Law - Negotiable Instruments Act, 1881
138. Dishonour of cheque for insufficiency, etc., of funds in the accounts
1[CHAPTER XVII]
OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY
OF FUNDS IN THE ACCOUNTS
138. Dishonour of cheque for insufficiency, etc., of funds in the accounts
Where any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account for the discharge,
in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because
of the amount of money standing to the credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to be paid from that account by an agreement
made with that bank, such person shall be deemed to have committed an offence and shall
without prejudice to any other provisions of this Act, be punished with imprisonment for 2["a term
which may extend to two year"], or with fine which may extend to twice the amount of the
cheque, or with both:
Provided that nothing contained in this section shall apply unless(a) The cheque has 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.
(b) The payee or the holder induce course of the cheque, as the case may be, makes a
demand for the payment of the said amount of money by giving a notice, in writing, to the
drawer, of the cheque, 3["within thirty days"] of the receipt of information by him from
the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the 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.
Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable
debt or other liability].
OBJECTS AND REASONS OF AMENDING ACT OF 2002
The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial
Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter
XVII was incorporated for penalties in case of dishonour of cheques due fo insufficiency of funds
in the account of the drawer of the cheque. These provisions were incorporated with a view to
encourage the culture of use of cheques and enhancing the credibility of the instrument. The
existing provisions in the Negotiable Instruments Act, 1881, namely, sections 138 to 142 in
Chapter XVII have been found deficient in dealing with dishonour of cheques, Not only the
punishment provided in the Act has proved to be inadequate, the procedure prescribed for the
Courts to deal with such matters has been found to be cumbersome. The Courts are unable to
dispose of such cases expeditiously in a time bound manner in view of the procedure contained
in the Act- (Para 1)
Keeping in view the recommendations of the Standing Committee on Finance and other
representations, it has been decided to bring out, inter alia, the following amendments in the
Negotiable Instruments, Act, 1881, namely:-
(i) to increase the punishment as prescribed under the Act from one year to two years;
(ii) to increase the period for issue of notice by the payee to the drawer from 15 days to 30 days;
(Para 4)
1. Inserted by Act 66 of 1988, , sec. 4 (w.e.f. 1-4-1989). Earlier Chapter XVII relating to "
Notaries Public" Inserted by Act 2 of 1985, sec. 10, was replaced by the Notaries Act, 1952 (53
of 1952), sec. 16 (w.e.f. 14-2-1956).
2. Substituted by Act 55 0f 2002, sec. 7 for "a term which may extended to one year" (w.e.f. 6-22003).
3. Substituted by Act 55 of 2002, sec. 7, for "within Fifteen days" (w.e.f. 6-2-2003).
Negotiable Instruments Act Index | Laws India
Web www.vakilno1.com
Dishonour of Cheques Judgements CD on Negotiable Instruments Act, Section 138 - Cheque
Bouncing, Cheque Dishonour - Decisions of Supreme Court of India and All High Courts - Fully
Updated Click here for details
Legal Drafts & Forms | Laws in India-Bare Acts | Legal News | NRI Section | How to | Legal
Links | Law Colleges | On the Lighter side | Sample Questions (Legal FAQ) | Get Legal Opinion |
Feedback | Terms of use | Disclaimer | Home
Copyright© Vakilno1.com 2000 All rights reserved