A cheque may be validly signed by the drawer and it can also be issued on a valid bank account. But in such cases, what if we look into whether the said cheque was issued for payment of lawful debt or liability. This is one such situation which arises in many cases of cheque bounce. It could be on a security cheque. It could be a loan which you may contest that you don't owe it. It can be on a running account or account which is in advance or part paid, familial relationships etc. There could be several such situations where you might be receiving cheque bounce notice and thinking that you are definitely liable to be convicted. However that's not the position of law. As discussed in this article section 138 is attracted when a cheque is bounced and is towards the payment of legally enforceable debt or liability. Though there is presumption created in the favour of the holder u/s 139 NI Act 1881, the same is rebuttable by raising a probable defence. Be it on the basis of some documents, some situations or even by using the materials available with the complainant himself. So in cheque bounce cases one must always try to build their defence against such charge. If you're facing a cheque bounce case in Delhi NCR or any other city in India then try to connect your defence to the transaction, payments and situations around such transaction. When Advocate BK Singh receives a matter regarding a cheque bounce section 138 NI act he always ensures to see the position of the transaction. Whether you owe anything in that particular transaction, how much you owe. Is it paid earlier, what is the object behind issuing the cheque etc. A cheque bounced must be towards payment of lawful debt or liability as per section 138 NI act 1881. The Supreme court has on various occasions mentioned the fact that when the cheque is issued for lawful debt or liability, it becomes a essential ingredient of a offence u/s 138. We take a scenario where the cheque is given by the businessman to make some transaction with another person but later on that transaction is cancelled and he was not liable to pay anything. Such scenario will arise in front of us while dealing with section 138. There are many cases which arise where there was a running account between two parties. The cheque may have been issued towards some specific amount but maybe some more amount has been paid before the cheque was presented. So the lawfully enforceable debt as on that particular date may become a point of contention. This is where Advocate BK Singh will analyse the entire transaction rather than taking one cheque and deciding upon it. If a person owes money today to someone and can be recovered under a contract/liability then it is a debt. This definition can be more wider than just loan. Honble Supreme court has stated that Debt or other liability can be an obligation created by law for which one assumes liability in certain conditions. The emphasis would be to see if there is liability which is enforceable by law and not restricted to see that the cheques amount was drawn out to the drawer. Hence when the Accused pleads that money was initially with some other person the defence may not hold. The undertaking / Contract/ Transaction and the agreement needs to be scrutinized. When the accused is able to prove that money was not payable or money was repaid before presenting the cheque/ amount was lesser than that of cheque, etc can help you establish your defence. The most important act is the Negotiable Instruments Act 1881. It's mainly Sections 118, 138, 139, 140, 142, 143, 143A, 145 and 147. According to India Code section 138 is used for dishonor of cheque and section 139 provides presumption to the holder. There are many criteria that must be fulfilled under section 138. One being the cheque should be dishonored within it's due validity period. Next there needs to be a legal notice issued within the stipulated time once cheque is dishonored. After that the drawer should fail to pay the amount due within the given time period of legal notice. Many times it's been held by the Supreme Court that the time duration of 15 days is very important when issuing the legal notice. Section 139 becomes crucial in case of defences. The moment you are given a statutory presumption the accused person has to prove his defences. Just by saying that there was no dues would not save him from this presumption. He/She can bring forth his/her arguments on basis of preponderance of probability and does not need to prove it beyond reasonable doubts like a criminal offence. Either from his evidence or from complainants evidences. Hence Advocate Bk Singh suggests to retain the whole deal instead of just looking at the bounced cheque. It could be shown by bank statement / UPI / Receipt / Ledger / Written acknowledgement etc. That a portion or full amount of what is being claimed has been paid off. Date can also play a role here. If the payment took place prior to the cheque being dishonoured, the debt due could be less than what the cheque amount reflects at point of dishonour. Cheques can be given during course of business discussions, for advance purposes or to secure a deal that might not have taken place. It's important to know the law between parties and if any debt was created prior to the date of dishonour. As per the judgement by Hon'ble Supreme Court in case Dashrathbhai Trikambhai