SIGNIFICANCE OF SECTION 138:
Chapter XVII, was inserted by section 4 of Banking, Public, Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The provisions of Chapter XVII were introduced to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties, in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangement made by the drawer, with adequate safeguards to prevent harassment of honest drawers.
The drawing of a cheque that is eventually dishonoured on presentation to the drawee bank is, subject o fulfilment of certain conditions specified in these provisions, deemed to be an offence punishable with imprisonment and/or fine upto double the amount of dishonoured cheque. The requisite ingredients to constitute an offence under section138 are:
(1) the cheque should have been issued in discharge of a legally enforceable debt or liability;
(2) the cheque should have been presented within a period of its validity;
(3) the cheque should have been dishonoured for want of funds in the account of the drawer;
(4) the payee or holder of the cheque should have issued, within a specified time limit, a notice in writing to the drawer demanding the amount of cheque;
(5) the drawer must have failed to make payment within 15 days of receipt of the notice.
The non payment by the drawer within the period of 15 days gives a cause action to the payee or the holder in due course to file a complaint against the drawer within a period of one month from such cause of action, if he is to be prosecuted, with a competent court having jurisdiction.
WHAT EVIDENCE ACT SAYS
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