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LIABILITY OF A PERSON DRAWING CHEQUE UNDER NEGOTIABLE INSTRUMENTS ACT 1881

Other Topics - By: - Mr. M. GOVINDARAJAN - Dated:- 28-8-2015 - Section 138 of the Negotiable Instruments Act, 1881 provides for the consequences of dishonor of cheque for insufficiency etc., of funds in the account. The said section provides that 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 ban .....

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both: Provided that nothing contained in this section shall apply unless- the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the b .....

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rawn by a person on an account maintained by him with the 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. In P.J. Agro Tech Limited V. Water Base Limited - 2010 (7) TMI 280 - SUPREME COURT OF INDIA the Supreme Court held that about the liability under Section 138 of the Act, where the cheque drawn by the employee of the appellant company on his person account, even if it be for discharging .....

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ng him ₹ 74,200/- during the year 1999. The respondent issued two receipts for the said amount one for a sum of ₹ 59,000/- and the second for the remaining amount. In the year 2003 the said project has not been started the appellant sought for refund of the advance booked by him. The respondent drew cheque for ₹ 74,200/- in favor of the appellant of an account maintained by him with his banker towards refund of the aforesaid booking amount. The cheque was drawn by the responden .....

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re the Metropolitan Magistrate. The Metropolitan Magistrate acquitted the respondent on the ground that the Company Salvi Infrastructure (P) Limited was not made the accused and instead the respondent was made accused in this case. The cheque could not be said to have been issued for the discharge of whole or part of the liability because it exceeded the liability. It had not been provide that the respondent was a person liable to make the payment for Salvi Infrastructure (P) Limited. The appell .....

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ndent and not by the company of which the respondent is the Managing Director; The cheque was drawn by the respondent in his personal capacity on account maintained by him with the banker; The Courts below have wrongly concluded that notice under Section 138(b) of the Act was sent to all the directors of the company. Such a conclusion was not supported by any evidence inasmuch as there was only one acknowledgement card on record, showing receipt of notice under Section 138(b) of the Act; The res .....

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person who, at the time of the offence 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 shall be liable; There was no averment that the accused was the person in charge of, and responsible for the affairs of the company; In this case the respondent was made accused in his personal capacity. The Supreme Court after hearing both sides analyzed the provisions of Section 138 of the Act. It held that from a bare r .....

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