138. Dishonour of cheque for insufficiency, etc., of funds in the account.- 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 [“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.
i. Compliant under section 138 must contain the following ingredients viz., (i) that there is a legally enforceable debt; (ii) that the cheque was drawn from account of bank for discharge in whole or in part of any debt or other liability which pre-suppose a legally enforceable debt; (iii) cheque so issued had been returned due to insufficiency of funds; Krishna Janardhan Bhatt v. Dattatraya G. Hegde, 2008 (4) SCC 54:2008 (1) SCR 605.
ii. The compliant cannot be quashed on the ground that the accused persons at the time of offence were not in charge of or responsible to the company for its conduct; S.V. Manzumadar v. Gujarat State Fertilizer Corporation Ltd., AIR 2005 SC 2436.
iii. In section 138 Legislature has clearly stated that for the dishonored cheque the drawer shall be liable for conviction if the demand is not made within 15 days of the receipt of notice but this is without prejudice to any other provision of the Act. If the cheque amount is paid within the above period or before the complaint is filed the legal liability under section 138 will cease and the recovery of other demands as compensation costs, interest etc., a civil proceeding will lie. Therefore, if in a notice any other sum is indicated in addition to the “said amount” the notice cannot be faulted; Suman Sethi v. Ajay K. Churiwal, AIR 2000 SC 828.
iv. The criminal liability cannot be fastened on the heirs and legal representatives of a person who is said to have been guilty of the offence under section 138 and for the alleged failure to comply with the notice; Bhupinder Lima v. State of Andhra Pradesh, (2000) 99 Comp Cas 424: 2000 ISJ (Banking) 154.
v. When s notice is returned by the sender as unclaimed such address such date would be the commencing date in reckoning the period of 15 days contemplated in clause (b) of the proviso to section 138 of the Act. Such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address; K. Bhaskaran v. Sankaran Vaidhyan Balan, (2000) 99 Comp Cas 268.
vi. An offence in terms of section 138 of the Act is committed even if the cheque is returned on the ground of the closer of account; G. Venkatramanaiah v. Sillakollu Venkateswarlu, (1999) 97 Comp Cas 13.
vii. A cheque can be presented any number of times during the period of its validity; Sadanandan Bhadran v. Madhvan Sunil Kumar, AIR 1998 SC 3043.
viii. Once the cheque is issued by the drawer a presumption under section 139 must follows and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under section 138 of the Act by the drawee or the holder of the cheque in due course; Modi Cements Ltd. v. Kuchil Kumar Nandi, AIR 1998 SC 1057.
ix. A post dated cheque is deemed to have been drawn on the date ir bears and the six months period for the purpose of section 138 is to be reckoned from that date; N. Sivalingam v. A.V. Chandraiyar, (1996) 86 Comp Cas 167.
x. Only the dates which the cheques bear are the relevant dates and on those dates they would assume the character of “cheque”; Salar Solvent Extractions Ltd. v. South India Viscose Ltd., (1994) 3 Crimes 295 (Mad).
xi. Till the time the cheque is returned by the bank unpaid, no offence under section 138 is made out; Anil Kumar Sawhney v. Gulshan Rai, 1993 LW (Crl) 641 (SC).
xii. It is well settled that there is no restriction regarding the number of times a cheque can be presented and that every subsequent representation and dishonor gives rise to fresh cause of action for filing compliant; Mallappa Sangappa Desai v. Laxmanappa Basappa Whoti, (1994) 3 Crimes 707 (Karn).
xiii. The period for sending the notice demanding payment is to be reckoned from the date of receipt of intimation of dishonor on the last presentation and it is on the basis of this action alone a compliant would be maintainable; Mallappa Sangappa Desai v. Laxmanappa Basappa Whoti, (1994) 3 Crimes 707 (Karn).
- xiv. The second presentation alos will give rise to a cause of action and will make out an offence; Manivannan, Prop. Satya Hosiery Garments v. Ever King Garments, (1994) 3 Crimes 262 (Mad).
xv. Even if the cheque was presented for the second time and returned with an endorsement “insufficiency of funds” still an offence under section 138 of the Act is made out; Manivannan, Prop. Satya Hosiery Garments v. Ever King Garments, (1994) 3 Crimes 262 (Mad).
- xvi. To comply with clause (b) of the proviso to section 138, it is not at all necessary for the payee to specify any time in the notice for making payment; V.N.Samant v. M/s K.G.G Traders, (1994) 3 Crimes 725 (Karn).