Practice Area

SECTION 138 NI ACT & PROCEDURE

Cheques are used in almost all transactions such as re-payment of loan, payment of salary, bills, fees, etc. A vast majority of cheques are processed and cleared by banks on daily basis. Cheques are issued for the reason of securing proof of payment. Nevertheless, cheques remain a reliable method of payment for many people. But with an increasing use of cheques, the cases of cheque bounce are also increasing. Hence the procedure to deal with such cases are mentioned below:

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Section 138: An offence committed under Section 138 is a non-cognizable offence (a case in which a police officer                                 cannot arrest the accused without an arrest warrant).

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Also, it is a bailable offence.

The offence under this section will be completed with following 5 components:

1. Drawing of Cheque by the drawer for the discharge of debt or other liability

2. Presentation of Cheque within 6 months form the date on which it is drawn

3. 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.

 5. Failure to make payment by the drawer within 15 days from the date of receipt of Notice; 

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Punishment :

Imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.
 

Procedure for Filing of Complaint:

 After complying all the timelines as provided under Section 138 of the NI 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 money by the drawer expires. The compliant is required to be signed by the Complainant himself or duly authorised Power of attorney holder or in case of Company through any person or director duly authorised by the board in this behalf. In case of more than one cheque as part payment of one transaction, Single Complaint maintainable upto four (4) cheques in case of all cheques are related with same transaction. [2019(4) Civ. CC 508 All.] On the day complaint is presented, if the complaint is accompanied by affidavit of complainant, the concerned magistrate shall scrutinise the complaint & documents and if commission of offence is made out, take cognizance & direct issuance of summons of accused, against whom case is made out. This order is popularly known as Summoning Order. Summons will be issued to accused in accordance with the section 144 of the act as explained above. If summon served upon the accused and the accused appeared in the court, the Court shall ask him to furnish bail bond to ensure his attendance during trail (as the offence under Section 138 is a bailable offence ) and notice issued to the Accused in terms of section 251 of the Cr.PC. Then trail of the case starts.

Legal Position :

Though compounding requires consent of both parties, even in absence of such consent, the court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused. [ Meters and Instruments (P) Ltd. vs. Kanchan Mehta : (2018) 1 SCC 560]