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N i act

A person issued cheque of Rs. Ten Lakh but the prescribed limit of cheque is only Rs. Five Lakh and bank dishonoured the cheque on account of insufficiency of funds. Whether an offence under S. 138 of N. I. Act is made out or not.


 9 Replies

Sood   15 October 2016

Definitely section 138 niaand 420 ipc is made out.

Ms.Usha Kapoor (CEO)     15 October 2016

Clearly an offence of  dishonour of cheque on  account of insufficiency of funds is made out.3 conditions must be met to  reduce the liability of drawyer of cheque. Payee or the holder in due course has issued notice in writing demanding payment of   the amount  of the cheque after coming to know of its return(cheque's return)within 30 days  of  information from the bank of its bounce or return   and  THE DRAWYER FAILS TO  PAY THE CHEQUE AMOUNT WITHIN A PERIOD OF 15 DAYS FAILS TO PAY SUCH AMOUNT an offence under section 138 is clearly made out. . As per section 138 clause (a) the cheque must be presented within  6 monts of its drawal or its validity whichever is earlier.Once the offfence under section 138  of N.I Act is  made out the drawyer of bounced  cheque would be punishable with   2 years imprisonment  or fine of  double the amount of  bounced cheque. or both.If you appreciate this answer please click the thank you button on this forum.

According to section 138 of Negotialbe Instruments Act:

Section 138 in The Negotiable Instruments Act, 1881
18 [ 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 19 [a term which may be extended to two years], 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 in due 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, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque 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 purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.]

G.L.N. Prasad (Retired employee.)     15 October 2016

If the drawer of the cheque knows that it can not be used for more than Rs.5 lakhs and still he has issued to the payee, then it becomes a cheating.(In addition to Sec.138).

Even he says that he is not aware of that, even after such return he should have issued cheques as required to correct the mistake if any committed.

If the drawer fails to do any of these two things, he has knowingly cheated the payee.

Samarpan (M)99958670740 (Free legal advice and legal aid cell)     15 October 2016

Yes. Section 138 NI is made out.


A walk alone (-)     15 October 2016

Definitely section 138 NI is made out.

A walk alone (-)     15 October 2016

please click thank you button for Ms Usha kapoor

Augustine Chatterjee,New Delhi (Advocate & Solicitor at Law)     16 October 2016

Mr Prasad has given the correcvt logic. Cheque bounce cases are based on the concept of strict liability and hence would only come into question if the payer had iminent knowledge of the fact that the same would be bounced upon presentation.

Augustine Chatterjee

Advocate & Solicitor at Law



Thanks to all. Please provide a citation of Apex Court or any High Court.




Thanks to all. Please provide a citation of Apex Court or any High Court.


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