LANDMARK JUDGMENT BY SUPREME COURT ON SECTION 138 OF NEGOTIABLE INSTRUMENT ACT

  • LANDMARK JUDGMENT BY SUPREME COURT ON SECTION 138 OF NEGOTIABLE INSTRUMENT ACT

    Date : 02-11-2018 11:50


    SECTION 138 OF NEGOTIABLE INSTRUMENT ACT: Dishonor of cheque for insufficiency etc of funds in the account- this section states that whenever any person gives a cheque to another person of his own account for payment of any debts. And the cheque is returned by the bank unpaid because of not sufficient amount or it exceeds the amount which is needed to be paid or any other reasonable cause, such person shall be deemed to have committed an offense and shall be punished with an imprisonment for a term which may extend to 2 years or with fine which may extend to twice the amount of cheque or with both.

    There are certain exceptions which are given under the section.

    Supreme Court changes the ground rule under section 138 of negotiable instruments acts to prosecute a person who had presented the cheque which bounced for insufficiency of funds. This judgment provides relief to the holders of bounced cheques under the provision of the negotiable instruments act.

    In this case, Supreme Court changed the basic criteria under section 138 of negotiable instrument act which is to prosecute the person who had presented the cheque and the cheque was returned due to the insufficient amount in the account or any other reason. In earlier times, the holder of the cheque had right to initiate the case at his place of business and residence but in the recent judgment, the court held that the case should be initiated at the place where the branch of the bank on which cheque was drawn was located. Due to the judgment, many cases which were pending related to cheque bounce cases were transferred to the state where the branch of the bank on which cheque was drawn was located. 

    In case where the offender under section 138 has committed many offenses as in continuing offense in single transaction within the meaning of section 220(1) of the criminal procedure code then the offender may be charged with and tried at one trial for every such offence and any such inquiry or trial may be conducted by any court competent to inquire into or try any offenses are provided by section 184 of the code.

    This judgment aims to resolve the issue in strict approach so as to discourage the payer from misusing or carelessly issuing cheques. After the passing of this law now the payer have to be more cautious regarding the cheque bounce because payer will have to travel to the place where the branch of the bank in which cheque is drawn and gets bounced.

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