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Object Of Section 138 N.I Act

A full Bench of the Kerala High Court in S.K.D Lakshmanan Fire Works Industries vs K.V Sivarama Krishnan has discussed the scheme of the provision s in chapter XVII of the Negotiable Instrument Act and broadly the scheme is as follows: The main part of section 138 Of the Act creates a new offence when a cheque is returned by the Bank unpaid either because of the amount of money standing to the credit of the account of the drawer is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from the account of the drawer.

A penalty of imprisonment for a term which may extend to one year or fine which May extend to twice the amount prescribed in cheque as the punishment for the offence. Clause (a) of the proviso to section 138 is an important provision and it is to the effect that the section will be applicable only in case the cheque is presented for payment within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier.

The other condition s to constitute the offences are:

  1. The payeee should have made a demand for payment by registered notice after the cheque and this demand is to be made within 15 days of receipt of information by him from the Bank regarding the return of the cheque as unpaid and
  2. The drawer should have failed to pay the amount demand within 15 day's of the receipt of notice.

Section 139 of the Act cast s a rebuttable presumption that a holder of the cheque has received the cheque towards discharge,in whole or in part of any debt or other liability.

Section 140 of the Act specifically precludes the drawer from pleading that he had no reason to believe that the cheque would be dishonoured

Section 141 of the Act provides Rules regarding Prosecution of a company and / or the person who ,at the time the offence was committed by the company, was in-charge of and was responsible to ,the company for the conduct of the buisness of the company.

As per section 142 of the Act, the offence has been specially made cognizable only on the basis of the written complaint filed by the payee or holder in due course of cheque. Section 142(b) specifically prescribe s a period of one month for filling a complaint from the date on which the cause of action arises under clause (c) of the proviso to section 138 of the Act.

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