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Analysing the retrieved Case Laws
Scanned Judgements…!
Depositing a cheque into a brother’s account without the owner’s knowledge, especially if the cheque is forged or filled in fraudulently, can be prosecuted as cheating or forgery, and the person responsible may be liable for criminal proceedings ["CHINA TRUST COMMERCIAL BANK & ANR. Vs THE STATE GOVT OF NCT OF DELHI & ANR - Delhi"].
Analysis and Conclusion:
References:- ["H. Chandrasekhar Shetty vs THE STATE OF TELANGANA - Telangana"]- ["State Bank of India v. Kerala State Cooperative Marketing Federation - Kerala"]- ["CHINA TRUST COMMERCIAL BANK & ANR. Vs THE STATE GOVT OF NCT OF DELHI & ANR - Delhi"]- ["Amit Kumar Gupta VS Delhi Safe Deposit Ltd. - Delhi"]- ["Punjab National Bank v. Kamal Thengal - Gauhati"]
Imagine discovering a cheque issued from your bank account—without your knowledge or permission—by a family member or employee, only for it to bounce due to insufficient funds. This scenario raises a critical question: a cheque credit by employee in his brother account without consent of owner—does this constitute an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act)?
In today's digital and business-driven world, cheque-related disputes are common, especially in cases involving unauthorized use. This blog post breaks down the legal implications, drawing from key judicial precedents and statutory provisions. Note that this is general information and not specific legal advice; consult a qualified lawyer for your situation.
The question revolves around an employee (or someone) issuing a cheque from his brother's (the account owner's) account without the owner's consent. If the cheque is dishonoured, can the account holder or issuer face criminal liability under Section 138 NI Act? Typically, Section 138 punishes cheque dishonour due to insufficient funds or exceeding arranged limits, but only if issued for a legally enforceable debt or liabilityAjay Kumar Radheyshyam Goenka VS Tourism Finance Corporation Of India Ltd - 2023 4 Supreme 711Ramrajsingh VS State of M. P. - 2009 0 Supreme(SC) 722Sampelly Satyanarayana Rao VS Indian Renewable Energy Development Agency Limited - 2016 6 Supreme 733.
Key conditions include:- The cheque must be presented within its validity period (usually six months).- A demand notice must be sent, and payment not made within 15 days.
However, absence of owner's consent introduces complexities like fraud, forgery, or unauthorized issuance, potentially affecting Section 138 applicability.
Section 138 states: 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 honour 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... Dipikaben Ashishbhai Doshi VS State Of Gujarat - 2023 Supreme(Guj) 778Ramesh Nagarkoti VS Kedar Datt Purohit - 2021 Supreme(UK) 150Ramesh Nagarkoti VS Kedar Datt Purohit.
Under Section 139, there's a presumption that the cheque was issued for a debt or liability unless proved otherwise Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109Ishar Alloy Steels LTD. VS Jayaswals Neco LTD. - 2001 2 Supreme 61Amar Singh Mehta VS Sukh Ram Sharma - 2018 0 Supreme(HP) 1284. But this presumption doesn't override issues of authority or consent.
Issuing a cheque without the owner's consent may not automatically trigger Section 138 unless linked to a valid debt. Courts emphasize: the cheque must be for a legally enforceable debt or liabilityRamrajsingh VS State of M. P. - 2009 0 Supreme(SC) 722. Fraudulent or unauthorized cheques might fall outside this, leading to defenses like forgery under other laws (e.g., IPC Sections 463, 420).
The law does not explicitly require explicit consent for Section 138, focusing instead on debt/liability and procedures Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109. However, unauthorized issuance on another's account (e.g., brother's) raises questions of validity. If proven fraudulent, it may invalidate Section 138 proceedings, as the cheque isn't a 'valid' instrument for debt discharge Rajinder Kumar Kindra VS Delhi Administration Through Secretary (Labour) - 1984 0 Supreme(SC) 279.
In one case, courts noted that disputed facts like financial fraud or authenticity require full trial, not quashing at initial stages Dipikaben Ashishbhai Doshi VS State Of Gujarat - 2023 Supreme(Guj) 778. Similarly, for vicarious liability (e.g., company officers), complaints must aver consent, connivance, or negligenceGazal Chadha VS Rajpal Bansal - 2023 Supreme(P&H) 315. Without such, liability doesn't attach.
