Proceeding For 138 NI ACT

The Negotiable Instruments Act, 1881, Section 138, primarily deals with the dishonor of cheques due to insufficient funds or if it exceeds the arrangement made with the bank. Here’s a breakdown of the process for proceeding under Section 138 of the NI Act:

Key Steps in Filing a Complaint under Section 138:

1. Preconditions to File a Case:
   • The cheque must be issued for the discharge of a legally enforceable debt or liability.
   • The cheque should be presented to the bank within its validity period (usually 3 months).
   • The cheque is returned unpaid due to:
     • Insufficient funds.
     • Account closure.
     • Exceeds the arrangement.
2. Demand Notice:
   • The payee (the person who received the cheque) must send a written notice (demand notice) to the drawer (the person who issued the cheque) within 30 days of receiving the dishonored cheque memo from the bank.
   • The notice should demand payment of the cheque amount within 15 days of the receipt of the notice by the drawer.
3. Waiting Period:
   • The drawer has 15 days to pay the cheque amount after receiving the demand notice.
4. Filing the Complaint:
   • If the drawer fails to pay the amount within 15 days, the payee can file a complaint in the appropriate court.
   • The complaint must be filed within 30 days from the date of expiry of the 15-day period given in the demand notice.
5. Jurisdiction:
   • The complaint can be filed at a court within the territorial jurisdiction where:
     • The cheque was presented for payment.
     • The bank where the payee has an account is located.
6. Court Process:
   • The complainant needs to submit:
     • The original cheque.
     • The bank’s dishonor memo.
     • A copy of the demand notice.
     • Proof of delivery of the demand notice.
   • Once the court is satisfied, it will issue a summons to the accused (drawer).
7. Trial and Judgment:
   • If the drawer is found guilty, they may face:
     • Imprisonment (up to 2 years).
     • A fine (up to twice the cheque amount).
     • Or both.

Precautions for the Payee:

• Ensure all timelines are adhered to strictly.
• Preserve all documentary evidence, such as the cheque, bank memo, and postal receipt of the demand notice.
• Engage a lawyer for drafting the complaint and representation.

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