Dishonour of Cheque - Offences by Companies - Section 141 of Negotiable Instruments Act 1881

Section 141 of Negotiable Instruments Act 1881 expressly extends to corporate bodies, including partnerships, companies or other association of individuals. The provisions of section 138, thus applies to drawers, who are either natural or corporate persons or association of persons. If a cheque falling within section 138 was drawn by or on behalf of corporate body not only the body corporate but also every person who at the time of drawing of the cheque was in charge of the body corporate, and was responsible to it for the conduct of its business shall be deemed to be guilty of the offence, unless the cheque was drawn without the person's knowledge or that he had exercised all due diligence to prevent the drawing of such cheques.

 

This section should apply to the Chief Executive of the body corporate, unless he can escape liability under the proviso. Whether any other person would be so liable would depend upon the particular circumstances of the case. If the cheque had been drawn with the consent or connivance, or the drawing is attributable to any neglect on the part of any director, manager, secretary or other officer of the drawer company, he shall be deemed guilty of the offence under section 138 of Negotiable Instruments Act 1881.
  
Dishonour of Cheque due to Insufficient Funds
The cheque must have returned un paid by the drawee bank either because of insufficiency of funds on the drawer's account in question or because the cheque exceeds the amount arranged to be paid from that account by an agreement made with the bank.
 
Section 138 of Negotiable Instruments Act 1881 would not apply to the cheque returned due to technical reasons such as discrepancy between the amounts stated in words and figures and irregularity of an endorsement.
 
Cheque must be presented before its becoming stale
It is necessary that the cheque has been presented before it became stale and invalid. It means the cheque should be presented within a period of six months from the date of which it is drawn or within the period of validity whichever is earlier.
 
Demand Notice and the drawers' failure to pay the amount
Within 15 days of receipt of information from the bank about the dishonor of the cheque the payee or holder in due course of the negotiable instrument, as the case may be must make a demand of the said amount from the drawer by giving a notice in writing. After receiving the notice, the drawer of the cheque should fail to make payment of the said amount of money to the payee or the holder in due course of the cheque, as the case may be, within 15 days of the receipt of the said notice.


Dishonour of cheque - An offence punishable under Negotiable Instruments Act - Punishment for dishonour of Cheque

When a cheque is dishounoured for insufficiency of funds in the drawer's account as stated in Section 138 of Negotiable Instruments Act, the drawer shall be deemed to have committed an offence. The drawer shall without prejudice to any other provision of this Act, be punishable with imprisonment for a term which may extend to two years or with fine which may extend to twice of the amount of the cheque or with both.
 
Cognizance of Offences - Section 142 of the Negotiable Instruments Act, 1881
Section 142 of Negotiable Instruments Act provides that the cognizance of an offence can be taken under section 138 upon a complaint in writing which must be made within one month by the payee or holder in due course from the date on which cause of action arises under clause (c) of the proviso to section 138. In the absence of proof of service of the notice of demand as required under section 138, the prosecution of the drawer is not permissible.
 
Where the case is to be filed
The case can be tired only by Metropolitan Magistrate or a judicial Magistrate of 1st Class. The Police officer has no jurisdiction to take the complaint.

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