Answer By law4u team
The primary section of the Negotiable Instruments Act, 1881 that deals with the dishonour of cheques for insufficiency, etc., of funds in the account is Section 138. This section makes the dishonour of a cheque a criminal offence under Indian law, provided certain procedural requirements and timelines are strictly met by the holder of the cheque. To understand the full legal framework surrounding cheque dishonour, it is essential to examine Section 138 along with the subsequent sections, primarily Section 139 and Section 142, which govern the presumption of law and the procedure for taking cognizance of the offence. Section 138 of the Negotiable Instruments Act, 1881 states that where any cheque drawn by a person on an account maintained by them with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence. For an action to be legally sustainable under Section 138, several mandatory ingredients must be satisfied concurrently. First, there must be a legally enforceable debt or other liability for which the cheque was issued. If a cheque is given as a gift, donation, or security for an uncertain future transaction without an existing debt, criminal liability under Section 138 generally does not attract. Second, the cheque must be presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity, whichever is earlier. Third, the cheque must be returned unpaid by the bank due to insufficient funds or because it exceeds the arrangement with the bank. Fourth, the payee or the holder in due course of the cheque must make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. Fifth, the drawer of such cheque must fail to make the payment of the said amount of money to the payee or the holder in due course within 15 days of the receipt of the said notice. Once these statutory conditions are fulfilled, the cause of action arises, and the payee can file a criminal complaint in the appropriate judicial magistrate court under Section 142 of the Negotiable Instruments Act, 1881. The complaint must be filed within one month of the date on which the cause of action arose under clause (c) of the proviso to Section 138, though the court has the power to condone the delay if sufficient cause is shown by the complainant. Another crucial provision linked to cheque dishonour is Section 139 of the Negotiable Instruments Act, 1881, which creates a strong statutory presumption in favour of the holder of the cheque. It presumes, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. This means the burden of proof shifts heavily onto the drawer of the cheque to rebut this presumption by leading cogent evidence that the cheque was not issued for a legally enforceable debt. Regarding the punishment for an offence under Section 138, the law provides that the person shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. Furthermore, under Section 143 of the Negotiable Instruments Act, 1881, these cases are tried summarily by Judicial Magistrates of the First Class or Metropolitan Magistrates to ensure speedy disposal of cheque bounce litigations. Additionally, Section 143A empowers the court to order the drawer to pay interim compensation to the complainant during the pendency of the proceedings, which can be up to twenty percent of the amount of the cheque.
