Absconded drawer - Dishonoured cheque

Sec 138 Negotiable Instruments Act, 1881

Procedure to Serve Notice:

01) It is really a catastrophic nightmare to the Holder of the DishonouredCheque more so when the Drawer absconded,whereabouts unknown, leftno assets.  With the fond hope of recovery, the hapless puzzled victim, thePayeeruns wary of various places at least to complete the service of Notices onfled away untraceable Drawer.  Here are a few broad illustrative legal procedures for the benefit of such sufferers,not exhaustive.

02) First send a legal Notice to the mysterious Drawer at the last known/ given/ recorded address within 30 days of receipt of 'cheque return memo' from the bankby Registered Post with AD or by Speed Post or by an approved Courier or Fax or e-mail or by such means.When the legal Notices returned undelivered with the remarks of postal department 'addressee not found', keep it in tact unopened.

03) The Payee or the holder in due course or holder for value or holder, hereinafter referred to as 'Payee', cannot contend the address of the Drawerunknown without which as to how the cheque in question came into his possession arises.

04) If the Drawer is not responding within 30 days of Notice, after the 15th day from the last day of the Notice, file a criminal complaint u/s Sec 138 of NI Act 1881 before the I class Magistrate of jurisdiction.

05) The court will issue Notice to the vanished Drawer, naturally will be returned unserved. The court may direct the Police to investigate.  The Payeemay pray the court through his Attorneyto serve through the concerned local SP, Police Department, to enable them to find the whereabouts of the Drawer.

06) If the Police accept the direct complaint from the Payee, they may investigate and find absconding Drawers whereabouts, normally may not be practical, stating to be civil dispute.

07) The publication in a local leading daily Newspaper both vernacular and English to respond within the given specified time, is a legal formality.

08) In Criminal case, as per Section 65 of the Code of Criminal Procedure, 1973, if the service cannot by the exercise of due diligence be effected as provided in section 62, section 63 or section 64, the serving officer shall affix one of the duplicates of the summons to some conspicuous part of the house or homestead in which the person summoned ordinarily resides, and thereupon the court, after making such inquiries as it thinks fit, may either declare that the summons has been duly served or order fresh service in such manner as it considers proper.

09) Once the cheques are dishonoured, a Civil suit for recovery of the said amount under the summary procedure provided in Order 37 of Code of Civil Procedure, 1908is one of the best provisions in the hands of a proposed Plaintiff.

10) Rule 1, Sub-Rule 2 makes it applicable to all suits upon Bills of Exchange, Hundies and Promissory Notes or the ones in which a Plaintiff seeks only to recover a debt or liquidated demand in money payable on a written contract, an enactment, where the sum to be recovered is a fixed sum of money or in nature of any debt except penalty, a guarantee, in respect of a debt or liquidated demand.

11) In Civil case, the mode of service of Summons as envisaged in Section 27 and Order 5 of the Code of Civil Procedure is followed.Without proper completion of service of Summons, Civil case cannot be further progressed.

12) After completion of service of the Court Summonsas per prescribed procedures, the legal proceedings commence. The court will issue Warrant of Arrest as the Drawercontinues to remain absent rather absconds on the dates of hearings.

13) During the trial, the deceptiveDraweras usual remainsconsecutively absent, the case will be decreed ex-parte.  The EP follows.

14) After long drawn legal battle, how the amount is to be recovered from the mythicalDrawerremains amillion dollar question in the absence of any of his whereabouts or tangible assets.  Payee continues his lost treasure hunt to dig fairy Drawers hide out.

Jurisdiction of filing the cases as per clauses (a) (b) and (c) of Section 142(2) of NI Act, New Ordinance dated 15-06-2015:

15)Many a time situations arose as to the territorial jurisdiction in case of

— single cheque dishonoured from one account and

— multiple cheques bounce of a single Drawer having various accounts with one or more branches of the same Bank at single station or different places.

To bring uniformity and certainty as well avoid harassment to Drawer and Payee, the Supreme Court has indicated certain guidelines as per the said amended provisions.

First situation:

16) The Payee for example is in Mumbai and his account maintained in Mumbai.  The cheque is received say from Pune and presented in Mumbai returned unpaid.  Now, the cheque bounce case has to be filed in the court at Mumbai only,the place where the Payee maintains the bank account, the Collecting Banker.

