Tag Archives: dishonour

Offence Under Section 138 Negotiable Instrument Act – Jurisdiction

(1)An offence under Section 138 of the Negotiable Instrument Act is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.
(2)Cognizance of any such offence is however forbidden under section 142 of the Negotiable Instrument Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.
(3)The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if —
(a)the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue.
(b)If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonor of the cheque, and
(c)If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.
(4)The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.
(5)The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant.
(6)Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.
(7)The general rule stipulated under Section 177 CrPC applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the court within whose jurisdiction the dishonor takes place except in situations where the offence of dichonour of the cheque punishable under Section 138 is committed alongwith other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof. Dashrath Rupsingh Rathod v. State of Maharashtra, 2014 (86) ACC 882.

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Scope of Section 147 of the Negotiable Instruments Act

The Section 147 of Negotiable Instruments Act, 1881 reads as under:

47. Offences to be compoundable.—Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.”.

In a recent decision of the Supreme Court – J.K. Industries Ltd.and ohers v. Amarlal V. Jumani and another, reported in (2012) 3 SCC 255 : (2012) 2 SCC (Cri) 125, it was held as under:

“Section 147 of the N.I. Act came by way of an amendment. From the Statement of Objects and Reasons of the Negotiable Instruments (Amendment) Bill, 2001, which ultimately became Act 55 of 2002, these amendments were introduced to deal with large number of cases which were pending under the N.I. Act in various courts in the country. Considering the said pendency, a Working group was constituted to review Section 138 of the N.I. Act and make recommendations about changes to deal with such pendency. Pursuant to the recommendations of the Working Group, the aforesaid Bill was introduced in Parliament and one of the amendments introduced was “to make offences under the Act compoundable”.

Non-compoundable offences have become Compoundable

It is clear from a perusal of Statement of Objects and Reasons that offence under the N.I. Act which was previously non-compoundable in view of Section 320, sub-section (9) of the Code has now become compoundable. That does not mean that the effect of Section 147 is to obliterate all statutory provisions of Section 320 of the Code relating to the mode and manner of compounding of an offence. Section 147 will only override Section 320(9) of the Code insofar as offence under Section 147 of the N.I. Act is concerned.

Therefore, Section 147 of the N.I. Act must be reasonably construed to mean that as a result of the said Section, the offences under the N.I. Act are made compoundable, but the main principle of such compounding, namely, the consent of the person aggrieved or the person injured or the complainant cannot be wished away nor can the same be substituted by virtue of Section 147 of the N.I. Act.     

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