Sec 138 - NEGOTIABLE INSTRUMENT ACT

SECTION 138 OF NEGOTIABLE
INSTRUMENTS ACT 1881:

STUDY OF JURISDICTIONAL ISSUES
IN THE LIGHT OF LEADING CASES
Submitted by:
AMIT KUMAR
LL.M (CORPORATE LAW)
School of Law, Madhav University,
Madhav Hills, Abu Road, Sirohi, Rajasthan
INTRODUCTION
Dealings in cheques are vital and important not
only for banking purposes but also for the
commerce and industry and the economy of the
country. But pursuant to the rise in dealings with
cheques also rises the practice of giving cheques
without any intention of honouring them. The law
regarding cheques, its ingredients, use, nature and
criminal consequences of its bouncing is described
in the Negotiable Instruments Act, 1881.
TABLE OF CONTENTS
Introduction.
Chapter- 1: Law on Cheques
Chapter- 2: Dishonoring of Cheques:
Chapter- 3: Law under Section 138.
Chapter- 4: Jurisdictional Issues.
Conclusion.
NEGOTIABLE INSTRUMENTS : CONCEPT & LAW
 Negotiable Instrument is a piece of paper while

entitles a person to a sum of money and which is
transferable from person to person by mere delivery
or by endorsement or delivery. A person taking a
Negotiable Instrument in good faith and for value
becomes the true owner even if he takes from a thief
or finder.
 Law relating to promissory notes, bills of exchange,
cheques and other negotiable instruments is codified
in India under the Negotiable Instruments Act, 1881.
CHEQUE : DEFINITION
 Cheque is an order by the account holder of
the bank directing his banker to pay on
demand, the specified amount, to or to the
order of the person named therein or to the
bearer
 Section 6 of The Negotiable Instruments
Act, 1881 defines “a cheque as a bill of
exchange drawn on a specified banker and
not expressed to be payable otherwise than
on demand”.
KINDS OF CHEQUES UNDER LAW
 Open cheque
 Bearer cheque
 Order cheque
 Crossed cheque
 Account Payee
 Not Negotiable
 Ante-dated cheques
 Stale Cheque
 Mutilated Cheque
 Post-dated Cheque
PRESENTATION OF CHEQUE
 The presentation of cheque
should be within its validity
period. There is no specified
manner or method of
presentation of cheque in bank
but we have to follow guidelines
of Reserve Bank of India.
ESSENTIALS OF CHEQUE
 Date of cheque
 Signature
 Counter sign on overwriting by the
drawer.
 Cheque must be drawn on the branch
on which it is presented for payment.
 Amount
 Issued for cheque book issued to
drawer.
DISHONOUR OF CHEQUE
 What is Dishonour?
 Statutory Grounds for Dishonoring
Cheques.
 Other Grounds in Practice.
 General Trends in Banks.
 Postdated Cheques.
DISHONOUR OF CHEQUE
 A cheque is said to be
dishonoured when it is refused to
accept or pay when presented to
the bank.
STATUTORY GROUNDS FOR DISHONOUR
 Dishonour by non-acceptance (Sec-91,
N.I. Act)
 Dishonour by non-payment (Sec-92,
N.I. Act)
DISHONOUR: OTHER GROUNDS IN PRACTICE
 Payment countermanded
 Insufficiency of funds
 Non-applicability of funds
GENERAL TRENDS IN BANK
 A cheque is sometime returned unpaid
by the bank to the customer. The
reason is usually given on the cheque
or upon a slip of paper attached to it.
POST DATED CHEQUES
 A post-dated cheque represents a mere
promise by the drawer to pay at some
future date.
LAW UNDER SECTION 138: N. I. ACT
 Historical Perspective
 Objects and Policy.
 What Constitutes an Offence under Section
138.
 Liability Individual
 Corporate Liability.
HISTORICAL PERSPECTIVE & OBJECTIVE
 To ensure promptitude and remedy
against defaulters and to make sure
credibility of the holders of the negotiable
instrument a criminal remedy of penalty
was inserted in the Act.
 The object of enacting section 138 is to
punish unscrupulous persons who issue
cheques without any intention to honour.
OFFENCE UNDER SEC-138 OF N. I. ACT
The offence under Sec. 138 are:
Dishonour of a cheque is an economic offence.
Proceedings under section 138 is a criminal
prosecution and is not a recovery of money

proceeding and the offence calls for conviction
and sentence of imprisonment or fine or both.
Offer of payment after institution of complaint
is of no value and is useless. It is at the most a

mitigating circumstance to be taken into
account in award of sentence.
LIABILITY OF DISHONOUR : INDIVIDUAL
 Civil liability.
 Criminal liability.
LIABILITY OF DISHONOUR : CORPORATE
 Section 141 of the NI Act provides that
when a company’s cheque is
dishonoured under Section 138 of the
NI Act, then those who were in-charge
of the conduct of the business of the
company, at the time the offence was
committed, would be constructively
liable.
JURISDICTIONAL ISSUES CONCERNING
SECTION 138 OF NEGOTIABLE
INSTRUMENTS ACT 1881
 Issues Involved.
 Provisions of the Act
 Trend-Setting Cases.
 Critique of Judicial Approach.
 Miscarriage of Justice.
ISSUES INVOLVED
 Whose debt liability does the section 138 of N. I.
Act talk about ?
 Insufficiency of funds is the reason for the
dishonor. May the same taken to be the conditio
sine qua non for the application of this Section?
 Who is an accused for the purposes of Sec 138
in the cases of companies & firms?
 If technical grounds there – does it Attract
Section 138?

PROVISIONS OF THE ACT
 Negotiable Instruments are cash
equivalents.
 These can be converted into liquid cash
subject to certain conditions.
 They play an important role in the economy
in settlement of debts and claims.
 Provisions have been made in the Act
concerning presentment, payment, interest,
discharge from liability etc.
TREND SETTING CASES
 K.K. Ahuja v. V.K. Vora MANU SC-
1111/2009
 K Bhaskaran V sankaran Vaidyaa
Balan and Anr AIR 1999 SC 3762
THANK YOU…

Sec 138 - NEGOTIABLE INSTRUMENT ACT

Uploaded by

Copyright:

Available Formats

Sec 138 - NEGOTIABLE INSTRUMENT ACT

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sec 138 - NEGOTIABLE INSTRUMENT ACT

Uploaded by

Copyright:

Available Formats

SECTION 138 OF NEGOTIABLE

INSTRUMENTS ACT 1881:

 Negotiable Instrument is a piece of paper while

Proceedings under section 138 is a criminal

prosecution and is not a recovery of money

is of no value and is useless. It is at the most a

You might also like