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.
