Top 20 Negotiable Instruments Act NI Act cheque bounce Negotiable Instruments Act Supreme Court Commercial Suit in India (January-June,2022),

 

1. HC: REFUSES TO EXERCISE EXTRAORDINARY JURISDICTION TO SUMMON COMPLAINANT’S WITNESS.

The single judge bench of Justice Chandra Dhari Singh in the case of Sh. Satish Kumar v. M/s Anshika Polysurf noted that the Additional Chief Metropolitan Magistrate gave several chances to file an application for summoning and examining a witness before closing his evidence under Section 145 (2) of the Negotiable Instruments Act. Hence, the application u/s. 311 was dismissed by the ACMM. Consequently, Section 482 of the CrPC does not provide grounds for exercising extraordinary jurisdiction. In this regard, the petition was dismissed. 

2. SC: SECTION 138 NI ACT PLACE OF ISSUANCE/DELIVERY OF THE STATUTORY NOTICE NOT RELEVANT FOR TERRITORIAL JURISDICTION.

The bench of Justice T.S. Thakur, Justice Justice Vikramajit Sen and Justice C. Nagappan in the case of Dashrath Rupsingh Rathod v. State of Maharashtra & Anr. ruled that the location of the statutory notification to present the cheque for encashment by the bank is unimportant in determining the geographical jurisdiction of the claims or complaints. The Supreme Court further ordered that the current decision be applied retrospectively to all connected cases, with the exception of those whose trials have already begun. This has seemed to posit that all complaints led by the courts other than where the drawee bank is located must be mandatorily transferred to the appropriate or competent court, and that in the future, creditors must file complaints only in a court with the necessary jurisdiction over the facts of the drawee bank's situation. 

3. HC: THE PRESUMPTIONS CONTAINED IN SECTION 118 NI ACT COME INTO PLAY IN A COMMERCIAL SUIT BASED ON DISHONOURED CHEQUES.

The High Court Bench of Hon'ble Mr. Justice Nitin J Jamadar ruled in the commercial case titled Crimson Interactive Pvt. Ltd. & ors.vs Jayant Bhavanji Soni & anr. that in the suits based on dishonoured cheques presumptions contained in Section 118 NI Act, 1881 and Section 114 of the Evidence Act do come into play. On the evidence part, Bench observed," In the backdrop of the undisputed facts, the nature of the claim in the instant suit requires appreciation. At this juncture, in view of the presumptions contained in Section 118 NI Act, 1881, it may not be appropriate to delve deep into the defences sought to be raised by the defendants regarding the abuse of the custody of the undated cheque Apparently, the suit is based on dishonoured cheques. Presumptions contained in NI Act, 1881 and Section 114 of the Evidence Act do come into play."

 

4. HC: ISSUES CIRCULAR FOR FAST-TRACKING SECTION 138 NI ACT CASES.

The Bombay High Court has issued circular outlining rules for quick trials in cases brought under Section 138 of the Negotiable Instruments Act in response to a Supreme Court judgement delivered last year.

 The Supreme Court made the order in "In Re: Expeditious Trial of Cases Under Section 138 of the Negotiable Instruments Act of 1881."

 5. SC: ENDORSEMENT OF ‘ACCOUNT FROZEN’ ON DISHONOURED CHEQUE MEANS ‘of 'Account Frozen' on Dishonoured Cheque means 'Account ceases to exist'.

The three-Judge Bench comprising of CJI NV Ramana, Justice A.S. Bopanna and Justice Hima Kohli while reviving Criminal Proceedings under Section 138, NI Act, 1881, held that return of cheque by the bank with endorsement to the effect “Account Frozen” will presuppose that an account existed. The SLP was filed against the Rajasthan High Court order whereby it allowed the writ petition preferred by the respondent and quashed and set aside the criminal proceedings. The Court noted that the matter require full-fledged trial and was in no way a case where the proceedings could have quashed. The impugned High Court order was thus set aside and matter was remitted back to Trial Court.

 6. HC: VICARIOUS LIABILITY IN CHEQUE BOUNCE CASES OF COMPANIES.  

The single-judge Bench of Justice Subramonium Prasad reiterated that it is for the Official who has been held vicariously liable to establish in trial that he/she was not responsible for the conduct of the company's business and that the High Court cannot dismiss a complaint based solely on averments made. Furthermore, they stated that the Supreme Court's recent decisions in Ashutosh Ashok Parasrampuriya vs. M/s. Gharrkul Industries Pvt. Ltd., 2021 Latest Caselaw 492 SC had completely settled the legal predicament surrounding it.

 

The bench of Hon’ble Shri Justice Vishal Dhagat had issued a decision in a Writ Petition seeking the revocation of an administrative order issued by the Indian Oil Corporation against the Petitioner, a Petroleum Outlet dealer.

