Negotatiable instrument act (cheque bounce)
dheepak srinivasa
(Querist) 17 April 2013
This query is : Resolved
Sir,
I had deposited a blank cheque with my signature as security deposit to a company. I had to pay only 10000/- as per my running balance but company filled up 4,00,000/ and deposited the cheque. This cheque got bounced for lack of funds and the company has sent me notice as per Negotatible instrument act.
1. Can the company have the right to fill up the blank cheque ? because my counsel has told me that only the drawer can fill the blank cheque is that correct? If correct under which section of CPC/NII?
2.What other recourse do I have as the company is from mumbai and I am from chennai and he is threating to file it the case is mumbai.?
Raj Kumar Makkad
(Expert) 17 April 2013
1. The action of the company filling more than due amount is illegal otherwise it can fill the exact amount due.
2. You should duly reply the notice sent by that company and should threaten to do all legal actions against them if they illegally file complaint under section 138 NI Act and you should enclose DD of your payable amount with the same reply.
M.Sheik Mohammed Ali
(Expert) 17 April 2013
1. yes the cheque holder can fulfill the amount.
2. the company can claim both city.
same time if you give that cheque for security deposit that company could not claim, already SC court order that security purpose given cheque could not come under NI Act. where are you from ?
DEFENSE ADVOCATE.-firmaction@g
(Expert) 17 April 2013
1) Case can be filed and you have to appear and contest.
2) You can win by efficient defense, any other action at this stage can not stop the filing of case.
3) You have given blank cheque or security cheque has to be proved by cogent evidence in the court, mere word of accused has no meaning.
SC in latest citation of LAXMI DYCHEM case has closed all such defenses.
Devajyoti Barman
(Expert) 17 April 2013
Immediatley send the company a protest letter alleging it doing the illegal thing of filling up with larger amount.It would be of help during trial
DEFENSE ADVOCATE.-firmaction@g
(Expert) 17 April 2013
Please read-
FROM LATEST SC ( 2012 ) LAXMI DYCHEM CASE.
JUSTICE J S THAKUR J-
17. It was contended by learned counsel for the respondent that the respondent-company had offered to issue new cheques to the appellant upon settlement of the accounts and that a substantial payment has been made towards the outstanding amount.
We do not think that such an offer would render illegal a prosecution that is otherwise lawful. The offer made by the respondent-company was in any case conditional and subject to the settlement of accounts.
Vidhi Joshi
(Expert) 17 April 2013
agree with advocate defense....no more to add
Raj Kumar Makkad
(Expert) 17 April 2013
I think the citation referred do no fit in the present matter.
ajay sethi
(Expert) 17 April 2013
blank cheque is no cheque ., if date and amount fiilled in without any authroisation from you no cheque bouncing case is maintanable . in reply to legal notice take the plea that blank cheques have been filled in . hope you had kept xerox copies of blank cheques
DEFENSE ADVOCATE.-firmaction@g
(Expert) 19 April 2013
Please tell me-
1) at what stage this plea will be taken.
2) How xerox copy in the hands of the accused can be a reliable evidence.Any accused can first take xerox of blank cheque and than fill it and give.
Madras HC has raised a valid point for such plea. The Honble HC says that if the any account holder signs a cheque and asks any body to fill it and bank is ready to make payment , how it can be illegal.
Mr Raj Makkad Please read the whole citation and tell us where your views are supported by it.
THERE HAS TO BE RELIABLE AND COGENT DEFENSE TO WIN ANY CHEQUE BOUNCE CASE WHICH OTHERWISE EASY SURE AND SIMPLE.
ajay sethi
(Expert) 19 April 2013
when legal notice is issued to accused he can take the plea that date and amounts were kept blank and details have been filled in the complainant .
if it is case of complainant that chequre with amount and date were filled in by the accused then accused can exaqmine hand writing expert to prove that material laterations have been amde in cheque without any authroisation by the complainant .
DEFENSE ADVOCATE.-firmaction@g
(Expert) 19 April 2013
Dear sir pl inform whether such line of action has been accepted in any case in any court in any case.
I go all over India and routinely see that such line of defense is not accepted.
In Laxmi Dycem case SC has mentioned all earlier cases and has laid down the basic rule that cheque bounce is genus and all other reasons are its species. Their lordships have further enlarged the scope of offense that even if it is claimed that cheque was lost and it was misused still it is offense.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 19 April 2013
Following ARE some imp portions of this latest SC citation-
This presumption coupled with the object o f
Chapter XVII o f the Act leads to the conclusion that by
countermanding payment o f post-dated cheque, a party should
not be allowed to get away from the pena l provision o f Section
138 o f the Act. A contrary view would render Section 138 a
dead letter and will l provide a handle to persons trying to avoid
payment under lega l obligations undertaken by them through
their own acts which in other words can be said to be taking
advantage of one's own wrong.ā€¯
THE SUPREME COURT HAS FURTHER ADDED THAT=
Even in such cases, the question whether
or not there was a lawfully recoverable debt or liability for discharge
whereof the cheque was issued would be a matter that the trial
Court will examine having regard to the evidence adduced before it
and keeping in view the statutory presumption that unless rebutted
the cheque is presumed to have been issued for a valid
consideration.
