liability of dishonour of cheque.doc

8/18/2019 liability of dishonour of cheque.doc

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LIABILITY FOR DISHONOR OF CHEQUES

BANKING LAW

PROJECT ASSIGNMENT

RICHA SINGH

8TH SEM

201289

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CERTIFICATE

Certified that the project report on liability for dishonour of cheques is my original work

and that it complies with all the formalities prescribed in the regulations.

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TABLE OF CONTENTS

1. Research Methodology

2. Introduction

. !ishonour of Cheques " Meaning

#. !ishonour of Cheque $ Interpretation of %ection 1&

'. !ishonour of Cheque " (ffence )y !rawer

*. +roceedings against !ishonour of Cheque

,. (ffences $ Cheating and -orgery

&. iability for %topped +ayment

/. !rawer0s iability for !ishonour of Cheque

1. !rawee0s iability for !ishonour of Cheque

11. !ishonour of Cheque $ iability of a Company

12. International aw on iability for !ishonour of Cheques

1. aws of other Countries on iability for !ishonour of Cheques

1#. Conclusion

1'. )ibliography


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TABLE OF CASES AND STATUTES

Tab! "# Ca$!$

1. (m +rakash Maniyar . %wati )hide 31//2 Mah 4 2 at #5

2. Medical Chemicals 6 +harma + td . )iological 7 td

. +ankajbhai 8agjibhai +atel . %tate

#. 9eshaji Madhaji . 7mperor 3:IR 1/ )om 1,/5

'. )aijnath %ahay . 7mperor 3:IR 1/ +at 1&5

*. :bdul %amod . %atya 8arayan Mahair

,. Mrs. R. 4ayala;mi . Mrs. Rashida

&. Mrs. Rama ares . C. ?. 4acob

1. M. M. Malik . +rem 9umar


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Tab! "# S%a%&%!$

1. 8egotiable Instruments :ctA 1&&1

2. Ciil +rocedure CodeA 1/&

. Code of Criminal +rocedureA 1/,

#. Indian +enal CodeA 1&*

'


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RESEARCH METHODOLOGY

A'($ a)* "b+!,%'-!$

?he project aims at studying the arious aspects related to dishonour of cheques and

liability arising therefrom. It begins by defining the concept of dishonour of cheques and

then proceeds to the liability arising out of such dishonour and the laws related thereto.

?he ultimate objectie is to understand the liability and the penal proisions for

dishonour of cheques and then to understand its application in the Indian conte;t.

S,".!

?he scope of the project has been restricted to the broad topics like the laws applicable

and the procedures followed. ?he author has limited the scope to a ery conceptual and

theoretical understanding of dishonour of cheques and liability arising therefrom.

M!%/"* "# '%')

?he researcher has endeaored to use a combination of descriptie and analytical styles

of writing throughout this project and has cited arious case laws for better understanding

of the topic. More emphasis has been placed on the descriptie style of writing.

S"&,!$ "# Da%a

?he main sources hae been te;tbooksA articles and web$search.

*


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INTRODUCTION

:dent of cheques in the market hae gien a new dimension to the commercial and

corporate worldA its time when people hae preferred to carry and e;ecute a small piece

of paper called cheque than carrying the currency worth the alue of cheque. !ealings in

cheques are ital and important not only for banking purposes but also for the commerce

and industry and the economy of the country. )ut pursuant to the rise in dealings with

chequesA the practice of giing cheques without any intention of honoring them has also

risen. In case a cheque is issued by a person in liquidation of his debt or liabilityA and

same is dishonouredA then it not only creates a bad tasteA but can also result in harassment

and can cause damages to the person to whom the cheque may hae been issued.

%ince business actiities hae increasedA the attempt to commit crimes and indulge in

actiities for making easy money hae also increased. ?hus besides ciil lawA an

important deelopment both in internal and e;ternal trade is the growth of crimes and it

has been found that the banking transactions and banking business is eery day being

confronted with criminal actions and this has led to an increase in the number of criminal

cases relating to or concerned with the banking transactions.

