INTRODUCTION Advent of cheques in the market have given a new dimension to the commercial and corporate world, its

time when people have preferred to carry and execute a small piece of paper called cheque than carrying the currency worth the value of cheque. Dealings in cheques are vital and important not only for banking purposes but also for the commerce and industry and the economy of the country. But pursuant to the rise in dealings with cheques, the practice of giving cheques without any intention of honoring them has also risen. In case a cheque is issued by a person in liquidation of his debt or liability, and same is dishonoured, then it not only creates a bad taste, but can also result in harassment and can cause damages to the person to whom the cheque may have been issued. Since business activities have increased, the attempt to commit crimes and indulge in activities for making easy money have also increased. Thus besides civil law, an important development both in internal and external trade is the growth of crimes and it has been found that the banking transactions and banking business is every day being confronted with criminal actions and this has led to an increase in the number of criminal cases relating to or concerned with the banking transactions. In India, cheques are governed by the Negotiable Instruments Act, 1881, which is largely a codification of the English Law on the subject. Before 1988 there was no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision to punish them in the event of such cheque not being honoured by their bankers and returned unpaid. Although, on dishonour of cheques there is a civil liability accrued, however in reality the processes to seek civil justice becomes notoriously dilatory and recover by way of a civil suit takes an inordinately long time. To ensure prompt remedy against defaulters and to ensure credibility of the holders of the negotiable instrument a criminal remedy of penalty was inserted in Negotiable Instruments Act, 1881 in form of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 which were further modified by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002[3]. Of the ten sections comprising chapter XVII of the Act, section 138 creates statutory offence in the matter of dishonour of cheques on the ground of insufficiency of funds in the account maintained by a person with the banker. Section 138 of the Negotiable Instruments Act, 1881 1

is a penal provision wherein if a person draws a cheque on an account maintained by 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, on the ground 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. Section 138 of the Act can be said to be falling in the acts which are not criminal in real sense, but are acts which in public interest are prohibited under the penalty or those where although the proceeding may be in criminal form, they are in reality only a summary mode of enforcing a civil right. Normally in criminal law existence of guilty intent is an essential ingredient of a crime. However the Legislature can always create an offence of absolute liability or strict liability where mens rea is not at all necessary.

DISHONOUR OF CHEQUES MEANING Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as "a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand". "Dishonour" means "to refuse or neglect to accept or pay when duly presented for payment of a bill of exchange or a promissory note or draft on a banker.1 Blacks Law Dictionary2 defines the term "Dishonour" as "to refuse to accept or pay a draft or to pay a promissory note when duly presented. An instrument is dishonored when a necessary or optional presentment is duly made and due acceptance or payment is refused, or cannot be obtained within the prescribed time, or in case of bank collections, the instrument is reasonably returned by the midnight deadline; Reference to the term 'dishonour' has been made in Section 91 and Section 92 of the Negotiable Instruments Act, 1881. Section 91 - Dishonor by non- acceptance "A bill of exchange is said to be dishonored by non-acceptance when the drawee, or one of several drawee not being partners, makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted. Where the drawee is incompetent to contract, or the acceptance is qualified the bill may be treated as dishonored". Section 92- Dishonour by non-payment "A promissory note, bill of exchange or cheque is said to be dishonored by non-payment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same".

