The Negotiable Instruments Act 1881

Before the enactment of negotiable instruments Act 1881, dishonour of cheque gave cause of action to file a civil suit, there was no effective penal provision to restrain/ punish the person for issuing a check without maintaining sufficient funds in their bank account. Based on the recommendations of the banking commission the government of India introduced negotiable instrument act, providing a criminal remedy of penalty for dishonour of cheques for reason of insufficient funds in the account of drawer. If the drawer is proven guilty, he will be punished with imprisonment for a term of one year or with fine which may extend to thrice the amount of the cheque.

• Object of negotiable instrument act

The object of enacting NI ACT was to deter drawers from issuing checks without having sufficient balance in their account to honour the same and to encourage the usage of checks by making the drawer liable for penalties in case of cheque bounce.

• Cognizance of offencest

The court shall take cognizance of the offence on the written complaint given by the payee or holder in due course of the cheque. Such complaint must be made within one month of the date on which the cause of action arises. In case the payee or the holder in due course couldn’t file the case within the stipulated time, he must convince the court with a valid reason for the delay in filing the complaint.

• Procedure for filing the case

1. The first step is that the cheque has to be presented in the bank with in 3 months from the date it is drawn.
2. The payee or the holder in due course of the cheque must make a demand for the payment of the cheque by giving a notice in writing within 30 days of the receipt of cheque return memo from the bank.
3. If the drawer fails to make the payment of the said amount to the payee or the holder in due course within 15 days of the receipt of the notice, the payee can file a case in the court.

•Jurisdiction

The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction----

Where the payee or the holder in due course maintain his account.

• Mode of service of summons

1. On the written complaint given by the payee or holder in due course the court shall register a case and issue summons to the drawer at the place where the drawer ordinally reside or carry on his business.
2. Court summons shall be sent by speed post or by such courier services as are approved by a court of session.
3. The courts shall also consider to take the assistance of the police to serve summons or warrants on the drawer/accused.

•On appearance of the drawer/accused

1. Then the drawer/accused appear before the court, the court shall direct the accused to furnish bail bond, to ensure his appearance during trial.
2. The magistrate shall furnish the copies of complaint and documents to the accused.
3. A summary trial shall be conducted.