Cheque bounce cases

In the era of liberalisation with several financial institutions having direct impact on consumers, the Supreme Court has extended the scope of vicarious liabilities in the cheque bouncing cases apart from criminal liabilities, holding that the trial courts can grant compensation to victims who suffered injury due to the dishonouring of cheques.

Making a distinction between fine imposed for criminal liabilities and the grant of compensation, the court ruled that where the offenders sentenced to jail term but no fine is imposed, they are liable to pay compensation to the complainant in terms of the provision of section 375 of the Criminal Procedure Code (CrPC).

Though the fine could be imposed in terms of the provision of the Negotiable Instrument Act applicable to cheque bouncing cases, but “when the fine is not imposed, compensation can be directed to be paid for loss or injury cause to the complainant by reasons of commission of the offence,” a Bench of justice S.B. Sinha and justice Dalveer Bhandari ruled.

Although the purpose of section 375 was to achieve the same, fixing vicarious liabilities on offenders, but legal difference between fine and compensation was that the amount of compensation can be directed to be recovered and the fine is imposed, thus the fine stands on a higher footing than compensation awarded by the courts.

Ordinarily, the fine should be lesser than the amount, which could be granted as compensation by the civil court upon appreciation of the evidence for losses, which might have been reasonably suffered by the complainant, the apex court said.

“The jurisdiction of civil court, in this behalf, for realisation of the amount (of cheque) in question must also be borne in mind. A criminal case is not a substitution for a civil suit.”

“While the trial courts shall give due weight to the need of the victims, it cannot ignore the right of the accused… the discretionary jurisdiction must be exercised judiciously,” the court said.

The ruling came in a cheque bouncing case filed against Goodvalue Marketing Company Ltd by Kotak Mahindra and the trial court in Mumbai imposing a fine of Rs 25,000 on the former, failing which its chairman was sentence to a month’s jail term.

Besides, the Goodvalue chairman was directed by the trial court to pay Rs 15 lakh as compensation for dishonouring the cheque issued by the company.

When the case went in appeal before the High Court, it directed Goodvalue and its chairman to deposit Rs 5 lakh each within four weeks towards the compensation amount with it, which the company challenged in the apex court. The apex court, however, ruled that the compensation of Rs 1 lakh would be the reasonable compensation for the loss suffered by Kotak Mahindra.

Courtesy:By Sri S.S.Negi

The Supreme Court on the High Court's powers after Investigation

When investigation is incomplete, it is impermissible for the High Court to look into the materials; the acceptability is essentially a matter for trial. Even at the stage where charge is framed, the court has to prima facie be satisfied about the existence of sufficient grounds for proceeding against the accused and for that limited purpose it can evaluate material and documents on record, but it cannot appreciate the evidence.

The Supreme Court made these observations while hearing an appeal filed by the State of Orrissa challenging an order of the High Court which had quashed proceedings at a stage when the investigation in a criminal case was incomplete.

A Division Bench comprising Justice Arijith Pasayat and Justice Tarun Chatterjee while setting aside the order of the High Court observed that the inherent power under Section 482 of the Cr. PC is to be exercised sparingly by the courts and that too in the rarest of rare cases. No hard and fast rule can be laid down as regards cases where such power can be exercised, but the High Court being the highest court of the State should normally refrain from giving a decision in a case where the entire facts are incomplete and hazy.

Further the Bench observed that the exercise of power under Section 482 Cr. PC is the exception and not the rule. The section does not confer any new powers on the High Court. It only saves the inherent power which the court possessed before the enactment of the Cr PC. While exercising powers under Section 482 Cr PC, the High Court does not function as a court of appeal or revision. Inherent powers under the section, though wide have to be exercised sparingly.

The court further stated that under this section, the High Court would not ordinarily embark upon an enquiry whether the evidence in question is reliable or not. That is the function of a trial judge. Judicial process should not be an instrument of oppression. At the same time, the section is not an instrument handed over to the accused to short circuit a prosecution and bring about its sudden death.

CHEQUE BOUNCE[SEC.138 & 142 OF Cr.P.C.

Cases of cheque bounce are not uncommon in the courts. Legal experts are of the view a majority of cases fought pertain to cheque bounce under the Negotiable Instruments Act. In this regard, it would be interesting to take note of two very interesting aspects pertaining to cases relating to cheque bounce. An accused whose cheque was dishonoured contended that the cheques issued were blank ones. He also said that a case of cheque bounce cannot be slapped against him if the cheque is given to a party as a security for repayment of a loan. Justice K Sreedhar Rao in his order stated that both points raised by the accused could not be sustained and would attract the provisions under the Negotiable Instruments Act.

Case at a glance:
A lady had borrowed a sum of Rs 75,000 in connection with some personal business. A blank cheque was issued as security. However the cheque was returned for want of sufficient funds, followed which a complaint had been filed. The accused stated before the court that no prosecution under Section 138 of the NI Act can lie in this case. The trial court dismissed the complaint against the accused following which the High Court was moved.

The Verdict: Justice Rao observed, " The dismissal of the complaint on the plea that the cheque was issued only as a security and therefore no prosecution would lie, is an untenable view. A cheque whether issued for repayment of a loan or as a security makes little difference under Section 138 of the NI Act. In the event of a dishonour, legal consequences are same without distinction. When once a cheque is issued and the same is proved, a presumption under Section 139 of the NI Act would arise with regard to consideration."

Legal view:
K M Natraj says once a cheque is issued there is a presumption under the NI Act that the cheque has been issued towards the discharge of a legally enforceable debt. It is a rebuttable presumption. The accused can rebutt that presumption and the burden is on him to dislodge that presumption