Thus if on presentation the banker does not pay, then dishonour takes place and the holder acquires at once the right of recourse against the drawer and the other parties on the cheque. Dishonour of cheque has been considered as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. According to Section 138 whenever any cheque for discharge of any legally enforceable debt or other liability is dishonoured by the bank for want of funds and the payment is not made by the drawer despite a legal notice of demand, it shall be deemed to be criminal offence. DISHONOUR OF CHEQUE - SECTION 138 Section 138 of the Negotiable Instruments Act, 1881 Dishonour of cheques is considered as an offence under Section 138 of the Negotiable Instruments Act, 1881. Section 138 deals with Dishonour of cheque for insufficiency of funds in the accounts. The Section reads as follows: "Where any cheque drawn by a person on an account maintained by 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 provisions of this Act, be punished with imprisonment for a term which may extend to two year, 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) The cheque has been presented to the bank within a period of six months from the date on which it is drawn 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 a 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 cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the said amount of money 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". Object of Section 138 The object of Section 138 is to make drawer of the cheque subject to penalty when the cheque bounces on the ground of insufficient funds. The plain reading of Section 138 of the Negotiable Instruments Act makes it clear that, the words, "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" have been specifically used. It would, therefore, mean that only two contingencies are contemplated and as such, the words-"either-or" have been used. It is, therefore, clear that the cheque should be dishonoured either for the insufficiency of the amount or, because it exceeds the amount arranged to be paid from that account. No third contingency or eventuality has been contemplated and the specific clear wording of Section 138 eliminates any third contingency than mentioned in the Section itself. The cheques can be dishonoured for many other reasons and there may be so many eventualities in which the payee is denied payment by the bank, the reasons such as mentioning the date incorrectly or some corrections not initialed or the difference in between the amount mentioned in figures and words, are certain other contingencies in which the cheques will be definitely dishonoured and would be returned as unpaid, however it is not in respect of any of these contingencies that he dishonour of a cheques has been made penal under Section 138 of the said Act. In Om Prakash Maniyar v. Swati Bhide3, the submissions on behalf of the petitioners to the effect that the dishonour because of the closure of the account should be held as penal, was not accepted by the court. Section 138 was introduced with a laudable public policy behind it. It is intended to prevent or curtail a mischief which is likely to affect financial transactions, and thereby trade and business and ultimately, economy of the country. .

Ingredients and requirements of the penal provisions Section 138 creates an offence for which the mental elements are not necessary. It is enough if a cheque is drawn by the accused on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for discharge in whole or in part, of any debt or other liability due. Therefore, whenever the cheques are on account of insufficiency of funds or reasons referable to the drawers liability to provide for funds, the provisions of section 138 of the Act would be attracted, provided the following conditions are satisfied: 1. Cheque drawn on a bank account Section 138 requires, that a cheque, to be caught by the section, should be 'drawn by a person on an account maintained by him with the banker for payment of any amount of money'. Existence of a "live account" at the time of issue of cheque is a condition precedent for attracting penal liability for the offence under this section. The cheque is returned by the bank unpaid either because of the insufficiency of the amount or, because it exceeds the amount arranged to be paid from that account. The words "that account" in the section denote to the account in respect of which the cheque was drawn. No doubt if any person manages to issue a cheque without an account with the bank concerned its consequences would not snowball into the offence described under section 138 of the Act. For the offence under section 138 of the Act there must have been an account maintained by the drawer at the time of the cheque was drawn. 2. Issue of Cheque in discharge of a debt or liability The cheque unpaid by the bank must have been issued in discharge of a debt or other liability wholly or in part. Where a cheque is issued not for the purposes of discharge of any debt or other liability, the maker of the cheque is not liable for prosecution under section 138 of the Act. A cheque given as a gift or for any other reasons and not for the satisfaction of any debt or other liability, partly or wholly, even if it is returned unpaid will not meet the penal consequences. If the above conditions are fulfilled, irrespective of the mental conditions of the drawer he shall be deemed to have committed an offence, provided the other four requisites are fulfilled: 7