In IndiaA cheques are goerned by the 8egotiable Instruments :ctA 1&&1A which is largely

a codification of the 7nglish aw on the subject. )efore 1/&& there was no effectie legal

proision to restrain people from issuing cheques without haing sufficient funds in their

account or any stringent proision to punish them in the eent of such cheque not being

honoured by their bankers and returned unpaid. :lthoughA on dishonour of cheques there

is a ciil liability accruedA howeer in reality the processes to seek ciil justice becomes

notoriously dilatory and recoer by way of a ciil suit takes an inordinately long time. ?o

ensure prompt remedy against defaulters and to ensure credibility of the holders of the

negotiable instrument a criminal remedy of penalty was inserted in 8egotiable

Instruments :ctA 1&&1 in form of the )ankingA +ublic -inancial Institutions and

8egotiable Instruments aws B:mendment :ctA 1/&& which were further modified by

the 8egotiable Instruments B:mendment and Miscellaneous +roisions :ctA 2235.

,


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MEANING OF DISHONOUR OF CHECK3

%ection * of the 8egotiable Instruments :ctA 1&&1 defines a cheque as

Ea bill of e;change drawn on a specified banker and not e;pressed to be payableotherwise than on demandE.

E!ishonourE means Eto refuse or neglect to accept or pay when duly presented for

payment of a bill of e;change or a promissory note or draft on a banker.1

%ection /1 $ !ishonor by non$ acceptance

E: bill of e;change is said to be dishonored by non$acceptance when the draweeA or one

of seeral drawee not being partnersA makes default in acceptance upon being duly

required to accept the billA or where presentment is e;cused and the bill is not accepted.

>here the drawee is incompetent to contractA or the acceptance is qualified the bill may

be treated as dishonoredE.

%ection /2$ !ishonour by non$payment

E: promissory noteA bill of e;change or cheque is said to be dishonored by non$payment

when the maker of the noteA acceptor of the bill or drawee of the cheque makes default in

payment upon being duly required to pay the sameE.

?hus if on presentation the banker does not payA then dishonour takes place and the

holder acquires at once the right of recourse against the drawer and the other parties on

the cheque.

!ishonour of cheque has been considered as a criminal offence under %ection 1& of the

8egotiable Instruments :ctA 1&&1. :ccording to %ection 1& wheneer any cheque for

discharge of any legally enforceable debt or other liability is dishonoured by the bank for

want of funds and the payment is not made by the drawer despite a legal notice of

demandA it shall be deemed to be criminal offence.

1 Fide >harton0s aw e;iconA 1/,& 7d. p. '

&


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DISHONOUR OF CHEQUE 4 INTERPRETATION OF SECTION 158

S!,%'") 158 "# %/! N!"%'ab! I)$%&(!)%$ A,%6 1881

!ishonour of cheques is considered as an offence under %ection 1& of the 8egotiable

Instruments :ctA 1&&1. %ection 1& deals with !ishonour of cheque for insufficiency of

funds in the accounts. ?he %ection reads as followsG

E>here any cheque drawn by a person on an account maintained by him with a banker

for payment of any amount of money to another person from out of that account for the

dischargeA in whole or in partA of any debt or other liabilityA is returned by the bank

unpaidA either because of the amount of money standing to the credit of that account is

insufficient to honour the cheque or that it e;ceeds the amount arranged to be paid fromthat account by an agreement made with that bankA such person shall be deemed to hae

committed an offence and shall without prejudice to any other proisions of this :ctA be

punished with imprisonment for a term which may e;tend to two yearA or with fine which

may e;tend to twice the amount of the chequeA or with both.

+roided that nothing contained in this section shall apply unless$

Ba ?he cheque has been presented to the bank within a period of si; months from the

date on which it is drawn or within the period of its alidityA whicheer is earlier.

Bb ?he payee or the holder in due course of the chequeA as the case may beA makes a

demand for the payment of the said amount of money by giing a noticeA in writingA to

the drawerA of the chequeA within thirty days of the receipt of information by him from the

bank regarding the return of the cheques as unpaidA and

Bc ?he drawer of such cheque fails to make the payment of the said amount of money to

the payee orA as the case may beA to the holder in due course of the chequeA within fifteen

days of the receipt of the said notice".

