Section 138 need advice

Parveen,

There is no record made in the police station regarding handing over of the cheques. Reg. financial status, we are way better off than them. We live in a city whereas they live in a small town. Can they just lodge a fresh police complaint against us for cheque stop payment and harass us using the police? If so, what precautions should we take?

Thanks.

So far as lodging of complaint with police regarding dishonour of cheque for stop payment is concerned, it is not possible because offence under section 138 of the N. I. Act (Cheque bounce) is cognizable by a Judicial Magistrate Ist Class only on a criminal complaint filed before it and not before police.

As stated by you, your financial stauts is much above than that of the in-laws of your brother then, it will be very difficult for them to prove the you owed any liability towards them.

WHAT HAS BEEN STATED IS CORRECT AND UPTODATE

Dear. it seems  that the diary entry was made or complaint was received by the concerned police officials at police station and thereupon called you over there and case was compromised and settled between the parties and you have handed over the cheques in the police station . so now you can not run from your liability  .bouncing of cheques is aganin a crime under  section 138 NI Act .So you can not escape from paying the amount of cheques

Subhash Kumar,Adv

hello,

the given facts do not attract sec. 138 of the NIAct. it cannot be proved that it was legally enforceable debt.

dilip kotak advocate

I thank all of you for your advice.

I agree with Dilip

i agrea with everyone....u can do 1 more thnig...just sent a letter to ur bank tat u hav lost blank cheques which were signed by the you or the a/c holder and not 2 give money wen those chqs cum 4 clearance..........no liability as well also arise u/s 138......as there is no legal debt or liability against which u hav issued the chqs

THRE IS NO LEGALLY  ENFORCIABLE LIBILITY HENCE COMPLAINT U/S 138 IS NOT MAINTAINABLE.

Does that mean that in case a person proves that he is not liable to make payment to the holder of the cheque/ no liability is maintainable,  and he deliberately dishonours the cheque by not keeping sufficient balance in his account, can he escape S 138 liability??

What is the justification?

Cheques were signed under undue influence??

Or as one of the replies, signed cheques lost????

 well 4 case under 138 to b maintainable...there must b a legal liability towards which u hav made the payment....whether its a loan ...a bill payment.....etc..its upon u how u defend ur case aur present ur case during evidence & argument....

Thanks Sweta, for your reply, but I want to know whether a person can escape S 138 liability by proving that no previous liability/ debt is maintainable??

Is this a tool used in general??

section 138 of N.I .Act will apply only when there is  LEGALLY ENFORCIABLE DEBT.

When a  signed cheque lost or taken by undue influence ,atonce one has to  file a written complaint before the staion house officer of that area and a copy of the same has to send to supdt. of police for information and it will be helfful when somebody files a  false  case u/s 138 of N.I Act. 

Dear Mr. Sunil Pagare and Ujas Dharamshi.

You have said in your opinion that under “Sec. 138 attract if there is legally enforceable debt. It is the duty of the holder of the cheque to prove it .If the cheque is given under the influence or threaten of the party then also 138 is not attract. Your duty is to send legal notice to the holder of the cheque & ask him to return the cheque.”

See:

Section 138. Dishonour of cheque for insufficiency, etc., of funds in the accounts

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for ²["a term which may extend to two year"], or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) The payee or the holder induce course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer, of the cheque, ³["within thirty days"] of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability].

OBJECTS AND REASONS OF AMENDING ACT OF 2002

The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter XVII was incorporated for penalties in case of dishonour of cheques due fo insufficiency of funds in the account of the drawer of the cheque. These provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The existing provisions in the Negotiable Instruments Act, 1881, namely, sections 138 to 142 in Chapter XVII have been found deficient in dealing with dishonour of cheques, Not only the punishment provided in the Act has proved to be inadequate, the procedure prescribed for the Courts to deal with such matters has been found to be cumbersome. The Courts are unable to dispose of such cases expeditiously in a time bound manner in view of the procedure contained in the Act- (Para 1)

Keeping in view the recommendations of the Standing Committee on Finance and other representations, it has been decided to bring out, inter alia, the following amendments in the Negotiable Instruments, Act, 1881, namely:-

(i) to increase the punishment as prescribed under the Act from one year to two years;

(ii) to increase the period for issue of notice by the payee to the drawer from 15 days to 30 days; (Para 4)

1. Inserted by Act 66 of 1988, , sec. 4 (w.e.f. 1-4-1989). Earlier Chapter XVII relating to " Notaries Public" Inserted by Act 2 of 1985, sec. 10, was replaced by the Notaries Act, 1952 (53 of 1952), sec. 16 (w.e.f. 14-2-1956).

