Negotiable Instruments Act

Putting larger amount in cheque than actual liability is a fraud

18 January 2020


(From previous issue) :
11. For prosecuting a person for an offence under Section 138 of the Act, it is inevitable that the cheque is presented to the banker within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier. When a post-dated cheque is written or drawn, it is only a bill of exchange and so long the same remains a bill of exchange, the provisions of Section 138 are not applicable to the said instrument. The post-dated cheque becomes a cheque within the meaning of Section 138 of the Act on the date which is written thereon and the 6 months period has to be reckoned for the purposes of Proviso (a) to Section 138 of the Act from the said date.
12. The views of the Indian Supreme Court is that if a cheque is issued as an advance payment for purpose of the goods and for any reason purchase order is not carried out, the cheque cannot be said to have been drawn for an existing debt or liability and dishonour of such cheque does not amount to an offence under Section 138 of the Act. Drawing of a cheque in discharge of an existing or past adjudicated liability is sin aqua non for brining an offence under Section 138 of the Act. [ref. Indus Airways Pvt. Ltd., vs Magnum Aviation Pvt. Ltd., reported in 12 SCC 539]. That interpretation is not acceptable for us in view of the amendment of law mentioned above. The present position in view of the amendment of 2000 stood that once the loan was disbursed and installments have been taken due on the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act.
13. Section 138 of the Act has been incorporated with a specific object of making special provision to facilitate to prevent smooth functioning of any transaction between the drawer and the payee. The law relating to the Negotiable Instruments is the law relating to commercial world legislated to facilitate the activities in trade and commerce making the provision of giving sanctity to the instruments of credit which would be deemed to be converted into money and easily passable from one person to another. The offence under Section 138 of the Act is not a natural crime like hurt or murder. It is an offence created by a legal fiction in the statute. It is a civil liability, transformed into a criminal liability under restricted conditions by way of an amendment of the Act. Before amendment, offending acts referred to Section 138 of the Act constituted only a pure and civil liability.
Act is significant. The commencement of section stands with the words, 'where any cheque'. Those three words are of more significance, in particular, by reason of the user of the word 'any'-the first three words suggest that in fact for whatever reson if a cheque is drawn on an account maintained by him with a banker in favour of another person for whatever reason it may be, the liability under this provision cannot be avoided, if the same stands returned by the banker unpaid.  
15. Another important issue is issuance of a blank cheque without mentioning the date and amount will come within the definition on cheque or not. If the cheque is not drawn for a specified amount it would not fall within the definition of bill of exchange. Filling up amount portion and date are material. Any alteration without the consent of the party who issued the cheque rendered the same invalid. However, question of issuance of blank cheque and fraudulent insertion of larger amount than actual liabilities is a question of fact. Insertion of larger amount in blank cheque than actual liability is an ingredient of fraud which cannot be approved since fraud goes to the root of the transaction. Where there is an intention to deceive and means of the deceit to obtain an advantage there is fraud.
16. The High Court Division on an application under Section 561A of the Code of Criminal Procedure is not authorized to quash a proceeding adjudicating a disputed question of fact. Once issuance of cheque and signature thereon are found to be genuine, the court shall proceed with the proceeding. Question of fraud or fraudulent insertion can only be determined by recording and considering evidence by the trial Court after holding trial. However, if blank cheque is issued towards liability or as security, when the liability is proved, if the cheque is filled up and presented to the bank, the person who had drawn the cheque cannot avoid criminal liability.
17. In view of the aforesaid facts and circumstances our considered opinion is that the disputed question of fact as to the issuance of the cheque as 'security' or 'advance' or 'post dated' can only be decided upon recording evidence. Accordingly, we do not find any substances in the appeals and petitions.
Thus, all the appeals and petitions ate dismissed.
(Concluded)

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