How to Handle a Cheque Bounce Case

The following are the important takeaways from "How to handle a cheque bounce case" a webinar on Lawsikho by Vignesh Raj.  
 
There are three parts of the same:

• How to proceed with issuing of Notice and filing of complaint
• How to proceed with the case 
• Factors for consideration

The first step while proceeding with a Section 138 Negotiable Instruments Act case is that it is important to confirm that the cheque was issued towards the discharge of a debt. If the cheque was not issued towards discharge of debt, a case under Section 138 NI Act is not maintainable. Once, you do that, send a legal notice within 30 days of the check 'bounce'. If the drawer fails to make payment within 15 days of receipt of the demand notice, then a complete complaint be filed within 30 days. This is known as the 30-15-30 rule.

Now the question arises who do you send the notice to?

It is always sent to the person who has failed to discharge his debt. But what happens when a cheque is issued by a Corporate Entity? A company is a legal person in its own right. However, you cannot send a company behind the bars. You need a physical person for that. Generally it is considered that a person who is responsible for conduct of business of the company shall be deemed guilty of the offence [Section 141 of the NI Act]. This means that a person who has signed the cheque on behalf of the company is deemed to have committed the offence along with the company. Also, all such persons who are responsible for the day to day conduct of the business of the company shall be responsible along with the company. Say the accounts officer has signed the cheque and the Managing Director of the company was conducting its day to day affairs. The person who sends the demand notice has to address the notice to all the three i.e. the Accounts Officer, the Managing Director as well as the Company.

How to deal with a cheque bounce case as an Advocate?

The legal notice, known as the demand notice in this case, must be delivered to the accused usually through registered post acknowledgement due. You should keep a copy of the demand notice with you. There may be cases where people send demand notices by email. Unless there is regular correspondence to prove that the email was in fact being used by the sufficient service of notice on the accused or until or unless a receipt is received from such person that he has received the email, such service by email shall not be considered sufficient service. Proof of receipt is only upon acknowledgement and there has to be a record of such acknowledgement. On the other hand, if you send the demand notice by courier, you can have the tracking report as proof of service.

Essentials to file a Complaint u/s 138 NI Act

1. Ensure that you satisfy all the conditions for a NI Act case to be maintainable.

2. Present the cheque along with the return memo and provide all the documents which form the basis of the assertion that the cheque was issued towards discharge of debt.

3. Ensure that you are able to prove, beyond reasonable doubt, that you received a purchase order and that you were able to satisfy the said order through proof of sale of goods or provision of services without there being any dispute regarding the quality of goods or services or without there being any dispute regarding the existence of debt.

What is the remedy that a person can have if the cheque is dishonoured and he hasn't taken any action for considerable amount of time?

People usually present the cheque if it is within the first 6 months of date of issuance of the cheque to get a further return memo on the basis of which a complaint under section 138 NI Act is fixed. One can also file a civil suit for the recovery of sums due and payable within a period of 3 years from the date of cause of action.

How do the proceedings take place in a 138 NI Act case?

The proceedings take place as if it is a summons case. The first requirement that any Advocate is required to do is that you have to present the complaint before a Magistrate carrying the originals of the Cheque, the Cheque return memo, the Notice and the reply received and also all the documents which show the existence of debt in the first place. Post that you have the 'sworn statement' wherein the complainant is brought for the examination of the originals of the document and thereafter, notice is issued to the accused to be present before the court.

If the accused arrives, he will have to enter appearance before the court. If not, there may be a Non-Bailable Warrant issued or the court may ask to furnish a fresh address of the accused as the case maybe. Then the case moves into trial.

More often than not, before the cases reaches the stage of judgment, payment of the cheque bounce amount due and payable will stand satisfied on the payment of the principal amount. The court will not ask for costs of litigation, any interest etc. if you are able to discharge the debt due on the cheque. But in the event the case reaches the stage where the judgment is passed, the court may ask you to pay all the amounts mentioned above over and above the amount due and payable.

What can an accused do in a cheque bounce case? 

