How to File a Complaint Under Section 138 of the Negotiable Instruments Act, 1881
Section 138 of the Negotiable Instruments Act, 1881 (NIA) deals with the legal consequences of cheque bounce cases in India. A cheque bounce occurs when a cheque is dishonored by the bank due to insufficient funds or other reasons. Under Section 138, the payee (the person to whom the cheque is issued) can initiate legal proceedings against the drawer (the person who issued the cheque).
Understanding Section 138 NIA
Section 138 of the NIA is a penal provision that allows for the prosecution of the drawer of the cheque if it is dishonored due to insufficient funds or because it exceeds the amount arranged to be paid from the drawer’s account. The objective of this provision is to ensure the credibility of cheque transactions.
Preconditions for Filing a Complaint Under Section 138
Before filing a complaint under Section 138, the following conditions must be met:
- Cheque Presentation: The cheque must be presented to the bank within its validity period, which is usually 3 months from the date of issue.
- Cheque Dishonor: The bank must return the cheque unpaid, with a memo stating the reasons for dishonor, such as “insufficient funds” or “exceeds arrangement.”
- Demand Notice: After receiving the dishonor memo, the payee must issue a written demand notice to the drawer within 30 days of the cheque bounce, demanding payment of the cheque amount.
- Failure to Pay: If the drawer fails to make the payment within 15 days of receiving the demand notice, the payee can file a complaint in the court under Section 138 NIA.
Steps to File a Complaint Under Section 138
1. Drafting the Complaint
The first step in initiating legal action is drafting a formal complaint. The complaint should include the following details:
- Parties Involved: Clearly mention the names and addresses of the complainant (payee) and the accused (drawer).
- Cheque Details: Provide the cheque number, date of issue, bank name, branch, and amount.
- Dishonor Details: Include details of the dishonor, including the reason given by the bank in the return memo.
- Demand Notice: Mention the date on which the demand notice was sent, and attach a copy of the notice and postal receipt as evidence.
- Cause of Action: State the cause of action, i.e., the failure of the drawer to make the payment within 15 days of receiving the demand notice.
- Prayer/Relief: Clearly specify the relief sought, such as the payment of the cheque amount with interest and legal costs.
2. Filing the Complaint in Court
Once the complaint is drafted, it must be filed in the appropriate court:
- Jurisdiction: The complaint can be filed in the court of the Judicial Magistrate First Class (JMFC) or Metropolitan Magistrate, depending on the location. The jurisdiction is determined based on the location where the cheque was presented for payment or where the demand notice was sent from.
- Time Frame: The complaint must be filed within one month from the date on which the cause of action arose (i.e., after the 15-day notice period expires).
- Court Fees: Pay the requisite court fees while filing the complaint, as per the court’s rules.
3. Court Proceedings
After the complaint is filed, the court will initiate the legal process:
- Summons: The court will issue summons to the accused to appear before the court. The summons will be served through the court process, and the accused must attend the court on the specified date.
- Pleading and Evidence: The complainant (payee) must provide evidence, including the original cheque, dishonor memo, demand notice, and acknowledgment of receipt of the notice. The accused (drawer) may also present their defense.
- Cross-Examination: Both parties will have the opportunity to cross-examine witnesses and present arguments.
- Judgment: After hearing both parties, the court will deliver its judgment. If the accused is found guilty, the court may order imprisonment (up to 2 years) and/or impose a fine (which may extend to twice the amount of the cheque).
4. Execution of Judgment
If the court convicts the accused and orders the payment of the cheque amount, the accused must comply with the order. If the accused fails to pay, the complainant may initiate execution proceedings to recover the amount through the court.
Important Legal Considerations
1. Liability of the Drawer: The drawer of the cheque is held liable under Section 138 for the dishonor of the cheque. This liability is strict, meaning that the drawer cannot escape liability merely because they had no intention to defraud.
2. Compounding of Offense: Offenses under Section 138 are compoundable, meaning that the parties can settle the matter out of court at any stage of the proceedings. If the complainant agrees to withdraw the case, the court can allow compounding, and the accused can be acquitted.
3. Multiple Cheques: If multiple cheques are issued by the drawer and dishonored, the payee can file separate complaints for each cheque or consolidate them into one complaint, depending on the circumstances.
4. Vicarious Liability: In cases where the drawer is a company or firm, the directors, partners, or other officers who were in charge of the company at the time of issuing the cheque may also be held liable under Section 138.
FAQs
Q1. Can a complaint under Section 138 be filed after the one-month limitation period?
Yes, a complaint can be filed after the one-month limitation period if the complainant provides a valid reason for the delay. The court may condone the delay if it is satisfied with the explanation provided.
Q2. Can a complaint be withdrawn after it is filed?
Yes, a complaint under Section 138 can be withdrawn by the complainant if the parties settle the matter. The court may allow withdrawal upon filing an application for compounding the offense.
Q3. What is the punishment under Section 138 of the Negotiable Instruments Act?
The punishment for an offense under Section 138 can include imprisonment for up to two years, a fine which may extend to twice the amount of the cheque, or both.
Q4. Is it necessary to hire a lawyer to file a complaint under Section 138?
While it is not legally mandatory to hire a lawyer, it is highly advisable. The process involves legal formalities, and a lawyer can help in drafting the complaint, representing the complainant in court, and ensuring compliance with legal procedures.
Q5. What happens if the accused fails to appear in court after receiving the summons?
If the accused fails to appear in court after receiving the summons, the court may issue a warrant for their arrest to compel their attendance.
Q6. Can a Section 138 case be settled out of court?
Yes, a case under Section 138 can be settled out of court. The offense is compoundable, and if both parties agree to a settlement, the court can close the case upon an application for compounding.
Q7. What is the role of the bank in a Section 138 complaint?
The bank’s role is limited to providing the dishonor memo and relevant records. The bank is not a party to the complaint but may be required to produce records or evidence related to the dishonored cheque.
Q8. Can a Section 138 case be filed if the cheque was issued as a gift or without consideration?
No, a case under Section 138 cannot be filed if the cheque was issued as a gift or without any underlying legal obligation. The cheque must have been issued in discharge of a legally enforceable debt or liability.
Conclusion
Filing a complaint under Section 138 of the Negotiable Instruments Act is an effective legal remedy for recovering unpaid amounts due to cheque bounce. The process involves careful adherence to legal timelines and procedures, starting from sending a demand notice to filing the complaint in the appropriate court. By following the steps outlined in this guide, the payee can seek justice and ensure that the drawer is held accountable for the dishonored cheque.
While the legal process under Section 138 is designed to be straightforward, it is crucial to approach it with diligence and legal expertise to ensure a successful outcome. Given the potential complexities involved, including jurisdictional issues, evidence requirements, and the possibility of settlement, seeking legal advice is often beneficial. The courts in India take cheque bounce cases seriously, and with the right approach, the complainant can effectively use Section 138 to secure the payment owed.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Adcocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304