File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Overview And S.138 Of Negotiable Instrument Act, 1881

This article examines the development of negotiable devices throughout history, emphasizing the crucial role that traveling buyers had in settling difficult circumstances and promoting more stable financial transaction tactics. It also briefly explores the role that the Negotiable Instruments Act of 1881 played in governing these devices in India. Additionally, the paper provides a full analysis of Section 138 of the Act, which addresses the significant issue of insufficient funding for follow-up tests. Investors faced a variety of risks during their travels, including robbers on land and pirates at sea who wanted to steal their riches.

Traveling merchants' financial operations were seriously jeopardized by these risks. But as money practices have advanced throughout time, quicker, more environmentally friendly, and more secure transaction methods have resulted. The development of negotiable instruments, a synopsis of the Negotiable Instruments Act of 1881, and a thorough analysis of Section 138 are the main topics of this article. This section is very important since it discusses the issues that arise when checks are returned for insufficient money.

In ancient times, trade was dangerous. Traveling merchants faced constant threats � pirates at sea and pirates on land hungry for their money. That is why Bills of Exchange became a tricky idea. Letters of Credit, generally called Bills of Exchange from a merchant of one country to his debtor who was a merchant of another country, were issued, requiring the debt to be paid to a third person who carried the letter of credit to a place where the debtor resided. This bill of exchange was basically an order to pay money you owed someone else. They provided a safe and convenient way to settle debts remotely, without merchants having to carry heavy bags of cash and face the hazards of the road.[1]

Suppose an Italian businessman owes a debt to a Chinese businessman. The Italian merchant could write a special document, called a bill of exchange, without risking a dangerous journey with a wallet. This letter ordered the Italian Commercial Bank to repay the loan to the Chinese businessman. The Chinese merchant acting as a "third party" could then safely travel with this document and take his money offshore.

The law pertaining to negotiable instruments has been codified in the Bills of Exchange Acts of nearly every commonwealth nation. Examples of these include the UK's Bills of Exchange Act 1882, New Zealand's Bills of Exchange Act 1908, Australia's Bills of Exchange Act 1909, India's Negotiable Instrument Act, 1881, and Mauritius' Bills of Exchange Act 1914.

According to the Bills of Exchange Act, a bill of exchange is an unconditional written order that is signed by the person giving it and that is addressed to another person. It requires the recipient to pay a specific amount of money either immediately upon demand or at a predetermined future date, or to bearer.[2]

Historical Development Of Act
Early Times (the eight century AD):
Negotiable instruments originated in China during the Tang period (618-907 AD), and they are the earliest known antecedents. The "fey tsien" served as a secure means of sending money across vast distances, eliminating the risks associated with carrying actual cash.

Europe's Middle Ages (12th�14th Century AD):
Similar difficulties experienced by merchants arose as trade in Europe expanded. Bills of exchange were developed in response to the risks associated with transporting large amounts of money across unsafe routes. These were originally employed by Italian merchants to settle debts with foreign business partners. A bill of exchange replaced the requirement for a physical cash transfer by instructing the bank of one merchant to pay another merchant a certain amount.

Development and Standardization (17th�19th Centuries AD):
Throughout Europe, the idea of bills of trade proliferated and took on diverse forms, including promissory notes and checks. On the other hand, disagreements and uncertainty were brought about by the absence of consistent laws and rules. As a result, in 1896 the United States passed the Uniform Negotiable Instruments Law. This law created a uniform set of guidelines for the issuing, negotiation, and enforcement of negotiable instruments amongst states, and it was later revised.

Transformation and Growth (the 20th and 21st centuries AD):
Digital technologies and electronic finance both flourished in the 20th century. Even though there are still paper-based negotiable instruments like cheques, newer ones like credit cards and electronic money transfers (EFTs) are gradually replacing them. These developments provide safer, more effective, and quicker ways to carry out financial transactions.