2. Substituted by Act 55 0f 2002, sec. 7 for "a term which may extend to one year" (w.e.f. 6-2-2003).

3. Substituted by Act 55 of 2002, sec. 7, for "within Fifteen days" (w.e.f. 6-2-2003).

I, being a friend would like to make some correction in your opinion that if you go through the provision of section 139 of Negotiable Instrument Act, 1881, then you would come to know that it is not the duty of the holder of the Cheque to prove that the cheque in question was given against the legally enforceable debt or liability, but on the contrary it is the duty of the accused of prove that the cheque in question was not given against the legally enforceable debt or liability.

The holder has just to file a Complaint under section 138 of Negotiable Instrument Act, 1881 against the accused person and presumption lies in favour of Complainant that the accused has issued the said cheque in question against the legally enforceable debt or liability, unless the accused rebut the presumption under section 139 of the Act by leading his evidence.

139. Presumption in favour of holder

¹[Presumption in favour of holder

It shall be presumed, unless the Contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability].

1. Inserted. By Act 66 of 1988, sec. 4 (w.e.f. 1-4-1989).

Now coming up to the opinion given by Dear Mr. Praveen that there no presumption exist and he has relied upon the Supreme Court Judgment dated 11.01.2008 titled 'Krishna Janardhan Bhat VS. Dattatraya G. Hegde'.

My dear friend I have carefully gone through that Judgment cited in AIR2008SC1325, delivered by Hon’ble Mr. Justice S.B. Sinha and Harjit Singh Bedi.

Speaking of the majority Justice Sinha, nowhere does say that there is no presumption under section 139 of Negotiable Instrument Act.  However justice Sinha found that the Complainant  said in his statement that he has withdrawn a sum of Rs.1,50,000/- from the society and gave to the Accused. In his cross examination the Complainant could not disclose the denominator of the Notes.

See the relevant Paras of the Judgment:

“According to him, he had been running such an industry in the name of Prasad Enterprises even prior to 1996. His acquaintance, according to him, with the appellant was only through his brother-in-law. He did not say that he had friendship with the appellant. There also does not appear to be any business transactions between them. He could not state about the denomination of the notes although according to him he had drawn the amount from the society”.

18. He did not produce any books of accounts or any other proof to show that he got so much money from the bank. He admittedly did not have any written document pertaining to the accused. He accepted that there was no witness to the transaction. He, of course, denied certain suggestions, but the suggestions put to him were required to be considered by the court below in the backdrop of the facts and circumstances of the case.

25. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is 'preponderance of probabilities'. Inference of preponderance of probabilities can be drawn not only from the materials brought on records by the parties but also by reference to the circumstances upon which he relies.

26. A statutory presumption has an evidentiary value. The question as to whether the presumption whether stood rebutted or not, must, therefore, be determined keeping in view the other evidences on record. For the said purpose, stepping into the witness box by the appellant is not imperative. In a case of this nature, where the chances of false implication cannot be ruled out, the background fact and the conduct of the parties together with their legal requirements are required to be taken into consideration.

28. Four cheques, according to the accused, appear to have been drawn on the same day. The counterfoil of the cheque book, according to the appellant, was in the handwriting of R.G. Bhat wherein it was shown that apart from other payments, a sum of Rs. 1500/- was withdrawn on a self-drawn cheque. The courts below proceeded to hold that the defence raised by the appellant has not been proved, which, in our opinion, is not correct. He did not know that the said cheque had not been encashed. He replied to the notice thinking that one of the cheque has been misused. There is nothing on record to show that he knew that one of the cheques was still with R.G. Bhat.

34. We are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This, however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same.

35. Keeping in view the peculiar facts and circumstances of this case, we are of the opinion that the courts below approached the case from a wholly wrong angle, viz., wrong application of the legal principles in the fact situation of the case. In view of the legal position as has been enunciated by this Court in M.S. Narayana Menon (supra) and later cases, we are of the opinion that the High Court should have entertained the revision application.

For the reasons aforementioned, the appeal is allowed. The judgments of conviction and sentence passed against the appellant are set aside.

I agree with you all upto the extent that there must be a legally enforceable debt or liability to attract the penal provision of section 138 of Negotiable Instrument Act, 1881. But the section 138 read with section 139 make the accused person liable, unless the accused successfully rebut the presumption lies in favour of the Complainant under section 139 of the Act.