/


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E7,&$'") "# M!)$ R!a2

-or committing an offence under %ection 1& of the :ct Emens reaE is not an essential

ingredient.

%ection 1& of the 8egotiable Instruments :ctA 1&&1A e;cludes mens rea by creating strict

liability and this is e;plicit from the words Hsuch person shall be deemed to hae

committed an offenceH. ?he returning of the cheque by the bank either because he amount

of money standing to the credit of the drawer of the cheque is insufficient or the amount

coered by the cheque is in the e;cess of the amount arranged to be paid from that

account by an agreement with the bank are the two necessary conditions creating strictliability.

I)!*'!)%$ a)* !&'!(!)%$ "# %/! .!)a ."-'$'")$

%ection 1& creates an offence for which the mental elements are not necessary. It is

enough if a cheque is drawn by the accused on an account maintained by him with a

banker for payment of any amount of money to another person from out of that account

for discharge in whole or in partA of any debt or other liability due. ?hereforeA wheneer

the cheques are on account of insufficiency of funds or reasons referable to the drawer0s

liability to proide for fundsA the proisions of section 1& of the :ct would be attractedA

proided the following conditions are satisfiedG

1 C/!&! *a) ") a ba): a,,"&)%

2 I$$&! "# C/!&! ') *'$,/a! "# a *!b% " 'ab''%;

If the aboe conditions are fulfilledA irrespectie of the mental conditions of the drawer

he shall be deemed to hae committed an offenceA proided the other four requisites are

fulfilledG

2 Mens Rea, a guilty mind " :lthough prima facie and as a general rule there must be a mind at fault before there can be a crimeA it is

not an infle;ible ruleA and a statute may relate to such subject$matter and may be so framed as to make an act criminalA whether therehas been any intention to break the law or otherwise to do wrong or not. ?here is a large body of Municipal law at the present day

which is so conceied " >ills R. . ?olsonA B1&&/ 2 .).! 1, Bide >harton0s aw e;icon 1#th 7d.A -ifth Imp.A 1//2. Mahendra :.!adia F. %tate of Maharashtra B2 B1 Ciil Court Cases #& B)om.

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a +resentation of the cheque within si; months or within the period of its alidity

b Return of the cheque unpaid for reason of insufficiency of funds

c Issue of the notice of dishonour demanding payment within thirty days of receipt of

information as to dishonour of the cheque.

d -ailure of the drawer to make the payment within fifteen days of the receipt of the

payment

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DISHONOUR OF CHEQUE < OFFENCE BY DRAWER

?he maker of cheque Bwho signs the cheque is called the JdrawerH.

>hen a person is aware of the fact that there are no funds in oneHs bank account if he

issues cheque to a trader for goods purchasedA the bank will return the cheque for

insufficiency of funds. )y issuing a cheque under such circumstanceA drawer commits an

offence under %ection 1& of the 8egotiable Instruments :ct.

(n the cheque being dishonouredA the payee in terms of %ection 1& of the :ct can call

upon the guilty to pay the money coered by the returned cheque within days from the

date of returnA only after sering a notice of dishonour to the drawer. If the drawer does

not pay the amount despite the notice within 1' days from the receipt thereofA the drawer commits an offence under %ection 1& of the 8egotiable Instruments :ctA 1&&1.

N"%',! "# D'$/")"&

8otice of !ishonour is a formal communication of the fact of dishonour of cheque. %ub$

section Bb of %ection 1& of the 8egotiable Instruments :ct requires the payee or the

holder in due course to issue a notice in writing to the drawer of the cheque within 1'

days of the receipt of the information by him from the bank regarding the return of the

cheque as unpaid. ?he sub$section further proides that the drawer has to comply with the

demand within 1' days of the receipt of the said notice.

Ca&$! "# A,%'")

Cause of action for prosecution under section 1& of the 8egotiable Instruments :ct does

not arise by mere presentation of the cheque in bank and by its dishonour.