STILL WE AS DEFENSE ADVOCATE HAS CONVICTION THAT ANY CHEQUE BOUNCE CASE HAVING ANY FACTUAL MATRIX CAN BE WON BY SIMPLE EASY AND SURE METHODS BY METICULOUS DEFENSE FROM DAY ONE BY EXPLOITING VARIOUS ROUTINE MISTAKES DONE BY THE COMPLAINANT IN OVER CONFIDENCE.
ajay sethi
(Expert) 19 April 2013
please peruse judgementsof bombay high court and other judgements wherein it has been held that blank cheque is no cheque . where amount , dates and have been filled in it amounts to material alteration of cheque . the issue would be whether details have been filled in with authorisation of accused or not
Andhra High Court
Avon Organics Ltd. vs Poineer Products Ltd. And Ors. on 4 July, 2003
Equivalent citations: 2003 (2) ALD Cri 219, 2004 119 CompCas
Section 87 of the Act reads as under :
"Effect of material alteration.--Any material alternation of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties ;
Alteration by indorsee, and any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof."
The Supreme Court in Kusum Ingots and Alloys Ltd. v. Pennar Peterson Securities Ltd. , laid down the
ingredients that have to be satisfied for making out a case under Section 138 of the Act. It is clear from the first ingredient mentioned a person must draw a cheque on the account maintained by him in a bank for payment of certain amount of money. Hence, it is clear from the principles laid down by the Supreme Court that the amount for which the cheque was drawn must be for a certain amount of money. If a person delivers the cheque without putting the actual amount payable, does it constitute a cheque within the meaning of Sections 5 and 6 of the Act ? I have already stated a bill of exchange contemplates mentioning of certain amount as payable. The cheque is a kind of bill of exchange, which means the amount payable must be mentioned in the cheque. At the time of issuing the cheque, the amount payable under the cheque is not mentioned. Consent is not given for which the amount was being drawn. It was virtually amounted to alteration of the cheque, which is not permissible. The letters do not make a specific mention that they can put the amount therein and they can draw. The act of the complainant in filling up the amount portion in words and figures and putting the date as per his own choice is certainly a material alteration. A blank cheque cannot be enforced even though it is issued for legal liability. It is stated in P. Srinivasulu v. Nagaral Eraiah Shetty alias N. Chinna Eranna Setty and Sons [1994] 2 An WR 225 that a presumption under Section 138 of the Act can be drawn in case where issuance of blank cheque which is not denied by the accused even though it was asserted by him that it was not issued with any dishonest intention. It is further stated in the said decision at para. 3, which reads as follows :
"The lower court found that exhibit P1 does not contain the ingredients of a valid cheque so as to attract the provisions of Section 139 of the Negotiable Instruments Act. In a case where a blank cheque has been issued, the issuance of which is not denied by the accused, even though it was asserted by him that it was not issued with any dishonest intention, the presumption under Section 139 of the Act can be drawn. The presumption under Section 139 is a rebuttable presumption, and the accused admitted the same and has not cross-examined the prosecution witnesses. Mere filling up of the figures in the cheque by the complainant will not be a ground for invalidating the cheque and preventing the party from taking steps under Section 138 inserted by the Negotiable Instruments Laws (Amendment) Act, 1988, on the ground of insufficiency of funds. This court has held that endorsement will not be a ground for throwing away the case under Section 138."
7. The Supreme Court has considered the issue regarding post-dated cheques in Ashok Yeshwant Badave v. Surendra Madhavrao Nighojakar . The relevant portion at para. 17 reads as follows (page 175) :
"From a bare perusal of Sections 5 and 6 of the Act it would appear that a bill of exchange is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at a designated future date or on demand. On the other hand, a 'cheque' is a bill of exchange drawn on a bank by the holder of an account payable on demand. Under Section 6 of the Act, a 'cheque' is also a bill of exchange, but it is drawn on a banker and payable on demand. A bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque. A post-dated cheque is not payable till the date which is shown thereon arrives and will become a cheque on the said date and prior to that date the same remains a bill of exchange."
