Section 138 of NI Act, 1881

Section 138 to 148 of Negotiable Instrument Act, 1881 talks about Penalties in case of Dishonour of Cheque due to insufficient funds in the account. we will see the sections in brief yet in a comprehensible way. "Debt or other liability for the purpose of this section means a legally enforceable debt or other liability."

Section 138 (Dishonour of of cheque for insufficiency, etc., of funds in the account):

This section talks about punishment for the person who draws a cheque from an account maintained by him for any debt or other liablity i.e. legally enforceable. A person who commits such an offence can 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.

Provided, nothing contained in the section shall applies (as given under the following clauses)

1. The cheque which has been drawn and presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity, whichever is earlier. The validity of cheque as per the RBI (Reserve Bank of India) guidelines is of 3 months from the date of the issue. The validity of the cheque can be further increased by 3 months once the drawer re-validates the cheque.
    
2. The Payee or the Holder (to whom the cheque has been issued) 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 (issuer of the cheque) of the cheque within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.
    
3. The drawer of such cheque fails to make the payment of the said amount of money to the payee or to the holder as the case may be, in due course of the cheque within fifteen days of the receipt of the above said written notice.

Section 139 (Presumption in favour of holder): Section 139 states that unless otherwise is proved, it is assumed that the person receiving a cheque mentioned in section 138 intended it to be used to settle, either fully or partially, a debt or other obligation.

S.140 (Defence which may not be allowed in any prosecution under section 138): Under this section it states that it shall not be a defence in a prosecution for an offence under section 138 that the drawer/issuer of the cheque had no reason to believe when he issued the cheque that the cheque may be dishonoured due to lack of insufficient funds or for the reasons stated in that section.

Section 141 (Offences by companies): [For the purpose of this section, 'Company' means any body corporate and includes a firm or other association of individuals and 'Director' in relation to a firm, means a partner in the firm.]

Sub-section (1)- If the person committing an offence under section 138 is a company, every person at the time of offence was committed, was incharge of, and was responsible to the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central or State Government or a financial corporation owned or controlled by the Central of State Government, as the case may be, he shall not be liable for prosecution under this Chapter though under

Sub-section (2) it states that where any offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Section 142 (Cognizance of offences): Sub-section (1)- States Notwithstanding anything contained in the Code of Criminal Procedure 1973. Clause (a) no court shall take cognizance, of any offence punishable under section 138 except upon (until and unless) a complaint, in writing, made by the payee or the holder as the case may be in due course of the cheque; Clause (b) such complaint in writing is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138 (Provided the court can take the cognizance after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such prescribed period.) Clause (c) States that no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

Sub-section (2)- It talks about the jurisdiction. Clause (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated at [where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account]; or Clause (b) if the cheque is presented for the payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Section 142-A (w.r.e.f. 15 June, 2015 which provides for Validation for transfer of pending cases): Sub-section (1)- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) or any judgment, decree, order or direction of any court, all cases transferred to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015 (Ord. 6 of 2015), shall be deemed to have been transferred under this Act, as if that sub-section had been in force at all material times.

Sub-section (2)- sub-section 2 of the section 142-A states that where the payee or holder of the cheque as the case may be, has filed a complaint against the same drawer is pending in different courts, all subsequent complaints arising out of section 138 shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.

Sub-section (3)- It states that if the payee or holder of the cheque as the case may be has filed more than one prosecution against the same drawer of the cheques before different courts, then upon the said fact having been brought to the notice of the court, such court shall transfer all such case to the court having jurisdiction under sub-section(2) of Section 142, before which the first case was filed and is pending.

Section 143 (Power of court to try cases summarily): Sub-section (1)- provides that offences under this section shall be tried by Judicial Magistrate First Class or Metropolitan Magistrate. Provided that it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not exceeding one year and amount of fine exceeding five thousand rupees. Provided further if at any stage it appears to the Magistrate that the nature of the case is such that sentence of imprisonment for term exceeding one year has to be passed or for any reason it is undesirable to try the case summarily, the Magistrate shall after hearing the parties, record an order to that effect and thereafter recall any witness thereafter who may have been examined and proceed to hear the case in the manner provided by the said code.

Sub-section (2)- the trial of the case under this section, so far as practicable, consistently with the interest of justice, be continued from day to day until its conclusion, unless the Court finds the adjournment of trial beyond the following day necessary for reasons to be recorded in writing.

Sub-section (3) - It states for an expeditious trial and to conclude the trial withing six months from the date of filing of the complaint.

Section 143-A (Power to direct interim compensation.): Sub-section (1)- states that the court trying an offence may order the drawer of the cheque to pay interim compensation to the complainant - clause (a)- in a summary trial or summons case, where he pleads not guilty to the accusations made by the complainant and clause(b) in any other case upon framing charges.

Sub-section (2)- gives that interim compensation under sub-section (1) shall not exceed twenty percent of the amount of the cheque. e.g. not more than Rs.3,000 in case of a cheque of Rs.15,000.

Sub-section (3)- The interim compensation shall be paid within sixty days from the date of the order as stated under sub-section (1) or within such period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the drawer of cheque.

Sub-section (4)- this sub-section talks about the case where the drawer of the cheque is acquitted, in such a case the court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complaint. i.e in total 90 days.

Sub-section (5)- States that the Interim compensation payable under this section may be recovered as if it were a fine under Code of Criminal Procedure, 1973 (2 of 1974).

Sub-section (6)- States that the amount of fine imposed or compensation awarded shall be reduced by the amount paid or recovered as interim compensation under this section. (kind of sets off with the amount of interim compensation)

Section 144 (Mode of Service of Summons): Sub-section (1)- States that a Magistrate issuing summons to an accused or a witness may direct a copy of summons to be served at the place where such accused or witness ordinarily resides or carries business or personally works for gain, by speed post or by such courier services as are approved by a Court of Session.

Sub-section (2)- States that where an acknowledgement purporting to be signed by the accused or witness or an endorsement purported to be made by any person authorised by the postal department or the courier services that the accused or the witness refused to take delivery of summons has been received, the Court issuing the summons may declare (in such case) that the summons has been duly served.

Section 145 (Evidence of affidavit): Sub-section (1)- States that the evidence of the complainant may be given by him on affidavit and may, subject to all just exceptions be read in evidence in any enquiry, trial or other proceeding under the said code.

Sub-section (2)- States that Court may if it thinks fit and Shall, on the application of the prosecution or the accused, summon and examine any person giving evidence on affidavit as to the facts contained therein.

Section 146 (Bank's slip prima facie evidence of certain facts): States that if a bank slip or memo with an official mark indicating that the cheque was dishonoured is shown, the Court will assume that the cheque was dishonoured unless proven otherwise.

Section 147 (Offences to be compoundable): States that every offence punishable under this Act shall be compoundable.

Section 148 (Power of Appellate Court to order payment pending appeal against conviction): Sub-section (1)- States that in an appeal by the drawer of the cheque where he is convicted, the Appellate Court may order the appellent to deposit such sum which shall be a minimum of twenty percent of the fine or compensation awarded by the trial court. Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellent under section 143-A.

Sub-section (2)- The amount referred to above in sub-section (1) shall be paid within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause shown by the appellent.

Sub-section (3)- States that Appellate Court may direct the release of the amount deposited by the appellent to the complainant at any time during the pendency of the appeal. Provided if the appellent is acquitted, the Court shall direct the complainant to repay to the appellent the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of of the relevent financial year, within sixty days from the date of the order, or within such further period not exceeding thiry days as may be directed by the Court on sufficient cause being shown by the complainant.