138. Dishonour of Cheque for Insufficiency, Etc., of Funds in the Account

D. P. Jindal

M.COM., CAIIB, LL.B.(DELHI UNIVERSITY)

Advocate, District & Session Court, Sector-12, Faridabad, Haryana

MOBILE: 09717007044

E-Mail:

138. Dishonour of cheque for insufficiency, etc., of funds in the account.

Where any cheque drawn by a person on an account maintained by him 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 and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.

However following 3 conditions to be fulfilled before any Action under Section 138 is taken:

1. Cheque must be presented within a period of 6 months (during the validity period of the cheque which is now 3 months) and it should be dishonoured (returned unpaid) by the paying bank

2. The payee must make a demand for the payment of said amount through a notice within 15 days after dishonour of cheque

3. The drawer (issuer) fails to make payment within 15 days of receipt of notice

Under provisions of negotiable instruments act.sec.138 a legal notice on behalf of complainant is issued to the defaulter whose cheque is dishonoured. It should be issued within 15 days of dishonour of cheque by registered post A.D. All facts including the nature of transaction, amount of loan and or any other legally enforceable debt againstwhich the said cheque was issued and the date of deposit in bank and date ofdishonour of cheque should be mentioned in the notice.

The person who has issued cheque is directed to make the payment of amount of dishonoured cheque within 15 days. In case the said amountis made within 15 days of service of notice then the matter ends.

But in case the said amount is not made within 15 days then the complainant has to file a criminal case in the court within 30 days from the expiry of notice period of 15 days.

The court will hear arguments of complainant/ advocate for complainant and issue process under section 138 of N.I. Act.

The summons are sent and served through police station where accused is residing.

Kindly note that in N. I. Act Sec.138 cases, police is limited to only service of summons and in case accused remains absent on court date after service of summons then only warrant is sent to police station to produce accused in court.

But it is observed in several cases that accused persons are harassed by concerned persons who are directed to serve notice/warrant.

Hence it is advisable that accused should not be afraid of this court case and regularly attend court dates so that warrant will not be issued and further unnecessary harassment will be prevented.

Kindly note that offence under section 138 of N.I. Act is a billable offence as the punishment providedfor saidoffence is two years.

Accused has to submit surety with all surety documents including ownership documents of house or land owned by surety, his address proof including ration card, election identity card, photo and address proof of surety and accused. On receiving summons from the court the accused and surety should remain present in court with all abovementioned documents and court will accept the surety and on signing bonds by accused and surety, the bail will be granted and accused will be released by court.

Then the complainant will file the affidavit for his evidence with all original documents in support of his complaint. This is called exam in chief of complainant. Then accused/his advocate will cross examine the complainant.

Complainant can submit additional witnesses in support of complaint.

Then once witnesses of complainant are over then statement of accused is recorded under sec.313 of Cr.P.C Accused will be asked to give reply to the questions and allegations against him.

Then witnesses of accused to prove his innocence will be produced and the evidence will be recorded by the court.

Last stage is of arguments of advocate of complainant and argument of advocate of accused

Court will pass the judgement.

In case accused is acquitted then matter ends.

But in case accused isconvicted then immediately accused should submit bail application and give surety and pray for time to appeal to sessions court. Court will direct him to deposit fine as per judgementin the court immediatelythen he will be released.

He should appeal to sessions court within one month from the date of judgement of lower court.

Criminal appeal with application for suspension of sentence and for bail will be given hearing by the dist and sessions court and on furnishing surety as per directions of court including deposit of some amount towards compensation ordered as per judgement the accused will be released on bail.

Kindly note that the dispute may go on from district and sessions court to high court and then to supreme court.

Kindly note that there is amendment in the negotiable instruments act. The offence is made compoundable.Hence in case the matter is settled between the parties, then on an application in the court, the court may allow compounding the case and closing the case.

Kindly note that these are general guidelines for knowledge and reference of all concerned who are harassed by the complainants by forcing the borrowers to issue blank signed cheques in advance at the time of sanction of loan.

Such blank cheques are misused by the complainants by writing false and fictitious amounts and getting those cheques dishonoured.

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