A local court sentenced Pankaj Goel, authorised signatory of Svocan Handicrafts, to nine months in jail for dishonouring a cheque worth ₹4 lakh issued in favour of HDFC Bank. The court also directed him to pay compensation equivalent to the cheque amount, along with 6% annual simple interest from the cheque date until the judgment.
Judicial magistrate first class Bhawna Gera, in her October 8 judgment, convicted Goel under Section 138 of the Negotiable Instruments Act, which deals with cheque dishonour in specified circumstances.
The case stemmed from a business loan of almost ₹15 lakh taken by Svocan Handicrafts from HDFC Bank. According to the bank, the borrower failed to adhere to the repayment schedule and several cheques issued for repayment were dishonoured.
The disputed cheque, dated October 31, 2019, was for ₹4.6 lakh and was returned by Punjab National Bank on November 2, 2019, with the remark “Payment stopped by drawer”. The bank subsequently sent a legal demand notice on November 22, 2019, but the amount remained unpaid, prompting it to file a complaint.
Goel argued that the cheque was issued as security when taking the loan and that the bank had later informed him the cheques had been cancelled. He also denied receiving the legal notice and contended that the bank had filled in the cheque particulars.
{{/usCountry}}Goel argued that the cheque was issued as security when taking the loan and that the bank had later informed him the cheques had been cancelled. He also denied receiving the legal notice and contended that the bank had filled in the cheque particulars.
{{/usCountry}}Rejecting these arguments, the court held that a security cheque could attract penal consequences under Section 138 if the underlying debt had become due and remained unpaid. It noted that the loan had been disbursed in September 2016 and the accused failed to establish that the outstanding liability had been cleared.
The court also declined to accept the defence’s reliance on emails regarding cancellation of the cheques, finding that the electronic records had not been proved according to the applicable law. It further held that the demand notice had been duly served.
The court concluded that Goel failed to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act that the cheque had been issued toward a legally enforceable debt or liability.
While seeking leniency during sentencing, Goel’s counsel submitted that his business had shut down after the Covid-19 pandemic and that he had no savings. The court, however, awarded the bank compensation of ₹4.6 lakh with 6% simple annual interest, payable within the period specified in the order after the appeal period expires or the appeal, if filed, is disposed of.