Filter Coffee #018

On Karnataka, cheques, and Turkish Coffee

Karnataka

Today, and on the 1st of November each year, the State of Karnataka celebrates Rajyotsava. Karnataka State came into being on 1st November 1956, when all the Kannada-speaking regions united to form a single state. The unified State was originally called the State of Mysore, but the people felt that the name related more to the princely city of Mysore than the region as a whole and so, on November 1st 1973, it was changed to ‘State of Karnataka’.

The move to have a unified Karnataka region began in 1905, even before India became independent. However, the State Reorganisation Act 1956 was enacted only in August 1956 on the recommendations made by the State Reorganisation Commission.

The Act created 6 Union Territories and 14 States. The Constitution had to be amended by the Seventh Amendment to delete the earlier classification of the States as Part A, Part B, Part C and Part D States. At the time, the Commission thought that it would not augur well for the unity of India if the country were to be divided on linguistic lines. But in the end, it was felt that reorganizing the States on the basis of language would not only help in ease of administration but also contribute to the development of vernacular languages, which had been ignored by the British.

The subsequent creation of States like Nagaland, Chhattisgarh & Jharkhand were based on development of those areas and not on linguistic basis. Today India has 28 States and 9 Union Territories.

Karnataka without Bengaluru is like Maharashtra without Mumbai or Tamil Nadu without Chennai. Bangalore became Namma Bengaluru in 2014. The silicon valley of India. A melting pot. Beer Capital. Terrific traffic. Home for every Indian. A miniature India. You name it and Bengaluru lives up to it. An average Bengalurian can speak at least three languages. The IT industry has done a lot to put Bengaluru on the global map. Americans say ‘our jobs have been Bangalored,’ implying that their jobs have been outsourced to an outfit in Bangalore. My north Indian friends have made Bengaluru their home and even expats find Bengaluru a lively place. Those who don’t speak Kannada have learnt to say “swalpa adjust maadi” to get things done in all walks of life. And they find amusing the “dead-end-u” used by very helpful people when they give directions. The typical direction given goes like this: “Saar, go straight-u, then right-u then take left-u at the dead end-u”. What would puzzle the uninitiated is “how do I take left if it is a dead end?” Sooner or later the guy will realise that dead end-u is basically a T-Junction! In the end-u, as a Kannadiga I feel very happy that my fellow Kannadigas are so helpful in giving directions-u. Three cheers-u to all of them.

♟ Chequemated

Note: I request all the non-legal minds to please read this segment patiently as a basic understanding of the law relating to cheques will be very useful in your daily life. Legal minds are welcome to add to what I say here in the comments section.

The Negotiable Instruments Act of 1881 (NIA) was passed by the Imperial Legislative Council on 9th December 1881 but came into force on 1st March 1882. However, the provisions relating to dishonour of cheques and the consequences thereof came into force in 1988 — more than 100 years — later and these were further strengthened by adding a few more Sections in 2002. I am not going to bore you with the details except to mention that the law relating to dishonour of cheques is now enshrined in the NIA. I will the explain consequences of cheques getting dishonored in simple language, and try and illustrate the narrative through a few anecdotes:

A client of mine came to me, quite distraught, holding a cheque which had been returned by his bank with an endorsement “payment stopped by the drawer”. My client had a fair understanding of ‘cheque bouncing and its consequence’ but was stumped by this endorsement which simply meant that the Bank would have paid but for the instructions to stop payment. He wanted to know if this action of issuing a cheque and then stopping payment would qualify as ‘dishonour of cheque’.

The common perception is that ‘cheque bouncing’ is an offense. Well, not quite. A few formalities need to be completed before it becomes an offence. So, let me give you an example.

John issues a cheque (Americans call it a check, and if it bounces, the person is truly checkmated) to Jack and it is dated Nov 1, 2020. Though Sec.138 of NIA says a cheque is valid for 6 months, with effect from 1st April 2012, the RBI has cut down the validity to three months. So, Jack is puzzled. How can RBI change the law? The answer lies in the language of the Section which reads: “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.”

Since RBI has prescribed a three month validity. Jack must present the cheque for encashment on or before 30th January 2021. Let us assume the cheque was presented on January 15th and on January 22nd, it was returned to Jack with the endorsement ‘refer to drawer’. At this stage, John has not yet committed the offence of dishonour.

