Negotiable Instruments Act, 1881

Group U2: Jem Joseph Elias || Sudeep Sinha || Tushar Sharma || Vinni Chowdhary

Currently 40 lacs pending cheque bouncing cases in which amount involved exceeds Rs.1200 crore. A Public Interest Litigation was filed by Indian Banks Association asking for speedy adjudication of cheque dishonour cases under Section 138 of the Negotiable Instruments Act.

The law of commercial world which was enacted to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments which could be deemed to be convertible to money and easily passable from one person to another. Main objective of the Act - To legalize the system by which the instruments contemplated by it could pass from hand to hand by negotiation like any other goods.

 A written and a signed document entitling a person to a sum of money specified in it and which is transferable from one person to another either by delivery or by an endorsement and delivery 3 most commonly used instruments Promissory Notes, Bill of Exchange, Cheque Cheque: A BOE(Bill of Exchange) drawn on a specified banker and not expressed to be payable otherwise than on demand

Covered under the section 138 Considered an offense if a cheque is dishonored due to insufficiency of funds Imprisonment for a term of up to two years or with a fine twice as much as the amount of cheque or both Cheque should be issued in discharge of a liability and hence a gift cheque is not counted under this category

Cheque to be presented within three months

1. In order to attract the provisions of Sec138 of Negotiable instruments Act, it is necessary that cheques are issued in discharge of a debt or liability. Unless cheques are so issued, drawer will not be guilty of offense under Sec 138 even if other conditions are fulfilled

Inmark Finance & Invt.co.Pvt.Ltd and another vs Metropolitan Magistrate, Bombay & Others

2.Post dated cheques if it is presented within 6 months from the date it bears, the presentation shall be deemed to be in order and hence cause of action shall lie u/s138 Anil Kumar Sawhney vs Gulshan Rai

3.Notice shall be served by ordinary post or even telegram. But the onus of proof of service of notice shall lie on the petitioner. If notice is served within the said 30 days no fresh cause of action can be created by presenting the cheque again

.Sadanandan Bhadran vs Madhavan Sunilkumar

4. The essential ingredient to take cognizance of the offense u/s 138 is that there should be a complain in writing by the payee and the said compliant should disclose an offense u/s138 Venkita Sivaram Prasad vs Rajeswari Constructions

5.When a person has drawn a cheque for the discharge of liability of another person without creating any document it will not and would not come u/s138 Hitan Sagar vs IMC Ltd