Patel we can say that this section will come into play if the debt was reduced due to any reason. Hon'ble court has discussed in this regard that at that particular stage amount should be due. It also mentions the provision about how endorsement should be done if part of amount is paid. If there are book of accounts maintained with your client many issues can arise like pending bills, debit notes, returns, interest charges etc. In case there has been adjustment which is not mentioned you may want to check through them. As I stated earlier labelling a cheque as Security cheque alone will not help you out in most of the cases. We would need to look at what was agreed upon while giving the cheque and if any debt existed at the time of dishonour. So keep these points in mind while saying that it was a security cheque. Step 1: Factual Reconstruction – Advocate BK Singh may start off by going through the cheque, bank return memo, statutory notice, complaint, transaction supporting documents and history of payment or expected payment. Step 2: Documentary Picture – Bank statements, invoice copies, agreements, account books, email exchanges, WhatsApp conversations, receipts, settlement letters and any other material document may reveal what transpired. Step 3: Legal Response – Depending on whether the matter is at notice stage, or whether summons have been issued; or whether a trial is pending; or whether this is an appeal or proceeding before a superior court, the legal response will be different. At the right stage, the remedy may include defending against the complaint made out, disproving the complainant’s version of events through admissible evidence, examination and cross examination, written submissions (applications) to the court, final submissions (arguments) or even settlement. Which path is taken depends on what the record shows. Note for clients in Delhi NCR: Sometimes court jurisdiction is important too. Since Cheque dishonour proceedings may be initiated before the competent Magistrate court having territorial jurisdiction (as per the statute and applicable Supreme Court rulings) please ensure the proper forum is determined based on facts. Just because a party resides in a particular court’s vicinity does not make that court the correct forum. An accused person in a cheque bounce case should not destroy or casually dispose of evidence of transactions. They may include: Preserve electronic evidence in its original form as much as possible. Don’t selectively delete messages just because they are inconvenient. The full conversation could be relevant. Seek legal counsel if you have received a Section 138 notice, got served with a summons, cheque was given as an earnest/ security or advanced part-payment, underlying transaction was rescinded or order was cancelled, or if the demanded amount seems wrong. It also makes sense to have your documents reviewed by a lawyer if the complainant files papers with inconsistent dates or amounts or descriptions of the transaction. If your case is already pending, take along the entire case file (including all documents relating to the transaction) to your lawyer and not just the cheque. Your lawyer will need all the facts surrounding the transaction to determine if your defence is one of debt, amount, notice, limitation, jurisdiction or evidence or something else entirely. Have a dispute relating to dishonor of cheque? Cheque Bounce Lawyer handles legal services for cheque bounce cases, including 138 NI Act filing & defense, Legal Notice, Summonets related help, Mediation & Settlement, Appeals & evidence based preparation. We have listed our Cheque Bounce defence related services here on the website. When confronted with a claim for payment that you believe is incorrect or inflated, whether because you dispute the existence of a legally enforceable debt or you dispute the amount of such a debt, the best place to begin is not with a formulaic checklist of defenses. Cheque Bounce Advocate BK Singh will review the documents of the transaction, payment history and procedural posture of the matter and advise you of your legal options. If you are located in Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad, feel free to seek help. However our website deals with cheque bounce matters from across India. Clear records matter. If the alleged liability is disputed, the transaction, payment history and surrounding documents should be considered together rather than looking at the bounced cheque in isolation. Ans. Yes. If the facts and evidence in the case support any defence. Section 138(1) is subject to a condition that there should exist a legally enforceable debt or liability, and Section 139 only raises a statutory, rebuttable presumption as to the facts. The accused shall raise some probable defence regarding his evidentiary situation and the surrounding circumstances of the case. Ans. No. Even though the cheque signed by the drawer will attract statutory presumptions under Section 139, it is rebuttable and evidence as to the surrounding transaction remains relevant in every case. Ans. No evidence as to the surrounding transaction remains relevant in every case. A cheque delivered as “security” will not by itself render a complaint under Section 138 non-manufacturable, and the Court will have to look at whether or not there existed a legally enforceable liability in favor of the