PROCEDURE OF DISHONOUR OF CHEQUE

 Cheque Received
 Cheque Deposit
 Dishonour/Return of cheque:-
A person suffers a lot if a cheque issued in his favour is dishonoured due to the
insufficiency of funds in the account of the drawer of the cheque. To discourage
such dishonour, it has been made an offence by an amendment of the
Negotiable Instrument Act by the Banking, Public Financial Institution and
Negotiable Instrument Laws (Amendment) Act, 1988.
A new Chapter VII consisting of Sections 138 to 142 has been inserted in the
Negotiable Instrument Act.
Section 138 Of NI Act,1881:- makes the dishonour of cheque an offence.
The payee or holder in due course can have recourse against the drawer, who
may be held liable for the offence.

Here are some common reasons for dishonour of a cheque:-

1. Insufficient Funds: The account balance is insufficient to cover the cheque

amount.
2. Stop Payment: The drawer has instructed the bank to stop payment on the
cheque.
3. Account Closed: The account has been closed or dormant.
4. Invalid Signature: The signature on the cheque does not match the drawer's
signature on record.
5. Altered Cheque: The cheque has been altered or tampered with.
6. Stale Cheque: The cheque is out dated or has exceeded its validity period
(usually 3-6 months).
7. Frozen Account: The account is frozen due to legal or administrative reasons.
8. Drawer's Death: The drawer has passed away.
9. Bankruptcy: The drawer has been declared bankrupt.
10. Technical Errors: Errors in the cheque format, date, or amount.
11. Disputed Signature: The signature on the cheque is disputed or claimed to
be forged.
[Link] Limit: The cheque exceeds the overdraft limit.
These reasons may lead to the dishonour of a cheque, resulting in a
return memo from the bank and potential legal consequences under
Section 138 of the Negotiable Instruments Act, 1881.

 Step before filing a complaint under sec.138 of NI Act :-

Here are the steps to take before filing a complaint under Section 138 of the
Negotiable Instruments Act, 1881:-
1. Check the cheque: Verify the cheque details, amount, date, and drawer's
signature.
2. Present the cheque: Present the cheque to the bank for payment within a
reasonable time (typically 3-6 months).
3. Receive the return memo: Get the return memo from the bank stating
the reason for dishonor (e.g., "Insufficient Funds" or "Stop Payment").
4. Send a legal notice: Serve a legal notice on the drawer demanding
payment within 15 days (as per Section 138).
5. Wait for the notice period: Allow the 15-day notice period to expire.
6. Gather evidence: Collect proof of the dishonored cheque, return memo,
legal notice, and any correspondence.
7. Confirm the jurisdiction: Determine the court having jurisdiction over the
case.
8. Consult a lawyer: Seek legal advice to ensure compliance with the NI Act
and applicable rules.
9. Draft the complaint: Prepare the complaint as per the prescribed format.
[Link] the complaint: Sign and verify the complaint as true and correct.

 Resubmission of cheque:-
Resubmission of a cheque refers to the process of depositing a cheque that has
been previously returned or dishonoured by the bank. Here are the general
steps for resubmitting a cheque:-
i. Verify the reason: Confirm why the cheque was returned or dishonoured.
ii. Check funds: Ensure sufficient funds are available in the account to cover the
cheque amount.
iii. Re-submit: Deposit the cheque again, either in-person, through an ATM, or
via mobile banking.
iv. Provide explanation: If required, provide a letter or explanation for the re-
submission.
v. Wait for clearance: Allow the cheque to clear and the funds to be credited to
your account.
 Important:-
i. Resubmission is only possible within a specific timeframe (usually three
months) from the date on the cheque.
ii. If the cheque is dishonoured again, you may need to pursue legal action to
recover the amount.
iii. Some banks may have specific requirements or procedures for resubmitting
cheques, so it's best to check with your bank for their policies.

