The judgement was rendered by Justice Joymalya Bagchi who held that return of a cheque by the bank of the payee will not attract Section 138 of the Negotiable Instruments Act (“Act”). The dispute emerged after a cheque drawn in favour of the complainant was returned by his bank with the endorsement that the “account name & cheque name differs/no fund”. The Additional Chief Judicial Magistrate had allowed the initiation of proceedings under the Act. An appeal against the same was preferred by the petitioners on the ground that the cheque was never presented for encashment before the bank on which it was drawn.

The Court noted:

Section 138 of the N.I. Act, inter alia, makes the dishonour of a cheque punishable in law provided the cheque upon presentation for encashment before the bank on which it is drawn is returned unpaid due to insufficiency of funds and the drawer of the cheque upon receipt of notice of dishonour does not pay the value of the dishonoured cheque within the stipulated time.”

Hence, the condition precedent for attracting penal liability under Section 138 of the Act is that the cheque must be presented for encashment to the drawer’s bank.

September 8th, 2017