Second situation:

17) The Payee already filed a case for one dishonoured cheque in Mumbai against the Drawer on which the case is continuing.  Meanwhile, some more cheques from the same Drawer, drawn on different places with various banks are received say from Pune and Nasik.

18) The other cheques subsequently received now from Pune and Nasik are presented by the Payeein some other banks in different Stations/ Cities but dishonoured.  Even then, for the rest of all otherdishonoured cheques, the court of jurisdiction will be Mumbai only, where the first cheque in previous case goes on.

19) If the Payee of a bearer cheque or holder in due course presented a 'bearer cheque' for payment other than through the account, then the case has to be filed at the branch of the Drawee bank where the Drawer maintains the account ie at Pune or Nasik.

20) To ensure the Drawer of the cheques is not harassed by Payee filing one case at Mumbai and some more cases for all the other cheques at various places Pune and Nasik;relief is provided to the Drawer as well as the Payee to file one case at one Collecting Banker place ie Mumbai only, to prevent unnecessary avoidable legal ordeals to Drawer at different locations.  Multiple cheque bounce cases of different drawee banks at various places therefore shall be filed by Payee,only at the first one single course of jurisdiction.

21) In the light of different situations as per the amended act, for a single or multiple dishonoured cheques, the court of territorial jurisdiction shall the place where the cheque is presented by the Payeewhereas for the 'bearer' cheque the place of Drawer bank where the account is maintained.

DISHONORED CHEQUE—COLLECTING BANKER CHARGES RATIONALE

Collection Charges:

22) It is quite often argued when the Payee or Holder in due course or Holder for value or Holder hereinafter referred to as Payee for brevity presents a cheque for collection dishonoured, the Collecting Banker slaps Collection Charges on each and every presentation, an additional levy, at his no fault, on the crippled victim in race of Drawers chase.

23) While levying the Drawer contended to be justified, simultaneous hit on the unpaid Payee with bank charges is argued to be injustice.  The rationale behind such Collecting Banker charges whether or not the cheque is honoured goes as under.

 Collecting Banker:

24) A Banker who undertakes to collect various types of Instruments defined under Indian Negotiable Instrument Act, 1881 (NI Act) representing money on behalf of his Customer or on his own behalf from the Drawer of such instruments is termed as the Collecting Banker.

Responsibilities of Collecting Banker:

25) As per Section 131, a banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.

26) Explanation I: A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer's accounts with the amount of the cheque before receiving payment thereof.

27) Explanation II: It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.

Duties:

28) Collects in good faith and without negligence on behalf of his Payee Customer, Acts as his agent for collection, Scrutinize the instrument, Guards against its fraudulent use, Checks the endorsement, Presents the instrument in due time, Collects the proceeds into the payee’s account, Issues Notice of dishonor and return the instrument.

Rationale:

29) The collection charges levied from the Payees account is nominal when compared to the Duties and Responsibilities undertaken, the Cost of funds involved including the Operational costs.

30) The moment a cheque is deposited into Payees account for collection, the collecting banker has to earmark such sum lying in shadow/ actual balance from bank owned funds or borrowed from call money market at higher rate on which no interest is earned.

31) The Bank parts funds till receipt from the Drawers bank, the cost of such idle funds during the interregnum period as a whole for any banker added together would be huge.

32) The cheque return charges nominal in the good old days is enhanced to discourage both ends, the Drawer and the Payee thereby limit transactions of 'Window Dressing'.

33) For cash transactions to deposit/ transfer to different account within intra/inter City/State or different States or in the same/different bank, charges are applied.

34) Charges are also recovered not only to cover operational costs but also to discourage cash transactions to prevent tax evasion, money laundering, unearth black money besides save paper currency and reduce risk.

35) To encourage secured net banking through NEFT/ RTGS, as per Reserve Bank of India guidelines, the charges are kept NIL for lower slabs or very nominal for other higher range.

36) In a fiduciary system like Banking, for the justifications illustrated mentioned  above the collection charges levied by Collecting Banker is quite negligible though the unpaid Payee feels the untimely cannot be avoided.