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Payment of the entire cheque amount does not automatically lead to dismissal of the complaint under Section 138 of the Negotiable Instruments Act. The primary issue is whether the accused has discharged their liability by making the payment. Once the payment is made, the accused can request the court to consider this as a full discharge of liability, potentially leading to the dismissal of the case. However, the court's decision depends on whether the payment is accepted as full and final, and whether all procedural requirements, such as proper notice and legal considerations, are satisfied. ["Nitin VS Saiyyad Musharraf - Bombay"], ["Delta Composite Film (Pvt. ) Ltd. VS State Of Bihar - Patna"]
The accused can request the court to dismiss the complaint after full payment if they can prove that the payment discharges the liability. Sec. 138 does not prohibit the accused from seeking dismissal once the debt is settled, but the court must be satisfied that the payment was made in accordance with legal requirements and that no further proceedings are necessary. The court may dismiss the case if it finds that the accused has fully paid the cheque amount and there are no other legal issues. ["Nitin VS Saiyyad Musharraf - Bombay"], ["Delta Composite Film (Pvt. ) Ltd. VS State Of Bihar - Patna"]
It is important to note that the mere payment does not automatically result in dismissal; the accused must demonstrate that the payment was made in full, legally valid, and that all procedural steps, such as serving proper notice and adhering to the timeline, are fulfilled. Once these conditions are met, the accused can indeed request the court to dismiss the complaint under Sec. 138. ["Nitin VS Saiyyad Musharraf - Bombay"], ["Satyavan Chaplot VS Rajendra - Rajasthan"]
Analysis and Conclusion:Yes, once the entire payment under Sec. 138 is paid and accepted, the accused can request the court to dismiss the complaint. The court's acceptance of the payment as full discharge of liability is crucial for dismissal. However, the dismissal is not automatic; it depends on whether all legal formalities are properly observed and whether the payment is deemed satisfactory by the court. Therefore, full payment can be a basis for dismissal, but it requires the accused to actively seek this relief and prove that the liability has been discharged.
In the fast-paced world of business transactions, cheques remain a common payment method in India. However, when a cheque bounces due to insufficient funds, it triggers serious legal consequences under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). A frequent question arises: Once the full payment is paid, can the accused request the court to dismiss the complaint in Sec 138 of the Negotiable Instruments Act?
This blog post explores this critical issue, drawing from judicial precedents and legal principles. While full payment before filing the complaint often extinguishes liability, timing and proof are key. Note: This is general information based on case law and not specific legal advice. Consult a qualified lawyer for your situation.
Section 138 penalizes the dishonour of a cheque for insufficiency of funds or exceeding arrangement, provided a demand notice is issued and payment isn't made within 15 days. The offence aims to ensure cheque credibility and penalize dishonesty. As noted in one judgment, Sec. 138 is introduced to prevent dishonesty on the part of the drawer of negotiable instrument SATISH JAYANTILAL SHAH VS PANKAJ MASHRUWALA - 1996 Supreme(Guj) 120.
Courts presume that every negotiable instrument was drawn for consideration under Section 118 NI Act, shifting the burden to the accused to rebut it. For instance, As per Sec. 118 of the N. I. ... Act, until the contrary is proved, the Court has to presume that every negotiable instrument was made or drawn for consideration Balabhau Haribhau Kavanpure VS Sai Auto Agencies - 2023 Supreme(Bom) 2210. Similarly, Section 139 presumes the cheque was issued for discharging a debt Vinod VS Shri Sunil - 2023 Supreme(Bom) 2214.
These presumptions establish a strong case for the complainant unless rebutted, but they don't override settlement via payment.
Yes, if full payment is made prior to or at the time of filing the complaint, the accused can request dismissal. The liability under Section 138 ceases upon payment before prosecution initiation. A key finding states: The court held that the legal liability under section 138 of the Negotiable Instruments Act ceases to be operative if the cheque amount is paid within the stipulated period or before the complaint is filed Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009).
This extinguishes the offence's basis, as no subsisting debt remains at dishonour presentation for prosecution.
Courts can quash proceedings under Section 482 CrPC or dismiss if payment is proven. The court can quash or dismiss the complaint if it is demonstrated that the payment was made in full before the complaint was filed Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009). The offence is compoundable, and full payment effectively compounds it, leading to acquittal Mohammed Rayouf VS State of Rajasthan - Dishonour Of Cheque (2006).
In practice, the accused files an application with payment proof, prompting the court to halt or terminate proceedings.
Judgments reinforce this. In one case, payment before complaint filing nullified liability Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009). Another allowed compounding upon full payment, resulting in acquittal and reinforcing extinction Mohammed Rayouf VS State of Rajasthan - Dishonour Of Cheque (2006).
