The provision of sec. 138 of the Negotiable Instruments [NI] act can be invoked where, cheque was issued in discharge of a legally enforceable debt or even in case of any other liability; not legally enforceable.
The debt should not have been a time barred debt, as specified under the Indian Limitation Act 1963. a complaint is not tenable if a cheque issued towards repayment of time bared debt gets dishonoured.
The provision u/s 138 can be invoked where cheque was bounced due to non-availability of funds and closure of the Bank account.
A notice be sent to the drawer of the cheque within 30 days from the date of dishonour of cheque.
Notice should be in writing calling up on the drawer to pay the sum of cheque.
If the notice states an amount greater than the cheque amount proper justification must be mentioned in the notice or else the notice will be treated as defective.
The drawer needs to pay the amount of cheque within 15 days from receiving the abovementioned notice.
Notice be given to all the partners of partnership firm. In case of unregistered firm notice be given to the person who has signed the cheque.
A single notice for dishonour of two or more cheques to the same drawer of cheque is also permitted.
A notice can be issued in the name of the person who has signed the cheque irrespective of his position / authority.
Dishonour of cheque because of incomplete signature of drawer does not not attract sec. 138
Criminal complaint should be filed within one month of expiry of 30 days provided to the drawer for payment.
A complaint should be filed in the court of Metropolitan Magistrate or First Class Judicial magistrate.
Once notice is issued under Sec.138, failure to initiate prosecution would forfeit the right to prosecute.
Once a notice is issued the bounced cheque can not be re-deposited.
Complaint is not maintainable in case the drawer Request not to present the cheque and even after such request the cheque is presented and got dishonoured.
With the permission of the court, legal heirs of the payee can continue the case.
Imprisonment for the term of 2 years and payment of fine to the extent of twice the amount of the cheque
A person or a director of a company can be made personally responsible towards bouncing of cheque provided the same is specifically mentioned in the complaint issued vide sec. 138 of the NI Act. Every director is not automatically vicariously liable for the offence committed by the company. Merely being a director is not sufficient to make the person liable u/s 141 of the NI Act. Its necessary to provide that the director is on a position and in control of the affairs of the business or he is the signatory of the cheque. The signatory of the cheque is clearly responsible for the incriminating act and will be covered under u/s 141(2). The complaint must disclose the necessary facts which makes the person liable. Even a person who is not a director can be made liable u/s 141 of the NI act.
Nominee directors are not liable for prosecution.
On the death of the drawer / accused, his legal heirs are not liable to pay the amount of cheque or fine as the act of dishonour of cheque is of criminal nature and hence the case can not be continued against the legal hairs of the drawer.
Appearance of accused in the court
A director can file an application to dispense with his personal appearance as provided in sec. 205 of the Criminal Procedure code 1973
Exemption from appearing in the court is not granted to the accused at the first instance. While granting an Exemption from personal appearance of an accused a court may demand an Undertaking viz. bail bond.
Compounding of the offense is possible u/s 147 of the NI Act. In January 2010 t
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