Cheque Bounce Cases Digest

Negotiable Instruments Act, 1881 (26 of 1881)

Section 138, 141 -- Cheque bounce case of Company – Incharge of the affairs of the Company, no document to support – Accused neither Director nor a signatory of cheque -- Quashing of complaint -- (a) The complaint is based on a Memorandum of Understanding, which is not signed by the petitioner and is rather signed by accused No.3. The dishonoured cheques were given to the complainant at the time of signing of the Memorandum of Understanding. (b) The cheque numbers of the disputed cheques are duly mentioned in the body of the Memorandum of Understanding signed by accused No.3, which show that he was the person In-charge of the Company as he entered into a Memorandum of Understanding on behalf of accused No.1-Company and had issued the cheques in favour of the complainant. (c) Even the cheques are not signed by the petitioner and the same are signed by accused Nos.2 and 3. (d) In the complaints, the only allegation in para 3 is that accused No.4-petitioner is In-charge of the affairs of accused No.1-Company, however, there is no document to support this version and rather in the reply filed by the complainant in High Court, nowhere reflects that the petitioner is the In-charge of the affairs of accused No.1-Company, in any manner. (e) There is nothing on record to support the complaints that the petitioner is one Director of accused No.1-Company as it is the case of the petitioner that he never remained the Director of accused No.1-Company at any stage and this fact is not disputed in the reply. Summoning orders and all other subsequent proceedings arising therefrom, are ordered to be quashed qua the petitioner.

(P&H HC) Decided on: 05.03.2020

Section 118(a), 138,139 -- Friendly loan of Rs. 20 lacs – Acquittal of accused -- -- Complainant has not mentioned in his complaint as to for what purpose, he had advanced such a substantial amount as loan to the accused. -- While appearing in the witness box applicant has deposed that the loan was advanced to the respondent in the presence of her father-in-law but she has not examined this witness in support of her claim. -- No other witness has been examined by her regarding the loan transaction. Applicant has also not produced on record any receipt or pronote for grant of loan to the accused. Therefore, the act and conduct of the applicant is highly improbable, as no sane person is expected to advance such a substantial amount as loan to any other person without any documentation or even receipt or acknowledgement. -- Complainant has also failed to mention the date, month and year of advancement of loan or issuance of cheque in question by the accused in her favour either in her pleadings or in her evidence. – Complainant has also not produced any document which may show her income/expenditure/ account of business income or the income tax return, which may draw an inference that she is financially well placed. -- She has not given any detail as to what business or profession she is carrying. -- Only contention, which the complainant has raised is that she has advanced a loan of Rs.20 lakhs to the accused as she had sold an industrial shed at Panchkula, but neither such sale deed nor any other relevant document has been produced on record by the complainant, which can substantiate the plea that the amount of Rs.20 lakhs was collected by her after the sale of the said industrial unit situated in Panchkula. When no evidence to connect the respondent-accused with the alleged offence is available on record, no case is made out for interference in the impugned judgment of acquittal.

(P&H HC) Decided on : 20.09.2017

Section 138, 141 – Code of Criminal Procedure, 1973 (2 of 1974), Section 482 – Offence against Director of Company – Issuance of process – Quashing of Complaint -- Supreme Court summarized the law as follows: a) Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director; b) If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. c) In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about role of the Director in the complaint. It may do so having come across some unimpeachable, uncontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, uncontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; d) No restriction can be placed on the High Court’s powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but, nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director.

(SC) Decided on: 17.10.2014

Section 138 – Constitution of India, Article 21 -- Dishonour of cheque -- Complaint u/s 138 of the NI Act – Speedy disposal of cases -- Directions given that : (1) Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinize the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons. (2) MM/JM should adopt a pragmatic and realistic approach while issuing summons. Summons must be properly addressed and sent by post as well as by e-mail address got from the complainant. Court, in appropriate cases, may take the assistance of the police or the nearby Court to serve notice to the accused. For notice of appearance, a short date be fixed. If the summons is received back un-served, immediate follow up action be taken. (3) Court may indicate in the summon that if the accused makes an application for compounding of offences at the first hearing of the case and, if such an application is made, Court may pass appropriate orders at the earliest. (4) Court should direct the accused, when he appears to furnish a bail bond, to ensure his appearance during trial and ask him to take notice under Section 251Cr.P.C. to enable him to enter his plea of defence and fix the case for defence evidence, unless an application is made by the accused under Section 145(2) for re-calling a witness for cross-examination. (5) The Court concerned must ensure that examination-in-chief, cross-examination and re-examination of the complainant must be conducted within three months of assigning the case. The Court has option of accepting affidavits of the witnesses, instead of examining them in Court. Witnesses to the complaint and accused must be available for cross-examination as and when there is direction to this effect by the Court. All the Criminal Courts in the country dealing with Section 138 cases to follow the above-mentioned procedures for speedy and expeditious disposal of cases falling under Section 138 of the Negotiable Instruments Act.

(SC) Decided on: 21.04.2014

Section 138, 145 – Dishonour of cheque – Complaint u/s 138 of NI Act – Evidence of Complainant – Procedure of -- Complainant can give his evidence by way of an affidavit and such affidavit shall be read in evidence in any inquiry, trial or other proceedings in the Court, which makes it clear that a complainant is not required to examine himself twice i.e. one after filing the complaint and one after summoning of the accused -- Affidavit and the documents filed by the complainant along with complaint for taking cognizance of the offence are good enough to be read in evidence at both the stages i.e. pre-summoning stage and the post summoning stage -- In other words, there is no necessity to recall and re-examine the complaint after summoning of accused, unless the Magistrate passes a specific order as to why the complainant is to be recalled -- In summary trial, after the accused is summoned, his plea is to be recorded under Section 263(g) Cr.P.C. and his examination, if any, can be done by a Magistrate and a finding can be given by the Court under Section 263(h) Cr.P.C. and the same procedure can be followed by a Magistrate for offence of dishonour of cheque since offence under Section 138 of the Act is a document based offence -- If the proviso (a), (b) & (c) to Section 138 of the Act are shown to have been complied with, technically the commission of the offence stands completed and it is for the accused to show that no offence could have been committed by him for specific reasons and defences.

(SC) Decided on: 21.04.2014

Section 138, 141 – Sick Industrial Companies (Special Provisions) Act (1 of 1986), Section 22-A – Code of Criminal Procedure, 1973 (2 of 1974), Section 482 -- Constitution of India, Article 227 -- Dishonour of Cheque -- Prosecution of the Company/ Directors – Company declared Sick -- Maintainability of complaint u/s 138 of NI Act -- In a case in which the BIFR has submitted its report declaring a company as ‘sick’ and has also issued a direction u/s 22-A restraining the company or its directors not to dispose of any of its assets except with consent of the Board then the contention raised that a criminal case for the alleged offence u/s 138 NI Act cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejected outright -- Whether the contention can be accepted or not will depend on the facts and circumstances of the case -- For instance, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of the BIFR u/s 22-A was passed against the company then it cannot be said that the offence u/s 138 NI Act was completed -- In such a case it may reasonably be said that the dishonoring of the cheque by the bank and failure to make payment of the amount by the company and/or its Directors is for reasons beyond the control of the accused -- In such circumstances it would be unjust and unfair and against the intent and purpose of the statute to hold that the Directors should be compelled to face trial in a criminal case.

(SC) Decided on: 23.02.2000