If all the three essentials regarding a cheque bounce case are fulfilled against the accused, there is not much that he can do, it is a simple open and shut case. However, there are situations, especially in a case against a company, where the accused can be let go especially if he is not made aware of the complaint or it includes him without any basis. For example, if you do not know who is running the day to day affairs of the company, then all those persons who are not signatory to the cheque, and who are not the company in itself, will not be liable for any reason whatsoever under the 138 proceedings unless one can show how such a person was aware of the day to day proceedings or was conducting the day to day proceedings of the company. Also, one of the defences available to the accused is if the complainant does not have proof that the notice sent out was in fact received by the accused, the latter can always contend that one of the conditions for a cheque bounce case has not been met so therefore he may ask for him being acquitted in such cases.

If the essential ingredients are satisfied, it is always better to settle if you are the accused, by paying the principal amount due and payable, to close the case.  

Top skills to acquire if you want to run your own business someday

The following are the key takeaways from a webinar of the same name by Lawsikho's Ramanuj Mukherjee

Become a knowledge and skill acquisition machine - Anything can help. Even reading a book can help. There is nothing wrong with bookish knowledge. But it is not complete. It is important to understand that it is not complete. It is giving you a perspective, it is giving you information but nothing is final. That is why it is important be a knowledge and skill acquisition machine. There is no end to it. You keep doing it. Steve Jobs learnt Calligraphy in College. This knowledge helped him to come with better fonts while designing Macintosh. So you have to be a knowledge aficionado.

Become a World Class Communicator - APJ Abdul Kalam spoke about how one might not be a great speaker but still be a great communicator. To be a good business leader, you have to develop this skill. You can be a very good storyteller. Analogies can be other great example. Inter-personal skills – oral and writing – in both ways, you are able to communicate through writing as well as speaking.

Blogging and Article writing - One of the things that you need to make your company successful is that you have to attract good people to come and work with you. That first 10 people are very important. And people will come and work with you for no other reason but your vision. What are you trying to build? What are you trying to do? Why is it important? If you don’t succeed what will happen? If you succeed what will happen? All these things need to be articulated to get people excited to work with you.When you are building a business, the first question to ask is why have you chosen this problem to work on? When you are building a business, usually you are solving a problem. If you are not solving any problem, what sort of business are you building? But why this problem? Why should anyone care about this business? Why should anyone care about this particular problem? So when you are able to think about it and articulate it, people will come to you, customers will come to you, your initial supporters will come to you, your initial employees, co-founders or even investors will come to you because they read and they are persuaded that yes, I believe in this cause. Yes, I believe in this company. I believe in this idea. So this is very very critical.

Basic Video Skill – Today’s public speaking is at a very different level. Video communication has become very important. You can impact people through videos. There are very cool softwares which can make a video more attractive and drive a point home. The future is video communication. If you are able to ace this skill, you can build an audience and get your ideas across to the world and it can make a good difference.

Communicate with Actions and not just words

Ditch the vague and cliché – Skip roundabout bullshit. You will not be rewarded in real world for saying vague and cliché things. Lot of people have a tremendous lack of clarity. So you have to make sure that there is no vagueness in what you are saying.

Become world class at Self-Management – If you are managing yourself really well, from there your leadership starts. So you can start talking about managing others, or managing an organization etc. You should become very good at managing your mind, body, health, emotion etc.

Relationships and Networking – Are you good at building new relationships, nurturing them and maintaining them? Are you able to deliver value to people you are networking with? If you are not able to do some of these things it will have a huge impact on your prospects as a founder. It is a mindset you need to develop over a period of time and you get better and better at it.

Learning to build and manage a team. – You need to be able to attract good quality people. And you need to make them perform. Some people will not perform and you need to fire them. Some people will perform and you need to keep them excited, you have to help them to do better and better over a period of time.

Connect – Are you connecting with people who are going to be able to help you? Are they connecting with your ideas and concepts?

Inspire - Are you able to get people to move just beyond thinking and debating and ideating and brainstorming to actually committing to do something?

Set High Standards – People will do something and say this is it. This is only what we can do. Insisting on a higher standard is a very important job of a founder and a leader.

