IPC Section 138
Overview:
Section 138 of the Indian Penal Code deals with the offence committed when a cheque is dishonored due to insufficient funds or the amount exceeding the arrangement in the drawer’s account, but the cheque was issued dishonestly or fraudulently to recover a debt or other liability.
📝 Legal Text (Simplified):
If a person issues a cheque to someone for the payment of money,
And that cheque is returned unpaid by the bank because of insufficient funds or exceeding the amount arranged,
Then, if the person had knowledge of the cheque bouncing,
And had intention to dishonestly or fraudulently make payment,
He/she is criminally liable under Section 138.
⚖️ Key Ingredients of Section 138:
Cheque must be issued for the discharge of a debt or other liability
The cheque should be issued in payment of a legally enforceable debt.
Cheque is returned unpaid by the bank
The cheque bounces due to insufficient funds or exceeds the amount arranged in the account.
Dishonest or fraudulent intention
The drawer must have intended to dishonestly or fraudulently cause the cheque to be dishonored.
Notice of dishonor must be given to the drawer
The payee must send a written notice to the drawer within 30 days of receiving the cheque return memo.
Failure to make payment within 15 days
After receiving the notice, the drawer fails to make payment within 15 days.
⏰ Timeline for Notice and Payment:
The payee must send a legal notice within 30 days of cheque return.
The drawer has 15 days to pay after receiving the notice.
If the drawer doesn’t pay within 15 days, a complaint can be filed in the court within 1 month after the expiry of those 15 days.
🔍 Punishment under Section 138:
Imprisonment up to 2 years, or
Fine which may extend to twice the amount of the cheque, or
Both imprisonment and fine.
💡 Why is Section 138 Important?
It protects the payee who relies on the cheque as a mode of payment.
It discourages people from issuing cheques without sufficient funds.
It promotes financial discipline and trust in commercial transactions.
📌 Summary Table:
| Element | Requirement/Condition |
|---|---|
| Cheque issued for | Payment of legally enforceable debt/liability |
| Cheque dishonored due to | Insufficient funds or exceeding arrangement |
| Notice to drawer | Written notice within 30 days of dishonor |
| Time to pay after notice | 15 days |
| Punishment | Up to 2 years jail and/or fine (up to 2x amount) |
🧠 Example:
A businessman issues a cheque of ₹50,000 to a supplier for goods delivered.
The cheque bounces because the businessman's bank account has insufficient funds.
The supplier sends a legal notice to the businessman within 30 days.
The businessman does not pay the amount within 15 days of receiving the notice.
The supplier files a complaint under Section 138 IPC against the businessman.
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