complainant when the cheque was presented. Ans. Yes, such payment can be quite relevant in a legal sense. The Supreme Court has clearly laid down that for the cheque to fulfill the requirement of Section 138, it must be the legally enforceable debt of the drawer at the instant it is presented and has also specifically dealt with the effect of part-payment of an amount due before the presentation of the cheque. Ans. Cheque bounce defence statements may help prove previous payments made by you, account movements or sometimes help point out inconsistencies in the amount stated as being due by the complainant. Their value will depend on all of the facts. Ans. Cancellation will often be relevant where between the drawer and the payee/collection co debtor the underlying transaction was cancelled, rescinded or terminated, and therefore the liability which was represented by the cheque never became legally enforceable. Sometimes subsequent to becoming enforceable, the liability was extinguished by payment or other means. Examination of the actual contract and entire history of the transaction will be necessary. Ans. No, not necessarily by giving evidence in person in every case. In several decisions the Supreme Court has reiterated that the accused is entitled to raise a probable defence by calling attention to the evidentiary situation and surrounding circumstances of the case including material adduced by either side. Ans. Yes. You can potentially still settle a cheque bounce case after the drawer has been accused of committing an offence and proceedings have been initiated by the complainant. Since offences under the NI Act are compoundable (Section 147) subject to following the prescribed procedure and depending on the circumstances of the case. Ans. Since every case is different, the terms of any settlement should be recorded to suit each individual case. Check exact terms discussed and signed by parties. Ans. Take prompt legal advice. Do not ignore a Section 138 notice. Preserve the legal notice, envelope or delivery receipt upon which the notice was delivered, cheque details, bank memo and entire transaction documents. Ans. Advocate BK Singh and Cheque Bounce Lawyer offer assistance and guidance to parties involved in cheque dishonour disputes. We provide legal services related to cheque bounce defence analysis, notices, cheques, court cases, negotiating settlement and other Section 138 legal issues. A cheque bounce complaint cannot be judged solely on the face of cheque. Its underlying legally enforceable liability is the heart of a Section 138 proceeding. If the amount was paid, transaction failed, liability was reduced , cheque was issued for different purpose or complainant’s story is at odds with documentary evidence, these are facts that merit careful legal consideration. Don’t destroy doccuments, ignore notices or think that a single line such as “security cheque” will fix everything. Preserve the record and seek advice sooner rather than later. Advocate BK Singh can review the documents, point out the legal issues involved and advise you on the defence or settlement option available to you depending upon the facts of your case. Advocate BK Singh works with Cheque Bounce Lawyer. He practices law in India. He helps people with legal help and guidance in cheque dishonour case, Section 138 NI Act, legal notice for cheque bounce, Defence in cheques bounce case, settlement and monetary disputes. Advocate BK Singh has assisted clients from Delhi NCR and other cities such as Delhi, Noida, Ghaziabad, Gurugram, Faridabad. Advocate BK Singh helps people, individuals, professionals, startups and businesses with the necessary paperwork, procedures to be followed, defend their case and what to expect practically in cheque bounce cases. He reviews facts, discusses what can be defended legally and presents practical options instead of making unrealistic claims.Cheque Bounce Case Without Legally Enforceable Debt: Defence Strategy
Why Does the Legally Enforceable Debt Matter?
Quick Facts
What is Legally enforceable Debt?
What Is the Legal Framework for This Defence?
Which Situations Can Support a No-Debt Defence?
Amount Paid Off
Amount Didn't Arise From Transaction
If any part of the debt was paid off.
Amount doesn't tally with books of accounts.
Security Cheque
How Is the Defence Process Usually Handled?
Documents to be preserved:
When Do You Need a Lawyer?
How Can Cheque Bounce Lawyer Help You?
Frequently Asked Questions
Q1. Can you defend a cheque bounce case if there was never any legally enforceable debt?
Q2. Does a cheque signed by the accused automatically prove the debt?
Q3. Can you defend a cheque bounce case if the cheque was delivered as security?
Q4. If I paid part of the amount due before presenting the cheque, can I defend against a cheque bounce case?
Q5. Will bank statements help with cheque bounce case defence?
Q6. If the underlying transaction was cancelled, can I defend against the cheque bounce?
Q7. Do I have to prove that the debt never existed as part of my cheque bounce defence?
Q8. Can you settle a cheque bounce case after it is filed?
Q9. What sort of terms should be used for settling a cheque bounce case?
Q10. What should I do after receiving a Section 138 legal notice?
Q11. Can Advocate BK Singh help with my cheque bounce case defence?
Conclusion
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