Post dated cheques and insufficient fund
If a firm supplies raw materials against Post dated cheques and every 3 months cheques are being rescheduled ,cause being shown is INSUFFICIENT FUND, then what should be the appropriate course? Can we approach Economic offences wing?
These are the remedies which you can seek:
A. Under Criminal Law
Your situation is covered by the Negotiable Instruments Act, 1881. Sec 138 of the said Act, deals with such situations where cheques are defaulted or bounced. There are essentially 3 criteria which need to be fulfilled in order to file a suit.
1. The cheque needs to be presented in the bank within six months from the date when it is drawn or within the period of its validity, whichever is earlier.
2. When a cheque bounces, the payee’s bank (your bank) gives a memo and the dishonoured cheque back to you. You need to send a legal written notice with all the relevant details to the drawer (the author of the cheque) in writing within thirty days of receiving the memo.
3. And the drawer needs to pay you back the sum in fifteen days. If not, then you can file a case against him/her.
You will need the following:
1. Proof of service of notice - receipt of postal department / courier
2. Copy of notice
3. Cheque in original
According to the law, if once a cheque is dishonoured, the payee can submit the cheque for a second time within three months.
Send him/her a notice with all the relevant details within thirty days from the dishonouring of the cheque again. If he/she does not pay you the sum within fifteen days of receiving this notice, you can go ahead and file a suit in the court of the Judicial Magistrate or Metropolitan Magistrate under whose jurisdiction your bank falls. The punishment is maximum two years of imprisonment or fine with twice the amount of the cheque or with both.
You can also take the help of S.417 and S.420 of the Indian Penal Code, 1860 to substantiate your case. These sections deal with cheating and the punishment for it. Note that under S 420 of the IPC, you have to prove that the seller had an intention to cheat you. If there was no intention to cheat at the time when promise of payment is made, subsequent inability to pay or perform the promise will not amount to any offence under this section of IPC. There should be circumstances showing in a clear way that the accused had such a dishonest intention at the initial stage. There have been several judgments where the court was not satisfied that the intention to cheat existed, and hence quashed the case. Hence, you have to be sure that you have enough evidence to show that the intention to cheat existed.
Also note that criminal proceedings under Section 420 I.P.C. does not provide any provision for recovery of money and is meant only for prosecution of the drawer of the cheque who has the dishonest intention to cheat.
Certain conditions have to be fulfilled under Section 138:
1. The cheque should have been drawn by the drawer on an account maintained by him.
2. The cheque should have been returned or dishonoured because of insufficient funds in the drawer's account.
3. The cheque is issued towards discharge of a debt or legal liability. (That is, liability should be contracted in accordance with law and not opposed to public policy viz., wagering contracts, debt obtained for running brothel or gambling house etc.)
B. Under Civil Law:
The objective of the Civil Law is mainly compensatory in nature. Under order 37 of the Code of Civil Procedure (1908), you can file a summary suit. The advantage of this over any ordinary suit is that, here defendant is not allowed to defend himself without the permission of the judge. And you will get the compensation for your loss (which is not there under the criminal proceedings).
Economic Offences Wing usually deals with cases which have a large amount of money involved. For instance, the Mumbai EOW has increased its minimum limit to 3 crores, meaning it doesn’t take up cases which have values lesser than this. The EOW wing in your jurisdiction might have different limits. I also do not know the value of the cheque in question. Hence, you should contact the EOW in your jurisdiction and find out their monetary limit.
 S. 138(1), Negotiable Instruments Act, 1881.
 S. 138(2), Negotiable Instruments Act, 1881.
 S. 138(3), Negotiable Instruments Act, 1881.
 S. 142, Negotiable Instruments Act, 1881.
If Cheque not clear on proper date or return with memo of insufficient funds, then you may file complaint of Dishoner of cheques. Its an offence & punishable under N. I. Act.
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