Legislative Intention of Section 138- Cheques are equivalent to money | Strict Liability
In the case of Dalmia Cement(Bharat) Ltd. V Galaxy Traders and Agencies Ltd. , the Supreme Court intepreted the object of Section 138 of the Act.
The court observed that Negotiable Instruments Act was enacted; and section 138 thereof incorporated, with a specified object of making a special provision by incorporating a strict liability so far as the cheque, a negotiable instrument, is concerned . The law relating to the negotiable instruments is the law of commercial world which has been legislated to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another.
Hence the Court had clearly sought to make the offence under Section 138 strictly liable. The object of Section 138 it to give a very serious status to transactions especially with respect to trade and commerce. Anyone hindering the free flowing transactions as is sought under the Act, is to be punished.
Procedure of filing complaint- Timeline of a regular Cheque bouncing case
Step 1: Send Legal Notice -As per the provisions of Negotiable Instruments Act, Section 138 you must send a legal notice to the Defaulter whose Cheque has been Dishonoured. A legal notice has to be sent to the defaulter within 15 days of Dishonour of Cheque by Registered Post A.D.
Step 2: Legal Notice Details important (sent by the Payee/Receiver of the debt or money) - must be drafted by a good cheque bounce lawyer in India and contain all the facts of the case including the nature of transaction, Amount of Loan or any other legally enforceable debt for the satisfaction of which the cheque was issued, Date of Deposit in Bank, Date of Dishonour of cheque.
Step 3: 15 days grace period provided to Drawer- The Drawer (Person who has to pay off debt) has to make payment for the debt owed to the payee within 15 days of service of notice.
Step 4: When debt is paid-off within 15 days of service of notice the matter is done away with- Hence law provides for this 15 days grace period to delay any further legal action and to provide a second chance to the Drawer of the cheque to fully and properly pay the legally enforceable debt or loan to the payee.
Step 5: Payment not made within 15 days- The person who has been denied rightful debt payment for the reasons of the account not having sufficient funds etc, can now file a complaint in the form of a CRIMINAL CASE in the court of lowest jurisdiction
Step 6: 30 days crucial time period provided to the complainant to file the criminal case- 30 days are calculated from the expiry of the Notice Period of 15 days given to the Drawer of the cheque to repay the debt.
Step 7: Court issues process- Upon registering a complaint case, the matter gets listed in the Courts in due time. The Magistrate hears the arguments of the Complainant and issues the required process.
Step 8: The process issued by the Court is initiated by the police through service summons- The Police station where the accused is residing is informed about the case and they have to comply by serving the summons at the residence/ last known address of the accused.
Step 9: Court may issue Warrant in some cases- In cases where the accused remains absent on Court Dates even after service of summons then the case becomes slightly more grave and a warrant is issued by the Court. Now the police have the power to take the accused into custody and bring the defaulter to the next court hearing.
How to defend a Cheque Bounce Case?
The trends under Cheque bouncing cases in India have shown that there is a lot of harassment involved by the Payee or the person who had to be paid by the debtor or the Drawee of the cheque.
It is always advisable to anyone defaulting in a case under Section 138 to not be afraid of the court hearings as the proceedings although are of a criminal nature the proceedings are not as rough as a hardcore criminal trial. A cheque bounce advocate in India can help you in defending a cheque bounce case. The defaulter must remain present in the Court during the hearings to avoid an issue of a warrant against him/her.
Nevertheless, the case made out under Section 138 is a bailable offence as the punishment provided for the offence is Two Years. Hence all hope is not lost if for some reason a defaulter is unable to attend various court dates.
Process of obtaining Bail - The defaulter or the accused has to submit Surety. Surety has to submit all necessary documents including ownership and title deed of their House/ Land owned, Address Proof (ration card, Identity Card, Photo address proof). Upon receiving the summons from the Court, both the accused and surety must remain present in Court with the required documents. The Court generally accepts the surety if there are valid documents to his name. On accepting the surety, the Court mandates the accused to sign a bond along with the surety and thereupon bail is granted and the accused is released by Court.
Serious Legislative Intent to ensure smooth transactions under Negotiable Instruments Act
Certain legislative reforms have been passed in the last decade which have been consistently aiming at encouraging the usage of cheques and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities canbe ensured.
As per the Negotiable Instruments Act, the offence under Section 138 has been made compoundable. Hence the parties to the case can settle the matter between themselves and present an application in the Court for proof of the same. The Court may allow the application and immediately close the case.Hence initiating Court process can also be a means to get the defaulter to the negotiation table and pay off the debts if a rightful case.
The inter alia, amended sections 138, 141 and 142 and inserted new sections 143 to 147 in the said Act. These sections aimed at speedy disposal of cases relating to the dishonour of cheque through their summary trial as well as making them compoundable. Punishment provided under section 138 too was enhanced from one year to two years.
The latest change and the present prevalent law is the 2015 Ordinance, has the effect of nullifying the law as laid down by the Supreme Court in 2014, "Dasrat Rathod case'. The legal effect of the Ordinance is that, so as to institute a complaint under Section 138, the same must be instituted as per : If the cheque is delivered for collection through an account, the branch of the bank where the payee or holder, maintains the account, is situated; or If the cheque is presented for payment by the payee or holder otherwise through his account, the branch of the drawee bank where the drawer maintains the account, is situated.
This law comes with a promise to solve and aid in not only the speedy disposal of the pending cases pertaining to complaints under 138, but also to bring a sanctity to the system by seeking to clamp down on defaults in payments. It clarifies the legal position as to jurisdiction and also seeks to keep up with the modern banking system.
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