Sections 118 and 139 create rebuttable presumptions of consideration. As held: In a trial under Section 138... a presumption will have to be made that every negotiable instrument was made or drawn for consideration... once execution... is either proved or admitted Ramesh Nagarkoti VS Kedar Datt Purohit. But the accused can rebut by showing no debt existed or issuance was unauthorized—e.g., probable defense creating doubt Ramesh Nagarkoti VS Kedar Datt Purohit - 2021 Supreme(UK) 150.
Bare denial isn't enough; evidence of non-existence of debt or lack of authority shifts the burden back Ramesh Nagarkoti VS Kedar Datt Purohit.
Employee/Brother Context: If an employee issues from brother's account without consent, it's akin to misuse. Courts have quashed complaints lacking proof of role or authority Gazal Chadha VS Rajpal Bansal - 2023 Supreme(P&H) 315. In partnership cases, firms must be arraigned if cheques are from firm accounts; partners aren't liable otherwise Ramesh Nagarkoti VS Kedar Datt Purohit - 2021 Supreme(UK) 150Ramesh Nagarkoti VS Kedar Datt PurohitRAMANEE NARAYANAN VS C. K. MUKUNDAN - 2016 Supreme(Ker) 441.
Fraudulent Transactions: Cases of unauthorized debits (e.g., during demonetization without consent) highlight that complaints must disclose cognizable offences clearly, or risk quashing K. V. Ramamoorthy VS State Represented by The Inspector of Police, Tiruppur - 2022 Supreme(Mad) 3040. Vicarious liability on superiors fails without evidence K. V. Ramamoorthy VS State Represented by The Inspector of Police, Tiruppur - 2022 Supreme(Mad) 3040.
One judgment clarifies: cheques from personal accounts aren't attributable to firms, limiting liability RAMANEE NARAYANAN VS C. K. MUKUNDAN - 2016 Supreme(Ker) 441Ramanee Narayanan VS C. K. Mukundan.
In extortion-like scenarios (forced issuance), intent matters—no wrongful gain/loss means no offence Naveen @ L. Srinivasan VS State rep. by The Assistant Commissioner of Police Central Crime Branch - 2010 Supreme(Mad) 1400.
If facing such a situation:- Verify Debt: Confirm if cheque links to enforceable liability Ajay Kumar Radheyshyam Goenka VS Tourism Finance Corporation Of India Ltd - 2023 4 Supreme 711.- Prove Lack of Consent: Gather evidence (e.g., bank statements, affidavits).- Follow Procedures: Send demand notice if complaining; respond promptly if accused.- Explore Alternatives: File for forgery (IPC) or civil recovery if unauthorized.- For Businesses/Employees: Secure accounts, authorize signatories clearly to avoid vicarious claims Gazal Chadha VS Rajpal Bansal - 2023 Supreme(P&H) 315.
Courts direct trials for complex issues, often within timelines (e.g., 8 months) Dipikaben Ashishbhai Doshi VS State Of Gujarat - 2023 Supreme(Guj) 778.
Issuing a cheque on a brother's account without owner's consent generally does not automatically constitute a Section 138 offence unless tied to a legally enforceable debt and procedures are met. Lack of consent serves as a potent defense, potentially shifting to fraud charges. Presumptions favor holders, but rebuttals via evidence of unauthorized acts prevail.
Key Takeaways:- Focus on debt/liability and authorityRamrajsingh VS State of M. P. - 2009 0 Supreme(SC) 722.- Unauthorized cheques may escape Section 138 but attract other liabilities.- Always document transactions to rebut presumptions.
Stay vigilant with financial instruments. For personalized guidance, seek professional legal counsel.
References (select cases):- Rajinder Kumar Kindra VS Delhi Administration Through Secretary (Labour) - 1984 0 Supreme(SC) 279, Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109, Ajay Kumar Radheyshyam Goenka VS Tourism Finance Corporation Of India Ltd - 2023 4 Supreme 711, Ramrajsingh VS State of M. P. - 2009 0 Supreme(SC) 722, Sampelly Satyanarayana Rao VS Indian Renewable Energy Development Agency Limited - 2016 6 Supreme 733, Ishar Alloy Steels LTD. VS Jayaswals Neco LTD. - 2001 2 Supreme 61, Amar Singh Mehta VS Sukh Ram Sharma - 2018 0 Supreme(HP) 1284, Dipikaben Ashishbhai Doshi VS State Of Gujarat - 2023 Supreme(Guj) 778, Gazal Chadha VS Rajpal Bansal - 2023 Supreme(P&H) 315, Ramesh Nagarkoti VS Kedar Datt Purohit - 2021 Supreme(UK) 150, Ramesh Nagarkoti VS Kedar Datt Purohit, RAMANEE NARAYANAN VS C. K. MUKUNDAN - 2016 Supreme(Ker) 441.
