Cheque Bounce Lawyer in Kolkata — Section 138 NI Act Cases

Section 138 of the Negotiable Instruments Act, 1881 makes the dishonour of a cheque for want of funds a criminal offence on a strict statutory timetable. Thirty days for the notice. Fifteen days for the drawer to pay. One month for the complaint. Miss a step and no offence is made out at all.

What Constitutes the Offence Under Section 138

Section 138 applies where a cheque drawn on an account maintained with a banker for payment of money is returned unpaid for insufficiency of funds or because the amount exceeds the arrangement with the bank, and the drawer fails to pay after a notice of demand. The ingredients are cumulative:

• drawn for the discharge, in whole or in part, of a legally enforceable debt or other liability — not a gift or a moral obligation;
• presented within its period of validity — three months from the date of drawing, under Section 72 as amended in 2015;
• returned unpaid for insufficiency of funds or because the amount exceeds the arrangement, which the bank's return memo proves;
• a written demand notice served on the drawer within thirty days of the payee's receipt of the bank's information of dishonour;
• failure to pay within fifteen days of receipt of the notice; and
• a complaint filed within one month of the cause of action, before a court with territorial jurisdiction.

The offence carries imprisonment which may extend to two years, or fine which may extend to twice the amount of the cheque, or both. It is complete only when the fifteen days expire without payment, so the notice is a statutory condition precedent.

The Statutory Demand Notice — the Thirty-Day Rule

The notice under clause (b) of the proviso to Section 138 must be issued within thirty days of the payee's receipt of the bank's information of dishonour — not the date of the cheque or of presentment. It should identify the cheque by number, date and amount, the bank on which it was drawn, the date of presentment and the return memo with its reason, and the nature of the debt with reference to the underlying invoice, agreement or ledger, and demand payment within fifteen days. It is sent to the drawer at his correct address, ordinarily by registered post with acknowledgement due or by speed post. Actual receipt is not required: under Section 27 of the General Clauses Act, 1897, service by post is deemed effected where the letter is properly addressed, prepaid and posted, and a cover returned as refused or unclaimed is good service. Section 144 of the Act permits service through electronic means.

The Fifteen-Day Period and When the Cause of Action Arises

Under clause (c) of the proviso the drawer must pay within fifteen days of receipt of the notice. Payment within that period negates the offence. Failing payment, the offence is complete on the sixteenth day — the day the cause of action arises — and the complaint must be filed within one month under Section 142(1)(b). The proviso to that clause allows cognizance after the month where sufficient cause is shown, but condonation is discretionary and should never be assumed.

Territorial Jurisdiction — Section 142(2) After the 2015 Amendment

Jurisdiction now lies under Section 142(2), inserted in 2015. Where the cheque was delivered for collection through an account, the complaint lies where the branch of the bank at which the payee maintains the account is situated; where it was presented otherwise, where the drawer's bank branch is situated. The provision undid the hardship created by Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, which had confined the offence to the place of the drawer's bank. A payee whose bank branch is in Kolkata may therefore file here though the drawer's bank is in Delhi or Mumbai. Only one court may take cognizance on a given cause of action, and it is the court where the first complaint was filed.

Filing and the Summary Trial Under Sections 143 to 146

The complaint is filed before the Chief Metropolitan Magistrate at Calcutta or the Judicial Magistrate having jurisdiction, with the cheque, the return memo, the office copy of the notice, the postal proof, the statement of account and an affidavit under Section 145(1), which permits the complainant's evidence on affidavit. Section 143 requires summary trial; on conviction in a summary trial the Magistrate may not impose imprisonment exceeding one year, though Section 138 authorises two years where the case is tried as a summons case. Section 146 makes the bank's endorsement of dishonour prima facie evidence, so no bank officer need be examined. Section 143A, inserted in 2018, is the payee's strongest lever: the court may order interim compensation up to twenty per cent of the cheque amount during the trial, recoverable as a fine, payable within sixty days and extendable by thirty days, refundable with interest on acquittal. Apply for it at the earliest stage.

Punishment, Compensation and the Section 148 Deposit

• Section 138 — imprisonment up to two years, or fine up to twice the cheque amount, or both;
• Section 143A — interim compensation up to twenty per cent of the cheque amount during the trial;
• Section 148 — in an appeal by the drawer against conviction, deposit of not less than twenty per cent of the fine or compensation awarded as a condition of hearing the appeal;
• Section 395 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (formerly Section 357 CrPC) — compensation to the victim in addition to the fine.

The Presumption Under Section 139 — and How It Is Rebutted

Section 139 provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it in discharge, in whole or in part, of a debt or other liability; Section 118(a) presumes consideration; and Section 140 removes the escape that the drawer had no reason to believe the cheque would be dishonoured. In Rangappa v. Sri Mohan, (2010) 11 SCC 441, a three-Judge Bench held that this is a presumption of law: once the signature is admitted or proved, the existence of a legally enforceable debt is presumed and the drawer must rebut it. In Basalingappa v. Mudibasappa, (2019) 5 SCC 418, the Court held that the accused need not prove his defence beyond reasonable doubt, but must raise a probable defence on a preponderance of probabilities; and in Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513, that a bare denial of the debt is not enough.

