Dishonour of Cheque

Introduction

Advent of cheques in the market have given a new dimension to the commercial and corporate world, its time when people have preferred to carry and execute a small piece of paper called Cheque than carrying the currency worth the value of cheque. Dealings in cheques are vital and important not only for banking purposes but also for the commerce and industry and the economy of the country. But pursuant to the rise in dealings with cheques also rises the practice of giving cheques without any intention of honoring them.

Before 1988 there being no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision ot punish them in the vent of such cheque not being honoured by their bankers and returned unpaid. Of course on dishonour of cheques there is a civil liability accrued. However in reality the processes to seek civil justice becomes notoriously dilatory and recover by way of a civil suit takes an inordinately long time. To ensure promptitude and remedy against defaulters and to ensure credibility of the holders of the negotiable instrument a criminal remedy of penalty was inserted in Negotiable Instruments Act, 1881 in form of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 which were further modified by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002

Of the ten sections comprising the chapter of the Act, section 138 creates statutory offence in the matter of dishonour of cheques on the ground of insufficiency of funds in the account maintained by a person with the banker. Section 138 of the Act can be said to be falling either in the acts which are not criminal in real sense, but are acts which in public interest are prohibited under the penalty or those where although the proceeding may be in criminal form, they are really only a summary mode of enforcing a civil right. Normally in criminal law existence of guilty intent is an essential ingredient of a crime. However the Legislature can always create an offence of absolute liability or strict liability where ‘mens rea’ is not at all necessary.

Link to NI Act-

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Format of Notice of Demand under Section 138 of the NI Act for Dishonour of Cheque

To,

Sh.(Name & Address)

________________

Sub:- Notice under Section 138 of the Negotiable Instruments Act for Cheque Dishonoured due to insufficient funds.

Dear Sir,

Under instructions and authority from our client M/s. ________ having their office at _________, we serve upon you the following notice of demand under Section 138 of the Negotiable Instruments Act.

1. That your business concern M/s _______ had purchased from my client goods (Name and brief description of goods) vide their invoice bearing no. ___ dated ________ for Rs._______

2. On delivery of goods above mentioned, you issued a cheque bearing no. ____ dated _________ for Rs._______drawn on ____ Bank.

3. That when the aforesaid cheque was presented by our client M/s. ____ to your Bankers i.e. ________ the same was returned unpaid by the Bank with the remarks/reasons "Insufficient Funds". This fact was brought to your notice by our client vide letter dated_______.

4. That in reply to our client’s letter, you sent a letter dated ____ requesting him to deposit the cheque again with banker and assured him that they will be cleared this time.

5. My client again presented your above mentioned cheque with its bankers, this time again cheque was returned un-paid by the bank due to insufficient funds.

6. That thereafter inspite of many telephonic reminders and personal visits by the representative of our client to your office, you failed to make the payment due to our client.

7. That on account of the above facts, you are liable to be prosecuted under section 138 of the Negotiable Instrument Act, 1881 as amended upto date under which you are liable to be punished with imprisonment which may extend to one year or with fine which may extend to twice the amount of cheque or with both.

8. Under the circumstances, we call upon you to make the payment of Rs. _____ being the principal amount of the aforesaid cheque along with interest @ ____ % per annum till the time of actual payment within a period of 15 (fifteen) days from the date of receipt of this notice, failing which we will be bound to take further necessary action under the provisions of Negotiable Instrument Act, 1881 against you in the competent court of law at your risk and cost.

This is without prejudice to all other legal rights and remedies available to our client for the above-stated purpose.

Kindly take notice.

Date:____________

Yours faithfully,

Name of the Holder of Cheque/ Advocate of Holder of Cheque

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Format of Complaint Under section 138 and 142 of the Negotiable Instrument Act, 1881

IN THE COURT OF CHIEF JUDICIAL MAGISTRATE AT_____________

Cr. Complaint No._______of ________.

__________________

……………Complainant.

Versus

__________________

…………Accused/Respdt.

Complaint Under section 138 and 142 of the Negotiable Instrument Act, 1881

Respectfully Showeth:-

That the accused issued one cheque bearing No. ________ dated________ for a sum of Rs. _________drawn on ______________________ for a lawful valuable consideration in discharge of his liability in favour of the complainant.

That the complainant presented the said cheque lastly on __________ which was returned unpaid by drawee Bank vide returning Memo dated ________ for the reasons `Insufficient Funds`. The said cheque was presented within its validity period and stood dishonoured on presentation.
That the complainant got a notice issued through his counsel dated ______ under registered AD cover and UPC to the accused demanding the amount of the dishonoured cheques within 15 days of the receipt thereof which was duly served upon him on(Date) ________. It is submitted that the Registered cover containing the notice was received back as unclaimed as the accused has deliberately avoided the service of the notice, however the notice sent through UPC stood served upon the accused on (Date)_______, the copy of notice with postal receipt/ UPC and envelop containing notice is filed with the complaint.
That the accused person has not cared to make the payment of the amount of dishonoured cheques to the complainant within 15 days as required under the law as demanded in the notice.
That the cause of action for filing the complaint arose to the complainant with in the jurisdiction of this learned court when the accused failed to make the payment of the cheques in dispute to the complainant with in 15 days of the receipt of notice.
That the accused is guilty of an offence under section 138 of the Negotiable Instrument Act, 1881 and is liable to be punished under section 142 of the said Act.

It is, therefore, prayed that the accused person be proceeded against and punished in accordance with law as envisaged under section 142 of the Negotiable Instrument Act in accordance with law.

Complainant

Through

Advocates

Place: __________

Dated: _________

List of Documents attached:-

1. Original dishonoured cheque No. ______ dated ________ for Rs._______ drawn on _________________

2. Original returning Memos of the drawee Bank dated ________

copy of Notice dated _________.
Postal and UPC receipt dated _________ and envelop containing notice.

List Witnesses:-

Complainant.
Concerned officers of the _____________________ with the records pertaining to the _____________________ of the accused regarding dishonoured cheque No._________ for Rs. _______.

AFFIDAVIT

I (Name)_________ s/o Shri ________ aged _______ years, r/o________ do hereby solemnly affirm and declare on oath that the contents of the accompanied application from para 1 to 6 are true and correct to my personal knowledge and belief and that nothing false is stated therein and also nothing material is concealed there from.

I further declare and verify on oath that the contents of this affidavit are true and correct and nothing material is concealed there from. Verified at ______________ on this _______ day of_________.

DEPONENT.