After referring to the three Apex Court judgments namely . Mohanraj and Others v. Shah Brothers Ispat Pvt. Ltd., 2021 SCC Online SC 152, Kaushalya Devi Massand v. Roopkrishore Khore (2011) 4 SCC 593 and the Meters and Instruments Private Limited and Another v. Kanchan Mehta respectively. the High Court of Madhya Pradesh allowed the Writ Petition and quashed the impugned order of the Respondent, observing that the proceedings under Section 138 of the Negotiable Instruments Act are civil in nature with criminal overtones. The HC directed the respondent to allow the petitioner to run the Petroleum outlet allotted to him.

 

8. CHEQUE PAYMENTS SYSTEM: CHEQUES TO BOUNCE IF YOU DO NOT FOLLOW THIS NEW RULE

Starting from Feb 1, the Bank of Baroda (BOB) has implemented changes in its cheque payments system. The RBI had issued guidelines for banks to implement this system from Jan 1, 2021, to safeguard against cheque frauds. To further augment customer safety in cheque payments & reduce instances of fraud occurring on account of tampering of cheque leaves, it has been decided to introduce a mechanism of Positive Pay for all cheques of value Rs 50,000 & above. Banks shall enable it for all account holders issuing cheques for amounts of Rs 50,000 and above. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of Rs 5,00,000 and above. 

9. SC: ACCUSED QUESTIONS COMPLAINANT’S CAPACITY TO PAY CASH LOAN, PLEADS COERCION IN ISSUANCE OF CHEQUE, COURT DISAGREES.

In the instant case, The Court was hearing a case in which a cheque for Rs. 5,00,000 was returned due to a lack of funds. A Three judge bench of Hon'ble Supreme Court in Rangappa Vs. Sri Mohan  (7 May 2010) held that the presumption u/s 139 of the NI Act, though rebuttable, goes to the extent of even presuming the existence of a legally enforceable debt. Furthermore, the standard of proof for any person accused of an offence under Section 138 of the Negotiable Instruments Act, 1881 is preponderance of probability, and the accused is not required to show his defence beyond reasonable doubts. On the other hand, the accused's plain denial or blatant suggestions would not be adequate to refute the aforementioned presumptions. In the current case, misuse of the blank signed cheques and blank signed papers of the accused by the complainant have been categorically denied by the complainant and accused has failed to prove the aforesaid facts by leading any evidence.

As such Court concluded that Accused deserved to be Convicted for commission of offence punishable u/s 138 of the Negotiable Instruments Act, 1881.

10. SC: COMPLAINANT NEED NOT PROVE HIS FINANCIAL CAPACITY UNLESS THE SAME IS QUESTIONED BY ACCUSED.

The Division Bench of Justices KM Joseph and Hrishikesh Roy noted that the onus is on the accused to raise a probable defence in order to negate the presumptions in cheque bounce cases, and that the complainant is not expected to confirm the presumption of consideration by leading evidence unless a case is set up in the reply notice to the statutory notice sent. Moreover they observed that it is not for the Complainant in a case under Sec.-138 NI Act to initially lead evidence to show that he had the financial capacity. To reiterate the same, The Court drew reference to SC judgement in Basalingappa Vs. Mudibasappa, 2019 wherein it was held that Section 139 of the N.I. Act is an example of reverse onus.

11. HC: NECESSARY TO PROVE INSTRUMENT NOT ISSUED UNDER ACCUSED’S KNOWLEDGE AND SUPERVISION FOR QUASHING OF PROCEEDINGS

The Karnataka high court presided over by Justice Nagaprasanna, refused to exercise its jurisdiction under section 482 of the criminal procedure code to quash the criminal proceedings of an offense punishable under the Negotiable Instruments Act, 1881. The court held that if in the case of section 138 of the negotiable instrument act, 1881, the accused is not a signatory to the instruments and are non-executive directors, has no role to play in the day-to-day administration of the company. Then, they can’t be prosecuted but in the present scenario, none of the petitioners' documents attached showed the existence of the terms "non-executive" or "independent director." They are the brain and soul of the company and are also engaged in the day-to-day administration of the company. Therefore, the criminal petition was dismissed on account of being meritless. 

 

12. SCOPE OF SECTION 147 OF THE NI ACT, ALL OFFENSES ARE COMPOUNDABLE

The single-judge bench of Justice H.B. Prabhakara Sastry of the Karnataka high court directed that if both the parties have entered into the terms of settlement in their best interests with their free consent and their own volition, without being influenced by undue influence, duress, misrepresentation, or mistake, stated that there is no embargo to deny them the permission to settle the matter. Section 147 of the negotiable instrument act made every offense punishable under the Act compoundable. At the same time, guidelines laid down by the supreme court in the judgment titled ‘Damodar S. Prabhu Vs Sayed Babalal’ regarding imposing graded costs on the litigant should be followed. 

