Negotiable Instruments Act Section 138 — Dishonour of cheque for insufficiency, etc., of funds in the account
CHAPTER XVI O F I N T E R N A T I O N A L LA W
General
Summary
If a cheque you have written is returned unpaid by the bank because there is not enough money in your account, or because the amount goes beyond an agreed overdraft limit, you are treated as having committed an offence. The punishment can be imprisonment for up to two years, a fine of up to twice the cheque amount, or both. However, this offence applies only if the cheque was presented to the bank within six months of its date (or its validity period, whichever is earlier), you received a written demand for payment within thirty days of the bank’s return of the cheque, and you failed to pay the amount within fifteen days of receiving that notice. For this section, the debt or liability must be one that is legally enforceable.
Official Text
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 provision of this Act, be punished with imprisonment for 4[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) thecheque 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, 5[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 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.
Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.