Introduction
Section 138 of the Negotiable Instruments Act, 1881, is a significant legal provision in India that addresses the issue of dishonor of cheques due to insufficient funds or other reasons. It establishes the legal framework for prosecuting individuals or entities who fail to honor their commitments made through negotiable instruments such as cheques. It acts as a deterrent against the issuance of dishonored cheques and provides recourse for victims of cheque dishonor to seek legal remedies and recover their dues.
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What is cheque bounce notice?
The law regarding legal notice for cheque bounce is available under Section 138 (b) and (c) of the NI Act.
Section 138 (b) of the NI Act provides that
“the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.”
How to file cheque bounce case?
Within 30 days of receiving information from the bank about the dishonor, send a legal notice of demand to the drawer (the person who wrote the check). The notice should include the date the check was issued, a copy of the dishonored memo, and demand payment within 15 days.
If the drawer doesn’t respond to the notice within 15 days, file a complaint in court.
Submit documents along with the complaint letter to the court, such as:
- Cheque Return Memo
- The original bounced check
- A copy of the notice sent along with the acknowledgement receipts
- An affidavit stating evidences need to be sent to the court in original format
According to Section 138 of the Negotiable Instruments Act of 1881, bouncing a cheque is an offense that is punished by a fine up to double the value of the check or up to two years in prison or both.
Section 251 of the Code of Criminal Procedure (CrPC) in India pertains to the procedure to be followed by a Magistrate when taking cognizance of an offense upon a complaint.
CASE- Atamjit Singh vs. State (NCT of Delhi)
Facts
The facts surrounding the case of Atamjit Singh vs. State (NCT of Delhi) in 2024 and the observation made by the Supreme Court in the case of Yogesh Jain vs. Sumesh Chadha in 2022 provide valuable insights into the legal landscape surrounding cheque bounce cases in India.
In the case of Atamjit Singh vs State (NCT Of Delhi) 2024
- Atamjit Singh, the complainant, initiated legal proceedings against the accused for dishonouring a cheque issued to him.
- The case involved a legal dispute regarding the dishonor of the cheque and the underlying debt or liability associated with it.
- The court’s judgment highlighted the importance of properly classifying the underlying debt or liability and emphasized the need for a thorough examination of evidence to determine whether the debt was time-barred.
- The case underscored the significance of adhering to legal procedures and due process in resolving disputes related to cheque dishonor effectively.
In the case of Yogesh Jain Vs Sumesh Chadha, 2022
- Yogesh Jain filed a plea seeking a decision on whether a cheque had been issued for a time-barred debt.
- The Supreme Court observed that determining whether a cheque was issued for a time-barred debt is a substantive legal issue that cannot be decided summarily under Section 482 of the Code of Criminal Procedure.
- The court emphasized the importance of addressing such legal issues through appropriate legal proceedings rather than through summary processes.
- This observation reaffirmed the principle of due process and underscored the significance of thorough legal proceedings in resolving disputes related to cheque dishonor.
Relevant laws
In the case of Atamjit Singh vs. State (NCT of Delhi) in 2024, several significant points were highlighted regarding the interpretation and application of Section 138 of the Negotiable Instruments Act, 1881 (NI Act). Here’s a breakdown of the key insights provided by this case:
- Interpretation of Section 138 of the NI Act: The case delved into the legal principles governing Section 138, which addresses the dishonor of cheques due to insufficient funds or other reasons. It underscored the importance of comprehending the provisions of Section 138 in prosecuting individuals or entities who dishonor cheques, thereby offering clarity on the legal framework surrounding such cases.
- Classification of Underlying Debt or Liability: A crucial aspect highlighted by the case was the proper classification of the underlying debt or liability associated with the dishonored cheque. It emphasized that determining whether the debt is time-barred necessitates an examination of the evidence presented by the parties and consideration of both legal principles and factual circumstances.
Additionally, in the case of Yogesh Jain vs. Sumesh Chadha in 2022, the Supreme Court made an observation regarding the adjudication of whether a cheque was issued for a time-barred debt:
The Supreme Court observed that determining whether a cheque was issued for a time-barred debt is a substantive legal issue that cannot be decided summarily under Section 482 of the Code of Criminal Procedure, 1973 (CrPC). Section 482 empowers the High Court to exercise its inherent jurisdiction to prevent abuse of the court’s process or to secure the ends of justice. However, the observation made by the Supreme Court suggests that resolving the issue of whether a cheque was issued for a time-barred debt requires appropriate legal proceedings rather than a summary process under Section 482.
Summary
In summary, Section 138 of the Negotiable Instruments Act, 1881, addresses dishonored cheques due to insufficient funds or other reasons, providing a legal framework for prosecution and recourse for victims. To file a case, a legal notice must be sent within 30 days of dishonor, followed by court action if no response is received within 15 days. The penalties for bouncing a cheque include fines or imprisonment.
Two key cases, Atamjit Singh vs. State (NCT of Delhi) in 2024 and Yogesh Jain vs. Sumesh Chadha in 2022, provide insights into interpreting Section 138. They emphasize properly classifying the underlying debt and the need for due legal process in determining if a cheque is issued for a time-barred debt. The Supreme Court’s observation in Yogesh Jain’s case reinforces the importance of addressing such legal issues through appropriate legal proceedings rather than summary processes. Overall, these cases underscore the complexities of cheque bounce cases and stress the significance of legal procedures, thorough examination of evidence, and adherence to due process for fair resolution.
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