Cheque Bounce Cases Under Ni Act
๐ Relevant Provisions โ Section 138 to 147, NI Act
Section 138 โ Punishment for dishonour of cheque for insufficiency of funds or other reasons.
Section 139 โ Presumption in favour of the holder.
Section 142 โ Cognizance of offence.
Section 143 โ Summary trial of cheque bounce cases.
Section 147 โ Offences under this chapter are compoundable.
๐งพ Section 138 โ Ingredients of the Offence
To attract punishment under Section 138, the following conditions must be fulfilled:
A person issued a cheque for the discharge of a legally enforceable debt or liability.
The cheque was presented within 3 months (now 3 months from the date of issue).
The cheque was returned unpaid by the bank due to insufficient funds or account closure, etc.
The payee issued a demand notice in writing to the drawer within 30 days of receiving information from the bank.
The drawer failed to make payment within 15 days of receiving the notice.
โ๏ธ Detailed Case Laws on Cheque Bounce
โ๏ธ 1. Dashrath Rupsingh Rathod v. State of Maharashtra
(2014) 9 SCC 129
๐น Facts:
The issue was about territorial jurisdiction โ where the complaint can be filed.
๐งพ Judgment:
The Supreme Court held that only the court within whose jurisdiction the drawee bank (where the drawer has his account) is located has jurisdiction to try cheque bounce cases.
This caused many cases to be transferred and led to difficulty for complainants.
โ Importance:
Landmark ruling on jurisdiction, later modified by legislation.
โ๏ธ 2. Bridging the Gap: 2015 Amendment
Parliament amended the NI Act through the Negotiable Instruments (Amendment) Act, 2015 in response to the Dashrath case.
Now jurisdiction lies where the payee presents the cheque for payment (i.e., the bank of the complainant).
โ๏ธ 3. Rangappa v. Sri Mohan
(2010) 11 SCC 441
๐น Facts:
Issue of presumption under Section 139 โ whether court can presume that cheque was issued for a debt.
๐งพ Judgment:
Court held that once the issuance of the cheque is admitted, presumption under Section 139 arises that it was issued in discharge of a liability.
Burden shifts to the accused to rebut this presumption.
The presumption is rebuttable, but accused must present cogent evidence.
โ Importance:
Strengthens the case of the complainant.
Presumption in favour of cheque holder is mandatory and strong.
โ๏ธ 4. Kumar Exports v. Sharma Carpets
(2009) 2 SCC 513
๐น Facts:
Issue of rebuttal of presumption by the accused.
๐งพ Judgment:
The accused can rebut the presumption under Section 139 either by direct evidence or by raising probable defence.
Rebuttal does not require proof beyond reasonable doubt, but should be preponderance of probability.
โ Importance:
Clarifies standard of proof for rebuttal.
Accused must show reasonable doubt or alternative version.
โ๏ธ 5. C.C. Alavi Haji v. Palapetty Muhammed
(2007) 6 SCC 555
๐น Facts:
Accused claimed non-receipt of legal notice.
๐งพ Judgment:
The Court held that service of notice by registered post is sufficient.
If the drawer refuses to accept notice or deliberately avoids it, it is deemed served.
It is the responsibility of the drawer to make arrangements to receive notice.
โ Importance:
Prevents accused from escaping liability by claiming non-service of notice.
Ensures procedural fairness is not misused.
โ๏ธ 6. M/s Meters and Instruments Pvt. Ltd. v. Kanchan Mehta
(2018) 1 SCC 560
๐น Facts:
Accused wanted to compound the offence at a late stage.
๐งพ Judgment:
Cheque bounce offences are compoundable at any stage, including appellate stage.
Encouraged compounding to reduce litigation.
Also said that courts should encourage mediation or settlement.
โ Importance:
Emphasized restorative justice and early resolution.
Reduces burden on courts.
โ๏ธ 7. Krishna Janardhan Bhat v. Dattatraya G. Hegde
(2008) 4 SCC 54
๐น Facts:
Cheque was issued as security, not for repayment.
๐งพ Judgment:
The Court initially took a view that mere issuance of cheque is not enough to prove liability.
However, this judgment was partially overruled by Rangappa v. Sri Mohan, which reinstated strong presumption.
โ Importance:
Shows evolution of jurisprudence.
Now, cheque = presumed liability, unless rebutted.
โ๏ธ 8. M/s. Indus Airways Pvt. Ltd. v. M/s. Magnum Aviation Pvt. Ltd.
(2014) 12 SCC 539
๐น Facts:
Cheque issued for advance payment, but deal did not materialize.
๐งพ Judgment:
Court held that cheque issued for advance payment for a contract that didnโt happen does not create legally enforceable debt.
Therefore, Section 138 was not attracted.
โ Importance:
Clarifies that existence of liability is key.
Cheque must be for discharge of an existing or legally enforceable debt.
๐ Key Legal Principles from Case Law
| Principle | Legal Position |
|---|---|
| Filing Jurisdiction | Presenting bank's location (2015 Amendment Act) |
| Presumption in favour of holder | Strong, mandatory under Sec. 139 (Rangappa) |
| Rebuttal by accused | Preponderance of probabilities (Kumar Exports) |
| Notice service | Refusal = deemed service (C.C. Alavi Haji) |
| Cheque must be for a debt | No offence if no liability exists (Indus Airways) |
| Security cheques | May not create liability (Krishna Bhat) |
| Compounding | Permissible at all stages (Kanchan Mehta) |
โ Punishment under Section 138
Imprisonment up to 2 years or
Fine up to double the amount of cheque or both.
Court may also direct compensation to the complainant.
๐ Recent Developments
Special Fast Track Courts for cheque bounce cases.
Use of video conferencing, e-filing, and summary procedures encouraged.
Supreme Court (2020 onwards) emphasized speedy disposal.
๐ Conclusion
Cheque bounce cases under the NI Act are among the most litigated criminal matters in India. The law balances commercial integrity with procedural safeguards. Courts have consistently upheld:
The presumption of liability in favour of the payee.
The necessity of timely notice and complaint.
The importance of genuine and enforceable liability.
The option for compounding and amicable resolution.
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