Section-138 of Negotiable Instruments Act,1881: Dishonour of cheque for insufficiency etc., of the funds in the account.

Basic information

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 honor 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 be extended 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-
a) 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.

b) 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

c) 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.

The offence under this section can be completed only with the concatenation of a number of acts. Following are the acts which are components of the offence.

1) Drawing of a cheque
2) Presentation of the cheque into the bank
3) Returning of the cheque unpaid by the drawee bank
4) Giving notice to the drawer of the cheque demanding payment of the cheque amount
5) Failure of the drawer to make payment within 15days of the receipt of the notice.
It is not necessary that all the five acts should have been perpetrated at the same locality. It is possible that each of those five acts should be done at five different localities. But Concatenation of all the five is a sine qua non for completion of offence under this section.

-Hemal Pandya