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Brief notes on Section 138, THE NEGOTIABLE INSTRUMENTS ACT 1881

Scope Section 138 creates statutory offence in the matter of dishonour of cheques on the ground of insufficiency of funds in the account maintained by a person with the banker. Section 138 of the Act can be said to be falling either in the acts which are not criminal in real sense, but are acts which in public interest are prohibited under the penalty or those where although the proceeding may be in criminal form, they are really only a summary mode of enforcing a civil right. ormally in criminal law e!istence of guilty intent is an essential ingredient of a crime. "owever the #egislature can always create an offence of absolute liability or strict liability where $mens rea% is not at all necessary. &urther the creation of the strict liability is an effective measure by encouraging greater vigilance to prevent usual callous or otherwise attitude of drawers of cheques in discharge of debts or otherwise attitude of drawers of cheques in discharge of debts or otherwise. 'he words as appearing in clause (b) of S. 138 cannot be construed even to imply failure without reasonable cause in view of the e!plicit language in which the provision is couched, the principle of strict liability incorporated in the main enacting clause. Fi e in!re"ients of t#e offence $n"er s% 138% 'he offence under Sec. 138 of the Act can be completed only with the concatenation of a number of acts. &ollowing are the acts, which are components of the said offence* 1. +rawing of the cheque, ,. -resentation of the cheque to the bank, 3. .eturning the cheque unpaid by the drawee bank, /. 0iving notice in writing to the drawer of the cheque demanding payment of the cheque amount. 1. &ailure of the drawer to make payment within 11 days of the receipt of the notice. 2t is not necessary that all the above five acts should have been perpetrated at the same locality. 2t is possible that each of those five acts could be done at five different localities. 3ut concatenation of all the above five is sine qua non for the completion of the offence under Sec. 138 of the Act. &r'(in! of ' C#e)$e 'he drawer in payment of a legal liability to discharge the e!isting debt should have drawn cheque. 'herefore any cheque given say by way of gift would not come within the purview of the section. 2t should be a legally enforceable debt* therefore time barred debt and money4lending activities are beyond its scope. 'he words any debt or any other liability appearing in section 138 make it very clear that it is not in respect of any particular debt or liability 'he presumption which the 5ourt will have to make in all such cases is that there was some debt or liability once a cheque is issued. 2t will be for the accused to prove the contrary. i.e., there is no debt or any other liability. 'his of course unless the prosecution restricts itself to a particular liability. 'he 5ourt shall statutorily make a presumption that the cheques were issued for the liability indicated by the prosecution unless contrary is to be proved. *resent'tion of C#e)$e 'he presentation of cheque should be within its validity period. 0enerally a cheque is valid for si! months, but there are cheques whose validity period is restricted to three months etc. 'he question arises as to which bank the cheque should reach within the validity period, is it the payee to his bank presents that of drawer%s bank or it is enough if the cheque before si! months. 'he courts are divided on the issue. 3ut common sense demands that the cheque should reach the drawer bank within the period of validity as it is that bank that either pays or re6ects payment as per the situation e!isting on that day.

. 'he case laws on the sub6ect have now made the position clear. 7hat reasons are relevant to hold the drawer of the cheque criminally responsible for bouncing of a cheque. Ret$rnin! Of t#e C#e)$e Unp'i" #ot of controversy had arisen on the issue. 2t is not what the bank says in its return memo that is relevant but the actual position as on the date when the cheque reaches the drawer bank whether there were enough funds in the drawer account to honour the cheque. .