Cheque Dishonor Prosecutions
Cheque Dishonor Prosecutions: Overview
Cheque dishonor means that a cheque issued by a drawer bounces or is returned unpaid by the bank due to insufficient funds, account closure, or any other reason.
The law governing cheque dishonor is Section 138 of the Negotiable Instruments Act, 1881.
Section 138 makes dishonor of cheque a criminal offense if the cheque was issued for the discharge of a legally enforceable debt or liability.
Key elements to prove:
Cheque was issued for repayment of a debt/liability.
Cheque was presented within validity period (6 months from issue date).
Cheque was dishonored due to insufficient funds or other reasons.
Drawer was given notice within 30 days of dishonor.
Drawer failed to make payment within 15 days of the notice.
Important Case Laws on Cheque Dishonor Prosecutions
1. K. Bhaskaran v. Sankaran Vaidhyan Balan (1999)
Facts: The court dealt with the quantum of punishment under Section 138.
Key Holding: The court ruled that punishment under Section 138 is not mandatory imprisonment; the court has discretion to impose imprisonment or fine based on facts.
Significance: Emphasized the court's discretion and the importance of the purpose of the cheque issue (debt discharge).
2. M.S. Narayana Menon v. State of Kerala (2000)
Facts: The issue was whether the cheque was issued to discharge a “lawful debt or liability.”
Holding: Court stated that the cheque must be issued for a “present or past” debt or liability, not a future or contingent liability.
Significance: Reinforced the condition of a legally enforceable debt/liability as a requirement for prosecution.
3. Bank of India v. Santosh Gupta (2002)
Facts: The accused argued that the cheque was post-dated and presented prematurely.
Holding: The court held that a cheque can only be presented after the date on it, and dishonor before that is invalid.
Significance: Clarified the rules regarding post-dated cheques and their presentation.
4. Rama Narayanan v. Meenakshi (2008)
Facts: The drawer issued a cheque which was dishonored; the court considered whether proper notice was given.
Holding: The court held that the notice must be sent within 30 days of receipt of information about dishonor, and the notice must be properly served.
Significance: Highlighted the procedural requirement of issuing proper legal notice as a prerequisite for prosecution.
5. Dr. C.K. Chockalingam v. State of Tamil Nadu (2013)
Facts: The accused claimed that no liability existed at the time of issuing the cheque.
Holding: The Supreme Court emphasized that the existence of liability at the time of issuing the cheque is crucial.
Significance: Reiterated the need to prove a legally enforceable debt/liability for conviction under Section 138.
Summary of Key Points for Cheque Dishonor Prosecutions
The cheque must be issued for repayment of a lawful debt or liability.
The cheque must be presented for payment within 6 months from the date on the cheque.
The cheque must be dishonored for insufficient funds or related reasons.
The payee must send a legal notice within 30 days of dishonor.
The drawer has 15 days to repay after receiving the notice.
Failure to repay leads to criminal prosecution under Section 138.
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