Negotiable Instruments Act

 

Negotiable Instruments Act.

 

While calculating the period of one month as prescribed under Section 142(b) of the Negotiable Instruments Act, 1881 for filing a criminal complaint on the ground of dishonour of cheque, the period is to be reckoned by excluding or including the date on which the cause of action arose?

Where a particular time is given from a certain date within

which an act has to be done, the day of the date is to be

excluded. The Limitation Act is not applicable to Negotiable

Instruments Act, with the aid of Section 9 of the General

Clauses Act, 1897 it can be concluded that while calculating

the period of one month as prescribed under Section 142(b)

of the N.I. Act, the period has to be reckoned by excluding

the date on which the cause of action. The Hon’ble Delhi

High Court in the case of Simranpal Singh Suri v.

State, 2021 SCC OnLine Del 236, decided on 01-02-2021

it has been held that

“The crux of the present case is that legal demand notice

dated 31.05.2019 was sent on 01.06.2019, which was duly

served upon the petitioner on 03.06.2019. The 15 days

notice period in this case commenced on 04.06.2019 and

lapsed on 18.06.2019. It is not in dispute that in terms of

Hon'ble Supreme Court's decision in M/S Saketh India Ltd.

(Supra), one day has to be excluded for counting the one

month limitation period and, therefore, excluding the day of

19.06.2019, the limitation period started from 20.06.2019

and the limitation period expired with the day in the

succeeding month immediately preceding the day

corresponding to the date upon which the period started.

Consequently, the limitation period in this case, which

commenced on 20.06.2019, expired in the succeeding

month on a day preceding the date of commencement i.e.

19.07.2019. Admittedly, the complaint in this case was

instituted on 20.07.2019 i.e. 01 day after the limitation

period had expired. Hence, both the courts below have

fallen in error while computing the period of limitation.

Moreover, at the time of filing, the complaint was not even

accompanied by an application under Section 142 (b) NI

Act for condoning the delay.”

 Whether the complainant has right to present the cheque as many number of times for encashment within a period of six months or within its validity period?

The Apex court in the case of MSR Leathers v. S.

Palaniappan, (2013) 1 SCC 177 has held that

“The holder or payee of the cheque may present the cheque

for encashment on any number of occasions within the

period of its validity [three months from the date of issue].

A dishonour, whether based on a second or any successive

presentation of a cheque for encashment, would be a

dishonour within the meaning of Section 138”

 What if the Complaint is Not Signed by the Complainant ?

In Indra Kumar Patodia v. Reliance Industries Ltd. [AIR

2013 SC 426] , the Supreme Court has held as follows:

“....the Legislature has made it clear that wherever it

required a writtendocument to be signed, it should be

mentioned specifically in the Section itself, which is

missing both from Section 2(d) as well as Section 142.”

“.......the complaint under Section 138 of the Act without

signature is maintainable when such complaint is verified by

the complainant and the process is issued by the Magistrate

after due verification.”

 Whether the Amendment of Complaint is Permissible?

The Hon’ble Supreme Court of India has held in the case of

S.R. Sukumar v. S. Sunaad Raghuram [ AIR 2015 SC 2757]

that if the amendment sought to be made relates to a simple

infirmity which is curable by means of a formal amendment

and by allowing such amendment, no prejudice could be

caused to the other side, notwithstanding the fact that there

is no enabling provision in the Criminal Procedure Code for

entertaining such amendment, the Court may permit such an

amendment to be made.

Whether Power of Attorney holder cannot depose as a witness in complaint filed under section 138 of NI Act ?

The question of launching a valid criminal prosecution

under section 138 of Negotiable Instruments Act with the

aid of power of attorney is no more res integra, in view of

the authoritative judgment of the Supreme Court in the case

of A.C. Narayanan v. State of Maharashtra and another

reported in AIR 2014 SC 630. wherein it has been held that

(i) Filing of complaint petition under Section 138 of N.I Act

through power of attorney is perfectly legal and competent.

(ii) The Power of Attorney holder can depose and verify on

oath before the Court in order to prove the contents of the

complaint. However, the power of attorney holder must

have witnessed the transaction as an agent of the

payee/holder in due course or possess due knowledge

regarding the said transactions.

Negotiable Instrument Act 1881 41 Of 67

(iii) It is required by the complainant to make specific

assertion as to the knowledge of the power of attorney

holder in the said transaction explicitly in the complaint

and the power of attorney holder who has no knowledge

regarding the transactions cannot be examined as a

witness in the case.

(iv) In the light of section 145 of N.I Act, it is open to the

Magistrate to rely upon the verification in the form of

affidavit filed by the complainant in support of the

complaint under Section 138 of the N.I Act and the

Magistrate is neither mandatorily obliged to call upon the

complainant to remain present before the Court, nor to

examine the complainant of his witness upon oath for taking

the decision whether or not to issue process on the

complaint under Section 138 of the N.I. Act.

(v) The functions under the general power of attorney

cannot be delegated to another person without specific

clause permitting the same in the power of attorney.

Nevertheless, the general power of attorney itself can be

cancelled and be given to another person.

Cheque Issued as Advance Payment Will Not Attract Culpability Under Section 138, N.I. Act

The Apex court in the case of M/S Indus Airways Pvt. Ltd

And Ors vs M/S Magnum Aviation Pvt Ltd [2014(2)

crimes(SC) 105] it has been held that

“if a cheque is issued as an advance payment for purchase

of the goods and for any reason purchase order is not carried

to its logical conclusion either because of its cancellation or

otherwise and material or goods for which purchase order

was placed is not supplied by the supplier, in our considered

view, the cheque cannot be said to have been drawn for an

existing debt or liability. “

Whether the cheque issued towords the time barred debt can be enforcebale through 138 NI Act proceedings?

