Cheque Bounced

CHEQUE BOUNCE: CONCEPT, RULES, NOTICE, PROCEDURE & PENALTY

A cheque bounce can occur due to various reasons such as inadequate balance, when the validity of the cheque has expired, in case of a torn cheque, or overwriting in the cheque. The drawer of the defaulted cheque is liable to criminal and civil proceedings under the Negotiable Instruments Act, 1881. The notice must be sent within 30 days from the date of the cheque bounce and the drawer must comply within 15 days. The penalty can be imprisonment, fine or both.

SUPREME COURT UPHOLDS CONVICTION IN CHEQUE BOUNCE CASE

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INTRODUCTION

A two-Judge Bench of the Supreme Court comprising of Justice B.R. Gavai and Justice Sandeep Mehta had passed an Order dated 29.01.2024 in?Criminal Appeal No(S) 478 / 2024? (Arising out of SLP(Crl.) No(s). 16641 of 2023)?in?Ajitsinh Chehuji Rathod Vs. State Of Gujarat & Anr.?and held that the onus of rebutting any presumptions against genuineness of signatures on the Cheque that got dishonoured is on the Accused by leading appropriate defense evidence and the Court cannot be expected to assist the Accused to collect evidence on his behalf.

FACTS

i) That the Appellant, Ajitsinh Chehuji Rathod was prosecuted for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act)?(Dishonour of cheque for insufficiency, etc., of funds in the account)?before the Ld. Trial Court with an allegation that the Cheque to the tune of Rs. 10 Lakhs issued by the Appellant in favour of the Complainant Shri Mahadevsinh Cahndaasinh Champavat upon being presented in the bank was dishonoured “for insufficient funds and account dormant”.

ii) That during the course of the trial, the Appellant preferred an Application dated 13.06.2019 before the Ld. Trial Court with a prayer to send the Cheque to the handwriting expert for comparison of the handwriting as well as the signature appearing thereon with a plea that his signature had been forged on the Cheque in question.

iii) The Ld. Trial Court rejected the Application vide Order 13.06.2019 itself observing that the Application was aimed at delaying the trial. The Ld. Trial Court further observed that the matter was at the stage of defense and the Accused could lead evidence to prove his claim pertaining to the mismatch of signatures.

iv) The Order dated 13.06.2019 passed by the Ld. Trial Court was not challenged any further and thus the same attained finality. The Ld. Trial Court, proceeded to convict the Accused-Appellant vide Judgment dated 07.11.2019.

v) The Appellant preferred an Appeal before the Ld. Principal Sessions Judge, Gandhinagar and during the pendency of the same, he filed an Application under Section 391 of the Code of Criminal Procedure, 1973 (?PC) (Appellate Court may take further evidence or direct it to be taken) for taking additional evidence at the Appellate stage and seeking a direction to obtain the opinion of the handwriting expert after comparing the admitted signature of the Accused-Appellant and the signature as appearing on the disputed Cheque. Another prayer made in the said Application was that the concerned officer from the Post Office should be summoned so as to prove the defense theory that the Notice under Section 138 of the NI Act was never received by the Accused-Appellant.

vi) That the Application preferred by the Appellant was rejected by the Ld. Principal Sessions Judge, Gandhinagar vide Order dated 25.07.2023, which was appealed by the Appellant to the High Court in?Criminal Misc. Application No. 17933/2023?which was dismissed by the High Court, vide Order dated 25.10.2023.

vii) Aggrieved by the Order dated 25.10.2023, the Appellant filed?Criminal Appeal No(S). 478 / 2024 (Arising out of SLP(Crl.) No. 16641 of 2023)?before the Hon’ble Supreme Court.

SUPREME COURT ANALYSIS

The Apex Court, vide Order dated 29.01.2024, made the following observations:

1) The Supreme Court opined that?it is a well-settled law that the power to record additional evidence under Section 391 CrPC should only be exercised when the party making such request was prevented from presenting the evidence in the trial, despite due diligence being exercised or that the facts giving rise to such prayer came to light at a later stage during pendency of the appeal and that nonrecording of such evidence may lead to failure of justice.

2) The Bench further observed that the Ld. First Appellate Court, i.e., the Ld. Principal Sessions Judge, Gandhinagar had observed that during the trial, the Appellant examined the witness of the Bank of Baroda in support of his defense but not a single question was put to the said witness regarding the genuineness or otherwise of the signatures as appearing on the Cheque in question.

3) Further, as per the Cheque Return Memo of the Bank dated 26.02.2018, the reason for the cheque being returned unpaid was recorded as “funds insufficient and account dormant”.

4) That Section 118 sub-clause (e) of the NI Act (Presumptions as to negotiable instruments) provides a clear presumption regarding endorsements made on the negotiable instrument being in order in which they appear thereupon. Thus, the presumption of the indorsements on the cheque being genuine operates in favour of the holder, which would be the Complainant herein. In case, the Accused intends to rebut such presumption, he would be required to lead evidence to this effect.

