1. DISHONOR OF CHEQUES & NI
ACT 138 INVOKED IN RECOVERY
OF MONEY IN CASE OF A
DISHONOURED CHEQUE

2. NEGOTIABLE INSTRUMENT
• A negotiable instrument is a document guaranteeing the
payment of a specific amount of money, either on demand, or
at a set time.
• According to the Section 13 of the Negotiable Instruments
Act, 1881 in India, a negotiable instrument means a
promissory note, bill of exchange or cheque payable either to
order or to bearer..

3. THREE TYPES OF NEGOTIABLE
INSTRUMENTS
There are three types of negotiable instruments such as
• PROMISSORY NOTE
• BILL OF EXCHANGE
• CHEQUE

4. CHEQUE
“Cheque is an instrument in writing containing an unconditional order,
addressed to a banker, sign by the person who has deposited money
with the banker, requiring him to pay on demand a certain sum of
money only to or to the order of certain person or to the bearer of
instrument.”
The main types of cheque are:
• Bearer Cheque
• Order Cheque
• Uncrossed / Open Cheque
• Crossed Cheque
• Anti-Dated Cheque
• Post-Dated Cheque
• Stale Cheque

5. DISHONOURING OF A CHEQUE
• A cheque is said to be dishonored when the payment is not
made on its presentment to the bank.
INSTANCES OF DISHONOURING OF A CHEQUE
• No enough money in the account
• Account frozen by the government
• Attachment order
• Stale cheque
• Post dated cheque
• Mutilation

7. PRIOR CONDITIONS TO TAKE LEGAL
ACTION UNDER THE ACT (SECTION 138):
In order to initiate a legal action against the person committed the
offence of dishonor of cheque under the Negotiable Instruments Act,
the following conditions shall have to fulfill:
• Ø The cheque has to be presented to the drawee Bank within 6
months from the date on which it is drawn or within the period of
its validity, whichever is earlier;
• Ø Demand has to be made for the payment of the said amount of
money by giving a 30 days written notice to the drawer of the
cheque within 30 days from the date of dishonor;
• Ø Failure to make the payment by the drawer within 30 days of the
receipt of the said notice (Clause c of the provision to Section 138).
After the expiry of this 30 days the cause of action of the case arises

8. PUNISHMENT FOR DISHONOUR OF CHEQUE
(SECTION 138):
Any person committed the offence of dishonor of cheque shall
be liable to be punished with imprisonment up to two year, or
with fine up to twice the amount of the cheque, or with both.

9. THE PROCEDURE FOR THE RECOVERY OF MONEY
IN CASE OF A DISHONOURED CHEQUE UNDER SEC
138 OF NI ACT 1881

10. THE PROCEDURE FOR THE RECOVERY OF MONEY
IN CASE OF A DISHONOURED CHEQUE UNDER
SEC 138 OF NI ACT 1881
• Under provisions of negotiable instruments act.sec.138 a legal notice
on behalf of complainant is issued to the defaulter whose cheque is
dishonoured.it should be issued within 15 days of dishonor of cheque
by registered post
• The person who has issued cheque is directed to make the payment
of amount of dishonoured cheque within 15 days. In c ase the said
payment is made within 15 days of service of notice then the matter
ends.
• But in case the said payment is not made within 15 days then the
complainant has to file a criminal case in the court within 30 days
from the expiry of notice period of 15 days .
• The court will hear arguments of complainant/ advocate for
complainant and issue process under section 138 of NI act.

11. CONTD..
• The summons are sent and served through police station
where accused is residing.
• Police is limited to only service of summons and in case
accused remains absent on court date after service of
summons then only warrant is sent to police station to
produce accused in court.
• Accused has to submit surety with all surety documents
including ownership documents of house or land owned by
surety, his address proof including ration card, election
identity card, photo and address proof of surety and accused.

12. CONTD..
• On receiving summons from the court the accused and surety
should remain present in court with all abovementioned
documents and court will accept the surety and on signing
bonds by accused and surety, the bail will be granted and
accused will be released by court.
• Then the complainant will file the affidavit for his evidence with
all original documents in support of his complaint. This is called
exam in chief of complainant. Then accused/his advocate will
cross examine the complainant.
• Complainant can submit additional witnesses in support of
complaint.

13. CONTD..
• Then once witnesses of complainant are over then statement of
accused is recorded under Sec.313 of CRPC .accused will be
asked to give reply to the questions and allegations against him .
• Then witnesses of accused to prove his innocence will be
produced and the evidence will be recorded by the court.
• Last stage is of arguments of advocate of complainant and
argument of advocate of accused
• Court will pass the judgment.
• In case accused is acquitted then matter ends.