a) Presentation of the cheque within six months or within the period of its validity The cheque must have been presented to the bank within a period of six months from the date on which it is drawn or its period of validity, whichever is earlier. Thus if a cheque is valid for three months and is presented to the bank within a period of six months the provisions of this section shall not be attracted. However if the period of validity of the cheque is not specified or prescribed the cheque is presented within six months from the date the cause of action can arise. The six months are taken from the date the cheque was drawn. b) Return of the cheque unpaid for reason of insufficiency of funds The cheque must be returned either because the money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the arrangement made to be paid from that account by an agreement with the bank. c) Issue of the notice of dishonour demanding payment within thirty days of receipt of information as to dishonour of the cheque. The payee or the holder in due course of the cheque has to give a notice in writing making a demand for payment of the said amount of money to the drawer of the cheque. Such notice must be given within 30 days of information from the bank regarding the return of cheque as unpaid. d) Failure of the drawer to make the payment within fifteen days of the receipt of the payment After the receipt of the above notice the drawer of the cheque has to make payment of said amount of money to the payee or to the holder in due course of the cheque within 15 days of the receipt of the notice. If the payment is not made after the receipt of the notice within stipulated time, a cause of action for initiating criminal proceedings under this section will arise.

Scope and applicability of Section 138: According to the Section 138 whenever any cheque for discharge of any legally enforceable debt or other liability is dishonoured by the bank for want of funds and the payment is not made by the drawer despite a legal notice of demand, it shall be deemed to be a criminal offence. Where a cheque is issued not for the purpose of discharge of any debt or other liability, the maker of the cheque is not liable for prosecution. For example, if the cheque is given by way of a gift or present and if it is dishonoured by the bank, the maker of the cheque is not liable for prosecution.

Notice
Notice is a very important stage. It is the non-payment of dishonoured cheque within fifteen days from the receipt of the notice that constitutes an offence. Issuing of a cheque and its dishonour is not an offence. The offence is when the drawer receives a notice from the payee and he fails to pay the dishonoured cheque amount within the grace period of 15 days that constitute an offence. Any demand made after the dishonour of cheque will constitute a notice. It is not necessary that the notice should be sent by Registered Post alone, it could be sent even by fax. It is not necessary that the notice should be in any particular form or style. What is essential is that there should be a demand to pay the dishonoured cheque amount. It is held by the Supreme Court that while the cheque could be presented at any number of times however there shall be only one Notice. The following case may be noted on the subject.Sadanandan Bhadran v. Madhavan Sunil Kumar (1998 (4) SCALE SC Complaint U/s. 138- Maintainability - conditions precedent to applicability of sec. 138 - A cheque can be presented any number of times during the period of its validity- Whether dishonour of the cheque on each occasion of its presentation gives rise to a fresh cause of action within the meaning of Sec. 142(b) of the act - Held No. - A competent court can take cognizance of a written complaint of an offence u/s.138 if it is made within one month of the date on which the cause of action arises under clause c of Sec.142 gives it is a restrictive meaning - it is the failure to make payment within 15 days from date of receipt of notice which will give rise to cause of action - Cause of action within meaning of Sec. 142 (c) arises and can arise only once - impediments which negate concept of successive causes of action-

Held.:On each presentation of the cheque and its dishonour a fresh right and not cause of action - accrues in his favour. He may, therefore, without taking pre-emptory action in exercise of his right under clause (b) of Section 138, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque. But, once he gives a notice under clause (b) of Sec. 138 he forfeits such right for in case of failure of the drawer to pay the money within the stipulated time he would be liable for the offence and the cause of action for filing the complaint will arise. Needless to say, the period of one month for filing the complaint will be reckoned from the day immediately following the day on which the period of fifteen days from the date of the receipt of the notice by the drawer expires. No action taken on the first notice - cheque presented again - second notice sent - on failure to receive money case filed on the basis of second notice - Acquittal on ground that there could not be more than one cause of action in respect of a single cheque - sustainable Appellant had earlier taken recourse to clause (b) of Sec. 138 but did not avail of cause of action that arose in his favour u/s. 142(b) of the Act. Approved: S.K.D. Lakshmanan Fireworks Industries v. K.V.Sivarama Kirshnan (1995 Cr.L.J. 1384)

Overruled: Kumaresan vs. Ammerappa (1991 (1) K.L.T. 893). Therefore it is essential that the notice should be perfect and in conformity with law. A mistake in the notice will be fatal. It is common mistake committed by most of the payees that as soon as the cheque is returned unpaid to write a letter to the drawer threatening him that in case he does not pay against the dishonoured cheque legal action will be taken etc. Such letter will also be construed as a notice. Since a second notice cannot now be issued on the basis of subsequent dishonour of cheque, due care and caution should be taken while sending the notice on dishonour of cheque. As stated already that non-payment of cheque amount within the grace period of fifteen days from the date of receipt of the notice constitutes an offence and therefore liable to prosecuted for the criminal offence so committed.

