What is Section 138 Negotiable Instrument?

Dishonour of Cheque for insufficiency etc of funds in the account- This section states that whenever any person gives cheque to another person from his own account in order to clear his debt, and the cheque is returned by the bank unpaid because of the insufficient funds or because of the amount exceeds the amount which is needed to be paid or due to any other reasonable cause, such person shall be deemed to have committed an offence and shall be punished with an imprisonment for a term which extend to twice the amount of cheque or with both.

There are certain exceptions which are given under this section and they are as follows-

Through this case supreme court has changed the ground rule under section 138 of Negotiable Instruments Act to prosecute a person who has intentionally moved a cheque which got bounced because of insufficient funds or for any other reason. The judgement provides relief to the holders of bounced cheques under the provision of this Act.

Earlier the defauler was prosecuted where the person is residening or in a place where a place of business is located but after this judgement Hon’ble Supreme court decided that the case would be initiated where the branch of bank was located or where the cheque was drawn . 

Due to this judgement many cases which were pending related to cheque bounce cases were transferred to the State where the branch of the bank where the cheque was drawn was located.

In a case where the offender under section 138 NI act has committed many offences as in continuing offence in single transaction within the meaning of section 220(1) of crpc then the offender may be charged with and tried at one trial for every such offence and any such inquiry and trial may be conducted by any competent court to inquire into or tr any offences that are provided by section 184 of the code.

This judgement was given by the Hon’ble Supreme court in order to discourage the person (Defaulter) from deliberately misusing or carelessly issuing the cheque. After passing the law, the payr is now to be more cautious regarding the cheque bounce because now payer would have to travel to the place where the cheque is being drawn, and it would involve more more expense other than the cheque amount. 

After this landmark judgement it was seen that the complainant is still facing issues and years to get its payment back, then writ petition was moved in the appellate court in section 143 a was inserted after an amendment no. 20 in section 138 NI act. 

Section 143A empowers a court while trying an offence for dishonour of a cheque to direct the drawer, who is the issuer of the cheque, to pay interim compensation to the complainant. The amount of compensation cannot exceed 20% of the amount as stated in the cheque. This amount has to be paid within a stipulated time period of 60 days from the date of the order passed the court, which can be further extended to 30 days after satisfying the court on the delay caused.

BIAT Legal is the one stop solution in dealing in Cheque bounce matters since years. We help to get the best solution for the problem. We contribute best legal cases we are dedicated to you at a more effective cost.  

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