W'%%!) C"(.a')%

: complaint is required to be filed by the payee or the holder in due course of the

dishonoured cheque.

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%ection 1#2 Ba of the 8egotiable Instruments :ctA makes it clear that only upon a

complaint in writing made by the payee or the holder in due course of the chequeA the

court can take cogniKance of the offence. If the payee or the holder in due course does not

file a complaintA the drawer cannot be prosecuted.

C")'=a),! "# O##!),!

In terms of %ection 1#2 of the 8egotiable Instruments :ctA 1&&1A no court shall take

cogniKance of any offence punishable under section 1& e;cept upon a written complaint

made by the payee or the holder in due course of the dishonoured cheque and filed within

one month of the date on which the cause of action arose. 8o court inferior to that of a

metropolitan magistrate or a first$class judicial magistrate can try an offence under

section 1&.

%ection 1#2 states that the cogniKance of an offence can be taken under %ection 1& upon

a complaint in writing which must be made within one month by the payee or holder in

due course from the date on which the cause of action arises under clause Bc of the

proiso to section 1. In substance we can say that when a drawerA sered with a notice

within days from the date on which the payee or the holder in due course has come to

know about the return of the cheque and the drawer does not make the payment as

demandedA the complaint shall hae to be filed within days from the date on which the

1' days time e;pires.

# 9ody 7lecot td . !own ?own =ospital

1


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PROCEEDINGS AGAINST DISHONOUR OF CHEQUE

+rior to the incorporation of chapter LFII in the 8egotiable Instruments :ct in 1/&&A to

deter and penaliKe the issue of worthless chequesA it was only under the proisions of the

Indian penal Code 1&* BI+C that the drawer of a cheque could be criminally prosecuted

if it could be shown that he cheated someone by issuing the cheque. 7en after the

introduction of the specific proisions in the 8egotiable Instruments :ctA a drawer can be

prosecuted under I+C for cheatingA but he cannot be prosecuted and punished for the

same offence under both the enactments. Mens rea or dishonest intention must be

established to proe cheatingA but it is not an essential element of an offence under

section 1& of the 8egotiable Instruments :ct.

C'(')a P",!!*') < C/a.%! >?II "# %/! N!"%'ab! I)$%&(!)%$ A,%

Chapter LFII inserted by the )ankingA +ublic -inancial Institutions and 8egotiable

Instruments aws B:mendment :ctA 1/&& proides for penalties in case of dishonour of

certain cheques for insufficiency of funds in the accounts or for the reason that the

amount e;ceeds the arrangement made by the drawer.

:s per the penal proisions under the :ctA the drawerA committing an offence under

%ection 1&A is liable to be punished with imprisonment for a term which may e;tend to

two yearsA or fine which may e;tend to twice the amount of the cheque or both.

OFFENCES 4 CHEATING AND FORGERY

Cheating being an offence is defined under %ection #1' of the Indian +enal Code as

followsG

E>hoeerA by deceiing any personA fraudulently or dishonestly induces the person so

deceied to delier any property to any personA or to consent that any person shall retain

any propertyA or intentionally induces the person so deceied to do or omit to do anything

which he would not do omit if he were not so deceiedA and which act or omission causes

or is likely to cause damage or harm to that person in bodyA mindA reputation or propertyA

is said to EcheatE.

1#


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In order to bring the case within the definition of Cheating under section #1' of the I+CA

it has to be shown by the prosecution that there was some inducement on the part of the

accused persons and the said inducement was made fraudulently or dishonestly with a

iew to deceie the complainant. It is further to be shown by the prosecution that due to

deception practiced by the accused personsA the person so deceied had deliered the

property to the accused persons or had gien consent that the accused person shall retain

that property.

?o hold a person guilty of the offence of cheating it has to be shown that his intention

was dishonest at the time of making the promise.

C/!a%') b; P!$")a%'")

%ection #1* of I+C defines cheating by personation as followsG

E: person is said to cheat by personation if he cheats by pretending to be some other

personA or by knowingly substituting one person for anotherA or representing that he or

any other person is a person other than he or such other person really is.

