Procedure for speedy justice in matters of dishonour of cheques.

Negotiable Instruments Act, 1881

Compounding the offence under Section 138 of the Negotiable Instruments Act, 1881 on payment of the cheque amount and in the alternative for exemption from personal appearance.
How the proceedings for an offence under Section 138 of the Act can be regulated where the accused is willing to deposit the cheque amount? Whether in such a case, the proceedings can be closed or exemption granted from personal appearance or any other order can be passed?

i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on accused in view presumption under Section 139 but the standard of such proof is “preponderance of probabilities”. The same has to be normally tried summarily as per provisions of summary trial under the Cr.P.C. but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will apply and the Court can close the proceedings and discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect.

ii) The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court. Continue reading “Procedure for speedy justice in matters of dishonour of cheques.”

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Recovery of fine for dishonour of cheque.

Recovery of fine.

Whether when compensation is ordered as payable for an offence committed under Section 138 of the Negotiable Instruments Act, and in default thereof, a jail sentence is prescribed and undergone, is compensation still recoverable?

The facts were that the complainant approached the Magistrate under Section 138 of the Negotiable Instruments Act in a transaction where the accused had borrowed a sum of Rs.2.75 lakh from the complainant. When the complainant demanded the amount, the accused issued a cheque for the said amount which was returned as dishonoured due to insufficiency of funds. The requisite demand notice was sent by the complainant to the accused followed by the complaint. Ultimately, the accused was found guilty of the offence under Section 138, and was convicted

Will undergoing imprisonment due to default in payment of fine will wipe out liability?

Continue reading “Recovery of fine for dishonour of cheque.”

Scope of power of attorney in Criminal Prosecution

Criminal Complaints through a Power of Attorney

The complaint in this case was a summary complaint under section 138 of Negotiable Instruments Act, 1888.

Whether a Power of Attorney holder can sign and file a complaint petition on behalf of the complainant ?

Supreme Court has answered the question in affirmative but subject to a few riders. The attorney acts as an agent of the complainant and therefore has to act in the name of principal:

“The power of attorney holder is the agent of the grantor. When the grantor authorizes the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates such legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor represented by his attorney holder and not by the attorney holder in his personal capacity. Therefore, where the payee is a proprietary concern, the complaint can be filed by the proprietor of the proprietary concern, describing himself as the sole proprietor of the payee, the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor, and the proprietor or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. However, we make it clear that the power of attorney holder cannot file a complaint in his own name as if he was the complainant. In other words, he can initiate criminal proceedings on behalf of the principal.”

Necessity of personal knowledge of attorney

Continue reading “Scope of power of attorney in Criminal Prosecution”

Negotiable instruments: Dishonour of cheque trial directions by Supreme Court

Dishonour of Cheques: directions for expeditious trial of cases.

Delay in cases for dishonour of cheques:

Background for direction:
An Association 174 banks/financial institutions as its members, which functions as think tank for banks in the matters of concern for the whole banking industry, raised issue of considerable national importance owing to the reason that in the era of globalization and rapid  technological developments, financial trust and commercial interest have to be restored. According to them the banking industry has been put to a considerable disadvantage due to the  delay in disposing of the cases relating to Negotiable Instruments Act. The Petitioner banks being custodian of public funds find it difficult to expeditiously recover huge amount of public fund which are blocked in cases pending under Section 138 of the Negotiable Instruments Act, 1881. Petitioners submitted that, in spite of the fact, Chapter XIV has been introduced in the Negotiable Instruments Act by Section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, to enhance the acceptability of cheques in settlement of liability by making the drawer liable for penalties 2014 in case of bouncing of cheques due to insufficiency of funds, the desired object of the Amendment Act has not been achieved.
Cheque, though acknowledged as a bill of exchange under the Negotiable Instruments Act and readily
accepted in lieu of payment of money and is negotiable, the fact remains that the cheque as a negotiable
instrument started losing its credibility by not being honoured on presentation.

Directions by Supreme Court about trial:

(1) Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinize the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons.

(2) MM/JM should adopt a pragmatic and realistic approach while issuing summons. Summons must be properly addressed and sent by post as well as by e-mail address got from the complainant. Court, in appropriate cases, may take the assistance of the police or the nearby Court to serve notice to the accused. For notice of appearance, a short date be fixed. If the summons is received back un-served, immediate follow up action be taken.

(3) Court may indicate in the summon that if the accused makes an application for compounding of offences at the first hearing of the case and, if such an application is made, Court may pass appropriate orders at the earliest.

(4) Court should direct the accused, when he appears to furnish a bail bond, to ensure his appearance during trial and ask him to take notice under Section 251Cr.P.C. to enable him to enter his plea of defence and fix the case for defence evidence, unless an application is made by the accused under Section 145(2) for re- calling a witness for cross-examination.

(5) The Court concerned must ensure that examination-in-chief, cross- examination and re-examination of the complainant must be conducted within three months of assigning the case. The Court has option of accepting affidavits of the witnesses, instead of examining them in Court. Witnesses to the complaint and accused must be available for
cross-examination as and when there is direction to this effect by the Court.

