Cheque Dishonour & Section 138 NI Act

Meaning of legally enforceable debt or other liability in the context of Section 138.

The cheque must have been issued for the discharge, wholly or in part, of a legally enforceable debt or other liability, as explained in Section 138. Such liabilities often arise from an underlying commercial transaction.

See also: corporate and commercial law.

Grounds for dishonour, return memo and its legal significance.

A cheque may be returned unpaid for reasons such as insufficiency of funds or exceeding the arrangement. The bank's return memo records the reason for dishonour.

See also: banking and debt recovery matters.

Notice requirements, contents, service and consequences.

The payee must make a written demand for payment within thirty days of receiving information of the dishonour, and the drawer has fifteen days from receipt of the notice to make payment.

Time limits for notice, complaint and cognizance under Section 138.

Under Section 142, a complaint is to be filed within one month from the date on which the cause of action arises, with provision for condonation of delay for sufficient cause.

Filing of complaint, jurisdiction, process and interim stages.

Complaints are filed before the competent Magistrate. Territorial jurisdiction is addressed in Section 142(2), inserted in 2015.

See also: criminal law and related proceedings.

Presumptions under Sections 118 and 139 and their relevance.

Section 139 presumes that the holder received the cheque for the discharge of a debt or liability, and Section 118 contains other presumptions. These presumptions are rebuttable.

Common legal issues and situations considered by courts.

Courts consider questions such as blank or security cheques, whether a liability existed on the date of presentation and whether the presumption stands rebutted, depending on the facts.

Liability of companies, directors and persons in charge of business.

Where the offence is committed by a company, Section 141 extends liability to persons in charge of and responsible for the conduct of its business, subject to the conditions in that section. Insolvency proceedings against the company may also be relevant.

See also: NCLT, NCLAT and insolvency.

Compounding of offences and role of settlement/mediation.

Offences under the Act are compoundable under Section 147, and courts encourage settlement, including through mediation, at appropriate stages.

See also: mediation and alternative dispute resolution.

Evidence, trial process and judgment.

Section 143 provides for summary trial of Section 138 complaints, and Section 143A permits interim compensation in specified circumstances.

Appeals, revisions and key High Court and Supreme Court rulings.

Appeals against conviction or acquittal, revisions and further proceedings before the High Court and Supreme Court are available as provided by law. Section 148 permits the appellate court to order a deposit.

See also: Civil Litigation & Court Proceedings.