and Justice Prafulla C Pant observed that it is settled law that when a notice is sent by registered post and is returned with postal endorseme...