Training People – When you are a small business, you don’t have people who come trained, or you don’t have enough money to hire trained people, in such a case you will have to learn a lot of skills yourself and train people in those skills to produce the results that you want.

Manage – Managing a startup can be equivalent to managing a Nursery or KG class. People are prone to disruption, they want to get paid and do no work, even if they want to do work they want to go in different direction and not follow the policy of the company or not follow a cohesive path. So keeping people together, focusing on the right priorities and keeping them going in the right direction is very challenging.

Support as they grow and evolve – You have to be the support system for a lot of people. As they grow and evolve they will face different challenges and you have to be their friend and guide whom they can come to for guidance and emotional support.

Retain – Better than an MBA you can go to a startup and you can learn a lot. But in reality it is quite difficult. If someone is really good, big companies want to hire him. There are companies which have more money than you and which are more desperate than you even if they are smaller so they are ready to pay them more money. You can never win that race even if you are paying above average salary than the market. People will stay because they feel like a part of a tribe, they feel like they are part of something big. They feel like they are part of making history. They feel like they are part of some important work that they don’t want to go just because some people offer more money. It is much harder for anybody to offer an environment where people can thrive. Where people can feel great, where people can feel that they are doing the best work of their life. Certain people will see that environment and complain that people are working too much and will run away. It is good for non-performers to run away. The people who are high performers would want to stay. You have to create a culture where high performers are sought after and low performers go away.

Developing Leadership – As your startup grows, you would want people who provide leadership rather than just do a job. People who are not just following you but are leaders in their own right.

Integrity and Accountability – First of all, you need to have this, and then you need to promote and cultivate it in the organization. There is no culture of lying, misleading, cutting corners etc. You need to believe in these things and you need to promote these things and it is harder to produce results with these things. You might be tempted as to why don’t I lie. But if you build that culture it will pay off later.

Socio-Political, philosophical and legal perspective – Which is why you need to be a knowledge acquiring machine. Suddenly you are responsible for deciding the direction in which your company is going. If you don’t have an understanding of the socio political system, then you will not know what to do. There will be such situations where you will have to decide which opportunities to go after and which to avoid. What are the risks that your company should avoid? What are the opportunities that are going to open up in the future? How does the future look like and can you take that into account? You need to be someone who understands where the world is headed. What are the forces that are shaping the world. Once you understand those things it will have a huge impact on your business.

In order to develop this perspective, you have to be a reader – For example, is conservatism on the rise in the world? If so, why? Is identity politics on the rise in the world? If so, why? What about its impact on India? How will it impact my business? Laboratory produced meat – is it possible that this is the future of food? What are the most important trends in food? What kind of work will be there for lawyers? What kind of lawyers will be in demand? Issues like the concept of algorithmic collusion in competition law, funding of losses, predatory high pricing, killing competition with massive funding, selling things below cost etc. Will same sex marriage be allowed in India? Once you study what is happening in the world, you might get an idea about what is going to happen in India. Look at rise of concerns around privacy in the world, you will realize what is important to people. What is the priority for the next generation? How do they see the world? It is important for you to understand this if you want business continuity.

Vision – It is something where you are able to imagine a future that touches and inspires other people. This will be informed by a better understanding of the world and if it so, it will be a more powerful vision that is likely to succeed and easier for people to buy in.

Questioning the status quo – People are having problem paying change in the bus. People always take this for granted. But an Entrepreneur looks at this and says can I make a change here. Can I solve this problem? Metro cards – there is a long queue of people trying to recharge their cards. Can there be a solution that we can pay from our phone directly to recharge the card? Normally, people are taught not to question the status quo. However, an entrepreneur is different.

Developing an ability to build – Can you build something? Can you physically build a product? The ability to write a book etc.

Marketing and Outreach – A good marketer is someone who sits in front of the computer and thinks how can I tell the whole world about this product or this service. I have a project, how can I get a lot of other people to come together and participate. How can I influence a lot of other people with this idea? Do you know what kind of content to post on social media to get a lot of attention? Can you make a good newsletter? Do you understand how to run Facebook, LinkedIn, Google ads etc?

Become good at managing money – You need to be able to track the cashflow and prioritise how to spend that money if you want to succeed.