Bouncing of Cheque under Negotiable Instrument Act, 1881

Right of  the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested

In the case of Rangappa v. Sri Mohan, (2010) 11 SCC 441 it was held that

“(..)we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. (..)As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.

Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. (..)the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard or proof.

In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under  Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own(…)since the accused did admit that the signature on the cheque was his, the statutory presumption comes into play(…)”(emphasis supplied)

A person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption

Bir Singh Vs. Mukesh Kumar, 2019 (4)  SCC 197 the Hon’ble Supreme Court observed and held:

“37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.

38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence.”

Ascertained and crystallized debt or other liability if exists on the date when the cheque is presented

In Credential Leasing & Credits Ltd. vs Shruti Investments & Anr. (2015) SCCOnLine Del 10061, Hon’ble Delhi High Court has held that the scope of section 138 NI Act would cover cases where ascertained and crystallized debt or other liability exists on the date when the cheque is presented and not only to the cases where ascertained and crystallized debt or other liability exists on the date on which it was delivered to the seller as a post- dated cheque or as a current cheque with a credit period.

29. Further as held in V.S. Yadav v. Reena , a bare denial of passing consideration or merely pleading that the cheques were given as security will not amount to rebut the presumption u/s 138 read with s.118 of the Act. Further, the defence pleaded in the notice of accusation and under the statement u/s 313 read with s.281 Cr.P.C do not assume the character of defence evidence. The accused has to substantiate and probabilize his defence by bringing forth facts and circumstances, which he may choose to do so, either from the evidence of the complainant itself or from his own independent evidence.

Power of Appellate Court to order payment pending appeal against conviction under NI Act

Section 148 of the Act as it stands today reads as follows:

“148. Power of Appellate Court to order payment pending appeal against conviction.–(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court:

Provided that the amount payable under this sub- section shall be in addition to any interim compensation paid by the appellant under Section 143-A.

(2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant.

(3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:

Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.”

The section directs that when an appeal is filed by the drawer of cheque under Section 138, the Appellate Court may order such sum which shall be minimum of 20% of the fine or compensation awarded by the trial Court. This is in addition to whatever interim compensation the complainant would be ordered to be entitled to under Section 143A. The said deposit is to be made within 60 days from the date of the order or within a further period not exceeding 30 days as may be directed by the Court on sufficient cause being shown by the appellant and the appellate Court after receipt of such deposit may direct release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal. If the accused is acquitted, the complainant will have to repay the amount so taken in terms of sub-section (3) of Section 148 of the Act and that shall be refunded within 60 days from the date of the order or within such period not exceeding 30 days as may be directed by the Court by sufficient cause being shown by the complainant.

8. What would emerge from the scheme of Section 148 is that the Appellate Court has no discretion to reduce the amount so stipulated under sub-section (1) of Section 148 of the Act to be deposited by the drawer of the cheque who files an appeal on his conviction i.e., 20% of the total fine amount or compensation awarded by the trial Court and in addition to interim compensation awarded during the pendency of the trial.

Therefore, the word ‘may’ will have to be read as ‘shall’ as the statute does not confer any discretion to reduce the minimum from 20%. This has to be deposited within 60 days extendable by 30 days on sufficient cause being shown. Therefore, there can be no extension also that could be granted by the learned Sessions Judge for deposit of the amount. Sub-section (3) of Section 148 confers discretion on the Appellate Court for directing release of the amount deposited by the appellant in favour of the complainant as the words deployed are ‘the Appellate Court may direct’ and ‘at any time during the pendency of the appeal’. The statute therefore here vests/confers such discretion upon the appellate Court for directing payment to the complainant and refund of the amount in the event of acquittal should also be done within an outer limit of 60 days extendable by 30 days on sufficient cause being shown by the complainant. Therefore, for deposit and refund there is no discretion conferred by the statute for the concerned Court for extension beyond, 90 days in each case.