 Preaparing a complain under sec.138 of NI Act,1881:-

To file a complaint under Section 138 of the Negotiable Instruments Act, 1881,
follow these steps:-
1. Determine the jurisdiction: Identify the court having jurisdiction over the
case, typically the court where the cheque was presented or the drawer's
address.
2. Gather documents:
-Original cheque
- Return memo from the bank
- Proof of delivery of notice (registered post acknowledgment or courier
receipt)
- Copy of the legal notice sent to the drawer
- Any other relevant correspondence

3. Draft the complaint:

- Use the sample format I provided earlier as a guide
- Clearly state the facts, including the cheque details, presentation, and
dishonour
- Mention the legal notice and the accused's failure to pay
- Pray for the court's orders directing the accused to pay the amount
and
any additional relief.
4. Verify the complaint: Sign the complaint and verify its contents as true
and
correct.
5. File the complaint: Submit the complaint to the appropriate court, along
with the required fee and supporting documents.
6. Serve the accused: Ensure the accused receives a copy of the complaint
and summons from the court.
 Format:-
In the Court of chief Judicial Magistrate......................................Court
At…………… ………………..

Complaint No……………… 20…….

M/s……………………
………………………. Through
Shri.…………. Partner of
the firm
…Complainant

Vs.

Mr.…………………….
Proprietor/Partner
…Accused

P.S.
U/S: 138 of N.I. Act

COMPLAINT UNDER SECTION 142 READ WITH SECTION 138 OF

NEGOTIABLE INSTRUMENTS ACT, 1881, ON BEHALF OF THE
COMPLAINANT

MAY IT PLEASE YOUR WORSHIP

That the complainant most respectfully submit as under :

1. The complainant is a partnership firm having their registered office at

mentioned in the title and the accused was purchasing goods from the
complainant on credit bases.

2. To fulfill the liability the accused had issued a cheque being No…………
dated………… of Rs………… drawn on.......................................towards
 part payment. The said cheque was presented by the complainant in
their bank on ……………… for encashment, but the said cheque return
unpaid by the banker of the accused for the reason
…………………. with the Bank memo dated……..

3. The complainant approach their lawyer who sent a legal notice

dated……… under clause (b) of the proviso to section 138 of the
Negotiable Instruments Act, 1881 and demanded from the accused the
amount of the dishonoured cheque. However, the said notice was
refused to be accepted by the accused, means the accused was aware
about the contains of the letter.

4. That since the accused did not make any payment under the said
cheque, despite sending said legal notice, which was refused to be
accepted, the complainant is left with no alternative, but to file the
present complaint under clause (b) of section 142 against the accused
for the offence committed by him under the provisions of the
Negotiable Instruments Act, 1881, resulting from the dishonour of the
cheque for reasons, “…………………..” in his account as indicated in the
returning memo. dated…….. sent by his bankers.

5. The cause of action has arisen on account of the dishonour of the

cheque dated…………… for Rs………… issued by the accused, as indicated
herein above. It also arose on………….. when the complainant received
the debit advice dated……… with regard to the dishonour of the
cheque from their bankers and also when the legal notice dated…………
was sent by the complainant which was refused to be accepted by the
accused on………..
6. That the cause of action has arisen within the jurisdiction of this
Hon’ble Court and the payment was also actually to be received
at………… and hence this Hon’ble Court has jurisdiction to try and
adjudicate upon the present complaint. That the complaint is being
filed within limitation as prescribed under the law.

PRAYER

It is therefore most respectfully prayed that this Hon’ble Court may

be pleased to:

a. pass appropriate orders summoning the Accused for having

committed offences under Section 138 and Section 142 of
Negotiable Instruments Act, 1881, as amended up to date;

b. pass appropriate orders for trial and punishment of the accused in

accordance with law; and/or

c. pass such other order(s) as may be deemed fit and proper in the
facts and circumstances of the present case.

Place: Complainant
Date:

Through
Counsel for Complainant
In the Court of Chief Judicial Magistrate......................................Court
At…………… ………………..

Complaint No……………… 20…….

M/s……………………
………………………. through
: Shri…………. Partner of
the firm
…Complainant

Vs.

Mr…………………….
Proprietor/Partner
…Accused

AFFIDAVIT
I, , s/o Sh. , aged about years, authorized
representative of the Complainant having its registered office at
, do hereby solemnly affirm, declare and state as under:

1. I am the authorized representative of the Complainant in the present

Complaint and am fully conversant with the facts and circumstances
of the case and as such fully competent to swear this affidavit.

