Section 138 Cheques Bounce

Section 138 of the Negotiable Instruments Act, 1981, deals with the offence of dishonour of cheques. It makes it a criminal offence for a person to issue a cheque that is dishonoured by the bank due to insufficient funds, or when the account is closed, among other reasons.

The objective of this section is to provide a legal framework for protecting the interests of cheque holders, as well as to promote trust and confidence in the banking system.

The offence under Section 138 is non-cognizable, which means that the police cannot arrest the accused without a warrant. The punishment under the section 138 shall be imprisonment for a term can be extended to 2 years, or a fine which can extend upto twice the amount of the cheque, or with both.

To establish an offence under Section 138, the following conditions must be satisfied:

The cheque must have been issued for the discharge of a debt or liability.

The cheque must have been presented to the bank within the validity period of three months.

The cheque must have been dishonoured by the bank due to insufficient funds or when the account is closed, among other reasons.

The payee must have sent a legal notice to the drawer within 30 days of the dishonour of the cheque demanding payment of the amount due.

The drawer must have failed to pay the amount within 15 days of receipt of the legal notice.

If these conditions are met, then the drawer of the cheque can be prosecuted under Section 138 of the Negotiable Instruments Act, 1981 . However, it is important to note that the offence under this section is not a strict liability offence, which means that the prosecution must prove the guilty intent of the accused.

It is important for individuals and businesses to be aware of the legal implications of dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1981. They should ensure that they have sufficient funds in their bank accounts before issuing cheques and should respond promptly to legal notices in case of dishonour of cheques. Failure to do so can result in criminal prosecution and penalties under the law.

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Offences Are Categorized As Either Bailable Or Non-bailable

April 14, 2023/

Section 138 Cheques Bounce