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Negotiable Instrument Act, 1881

Negotiable Instrument Act, 1881. Dishonour of Cheque. Under Section 138 of the Negotiable instruments Act, 1881, Criminal action can be initiated against a party in case of dishonour of certain cheques for insufficiency of funds.

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Negotiable Instrument Act, 1881

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  1. Negotiable Instrument Act, 1881

  2. Dishonour of Cheque • Under Section 138 of the Negotiable instruments Act, 1881, Criminal action can be initiated against a party in case of dishonour of certain cheques for insufficiency of funds. • The drawer of such cheques shall be deemed to have committed a criminal offence and shall be liable for punishment with imprisonment for a term upto two years or with fine upto twice the amount of the cheque or with both. • Section 141 provides for offences by Companies. Criminal action can be taken against the top management of the Company including Directors, Chairman, CEO, etc.

  3. Essential Ingredients • The essential ingredients for proving the offence u/s 138 are: • The Cheque is drawn on a bank for the discharge of any legally enforceable debt or other liability; • The Cheque is returned by the bank unpaid; • The Cheque is returned unpaid because the amount available in that account is insufficient for making the payment of the cheque; • The payee gives a notice to the drawer claiming the amount within 30 days of receipt of the information from the bank; and • The drawer fails to make payment within 15 days of the receipt of the notice.

  4. Points to be noted • The following important points to be noted: - • A Cheque must be presented within the validity period of six months from the date on which it is drawn or its own specific validity period, whichever is earlier. • The dishonour must be for insufficiency of funds • Notice of dishonour must be given within 30 days of the receiving of information about the dishonour of cheque calling upon the party to pay the amount. • If the party fails to make the payment within 15 days of the receipt of notice, he is liable to be prosecuted.

  5. Points to be noted • A complaint can be filed within one month from the date of cause of action as per Section 142 (b). • The cheque may be presented any number of times for collection within its validity period – once Notice is issued u/s 138 of NI Act, Cheque cannot be re-deposited in the Bank for creating fresh cause of action. • The complaint has to be filed before a Metropolitan magistrate or a Magistrate not below the rank of a First Class. • In private Complaint in criminal cases, a Power of Attorney is being insisted upon by the Criminal Courts. Therefore, a person filing a complaint should have Power of Attorney issued by the Corporation. • A person can be held liable for being punished u/s 138 mentioned above as well as u/s 420 of the Indian Penal Code for cheating.

  6. Guidelines for filing Complaint • The Complaint should be in writing • Alongwith the complaint, the dishonoured cheque, the return memo, a copy of the notice intimating about the dishonour of the cheque and the evidence for the receipt of notice send by us should be filed.

  7. Guidelines for filing Complaint • The Complaint may be filed in a Court within the jurisdiction where the cheque was issued or dishonoured. The cause of action arose: - • In the Place where the cheque has been issued; • In the place of drawee’s bank where the cheque is presented for collection • At the place of drawee’s bank where the cheque is not paid; • At the residence or the business place of the party where the demand is made for the payment of the dishonoured cheque (Section 178, 179 and 182 of the Cr.P.C.)

  8. Maharashtra Rent Control Act, 1999 • As per Section 3 (1) (b) of the said Act Companies having paid up capital of more than Rupees One Crore or more are exempted from Tenancy Protection effective 31.03.2000. Further, the word “Premises” has been defined under Section 7 (9) of the Act and as per the new definition of the word premises, land is omitted. As per the new Act, the word premises comprises only building taken/given on lease. Thus, we are not having tenancy protection in respect of outlet sites under two folds as mentioned above.

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