GRANTING OF BAIL IN CHEQUE DISHONOR CASES

[DR.MARIAPPAN GOVINDARAJAN]

Dishonor of cheque

Section 138 of Negotiable Instruments Act, 1881 provides that  where any cheque drawn by a person on an account main­tained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honor the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both.

Nothing contained in this section shall apply unless-

• the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
•  the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
•  the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

Defence

Section 140 provides that it shall not be a defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonored on presentment for the reasons stated in that section.

Cognizance of offence

No court shall take cognizance of any offence punisha­ble under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque.   Such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138.   The cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period. 

No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.  The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,-

• if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or
• if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Interim compensation

 The Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant, not exceeding 20% of the amount of the cheque.

Bail

Bail is the temporary release of an accused person awaiting trial, sometimes on condition that a sum of money is lodged to guarantee their appearance in court.  Bail usually implies a bail bond, a deposit of money or some form of property to the court by the suspect in return for the release from pre-trial detention.

There are three types of bail prevailing in India which are-

• Regular Bail – it is generally granted to a person who has been arrested or is in police custody.  A bail application can be filed for the regular bail under section 437 and 439 of Cr.PC.
• Interim bail – this type of bail is granted for a short period of time and it is granted before the hearing for the grant of regular bail or anticipatory bail.
• Anticipatory bail – it is granted under section 438 of the Cr.PC either by Sessions Court or by High Court.  An application for the grant of anticipatory bail can be filed by the person who discerns that he may be arrested by the police for a non bailable offence.

Granting of bail

The Supreme Court, in ‘Shri P. Chidambaram v. Central Bureau of Investigation’ -  2019 (10) TMI 879 - SUPREME COURT  held that the jurisdiction to grant bail has to be exercised on the basis of the well-settled principles having regard to the facts and circumstances of each case.  The following factors are to be taken into consideration while considering an application for bail-

• the nature of accusation and the severity of the punishment in the case of conviction and the nature of the materials relied upon by the prosecution; 
• reasonable apprehension of tampering with the witnesses or apprehension of threat to the complainant or the witnesses; 
• reasonable possibility of securing the presence of the accused at the time of trial or the likelihood of his abscondence;
• character behavior and standing of the accused and the circumstances which are peculiar to the accused; 
• larger interest of the public or the State and similar other considerations.

There is no hard and fast rule regarding grant or refusal to grant bail. Each case has to be considered on the facts and circumstances of each case and on its own merits. The discretion of the court has to be exercised judiciously and not in an arbitrary manner.

Case laws

In ‘Narayan Singh Gautam v. State of UP’ – 2020 (10) TMI 470 – Allahabad High Court, there is allegation against the applicant that he has taken ₹ 3,50,000/- from the informant. He has given a cheque of the same amount to the informant, which has bounced. However, applicant paid ₹ 20,000/- to the informant thereafter.  The petitioner submitted that-

• The applicant has been falsely implicated in this case.
• The cheque is alleged to have bounced in the year 2015 and no efforts were made by the informant to file complaint. After three of years, FIR has been lodged on the basis of false allegation against the applicant.
• The applicant has no criminal history to his credit and is in jail since 17.8.2020.

1. The petitioner prayed for the release on bail.  The High Court considered the materials on record and larger mandate of the Article 21 of the Constitution of India and the dictum of Apex Court in the case of Dataram Singh Versus State of Uttar Pradesh And Anr. - 2018 (2) TMI 410 - Supreme Court  and without expressing any opinion on the merits of the case, let the applicant involved in the aforesaid crime be released on bail on his furnishing a personal bond and two sureties each in the like amount to the satisfaction of the court concerned with the following conditions that-

• The applicant shall not tamper with the prosecution evidence by intimidating/ pressurizing the witnesses, during the investigation or trial.
• The applicant shall cooperate in the trial sincerely without seeking any adjournment.
• The applicant shall not indulge in any criminal activity or commission of any crime after being released on bail.
• In case the applicant has been enlarged on short term bail as per the order of committee constituted under the orders of Supreme Court his bail shall be effective after the period of short term bail comes to an end.
• The applicant shall be enlarged on bail on execution of personal bond without sureties till normal functioning of the courts is restored. The accused will furnish sureties to the satisfaction of the court below within a month after normal functioning of the courts are restored. In case court below is functioning normally, this condition will not apply and applicant shall be enlarged on bail on execution of bail bond and two sureties to the satisfaction of the court below.
• The party shall file computer generated copy of such order downloaded from the official website of High Court Allahabad.
• The concerned Court/Authority/Official shall verify the authenticity of such computerized copy of the order from the official website of High Court Allahabad and shall make a declaration of such verification in writing.

