The Correct Procedure to File a Complaint under Section 138 of the Negotiable Instruments Act, 1881

The Correct Procedure to File a Complaint under Section 138 of the Negotiable Instruments Act, 1881

The Negotiable Instruments Act, 1881 (NI Act), is a vital piece of legislation that governs promissory notes, bills of exchange, and cheques. Section 138 of the Act specifically deals with the dishonor of cheques due to insufficient funds or other reasons and provides a legal remedy to ensure accountability. Let’s delve into the correct procedure for filing a complaint under this section and understand the powers conferred by the Act.

Step 1: Cause of Action

A complaint under Section 138 arises when:

• A cheque is drawn by the drawer for the discharge of a legally enforceable debt or liability.
• The cheque is presented to the bank within its validity period (usually 3 months).
• The cheque is dishonored due to insufficient funds or other reasons.

Step 2: Sending a Legal Notice

The payee (complainant) must send a written legal notice to the drawer within 30 days from the date of cheque dishonor, demanding the payment of the cheque amount.

The notice should:

• Clearly mention the cheque details — number, date, amount, and reason for dishonor.
• Demand payment within 15 days from the receipt of the notice.
• Be sent via registered post, speed post, or other reliable methods to ensure proof of delivery.

Step 3: Filing the Complaint

If the drawer fails to make the payment within 15 days from receiving the notice, the complainant can file a criminal complaint before the Magistrate’s court within 30 days from the expiry of the notice period.

The complaint must include:

• Copy of the dishonored cheque.
• Copy of the bank’s return memo.
• Copy of the legal notice and proof of dispatch.
• Affidavit or statement verifying the facts.

Step 4: Court Proceedings

• The Magistrate examines the complaint and, if satisfied, issues summons to the accused.
• The accused can contest the complaint, presenting defenses such as absence of liability or errors in the complaint.
• Upon proof of guilt, the court can impose punishment — imprisonment up to 2 years or fine up to twice the cheque amount, or both.

The Power of the NI Act

The NI Act empowers individuals and businesses by ensuring:

1. Legal Protection: It protects the payee from financial loss due to bounced cheques.
2. Speedy Justice: The Act mandates time-bound processes to avoid prolonged litigation.
3. Presumption of Liability: The Act assumes the cheque was issued for a lawful debt unless proven otherwise.
4. Compensation: Courts may award compensation to the complainant in addition to penalties.
5. Criminal Deterrent: The fear of imprisonment and heavy fines discourages cheque fraud.

Section 138 of the NI Act stands as a robust legal tool to uphold the credibility of cheque transactions in business and personal dealings. Following the correct procedure ensures a strong legal standing and maximizes the chances of recovering the due amount.

Have questions or need expert assistance in filing a Section 138 complaint? Feel free to contact me for personalized guidance!

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