SURINDER SINGH DESWAL v. VIRENDER GANDHI [(2019) 11 SCC 341]

“6.1. The short question which is posed for consideration before this Court is, whether the first appellate court is justified in directing the appellant- original accused who have been convicted for the offence under Section 138 of the NI Act to deposit 25% of the amount of compensation/fine imposed by the learned trial court, pending appeals challenging the order of conviction and sentence and while suspending the sentence under Section 389 CrPC, considering Section 148 of the NI Act as amended?
6.2. While considering the aforesaid issue/question, the Statement of Objects and Reasons of the amendment in Section 148 of the NI Act, as amended by way of Amendment Act 20 of 2018 and Section 148 of the NI Act as amended, are required to be referred to and considered, which read as under:

 “The Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. However, the Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases. This is because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. As a result of this, injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque. Such delays compromise the sanctity of cheque transactions.
2. It is proposed to amend the said Act with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money. The proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy.

3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment) Bill, 2017 to provide, inter alia, for the following, namely–

(i) to insert a new Section 143-A in the said Act to provide that the court trying an offence under Section 138, may order the drawer of the cheque to pay interim compensation to the complainant, in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint;

and in any other case, upon framing of charge. The interim compensation so payable shall be such sum not exceeding twenty per cent of the amount of the cheque; and

(ii) to insert a new Section 148 in the said Act so as to provide that in an appeal by the drawer against conviction under Section 138, the appellate court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial court.

What is Cheque & Different Types of Cheque

Types Of Cheques

A cheque is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits as well as words to the person whose name is borne on the cheque.

Cheques are also called negotiable instruments. In banking terms, a negotiable instrument is a document that promises its bearer a payment of the specified amount either on furnishing the document to the banker or by a given date.

We offer a variety of current/cheque accounts, fixed deposits and savings account designed to suit your perso
nal banking needs.

The issuing party is called the drawer of the cheque, and the one it is issued to or put simply, whose name is mentioned on the cheque is the drawee.

What are the types of cheques?

How many types of cheques are in use depends on elements like who is the issuer and who is the drawee. Based on these essentials, we explore the different types of cheques in India.

1. Bearer Cheque

A bearer cheque is the one in which the payment is made to the person bearing or carrying the cheque. These cheques are transferable by delivery, that is, if you are carrying the cheque to the bank, you can be issued the payment to. The banks need no other authorisation from the issuer to be allowed to make the payment.

How can you identify a bearer cheque? You know it is a bearer cheque when you see the words ‘or bearer’ printed on them.

2.  Order Cheque     

In these cheques, the words ‘or bearer’ is cancelled. Such cheques can only be issued to the person whose name is mentioned on the cheque, and the bank will do its background check to authenticate the cheque bearer’s identity before releasing the payment.

3. Crossed Cheque

You may have observed cheques with two sloping parallel lines with the words ‘a/c payee’ written on the top left. That is a crossed cheque. The lines ensure that irrespective of who presents the cheque, the payment will only be made to the individual whose name is written on the cheque, in other words, the a/c payee along with his/her account number. These cheques are relatively safe because they can be encashed only at the drawee’s bank.

4. Open cheque

An open cheque is basically an uncrossed cheque. This cheque can be encashed at any bank, and the payment can be made to the person bearing the cheque. This cheque is transferable from the original payee (the original recipient of the payment) to another payee too. The issuer needs to put his signature on both the front and back of the cheque.

5. Post-Dated Cheque

These types of cheques bear a later date of being encashed. Even if the bearer presents this cheque to the bank immediately after getting it, the bank will only process the payment on the date mentioned in the cheque. This cheque stands valid past the mentioned date, but not before.

6. Stale Cheque

A cheque past its validity, three months after the date of being issued, is called a stale cheque.

7. Traveller’s Cheque

Foreigners on vacations carry traveller’s cheques instead of carrying hard cash, which can be cumbersome. These cheques are issued to them by one bank and can be encashed in the form of currency at a bank located in another location or country. Traveller’s cheques do not expire and can be used for future trips.

8. Self Cheque

You can identify self cheques by the word ‘self’ written in the drawee column. Self cheques can only be drawn at the issuer’s bank.

9. Banker’s Cheque

A bank is the issuer of these types of cheques. The bank issues these cheques on behalf of an account holder to make a remittance to another person in the same city. Here the specified amount is debited from the account of the customer, and then, the cheque is issued by the bank. This is the reason banker’s cheques are called non-negotiable instruments as there is no room for banks to dishonour these cheques. They are valid for three months. They can be revalidated provided specific conditions are met.

SOURCE: HDFC Bank