Jack is required to issue a notice to John, within 30 days of receiving the endorsement from the Bank, demanding payment of the sum for which the cheque was issued. John will have to make payment within 15 days from the date of receiving the demand. If payment is made, the matter ends there. But if John fails to make the payment then he is deemed to have committed an offence of cheque bouncing.

So what should Jack be doing? He can file a complaint before the Magistrate in the same region where his Bank is located. Earlier the complaint had to be filed in the place where the complainant resided, but the law has been amended to make it easier for people like Jack to file the complaint in his own locality. Jack cannot be complacent. The complaint must be filed within 30 days of John failing to make payment.

Now let me go back to where I started i.e., my client and his dishonoured cheque. I asked my client as to why he was issued a cheque. He said he had agreed to supply certain components and the customer had rejected the samples on quality issues and had demanded the return of the cheque. The rejection was not acceptable to my client and so he went ahead and banked the cheque.

Dear Readers, If the cheque is issued for a crystallised debt or liability then alone it can fall under NIA. I advised my client that he cannot treat the cheque as having been dishonoured since the amount in question was at best disputed and had not crystallised into a ‘debt or any other liability’. To make the point, I gave an extreme example of a person attending a wedding reception and handing over a cheque to the bride which, when presented, was returned by the Bank. No action could be taken under law since the amount mentioned in the cheque was at best a mockery of a gift, but did not amount to a debt or a liability.

Taking or giving post dated cheques (PDC) should be done with circumspection. It can lead to avoidable problems if they are misused or they are not honoured. In my previous newsletter I had spoken about the problems of being a guarantor.

For instance, a person borrows certain money, promising to return it within 90 days with interest. The lender wants some security which the borrower can not provide. He requests a friend to issue a PDC payable at the end of 90 days on the assurance that he would definitely make the payment and get back the PDC. In a sense this friend assumes the role of a guarantor. Well, what that friend feared would happen came to fruition. The lender did not get the money from the borrower, and he banked the cheque, and the encashment could not be prevented as the cheque was issued for discharging the liability on behalf of the borrower.

In another case a person issued a cheque from an account he held jointly with his wife. The cheque was dishonoured. Is the wife in any way liable? Obviously not. It is founded on the principle that a person cannot be held responsible for the acts of another person unless there is some complicity. If however, it was signed by both, then both can be held liable.

In yet another instance, the person who issued a cheque called and asked the payee not to present the cheque for another 15 days as funds were awaited. In such cases, the person can refuse the request, but it is better to not present the cheque for the time being — regardless, the payee could certainly demand interest for that period. However the presentation of the cheque cannot be delayed beyond its validity i.e., three months from the date on the cheque.

I hope you got a fair idea of dishonour of cheques and the consequences. I’m not going into the nuances of the topic today. For example, I am not going into the details of how a prosecution takes place or how cheques issued by companies can become the liability of directors. If anyone would like to know more on the topic they can inquire about it in the comments.

☕ Turkish Coffee

I went to Istanbul many years ago and visited the 🔗Blue Mosque, a must see landmark. I had my first taste of Turkish Coffee in a shop outside and it took me some time to get used to its bitter sweet cardamom taste. I had many cups of that coffee during my stay. Some years later, my wife and I visited Jordan and there was another variant of this Turkish coffee.

I would recommend that everyone try making Turkish coffee at home. The recipe might put you off but try you must, for the experience of it.

Coffee beans are ground so finely that they resemble the texture of cocoa powder. The ground beans are boiled with sugar and cardamom in a cezve, a small coffee pot that is heated. This process produces a cup of coffee with a strong taste whose grounds remain in the cup—and which you don't filter or drink. One important distinction between Turkish coffee and typical drip coffee: Turkish coffee is actually cooked with sugar and it then forms a foam on top. The coffee is served, without cream or milk. in small cups and sits for a few moments before serving, to allow the grounds to sink to the bottom of the cup and settle. It is said your fortune can be told by the coffee grinds left at the bottom of the cup. If you are interested in knowing more, 🔗 please click here.

😜 On a lighter note

The Washington Post asked readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and give it a new meaning. Few of the winners:

• Bozone (n): The substance surrounding stupid people that stops bright ideas from penetrating.

• Sarchasm (n): The gulf between the author of sarcastic wit and the person who doesn't get it.

• Inoculatte (v): To take coffee intravenously when you are running late-

• Caterpallor (n): The color you turn after finding half a worm in the fruit you're eating.

Bye for now Readers. Please keep giving your feedback. Take care and be safe and don’t let that mask slip! 😷