Thursday, March 11, 2010
DISHONOUR OF CHEQUE: A READY RECKONER
(i) The cheque should be presented within its validity period. Generally a cheque is valid for six months, but there are cheques whose validity period is of lesser period.
(ii) Cheque drawn returned unpaid for any of the following reasons:
Amount in the account is insufficient to honour the cheque; or
Amount of the cheque exceeds the amount to be paid from that account by an agreement made with the bank.
(iii) A written notice must be sent to the drawer of cheque within 30 (thirty) days of the receipt of information by him from the bank regarding the return of the cheque unpaid. "Service of Notice under Section 138 of Negotiable Instruments Act imperative in character to make the complaint maintainable." If in the notice an omnibus demand is made without specifying what was due under the dishonoured cheque , the notic emight fail to meet the legal requirement and may be regarded as bad. [Rahul Builders vs. Arihant Fertilizers and Chemical and Anr. 2007 (2) UJ SC 1335]
The object of the notice is to give a chance to the drawer of the cheque to rectify his omissions.
CLICK HERE to see the smaple of Notice to be sent under Section 138 of Negotiable Instrument Act.
(iv) If the drawer of the cheque fails to make the payment of the said amount of money within 15 (fifteen) days of the receipt of said notice.
(v) The Court shall take cognizance of the offence only if the written complaint has been made by the appropriate person (payee or holder in due course, as the case may be) within 1 (one) month from the date on which the cause of action arises. The cause of action arises when the drawer of the cheque fails to make payment after 15 days of the receipt of written notice.
(vi) The circumstances under which such dishonour takes place shall be totally ignored. There is a strict liability hence the existence of guilty intent is not an essential ingredient to constitute this offence.
(vii) There is a presumption that the holder of cheque received the cheque for the discharge in whole or in part of a legally enforceable debt or other liability. However, if the contrary is proved then this offence under Section 138 of Negotiable Instrument Act shall not be attracted.
(Viii) If the cheque is drawn by a Company has been dishonoured, then every person who was in charge of and was responsible for the conduct of business of the company as well as the Company shall be guilty of the offence.
(ix) A person guilty of offence for dishonor of cheque shall be liable for imprisonment for a term which may extend to 2 (two) years; or Fine which may extend to twice the amount of cheque; or both
(x) It is important to note here that this offence is a compoundable offence.
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