Section 138 Negotiable Instrument Act1881

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138 Negotiable Instrument Act1881

On the other hand, section 138 of the NI Act defines the offence of misappropriation of a cheque as insufficient funds in the account, and on the contrary there is no offence of misappropriation of a cheque, and there is confusion as to whether the wording of this provision is the same as that for cheques returned to the bank unpaid. The accused must prove that the account had sufficient funds at the time the cheque was handed over, that it was stopped before payment, that a communication was issued or that there was no other valid reason for the alleged offense under Section 138 (MMTC Ltd v Medchl Chemical Pharma P Ltd, 2002, 1 SCC 234). A complaint under this section must be made not only that the cheques were dishonourable because the means were insufficient to fulfil them, but also that the amount in the cheques exceeded the amount in the drawer when he was told to do so, and that the bank should have stopped payment.

The NI Act never absolves people of civil liability. The injured party may initiate proceedings before a civil court for recovery. The seizure of a cheque constitutes criminal prosecution under the Act on Negotiable Instruments and is a criminal offence and the drawer owner or signatory of such a cheque may be punished up to two years and / or a fine that can be extended up to the amount of the cheque.

The amendment act 2018, which entered into force on September 1, 2018, allows a court to hear a criminal offence relating to the flouting of cheques to induce the drawer to pay the complainant an interim compensation of no more than 20% of the amount of the cheque within 60 days of the court ordering the payment of the compensation. This sum (20%) of the compensation or fine awarded by the court shall be paid in addition to the interim compensation paid pursuant to subparagraph 143 (a). If the second reservation of paragraph 143 states that it would not be desirable to hear the case after a sentence of more than one year, it is at the discretion of the judge to consider such an exercise only if it promotes the fact that the custodial sentence provided for in paragraph 357 (3) of the CrPC6, the granting of adequate compensation for the default penalty provided for in paragraph 64 of the IPC and the further possibility of recovery provided for in paragraph 431 of the CRPC7 or the approximation of a prison sentence of more than one year are not necessary in such a case.

Section 138 of the Negotiable Instruments Act is a criminal provision dealing with the punishment for embezzlement of a cheque. The mere dishonesty of the cheque, if the reason given in the section for committing the crime under the section is sufficient, is not essential that it had reason to believe that it had issued the cheques and that they were not dishonourable in the presentation. If the offence was committed under section 138 (i) of the NI Act and the debt is not paid within 15 days, he will be punished with prison for up to two years and / or a fine that can be extended to cheques.

To prevent prosecution of a criminal offence under Section 138 of the Negotiable Instruments Act (1881) the accused is allowed to present a defense which led him, when a cheque is issued, to believe that it should not be dishonoured during the performance. Provided that no person by virtue of his or her office in the Central Government or in the State Government or in a financial company owned or controlled by the central government or the State Government is appointed director of a company and shall not be punished under Section 141 of the Negotiable Instruments Act. Provided that nothing contained in paragraph 141 makes a person liable to prosecution, unless he can prove that the offence was committed with his knowledge and that he exercised due care to prevent the offence from being committed.

In accordance with this section, strict liability is an effective measure to prevent the usual negligent attitude change in the debt relief drawer. These elements are mentioned in the case law of Kusum Ignot Alloys Ltd. v. Pennar Peterson Securities Ltd. [4], in which the payee initiated in criminal proceedings a recovery procedure under Order 37 of the Civil Procedure Code 1908. Section 319 of the CrPC 1973 provides that the court may take action against him if it becomes clear to the court on the basis of evidence that a person who has not been charged has committed an offence. The legal situation under paragraph 138 is enacted by the rule that strict liability is unreasonable, and paragraph 140 provides that certain defensive measures under paragraph 138 may not be prosecuted.

One was the inclusion of criminal penalties (as of two years imprisonment and / or a fine of up to the amount of a cheque) and the second was the adoption of a criminal code to deal with such cases.

According to the report of the 213th Legal Commission and several newspapers reports, 38-40 lakh cheque withdrawals stifling the judicial system in the country, making it clear that this one category of cases accounts for a solid proportion of all pending cases in the judicial system. There are more than 35 lakh cheques pending in various court cases across India. Cases involving dishonourable cheques represent an as yet unidentified and unexplored black hole in the ocean of cases.