Section 138 of the Negotiable Instruments Act, of 1881, Criminalizes dishonoring a cheque with the punishment of imprisonment for a term of up to two years or a fine twice the value of the cheque. The inclusion of Section 138 of the Negotiable Instruments Act, 1881 under the penal statute was essential to uphold the trust built upon the transactions taking place with the cheques in the market of exchange and in larger interest of the people.
Dishonour of cheque for insufficiency, etc., of funds in the accounts:-
“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 arrangement made by the bank for that account, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act or of any other law for the time being in force, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both.”
The sensitivity of the cases filed under section 138 is hypersonic after the cheque gets dishonoured and the legal notice is served to the Drawer of the cheque. The procedure laid down by the act according to Section 138(b) & 138(c),
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, [within 15 days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
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 cheque, within 15 days of receipt of the said notice.
Making it essential to understand the significance of a legal notice in prosecuting under this section. A defective legal notice can lead to an acquittal, emphasizing the need for precision and compliance with statutory requirements. In the lifespan of this esteemed section, there are several instances where the Hon’ble Court of Justice has acquitted the accused based on defective and also delayed notice. A legal notice is a mandatory precursor to filing a complaint under Section 138. To be valid, the legal notice is a notice which
- must demand payment within 15 days,
- specify the cheque details,
- The reason for dishonouring.
- Avoids typographic defects in the notice, such as incomplete or inaccurate information, insufficient demand for payment, incorrect cheque number or incorrect addresses…etc
- Compliance with Section 138 requirements.
There are instances when the Court has acquitted the accused based on the factors non complying with the above-said provisions. Delay in serving the legal notice also becomes ground of acquittal in the case filed u/s 138 of the Negotiable Instruments Act, 1881. In the case of Biswanath Dhar v. State of Tripura & Anr. Respondent borrowed Rs.1,50,000/- from the petitioner for a term of one year on 5-2-2012. Petitioner started demanding a given loan in January 2013, due to lack of funds Respondent has issued a cheque of Rs.1,50,000/- dated 10-4-2013. The cheque was dishonored by the IDBI Bank and the same was returned back to the petitioner on 12-4-2013. After the dishonoring of the cheque, the petitioner sent a handwritten notice to the respondent at his address on 28-6-2013 to the respondent intimating to him of the dishonor of the cheque, but it was returned back to the petitioner on 5-7-2013, again the series of the legal notices were sent by the petitioner in the address of respondent in person and even through the counsel, but all returned back to him. The petitioner filed a complaint before the learned Chief Judicial Magistrate, West Tripura, Agartala. Respondent appeared through his Counsel in front of Addl. Judicial Magistrate. Respondent submitted that the dishonoring of the cheque and the notice served to him was far from his knowledge as he never received it. Misreading the statement of the petitioner recorded u/s 200 of Cr. P.C. held that valid notice had been absent as the notice was not served within the statutory period and acquitted the Respondent. Aggrieved by the decision, the Petitioner moved to appeal.
The Hon’ble High Court of Tripura observed that even though the last notice was served to the respondent on 6-8-2013, the complaint was lodged on 12-9-2013 which is much beyond the stipulated period of one month. Petitioner should have filed the case irrespective of deliveries of legal notices whether through registered or non-registered post. The court found that the impugned order passed by learned Chief Addl. Magistrate is maintainable and also passed through the accordance of law and the jurisdiction. Setting the respondent free from the charges is according to the law and according to Section 138. Of Negotiable Instruments Act, 1881. The above case shows the importance of delayed serving of legal notice to the drawer of the cheque and another unremarkable thing here, in this case, is the importance of the correct address of the drawer as without the proper address, the legal notice will not reach in the hand of the accused person and it will not amount to be a delivered legal notice. Another instance where in the case of Ram ji Goutam v. Abhai Patel in the High Court of Allahabad, where there was a delay of more than 50 days in serving legal notice, The Hon’ble Court laid down that where the notice was sent after 50 days i.e. much beyond the prescribed period of 30 days, the acquittal is just and proper.
The typography mistake or typing mistake in a legal notice which may be the result of negligence but a typing mistake of a single digit can also lead to the acquittal of an accused, in the case of Mohamed Irfan v. Velukannan, in this spectacular case where a single-digit mistyping led to the acquittal of the accused. The cheque number which was supposed to be 361868 was typed 361838, as above mentioned points which must be considered while drafting a legal notice, one of them is to specify the correct details of dishonored cheque, incorrect details can set an accused person free in the case may be. Another instance where the incomplete information was furnished to drawer on account of dishonouring of cheque was in the case of Dolma Devi v. Roshan lal where the judgment by the court of learned sub-divisional judicial magistrate has been challenged, wherein a complaint was filed u/s 138 of the Negotiable Instruments Act.The appellant filed a complaint on the ground that she had filed objections before the Land Acquisition Officer, Bilaspur against an award that was made in favour of the accused. During those proceedings, the parties arrived at a compromise and in terms of the compromise, a cheque for an amount of Rs.3,00,000/ was issued by the accused.
The cheque was submitted by the complainant which was returned as it was not post-dated. Later a notice was issued under the NI Act, but even then, the amount was not paid hence, the complaint was filed. The complaint was rejected by the trial court and the same was upheld by the Hon’ble High Court that the cheque was received by the payee bank from the appellant’s bank after a delay of 6 months from the date of issuance of the cheque. The court then referred to the Supreme Court’s judgment in Shri Ishwar Alloy Steels Ltd. v. Jayaswals Neco LTD and held that accordingly, there was no infirmity in the findings returned by the learned Trial Court that the cheque was presented before the payee bank after the cheque had expired and the court then quoted the relevant paragraphs of the notice issued by the appellant after the dishonoring of the cheque according to which it was noted that no demand for the payment of the said amount of money was raised in the notice. Then Supreme Court’s judgment in K.R. Indira v. Dr. G.Adinarayana, where it was held that in a notice under the NI Act even though there is no formal notice, making a demand for the amount covered by the bounced cheque is necessary. It was then noted in the current case, no demand of the amount of the bounced cheque was made and as noted by the trial court the notice was no notice in the eyes of the law.
Concludingly, we can determine the irregularities and errors which may be unnoticeable at the time of serving a legal notice to the drawer of in account of dishonouring of a cheque in a bank, but a minute thing can lead towards acquittal in case of not serving or not properly serving a legal notice according to the procedure established u/s 138 of Negotiable Instruments Act, 1881.
This article has been authored by Ali Hyder.
