As per Section 138 of Negotiable Instruments Act 1881, Cheque drawn for payment for discharge of any debt or other liability, is returned by the bank unpaid due to insufficient funds or exceeding the arrangement (in case of CC/OD account), such person is deemed to have committed an offence.
Consqueces of dishonour of cheque or Punishment for dishonor of cheque
Imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.
Read: Difference between promissory note and bill of exchange
Conditions for punishment under Section 138
No court can take cognizance of any offence 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;
Complaint for dishonor of cheque:
Complaint for dishonor of cheques is required to be made in the court of a metropolitan magistrate or a judicial magistrate of first class within one month of the date of cause of action i.e., one month from lapse of 15 days of giving notice for demand of amount of cheque.
If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
A person shall not be liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
Where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
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