5) Moreover, a certified copy of a document issued by a Bank is itself admissible under the Bankers’ Books Evidence Act, 1891 without any formal proof thereof. Hence, in an appropriate case, the certified copy of the specimen signature maintained by the Bank can be procured with a request to the Court to compare the same with the signature appearing on the Cheque by exercising powers under Section 73 of the Indian Evidence Act, 1872.

6) The Bench further observed that the Appellant was desirous of proving that the signatures as appearing on the Cheque issued from his account were not genuine, then he could have procured a certified copy of his specimen signatures from the Bank and a request could have been made to summon the concerned Bank official in defense for giving evidence regarding the genuineness or otherwise of the signature on the Cheque.

7) Though, despite having opportunity, the Accused-Appellant did not put any question to the bank official examined in defense for establishing his plea of purported mismatch of signature on the cheque in question and hence, the Apex Court observed that the Appellate Court was not required to come to the aid and assistance of the Appellant for collecting defense evidence at his behest. The presumptions under the NI Act albeit rebuttable operate in favour of the Complainant.

SUPREME COURT ORDER

The Apex Court based on the aforesaid observations, observed that it was for the Accused to rebut the presumptions against genuineness of signatures on Cheque that got dishonoured, by leading appropriate defense evidence and the Court cannot be expected to assist the Accused to collect evidence on his behalf. Thus, the Supreme Court dismissed the Appeal filed by the Accused, as it lacked merit and the Apex Court also found no infirmity in the High Court and Trial Court Orders warranting interference.

ONE OTHER CASE

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The?Supreme Court?has emphasized that the?determination of whether a cheque was issued for a time-barred debt should be made based on the evidence presented.

In a recent ruling, the Supreme Court has recently made some significant decisions regarding?cheque bounce cases the bench of?Justices AS Bopanna and Prashant Kumar Mishra?clarified that the power to quash a cheque bounce case under?Section 482 of the Criminal Procedure Code (CrPC)?should only be exercised when it is evident that the amount in question is patently non-recoverable. The court specified that such jurisdiction arises only in cases where a cheque is issued, dishonored, and a criminal action is initiated for the recovery of an amount that is unmistakably non-recoverable. The case in question involved the Andhra Pradesh High Court’s decision to quash a cheque bounce complaint on the grounds that the prosecution did not pertain to a legally recoverable debt. In its ruling, the Supreme Court referred to its prior judgments in?S. Natarajan vs. Sama Dharman & Anr. (2021) and A.V. Murthy vs. B.S Nagabasavanna (2002)?to clarify the scope of consideration in petitions filed under?Section 482 of the CrPC, seeking the quashing of complaints filed under Section 138 of the Negotiable Instruments Act.

The Court acknowledged that the nature of proceedings under the Negotiable Instruments Act involves a promise to pay through a cheque, even if the debt is time-barred. In such situations, the determination of whether the debt or liability is time-barred should be based on the evidence presented by the parties, as it is a mixed question of law and fact.

Therefore, the Court emphasized that the power to quash proceedings under Section 482 of the CrPC should only be exercised when the amount is patently non-recoverable and when the threshold jurisdiction is established. The Court concluded that the claim made in the complaint, based on a dishonored cheque in this case, could not be considered time-barred or legally irrecoverable based on the facts presented. Moreover, the complaint was filed within the applicable time frame. As a result, the High Court’s judgment was set aside, and the complaint was reinstated. The case in question is?K. Hymavathi vs. State of Andhra Pradesh in 2023.?These ruling underscores the principle that the determination of whether a cheque was issued for a time-barred debt should depend on the evidence and that the power to quash such cases should only be exercised when the amount is clearly non-recoverable.

1.?? Supreme Court Upholds Conviction in Cheque Bounce Case:

In a recent ruling, the Supreme Court upheld the conviction of an accused in a cheque bounce case.?The case involved an allegation that a cheque issued by the appellant was dishonored due to insufficient funds in the account. Th e court clarified that the onus of rebutting any presumptions against the genuineness of signatures on the cheque lies with the accused. The accused must lead appropriate defense evidence, and the court cannot assist the accused in collecting evidence on their behalf. The court emphasized that the accused cannot escape liability by citing sufficient funds in accounts other than the one from which the cheque was issued.

2.?? Special Courts for Cheque Bounce Cases:

In March 2020, the Supreme Court took cognizance of the large number of pending cheque bounce cases. As a result, the court directed the constitution of special courts with retired judges in five states, starting from September 1, to expedite the disposal of cheque bounce cases.

3.?? Evidence-Based Approach:

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In another ruling, the Supreme Court clarified that the power to quash a cheque bounce case under Section 482 of the Criminal Procedure Code (CrPC) should only be exercised when it is evident that the amount in question is patently non-recoverable3 .

These decisions underscore the importance of adhering strictly to the provisions of the Negotiable Instruments Act in cheque bounce cases.

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