New Laws for Cheque Bounce in India


May 25, 2022, 4:27 pm | Updated June 6, 2023, 10:55 am IST
New Laws for Cheque Bounce in India
Cheques are a much familiar mode of transactions in India. People in business find cheques as a relevant payment mode since there is a document proof along with it. Since they are very common to all of us, the new laws for cheque bounce in India which may affect us should be known to all. Also know the latest Supreme Court judgment on cheque bounce case in India for better procedural understanding.
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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.


New Laws for Cheque Bounce in India

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.


Cheque Bounce New Law in India 2022

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.


RBI Guidelines Applicable Since August 2021

Bulk Clearing

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.

 

Cheque Bounce Latest Judgement 2022

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.


Sumeti Vij vs Paramount Tech Fab Industries (2021) (1) TVT 445 SC

The Supreme Court in the said case held the following pointers:

  • As per NI Act, there is a presumption of consideration for a person holding a cheque given by another
  • Primary onus to prove dishonour of cheque lies on the prosecution
  • The Prosecution does not need to prove the case beyond doubt
  • Prosecution only needs to prove the debt clearance and payment through cheques
  • Afterwards, onus to prove shifts to the accused

 

Facts of the Case

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.”


New Laws for Cheque Bounce in india 2022

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.


M/s TRL Krosaki Refractories Ltd. vs M/s SMS Asia Private Limited & Anr. (2022) Crl 270

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.“

 

Facts of the Case

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. 

 

Conclusion

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.

Written By:
Vidhikarya

Vidhikarya


Recommended Free Legal Advices
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Dear Sir, It all depends upon the facts and circumstances of the case however since there is no provision for discharge so drawer of the cheque has to face trial unless he goes to High Court and get such criminal case quashed.
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Good Eve Teja, After reading the above instances you've mentioned, I am of opinion that you have a very strong case u/s 138 of Negotiable Instruments Act and you also may proceed parallelly with 420 IPC Fraud at JMFC Court and also Summary Civil Suit of Recovery, however the strong base of the case can only be casted in the very beginning as initially you are required to file police complaint and issue legal notice/s to the accused and your original story of claiming amounts being complicated has to be newly formed only based upon the remaining 2 blank cheques' you possess, as even bringing small changes to your complaint idea / story in later stages of any suit may result in shattering of your legal right of recovery. some crucial points are to be mentioned by you such as: 1. if signing of any agreement took place either on letter-head or stamp-paper between both parties ? 2. What is the mode of transfer of given loan amount? 3. When were the cheques issued in your favor? 4. Till now, what is mode of payment of interests you have received from borrower? Legal notice and police complaint here are going to form very basis dealing with crucial future trajectory of your cases so future amendments leading to loosening of case can be avoided, I am a High-court level Law-Practitioner based in Maharashtra, India, Specialized in Negotiable Instruments cases, I try to empower people by helping them know about their legal rights as much as much as for free-under my capacity, if you do happen to like my answer you may procced to get the the Strong Legal Notice served on accused at a highly economic fee possible, feel free to reach me out for further advise vide finding me on google, or by contacting the Vidhikarya for my details. Have a lovely day. __Adv. Yogesh Tahiliani (ADVOCATE, BOMBAY HIGH COURT, NAGPUR BENCH)
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Dear Sir, You just file cheque bounce case against him and then let him contest the case and prove his defence which is very hard.
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Dear Sir, It is better to challenge such proceedings before High Court and get a stay order. It appears the said cheques were taken before delivery of the car that means before consideration is passed to you. There are so many technical points which will be argued before the High Court. Thanks.
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Dear Sir, You have to contest the case hardly and putforth all the evidences to show that the cheque and promissory note were not issued for any consideration and all the amounts were cleared.