INTRODUCTION:

The Negotiable Instruments Act, 1881 is an Act to define the law relating to promissory notes, bills of
exchange and cheques. This Act has been amended several times commencing from 1885 till 2002.
The most important amendment is by Act 66 of 1988 and by virtue of chapter XVII was introduced by
the Banking, Public Financial Institutions and Negotiable Instruments laws (amendment) Act, which
came into force from 01-04-1989. The introduction of Chapter XVII i.e., sections 138 to 142 of the
Negotiable Instruments Act, for the prosecutions relating to the offences of dishonour of cheques.

The dishonour of cheques became popular and frequent in courts of law and the law relating to the
same developed in such a rapid pace covering almost several aspects which may arise in the day to
day disposal of such cases by the courts.

Chapter XVII of Negotiable Instruments Act has been lastly amended by Negotiable Instruments
(Amendment and Miscellaneous provisions) Act 55 of 2002 and the same has been came into force
w.e.f., 06-02-2003.

Sec.138 to 142 of N.I. Act deals with :

i) Sec.138 deals with the offence of dishonour of cheque and the punishment there for.

ii) (a) Sec.139, deals with presumption that the holder of a cheque in discharge in whole or in part of
any debt or liability;

(b) Sec. 140, the defence which may not be allowed in any prosecution under Sec.138. The drawer
that he had no reason to believe when he issued the cheque that it may be dishonoured on its
presentation;

(c) Sec.141, deals with offence by a company prescribing different burden and onus of proof
between persons in-charge of and responsible to the company for the conduct of its business and
persons, with whose consent or connivance or due to neglect on his part, the offence had been
committed, may be stated to fall under ‘evidence aspect’.

iii) Sec.142, deals with the cognizance of an offence prescribing the method or mode of preferring a
complaint and the forum before which the complaint has to be preferred, besides prescribing the
period, with in which the complaint is to be preferred from the time of accrual of the cause of
action, not withstanding anything contained in the code may be stated to fall under ‘procedural’ and
‘limitation’ aspects.

138. 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 the amount of money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be paid from that account by an
agreement made w ith that bank, such person shall be deemed to have committed an offence
and shall, without prejudice to any other provisions of this Act, be punished with
imprisonment for a term which may extend to 1[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 paym

ent of the said amount of money by giving a notice, in writing, to the drawer of the cheque,
within 2[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.

Explanation: For the purposes of this section, “debt or other liability” means a legally
enforceable debt or other liability.

Presumption in favour of holder.

139. It shall be presumed, unless the contrary is proved, that the holder of a cheque received
the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of
any debt or other liability.

Defence which may not be allowed in any prosecution under section 138.

140. It shall not be a defence in a prosecution for an offence under section 138 that the
drawer had no reason to believe when he issued the cheque that the cheque may be
dishonoured on presentment for the reasons stated in that section.

Offences by companies.

141. (1) If the person committing an offence under section 138 is a company, every person
who, at the time the offence was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company, as well as the company, shall be
deemed to be guilty of the offence and shall be liable to be proceeded against and punished
accordingly:

Provided that nothing contained in this sub-section shall render any person liable to
punishment if he proves that the offence was committed without his knowledge, or that he
had exercised all due diligence to prevent the commission of such offence :
1
[Provided further that where a person is nominated as a Director of a company by virtue of
his holding any office or employment in the Central Government or State Government or a
financial corporation owned or controlled by the Central Government or the State
Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act
has been committed by a company and it is proved that the offence has been committed with
the consent or connivance of, or is attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or other
officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly.

Explanation : For the purposes of this section,—

     (a)  “company” means any body corporate and includes a firm or other association of
individuals; and

     (b)  “director”, in relation to a firm, means a partner in the firm.

Cognizance of offences.

142. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of

1974),—

     (a)  no court shall take cognizance of any offence punishable under section 138 except
upon a complaint, in writing, made by the payee or, as the case may be, the holder in due
course of the cheque;

     (b)  such complaint is made within one month of the date on which the cause of action
arises under clause (c) of the proviso to section 138:

           1[Provided that the cognizance of a complaint may be taken by the Court after the
prescribed period, if the complainant satisfies the Court that he had sufficient cause for not
making a complaint within such period;]

     (c)  no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the
first class shall try any offence punishable under section 138.]