- The Foundation of Section 138: Why It Exists
- Procedure and Compliance in Filing Cases
- Impact, Challenges, and Importance of Legal Guidance
The Foundation of Section 138: Why It Exists
The prevalence of cheque bounce cases in India has made Section 138 of the Negotiable Instruments Act, 1881, one of the most commonly invoked legal provisions in both civil and criminal jurisdictions. This statute was introduced to enhance the credibility of negotiable instruments, particularly cheques, which play a vital role in financial transactions. With the surge in business dealings, credit-based purchases, and financial arrangements, cheques have become indispensable. However, dishonour of cheques due to insufficient funds or a stop-payment instruction has led to widespread legal conflicts, prompting a closer examination of Section 138.
Procedure and Compliance in Filing Cases
Section 138 seeks to penalize the drawer of a cheque if it is returned by the bank unpaid due to insufficient funds or because it exceeds the arrangement made with the bank. The law stipulates that such dishonour constitutes a criminal offence, punishable by imprisonment, fine, or both. The objective is not only to deter defaulters but also to instill a sense of responsibility and accountability in monetary dealings. However, this provision has its own set of procedural requirements and limitations, making it essential for both complainants and accused to understand the nuances.
To initiate proceedings under Section 138, the aggrieved party must first serve a legal notice within 30 days of receiving information from the bank regarding the dishonour. The drawer is then given 15 days to make the payment. If the payment is not made within this time, the complainant has the right to file a complaint before a Magistrate within 30 days from the expiry of the 15-day period. The procedural rigour is essential as any lapse in timelines can invalidate the complaint.
Impact, Challenges, and Importance of Legal Guidance
Section 138 is unique in that it provides for both criminal prosecution and civil remedies. The complainant can simultaneously file a civil suit for recovery and initiate criminal action, thereby increasing the pressure on the drawer to honour the commitment. This dual remedy is particularly useful in commercial contexts where speedy recovery is often as critical as penal consequences.
Despite its robust framework, Section 138 is not free from challenges. There is a growing concern about the pendency of cheque bounce cases in courts, which slows down the overall effectiveness of the remedy. Efforts have been made to introduce digital and summary procedures to expedite such cases, but more systemic reforms are necessary.
For both complainants and accused, legal representation is crucial. The complainant must ensure that the notice is properly drafted, timelines are followed, and evidence is preserved. The accused, on the other hand, must evaluate the grounds for dishonour and determine whether there exists a valid defence, such as absence of liability, post-dated cheque, or procedural lapse by the complainant.