Limitation
These being a special legislation certain time limits have been laid down and they should be strictly followed. Any lapse in adhering to the schedule, shall take away a cause of action under Sec. 138. The time limits placed cannot be condoned by the Courts. Therefore the question of making an application for condonation of delay as in the case of civil does not 10

arise at all under the said section. What then are the limitations one has to keep in one mind and follow them strictly to prosecute the drawer of cheque who has failed to pay the said sum within fifteen days from the receipt of the notice? Cheque should be presented to the bank for encashment within its validity period. Within fifteen days from the receipt of return memo indicating reason of dishonour, a notice should be sent demanding the amount of dishonoured cheque. If the drawer does not pay the amount of dishonoured cheque within the grace period, a complaint thereafter should be filed within one month in the relevant court of Metropolitan Magistrate/Judicial Magistrate as the case may be, having jurisdiction. On the subject, Supreme Court in its following judgment was laid down:

Saketh India Ltd. v. India Securities Ltd. (1999 96 SC 329 SC)=1999 Cri LJ 1822 (SC)=Vol 3 DCTC 647 (SC)- decided on 10-3-1999. Limitation for filing complaint limit defined as from a particular day - first day to be excluded. Period of 15 days from the date of receipt of notice ending on 14-10-1995 - 30 days period begins on 15-10-1995 Complaint filed on1511-1995-within time. Held on the facts that the period of limitation of 15 days expired on 14-10-1995. So the cause of action for filing the complaint would arise from 15-10-1995. That day (15 Oct) was to be excluded for counting the period of one month - The Complaint filed on 15-11-1995 was in time) 1972 (1) SCC 639 (Haru Das Gupta v. St. of West Bengal) relied.

Penalty
On the subject of penalty, the following Supreme Court case is worth noting: 1999 SO.L. Case No. 590 K. Bhaskaran v. Sankaran Vaidhyan Balan. Penalty is restricted to Rs.5, 000/besides imprisonment; but magistrate can make liberal use of Sec. 357(3) of the Code. A Magistrate can award any sum as compensation to alleviate the grievance of the complainant by making resort to Sec. 357(3) of the Code. It is well to remember that this Court has emphasized the need for making liberal use of that provision. No limit is mentioned in the sub-section and therefore, a magistrate can award any sum as compensation. Of course while fixing the quantum of such compensation the Magistrate has to consider what would be the reasonable amount of compensation payable to the complainant. Thus, even if the trial was before a court of magistrate of first class in respect of a cheque which covers an amount

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exceeding Rs, 5,000/- the court has power to award compensation to be aid to the complainant. Trial held by Magistrate 1st Class who acquitted the accused; In appeal HC convicted the accused and sentenced him to 6 months imprisonment and fine of Rs. One lac. HC could not impose fine exceeding Rs.5000 which the Magistrate could impose under Sec. 29(2) Cr.P.C. High Court could not exercise its own power in imposing the fine.

Case Laws on Dishonor of Cheques:

