Meaning of Cheque Bounce
Cheque Bounce Means Where 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 discharge, in whole or in part, of any debt or other liability is returned unpaid by the bank, either because the amount of money standing to the credit of that account is insufficient to honor the cheque or because it exceeds the amount arranged to be paid from that account by an agreement made with that other person, the person drawing the cheque shall be liable to pay
Provided that nothing in this section shall apply unless: (a) the cheque has been presented to the bank within six months of the date it was drawn or within the time of its validity, whichever is sooner; or (b) the cheque has been presented to the bank within the period of its validity.
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as applicable, the holder in due course of the c.
Explanation of Cheque Bounce
Explanation “Debt or other liability” in this clause means a debt or other obligation that can be enforced by the law.
This provision describes the procedure in the case of a dishonored check without debate. The issue emerges, however, when the dishonored check was issued as a security check. It is unclear under the law if such a check is subject to Section 138 of the Act’s penalties. Whether or not the security check is affected by Section 138 of the Act depends on whether or not Section 139 of the Act applies.
Section 139 of the Act states: “It shall be presumed unless the contrary is proven, that the holder of a cheque received the cheque described in Section 138 to discharge, in whole or in part, any debt or other liability.”
Advocate Govind Bali is a Lawyer Practicing in the Supreme Court of India, and specializes in Cheque bounce cases
Land Mark Cases on Cheque Bounce / Dishonor of Cheque
In light of the Supreme Court’s ruling in Adalat Prasad v. Roop Lal Jindal and Others, once the cheque has been issued, presented, and the statutory procedure for notice has been followed following its dishonor, the presumption under Section 139 arises immediately.
Evidence can be used to disprove the assumption, but the person who wants to disprove the assumption has to show evidence. So, if the defendant shows through direct or indirect evidence that the security check wasn’t used to pay off any obligation, the plaintiff has to prove that the check was used to pay off some obligation. If the plaintiff fails to show his case, the court will rule in favor of the defendant. In these cases, the defendant doesn’t have to prove their guilt beyond a reasonable doubt.
In contrast to the foregoing opinion, Justice Rao stated in one of the cases involving the same problem that “Section 138 of the Act draws little distinction between a check issued for loan repayment or as collateral.” “In the event of a breach of honor, legal repercussions are uniform.”
In the matter of M/s Datt Enterprises Ltd. v. V.K. Dua and Another, the High Court of Delhi, after considering the facts submitted by the parties, determined that the security cheque is not subject to Section 138 of the Act.
The court found that the plaintiff made false accusations against the defendant. The checks were given out as a security deposit, as had been done in the past until the accounts were balanced. They were not used to paying any bills.
The same observation was repeated by the court in M.S. Narayana v. State of Kerala, in which the court stated:
The evidence that both sides brought to the trial court suggests that the appellant was able to meet his initial burden of proof. As a result, the burden of proof shifted to the second respondent. He did not do so. In addition, Sinha. J noted that the appellant explicitly stated that nothing was owed and that the check was issued as collateral. The aforementioned defense has been acknowledged as plausible. If the defense makes sense, the check can’t be seen as having been written to meet the obligation. For example, a check written as security or for any other reason doesn’t fall under Section 138 of the Act.
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