PPT ON DISHONORING OF CHEQUES

1. Amity Business School
LAOB ASSIGNMENT PRESENTATION
BY: SAKSHI TIWARI MBA(GEN)

2. Dishonor of Cheques
UNDER SEC 138 OF NEGOTIABLE INSTRUMENTS ACT 1881

3. What is a cheque?
 Cheque is an instrument in writing containing an
unconditional order, addressed to a banker, sign by the
person who has deposited money with the banker, requiring
him to pay on demand a certain sum of money only to or to
the order of certain person or to the bearer of instrument.

4. Different types of cheque:
1. Bearer Cheque
2. Order Cheque
3. Uncrossed / Open Cheque
4. Crossed Cheque
5. Anti-Dated Cheque
6. Post-Dated Cheque
7. Stale Cheque

5. Dishonor of Cheques defined
Dishonouring of a Cheque u/s 138
 A cheque is a type of bill of exchange and is a negotiable instrument. It is used for
making payments without any need to carry cash. A Dishonored Cheque is a Cheque
that is not credited by the Bank for numerous reasons including: The signature does
not match; the account on which the cheque is drawn has insufficient funds, the date
is invalid – i.e. the presentation of the cheque 6 months from the date on the cheque.

6.  Five ingredients of the offence under s. 138
The offence under Sec. 138 of the Act can be completed only with the concatenation of a number of acts.
Following are the acts, which are components of the said offence;
1. Drawing of the cheque,
2. Presentation of the cheque to the bank,
3. Returning the cheque unpaid by the drawee bank,
4. Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount.
5. Failure of the drawer to make payment within 15 days of the receipt of the notice.

7. DISHONOUR OF CHEQUE: LEGAL
PROCEDURE
 1.AFTER the receipt of dishonoured cheque with return memo from bank, demand notice to be sent
by registered post with AD within 30 days from the date of receipt of return memo and dishonoured
cheque from bank.
 2.IN demand notice, 15 days time to be given to the accused for making payment from the date of
receipt of notice by the accused.
 3.IN case of non-payment within 15 days, CAUSE OF ACTION arises on 6th day from the date of
receipt of notice by the accused.
 4.COMPLAINT case under section 138 of NEGOTIABLE INSTRUMENT ACT is to be filed within 30
days from the date of CAUSE OF ACTION, i.e. from 16th day of receipt of notice by the accused.

8.  5.SA (Solemn Affirmation), i.e. preliminary evidence either by disposition or by affidavit in evidence
to be completed under section 200 CRPC for issue of summon.
 6.AFTER issue of summon next stage shall be for S.R. (Summon Report).
 7 (a) In case the summon is served, party has to appear and take bail and the next stage would
for plea. (plead guilty or not guilty).
(b)In case the summon is served and party does not appear, warrant of arrest would be issued as per the
provisions of CRPC.
(c)In case the summon service report has not arrived in the court's record the next date would be for TAGID
(follow-up of report).
(d)In case the summon is returned with such remark like 'does not exist', 'incomplete address' etc. then fresh
requisite with complete particulars to be provided for issue of fresh summon.

9.  8. AFTER the completion of the above stage next stage would be for plea.
 9. AFTER plea the evidence process will start:
(a) 1st Date-Evidence of completion also called as evidence in Chief shall be
completed.
(b) Then the cross examination of the complaint by the defence lawyer
shall be completed.
(c)Then the bank evidence will start and in this case evidence of only one bank or both
the banks (complainant’s bank and accused’s bank) may take place depending upon the
return memo and averments in the complaint petition. Nevertheless, as per the recent
amendments in Feb.2003, banking evidence is not mandatory since exhibit of return memo is
sufficient to construe banker’s evidence.

10.  (d) After the completion of the above evidences, examination of the accused under section 313
CRPC by the magistrate takes place.
 (e) Then the evidence of defense witness by the complainant's lawyer takes place. And the
evidence is closed.
 10. AFTER the completion of the evidence argument between both the lawyers takes place and
judgment is delivered.
 11.IN the case of cheque dishonour the punishment is upto twice the amount of cheque and upto
two years' of imprisonment.

11. Punishment for dishonor of cheque:
A person who commits an offence under Section 138 may be punished as under :
1. Imprisonment for up to two years.
2. A fine which may extend to twice the amount of the cheque, or with both.
However, no one can be punished unless the cheque has been presented to the bank within six months from the
date on which it is drawn or within the period of its validity, whichever is earlier.

12. Defence that can be taken in regard to dishonoured cheque cases:
If the matter is examined critically, then the following may be a line of defence that may be taken
are as follows:-
1. Absence of a legally-enforceable debt or liability.
2. The cheque was not returned for the reasons constituting an offence.
3. The complaint was not as per time period provided in Sections 138 and 142, i.e. the plea of
limitation.
4. Absence of legal notice of 15 days.
5. Lack of Jurisdiction.
6. No return of cheque to the payee.

13. THANK YOU