Cheque bounce law nia 138
shyam
(Querist) 28 March 2013
This query is : Resolved
dear sir/madam,
one of my clients gave a cheque on giving him some service from our company.
the cheque was bounced citing reason " cheque payment stopped "
again we presented the cheque in the bank and it was returned with
same reason.
the cheque again bounced citing reason " cheque payment stopped "
i have spoken to some lawyer and he told me that in case of " stoppage of payment by the issuer of the cheque , the same cheque can not be represented again in the bank as per N. I. act 138, AND NOTICE CAN NOT BE SERVED, UNDER NIA 138 for second stoppage of payment, and cheque bounce if "payment stopped by issuer " of cheque is the reason of cheque bounce.
where as PER my knowledge ,the final supreme
court rulings ( in MSR LEATHER CASE ) ( negating the previous supreme court verdict in sadanand case )the apex court has clarified that with every cheque bounce fresh notice can be given and that the cheque can be presented any no.of times till the validity of the cheque, and fresh cause of action arises on every representation of the cheque which has bounced, and thus a fresh notice can always be given on every time cheque bounced or stop payment done by issuer of cheque.
pls clarify this matter.
DOES IT REALLY AFFECT THE CAUSE OF ACTION A S PER NIA 138,
2. I HAVE GIVEN NOTICE TO THE CHEQUE ISSUER ALONG WITH MY LAWYER , CAN 2 SIMULTANEOUS NOTICE CAN BE GIVEN FOR ONCE BOUNCE CHEQUE.
3. I M CLARIFYING THAT WE HAD NOT GIVEN any NOTICE , ON FIRST TIME BOUNCE OF CHEQUE , BUT REPRESENTED THE CHEqUE IN ThE BANK second time on request of cheque issuer , AND ON SECOND BOUNCE ( STOP PAYMENT ) , i along with my lawyer have sent a legal NOTICE under sec 138 nia.( two different notice, one from my side and one from my laywer side for the same cheque on second bounce.)
.
IS IT LEGAL to send two notice bounce of the cheque
Devajyoti Barman
(Expert) 28 March 2013
1. No it is not affected.
2. No only one notice is required.
3.Second notice is valid.
File case on the basis of one notice only.
Advocate M.Bhadra
(Expert) 28 March 2013
Information taken from Financialexpress:-----
The Supreme Court in MMTC Ltd v M/s Medchl Chemicals and Pharma Pvt Ltd (2001 AIR SCW 4793) has declared that even if cheque is dishonoured by reason that payment of cheques had been stopped by the drawer, complaint under section 138 of the Negotiable Instruments Act is maintainable.
The facts of the case are as follows: The appellant is a Government of India undertaking incorporated under the Companies Act. Pursuant to a memorandum of understanding two cheques, one dated 31 October 1994 for Rs 20,26,995 & another cheque dated 10 November 1994 for Rs 22,10,156 were issued by the first respondent in favour of the appellant. Both the cheques were presented for payment and were returned with the endorsement "Payment stopped by drawer".
The notices were issued & since the cheques were not paid, the appellant lodged two complaints through their regional manager, Mr Goel. The respondent filed two petitions for the quashing of complaint, which were then quashed.
It may be mentioned that the respondents had issued four further cheques to the appellants which were also dishonoured. In these cases also four complaints were lodged by the appellant through their regional manager. These four cases were also quashed by the magistrate and discharged the respondent
The high court allowed the revision petition filed by the appellant & set aside the order of discharge. The court held as between the same parties, that the magistrate had erred in holding that the complaints filed by Mr Goel were not maintainable and restored the four complaints and directed the magistrate to proceed with the trial in accordance with law.
In this case the respondent has taken identical contentions that the complaints filed by Mr Goel were not maintainable and that the cheques were not given for any debt or liability. Though it was pointed out that between the same parties and on identical facts, it has been held that the case for discharge was not made, high court ignored those findings and proceeded with the case.
The high court in its order interalia held the complaint is signed and presented by a person, who is neither an authorised agent nor a person empowered under the articles of association of the company or by any resolution of the board to do so. Hence the complaints are not maintainable and that the cognigence of the said complaints ought not to have been taken by the magistrate.
The Supreme Court opined that the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that the complaint under section 138 can be made by the payee or the holder in due course of the said cheque. The complaints filed are by the appellant who is the payee of the cheques.
The court relied upon its decision in the case of Vishwa Mitter v OP Poddar (1983 4 SCC 701) and quoted with approval its observation, "no court can decline to take cognisance on the sole ground that the complainant was not competent to file the complaint. If any special statute prescribes offences and make any special provision for taking cognisance of such offences under the statute, then the complainant requesting the magistrate to take cognisance of the offence must satisfy the eligibility criterion prescribed by the statute. In the present case the only eligibility criterion prescribed by section 142 is that the complaint must be by payee or the holder in due course. The criterion is satisfied as the complaint is in the name and on behalf of the appellant company.
The Supreme Court referred to the decision in case of Associated Cement Co Ltd v Keshavananda (1998 1 SCC 687). It was held that when the complainant is a body corporate, it is the de jure complainant & it must necessarily associate a human being as de facto complainant to represent the former in court proceedings and that no magistrate shall insist that the particular person whose statement was taken on oath at the first instance alone can continue to represent the company till the end of the proceedings.
Even presuming that initially there was no authority still the company can at any stage rectify the defect and at subsequent stage company can send a person who is competent to represent the company. The complaints could not have been quashed on this ground.
The Supreme Court rejected the conclusion of the high court that cheques were issued as security and not for any debt or liability xisting on the date they were issued and observed "it is settled law at this stage the court is not justified in embarking upon an enquiry as to the reliability or genuiness or otherwise of the allegations made in the complaint. The inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whims or caprice." The court rejected the argument that it is necessary to allege in the complaint that there was a subsisting liability and an enforceable debt & cheques were issued to discharge the same. In the absence of such vital allegation the suit cannot be maintained.
The Supreme Court relied on its decision in Maruti Udyog Ltd v Narendra (1999 1 section 113) wherein it was held that by virtue of section 139 of the Negotiable Instruments Act the court has to draw a presumption that the holder of cheque received the cheque for discharge of a debt or liability until the contrary is proved.
The apex court also rejected the submission that the complaint under section 138 could only be maintained if the cheque was dishonoured for reasons of funds being insufficient to honour the cheque or if the amount of cheque exceeds the amount in account. Further as the payment of the cheque has been stopped by the drawer one of the ingredient of section 138 was not fulfilled and hence the complaint was not maintainable.
The Supreme Court referred to its decision in Modi Cement Ltd v Kuchel Kumar Nandi (1998 3 SCC 249) wherein the above submission was rejected.
If the accused shows that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of cheque for encashment at the drawer bank and that stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, the offence under section 138 would not be made out. The burden of proof for so proving is on the accused.
The apex court directed the metropolitan magistrate to proceed with the complaints against the respondents in accordance with the law.
Raj Kumar Makkad
(Expert) 28 March 2013
Nothing to add more in the given replies.
