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Analysis of Section-138 of Negotiable Instruments Act

Negotiable Instrument act was enacted before our country got its independence therefore most of the provisions in the act are supported by English statute. After the independence, certain amendments were made in the Act in order to firm the provisions. The act was drafted in the year 1866 and it came into force in the year1881.

Negotiable Instruments Act, regulates various sorts of negotiable instruments like Promissory notes, Bills of Exchange and Cheques. In the simple terms it means any transferable document which is on delivery.

In the Chapter XVII - Of Penalties in case of Dishonour of certain cheques for insufficiency of Funds in the Accounts form the Section 138 to Section 148 of The Negotiable Instruments Act, 1881, a statutory and judicial prospective is focused on the different aspects of provisions and procedures set up in the cases related to Dishonour of Cheque. This section has been very recently decriminalised and the main purpose behind this is to promote foreign investment in our country.

Objective and Scope
Section 138 of the Negotiable Instruments Act deals with the punishment for the dishonour of the cheque. Section 138 of the Negotiable Instruments Act 1881 provides the legal recourse to handle things of cheque bounce. The main objective is to incentivize the trend of the use of cheques and to increase the credibility of cheques transactions by making the offence. An offence committed under Section 138 is a non-cognizable offence. Also, it is a bailable offence.

Offence under section 138 will be completed with following components:
  • Drawing of Cheque by the drawer for the discharge of debt or other liability
  • Presentation of Cheque within 6 months form the date on which it's drawn
  • Dishonour of cheque and return unpaid by the drawee bank
  • Statutory Notice within 30 days of receipt of information from the bank regarding the return of cheque as unpaid to the drawer demanding payment of cheque amount
  • Failure to form payment by the drawer within 15 days from the date of receipt of Notice;
A person who is guilty for an offence under the Section 138 shall be Imprisonment for a term which can be extended to 2 years, or with fine which can extend upto twice the amount of the cheque, or with both.

Section 138 creates statutory offence in dishonor cheques matter on the basis of insufficiency of funds in the account maintained by a person with the banker and exceeds the amount arranged to be paid from that account by an agreement made thereupon bank as mentioned within the act.

Procedure for Filing of Complaint:
After complying all chronology provided under Section 138 of the Act, the Compliant is required to be made to the Concerned Magistrate within 30 days from the day on which the period of 15 days for payment of monetary by the drawer expires. The compliant is required to be signed by the Complainant himself or duly authorised Power of attorney holder. On the day complaint is presented, if the complaint is accompanied by affidavit of complainant, the concerned magistrate shall examine complaint & documents.

Summons are going to be issued to accused in accordance with the section 144 of the act as explained above. If summon served upon the accused and therefore the accused appeared within the court, the Court shall ask him to furnish bail to make sure his attendance during trail (as the offence under Section 138 is bailable offence ) and issued to the Accused in terms of section 251 of the CRPC Then trail of the case starts.

Through Section 138 Payee is protected against illegal activity of the drawer. It not solely aims to shield the interest of the payee but additionally to bring a holiness to the drawers who issues the cheques.At last, I need to conclude that the importance of speedy and timely disposal of cheque bounce cases are one amongst the most concern before the judiciary as a result of the aim of timely payment of monetary to payee and enacting the remedy for him would fail if accused accomplish prolonging these cases.

  1. Dishonour of Cheque [S. 138 NI Act and allied sections] by Tejaswi Pandit [SCC Online]

Suggested Articles on Section 138 of the Negotiable Instruments Act:

  1. Section 138 of the Negotiable Instruments Act
  2. Critical Analysis of Section-138 of Negotiable Instruments Act
  3. Section 143-A of Negotiable Instruments Act, 1881 Has No Retrospective Effect
  4. Commentary: Re: Expeditious Trial Of Cases Under Section 138 Of N.I. Act 1881
  5. Decriminalizing Sec 138 Of Negotiable Instrument Act, 1881: Boom Or Bane A Socio-Legal Study
  6. Stopped Payment of Cheque: Can the Drawer Be Held Liable Under Section 138 of the Negotiable Instruments Act

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