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GROUP 8

SHOMIC

CHARUVANDANA

JAYANTIAPAR ANIL

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Introduction

D sent 10 post dated cheques each for Rs. 40,000/- to G in July1992 for the amt due from him.

2 cheques dated 10 th Dec 1994 & 10 th April 1995 were issuedunder the mistaken belief that he (D) was liable.

D asked G to consider those cheques as invalid & D also wroteto drawee-bank asking it to stop payment of the post dated

cheques issued by him.

G presented those 2 cheques on May 10, 1995.

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Cheques were returned unpaid on May 12, 1995.

G issued notice under Sec 138 of NIA demanding D to payRs.80,000/-

D did not respond

July 7, 1995, G filed a complaint under sec 138 of NIA in trialcourt

y

Complaint was dismissed in October 1999 taking the view thatsaid Act was not applicable.

y G again filed the appeal before the Goa Bench of the BombayHigh Court.

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y HC too dismissed the appeal in March 2002.

y Aggrieved G then filed an appeal before the SupremeCourt.

y Its contention was that merely writing a letter to the bank to stop payment of the post-dated cheques did not removethe case from the purview of the NIA.

y On the other hand, D argued that the cheques issued to Gwere under mistaken belief of liability & hence to betreated as invalid.

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ISSUESy Do the instructions given by the drawer of a cheque to a

bank to stop payment of a post dated cheque before thedue date attract Section 138 of the NIA or not?

y Whether D is liable to the punishment u/s 138 or not?

y Dsouza V/s Goaplast Pvt. Ltd.

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NEGOTIABLE INSTRUMENTS ACT, 1881

Preamble:y An Act to define and amend the law relating to Promissory

Notes, Bills of Exchange and Cheques.

y Contains 147 Sections divided into XVII chapters.

y Chapter XVII containing sections 138 to 142added in 1988(effective from 1.4.1989)

y Sections 143 to 147 added in 2002 (effective from 6.3.2003)amendment.

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Wha t is Negoti abl e Instrument ?

y S ec13. (1) A negotiable instrument means a

promissory note, bill of exchange or cheque payableeither to order or to bearer.

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Bill of exchangey S ec. 5. A bill of exchange is an instrument in writing

containing an unconditional order , signed by themaker, directing a certain person to pay a certain sumof money only to, or to the order of, a certain person orto the bearer of the instrument.

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C h equey S ec. 6. A cheque is a bill of exchange drawn on a

specified banker and not expressed to be payableotherwise than on demand .

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Import a nt termsS ec. 7. Drawer , Drawee .y T he maker of a bill of exchange or cheque is called the

drawer ; the person thereby directed to pay is calledthe drawee .S ec. 7. Payee .y T he person named in the instrument, to whom or to

whose order the money is by the instrument directedto be paid, is called the payee .

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Section 138y W 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 thataccount for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid,either because of the amount of money standing to thecredit of that account is insufficient to honour the

cheque or that it exceeds the amount arranged to bepaid from that account by an agreement made withthat bank, such person shall be deemed to havecommitted an offence and shall, without prejudice toany other provisions of this Act.

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Provided that nothing contained in this section shall apply unless

y (a)the cheque has been presented to the bank within a period of sixmonths from the date on which it is drawn or within the period of itsvalidity, whichever is earlier;

y (b)the payee or the holder in due course of the cheque, as the casemay be, makes a demand for the payment of the said amount of money by giving a notice , in writing, to the drawer of the cheque,within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

y (c )the drawer of such cheque fails to make the payment of the saidamount of money to the payee or, as the case may be, to the holder indue course of the cheque, within fifteen days of the receipt of thesaid notice.

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Pu nishmenti. Imprisonment for a term which may

extend to two years ,ii. or with fine which may extend to twice

the amount of the chequeiii. or with both

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Sec 139y Presumption in favour of holder .It shall be presumed, unless the contrary is proved, that

the holder of a cheque received the cheque of the naturereferred to in Sec 138 i.e. for the discharge in whole or inpart, of any debt or other liability

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Sec 142( Cogniz a nce of offence)a) No court shall take cognizance of any offence

punishable under section 138 except upon a

complaint, in writing made by the payee or as thecase may be, the holder in due course of the cheque.b) Complaint should be made within 1 month of the

date on which the cause of action arises under the

clause (c) of the proviso to sec 138.c) No court inferior to that of a Metropolitan Magistrateor a Judicial Magistrate of the 1 st class.

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CO NCL USIO Ny In this case issue is regarding payment of a post-dated cheque

being countermanded before the date mentioned on the face of thecheque.

y A post-dated cheque will lose its credibility and acceptability if its

payment can be stopped routinely.

y The purpose of a post-dated cheque is to provide someaccommodation to the drawer of the cheque. Therefore, it is all the

more necessary that the drawer of the cheque should not beallowed to abuse the accommodation given to him by a creditor byway of acceptance of post-dated cheque.

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y O nce a cheque is issued by a drawer, apresumption under Section 139 must follow andmerely because the drawer issued notice to thedrawee or to the bank for stoppage of payment it will not preclude an action under Section 138 of the Act by the drawee or the holder of the chequein due course.

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THANK YOU