In 1879, Mr. Arthur Philips, the then Law Secretary and a Member of the Calcutta Bar, redrafted the Bill. This Bill, after passing through the Select Committee more than once, was again, referred to anew Law Commission in 1879.3 On the recommendation of the new Law Commission, the Bill was re- drafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was passed into law in 1881 being the Negotiable Instruments Act, 1881.[3]

There have been numerous significant modifications to the issuance, bounce, and handling of checks over time. Our nation has benefited much from commercial globalization. The use of checks expanded along with the quick rise in trade and commerce, and so did the number of conflicts involving bounced checks.[4] The purpose of the Negotiable Instruments Act, 1881's Sections 138�142 is to guarantee credibility when conducting business through checks and to advance the effectiveness of banking operations.[5]

A person who issues a check to settle a debt or duty in full or in part and the bank rejects the check upon presentation is subject to criminal prosecution under Section 138, which carries a fine, imprisonment, or both.[6] In order to penalize dishonest check drawers who pretend to release themselves from liability by issuing checks but actually don't intend to, Section 138 was passed. This provision seeks to impose criminal liability on such dishonest check drawers in addition to civil penalties. However, the prosecution under Section 138 of the Act has been made subject to specific criteria in order to prevent needless prosecution of an honest drawer of the check and to give him a chance to atone. The proviso to Section 138 lists these requirements.[7]

Committing an offense is one thing under criminal law; prosecuting someone is quite another. Section 138 of the Act governs the commission of an offense. Section 142 of the Act governs prosecution.[8] It is also important to note that, while though dishonouring a check is a crime that carries a jail sentence and a fine, Section 138 nevertheless includes protections for check drawers in cases where dishonour may occur for reasons other than dishonest intent. It allows for the filing of a notice requiring the instrument drawer to make the payment covered by the check after the statutory term has passed and only if the drawer fails to make the payment within that time frame.[9]

What Is Negotiable Instrument?

One form of document utilized in enterprise transactions is referred to as a negotiable device. It entails an agreement to pay a sure quantity to the record's holder. It is basically the switch of a debt from one organization to any other. There are times wherein the lawful owner can assign responsibilities or obligations below a contract by using surely turning in certain styles of documents, together with promissory notes, payments of change, and checks.

According to the Section 13[10] Negotiable instrument means a:
  1. A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer.[11]

    Explanation (i): A promissory note, bill of exchange or cheque is payable to the order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words, prohibiting transfer or indicating an intention that it shall not be transferable.

    Explanation (ii): A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

    Explanation (iii): Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.
  2. A negotiable instrument may be payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.[12]

Objective Of The Act
  1. To simplify the exchange and alternate market, the Negotiable Instruments Act of 1881 was enacted with the intention of formalizing the process of negotiable units exchanging hands through negotiation.
  2. A chaotic and complicated financial landscape can result from the absence of tools like checks and payments of exchange. These devices simplify transactions and increase their feasibility for companies.
  3. By allowing negotiable devices to travel freely and eliminating the need for large amounts of forex to be physically exchanged, the Act made it easier for trade to proceed.
  4. The Act gave corporate transactions more structure by making negotiable devices lawful, which made it possible for companies to conduct exchanges more effectively.
  5. All things considered, the Negotiable Instruments Act of 1881 completed a crucial step toward improving trade and alternate markets' preparedness and decreasing their dependency on large-scale foreign exchange exchanges.

Section Arrangement
Preamble: An Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheque.
Chapter Chapter Name Section Arrangement
1 Preliminary 1-3
2 Notes, Bills and Cheque 4-25
3 Parties to Notes, Bills and Cheques 26-45A
4 Negotiation 46-60
5 Presentment 61-77
6 Payment and Interest 78-81
7 Discharge from Liability on Notes, Bills and Cheques 82-90
8 Notice of Dishonour 91-98
9 Noting and Protest 99-104A
10 Reasonable Time 105-107
11 Acceptance and Payment for honour and Reference in case of need 108-116
12 Compensation 117
13 Special rules of evidence 118-122
14 Crossed Cheques 123-131a
15 Bills of Sets 132-133
16 International Laws 134-137
17 Penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts 138-148