 

 

13. HC: NI ACT COMPLAINT ONCE DISMISSED IN DEFAULT RESULTS IN ACQUITTAL OF THE ACCUSED, AND CAN’T BE RESTORED.

A single-judge bench of Justice Sanjay Dhar of the Jammu & Kashmir High Court held that if a magistrate decided to dismiss the case on the account of the non-appearance of the complainant. Then, he has to acquit the accused in any case. Further, the court relied on section 369 of the J & k Cr. P . C  to hold that once a judgment is signed by a court the same shall not be amended or reviewed except to correct a clerical error. 

 

14. HC: DISHNONOR CHEQUE MUST HAVE BEEN ISSUED BY ACCOUNT HOLDER UNDER HIS NAME & SIGN FOR AN OFFENSE TO BE MAID OUT.

The Meghalaya High Court comprising of a bench of Justice Suresh Kumar held that the offenses under section 138 of the negotiable instrument act can be made out the cheque has to be issued by the account holder under his name and signature. It is clear that only the holder of the account on which the cheque is drawn can be held liable, and such culpability cannot be extended to others except as provided in Section 141 N.I. Act deals with offenses committed by and on behalf of the company or partnership, where the signatory to the cheque may be a Director of the company or a Partner of a partnership firm.

15. HC: CAN CHEATING FIR BE STILL LODGED IF SECTION 138 OF THE NEGOTIABLE INSTRUMENT ACT COMPLAINT IS ALREADY FILED?

A single-judge bench of Justice M Nagaprasanna of the Karnataka High Court held that the provision of dishonor of cheque under the negotiable instrument Act predominately comes under the civil law but if any element of mens rea can be suspected then, the complainant can also file a criminal complaint under section 406, 420 of the Indian penal code. The court relied on the judgment of the apex court titled, ‘Sangeetaben Mahendrabhai Patel Vs State of Gujarat & ANR, 2012’. In this, the top court clarified that the same will not amount to a violation of Article 20(2) of the constitution of India or section 300(1) of the Cr. P.C as it doesn’t result in double jeopardy.

 

16. SC: CAN CRIMINAL LIABILITY BE FASTENED UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENT ACT ON A LOAN GUARANTOR OR A PARTNER OF A FIRM?

The division bench comprising of Justice Sanjeev Khanna and Justice Ajay Rastogi directed that due to civil liability, vicarious liability in criminal law under Section 141 of the NI Act cannot be fastened, and thus a Partner who stood as a Loan Guarantor cannot be tried under Section-138 of the NI Act. A person cannot be prosecuted on the offense of dishonor of cheque merely because he partnered with the firm which had taken the loan to which he stood as a guarantor. The court referred to the case titled, Dayle De'Souza Vs. Government of India through Deputy Chief Labour Commissioner (C) and further directed that vicarious liability occurs only when the offense is committed by the primary offender.

17. HC: NO LIABILITY CAN BE FASTENED ON THE DIRECTORS UNLESS THE OFFENCE IS ATTRIBUTED TO THE COMPANY

The single-judge bench of the Justice Asha Menon of the Delhi High Court held that the primary liability rests with the Company, and a person seeking to be held vicariously liable for an offense in which the principal accused is a company must have a role to play about the incriminating act. Section 141 of the Negotiable instrument Act applies only when a company commits an offense under Section 138 of the Negotiable instrument Act.

 

18. HC: NO SCOPE OF EXPARTE TRIAL IN CRIMINAL LAW EXCEPT SECTION 299 CRPC PROCEEDINGS

The single-judge bench of Justice Sreenivas Harish Kumar of the Karnataka high court reiterated that the absence of an accused unless personal appearance is waived for valid reasons, and there cannot be a waiver of examination of an accused under Section 313 Cr.P.C. if incriminating evidence appears in the testimony of a witness. 

 

19. SC: SECTION 138 OF THE NEGOTIABLE INSTRUMENT ACT CASES SHALL CONTINUE AGAINST DIRECTORS DESPITE IBC MORATORIUM AGAINST THE COMPANY

The full judge bench of Justice U.U Lalit, Justice S. Ravindra Bhat and Justice PS Narasimha of the apex court reaffirmed that the terms of the moratorium provided in Section 14 of the Insolvency and Bankruptcy Code, 2016 would only apply to the corporate debtor and that the natural people named in Section 141 of the NI Act would continue to be statutorily responsible under the provisions of the Act

20. SC: SUPREME COURT DIRECTS THE SETTING UP OF PILOT COURTS WITH RETIRED  JUDGES IN 5 STATES WITH THE HIGHEST PENDENCY

The bench comprises Justice L. Nageswara Rao, Justice B.R Gavai and Justice S Ravindra Bhat directed the establishment of Pilot Courts in the five states with the heaviest caseloads, to be presided over by Retired Judges. The pilot courts shall be set up in 5 districts Maharashtra, Rajasthan, Gujarat, Delhi, and Uttar Pradesh. 

 

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