Is it cheque or check? If you make or receive payments through cheques as the mode of transaction, you should take a look hereby. As a negotiable instrument which is common in day-to-today financial transactions, some laws apply for regulation as well. The Negotiable Instruments Act, 1881 provides authority to cheques as mode of financial transactions. However, the same Act provides for punitive outcomes in case the provisions are not duly followed. Even the Section 138 of the Act lays criminal provisions in case a cheque is dishonoured (cheque bounced) due to insufficiency of funds. There are some new laws for cheque bounce in India which everyone who indulges in transactions through cheques should be aware of. One may also contact banking lawyers for professional assistance on particular facts.
Laws applicable in India and on Indians are brought in power by the legislature. Usually, banking laws in India are more of Reserve Bank of India affairs. Sometimes, the laws made by the legislature or the RBI policies under question are also brought before the Supreme Court of India. All such new laws for cheque bounce in India that may affect the layman are explained below.
The Reserve Bank of India is the central regulatory authority for Banks in India. RBI time and again brings new policies to smoothen the banking system in India in order to provide convenience for banks as well as the customers. Given below are some new rules for cheque bounce in India which indirectly affect the ignorant customers.
The recent RBI circular notified clearance of cheques within 24 hours of production in the banks. Earlier, the gazetted holidays and weekends had to be skipped in case a payment is made through cheques. This used to affect businesses as well as employees who had to await their salaries if month end accompanied weekend. Thus, people who drew cheques in advance hoping to add sufficient funds in their accounts later should be aware of the 24 hour clearing system before drawing a cheque..
Positive Pay System
Through the new PPS system, confirmation of cheques of amounts above 50,000 has become a new practice. While those of less amount may be cleared through the automated machine system, the higher amount figures require double checks.
Contact cheque bounce lawyers in the nearby location for consultation purposes.
When a case is brought before the court, it is a matter of who has more relevant evidence to prove their case. The mere reason is that the court does not move along with the parties during the transaction and only relies upon the evidence produced in case of a dispute which leads the court. The concept of burden of proof has been explained through the latest Supreme Court judgement on cheque bounce case whose highlights are provided below.
The Supreme Court in the said case held the following pointers:
In this case, the accused lady had contacted the complainant for delivery of non-woven fabric to her factory given a certain address. Two cheques were given to the complainant with amounts 5 lakh+ each. However, when both the cheques were produced at the banks for payment, both were dishonoured due to insufficient funds. The complainant served the accused lady with due legal notices regarding said payments which was followed by complaint under Section 138 of NI Act, 1881. The complainant produced the relevant documents including cheques accompanied by dishonour memo while the accused lady did not produce any evidence in support of her statement. The trial court decided in favour of the accused stating that the complainant did not prove the debt beyond doubt as required under the Section 139 of NI Act, 1881. However, the decision was reversed by the concerned High Court stating that the prosecution had produced all the relevant evidence. Thus, the onus to prove shifted to the accused to deny any liability against the complainant and the whereabouts of said cheques. The hon’ble Supreme Court in the present case also upheld the High Court’s contention and quashed the accused’s appeal against the High Court’s decision.
The hon'ble Supreme Court in case of Kumar Exports (Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513] 4 (2019) 18 SCC 106) while supporting the above case also held that “Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their nonexistence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.”
In a matter to be brought before the court, proving the locus standi, i.e. the stand before the court, is a must. In other words, the court should know what exactly affected you to move the legal matter before the court. In case of cheque bounce, only the payee or holder of said cheque is rightful to bring a legal action against the drawer of said cheque. To bring clarity in this regard, cheque bounce latest judgement 2022 has been provided below.
The Supreme Court held that “When the complainant/ payee is a company, an authorised employee can represent the company. All that is necessary is to demonstrate before the learned Magistrate that the complaint filed is in the name of the “payee” and if the person who is prosecuting the complaint is different from the payee, the authorisation therefore and that the contents of the complaint are within his knowledge.“
In this case, several cheques were drawn in favour of the said company. When brought to the banks for payment, the cheque amounted Rs 1 Crore 10 lakhs was dishonoured whereby the memo read ’Account closure’. A complaint under Section 138 of NI Act, 1881 was filed by the General Manager (Accounting) of the said company. The accused challenged the due process followed under Section 142 of NI Act, 1881 which lays various provisions for cheque bounce complaints including who can bring the cause in motion. The main concern as per the accused was that the General Manager was not empowered to bring an action on behalf of the company as per the laws. However, the complainant supported through documents that the Managing Director of the said company had empowered the General Manager (Accounting) to bring action and the signatures were also attested in this regard. The apex court rejected the order of High Court of Cuttack in support of the accused which upheld the question of stand by the General Manager.
If you are someone indulged in transactions through cheques, knowing the new laws for cheque bounce in India is paramount. However, if there is some legal trouble involving payment through cheques, then knowing the cheque bounce case process. The latest Supreme Court judgement on cheque bounce case may also help in the ongoing cases. SInce the nature is more civil than criminal in cheque bounce cases, courts also prioritise payments over cheque bounce punishment in India.