Two Important Sections of the Negotiable Instrument Act
Section 138 in The Negotiable Instruments Act, 1881
[ 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.]
Section 142 in The Negotiable Instruments Act, 1881
[ 142 Cognizance of offences. —Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)—
(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138: 24 [Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.]
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.] COMMENTS
(i) Consequent upon the failure of the drawer to pay the money within the period of 15 days as envisaged under clause (c) of the proviso to section 138, the liability of the drawer for being prosecuted for the offence he has committed, arises, and the period of one month for filing the complaint under section 142 is to be reckoned accordingly; Sadanandan Bhadran v. Madhavan Sunil Kumar, AIR 1998 SC 3043.
(ii) A manager or any other person authorised by the company can represent it during the course of legal proceedings before the court and file a complaint; Salar Solvent Extractions Ltd. v. South India Viscose Ltd., (1994) 3 Crimes 295 (Mad).
(iii) The Magistrate while taking cognizance has to look into the question whether the ingredients of an offence have been made out or not; M/s. Pearey Lal Rajendra Kumar Pvt. Ltd. v. State of Rajasthan, (1994) 3 Crimes 308 (Raj).
(iv) The cause of action for filing complaint would arise after the completion of 15 days from the date the drawer receives the notice and fails to pay the amount within that period; V.N. Samant v. M/s. K.G.N. Traders, (1994) 3 Crimes 725 (Karn).
(v) The payee cannot lodge a complaint after the completion of one month from the date on which the cause of action arose as there is a bar under clause (b) of section 142; V.N. Samant v. M/s. K.G.N. Traders, (1994) 3 Crimes 725 (Karn).
(vi) So long as the period of notice does not expire there can be no cause of action with the payee to make the drawer liable criminally; T.K. Khungar v. Sanjay Ghai, (1994) 3 Crimes 802 (P & H).
(vii) It is well settled that it is not necessary for the Magistrate to specifically state that he is taking cognizance of the offence. If he takes steps as provided under section 200, of the Code of Criminal Procedure then it necessarily means that he has taken cognizance of the offence; R. Rajendra Reddy v. M/s. Sujaya Feeds, (1994) 3 Crimes 692 (Karn).
(viii) The complainant must allege in his complaint that the cheque was dishonoured due to want of sufficient amount in the account, even if the payment was stopped; Ballakrishna Pillai v. Abdullakutty, (1994) 2 Crimes 327 (Ker).
(ix) Once a cause of action has arisen, the limitation will begun to run and it could not be stopped by presenting the cheque again so as to have a fresh cause of action and fresh limitation; M/s. Chahal Engineering and Construction Ltd. v. M/s. Verma Plywood Co., (1994) 1 Crimes 845 (P & H).
(x) The criminal prosecution has to be launched within one month of the expiry of 15 days' period from the issuance of notice as provided by section 142(b) of the Act; M/s. Chahal Engineering and Construction Ltd. v. M/s. Verma Plywood Co., (1994) 1 Crimes 845 (P & H).
(xi) When the cheque stood issued in favour of a company, a complaint under section 138 of the Act can be filed by its Manager, Partner, Director or any person authorised by the company; M/s. Ruby Leather Exports v. K. Venu, (1994) 1 Crimes 820 (Mad).
(xii) There is no ambiguity in clause (a) of section 142 of the Act, which prohibits or excludes complaints being initiated by Power of Attorney, agents of the payee or the holder in due course. A Power of Attorney, will be competent to initiate a private complaint by stepping into the shoes of the payee or the holder in due course; M/s. Ruby Leather Exports v. K. Venu, (1994) 1 Crimes 820 (Mad).