सीजेआई चंद्रचूड़ ने सुप्रीम कोर्ट परिसर में आयुष समग्र कल्याण केंद्र का उद्घाटन किया
CJI Inaugurates AYUSH Holistic Wellness Centre at SC Premises
National subsidized community kitchens: SC declines to pass directions
Calcutta HC Grants Bail to TV Journalist Arrested in Sandeshkhali by WB Police
Vedanta's bid to resume Tuticorin smelter faces scrutiny from court
Bombay HC Quashes Look-Out Circulars Against Actor Rhea Chakraborty, Brother Showik, and Father
Journalist Files Petition in P&H HC Demanding FIR Against Haryana Police for Tear Gas Shell Incident During Farmers' Protest Coverage
Delhi HC Asserts Doctrine of Absolute Privilege: Bars Claims Against Judges, Counsel, Witnesses, or Parties in Judicial Proceedings
Manipur HC Amends 2023 Order, Alters Direction on Meiteis' ST Inclusion
Allahabad HC Deems Non-Appearance of Advocates in Listed Cases as Professional Misconduct and Bench Hunting
The Scope of Sec. 138 of The Negotiable Instrument Act

The Scope of Sec. 138 of The Negotiable Instrument Act

Section 138 of the Act pertains exclusively to situations where a person issues a cheque from their bank account to settle a debt or obligation, and the bank returns the cheque unpaid due to insufficient funds or exceeding the agreed-upon amount. The legal principle highlighted in the text underscores that an acquittal order should not be overturned unless the conclusions drawn from the evidence are exceptionally unreasonable, perverse, or unsustainable. In essence, the legal system generally respects trial judgments, intervening only in rare instances where the conclusions are deemed highly unreasonable based on the evidence.

The addition of Section 138 to the Act was a result of the Banking, Public Financial Institution, and Negotiable Instrument Law (Amendment) Act, 1988 (Act 66 of 1988). This amendment aimed to regulate financial transactions in the expanding business, trade, commerce, and industrial activities of the country, imposing strict liability to enhance vigilance in financial matters. The inclusion of this provision was intended to protect the confidence of creditors in the cheque drawer, a crucial aspect for the economic development of a country like India. The provision was introduced with the purpose of curbing the indiscriminate issuance of cheques by implementing stringent measures to safeguard the interests of creditors.

Section 138 of the Act constitutes a penal provision within a special statute, establishing vicarious liability. The accused bears a certain burden of proof. Given the punitive nature of the provision and its severe penalties, it necessitates a strict construction. The provision appended to Section 138 includes a non-obstante clause.

In a specific case, the accused had granted authority to the bank for completing cheque transactions. However, there is a lack of evidence on record supporting the accused's claim of discharging debts by presenting the cheque for repayment in case of default. Consequently, the accused was found guilty of the offense, and the conviction was deemed appropriate.

The mere act of a client issuing a cheque does not necessarily prevent them from challenging the associated liability. In cases where the liability is contested, the legal representative must independently establish the contractual basis. Filing a complaint under Section 138 of the Negotiable Instruments Act, 1881, solely on the grounds of a claim based on a percentage of the subject matter in litigation, can be considered against public policy and deemed an act of professional misconduct. Consequently, proceedings initiated by the complainant advocate in such a case may be regarded as an abuse of the legal process and should be quashed.

If a drawer issues a cheque to settle a debt or any other obligation, and the cheque is returned unpaid by the bank due to insufficient funds, the drawer is deemed to have committed an offense.

In a situation where a complaint was filed without an accompanying application for the condonation of delay, despite a delay in filing the complaint petition under Section 138 of the Negotiable Instruments Act, the complaint may be susceptible to being quashed.

In an offence like one under Section 138 of the Negotiable In cases governed by the Negotiable Instruments Act, where the Trial Court has the authority to impose a substantive sentence, which may extend up to two years, along with a fine, the default sentence clause for non-payment of the fine should not exceed one-fourth of the term of imprisonment that the Magistrate is competent to impose as punishment for the offense.

Under Section 138 of the Negotiable Instruments Act, 1881, the complainant is required to provide an affidavit and issue a notice within fifteen days from the receipt of information. The Trial Court gains nothing from delaying the sending of the notice, and it could have promptly resubmitted the cheques for collection within their validity period, gaining a fresh period. In this context, the Trial Court overlooked the oral evidence of the complainant, who had valid cheques for collection and had extended the validity period. Consequently, there is no valid reason to doubt his oral evidence when considered alongside the supporting documents.

Section 138 of the Negotiable Instruments Act stipulates that the complainant, whether an individual or a legal entity, must be the payee. On the other hand, Section 200 of the Code of Criminal Procedure (CrPC) specifically contemplates a complainant as a corporeal (physical) person. It mandates the examination of the complainant and requires the sworn statement to be signed by the complainant.

If one were to interpret Section 142 of the Negotiable Instruments Act and Section 200 of the CrPC literally, two outcomes emerge: (a) the complainant must be the payee of the cheque, and (b) the complainant should undergo examination before the issuance of process, with the complainant's signature being obtained on the deposition.

In simpler terms, the literal interpretation of these sections implies that the person filing the complaint under Section 138 should be the payee of the cheque, and their examination, along with their signature on the sworn statement, is a mandatory procedural step before any legal process is initiated.

The offence under Section 138 of the Act can be completed only with the concatenation of number of acts. The acts which are components are as follows:

(1) Drawing of the cheque;

(2) Presentation of the cheque to the bank;

(3) Returning the cheque unpaid by the drawee bank;

(4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount;

(5) Failure of the drawer to make payment within 15 days of theIt is not necessary that the above five acts should have been receipt of the notice.

The offence under Section 138 of the Negotiable Instruments Act, 1881, pertains to the dishonor of a cheque drawn by an individual on an account maintained with a bank for the payment of money to another person to discharge a debt or liability. This law falls within the domain to which the executive power of the Union extends.

Section 138 of the Negotiable Instruments Act establishes a substantive criminal offence, involving the conviction of the accused upon being found guilty and the imposition of a sentence. It is crucial to recognize that this is a criminal offense, not merely a recovery proceeding, as argued on behalf of the petitioner. Consequently, proceedings under Section 138, like any other criminal trial, must be conducted in the presence of the accused.

Regarding the term "the bank" in Section 138, it refers specifically to the drawee bank on which the cheque is drawn and not any other bank. The presentation of the cheque at the payee's bank in Ahmednagar alone does not constitute a cause of action within the territorial jurisdiction of that court.

It's noted that if a notice is issued to the payee or holder in due course before the presentation of the cheque for encashment, instructing not to present it, and yet the payee or holder presents the cheque to the bank and it is returned on instructions, Section 138 is not applicable in such a scenario.

Section 138 of the Negotiable Instruments Act, 1881, establishes a presumption that an individual has committed an offence if they issue a cheque dishonestly. Dishonest issuance of a cheque, in this context, refers to situations where a person issues a cheque with the knowledge that there are insufficient funds in the account or that it exceeds the amount arranged to be paid by an agreement with the bank.

In practical terms, once a cheque has been drawn and issued to the payee, if the payee presents the cheque and subsequently instructions are issued to the bank for non-payment, resulting in the cheque being returned to the payee with such an endorsement, it constitutes dishonor of the cheque. This dishonor falls within the scope of Section 138 of the Negotiable Instruments Act. The provision is designed to address instances where cheques are not honored due to insufficient funds or other related reasons, and it establishes legal consequences for such dishonorable actions.

To get Legal Advice on Negotiable Instruments Click Here

Share this News

Website designed, developed and maintained by webexy