Essentials And Types Of Negotiable Instrument

Types Of Negotiable Instrument Essentials Of Instruments Parties Of Negotiable Instrument
Promissory Notes It must be in writing and signed by the maker.
  • There must be an undertaking or a promise to pay.
  • Such a promise must be unconditional.
  • The promise must be in respect of payment of money only.
  • The amount payable must be certain.
  • The payee must be certain.
  1. The person who makes the promise, and who is called the maker,
  2. The person to whom the promise is made, and who is called the payee.
Bill Of Exchange It must be in Writing.
  • It requires three parties.
  • It must contain an Order to Pay.
  • The Order Contained in the Bill Should be Unconditional.
  • Bills payable out of a Particular Fund.
  • It must be signed by the Drawer.
  • The Drawee must be Certain.
  • The Sum Payable must be Certain.
  • The Instrument must Contain an Order to Pay Money and Money only.
  • The Payee must be Certain.
  • The party giving the order, who must sign it, and who is called the drawer,
  • The party to whom the order is given, who is called the drawee, and who on assenting to the terms of the order and signing it is called the acceptor,
  • The party to whom the money is to be paid, who is called the payee, or if the bill be expressed to be payable to bearer, the bearer.
Cheque Must be in Writing.
Must be Unconditional.
Must be Drawn on a Specified Banker.
Certain Sum of Money.
Certain Payee.
The maker of a cheque is called the Drawer,
The person thereby directed to pay is called Drewee, and
The person named in the instruments, to whom or to whose order the money is by the instrument direct to be paid, is called the Payee.

Important Definitions:
  •  Statutory Definitions Of Promissory Note:
    Section 4 of the Negotiable Instrument Act, 1881 defines the Promissory Note' as under:
    "Promissory note" is an instrument in writing (not being a bank- note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument."[13]
    • Dictionary Meaning:
      Black's law Dictionary defines Promissory note as under:
      • "A promise or engagement in writing to pay a specified sum at a time there in limited, or on demand, or at sight, to a person there in named, or to his order or bearer. A written promise made by one or more to pay another or order, or bearer, at a specified time, a specific amount of money, or other articles of value"[14]
    • Wharton 's law lexicon dictionary defines Promissory note as under:
      • "An unconditional promise in writing, made by one person to another, signed by the maker engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to or the order of specified person or to bearer."[15]
    • Statutory Definition of Bill of Exchange:
      • Section 5 of the Negotiable Instruments Act, 1881 defines the "Bill of Exchange" as under:
      • "A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person, to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."[16]
      • A promise or order to pay is not "conditional" within the meaning of this section and Section 4, by reason of time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.

        The sum payable may be "certain", within the meaning of this section and Section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that on default of payment of an instalment, the balance unpaid shall become due.

        The person to whom it is clear that the direction is given or that payment is to be made, be a "certain person", within the meaning of this section and Section 4, although he is mis-named or designated by description only.
    • Dictionary Meaning:
    • Black 's law Dictionary defines Bill of Exchange as under:
      • "Bill of Exchange. A three-party instrument in which first party draws an order for the payment of a sum certain on a second party for payment to a third party at a definite future time."[17]
    • Wharton 's law lexicon Dictionary defines Bill of exchange as under:
      • "As an unconditional order in writing, addressed by one parson to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer."[18]
    • Statutory Definition of Cheque:

      • Section 6 of the Negotiable Instruments Act, 1881 defines the 'Cheque' as under:
      • "A 'cheque' is a bill of exchange drawn on a specified Banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form."[19]
      • ...
    • Dictionary Meaning:
    • Black's Law Dictionary with pronunciation defines cheque as under:
      • "Check n. - A draft drawn upon a bank and payable on demand signed by the maker or drawer, containing an unconditional promise to pay a sum certain in money to the order of the payee."[20]
    • Wharton's Law Lexicon[21] defines it as:
      • "Cheque- An order addressed to a banker requesting him to pay to (a) the person therein mentioned, or his order, or (b) the person therein mentioned, or the bearer of the cheque, the sum of money therein mentioned; defined in the Bill of Exchange Act, 1882, Sec. 73 by which such provisions of that Act as are applicable to a bill of exchange payable on demand apply also to a cheque as a bill of exchange drawn on a banker payable on demand."
    • Details Explanation of the S. 138 and Related Section:
      • According to the Section[25] 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 two years, or with fine which may extend to twice the amount of the cheque, or with both:

        Provided that nothing contained in this section shall apply unless:
        1. 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;
        2. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
        3. the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.
        Explanation: For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
    • Classification of Offence and Punishment
      • Offence: A non-cognizable offense is one that is committed under Section 138, meaning that a police officer cannot make an arrest without an arrest warrant. The offense is also a Bailable Offence.
      • Punishment: Section 138 stipulates a maximum punishment of two years, along with a fine that can be doubled, or both. It is important to remember that, in the event that a fine is not imposed, the authority under Section 357(3) CrPC to order the payment of compensation is additional to the specified penalty. Meters and Instruments (P) Ltd. v. Kanchan Mehta[26], states that the order to pay compensation may be enforced by default sentence under Section 64 IPC and by recovery method established under Section 431 CrPC.
    • Ingredients of the S. 138:
      • The accused commits an offence when:
        • a check is drawn on a bank account he maintains;
        • the amount of the check is used to settle a debt or liability; or
        • the check is returned unpaid due to insufficient funds or because the amount exceeds the agreed-upon amount with the bank.
        The proviso's further instructions are different from the elements of the offense that the enacting section establishes and renders illegal. Therefore, the dishonouring of the cheque constitutes an offence under Section 138 as well. However, no court may take cognizance of this offense as long as the complainant lacks the right to file a complaint under clause (c) of the proviso read with Section 142, Dashrath Rupsingh Rathod v. State of Maharashtra.[27]

    Conditions Precedent For Constituting An Offence Under S.138

    Before the dishonouring of a check to be considered an offense and subject to punishment, three separate requirements must be met.

    1. The check must have been given to the bank either during the validity period, which is three months, or six months [three months] from the date it is drawn.
    2. Upon receiving notification from the bank that the check has been returned as unpaid, the payee or holder of the check, as applicable, should demand that the stated amount of money be paid by sending a written notice to the check's drawer within 30 days.
    3. Within 15 days of receiving the aforementioned notice, the drawer of such a check should have failed to pay the payee or, if applicable, the holder of the check the stated amount.

    The person issuing the check can only be found to have committed an offence under Section 138 if all three of the requirements listed above-clauses (a), (b), and (c)-are satisfied. This was decided in the case of MSR Leathers v. S. Palaniappan

    Compounding Of Offence[29] Quashing Of Complaint By The High Court[30]
    The conviction and punishment must be overturned if the initial complainant appears before the court and claims he has compounded the case and is withdrawing from prosecution due to compromise. It's not necessary to have official permission to compound the offense.[31] An accused person must establish that forcing him to stand trial would constitute an abuse of the court's process in order to file a petition under Section 482 CrPC to have the proceedings under Sections 138 and 141 set aside.[33]
    Even though both parties must accept for compounding to occur, the court may choose to end the case and release the accused in the interests of justice if it is satisfied that the complaint has received fair compensation.[32]


    Where To File A Case Under The S. 138 Offence? Liability Under The S. 138
    If cheque delivered for collection through an account[34]


    In the event that the check is delivered for collection via an account, the case will be heard by a court with standing equal to or greater than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class, whose local jurisdiction includes the bank branch where the payee or holder, as applicable, keeps the account. Debt and other Liability The dishonoured check must have been received by the complaint in relation to a "legally enforceable debt or liability," as stated in the explanation provided under Section 138.[35]
    If cheque presented for payment by payee or holder in due course otherwise through an account[36]
    Under such circumstances, the case will be heard by a court with standing equal to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class, whose local jurisdiction includes the drawee bank branch where the drawer of the check maintains the account. Liability of a guarantor The legislative aim is made clear in Section 138 by the terms "any cheque" and "other liablity." If the check is written for any debt that even someone else may have, such in the case of a guarantor, the person drawing the check faces legal action should the check be dishonored.[37]

    Mens Rea Not Required For Offence Under S. 138

    Since the goal of Parliament was to increase the use of checks as commercial tender-as opposed to other negotiable instruments-it became imperative that Section 138 be released from the burden of demonstrating mens rea, or a guilty mental state. This has been made possible by treating the commission of an offense as occurring outside of mens rea under both Section 138 and the two provisions that follow. The assumption that the holder of a check has received it for the discharge of any liability is carved out by Section 139[38]. According to Section 140[39], the drawer cannot use the fact that he had no cause to suspect, at the time the check was written, that it would not be honored as a defense.[40]

