'Issuing cheque with no money in account is fraud'

 Source : TOI :NEW DELHI: AGENCIES, 

 Issuing a cheque with the knowledge that there are insufficient funds in the account comes within the ambit of fraud for which an insurance company is bound to pay claim to a policy holder, the Delhi Consumer Commission has held.

The Commission's observation came in a decision directing New India Assurance Company Limited to pay Rs 27 lakh as claim to a money exchange company, which suffered losses in business after the cheques received by it from its associates were not encashed.

The company had taken an insurance policy against day-to-day risks involved in business transactions.

"If any person knowingly issues a cheque of such a huge amount knowing fully well that no sufficient funds were available, it also comes within the ambit of fraud," the Commission President Justice J D Kapoor said.

Indo American Com Ltd (IACL), a money changer company, approached the Commission after the insurance company refused to indemnify the losses suffered by it due to dishonouring of cheques.

The IACL had obtained the company's money insurance policy against such day to day risks involved in the business transactions.

The insurance firm, however, contended that dishonouring of a cheque in the course of business transaction does not come within the ambit of the policy as it is neither a case of fraud nor forgery.

"The circumstances of not making the payment to Indo American Com Ltd immediately on knowing that the cheque has been dishonoured for any reason including insufficient funds leads to the inescapable and ineluctable conclusion that it was a pure and simple case of fraud," Justice Kapoor said.

The insurance firm which also contended that had it been a case of fraud, the complainant should have initiated proceedings under Section 138 (dishonouring of cheque) of the Negotiable Instruments Act did not find any favour with the consumer panel.

The availability of more than one remedy does not debar the insured from seeking the benefit from the source which is available to him, the Commission said.

"Criminal proceedings do not necessarily make up the financial loss suffered by a party. These are penal proceedings," the Commission said.

The Commission, also comprising member Rumnita Mittal, noted that the company had opted for the 'Money Insurance Policy' as it was exposed to such risks which are imminent in the nature of business transactions.

Besides awarding the insurance firm the claim, the Commission also asked it to pay interest on the amount as compensation. It also imposed a cost of Rs 25,000 on the insurance firm.