The Prosecution under Section 138, N.I. Act is only

maintainable against a legally enforceable debt. A time

barred debt, however, is a not a legally enforceable

debt.The Hon’ble Kerala High Court in the case of

Sasseriyil Joseph vs Devassia Equivalent citations: 2001

CriLJ 24 has held that

“7. Thus, Section 138 is attracted only if the cheque is

issued for the discharge of a legally enforceable debt or

other liability. In this case, admittedly, the cheque in

question was issued in discharge of a time barred debt. It

cannot be said that a time barred debt is a legally

enforceable debt. In this connection, it is also relevant to

note the decision of the Andhra Pradesh High Court

reported in Girdhari Lal Rathi v. P.T.V. Ramanujachari 1997

(2) Crimes 658. It has been held in that case that if a cheque

is issued for a time barred debt and it is dishonoured, the

accused cannot be convicted under Section 138 of the

Negotiable Instruments Act simply on the ground that the

debt was not legally recoverable. I am fully in agreement

with the view expressed by the learned Judge in the decision

referred to above.”

Aggrieved by this Judgement of the Hon’ble Kerala High

Court the complainant preferred Special Leave

Appeal( Cr)No 1785/2001 before the supreme court of India

and on 10.09.2001 the Apex court has confirmed the said

decision of the Kerala High Court.

Whether proceedings under Ss. 138 and 141 of NI Act can be initiated against corporate debtor during moratorium period?

The Hon’ble Supreme Court decision in P. Mohanraj v. Shah

Brothers Ispat (P) Ltd., (2021) 6 SCC 258, it was held that

the moratorium provision contained in Section 14 of the

Insolvency Bankruptcy Code, would apply only to corporate

debtor, the natural persons mentioned in Section 141

continuing to be statutorily liable under Chapter XVII of the

Negotiable Instrument Act,

Whether the authorised signatory of the Proprietorix concern who is not account holder but signed the cheque ‘in the capacity of authorised signatory’ can be prosecuted for the offence u/s 138 of NI Act ?

The Madras High court in the case of P.Saravana Kumar v/s

S.P.Vijaya Kumar [Crl.O.P.No.31018 of 2019, Decided on 29.03.2022] has

held that

“One can easily visualise the object of Section 138 of the

Negotiable Instruments Act, 1881, will be defeated, If the

proposition canvassed by the petitioner is held legally valid.

Fraudsters will open the Bank Account in the name of

Proprietor concern by one individual and another individual

will be nominated as Authorised Signatory. Allow the

cheque drawn by the authorised signatory gets bounced and

pleads that he is only the drawer of the cheque, but not the

person maintaining the account.

The Court cannot give an interpretation to the provision of

law, which will be contrary to object of the Act and defeat

the very purpose of the Act.”

Whether the compounding can/may be allowed at various

stages of the trial only after imposition of a certain percentage of costs upon the accused ?

In Damodar S. Prabhu vs. Sayed Babalal H. (2010) 5 SCC 663,

Hon'ble Supreme Court held that compounding can/may be allowed at various stages of the trial after imposition of a certain percentage of costs upon the accused. The guidelines are as follows:

(a) That directions can be given that the Writ of Summons

be suitably modified making it clear to the accused that he

could make an application for compounding of the offences

at the first or second hearing of the case and that if such an

application is made, compounding may be allowed by the

court without imposing any costs on the accused.

(b) If the accused does not make an application for

compounding as aforesaid, then if an application for

compounding is made before the Magistrate at a subsequent

stage, compounding can be allowed subject to the condition

that the accused will be required to pay 10% of the cheque

amount to be deposited as a condition for compounding

with the Legal Services Authority, or such authority as the

Court deems fit.

(c) Similarly, if the application for compounding is made

before the Sessions Court or a High Court in revision or

appeal, such compounding may be allowed on the condition

that the accused pays 15% of the cheque amount by way of

costs.

(d) Finally, if the application for compounding is made

before the Supreme Court, the figure would increase to 20%

of the cheque amount.

Let it also be clarified that any costs imposed in accordance

with these guidelines should be deposited with the Legal

Services Authority operating at the level of the Court before

which compounding takes place. For instance, in case of

compounding during the pendency of proceedings before a

Magistrate's Court or a Court of Sessions, such costs should

be deposited with the District Legal Services Authority.

Likewise, costs imposed in connection with composition

before the High Court should be deposited with the State

Legal Services Authority and those imposed in connection

with composition before the Supreme Court should be

deposited with the National Legal Services Authority.

However, in Madhya Pradesh State Legal Services Authority vs. Prateek Jain and another, 2014(4) RCR (Criminal) 178 (SC) it was held by the Hon’ble Supreme Court that where settlement is made in Lok Adalat, the Lok Adalat can waive the cost for reasons to be recorded.

Whether the accused can be permitted to file his chief examination in the form of Affidavit in the cheque bounce cases?

The Apex court in the case of M/S. Mandvi Co-Op Bank

Ltd vs Nimesh B.Thakore [ 2010 (3) SCC 83 has

catagorically held that the accused has no right to file proof

affidavit for his examination-in-cheif.

Whether it is mandatory to lead evidence of financial

capacity in every case filed under section 138 of NI Act?

The Hon’ble Supreme court in the case of Tedhi Singh Vs

Narayan Dass Mahant 2022 Live Law(SC) 275 [Crl.Appeal

No 362 of 2022] held that

“Complainant Not Expected To Initially Give Evidence Of

Financial Capacity Unless Accused Disputes it in reply

Notice”