Cheques have long been regarded as a symbol of trust and credibility in financial transactions. However, when a cheque is dishonoured due to insufficient funds or other reasons, it not only disrupts business dealings but also erodes confidence in the banking system. To address this, Section 138 of the Negotiable Instruments Act, 1881 was enacted, making cheque bounce a criminal offence in India.
Under this provision, if a cheque issued by an individual or business is returned unpaid, the payee has the right to issue a legal notice within 30 days of receiving the dishonour memo. If the drawer fails to make the payment within 15 days of receiving the notice, the payee can initiate criminal proceedings. The law prescribes penalties, including imprisonment of up to two years or a fine that may extend to twice the cheque amount, or both.
The objective of Section 138 is to safeguard the sanctity of cheques as a reliable instrument of payment. It ensures accountability in commercial and personal transactions by penalizing wilful defaults. At the same time, courts have stressed the need to balance strict enforcement with preventing misuse, as not all cheque dishonours stem from fraudulent intent.
In today’s financial landscape, Section 138 plays a vital role in strengthening trust in business relationships and promoting discipline in monetary dealings. It transforms cheques from a mere mode of payment into a legal commitment backed by the force of law.
