Cheque Bouncing: fulfill your promise to avoid criminal offense

Promises are made to be kept, but it’s not always possible to fulfill them. In personal and public life, sometimes we break promises. A cheque is also a promise in writing to pay the exact amount to the person in whose favor the cheque has been issued, and if someone breaks such promise, our law makes it a criminal offense under certain conditions.

Before dealing with core legal issues related to cheque bouncing under Negotiable Instruments Act, 1881 we would deal with those general perceptions which are wrong.

1. For buying goods or availing services people often issue cheques in advance. When desired good are not supplied or services not rendered, they neglect or deny to make payment against the cheque, without raising any dispute in writing.

Under such circumstances, the cheque returns unpaid from their account due to insufficient balance or payment stopped by drawer or for other reasons, and issuer of the cheque thinks that he is not liable to pay against such cheque.

2. However, the law presumes otherwise. Section 139 of the Negotiable Instruments Act, 1881 provides that there is presumption of legally recoverable debt or liability in favour of the holder, i.e. in whose favour the cheque has been issued, and against the issuer of the cheque.

Hence, even if the goods have not been supplied or defective goods have been supplied or services have not been rendered after issuance of cheque, it may create cause of action to file criminal complaint case against the issuer of the cheque, although the issuer may be under bona-fide belief that he is not liable to pay.

3. Once the criminal proceedings are set into motion against the issuer of the cheque, he will be considered as ‘accused’ and he will be presumed ‘guilty’ unless proved otherwise. Here Section 139 of the Negotiable Instruments Act, 1881 makes a clear departure from the general criminal jurisprudence that every accused is innocent unless proved guilty beyond reasonable doubt.

However, in a cheque bouncing case the issuer is presumed guilty and he has to rebut such presumption or prove his innocence, although the degree of such proof of innocence is not required to be ‘beyond reasonable doubt’ and may be that of ‘preponderance of probability’, i.e.  a defense based on written or documentary evidence which may be believed.

4. A prudent person may think that since he has proof that goods were not supplied or services were not rendered against which the cheque in question was issued, the case against him will be dismissed by the Court in one or two hearings on showing such proof, which is not correct position.

In India, every criminal proceeding is administered by the Criminal Procedure Code, 1973, commonly known as Cr.P.C. While conducting any criminal trial every criminal court has to follow steps provided under this code. So, even if you appear before the competent court with written evidence in reply to summons issued against you, such evidence will not be considered by the court at initial stage and you will be directed to furnish personal bond and surety bond for a sum which may be approximately 5% to 10% of the cheque amount. Once your personal bond and surety bond, commonly known as bail bonds, are accepted by the Court, the trial will begin.

After going through different stages of trial which may be 10 to 20 effective hearings, the opportunity to produce the documentary evidence by the accused (you) will come at the stage of defense evidence.

5. It should also be kept in mind that in such criminal trial the accused, i.e. the issuer of the cheque, who has valid evidence in his favor, has to appear before the Court on each and every date of hearing, and on failure to do so without a valid and acceptable reason, the court will issue Non-Bailable Warrants against him.

Therefore, it’s very important for everyone to know the nuances of the rules related to cheque before issuing it in someone’s favor to avoid criminal offense.

--- By Advocate Vijay K.