‘No criminal case if trust broken’

It’s a case of cheque-bouncing, for which the one who issues the cheque will not be held guilty, reports Kanchan Chaudhari.

It’s a case of cheque-bouncing, for which the one who issues the cheque will not be held guilty.

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You issue a blank cheque to someone in good faith, and tell him to fill in a certain amount at a later date. If that person writes a cheque for an higher amount and the cheque bounces, there will be no criminal proceedings against you [the issuer], the Bombay High Court has said.

In a business transaction, parties issue blank cheques in good faith and agree to an amount to be filled in by the recipient at a later date.

“Whenever a blank cheque or a post-dated cheque is issued, a trust is reposed that the cheque will be filled in or used as per the understanding or agreement between parties,” said Justice P.R. Borkar.

Justice Borkar set aside a criminal proceeding initiated by Jalgaon-based Jain Irrigation Systems against one of its dealers, Pioneer Drip Systems Private Limited, saying: “If there is prima facie reason to believe that the said trust is not honoured, then continuation of prosecution under Section 138 of the Negotiable Instruments Act, would be abuse of process of law.’

The judgment holds significance, considering the number of pending cases relating to cheque-bouncing in the lower courts. More than 1 crore cases have been registered under the Negotiable Instruments Act in various lower courts in the country. “It is in the interest of justice that parties in such cases are left to civil remedy,” the high court said.

A local court in Jalgaon had issued criminal proceedings against Pioneer Drip Systems, acting on a private complaint filed by Jain Irrigation Systems after a cheque issued by the former company based in Secunderabad for an amount of Rs 50,90,622 was dishonoured in December 2003.

However, lawyer for Pioneer, B.L. Sagar-Killarikar pointed out that a blank cheque, issued in good faith on January 7, 2003, was misused by Jain Irrigation Systems, and a false date and an exorbitant amount mentioned on it.

Sagar-Killarikar also said that letters received from the Jalgaon-based company stated that an amount of Rs 32,49,839 was due on June 2003. But instead of the amount due, more than Rs 50 lakh was filled in.

The judge also considered section 20 of the Negotiable Instruments Act, which authorises the recipient to fill in a blank cheque, but also states that the recipient cannot exceed the amount agreed to between the parties.