Related principles include:- Presumptions in NI Act cases: Complainants must establish foundational facts to invoke Sections 118 and 139 presumptions. The accused's failure to rebut leads to conviction, but payment overrides this Balabhau Haribhau Kavanpure VS Sai Auto Agencies - 2023 Supreme(Bom) 2210Vinod VS Shri Sunil - 2023 Supreme(Bom) 2214.- Material alterations: If a cheque is altered (e.g., blank cheque filled unilaterally), it may be void, preventing Sec 138 liability altogether Ramachandran VS Dinesan - 2004 Supreme(AP) 1286Avon Organics Ltd. , (A Company incorporated under companies Act, 1956) VS Poineer Products Limited - 2003 Supreme(AP) 799.- Jurisdiction and procedure: Cases proceed where dishonour occurs Mala Bansal VS State of U. P., with safeguards like notice service SATISH JAYANTILAL SHAH VS PANKAJ MASHRUWALA - 1996 Supreme(Guj) 120.
These highlight that while presumptions favour complainants, genuine settlement via payment provides a robust defence.
Full payment doesn't always guarantee dismissal:- Timing is critical: Payment after filing typically doesn't lead to automatic dismissal; proceedings may continue Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009).- Proof required: Must demonstrate full settlement with receipts or acknowledgments.- Post-filing compounding: Possible under Section 147 NI Act (as amended), but court discretion applies, often requiring complainant consent.- Other factors: If involving conspiracy or non-drawer parties, separate rules apply; non-drawers can't be prosecuted under Sec 138 R. Padmapriya VS C. Krishnakumar - 2011 Supreme(Mad) 775.
Courts also deny dilatory tactics, like witness recalls to delay trials Fantasy Fashion VS Asim Kumar Sinha - 2012 Supreme(Del) 1466.
To leverage full payment effectively:- Document everything: Obtain written acknowledgment or receipt proving payment before complaint filing.- File promptly: Approach the court via application under Section 258 CrPC (summary trials) or quashing petition.- Negotiate early: Respond to demand notice within 15 days to avoid filing.- Seek restoration if needed: If complainant defaults, but prosecute diligently ICICI Bank VS State - 2012 Supreme(Del) 1310ICICI Bank Ltd. VS State - 2012 Supreme(Del) 2637.
Complainants should note courts may award interest on compensation under Section 357(3) CrPC SATHYAN @ AYYAPPA SATHYAN vs YOUSEF - 2006 Supreme(Online)(KER) 1095.
Under Section 138 NI Act, full payment before or at complaint filing generally allows the accused to seek dismissal, as liability ceases Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009)Mohammed Rayouf VS State of Rajasthan - Dishonour Of Cheque (2006). This promotes amicable resolutions in cheque bounce disputes.
Key Takeaways:- Payment timing determines success.- Strong proof and prompt action are essential.- Presumptions exist but yield to settlement.- Consult professionals; outcomes vary by facts.
Stay informed on NI Act updates to navigate these matters smoothly. For tailored advice, reach out to a legal expert.
References:- Rajesh Sarvaiya VS Niki Chemicals Industries - Rajasthan (2009), Mohammed Rayouf VS State of Rajasthan - Dishonour Of Cheque (2006), Balabhau Haribhau Kavanpure VS Sai Auto Agencies - 2023 Supreme(Bom) 2210, Vinod VS Shri Sunil - 2023 Supreme(Bom) 2214, SATISH JAYANTILAL SHAH VS PANKAJ MASHRUWALA - 1996 Supreme(Guj) 120, Ramachandran VS Dinesan - 2004 Supreme(AP) 1286, Avon Organics Ltd. , (A Company incorporated under companies Act, 1956) VS Poineer Products Limited - 2003 Supreme(AP) 799, R. Padmapriya VS C. Krishnakumar - 2011 Supreme(Mad) 775, Fantasy Fashion VS Asim Kumar Sinha - 2012 Supreme(Del) 1466, ICICI Bank VS State - 2012 Supreme(Del) 1310, ICICI Bank Ltd. VS State - 2012 Supreme(Del) 2637, Mala Bansal VS State of U. P., SATHYAN @ AYYAPPA SATHYAN vs YOUSEF - 2006 Supreme(Online)(KER) 1095
#ChequeBounce, #NIActSec138, #LegalDismissal
As per Sec. 118 of the N. I. ... Act, until the contrary is proved, the Court has to presume that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration. ... He made a written request to the partner of the complainant to advance him Rs.95, 000.00 for being deposited as down payment#HL_EN....
