• Sec 138 case options/alternatives

Our company used to purchase raw material from traders and as a security of the credit offered they had taken few security cheques from us. Though all the payments use to happen through RTGS, some payments got delayed due to cash flow crunch. All this happened when our company was making losses and ultimately had to shut operations. This trader then utilized our security cheques and had filed five sec138 cases against our company for 5 cheques in Tis hazari court Delhi. I have a few confusions regarding the same: 

1. The cases have been filed against both directors, one of whom is a senior citizen lady who had been a director on papers and had no role in day to day operations or cheque signing. Does she also need to appear and seek bail? is there an option available for seeking permanent exemption for her from high court, if so, what is the procedure?

2. We consulted a lawyer and he is of the opinion that for seeking bail , you need to furnish security bonds which are atleast 10% of value of the cheque bounced amount. So for cheques worth 90L, do we need to have 9L security bonds for each accused?

3. What should be the ideal defence for us while fighting the case? All security cheques have same amount and dates filled by the trader? will this stand a chance?

Looking forward to the advice.

Thanks
Nikhil
Asked 15 days ago in Criminal Law from Delhi, Delhi
Religion: Hindu

Hello,

yes she will have to appear if she has been impleaded. 

Yes, but this can be adjusted by moving an application before the court.

this will be no valid defense, you can only show that there is no outstanding liability against the same. Or if you have filed application for winding up then that may be used as defense.

regards

Anilesh Tewari
Advocate, New Delhi
14193 Answers
191 Consultations

5.0 on 5.0

As a cheque is given as a security amount, the provisions of Section 138 of the negotiable instrument Act cannot be attracted. Also, the debt if any would be barred by a period of limitation.

The offence of dishonour of cheque is made out only if the cheque had been issued for the discharge of any debt or other liability.

In this regard, it may be noted that in the case of Vijay v. Laxman, (2013) 3 SCC 86, the Supreme Court upheld the acquittal of the accused in a cheque dishonour case on the ground that the accused, who was supplier of milk, was given the price of the milk in advance as per the trade practice, in acknowledgment and by way of security for which amount the accused had issued the cheque in question.

Likewise, in the case of Sudhir Kumar Bhalla v. Jagdish Chand, (2008) 7 SCC 137, the Supreme Court set aside the order of the High Court, inter alia, on the ground that the High Court had not addressed the legal question that the criminal liability of the accused under the provisions of Section 138 of the Negotiable Instruments Act is attracted only on account of the dishonour of the cheques issued in discharge of liability or debt, but not on account of issuance of security cheques. In this case, the Supreme Court remitted the case back to the High Court for reconsideration.

The directors would have to seek bail from court as well and exemption application for permanent exemption of the senior citizen lady director can be filed in the court where the present cases at being tried.

There is no set formula for deciding the bail amount and it is totally upon the descretion of the magistrate trying your cases.

 

 

Siddharth Jain
Advocate, New Delhi
2839 Answers
31 Consultations

5.0 on 5.0

1)she has to appear in court and seek bail 

 

2) make application from exemption from personal appearance in trail court until further orders 

 

3)local lawyer can guide you as to amount of security bonds required to be furnished by the accused 

 

4) lady should take defence that she is not in charge of day to day management . that she has not signed cheques issued by other director on behalf of company 

Ajay Sethi
Advocate, Mumbai
56959 Answers
3456 Consultations

5.0 on 5.0

Dear Client,

Director who issued the cheque shall be liable along with company. First she have to apply for bail than her presence will be exempted under code of criminal procedure.

Directors of a Company are Liable for a Bounced Cheque of the Company who, at the time the offense was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company.

Car or property can also be used in security.

If it is proved that figure and date fill by trader, case shall be dismiss.

Yogendra Singh Rajawat
Advocate, Jaipur
7604 Answers
6 Consultations

4.7 on 5.0

1. Well, neither security cheque  no the old age or passive role of the Director is an excuse. Since case has been filed the persons named in the complaint will have to appear and seek bail.

2. Yes, the value of the Bind varies from court to court. In many courts the amount is one thousand per lakh but 10% is surely exorbitant. In any event it is fixed by court and not by an advocate.

3. Talk to them and settle the dispute by making an agreed amount. 

Devajyoti Barman
Advocate, Kolkata
15387 Answers
211 Consultations

5.0 on 5.0

1.  As per s. 141 of NIA all officers of company who were in charge of affairs of company are liable under 138. So the lady would not be liable

2. Directors won't be arrested so soon. First summons will be issued. If accused do not appear  then bailable warrant will be issued

3. Please settle the matter by paying the dues of the trader. 

Yusuf Rampurawala
Advocate, Mumbai
3186 Answers
12 Consultations

5.0 on 5.0

1)Directors may be held liable when the Company has committed the offence of cheque bouncing, under Section 141 of the Negotiable Instruments Act, 1881.
2) senior citizen lady is also liable, she has to appear and apply for regular bail.
3) engage a local lawyer who can guide you about surety.

Mohammed Mujeeb
Advocate, Hyderabad
4635 Answers
3 Consultations

4.5 on 5.0

1. With regard to first query everyone who has been arrayed as accused has to appear before court and seek bail from court. The lady can file for permanent exemption from appearance citing her old age by filing application under section 205 of Cr.P.C

2. You can give surety of persons who are having property in the jurisdictional court. Local lawyer can guide you with regards to the security bond usually the court will award nominal amount to be furnished as security bond.