1) Account Closed: Account closed was held to be an offence u/s 138 of the Negotiable Instruments Act and the accused cannot escape liability of the offence. 2) Issuance of Post-dated cheque & Closing of Account: Where the accused issued the post dated cheque and had also closed his account in the bank ,in such a case he is liable to be prosecuted u/s 138 of the N.I. Act . 3) Incomplete Signature : Dishonour of cheque because of incomplete signature on cheque of drawer. Held: Did not attract section 138 ( 2002(7) SCC 531. 4) Cheque Issued by Partner: Complaint u/s 138 of the N.I. Act against firm and its partners . No allegation in the complaint that the partner was in charge of and was responsible to the affairs of the firm-Held not maintainable against the partner. 5) Offences committed by a Company: Where an offence is committed by a Company ,either Company can be prosecuted or the person in charge of the Company can be prosecuted or both of them can be prosecuted. (1198 (2) Crimes 409) 6) Discharge of Fathers Debt: Father of the accused but not the accused owes a debt to the complainant. Complainant obtained cheque from the accused by force. Cheque was not issued in discharge of fathers debt. Accused cannot be prosecuted.(2003(6) AID(NOC)64) 7) Notice once issued, cheque cannot be presented for collection: It is settled that the payee is free to present the cheque repeatedly within its period of validity any number of times, but once notice has been issued, the drawee to avail the cause of action arising

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thereupon and file the complaint within the stipulated period.( 2002 (1) ALD( Crl)397 (AP)(1998 SCC(Crt) 1471 followed. 8) Omission of ch No. in Notice: The number on the cheque has no relevance in a proceeding u/s 138 of the N.I. Act. Sec 5 and sec.6 of the Act does not specify that the cheque or bill of exchange should bear a number. There is also nothing in section 138 of the Act to show that the number of the dishonored cheque also should be mentioned in the statutory notice or in complaint , (2004 Cr.LJ 712 AP) 9) Issue of Second Notice: Cheque issued by the respondent was dishonored presented again-again dishonoured. The notice issued by the complainant at the time of first dishonor was not served on respondent/accused , but the fact remains that the notice has been issued for second time. Therefore, cause of action stood terminated. (2003 (117) Company Cases (Madras) 10) Accused refused to receive Notice: Where accused ha refused to receive notice, even then compliant to be filed after expiry of 15 days from the date of receipt of notice. In case of refusal to receive notice it amounts to acceptance of notice and date of refusal to receive such notice shall be treated as the date of receipt of such notice. In such case the period of 15 days to be computed from date of refusal (AIR 1996 SC 330 AIR 1989 SC 630) 11) Evading Notice: Where accused has evaded service of notice relating to dishonour, it will amount to constructive notice. (2001 (2)ALD (Crt) (Mad) 137) 12) Civil Suit and Criminal Complaint : Filing of civil suit and filing of criminal compliant are not alternative remedies and they are different type of rights.(19994 Criminal Laws Journal 887). The mere pendency of a civil dispute will not oust the jurisdiction of a criminal court from taking cognizance of an offence on a compliant u/s 138 of N.I.Act (1998 Crt. LJ559-1198(2) ALD (Crt) 300 Guj.) 13) Section 138 of N.I.Act & Section 420 of I.P.C.: When the cheque was dishonored for insufficiency of funds such person issuing a cheque is liable for offence of section 138 of N.I.Act but not u/s 420 of IPC (1989 Cuttack law times 719) 14) Time Barred debt : Where cheque itself was issued for a time-barred debt there cannot be conviction under provisions (1997 (2) Crimes 658). Where the loan was taken in 1985 and 13

cheque was issued in 1990 and the loan is barred by limitation, drawer of cheque cannot be prosecuted.( 1997 (1) ALT(Cri)509. 15) Refer to drawer: The bank endorsement refer to drawer also may fall within the ambit of provisions of section 138 of the N.I.Act-(1194 Crt.LJ 2874, Crt.LJ3828,1994 (1) Crimes 606). 16) Dismissal of complaint for default and restoration: Where the complaint is dismissed for default in restoration application, the complainant must assign a valid reason as to what prevented him from coming to the court by the time when the case was called ( 1998 BC 63 (AP). For securing the ends of justice ,the Magistrate is empowered to restore the complaint filed u/s 138 of the Act (2001 Crt.LJ2821 Kant) 17) Dismissal of complaint and appeal thereof: Dismissing complaint due to nonappearance of complainant resulting in acquittal of accused. Revision is not maintainable and only appeal lies to High Court u/s 378 of Cr.Pc (11 2003 CCr 387 HP) 18) Default of fine u/s 138 of N.I.Act: Sentence of imprisonment in default of payment of fine-imposition of imprisonment and challenge thereof. Section 138 does not provide for such sentence. Hence sentence in default of fine set aside. (200 6 (9) SCC 784).

