The Supreme Court of India has been immensely involved in the development of laws governing cheque-bouncing cases. As payments by cheque have become more common, especially in commercial transactions, the problem of cheque dishonour has emerged as an important question in financial law in India. The Arbitration and Conciliation Act 1996 governs the offence of bounced cheques and its legal remedies under Section 138 of the Negotiable Instruments Act 1881. Some major points of this act have been explained by the Supreme Court in many of its judgments over the years.
We have seen in the recent past landmark decisions being passed by the Indian Supreme Court that have given better clarity on issues that are namely, the burden of proof, the aspect of intent to cheat, jurisdiction on a case arising under Section 138 of the Negotiable Instruments Act, and the time of strict compliances. The two cases have general and worthwhile lessons for people giving or receiving cheques in capacity as individuals or corporate entities. This blog will provide an analysis of these recent judgments and will focus on issues that this blog’s readers should know about.
Recent Supreme Court Judgments on Cheque Bounce Cases
1. Ajitsinh Chehuji Rathod Vs. State of Gujarat & Anr
Key Issue:
In Ajitsinh Chehuji Rathod vs State of Gujarat & Anr., the main controversy arose over the negation of presumptions regarding bonafide of the signatures on the dishonoured cheques. The accused, Mr Rathod, sought to challenge the dishonour of the cheque and argued that the signatures on the cheque were forged while urging him to produce expert handwriting to defend himself.
Supreme Court’s Ruling:
A drastic judgment was delivered on 29 Jan 2024 when the Supreme Court held that the accused has to prove that the signatures on a dishonoured cheque are forged. The Court further clarified that in as much as the accused has the onus to prove the forged signature, you must provide the appropriate defence evidence to prove the same. The court also clarified that the court is not under any duty to help the accused look for evidence for their side.
In this case, the appellant had also sought to have the cheque forwarded to the trial court for handwriting examination but was declined. After this, he went to the higher instances and all of them refused him to adduce further evidence. The Supreme Court supported these decisions by saying that it was not the responsibility of the court to assist the accused to gather evidence after the case has been called for determination.
The Supreme Court noted that the accused should have taken steps during the trial to challenge the signature’s authenticity, such as by obtaining certified copies of specimen signatures from the bank and requesting the court to compare them. The accused did not raise this point in the trial and therefore the Court had no reason to allow new evidence on appeal.
The Court noted that even Section 118’s presumption was rebuttable but it was the accused’s burden to come up with sufficient evidence to do so.
2. Monika Sabharwal v. Rajni Bagga (2024)
Key Issue:
In Monika Sabharwal v., The central legal issue in Rajni Bagga was the purpose of cheating as a mandatory requirement to uphold a conviction under Section 138 of the Negotiable Instruments Act. This question was raised because it was considered that a man should be put under Section 138 only in those cases when it was possible to prove that the dishonour of the cheque was committed with the intent to defraud or with the purpose of cheating the payee.
Supreme Court’s Ruling:
The Legal Proviso: The Supreme Court, in yet another landmark judgment in the year 2024, held that it is not mandatory that in every case under Section 138, the caller has to have the intention to cheat. The Court further stated that unless the drawer has a reasonable explanation or defence to offer, then mere dishonour of the cheque is adequate to hold the drawer guilty. Hence, assuming a person has drawn a cheque and delivered it for payment and the cheque has been dishonoured under one reason or another, they are triable even when no visage of fraudulent purpose to defraud the payee is present.
This prima facie ruling is quite momentous for creditors on the grounds that it makes it much easier to seek a legal remedy in the event of bounced cheques. People must follow the law to the letter without reference to the established intent of a practice or an action.
3. Vijayanagar PS v. A1-Hemalatha (2024)
Key Issue:
The Vijayanagar PS v. A1-Hemalatha case involved the question of the correct time and whether the compliance of the provision of section 138 had been done or not. For instance, the case looked at the requirement of the legal notice within 30 days of cheque dishonour and the effects of not issuing it on the complainant’s case.
Supreme Court’s Ruling:
The Hon’ble Supreme Court pointed out that according to Section 138, everything must be in compliance only with the formalities prescribed. In its verdict, it was said that the notice should reach the drawer within 30 days after the dishonour of the cheque, and the drawer should make the payment within 15 days of the receipt of such notice. Any failure to observe these time bars could lead to the discharge of the complaint as it would be detrimental to the position of the complainant.