#Section138, #ChequeBounce, #NIACT
money standing to the credit of that account is insufficient to honour 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 ... Dishonour of cheque for insufficiency, etc., of funds in the account. ... Even if in the complaint it is stated that the petitioner, who is the brother#H....
... 3In the written statement filed by the first defendant, it is admitted that a cheque for a sum of rupees one lakh was presented by a customer named Sri. K. Narayanan, for collection and credit to his account on 29-12-1982. ... A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner ....
of the amount of money standing to the credit of that account is insufficient to honour 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 ... Dishonour of cheque for insufficiency, etc., of funds in the account. ... Where any cheque drawn by a person on an account mainta....
P.4(d) and on 9.12.1943 himself drew a cheque for Rs.2,800/- Ext. P.4(c), and thereafter disappeared. The balance remaining to the credit of his account at that time was Rs.124-90/-. ... 14. ... The Court of Appeal held that the strict liability of the Bank to the real owner of the cheque, at common law, was to some extent modified by the statute and if the Bank was not negligent in opening the account and collecting the cheque, Bank cannot be made liable to the tr....
In the written complaint the complainant demanded credit of the cheque amount to S/B Account No. 13741. On the same day, an FIR was lodged whereafter Golaghat P.S. ... The Exhibit 1 was deposited to the S/B Account of the respondent No. 1 bearing No. 13741. As the said Exhibit 1 cheque was crossed cheque it indicated that the said amount is to be deposited in the Account of the respondent No. 1. ... After proper enquiry in the Branch, as pleaded, the relevant #HL_STAR....
Submission regarding respondent being a money lender without registration, in view of allegations and denial thereof, the same becomes a disputed question of fact and requires to be proved at the stage of trial and on this account alone FIR cannot be quashed. ... allegation about consent, connivance or negligence. ... , it is necessary to aver in the complaint, their position and duties, and also their role with regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligenc....
Furthermore, by filling the date in the cheque before presenting it to their bankers, without the knowledge, consent, or authorization of the Petitioner Company, a false document was created, thereby committing the offence of forgery for the purpose of cheating p class="para" data-page ... Despite being aware that the Account was inoperative, the cheque was nevertheless presented for encashment. 45. It is further alleged that the date on the cheque was subsequently filled in by hand a....
of that account is insufficient to honour the cheque or that it cheque drawn by a person on an account the cheque or that it exceeds the amount etc., of funds in the account. ... His liability was unlimited and there was no legal distinction between the owner and the business.
is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour 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 ... , whichever is earlier; (iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is insufficient to ....
standing to the credit of that account is insufficient to honour 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 ... cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is insufficient to honour the #HL_S....
However, the first accused has falsely transacted to a tune of Rs.1,65,00,000/- into the complainants account without his knowledge and consent. During demonetization, he and his family members deposited demonetised money Rs.58,25,000/- in their accounts maintain at Tiruppur Branch. The first accused, without any cheque signed by the complainant or his family members, had debited from his account and his family members account.
The Partnership Firm was not in any way associated with Exhibit-P1. It is a cheque individually issued by the accused from his own account maintained with his Bankers.
The Partnership Firm was not in any way associated with Exhibit-P1. It is a cheque individually issued by the accused from his own account maintained with his Bankers.
Whether any offence appears to have been committed and if so by whom? On 5th July one cheque for Rupees one crore has been wrongly encashed by the said Hero Exports, since SI Tr.Arulraj threatened to take criminal action against him of the cheques were not honoured by his company in this very complaint which according to him could land him and other Directors in Jail. By then it was becoming late and it was about five pm. He gave the cheque details and asked his company officials to get the cheques and without his consent he was forced to sign the said MOU.
Having confirmed the verdict of guilty and conviction, I am satisfied that there is absolutely no merit in the challenge against the direction regarding disposal of the property that is the proceeds of Ext. P11 cheque standing to his credit in the petitioners account. The said direction does not also, in these circumstances, warrant interference.
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