Vakila Varte

15-06-2008                         Fortnightly                         Four pages


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Dishonoured Cheques

Use and misuse of cheques has become very common in both business and personal transactions. Every day lakhs of cheques are issued and collected for different purposes such as donations, payments, deposits, debt clearance , security and many other purposes. At times, some of these cheques get bounced when presented for encashment to banks and the persons who have drawn the bounced cheques may even refuse to pay the cheque amount.

Please also read the following topics:

Drop colonial vacation practice of Courts and reduce 17% of pending cases every year.

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Cheque bounce cases under Section 138 of the amended Negotiable Instrument Act.

Money Matters
Property title should be valid, clear. Basic Property Documents.

Property Points
Writing a WILL to voluntarily bequeath( leave ) properties to others after death.

Personal Laws

Under such circumstances, the cheque holders of the bounced cheque will have a legal remedy to recover the cheque amount, if the dishonoured cheque was issued towards debt or legal liability. They can file a criminal complaint under Section 138 of the amended Negotiable Instrument Act in the jurisdictional criminal court which will punish the person/s who have drawn / signed the bounced cheques , to pay fine or to under go imprisonment up to two years or both, for the offence committed.

The fine imposed may be up to the double the bounced / dishonoured cheque amount and a whole or a part of it will be awarded to the cheque holders as compensation . If the accused is incapable or refuse to pay fine and prefers imprisonment in civil prison, the Cheque holder will not get any money under this complaint. The alternative for him to file a separate suit for recovery of the cheque amount.

The remedy under section 138 , is available only if the cheques are issued to clear debt or liability, a notice is sent properly demanding the payment of cheque amount and the demanded amount is not paid with in time by the cheque drawer.

A complaint under this Section will not succeed if the bounced cheques have been issued to pay donations, to advance loan or towards allotment of shares , in short, not issued towards debt or liability.

However when the cheque is issued , it will be presumed that it is towards the debt or liability and it is left to cheque drawers to establish in Courts other wise. They can avoid punishment only if they establish that the dishonoured cheques are not issued towards debt or liability and the filing of complaint is not in order . Otherwise they will be liable for punishment.

Thousands of cases are being filed every day in Indian courts under the Section 138 since the success is almost Guaranteed and there in no court fee/expenses , apart from advocates fee.

Most of these cases are settled amicably before the final judgment for various reasons. Accused will come for settlement when he has no records to disprove legal liability and the complaint filed , is in order.

The complainant agrees to settlement when he realizes that either it will take long time to get his money or he may not get it if the accused prefers imprisonment ,opting not to pay fine.

Our courts also encourage amicable settlements by the parties.