Section 138 of the Negotiable Instruments Act, 1881 addresses the dishonour of a cheque for insufficiency of funds or where it exceeds the amount arranged to be paid, subject to the statutory ingredients and exceptions.
Key statutory elements
A Section 138 matter commonly requires examination of whether the cheque was drawn for discharge, wholly or partly, of a legally enforceable debt or liability; whether it was presented within its validity period; the bank return information; whether a written demand notice was issued within the statutory period; and whether payment was made within the time provided by the Act.
Important timelines
The Act contains strict timelines for presenting the cheque, issuing the written demand notice after information of dishonour, allowing the drawer the statutory period to make payment and filing a complaint after the cause of action arises. The exact date calculations should be made from the bank memo, delivery proof and other documents. The statutory text and any applicable amendments should always be consulted.
Documents to preserve
- Original cheque and bank return memo;
- invoice, loan record, agreement or other material showing the underlying transaction;
- copy of the demand notice and postal or courier proof;
- tracking record, delivery confirmation or returned envelope;
- account statements and relevant correspondence.
Defence and response considerations
Where a notice or complaint has been received, the drawer should preserve the complete transaction record, cheque-book or account information and communications with the payee. Possible issues depend on the underlying liability, authority to issue the cheque, service of notice, limitation and admissible evidence. A defence should be based on documents and facts rather than assumptions.
Official resources
Read the Negotiable Instruments Act, 1881 on India Code. Court case information and filing resources are available through Delhi District Courts and eCourts.
Time limits are fact-sensitive. This page is a general overview and should not be used to calculate a deadline in an individual case.