In case of breach of any of the above conditions, it shall be a ground for cancellation of bail.

In ‘KANTILAL CHOUKSEY S/O. LALARAM CHOUKSEY VERSUS STATE OF M.P.’ – 2020 (10) TMI 151 – Madhya Pradesh High Court, the present petition has been filed by the petitioner on the apprehension of  his arrest by Police in connection with Crime No.134/2020 registered at Police Station Kotwali, District Dewas, concerning offence u/s. 406, 420, 506 & 34 of the IPC.  Jagjeet Singh Tuteja is a supplier of the building material.   In the month of February, 2019, he has supplied the sand to Deepti Construction worth ₹ 6,24,464/- and the said firm has not made the payment to him and unnecessary creating dispute of non-payment of GST, royalty amount.  The petitioner contended that he is nowhere connected with the said firm.  The applicant has been made accused only to pressurize the main accused. The dispute is commercial in nature and if any amount is due, the complainant can file proper proceedings before the appropriate forum and the police has registered in order to create undue pressure. Hence, the applicant is entitled for protection from his arrest.

The complainant/objector opposes the prayer by submitting that the applicant has issued a cheque for payment of the aforesaid amount and the said cheque has been returned unpaid and for which the proceedings u/s. 138 of the Negotiable Instruments Act have been initiated and, therefore, the Police has rightly registered the FIR. The complainant is a petty contractor and a supplier. Hence, the applicant is not entitled to any protection.

The High Court observed that from the face of it, the present petitioner is not concerned with the said dispute. Hence, the application deserves to be allowed.  The High Court directed that in the event of arrest of the applicant in connection with the aforesaid crime number, he shall be released on bail upon his furnishing personal bond in the sum of ₹ 50,000/- with one surety in the like amount to the satisfaction of the arresting officer. This order shall be governed by the conditions No.1 to 3 of sub section (2) of section 438 Cr.P.C. The applicant shall also co-operate with the investigation.

In ‘Ashish Sharma v. State of UP’ – 2020 (9) TMI 1029 – Allahbad High Court, the applicant submitted that  he  is wholly innocent and he has been falsely implicated in the present case, in fact informant himself is involved in fraudulent activities by receiving money.   The informant himself is having criminal history and proceeding under section 138 of Negotiable Instruments Act was also initiated against the informant by one Lalu Prasad Kostha who had given the money to him for providing job, but when the job was not provided, he had filed Complaint Case No. 2770 of 2019 under Section 138 of Negotiable Instruments Act against the informant. There are no chances of the applicant of fleeing away from the judicial process or tampering with the prosecution evidence.   The applicant is in jail since 4.1.2020 and in case he is enlarged on bail, he will not misuse the liberty of bail.

The informant submitted that the applicant is the only person who is indulge in fraudulent activities and also cheated the informant, but could not explain the proceeding initiated against the informant under Section 138 of Negotiable Instruments Act which is also pertaining to receiving money for providing job.

The High Court, Considering the facts and circumstances of the case and also perusing the material on record, let the applicant, Ashish Sharma,  be released on bail on his furnishing a personal bond and two local sureties each of the like amount to the satisfaction of court concerned. It is further provided that this bail order available on the official website of the High Court will be taken to be the authentic one and certified copy shall be submitted before that court concerned as soon as it is issued.  The bail is subject to conditions.   In case of breach of any of the above conditions, it shall be a ground for cancellation of bail.

Discussions to this article

[Anil Aggarwal]

in case the blank cheque is given to a company as security cheque with clear instruction that it cannot be banked with out the written approval .

the comapny fills the cheque and banked the same. the cheque is dis-honoured.

does section 138 still applies in this case

[DR.MARIAPPAN GOVINDARAJAN]

Since there is an instruction before hand section 138 would not attract.