    Interim Compensation To The Complainant

    The complainant may get interim compensation from the check drawer up to 20% of the total amount of the check, according to Section 143-A[41], which gives the court the authority to try a crime under Section 138. The drawer is required to pay this interim compensation within 60 days (which can be extended by 30 days) after the date on which the order requiring it was issued. Under Section 421[42], such compensation may be recouped as if it were a fine.

    The complainant must return the amount of compensation obtained if the drawer of the check is found not guilty within 60 days (which can be extended by 30 days) after the acquittal order date. In addition, the complaint must pay interest on the sum at the bank rate that was in effect at the start of the relevant fiscal year, as announced by the RBI.

    Payment Pending Appeal Against Conviction

    If found guilty under Section 138, a check drawer has the right to appeal the decision. Under Section 148[43], the Appellate Court may, in such a scenario, direct him to deposit an amount equal to at least 20% of the damages or fine that the trial court assessed. In addition to any interim compensation given under Section 143-A, this sum is also due. While the appeal is pending, the complainant may get the money from the court at any point.

    Should the appellant be found not guilty, the complainant will be required to reimburse the appellant in the same way as described under the heading "interim compensation to the complainant."

    Important Cases Under NI, Act, 1881

    S. No.  Scenario Case Laws Explanation
    1. If the cheque is submitted for encashment more than once, may a case be made? MSR Leathers v. S. Palaniappan., (2013) 1 SCC 177 Throughout the duration of the check's validity-three months from the date of issuance-the bearer or payee may produce the check for encashment as many times as necessary. A dishonor would be a dishonour in accordance with Section 138, regardless of the basis for the second or any subsequent presentation of a check for encashment.
    2 In the event of a postdated cheque

    Chico Ursula D'Souza v. Goaplast (P) Ltd., (2003) 3 SCC 232. By accepting the check, the payee modifies his position on the understanding that it would be paid by postdated check. If it is permissible to halt payment before to the check's due date in order to exclude the transaction from Section 138, this will undermine the trust that a check is meant to foster regarding the availability of funds on that day.
    3 Signatures are not identical Laxmi Dyechem v. State of Gujarat., (2012) 13 SCC 375. Section 138 of the Act defines "amount of money... is insufficient" as a genus, and the phrases "account closed," "payment stopped," and "referred to the drawer" are merely species of that genus. In the same way that a check dishonored because the account has been closed falls under the first contingency mentioned in Section 138, a check dishonored because the "sigatures do not match" or the "image is not found" would also be considered dishonored under Section 138 of the Act.
    4 Notification according to S. 138 Palapetty Muhammad v. C.C. Alavi Haji, 2007 6 SCC 555 The required condition of issuing notice in terms of clause (b) of proviso to Section 138 of the Act is satisfied when the notification is issued by registered post and is addressed appropriately to the drawer of the check. It goes without saying that the complaint must include the essential details of how and when notification was sent to the check drawer.
    5 Under S. 139, presumption
    • Basalingappa v. Mudibassapa, 2019 SCC OnLine SC 491
    • Gujarat State v. Laxmi Dyechem, 2012 13 SCC 375
    Section 139 establishes an assumption that the bearer of a check gets it in discharge, either fully or partially, of any debt or other responsibility once the check's execution is accepted.