2. The accompanying Complaint under Section 142 read with Section

138 of Negotiable Instruments Act, 1881, has been drafted by my
Counsel under my instructions, the contents of which I have fully
understood and state that the same are true and correct and which
are not repeated here for the sake of brevity and I crave the leave
of the court to read and rely upon the same in the interest of
justice.

DEPONENT
 VERIFICATION
Verified at on this day of _ that the contents
of the above affidavit in Para no. 1 & 2 are true and correct to
my knowledge and no part of it is false and nothing material has
been concealed therefrom.

DEPONENT

 A complaint and an affidavit are both legal documents, but they

serve different purposes:-
Complaint:
i. A complaint is a document that initiates a legal action or proceeding.
ii. It sets out the allegations or grievances of the complainant against the
accuse or respondent.
iii. It contains the facts, charges, and relief sought by the complainant.
iv. It's usually filed with a court or tribunal to commence a legal case.

Petitioner:
i. A petitioner is the person who files a petition or complaint with a court.
ii. They are the party that initiates the legal action or proceeding.
iii. The terms "petitioner" and "complainant" are often used interchangeably.

Affidavit:
i. An affidavit is a written statement confirmed by oath or affirmation.
ii. It's a document that contains facts or evidence sworn to be true by the
deponent (the person signing the affidavit).
iii. Affidavits are used to support a legal argument or case, providing evidence
or testimony.
iv. They are often filed in support of a complaint, petition, or other legal
document.

Key differences:
i. Purpose: A complaint initiates a legal case, while an affidavit provides
evidence or support for a case.
ii. Content: A complaint sets out allegations and relief sought, whereas an
affidavit contains sworn statements of fact.
iii. Tone: A complaint is often more formal and accusatory, whereas an
affidavit is a neutral, factual statement.
 Step after filing a complaint:-
After filing a complaint under Section 138 of the Negotiable Instruments Act,
1881, the following steps typically ensue:-

1. Registration of the complaint: The court registers the complaint and

assigns a case number.
2. Issuance of summons: The court issues summons to the accused (drawer of
the cheque) to appear before the court.
3. Service of summons: The summons is served on the accused, usually by a
court official or a private agent.
4. Appearance of the accused: The accused appears before the court on the
designated date.
5. Reply by the accused: The accused files a written statement or reply to the
complaint, admitting or denying the allegations.
6. Evidence presentation: Both parties present evidence and witnesses to
support their case.
7. Arguments: The parties' lawyers argue the case, and the court hears their
submissions.
8. Judgment: The court delivers its judgment, either convicting or acquitting
the accused.
9. Sentence or order: If the accused is convicted, the court passes a sentence
or order, which may include payment of the cheque amount,
compensation, and costs.
10. Appeal: Either party may appeal the judgment to a higher court.

 Under Section 138 of the Negotiable Instruments Act, 1881, the following orders
and interim orders can be passed by a court:-
Orders:
i. Conviction Order: The court may convict the accused and impose a fine,
compensation, or imprisonment.
ii. Acquittal Order: The court may acquit the accused if the prosecution fails to
prove the case.
iii. Compensation Order: The court may order the accused to pay
compensation to the complainant.
 Interim Orders:-

i. Interim Compensation Order: The court may order the accused to pay
interim compensation to the complainant pending the trial.
ii. Attachment Order: The court may attach the accused's property to ensure
satisfaction of the decree.
iii. Injunction Order: The court may restrain the accused from transferring or
disposing of assets.
iv. Search and Seizure Order: The court may authorize the search and seizure
of documents or assets.

These orders and interim orders aim to provide relief to the complainant and
ensure that the accused does not evade the law or dissipate assets. However, it's
important to note that the specific orders and interim orders passed by the court
will depend on the facts and circumstances of each case.

 Under Section 138 of the Negotiable Instruments Act, 1881, the following
applications and statements are relevant:-

Dismissal Application:

i. Application for Dismissal: The accused may file an application to dismiss

the complaint, citing reasons such as:

- Lack of jurisdiction
- Insufficient evidence
- Invalid notice
- Settlement or compromise

ii. Grounds for Dismissal: The application must specify the grounds for
dismissal, supported by affidavits and evidence.