(ffence of cheating by personation is punishable under section #1/ of I+C whereas

general cheating is punishable under section #1, and section #1, of I+C.

F"!;

%ection #* of I+C defines forgery asG

E>hoeer makes any false documents or electronic record part of a document or

electronic record withA intent to cause damage or injuryA to the public or to any personA or

to support any claim or titleA or to cause any person to part with propertyA or to enter into

any e;press or implied contractA or with intent to commit fraud or that fraud may be

committedA commits forgery.E

%ection #*# of I+C deals with making a false document and proides as underG

: person is said to make a false document or false electronic record$

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-irstly $>ho dishonestly or fraudulently makesA signsA seals or e;ecutes a document or

part of a document or makes or transmits any electronic record or part of any electronic

recordA affi;es any digital signature on any electronic recordA or makes any mark denoting

the e;ecution of a document or the authenticity of the digital signatureA with the intention

of causing it to be belieed that such document or part of documentA electronic record or

digital signature was madeA signedA sealedA e;ecutedA transmitted or affi;ed by or by the

authority of a person by whom or by whose authority he knows that it was not madeA

signedA sealedA e;ecuted or affi;ed or

%econdly$ >hoA without lawful authorityA dishonestly or fraudulentlyA by cancellation or

otherwiseA alters a document or an electronic record in any material part thereofA after it

has been madeA e;ecuted or affi;ed with digital signature either by himself or by any

other personA whether such person be liing or dead at the time of such alteration or

?hirdly$ >ho dishonestly or fraudulently causes any person to signA sealA e;ecute or alter

a document or an electronic record or to affi; his digital signature on any electronic

record knowing that such person by reason of unsoundness of mind or into;ication

cannotA or that by reason of deception practised upon himA he does not know the contents

of the document or electronic record or the nature of the alterations.

P&)'$/(!)% #" F"!;

>hoeer commits forgery shall be punished with the imprisonment of either for a term

which may e;tend to two years or with fie or with both.'

Ba):!@$ 'ab''%; #" .a;(!)% (a*! ") #"!* ,/!&!$

Relationship between a banker and his customer is that of a debtor and creditor. >hen a

cheque with a forged signature is presentedA the banker has no authority to make

payments on itA and if he does make such payment he would be acting contrary to the law

and would be liable to the customer for the said amount. : bank in such cases can escape

' %ection #*' of Indian +enal Code

1*


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liability only if it can show that the customer is not entitled to make a claim on account of

adoptionA estoppel or ratification.

LIABILITY FOR STOPPED PAYMENT

: stopped payment is usually requested if the cheque has been declared missing or lost.

)ut many a times the drawerA to escape his debt or liability has used it as an instrument of

deception. ?he 1/&& amendment in %ection 1& of 8egotiable Instruments :ct is also

silent about %topped +ayment.

: customer has a right to gie notice to his )ankers to stop payment of a cheque which

he has issued.


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#. ?he payee gies a notice to the drawer claiming the amount within 1' days of the

receipt of the information by the )ank and

'. ?he drawer fails to make payment within 1' days of the receipt of notice.

?he aboe mentioned case$laws supports the preposition that while holding any drawer

liable under %ection 1&A the Court should first see that whether payment was made to the

within 1' days of notice or not. ?he reason for dishonour is immaterial because if the

drawer is bonafide then he may make the payment of the amount due under the cheque

within the grace period i.e 1' days.

DRAWER@S LIABILITY FOR DISHONOUR OF CHEQUE

%ection of the 8egotiable Instruments :ctA 1&&1 reads as followsG

Ethe drawer of a bill of e;change or a cheque is boundA in case of dishonour by the

drawee or acceptor thereofA to compensate the holderA proided due notice of dishonour

has been gien toA or receied byA the drawerE.

%ection makes it imperatie that the notice of dishonour should of necessity be sered

on to the drawer of such cheque. It is clear that the drawer shall be bound to compensate

the payee or the holderA as the case may beA if only he has been sered with the notice of

dishonour.

