Introduction

A cheque bounce case arises when a cheque issued by a drawer is returned by the bank due to insufficient funds or any other reason specified under Section 138 of the Negotiable Instruments Act, 1881. The aggrieved party can initiate legal proceedings against the drawer. However, the accused has several defenses available to contest the allegations. This article explores the grounds for defending a cheque bounce case and examines landmark judgments that have shaped the legal landscape in India.

Grounds for Defending a Cheque Bounce Case

1. Absence of Debt or Liability:

   - Argument: The accused can argue that there was no existing debt or liability at the time the cheque was issued. 

   - Example: The cheque was issued as a security deposit or a gift, and not against any debt or liability.

2. Cheque Issued Under Coercion or Fraud:

   - Argument: If the cheque was obtained through coercion, fraud, or misrepresentation, the accused can argue that it was not issued voluntarily.

   - Example: The drawer was forced to issue the cheque under threat.

3. Post-Dated Cheque:

   - Argument: If the cheque is post-dated and presented before the due date, it can be a valid defense.

   - Example: A cheque dated for a future date presented before that date.

4. Material Alteration:

   - Argument: Any unauthorized alteration in the cheque can render it invalid.

   - Example: Changes in the amount or date without the drawer’s consent.

5. Signature Mismatch:

   - Argument: If the signature on the cheque does not match the drawer's signature on record with the bank, it can be a defense.

   - Example: The drawer’s signature was forged.

6. Stop Payment Instruction:

   - Argument: If the drawer had issued a stop payment instruction to the bank before the cheque was presented, it can be used as a defense, provided the reasons for the stop payment are justified.

   - Example: The drawer stopped payment due to non-fulfillment of contractual obligations by the payee.

7. Cheque Not Presented Within Validity Period:

   - Argument: A cheque must be presented within its validity period (three months from the date of issuance).

   - Example: The cheque was presented after its validity period had expired.

8. Bank Memo Not Provided:

   - Argument: The bank’s memo stating the reasons for the dishonor of the cheque is crucial for the prosecution’s case.

   - Example: The prosecution fails to produce the bank memo as evidence.

Landmark Judgments on Cheque Bounce Cases

1. Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513

   - Summary: The Supreme Court held that the presumption under Section 139 of the Negotiable Instruments Act is a rebuttable presumption. The accused can rebut this presumption by adducing evidence that casts doubt on the existence of the legally enforceable debt or liability.

   - Impact: This judgment clarifies that the burden of proof shifts to the accused to disprove the existence of debt or liability once the presumption is established.

2. Rangappa vs. Sri Mohan (2010) 11 SCC 441

   - Summary: The Supreme Court expanded the scope of the presumption under Section 139, stating that it includes a presumption regarding the cheque’s validity, signature, and the consideration for which it was issued.

   - Impact: This case strengthened the prosecution’s case by broadening the scope of the presumption in favor of the payee.

3. M.S. Narayana Menon vs. State of Kerala (2006) 6 SCC 39

   - Summary: The Supreme Court held that if the accused can raise a probable defense which creates doubts about the existence of a legally enforceable debt or liability, the presumption under Section 139 may be rebutted.

   - Impact: This judgment highlighted the standard of proof required from the accused to rebut the statutory presumption.

4. Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Ltd. (2016) 10 SCC 458

   - Summary: The Supreme Court held that if the cheque is issued for the discharge of a debt or liability, it falls within the purview of Section 138. However, if it is issued for future liability or as a security, it does not attract penal provisions under Section 138.

   - Impact: This judgment differentiates between cheques issued for present liabilities and those for future liabilities or security, providing a significant defense for the accused.

5. Laxmi Dyechem vs. State of Gujarat (2012) 13 SCC 375

   - Summary: The Supreme Court held that dishonor of cheques due to a mismatch of signature or other technical reasons does not absolve the drawer from liability under Section 138.

   - Impact: This judgment ensures that technical defenses like signature mismatch are not easily available to evade liability under Section 138.

 Conclusion

Defending a cheque bounce case requires a thorough understanding of the provisions of the Negotiable Instruments Act and the judicial precedents that interpret these provisions. The defenses available to an accused range from questioning the existence of debt to challenging the validity of the cheque itself. Landmark judgments by the Supreme Court have provided clarity on various aspects, thereby shaping the defense strategies in cheque bounce cases. While the law aims to protect the interests of the payee, it also ensures that the accused has sufficient grounds to present a legitimate defense.

Also read: Frequently Asked Questions regarding Cheque Bounce Cases