As Ms. Pooja rightly questioned during the course of discussion:

Does that mean that in case a person proves that he is not liable to make payment to the holder of the cheque/ no liability is maintainable, and he deliberately dishonors the cheque by not keeping sufficient balance in his account, can he escape S 138 liability??

What is the justification?

Cheques were signed under undue influence??

Or as one of the replies, signed cheques lost????

 I would just say that under the principle of Criminal Jurisprudence the prosecution must prove its case beyond reasonable doubt to hold the Accused guilty. But the provision of section 138 is quite different because there is a provision under section 139 of the Act, which lays the Burdon to prove innocence on the accused. The accused has to rebut the above captioned presumption by leading evidence in his favour that there no legally enforceable debt or liability exist against him.

Just saying that I am not liable to pay the amount mentioned in Cheque would not suffice the purpose of rebutting the presumption.

See the opinion of the Supreme Court while deciding the case.

33. But, we may at the same time notice the development of law in this area in some jurisdictions.

The presumption of innocence is a human right. [See Narender Singh and Anr. v. State of M.P. MANU/SC/0341/2004 : 2004CriLJ2842 , Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra and Anr. MANU/SC/0268/2005 : 2005CriLJ2533 and Rajesh Ranjan Yadav @ Pappu Yadav v. CBI through its Director MANU/SC/5112/2006 : 2007CriLJ304 ] Article 6(2) of he European Convention on Human Rights provides: "Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law". Although India is not bound by the aforementioned Convention and as such it may not be necessary like the countries forming European countries to bring common law into land with the Convention, a balancing of the accused rights and the interest of the society is required to be taken into consideration. In India, however, subject to the statutory interdicts, the said principle forms the basis of criminal jurisprudence. For the aforementioned purpose the nature of the offence, seriousness as also gravity thereof may be taken into consideration. The courts must be on guard to see that merely on the application of presumption as contemplated under Section 139 of the Negotiable Instruments Act, the same may not lead to injustice or mistaken conviction. It is for the aforementioned reasons that we have taken into consideration the decisions operating in the field where the difficulty of proving a negative has been emphasized. It is not suggested that a negative can never be proved but there are cases where such difficulties are faced by the accused e.g,. honest and reasonable mistake of fact. In a recent Article "The Presumption of Innocence and Reverse Burdens: A Balancing Duty" published in [2007] C.L.J. (March Part) 142 it has been stated:

In determining whether a reverse burden is compatible with the presumption of innocence regard should also be had to the pragmatics of proof. How difficult would it be for the prosecution to prove guilt without the reverse burden? How easily could an innocent defendant discharge the reverse burden? But courts will not allow these pragmatic considerations to override the legitimate rights of the defendant. Pragmatism will have greater sway where the reverse burden would not pose the risk of great injustice - where the offence is not too serious or the reverse burden only concerns a matter incidental to guilt. And greater weight will be given to prosecutorial efficiency in the regulatory environment.

I would say that even in the aforementioned opinion and in the very last line the court said that a greater Weight will be given to prosecutorial efficiency in the regulatory environment.    

 My Dear Friend,

In your case first your in-laws has to prove that how this amount is legally enforceable liability. Thereafter if you are able to prove that your in-laws have not given any amount to your family, in repayment thereof you have issued the post dated cheques, then there is no need to worry about it because the this transation does not come in the definition of leagally enforceable debt or liability.

However as per my knowledge in this transition the cheques were not issued against the legally enforceable liability if you are able to prove that you have issued the cheques in question for withdrawing the criminal case under the settlement.  

If your in-laws themselves say that you have issued the Cheques under the settlement for withdrawing the criminal case, then the provision of “Indian Contract Act” would attract. Thereafter you have to prove that this settlement is against the public police and harmful in nature. I hope you would succeed.  

 If you are able to prove that the Cheque in question were issued for the payment of the amount for settlement and to withdrawal of the Complainant/FIR, whatsoever is it, then you should not worry about it.

I would suggest you that intimate the Bank to honor the said Cheeses in question, inform the police that you have issued some cheques under undue influence i.e. payment absent the settlement of the Criminal Case filed against your family. But only doing these things would not suffice your purpose. Better you find a lawyer, who has caliber to deal with this situation and get a notice issued to return all the Post dated Cheques. Surely you will get the result in your favour.  Otherwise you are liable to pay the amount mentioned in the Cheque, if the Complainant under section 138 is field.  

I hope you would satisfy with the same.

Thanking you.