PROCEEDINGS AGAINST DISHONOUR OF CHEQUE Prior to the incorporation of chapter XVII in the Negotiable Instruments Act in 1988, to deter and penalize the issue of worthless cheques, it was only under the provisions of the Indian penal Code 1860 (IPC) that the drawer of a cheque could be criminally prosecuted if it could be shown that he cheated someone by issuing the cheque. Even after the introduction of the specific provisions in the Negotiable Instruments Act, a drawer can be prosecuted under IPC for cheating, but he cannot be prosecuted and punished for the same offence under both the enactments. Mens rea or dishonest intention must be established to prove cheating, but it is not an essential element of an offence under section 138 of the Negotiable Instruments Act.

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Criminal Proceeding Chapter XVII of the Negotiable Instruments Act Chapter XVII inserted by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 provides for penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts or for the reason that the amount exceeds the arrangement made by the drawer. As per the penal provisions under the Act, the drawer, committing an offence under Section 138, is liable to be punished with imprisonment for a term which may extend to two years, or fine which may extend to twice the amount of the cheque or both. Summary Proceeding - Order 37 of the Code of Civil Procedure: When a cheque is dishonoured, the holder or payee of the cheque can sue the drawer or endorser for the recovery of amount alongwith interest. Besides a civil suit for recovery of the amount, proceeding in a summary manner can be initiated under Order 37 of the Code of Civil Procedure. The advantage of suing under chapter XXXVII of Civil Procedure Code is that the defendant is not allowed in such cases to defend the suit without leave obtained from Court and it is provided further that a decree passed under the said Order, may be executed forthwith. If no such leave is applied for or granted ,the allegations in the plaint shall be deemed to be admitted, and the plaintiff is entitled to a decree for the principal sum and also the interest as calculated under Section 9 and 80 of the Negotiable Instruments Act, 1881. Criminal prosecution under section 138 does not bar a civil action against the drawer on the dishonoured cheque. In Medical Chemicals & Pharma P Ltd v. Biological E Ltd., the Supreme Court said: "Both criminal law and civil law remedy can be pursued in diverse situations. As a matter of fact, "they are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence". In addition to the remedies available under the Act the payee can also resort to remedies available under Civil Procedure Code and Consumer Protection Act. In Pankajbhai Nagjibhai Patel v. State, it has been held that in view of the limit of fine as prescribed in Section 29(2), Code of Criminal Procedure, the Magistrate who thinks it fit that the complainant must be compensated for loss can resort to section 357(3) of the code and can award compensation to the complainant for which no limit is prescribed in Section 357(3). The power of Courts to award compensation is not ancillary to other sentences but it is in addition thereto. 15

CASE STUDIES

CASE STUDY 1: Any complaint made prematurely, that is before the expiration of the period of fifteen days within which the defaulting drawer is allowed to pay, is liable to be quashed. Any complaint, in order to be filed, must be made within a period stated as one month in Sec. 142 of the Act for filing complaint refers to the English calendar month and not to thirty days vide Sec. 3(35) General Clauses Act, 1897. Now let us look at the following case from this point of view. D Ramamoorthi v/s K J Duraiswamy ( [1998] 93 Comp Cas 538) In the above mentioned case, D Ramamoorthi v/s K J Duraiswamy, it so happened that a cheque was first presented to and returned unpaid by the drawee bank on 21 st August, 1992. It was re-presented to the bank and again dishonoured on 19th October, 1992. The payees statutory notice was received by the drawer on 28 th October, 1992, and on non payment by the drawer, the payee filed a complaint under Sec. 138 under the Act on 1st December, 1992. The complaint was returned by the magistrate for rectifying an omission to mention the age of the accused in the complaint. The rectified complaint was re-presented to the magistrate on 14th September, 1993. It was held that the material date was that on which the complaint was initially filed, and that, once a complaint is filed, it is deemed to be in the custody of the court, although it is returned for rectification of a defect noticed therein.