    It is undeniable that this presumption favors the complaint and transfers the burden of proof on the instrument drawer (should the same be dishonoured) to demonstrate that the instrument was not made with legal thought.
    6 In the event of a blank cheque Mukesh Kumar v. Bir Singh, 2019 4 SCC 197 When a payee willingly hands over a signed blank check for payment, they have the option to fill in the amount and any details. The check would still be valid despite this. The accused would still have the burden of providing evidence to demonstrate that the check did not satisfy any obligation or duty. As long as the check is properly signed by the drawer, it doesn't matter whether it was filled out by someone else.
    7 What occurs if the recipient declines to receive the notice? G. Kannan v. N. Parameswaran Unni, (2017) 5 SCC 737. In numerous cases, the Supreme Court has ruled that due service must be assumed when a notice sent by registered post is returned with a postal endorsement that reads "refused," "not available in the house," "house locked," "shop closed," "addressee not in station," or "intimation served, addressee absent."
    8 It is not required for the accused to testify in person. Basalingappa v. Mudibassapa, (2019) SCC OnLine SC 491 The accused does not have to enter the witness box to provide evidence in favor of his defense. The burden of proof under Section 139 is evidentiary rather than persuasive.
    If the accused contests this, it is the complainant's responsibility to demonstrate his ability to afford to repay the disputed debt.
    9 Online Proceedings Meters and Instruments (P) Ltd. v. Kanchan Mehta, (2018) 1 SCC 560 A minimum amount of Section 138 cases are amenable to online decision-making. It may not be necessary for the complainant or the accused to present in person if the complaint, along with any supporting affidavits and documentation, can be submitted online, the process may be issued online, and the accused can pay the required sum online. The parties may need to attend in person if the accused disputes the charges, in which case they may do so through legal representation or, if practical, videoconferencing. When self-operating circumstances are right, personal appearances are optional. The High Courts will review this problem, and if practical, they may issue relevant directives.
    10 Complaint by a Company Associated Cement Co. Ltd. v. Keshvanand, (1998) 1 SCC 687 The person filing the complaint must be a living, breathing individual who is able to appear in person before the court. A natural person must appear in court on behalf of an incorporeal person (such as a firm or corporation) if a complaint is filed in that person's name. There may be times when several people represent the business.

    The Negotiable Instruments Act, 1881 (NI Act) performs a important position in facilitating business transactions with the aid of selling using negotiable gadgets like promissory notes, payments of exchange, and cheques. These devices act as substitutes for bodily cash, simplifying monetary transactions and enhancing their performance. Section 138 of the NI Act especially addresses the difficulty of dishonored cheques. It goals to discourage the issuance of cheques without sufficient finances or exceeding the agreed-upon restrict with the financial institution, thereby protective the payee from financial loss and fostering consider in the economic device.

    This segment penalizes people who difficulty cheques that are dishonored due to inadequate finances or exceeding the organized restriction with imprisonment, a pleasant, or both. However, sure conditions need to be met before prosecution can arise, together with:
    1. The cheque being offered within the validity length (six months from the date of drawing)
    2. The payee or holder issuing a written call for for charge inside 30 days of receiving data about the dishonored cheque
    3. The drawer failing to make the price within 15 days of receiving the call for notice
    It's critical to notice that Section 138 does now not require evidence of "mens rea" (responsible mind) from the drawer. This emphasizes the stern liability nature of the offense aimed at encouraging responsible economic conduct. Section 138 of the NI Act serves as a vital protect for people accomplishing economic transactions through cheques. It discourages the misuse of cheques and promotes responsible economic practices, contributing to far better and sincere business surroundings.