8. It is categorically stated that post-dated cheque is not payable till the date, which is shown thereon, arrives and will become cheque on the said date and prior to that date the same remains bill of exchange. That was a case dealt with in respect of post-dated cheque etc. This court in Taher N. Khambat v. Vinayak Enterprises [1995] Crl. LJ 560 ; [1996] 86 Comp Cas 471 (AP) held in para. 10 as follows (page 476) :
"Section 138 of the Act is introduced with a view to avoid the malignant trade practice of indiscriminately issuing cheques without sufficient funds. The amendment is introduced with a view to curb instances of issuing such cheques indiscriminately. So, having regard to the purpose with which this provision is introduced, it is doubtful whether a case of this nature can be construed as attracting the provisions of Section 138 of the Act. In the instant case, the appellant advanced some money to the respondents and obtained a pronote. It was stipulated that the respondents should pay interest every month. At the same time the appellant-creditor took a blank signed cheque from the respondents with the understanding that the complainant could fill the other columns in the cheque and present it if the respondents committed default in payment of interest. The respondents paid interest for about eight months and, thereafter, stopped payment of interest. Then the appellant put the date on January 15, 1991, wrote his own name in the space intended for the payee and also mentioned the amount as Rs. 1,18,337 and presented the cheque. Even at the time when he presented the cheque, he would not have expected that the cheque would be honoured. He was presenting the cheque only with a view to get an endorsement which would enable him to proceed under Section 138 of the Act. If this sort of practice is allowed, every creditor would abuse the provisions of Section 138 of the Act by obtaining blank cheques and putting the debtors in fear of prosecution insist on discharge of the debts at any time. I do not think that would have been the intention of the Legislature while incorporating Section 138 in the Negotiable Instruments Act. Though the appellant did not state the circumstances under which he obtained the pronote and the cheque in his complaint yet it is clear from the evidence the circumstances under which the complainant obtained a signed blank cheque from the respondent. So, the appellant has obtained this blank signed cheque with a view to make use of it, as a threat to the respondents for realisation of the amount. So, it cannot be construed that the respondent had issued the cheque voluntarily for discharge of any debt or legal liability as envisaged under Section
138. I, therefore, find that the facts and circumstances of the case are not attracted by the provisions of Section 138 of the Act and that the learned magistrate was justified in acquitting the accused. Hence, the criminal appeal is dismissed."
9. Whenever blank cheques are filled up and presented, a presumption can be drawn under Section 139 of the Act. It is a rebuttable presumption. The question is whether the accused is able to rebut the presumption. I am of the considered view that he has rebutted the presumption in this case as he has not given consent to fill up the cheque for a particular amount in figures and words and the date portion. It constitutes alteration of the cheque. It cannot be done without the consent of the party who issued the cheque. I also state that it was issued for the legally enforceable liability, namely, towards the amount due under the invoices. But the instrument issued without mentioning the figures and words and date portion in the cheque do not amount a cheque or a bill of exchange at the time of its issuing. Subsequently, it can be altered only with the consent of the party, who has issued the cheque. Otherwise, it amounts to material alteration. When it does not constitute a cheque and the same is filled up and presented to the bank, it cannot be said that the accused has committed an offence. No doubt, morally the accused is not justified in issuing the cheque, when he is not having sufficient funds in the bank. But, the legality has to be judged in this case. The person who accepts the blank cheque certainly has to take it along with the risks to be faced under law. It is not open to him to complain subsequently when the amount has not been realised, etc. I am of considered view that the cheque issued without mentioning the amount for which it is drawn is not a cheque at all. It is not a bill of exchange at all as it is not drawn for a certain amount. When such is the thing, the question of invoking Section 138 of the Act does not arise. May be there is lacuna in Section 138 of the Act. It cannot be said that it covers invalid cheques also. Such an interpretation cannot be put on to it. It is for the Legislature to look at the lacuna found. The lower court has elaborately discussed and ultimately come to the conclusion that the complainant failed to establish the relevant ingredients that are to be established under Section 138 of the Act. The relevant ingredients that have to be established have already been mentioned by the Supreme Court in the decision in Kusum Ingots and Alloys Ltd. v. Pennar Peterson Securities Ltd. . If the facts are judged, I am of the considered view that the learned magistrate has rightly come to the conclusion that the ingredients under Section 138 of the Act are not established. In that view of the matter, there is no perversity in the judgment under appeal. The judgment rendered by the learned magistrate in C. C. No. 858 of 1997 is liable to be confirmed and it is, accordingly, confirmed.
10. The criminal appeal is, accordingly, dismissed.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 19 April 2013
Once the Suprem court LAXMI DYCHEM case of 2012 has come than it will be relevant , earlier HC cases can not have weight before SC citation.
More ever even if you read the HC citations completely there also accused was able to prove by independent evidence that blank cheques were given.
Notice from accused after bounce of cheque that cheque was blank is not credible. The accused should be able to show independent cogent evidence which even in above HC citations accused was able to show.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 19 April 2013
Case laws referred above the accused was able to prove evidence which was prior to cheque bounce- the COURT has accepted it in following words=
6. PW1 has produced two letters exhibits P15 and P16 written by the accused. The cheque was sent along with exhibit P15. The appellant was also produced exhibits P4 and P6 which showed the consignment. I have
perused the letters written by the accused. What is stated in the exhibit P15 letter is that he can present the cheque after one month. In exhibit P16 he requested for further time of 15 days.
ANY SUCH DEFENSE BY ACCUSED AFTER THE CHEQUE HAS BOUNCE IS NOT RELEVANT AND INTERESTED TESTIMONY AND HENCE CAN NOT BE BELIEVED UNLESS SUPPORTED BY INDEPENDENT EVIDENCE.
