Lawyer Advocate for cheque dishonour case
The courts are flooded with cheque dishonour cases under Section 138 of NI ACT, 1881.
Section 138 of NI Act: Dis-honour of cheque for insufficiency, etc., of funds in the accounts:
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 by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for 2[“a term which may extend to two year”], or with fine which may extend to twice the amount of the cheque, or with both.
Provided that nothing contained in this section shall apply unless-
(a) The cheque has been presented to the bank within a period of 3 months from the date on which it is drawn or within the period of its validity, whichever is earlier.
(b) The payee or the holder induce course of the cheque, as the case may 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, 3[“within thirty days”] of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation: For the purpose of this section, “debt or other liability” means a legally enforceable debt or other liability].
139. Presumption in favour of holder; 1[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 nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability].
141. Offences by companies. 1[Offences by companies.
(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and proceeded against and punished accordingly];
With regards to the legal position concerning the vicarious liability of the Director in a company, the Supreme court has laid down following principles in the case of
National Small Industries Corporation Limited versus Harmeet Singh Paintal
- In order to make the accused vicariously liable, the complainant must make specific averments as required under the law in the complaint. There is no presumption that the director knows about the transaction in order to make him criminally liable.
- The director must be at the time of commission of offence in charge and responsible for the conduct of the business of the company. Section 141 does not make all the directors liable for the offence.
- Vicarious liability should not be inferred but should be pleaded and proved.
- It is not necessary that specific averments should be made in the complaint, if the accused is a managing director or a joint managing director. By the virtue of their position, they are liable to be proceeded with.
- When a director or an officer of the Company signs the cheque on behalf of the Company, no specific averments are required to be made in the complaint.
Section 141 (2) of NI ACT : makes those corporate directors/officers responsible who may not be in charge of the conduct of the business of the company, but the offence was committed with their consent, connivance or due to their negligence provided specific averments are made in the complaint illustrating the manner in which they are guilty of consent, connivance and negligence.
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