    1. "S Krishnamurthy Aiyar: Law Relating to Negotiable Instruments Act, 14th Edition,", 2022 (last visited Feb 15, 2024).
    2. Ranbir Singh, "A study of negotiable instruments in India" (2024).
    3. Reported of the Select Committee.
    4. Law Commission of India, 213th Report, Fast Track Magisterial Courts for Dishonoured Cheque Cases, November 2008 (Feb, 2024).
    5. Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 249.
    6. SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.
    7. C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555.
    8. William Rosario Fernandes v. Cabral & Co., 2006 SCC OnLine Bom 918.
    9. Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.
    10. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 13
    11. Subs. by Act 8 of 1919, S. 3.
    12. Ins. by Act 5 of 1914, S. 2.
    13. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 4
    14. 5th ed July 1973, p. 1093.
    15. 14TH Ed Re-print 2006, p. 809.
    16. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 5.
    17. 5th Ed. July 1973, p. 149.
    18. 14th Ed. Re-print 2006, p. 126.
    19. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 6.
    20. 5th Ed. July 1973 pp. 215-16.
    21. 14th Ed. -3rd Indian Re-print 1996, p. 186.
    22. (1931) 1 K.B. 173.
    23. (1924) 1 K.B. 173.
    24. (1933) 49 ILR 116.
    25. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 138.
    26. (2018) 1 SCC 560
    27. (2014) 9 SCC 129.
    28. (2013) 1 SCC 177.
    29. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 147 � "Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable" was Ins. by Act 55 of 2002, S. 10 (w.e.f. 6-2-2003).
    30. The Code Criminal Procedure, 1973 (Act 2 of 1974) s. 482 [Inherent Power] � "Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice."
    31. Rameshbhai Sombhai Patel v. Dineshbhai Achalanand Rathi., 2004 SCC OnLine Guj 469.
    32. Kanchan Mehta v. Meters and Instruments (P) Ltd., 2018 1 SCC 560.
    33. Gunmala Sales (P) Ltd. v. Anu Mehta., (2015) 1 SCC 103.
    34. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 142(2) (a).
    35. Nanda v. Nandkishor, 2010 SCC OnLine Bom 54.
    36. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 142(2) (b).
    37. ICDS Ltd. v. Beena Shabeer, (2002) 6 SCC 426.
    38. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 139 [Presumption in favour of holder] � "It shall be presumed, 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."
    39. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 140 [Defence which may not be allowed in any prosecution under Section 138] � "It shall not be a defence in a prosecution for an offence under Section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section."
    40. Dashrath Rupsingh Rathod v. State of Maharashtra., (2014) 9 SCC 129.
    41. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 143-A [Power to direct interim compensation]:
      1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant:
        1. in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and
        2. in any other case, upon framing of charge.
      2. The interim compensation under sub-section (1) shall not exceed twenty per cent of the amount of the cheque.
      3. The interim compensation shall be paid within sixty days from the date of the order under sub-section (1), or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque.
      4. If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.
      5. The interim compensation payable under this section may be recovered as if it were a fine under Section 421 of the Code of Criminal Procedure, 1973 (2 of 1974).
      6. The amount of fine imposed under Section 138 or the amount of compensation awarded under Section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or recovered as interim compensation under this section."- was Ins. by Act 20 of 2018, S. 2 (w.e.f. 1-9-2018).
    42. The Code Criminal Procedure, 1973 (Act 2 of 1974) s. 421[Warrant for levy of fine]:
      1. When an offender has been sentenced to pay a fine, the Court passing the sentence may take action for the recovery of the fine in either or both of the following ways, that is to say, it may -
        1. issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender;
        2. issue a warrant to the Collector of the district, authorising him to realise the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter:
      2. The State Government may make rules regulating the manner in which warrants under clause (a) of sub-section (1) are to be executed, and for the summary determination of any claims made by any person other than the offender in respect of any property attached in execution of such warrant.
      3. Where the Court issues a warrant to the Collector under clause (b) of sub-section (1), the Collector shall realise the amount in accordance with the law relating to recovery of arrears of land revenue, as if such warrant were a certificate issued under such law.
    43. The Negotiable Instrument Act, 1881 (Act 26 of 1881), s. 148 [Power of Appellate Court to order payment pending appeal against conviction]
      Sure, here's the provided text with HTML code bullets: html Copy code
      1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court:
      2. Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under Section 143-A.
      3. The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant.
      4. The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:
        Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.

    Law Article in India

    Ask A Lawyers

    You May Like

    Legal Question & Answers

    Lawyers in India - Search By City

    Copyright Filing
    Online Copyright Registration


    How To File For Mutual Divorce In Delhi


    How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

    Increased Age For Girls Marriage


    It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

    Facade of Social Media


    One may very easily get absorbed in the lives of others as one scrolls through a Facebook news ...

    Section 482 CrPc - Quashing Of FIR: Guid...


    The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

    The Uniform Civil Code (UCC) in India: A...


    The Uniform Civil Code (UCC) is a concept that proposes the unification of personal laws across...

    Role Of Artificial Intelligence In Legal...


    Artificial intelligence (AI) is revolutionizing various sectors of the economy, and the legal i...

    Lawyers Registration
    Lawyers Membership - Get Clients Online

    File caveat In Supreme Court Instantly