3. You can take up the defense that once your company was winded up thereafter they have presented cheque and there is no legally recoverable debt from you and the complainant has to prove that there was legally recoverable debt from you. In case you have invoices showing that all dues payable by you was made to the complainant then the case of complainant will be dismissed.

Swarnarka Chowdhury
Advocate, Mysore
1657 Answers
3 Consultations

5.0 on 5.0

Hi, we need to go through all the case details. Why do not you visit our Tis Hazari law firm  office with all the relevant information and documents. We will definitely take the best defence for you and advise you the best. Kindly concact me on my number if you wants to proceed further. 

Akash Gupta
Advocate, Gurgaon
59 Answers
2 Consultations

4.0 on 5.0

1. If the court has summoned the director as an accused person then she too needs to appear and seek bail on the first date of hearing. 

2. If she did not have any role in the day to day functioning of the company then she can seek the quashing of case by filing a petition in the High Court. Alternatively, she can contest the matter in the trial court.

3. Exemption from personal appearance has to be sought from the trial court in the first place, and if it is denied then the matter can be carried to the High Court.

4. Your lawyer is right.

5. Even a security cheque on being dishonoured makes the accused liable under Section 138 of NI Act. Under Section 138 NI Act there is a presumption that cheque in question was issued to discharge a legally enforceable debt, and the onus is stacked on the accused to rebut this presumption. It is a provision loaded heavily against the accused. So unless there is some plausible and cogent defence, conviction is bound to happen on trial.

Ashish Davessar
Advocate, Jaipur
25198 Answers
706 Consultations

5.0 on 5.0

The director or any persons who is not actively involved in daytoday working of the affairs of a company is not liable under section 138 of NI Act. The complainant has to specifically implead and plead how an accused was involved in the functioning of the company. The law has been settled by SC  in various judgments. 

The bail amount is at discretion of court and in your case the Court may aske security of i L each accused. The bail amount is not to be paid in cash. You can furnish a security by way of property documents etc. 

As far as defence is concerned, there is no straight jacket formula. The law is that security cheques are not given against liability but if you owe some money to suppliers then he can utilise the cheques  against that liability. 

In my practice we have got acquitted accused who actually issued cheques against the liability because there were technical errors in the complaints. So defence depends upon close scrutiny of complaint, cross examination of accused etc.

H. S. Thukral
Advocate, New Delhi
586 Answers
180 Consultations

5.0 on 5.0

Hi

1) In order to attract the provisions of Section 138 of Negotiable Instruments Act, the cheque should have issued for discharge of a liability or debt. 

2) Now you will need to prove in the court  that  there are no outstanding dues or liabilities to the trader in order to claim that your cheques were issued as a security. 

3) In a cheque bounce case, the  court will impose bail conditions (such as 1 personal bond and 2 sureties for Rs30000 or 40000 (so totally 3 *30000 or 3*40000) .  so technically the sureties for bail will not exceed Rs1,20,000-/- 

4) However you should be aware that under the Amended Negotiable Instruments Act 2018( came in to effect from [deleted]), the court u/s 143 A of N.I Act, can direct  the drawer(issuer of cheque to pay up to 20% of cheque amount ) should the issuer opts for contesting the cheque bounce case. 

So technically, the court can ask the drawer to pay up to Rs18 Lakhs(20/100*90Lakhs) as interim compensation.

 

5) The director who had signed the cheque alone has to apply for bail. The other director should file for quashing of case under 482 of Cr.P.C instead of applying for bail. 

Hope this information is useful. 

 

Rajgopalan Sripathi
Advocate, Hyderabad
1571 Answers
225 Consultations

5.0 on 5.0

Sir,

We require to see the petition before answering the question with surety. Though the cheques are hefty, liability cannot be decided before hand . The cheues itself as you say were security cheques have to see the legal notice how prepared to find the adeqate defence

Anand Shukla
Advocate, Delhi
331 Answers
6 Consultations

4.9 on 5.0

1. Go for quashing of you have merits.

2. Presently seeking bail requires some interim protection.

3. 

  • Section 143A has been inserted which essentially empowers the court trying the offence under Section 138 of the Act, to direct the drawer of the cheque to pay interim compensation to the Payee in situations of a summary trial or summons case wherein the drawer pleads to be "not guilty". This new provision seeks to cap interim compensation to 20% of the cheque amount.

 

Prashant Nayak
Advocate, Mumbai
4875 Answers
3 Consultations

4.8 on 5.0

1. If she has been implicated as co-accused, then she has to first appear before court, get enlarged on bail and then file an application to dispense with her personal appearance before court citing the reasons thereby.

 

2. Your lawyer is misguiding you, the surety  for bail will not be to that amount, the court will inform you the conditions imposed on that which will be very minimal.

 

3. You may have to defend your interest on the basis of merits in your side, of course this point may help you out to certain extent.

T Kalaiselvan
Advocate, Vellore
46951 Answers
557 Consultations

5.0 on 5.0

- Once , the court has issued summon against any person, he is bound to appear before the court.

- Firstly, she should appear before the court for taking bail after producing a sound surety. It is not mandatory as per law to produce a surety of 10% value of the cheque amount.   The surety should be perfect ,very close to the accused. 

- Further, being a senior citizen lady, she should move an application for permanent exemption from the personal appearance before the court. She will have appear on the dates fixed for her appearance , when court deems necessary and not each and every dates of hearing.  

- It is well settled in law that if a cheque is issued for security, offence under Sec. 138 of NI Act is not made out.

Mohammed Shahzad
Advocate, Delhi
256 Answers
9 Consultations

5.0 on 5.0

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