%ection 1& of the 8egotiable Instruments :ct requires that the payee or the holder in due

course of the cheque to issue a notice in writing to the drawer making a demand for

payment of the cheque amount. %uch notice must be gien within days of information

from the bank regarding the return of cheque as unpaid.

?he criminal liability cannot be fastened to the heirs and the legal representaties of the

person who is said to hae been guilty of the offence in question.

1&


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Da! *!,a!* ')$"-!)%

?he drawer cannot escape from the criminal liability by putting forward he plea that he is

not bound to discharge the liability mentioned in the complaint as he was already

declared as an insolentA especially when there is section 1/ permitting the court to

presume that there is an e;isting liability and the issuance of the cheque was made

towards the discharge of the said liability.

1/


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DRAWEE@S LIABILITY FOR DISHONOUR OF CHEQUE

R'/%#& D'$/")"& 4 /!) ba): (a; !#&$! %" /")"&

>hen there is the relationship of banker and customer between the partiesA the banker is

under an obligation to pay cheques when a mandate to pay is receied from the customerA

or when a cheque is issued.

?hese are the cases which may be termed as a countermand from the customer which

means an order to reoke the former instructions and annulling the former mandate gien

by the customer to the bank to honour the cheques and it also means the situations

resulting from the closure of account by the customerA prohibitory HgarnisheesH orders

haing been receied from the court or orders for payment haing been receied from thecourt or orders for payment haing been receied under %ection 22* B of the Income$

?a; :ctA 1/*1 and similarly it also means the situation when there is a restrained order

from the courtA notice of death of the customerA lunacy of the customerA notice of loss of

cheque or forged signatures on the cheque.

W")#& *'$/")"& "# ,/!&! < Da!! ba):@$ 'ab''%; %" .a; *a(a!$

In case all the conditions which are necessary for the payment of a cheque are present and

hae been fulfilled then if the bank dishonours a cheque it will amount to a breach of

contract for which the banker is liable to pay damages.

?he liability of drawee of cheque in case of a wrongful dishonour has been dealt with

under %ection 1 of the 8egotiable Instruments :ctA 1&&1.

?he position of law has also been made clear in a number of authorities. Reference may

be made to the followingG

In Jogendra Nath Chara!arti v. Ne! engal an #imited *A it was heldA Ewhere the

bankerA being bound to honour his customer0s chequeA has failed to do soA he will be

liable in damages. IfA special damageA naturally ensuing from the dishonourA is proedA it

will be properly taken into account in assessing the amount of the damages. If the

* :IR 1// Cal. *

2


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customer be a traderA the court may properly award substantial damagesA in the absence of

proof of special damages. In other cases the customer will be entitled to such damages as

will reasonably compensate him for the injury whichA from the nature of the caseA he has

sustained. :ll loss flowing naturally from the dishonour of a cheque may be taken into

account in estimating the damages.

C"(.!)$a%'") #" ")#& *'$/")"&

>rongful dishonour of a cheque e;poses the drawee bank to statutory liability to the

drawer to compensate him for Hany loss or damage cause by such defaultH.

?he principle of awarding compensation to the drawer of a cheque is reparation for the

injury sustained or likely to be sustained by reason of dishonour. ?here appears to be adistinction between a trader and a non$trader in this respectA while a trader is always

entitled to substantial damages for dishonouring of his chequeA a non$trader will be

entitled only to nominal damages in the absence of an allegation and proof of substantial

damages,.

, estminster )ank B1// :ll 7.r. ',,

21


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DISHONOUR OF CHEQUE 4 LIABILITY OF A COMPANY

%ince a company is an artificial person it is incapable of committing any crime

personally. =oweerA if certain crimes are committed by its officials in the name of the

company then in such circumstances a company is said to hae committed these crimes.

%o far as the punishment is concernedA its liability can be only in terms of fine. ?he

company shall be responsible for the acts of commissions and omissions of the persons

working for the company.

