Suppose you get a cheque from somebody who owes you money and the cheque bounces. What happens? Under Section 138 of the Negotiable Instruments Act, the person giving you such cheque is an offender and can be punished with two years imprisonment or fine up to twice the amount of cheque or both. But there are certain conditions:
1. The cheque ought to have 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.
2. The payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.
3. The drawer of such a cheque should have failed to make 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.
The Complaint has to be filed within one month from the date of the cause of action in (3) above happens.
Now suppose after the cheque has bounced and you send a notice to the drawer of the cheque and he tells you that he would arrange the money and requests you not to file a case and present the cheque to the bank again. You do that and the cheque again bounces. You send another notice and then file a complaint in the Court. Is the Complaint valid? NO, according to the Supreme Court in a fabled judgement delivered in 1998. And this has been the Law for the last 14 years!
Recently, the Supreme Court reversed this view and held that prosecution based upon second or successive(second) dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act.
The Supreme Court observed that the object underlying Section 138 of the Act is to promote and inculcate faith in the efficacy of banking system and its operations, giving credibility to Negotiable Instruments in business transactions and to create an atmosphere of faith and reliance by discouraging people from dishonouring their commitments which are implicit when they pay their dues through cheques. The provision was intended to punish those unscrupulous persons who issued cheques for discharging their liabilities without really intending to honour the promise that goes with the drawing up of such a negotiable instrument. It was intended to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case the cheque was dishonoured and to safeguard and prevent harassment of honest drawers.
Â
Â
