Chapter XVII of the Negotiable Instruments (N.I.) Act, 1881
Of Penalities In Case Of Dishonour Of Certain Cheques For Insufficiency Of Funds In The Accounts
Section – 138 – Dishonour of cheque for insufficiency, etc., of funds in the account –
Where any cheque drawn by a person on an account maintained b him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless –
(a) that cheque has been presented to the bank within a period of six months from the date on which it is drwan or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of maoney to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation – For the purpose of this section, “debt of other liability” means a legally enforceable debt or other liability.
In Makwana Mangaldas Tulsidas v. The State Of Gujarat And Anr. the Honourable Supreme Court in one of its order held that Dishonour of cheque, which originally gave cause of action to file a civil suit, was criminalised in the year 1988, with the insertion of Chapter XVII in the Negotiable Instrument Act, 1881. Cheque dishonour, followed by default in payment after a demand notice, became punishable under Section 138 with imprisonment or fine which may extend to twice the amount of the cheque or both. The legislative intent behind the above-mentioned amendment was to ensure faith in the efficacy of banking operations and credibility in transacting business on cheques. It was to provide a strong criminal remedy in order to deter the high incidence of dishonour of cheques and ensure compensation to the complainant. Subsequent amendments in the Act and the pronouncements of this Court reflect that it was always perceived that these cases would be disposed off speedily so as to preserve the object of criminalisation of the act. Despite many changes brought through legislative amendments and various decisions of this court mandating speedy trial and disposal of these cases, the Trial Courts are filled with large number of pendency of these cases. A plain reading of Chapter XVII of the N.I. Act, 1881 and the judgments of this Court in Indian Bank Association & others v. Union of India and ors., (2014) 5 SCC 590 and Meters and Instruments Private Limited and anr. v. Kanchan Mehta, (2018) 1 SCC 560 would show the following mandates with regard to the expeditious trial of cases of this nature:
(a) The trial of cases relating to Section 138 of the Act must be with nature of Summary Trial unless reasons call for Summons Trial, which is always exceptional.
(b) The evidence of the complainant must be conducted within three months of assigning the case.
(c) Endeavour must be made to conclude the trial within six months from the date of filing of the complaint.
(d) The Trial, as far as practicable, must be held on a day to day basis unless reasons exist to do otherwise.