The Negotiable Instruments Act, 1881 (NI Act) governs the law relating to negotiable instruments, such as promissory notes, bills of exchange, and cheques in India. The procedure under the NI Act is particularly relevant when dealing with dishonored cheques under Section 138. Here's an overview of the process: 1. Dishonor of Cheque (Section 138) Issuance of Cheque: The drawer issues a cheque to the payee. Cheque Presented for Payment: The payee presents the cheque to the bank within its validity period (usually three months). Cheque Dishonored: If the cheque is dishonored due to insufficient funds, account closure, or any other reason, the bank returns the cheque with a "cheque return memo" indicating the reason for dishonor. 2. Notice to Drawer Demand Notice: The payee must send a written notice to the drawer within 30 days of receiving information about the dishonor from the bank. The notice should demand payment of the cheque amount within 15 days from the date of receipt of the notice. Waiting Period: The drawer has 15 days from the date of receipt of the notice to make the payment. 3. Filing of Complaint No Payment: If the drawer fails to make the payment within the stipulated 15 days, the payee can file a complaint in a court of competent jurisdiction within 30 days from the expiry of the 15-day period. Jurisdiction: The complaint can be filed where the cheque was presented, where the cheque was dishonored, or where the notice was served. 4. Court Proceedings Cognizance by Court: The court takes cognizance of the complaint and issues summons to the accused (drawer). Appearance and Plea: The accused appears before the court and pleads guilty or not guilty. If the accused pleads not guilty, the trial proceeds. Evidence: The complainant presents evidence to prove the dishonor of the cheque and compliance with the procedure under Section 138. Defense: The accused has the opportunity to present a defense, such as proving that the cheque was not issued for any enforceable debt or liability. Judgment: After hearing both sides, the court delivers its judgment. If the accused is found guilty, the court may impose penalties, including a fine (which may extend to twice the amount of the cheque) and/or imprisonment (up to two years). 5. Appeal Appeal by Accused or Complainant: If either party is dissatisfied with the judgment, they may appeal to a higher court. The time limit for filing an appeal varies but is typically within 30 days from the date of the judgment. 6. Compounding of Offenses Settlement: The NI Act allows for the compounding (settlement) of offenses under Section 138. If both parties agree to settle, they can approach the court to compound the offense at any stage of the proceedings. 7. Civil Suit Additional Remedy: Apart from the criminal proceedings under Section 138, the payee may also file a civil suit for recovery of the cheque amount. Important Points: Presumption: The law presumes that the cheque was issued for the discharge of a debt or liability unless proven otherwise by the drawer. Strict Compliance: The procedural requirements (e.g., sending notice within the prescribed time) are strictly enforced by the courts.