Perusal of the Roznama shows that the complaint was filed under Sec. 138 of the Negotiable Instruments Act. On due consideration of the fact and the verification, learned Magistrate has passed the order of issuance of process under Sec. 138 of the Negotiable Instrument Act. ... Learned counsel for the appellant submitted that present appellant has filed complaint under Sec. 138 of the Negotiable instrumen....
, within 15 days of the receipt of the said notice, the liability under Sec. 138 of the Negotiable Instrument Act would arise. ... (b) of the proviso given below Sec.138 of the Negotiable Instrument Act because there is no violation of law if any particular period within which payment is to be made is mentioned in the notice and such period is other than the less or more than 15 days. ... Chief Ju....
Apart from this fact, when any negotiable instrument has been given or executed, a presumption can be raised under sec. 138 of the Negotiable Instrument Act that the negotiable instrument was made or drawn for valid consideration. ... Therefore, despite civil remedy, Sec. 138 is introduced to prevent dishonesty on the part of the drawer of negotiable instrument ....
of Rs. 4,26,000/-, as such, it can not be said that the liability of payment of loan has been discharged and Sec. 138 of the Negotiable Instrument Act is not applicable. ... In the given facts, petitioners 1 and 2 can not be held responsible for committing an offence under Sec. 138 of the Negotiable Instrument Act. The complaint as against petitioners 2 and 3 can not be maintained under Sections 1....
Sec.80 of the N.I. Act is applicable to all instruments. There is no definition for the expression “instrument” in the N.I. Act. But the expression “negotiable instrument” is defined in Sec.13 of the N.I. Act. ... The cheque is hence a negotiable instrument and consequently an instrument to which Sec.80 of the N.I. Act would apply. 18. ... When the cheque is dis....
. 138 of the Negotiable Instruments Act, 1881 (for short 'N.I.Act'). ... Act, until the contrary is proved, the Court has to presume that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration. ... The accused has admitted receipt of the notice at Exh.21. The complainant, on the ....
Ramadas this Court had considered the effect of material alteration of a negotiable instrument. ... The conviction and sentence imposed on the revision petitioner under sec. 138 of the Negotiable Instruments Act are hereby set aside. He is found not guilty of the offence and acquitted. He is set at liberty. Fine, if any, paid shall be refunded to him. ... ... ... ( 1 ) THE revision petitioner was found guilty of an offence punishable under Sec. #HL....
The respondents paid interest for about 8 months and thereafter stopped payment of interest. ... I do not think that would have been the intention of the legislature while incorporating Sec. 138 in the Negotiable Instruments Act. ... The accused received the said notice on 7-10-1997. Ex. P-12 is the postal acknowledgment. The appellant invoked the provisions of Sec. 138 of the Act by presenting the complaint for dishonouring of cheq....
of Negotiable Instrument Act in default of payment of fine amount he shall default of payment of fine amount he shall default of payment of fine amount he shall and he is sentenced to pay fine of Rs.3000/- Negotiable Instrument Act, 1881 (herein referred to span style="font-family:Verdana,serif;font-size:12.95628pt
The three Judges bench of Hon’ble Supreme Court has ruled that Sec 177 of Cr. P.C. applies to cases under Sec. 138 Negotiable Instrument Act. In the case, in hand the cheque was certainly dishonoured at Bangalore. Prosecution in such case can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable u/s 138 is committed along with other offences in a single transaction within the meaning of Sec. 220 (1) read with Sec. 184 of t....
The documents sought to be confronted pertain to third party and the purpose of filing this petition is only to delay the trial. The complaint is under Section 138 Negotiable Instrument Act, which was filed on 16.07.2005, is a summary trial but pending for almost seven years.
Hence, complaint under Sec.138 Negotiable Instrument Act was filed. Thereafter on 04.09.2009 a demand/legal notice was sent to accused/respondent No.2 by the appellant bank through its counsel thereby calling upon him to make payment of the dishonoured cheque within 15 days from the receipt of legal notice but despite that accused/respondents No.2 failed to make the payment.
Thereafter on 04.09.2009 a demand/legal notice was sent to accused/respondent No.2 by the appellant bank through its counsel thereby calling upon him to make payment of the dishonoured cheque within 15 days from the receipt of legal notice but despite that accused/respondents No.2 failed to make the payment. Hence, complaint under Sec.138 Negotiable Instrument Act was filed.
8. The statutory notice given under Section 138 of the Negotiable Instrument Act can be proceeded only under Section 138 of the Negotiable Instrument Act. No doubt, it is true that the complaint speaks about the offence of 120(B) read with 420 I.P.C and 120(B) I.P.C. read with 138 of the Negotiable Instrument Act. If it is so, the petitioner has not produced any other document to show that a complaint was given to police under Section 120(B) and 420 I.P.C for the alleged conspiracy had in between the petitioner and A1.
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