[Source: Indian Bank Association vs. Union of India (Supreme Court of India)]

 

Double jeopardy and dishonour of cheque with cheating

Prosecution for cheating and dishonour of cheque:

Principle of Double Jeopardy:

Double jeopardy or Autrefois Acquit is the name of doctrine which prohibits second trial of an acquitted accused. But it does not prohibit a second trial, on same facts, but for an offence, different from previous prosecution.
The statutes involved: General Clauses Act: Section 26; IPC: Section 420; Negotiable Instruments Act: Section 138; Criminal Procedure Code: Section 300.

Prosecution for dishonour of cheque:

However there appears to be conflict of opinion in two different benches of Supreme Court of India. This position was less complicated until the Supreme Court of India, quashed the criminal proceedings under Sections 406/420 IPC which were launched during the pendency of proceedings u/s 138 of Negotiable Instruments Act for dishonour of cheque, holding that it would amount to abuse of process of law. It was observed.
“…..A finance company also advances short term loans. In that case it is essentially a commercial transaction. After first two cheques were dishonoured two cheques were again issued, which again were dishonoured resulting in filing of complaint under Section 138 of the Negotiable Instruments Act. None of the respondents has been able to explain as to why offences under Sections 406/420, I.P.C. were not added in the complaint filed under Section 138 of the Negotiable Instruments Act and why resort was had to filing of a separate First Information Report. Certain motive has been attributed to the Investigating Officer but we think we need not go into that. There is also no answer as to why investigation against three other directors was still stated to be pending when same role is assigned to all the accused. In the FIR it is Sukhvender Singh, who first approached the complainant, but later it is Mukender Singh. There is no answer as to why there are two different names. As to who are the directors of Ganga Automobiles Ltd. could have been easily found by the complainant after going through the records of Register of Companies and also about its status. As noted above, in the subsequent statement by the complainant he does not assign any role to the first appellant. The allegation that in the first instance three persons contacted the complainant company, who told the complainant of other Directors with whom the complainant conversed on telephone appears to be rather improbable.
14. We agree with the submission of the appellants that the whole attempt of the complainant is evidently to rope in all the members of the family particularly who are the parents of the Managing Director of Ganga Automobiles Ltd. In the instant criminal case without regard to their role or participation in the alleged offences with a sole purpose of getting the loan due to the Finance Company by browbeating and tyrannizing the appellants of criminal prosecution. A criminal complaint under Section 138 of the Negotiable Instruments Act is already pending against the appellants and other accused. They would suffer the consequences if offence under Section 138 is proved against them. In any case there is no occasion for the complainant to prosecute the appellants under Sections 406/420, I.P.C. and in his doing so it is clearly an abuse of the process of law….”

[Source: G. Sagar Suri v. State of U.P. ( (2000) 2 SCC 636)]

 

Thus the above case involved addition of charge of cheating in a prosecution pending for dishonour of cheque. However in Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao, it was held  that once the conviction under Section 138 of N.I. Act has been recorded, the question of trying a same person under Section 420 IPC or any other provision of IPC or any other statute is not permissible being hit by Article 20(2) of the Constitution and Section 300(1) Cr.P.C. It was held:

“Thus, it can be seen that Section 300(1) of Cr.P.C. is wider than Article 20(2) of the Constitution. While, Article 20(2) of the Constitution only states that ‘no one can be prosecuted and punished for the same offence more than once’, Section 300(1) of Cr.P.C. states that no one can be tried and convicted for the same offence or even for a different offence but on the same facts. In the present case, although the offences are different but the facts are the same. Hence, Section 300(1) of Cr.P.C. applies. Consequently, the prosecution under Section 420, IPC was barred by Section 300(1) of Cr.P.C”

[Source: Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao, (2011) 2 SCC 703]

Now the same question arose once again in Sangeetaben Mahendrabhai Patel‘ case unfortunately without adverting to the difference of scope of Section 300 of Cr. P.C., now it has been held that after prosecution under 138 of NI Act, a subsequent prosecution under section 420 of IPC would be maintainable.

“……..in order to attract the provisions of Article 20(2) of the Constitution i.e. doctrine of autrefois acquit or Section 300 Cr.P.C. or Section 71 IPC or Section 26 of General Clauses Act, ingredients of the offences in the earlier case as well as in the latter case must be the same and not different. The test to ascertain whether the two offences are the same is not identity of the allegations but the identity of the ingredients of the offence. Motive for committing offence cannot be termed as ingredients of offences to determine the issue. The plea of autrefois acquit is not proved unless it is shown that the judgment of acquittal in the previous charge necessarily involves an acquittal of the latter charge…….
…………….the appellant had been tried earlier for the offences punishable under the provisions of Section 138 N.I. Act and the case is sub judice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section 138 N.I. Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I. Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under N.I. Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I. Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary.
28. There may be some overlapping of facts in both the cases but ingredients of offences are entirely different. Thus, the subsequent case is not barred by any of the aforesaid statutory provisions.”

[Source: Sangeetaben Mahendrabhai Patel v. State of Gujarat, 2012 (7) SCC 621, ]

 

Now we are left in a piquant situation. Two judgments relying upon two different lines of reasoning. One relying upon the similarity of the facts of case and other relying upon  the difference in ingredients of offence.

In the meanwhile Gujarat High Court in the case of Nandlal vs State and Uttrakhand High Court in Rihan v.s State has followed the Kolla Veera case above.