The Negotiable Instruments Act, 1881 (NI Act) governs the law relating to negotiable instruments, such as promissory notes, bills of exchange, and cheques in India. The procedure under the NI Act is particularly relevant when dealing with dishonored cheques under Section 138. Here's an overview of the process: 1. Dishonor of Cheque (Section 138) Issuance of Cheque: The drawer issues a cheque to the payee. Cheque Presented for Payment: The payee presents the cheque to the bank within its validity period (usually three months). Cheque Dishonored: If the cheque is dishonored due to insufficient funds, account closure, or any other reason, the bank returns the cheque with a "cheque return memo" indicating the reason for dishonor. 2. Notice to Drawer Demand Notice: The payee must send a written notice to the drawer within 30 days of receiving information about the dishonor from the bank. The notice should demand payment of the cheque amount within 15 days from the date of receipt of the notice. Waiting Period: The drawer has 15 days from the date of receipt of the notice to make the payment. 3. Filing of Complaint No Payment: If the drawer fails to make the payment within the stipulated 15 days, the payee can file a complaint in a court of competent jurisdiction within 30 days from the expiry of the 15-day period. Jurisdiction: The complaint can be filed where the cheque was presented, where the cheque was dishonored, or where the notice was served. 4. Court Proceedings Cognizance by Court: The court takes cognizance of the complaint and issues summons to the accused (drawer). Appearance and Plea: The accused appears before the court and pleads guilty or not guilty. If the accused pleads not guilty, the trial proceeds. Evidence: The complainant presents evidence to prove the dishonor of the cheque and compliance with the procedure under Section 138. Defense: The accused has the opportunity to present a defense, such as proving that the cheque was not issued for any enforceable debt or liability. Judgment: After hearing both sides, the court delivers its judgment. If the accused is found guilty, the court may impose penalties, including a fine (which may extend to twice the amount of the cheque) and/or imprisonment (up to two years). 5. Appeal Appeal by Accused or Complainant: If either party is dissatisfied with the judgment, they may appeal to a higher court. The time limit for filing an appeal varies but is typically within 30 days from the date of the judgment. 6. Compounding of Offenses Settlement: The NI Act allows for the compounding (settlement) of offenses under Section 138. If both parties agree to settle, they can approach the court to compound the offense at any stage of the proceedings. 7. Civil Suit Additional Remedy: Apart from the criminal proceedings under Section 138, the payee may also file a civil suit for recovery of the cheque amount. Important Points: Presumption: The law presumes that the cheque was issued for the discharge of a debt or liability unless proven otherwise by the drawer. Strict Compliance: The procedural requirements (e.g., sending notice within the prescribed time) are strictly enforced by the courts.

Dear client, Section 138 of Negotiable Instruments Act was framed to keep a check on the bounced cheque. If you have received a cheque that got bounced, you can draft a legal notice. The notice must comply with section 138 of NI Act. The issue of notices should be taken with great caution, provided that most cases of faulty notifications fail in compliance with section 138 of NI Act. What is a cheque bounce notice? Cheque bounce notice is a clear and severe intimation to the cheque issuer that if payment is not rendered promptly, the cheque recipient may take legal action. A notice of Section 138 must be sent to check issuer within 30 days of check return due to validity. In case of dishonors of cheque according to Section 138 of NI Act of the law on Negotiable Instruments, this notice shall be given to the defaulting debtor via a notice from the unpaid creditor through an advocate. What does the cheque involve? Drawer- Drawer is the person who issues the cheque i.e. the check creator. The drawer maybe the debtor. Payee- A person whose checksum is payable i.e. whoever collects the cheque, is called payee. Drawee- The bank in which the drawer keeps a check balance account, i.e. the bank to which the sum is directed is called Drawee. Payee's Bank- The bank where the payee has a bank account or the bank whereby the payee deposits the cheque is called 'payee's Banker'. Consequences of cheque dishonor - The payee can re-deposit the cheque during its validity or take legal action. The payee shall notify the drawer in writing if he decides to give the payee sufficient time to reimburse the amount in law. If payee refuses to pay the required amount of obtaining bank's memo within 15 days, the action may be initiated under section- 138 of NI act. Serving notice before etaki g legal action is mandatory for Cheque dishonor. What are the required documents to be submitted along with the complaint? 1. Original copy of cheque 2. Return memo which was given by bank 3. Copy of Demand Notice 4. Postal Receipt 5. Limitation clause. Should you have any queries, please feel free to contact us!

Dear Client, The NI Act, 1881 procedure for cheques having been dishonoured is as follows, in particular under Section 138 - with relevant sections highlighted - 1. Issuance of the Cheque The cheque is issued by the drawer to discharge a legally enforceable debt or liability (Section 138). 2. Dishonor of the Cheque When cheque is offered for payment it is returned by the bank as dishonored due to insufficient funds or account closed (Section 138[b]). The cancelled cheque is returned along with a memorandum showing the grounds of refusal 3. Legal Notice to the Drawer Section 138[b] holds that the payee delivers a legal notice to the drawer within 30 days after receipt of memo of dishonor. The notice shall require the drawer to make payment of the cheque amount within 15 days from the date of receipt of the notice. 4. Non-Payment by Drawer When the drawer fails to make payment within 15 days from the date of receipt of the notice the payee may bring action under Section 138(c) 5. Presentation of the Complaint Jurisdiction: Under Section 142(2), the complaint should be presented before the court by which the paying branch of the payee is situated. Timeframe: The complaint shall be made within thirty days from the date of expiry of the fifteen days after giving the notice (Section 142(b)). Complaint is filed under Section 223of the BNSS (Bhartiya Nagarik Suraksha Sanhita 2023) for a criminal offense. 6. Cognizance and Summons Under Section 142, the Magistrate takes cognizance of the complaint and issues summons to the accused after preliminary review. 7. Trial Process Both parties present evidence : Pre-Terminatory Evidence: Payee presents evidence to raise a prima facie case (Section 145). The respondents can raise certain defenses, including the absence of an enforceable debt or procedural errors. Hope this answer help you. for more detail discussion please contact.