Section 142 of The Negotiable Instruments Act, 1881

Question asked on: 15/01/2017

I am a software engineer and working in Infosys. One of my colleagues met financial hardship and requested from me to give five lakh rupees. I remitted that amount in his bank account. I have evidence to prove that he took an unsecured loan from me. After seven months he gave me a cheque valued rupees three lakh. That cheque became dishonoured. I want to take legal action against him. What is the procedure for initiation of proceeding for the offence of cheque dishonour under section 138 of NI Act?

Advised by: Shivendra Pratap Singh,

Dishonour of cheque is an offence under section 138 of the Negotiable Instrument Act (NI Act). Section 142 of the NI Act provides a procedure and limitation period to file a complaint before the competent court. According to section 142, only Metropolitan Magistrate or Magistrate of the First Class may take cognisance of the offence. No other court has jurisdiction in respect of cheque bounce.

Hence, you have to file the complaint before the court mentioned above. Section 142 also provides that a complaint must register within thirty days from the date when the cause of action has arisen. The cause of action arises when the drawer (the person who signed the cheque) failed to pay the amount bearing in the cheque within fifteen days from the date of receiving the demand notice.

When the holder of the cheque receives information from the payee bank that the cheque has dishonoured, he has to send a demand notice to the drawer. The limitation period for sending that notice is thirty days from the date of receiving the information from the bank. He should append the dishonour memo of bank with the demand notice.

The purpose of demand notice is to give a chance to the drawer to pay the amount. He commits the offence punishable under section 138 NI Act when did not pay the amount within fifteen days.

In N. Venkata Sivaram Prasad vs Rajeshwary Construction 1996 Cri. L. J. 3409 (AP) complaint cannot be filed until the drawer of the cheque fails to make the payment to the payee within 15 days of the receipt of the demand notice.

In Rakesh Nemkumar Porwal vs Narayan Dhondu Joglekar 1993Cri L J 680 (Bom) the Bombay High Court held that 15 days’ time is granted to the drawer of the cheque to make payment and unless this period elapsed and no payment was made, the drawer was not liable for any offence under section 138 of the NI Act.

Section 142: Cognizance of offences:

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)-

(a) no court shall take cognisance of any crime punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint should be filed within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138:

Provided that the Court may take the cognisance of a complaint after the prescribed period if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

(c) 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.

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