The Honourable Court said: Since the notice of the demand was received by the drawer on 28th October, 1992, it should have been complied with on or before 13th November, 1992 and that the cause of action arose on and from 14 th November, 1992 and the complaint should have been filed within one month from 13 th November, 1992.

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CASE STUDY 2 :

Altaf Ahmed v/s Minerals and Metal Trading Corp. ([1997] 89 Comp. Cas 837) In the above mentioned case, Altaf Ahmed v/s Minerals and Metal Trading Corp., it so happened that in an action under Sec. 138 of the Act, the court awarded sentence of imprisonment to the drawer for non payment of dues, and the drawer petitioned for waiver of award stating that the payee was in possession of sufficient collateral security by which to recover his dues through a civil action. The Hon. Court rejected the petition stating that Sec. 138 of the Act envisages criminal, as distinct from civil, action against an errant drawer, and provides for levy of a fine on the drawer up to twice the amount of the dishonoured cheque, with or without a sentence of imprisonment of the drawer up to one year, but does not speak of payment of compensation to the complainant.

However, Sec. 357 of Cr. PC says 1)When a court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing the judgment, order the whole or any part of the fine recovered to be applied:a) in defraying the expenses properly incurred in the prosecution; b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the court, recoverable by such person in a civil court.

2) At the time of awarding compensation in any subsequent civil suit relating to the same matter, the Court shall take into account any sum paid or recovered as compensation under this section. The Supreme Court emphasized the importance of Sub-section 3 of the above section of the code and lamented the ignorance of its objects on the part of the courts.

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CONCLUSION
The law relating to Negotiable instruments is the law of the commercial world which was enacted to facilitate the activities in trade and commerce, making provision of giving sanctity to the instrument of credit which would be deemed convertible into money and easily passable from one person to another. In the absence of such instruments, the trade and commerce activities were likely to be adversely affected as it was not practical for the trading community to carry on with it the bulk of currency in force. The main object of the Act is to legalise the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. Chapter XVII was inserted in the Act 1988 with a view to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. However the chapter is not comprehensive and lacks to cover the various aspects of the commercial transactions especially in view of the emerging ways of payment through the Internet and other electronic means. Section 138 also does not specifically cover the aspects such as where the payment has been stopped by the drawer or where the account has been closed prior to the endorsement of the cheque. These provisions no doubt have served their purpose but they could be more elaborate in solving the dispute rather than merely relying on the Court judgments. Though insertion of the penal provisions have helped to curtail the issue of cheque lightheartedly or in a playful manner or with a dishonest intention and the trading community now feels more secured in receiving the payment through cheques. However there being no provision for recovery of the amount covered under the dishonoured cheque, in a case where accused is convicted under section 138 and the accused has served the sentence but, unable to deposit amount of fine, the only option left with the complainant is to file civil suit. The provisions of the Act do not permit any other alternative method of realization of the amount due to the complainant on the cheque being dishonored for the reasons of "insufficient fund" in the drawers account. However, the processes to seek civil justice is notoriously dilatory and recover by way of a civil suit may take inordinately long time therefore if the Government of India could establish a tribunal to deal with the dishonour of cheques and the liability arising therefrom, it could

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make the process of recovery of damages faster for the aggrieved party. For example, the Debts Recovery Tribunals have been established by the Government of India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of debts due to banks and financial institutions. Establishment of a similar tribunal to deal with the cases of dishonour of cheques could perhaps provide a faster relief to the aggrieved party.

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Bibilography
Books:
Bhashyam & Adigas. S K Awasthi.

Websites: www.google.com www.vakilno1.com www.scribd.com

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