Written Statement:

i. Written Statement by the Accused: The accused must file a written

statement in response to the complaint, admitting or denying the
allegations.
ii. Content of Written Statement: The statement should:-
 - Admit or deny the facts alleged in the complaint
- Set out the accused's defense
- Raise any counterclaims or objections
- Be signed and verified by the accused or their authorized representative

The written statement is a crucial document, as it sets out the accused's defense
and determines the course of the trial. The dismissal application and written
statement are important legal documents that require careful drafting and
consideration of the facts and law

 Ex-Parte proceeding under sec.138 of NI Act,1881:-

Ex-parte refers to a legal proceeding where one party is absent or represented by
a lawyer, and the other party presents their case without opposition.
Provisions for ex-parte proceedings under Section 138 of the Negotiable
Instruments Act, 1881:

Section 145(1): If the accused fails to appear or respond, the court may proceed
ex-parte.

Section 145(2): The court may also proceed ex-parte if the accused's whereabouts
are unknown or they are absent due to circumstances beyond their control.

Reasons for ex-parte proceedings:-

- Absconding or hiding by the accused

- Failure to respond or appear despite summons and notices

- Untraceable or unknown whereabouts of the accused

Grounds for ex-parte order:-

- Uncontested allegations in the complaint

- No response or defense from the accused

- Prima facie evidence against the accused

Ex-parte order implications:-

- The court may pass an order or judgment without hearing the accused's side
 - The accused may be convicted or ordered to pay the cheque amount and costs

- The accused may face consequences, such as arrest or attachment of properties

 Withdrawing a complaint under Section 138 of the Negotiable

Instruments Act, 1881:-
1. Withdrawal Application: The complainant can file an application to
withdraw the complaint, citing reasons such as:-
- Settlement or compromise with the accused
- Error or mistake in the complaint
- Want of prosecution
2. Court's Discretion: The court may allow or refuse the withdrawal
application, considering factors like:
- The stage of the proceedings.
- The reasons for withdrawal.
- The interests of justice.
3. Consequences of Withdrawal:
- If allowed, the complaint is dismissed, and the accused is discharged.
- If refused, the trial proceeds, and the complainant must continue with
the case.
4. Effect on Accused: Withdrawal does not automatically acquit the accused;
the court may still proceed with the trial if it deems fit.
5. Legal Implications: Withdrawal may have implications for the complainant,
such as:-
- Bar on filing a fresh complaint (res judicata)
- Potential liability for costs or damages

Compromise:-The parties (complainant and accused) reach a mutual agreement

to settle the dispute. The compromise may involve payment or other terms.

Effect of Compromise and Withdrawal:-

i. The complaint is dismissed, and the accused is discharged.

ii. The accused is absolved of liability.
iii. The compromise is a valid defense in any future proceedings.
 Legal Implications:- The compromise and withdrawal have a bearing on the
limitation period (Section 12(2) of the Limitation Act, 1963). The compromise may
be considered in future proceedings, if any.

Procedure:-

i. File an application for withdrawal, citing the compromise.

ii. Affidavit in support of the compromise and withdrawal.
iii. Court's discretion to allow or refuse the application.
iv. If allowed, the complaint is dismissed, and the accused is discharged.
 NBW, Section 82, and Section 83 of the Criminal Procedure Code (CrPC) are
related to warrants, arrests, and proclamation/attachment of property. Here's a
breakdown:-
NBW (Non-Bailable Warrant):-

- Issued by a court when a person fails to appear despite a bailable warrant. -

Allows police to arrest and produce the person before the court.

- Section 82 CrPC:-

- Proclamation and attachment of property.

- Court issues a proclamation requiring the person to appear.
- If they fail to appear, the court may attach their property.

- Section 83 CrPC:

- Attachment of property in certain cases.

- Court may attach property if the person fails to appear or execute a bond.

The flow is:

1. Bailable warrant → Person fails to appear → NBW (Non-Bailable Warrant) →

Arrest

2. Person fails to appear → Proclamation (Section 82) → Attachment of property

(Section 83)