Defences Available to the Accused

• No legally enforceable debt or liability — the cheque was a gift, was issued for a moral obligation, the debt was time-barred when the cheque was drawn, or no sum was due;
• Cheque issued as security. In Sripati Singh v. State of Jharkhand, (2021) SCC OnLine SC 1002, the Supreme Court held that where a security cheque is dishonoured and the liability has in the meanwhile arisen and remains undischarged, proceedings under Section 138 may be maintained. The defence succeeds where the drawer proves that no liability had arisen on presentment;
• Signature not authorised, material alteration or forgery, to be proved through a handwriting expert or bank records;
• Notice not served or defective — wrong address, despatch beyond the thirty-day period, or a demand for an amount other than the cheque amount;
• Presentation outside the three-month validity, or no valid presentment at all;
• The complainant is not the payee or holder in due course under Section 142(1)(a), or the complaint is time-barred; and
• Payment within fifteen days of the notice, or want of territorial jurisdiction under Section 142(2).

Two answers are routinely attempted and routinely fail. Stop payment instructions are no defence — in Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 68, a cheque returned with the remark payment stopped still attracts Section 138 where the reason is insufficiency of funds. Closure of the account fares no better: in NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253, the return of a cheque for the reason account closed was held to fall within the mischief of the section.

Compounding and Settlement — Section 147

Section 147 provides that every offence punishable under the Act is compoundable, so the parties may settle at any stage, ordinarily on payment of the cheque amount with interest and costs; compounding after conviction requires the leave of the court and results in acquittal. In Meters and Instruments (P) Ltd. v. Kanchan Mehta, (2018) 1 SCC 560, the Supreme Court observed that the object of Section 138 is primarily compensatory and that the court may close the proceedings on satisfaction of the claim.

Recovery of the Amount and the Parallel Civil Suit

• Compensation in the criminal case — under Section 143A during the trial and Section 395 BNSS at the conclusion, apart from the fine under Section 138;
• A summary suit under Order XXXVII of the Code of Civil Procedure, 1908 — a cheque is a bill of exchange, so a summary suit lies before the Original Side of the Calcutta High Court or the City Civil Court at Calcutta according to the pecuniary value. The drawer must seek leave to defend; if leave is refused the suit is decreed without a full trial;
• A money suit on the underlying contract or ledger within three years from the date the payment fell due;
• Execution — attachment of the drawer's bank accounts, salary or immovable property once a decree or order of compensation is obtained. The criminal complaint and the civil suit may be pursued together.

Documents Required in a Cheque Dishonour Case

• the original cheque and the bank's return memo recording the reason for dishonour;
• the office copy of the demand notice with proof of service — registered or speed post receipt, acknowledgement due card, courier receipt, or the e-mail delivery log;
• the reply notice from the drawer, which fixes his defence in advance;
• the statement of account, ledger, invoices, agreements or correspondence establishing the debt, with the loan agreement and proof of disbursement where the cheque was given for a loan;
• identity proof of the complainant, and where the complainant is a company or firm the resolution under Section 142(1) with proof of the signatory's authority;
• the affidavit under Section 145(1), the lists of documents and witnesses, and the vakalatnama.

Practical Steps and Timelines in Kolkata

• Step 1 — on receipt of the return memo, verify the cheque, the presentment record and the underlying transaction, and decide whether Section 138 is available or the remedy should be a civil suit;
• Step 2 — issue the demand notice within thirty days by registered or speed post, and preserve the postal proof;
• Step 3 — on the expiry of fifteen days without payment, compute the cause of action and file the complaint within one month before the Magistrate having jurisdiction under Section 142(2);
• Step 4 — apply at the earliest for interim compensation under Section 143A, and for issue of process by post or electronic means under Section 144 where the drawer evades service;
• Step 5 — prosecute the summary trial and press for compensation under Section 395 BNSS on conviction and, if the drawer appeals, for the Section 148 deposit, while pursuing the civil suit where the drawer has assets to attach. A contested complaint ordinarily runs twelve to thirty months; a settled case closes within a few months.

Common Mistakes That Weaken a Cheque Dishonour Case

• sending the demand notice beyond thirty days from receipt of the bank's information, which destroys the offence;
• sending it to an address other than the drawer's correct address, or by ordinary post without proof of despatch;
• filing the complaint before the fifteen-day period expires, or beyond one month from the cause of action without an application for condonation;
• filing before a court without territorial jurisdiction under Section 142(2), or not applying for interim compensation under Section 143A at the start of the trial and so losing the settlement lever;

What Your Cheque Bounce Lawyer in Kolkata Does

• examines the cheque, the return memo and the underlying transaction to confirm that every ingredient of Section 138 is satisfied before proceedings begin;
• computes the cause of action precisely and files the complaint within the month allowed by Section 142(1)(b), before the correct court under Section 142(2);
• prepares the Section 145(1) affidavit with the lists of documents and witnesses, and applies for interim compensation under Section 143A and for service of process under Section 144;
• conducts the summary trial on the presumption under Section 139 and the evidence of the debt, and negotiates and records a compounding settlement under Section 147, ensuring payment is received before the acquittal is recorded;
• for the drawer — advises on the reply to the notice, builds the defence on the preponderance of probabilities, resists the Section 143A application, and explores settlement where the liability is admitted.

Frequently Asked Questions