Legal Question in Banking Law in India

Re: bouncing of cheque

The recent rulings rendred by the Apex Court clearly rules that in order to maintain a Complaint u/s 138 of the N.I.Act their has to be a legal debt or liability and a cheque taken as security without any consideration passed cannot be enforced u/s.138, however the same can be dealt under Civil laws.The burden of proof lies on you to prove the validity of the transactions.

Re: bouncing of cheque

Absolutely right, there has to be liability for action u/s. 138 for dishonour of cheque but otherwise this goes as breach of contract under civil laws. Cheque given as security which is bounced , no action lies under section 138. Do not worry, except that you may have to take profesional services if company files case and get u to court.

Re: bouncing of cheque

Hi,

Issuance of a blank cheque is just like driving your car blind-fold in a busy street.. you will not know what happens next.

Indian law on dishonour of cheques is very strict. If after dishonour of cheque and legal notice, the payment is not made within 15 days, it becomes a criminal offence and is punishable by compensation or imprisonment or with both.

When a blank cheque is issued by you, you are infact authorising the payee/holder to fill it up as he pleases. The recent Indian court rulings have upheld the validity of blank signed cheques and of cheques issued as security.

When it is proved that the cheque was executed by you, the Indian law presumes that you received consideration for that. It is your burden to prove that the cheque was not supported by any consideration.

To escape the liability, you may prove that:

1. The cheque was not infact supported by any consideration. (absence of reciprocation in return) OR

2. That there was an express agreement to the effect that the cheque will not be presented despite the fact that it was signed and issued.. (That, it was never intended for encashment through bank - strict proof is needed) OR

3. The blank cheque was signed and kept in your custody which the payee/holder managed to possess without your knowledge or consent (You should have lodged a police complaint stating the loss of your signed cheque leaf at the earliest opportunity after becoming aware of such theft) OR

4. The cheque and the paper was signed and issued by you in captivity or under dangerous threat, without your free will or consent OR

5. The cheque was issued by you as an illegal consideration.

You may contend that the word mentioned is "Salary" which means "A fixed regular payment made by an employer to the employee" [ Reader's Digest - Great Dictionary of the English Language (2003)] and since you were not drawing any Salary the employer is not entitiled to any amount.

On the contrary, please see that on a wider perspective, the word "Salary" can also mean remuneration. Thus, your employer can contend that your last remuneration was your salary and you were regularly being paid your fixed remuneration.

If your cheque is dishonoured, your employer can file a complaint under Section 138 of the Negotiable Instruments Act. Such a complaint need not mention anything about the so called bond/contract. The dishonoured cheque alone can maintain both a criminal complaint AND a civil suit.

Since the payee's name was not filled-in by you, your employer can write the name of even a total stranger on the cheque, and in such a situation, it may be very difficult for you to prove in the Court that you did not issue any cheque to such person. Moreover, apart from the criminal complaint and the civil suit by such stranger, the employee can file a suit for compensation for breach of contract on the basis of the bond/contract. (But the bond may need stamping)Meet a lawyer.

Wish you Good Luck !