This ruling gives the impression that cheque bounce cases are sensitive to time and as such requires forwarded actions to be done as early as possible. This puts the complainant in a position of having to do everything possible to safeguard their legal position throughout the procedural process.
Analysis of These Recent Supreme Court Judgments
These recent Supreme Court judgments have profound implications for both individuals and businesses involved in cheque transactions:
- Strict Compliance points out general insistence on procedural norms.
The Supreme Court has remained particularly Californian and straightforward on the need to adhere to procedural formalities under Section 138. Others are providing a notice within thirty days of dishonor, making sure that the reaction from the complainant is timely, and presenting a complaint within regulatory statutory periods. This is because failure to adhere to the laid procedures will compel the complainant to lose the case and the process may lead to dismissal of the complaint.
This trend indicates that both creditors and businesses have to be very careful with cheque transactions and should have knowledge of the law regarding dishonor of cheque transaction.
- Burden of Proof Lies with the Complainant
The complainant has to provide evidence in cheque bounce cases when proving his/her claim. According to the Applied Supreme Court of India case of Ajitsinh Chehuji Rathod, The complainant is required to prove the essential ingredients of the offence. This involves the making of the cheque, presenting it for payment, and presenting it on the occasion when it is dishonoured or when the payer has failed to make payment. In case the accused makes a defence, including forgery, inadequate amount of money, or any defence at all, then they have to prove it to the required standard.
What this means is that all the processes and the transactions that are done legally should be well documented. It also proves that complainants must have their legal requirements for such cases in order to secure a victory.cases.
- Intent to Cheat is Not a Requirement for Conviction
The Monika Sabharwal v. In the recent case of pronouncement, Rajni Bagga (2024) has cleared that intent to cheat is not essential for getting a conviction under Section 138. This ruling makes the prosecution easier compared to the previous law because mere dishonour of a cheque is proof of guilt if the drawer does not have any defence or excuse to give for the dishonour of the cheque.
This ruling has made cheque bounce cases less complicated so that the payee can get a favourable judgment. Creditors now have an avenue to take legal proceedings with ease while not having to show that they had ulterior malice intent of the debtor.
- Timely Action is Essential
As seen in the Vijayanagar PS v. In regard to the A1-Hemalatha case, the due notice of 15 days and the due payment of the invoice within 60 days are of importance. The drawer is required to make a payment within fifteen days from the date of the mentioned legal notice. Otherwise, it will have fatal consequences. Creditors should immediately proceed to the next step after a cheque has been dishonoured, and all processes should be done correctly.
This has a bearing on speedy dispute resolution of cheques dishonor cases that this paper seeks to address. Failure to act could also make the complainant compromise his chances of loving the matter to court Successfully.
Preventive Measures to Avoid Cheque Bounce Cases
To mitigate the risks of facing a cheque bounce case, individuals and businesses should implement the following preventive measures:
- Maintain Sufficient Funds: Make certain that you have enough money in your chequing account to meet any cheques tendered. You should also check your bank balance to avoid getting a notice of insufficient funds.
- Issue Cheques Only for Legitimate Transactions: Cheques should only be written when there are valid business transactions to support them. Do not write cheques that could be bounced in the future.
- Maintain Proper Records: There should be a proper record of all cheques that passed through any of the conduits, including the date of issue, amount of the cheque and details of the payee in the event of a disagreement.
- Seek Legal Advice: In the case of a dishonoured cheque, consultation with the drafting lawyer or any legal professional can be sought to explain the legal possibilities for redress.
Conclusion
The recent judgements of the Supreme Court on cheque bounce cases have brought valuable directions about the presumption of bona fide, burden of proof and compliance with formality under section 138 of the Negotiable Instruments Act. Such a decision also underscores the fact that both the complaints and the accused persons are required to observe legal procedures in order to receive justice. These judgments enable people and or companies to manage cheque-related problems, avoid or minimize possible risks that may arise, and protect their interests. Much attention should be paid to quick decision-making and compliance with all the legal regulations so as not to suffer from cheque dishonour.