%ection 1#1 B1 of the 8egotiable Instruments :ctA 1&&1 reads as followsG

EIf the person committing an offence under section 1& is a companyA eery person whoA

at the time the offence was committedA was in charge ofA and was responsible to thecompany for the conduct of the business of the companyA as well as the companyA shall be

deemed to be guilty of the offence and shall be liable to be proceeded against and

proceeded against and punished accordingly

+roided that nothing contained in this sub$section shall render any person liable to

punishment if he proes that the offence was committed without his knowledgeA or that

he had e;ercised all due diligence to preent the commission of such offenceE.

?he Ficarious liability of a person for being prosecuted for commission of an offence by

the company arises if at the time when the offence is alleged to hae been committedA he

was in charge of and was responsible to the company for the conduct of its business. It is

necessary that there hae to be aerments in the complaints that the petitioners were in

charge of and were also responsible to the company for the conduct of its business of the

company&.

?husA it can be concluded that three categories of persons can be discerned from the said proision who are brought within the puriew of the penal liability through the legal

fiction enisaged in the section. ?hey areG B1 ?he companyA the principal offenderA which

committed the offence B2 7ery one who was in charge of and was responsible for the

business of the company B :ny other person who is a director or a manager or a

&


23/26

secretary or officer of the companyA with whose conniance or due to whose neglect the

company has committed the offence/.

=oweerA in case an employee of the company proes that the offence was committed

without his knowledge or that he had e;ercised all due diligenceA then he may not be

prosecuted under the :ct. In case he proes that after due diligence he could not preent

the commission of the offenceA it may proide a alid defence.

W')*') &. .",!!*')$ .!)*')

: company cannot escape from a penal liability under section 1& of the :ct on the

premise that a petition for winding up of the company has been presented and was

pending during the releant time. ?he Company cannot aert its liability on the mereground that the winding petition was presented prior to the company being called upon by

a notice to pay the amount of the cheque.

?here is no proision in the Companies :ctA 1/'* which prohibits enforcement of the

debt due from the company. >hen a company goes into liquidationA enforcement of debt

due from the company is only made subject to the conditions prescribed therein. )ut that

does not mean that the debt has become unenforceable altogether 1.

/ :nil =ada . Indian :crylic td. B2 // Comp Cas * B%C

1 +ankaj Mehra %tate 2 Cri 4 1,&1 B%C

2


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CONCLUSION

?he law relating to 8egotiable instruments is the law of the commercial world which was

enacted to facilitate the actiities in trade and commerceA making proision of giing

sanctity to the instrument of credit which would be deemed conertible into money and

easily passable from one person to another. In the absence of such instrumentsA the trade

and commerce actiities were likely to be adersely affected as it was not practical for the

trading community to carry on with it the bulk of currency in force.

?he main object of the :ct is to legalise the system by which instruments contemplated

by it could pass from hand to hand by negotiation like any other goods.

Chapter LFII was inserted in the :ct 1/&& with a iew to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques.

?hough insertion of the penal proisions hae helped to curtail the issue of cheque

lightheartedly or in a playful manner or with a dishonest intention and the trading

community now feels more secured in receiing the payment through cheques. =oweer

there being no proision for recoery of the amount coered under the dishonoured

chequeA in a case where accused is conicted under section 1& and the accused has

sered the sentence butA unable to deposit amount of fineA the only option left with the

complainant is to file ciil suit. ?he proisions of the :ct do not permit any other

alternatie method of realiKation of the amount due to the complainant on the cheque

being dishonored for the reasons of Einsufficient fundE in the drawer0s account.

=oweerA the processes to seek ciil justice is notoriously dilatory and recoer by way of

a ciil suit may take inordinately long time therefore if the


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of a similar tribunal to deal with the cases of dishonour of cheques could perhaps proide

a faster relief to the aggrieed party.

2'


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BIBLIOGRAPHY

1. R.9 %uri !ishonour of Cheques$ +rosecution 6 +enaltiesA :? +ublishersA

=yderabad

2. %.8.

liability of dishonour of cheque.doc

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