Penal provisions for dishonour of cheques (ss.138-148) and the Bankers' Books Evidence Act, 1891

1. Why the offence exists

Chapter XVII (ss.138–142) was inserted by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, from 1 April 1989, to give credibility to cheques as a means of payment. Before it, a dishonoured cheque gave only a civil suit, or a cheating prosecution if dishonest intention at the time of issue could be proved. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 added ss.143–147, the 2015 amendment rewrote s.142 on jurisdiction, and the 2018 amendment added ss.143A and 148.

2. The ingredients of s.138

• a cheque drawn by a person on an account maintained by him with a banker;
• for payment of money to another person for the discharge, in whole or in part, of any debt or other liability, which the Explanation defines as a legally enforceable debt or liability;
• the cheque is returned unpaid because the amount standing to the credit of the account is insufficient, or it exceeds the amount arranged to be paid by agreement with the bank. The Supreme Court has treated returns for “account closed” and, in appropriate cases, “payment stopped by drawer” as within the section, since a drawer cannot escape by closing the account or countermanding when funds are short;
• the cheque was presented within six months of its date or within its period of validity, whichever is earlier (proviso (a)); since RBI reduced validity to three months, that is the effective limit;
• the payee or holder in due course gives a written notice of demand within thirty days of receiving information of the return from the bank (proviso (b));
• the drawer fails to pay within fifteen days of receipt of the notice (proviso (c)).

Punishment: imprisonment up to two years, or fine up to twice the amount of the cheque, or both. A cheque may be presented any number of times within its validity, but prosecution can rest on only one cause of action.

Cognizance (s.142(1)). Only on a written complaint by the payee or holder in due course; within one month of the cause of action under proviso (c), with power to condone delay for sufficient cause; triable by a Metropolitan Magistrate or Judicial Magistrate of the first class. Under s.140 it is no defence that the drawer had no reason to believe the cheque would be dishonoured.

3. The presumption and its rebuttal

Section 139 presumes, unless the contrary is proved, that the holder received the cheque for the discharge of a debt or liability. Section 118(a) separately presumes consideration.

• Rangappa v. Sri Mohan, 2010 INSC 289, (2010) 11 SCC 441 (three judges): the presumption includes the existence of a legally enforceable debt. It is rebuttable; the accused need not disprove it beyond reasonable doubt but may raise a probable defence on a preponderance of probabilities, relying on his own evidence or on the complainant's. It is a reverse onus clause justified by the test of proportionality.
• Bir Singh v. Mukesh Kumar, 2019 INSC 149, (2019) 4 SCC 197: s.139 is a presumption of law. A signed blank cheque voluntarily handed over attracts it even if the details were filled in by the payee, unless the accused proves the cheque was not issued for a debt.

4. Companies (s.141)

Where the drawer is a company, every person in charge of and responsible to the company for the conduct of its business at the time, as well as the company, is deemed guilty, unless he proves the offence was committed without his knowledge or that he exercised due diligence. Directors, managers or officers with whose consent, connivance or neglect the offence was committed are also liable. In Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., 2012 INSC 187, (2012) 5 SCC 661, a three-judge Bench held that the commission of the offence by the company is an express condition precedent for the vicarious liability of others: an authorised signatory or director cannot be prosecuted unless the company itself is arraigned as an accused.

5. Territorial jurisdiction

• K. Bhaskaran v. Sankaran Vaidhyan Balan, 1999 INSC 450, (1999) 7 SCC 510: the offence is completed by a concatenation of five acts (drawing, presentation, return, notice, failure to pay), and a complaint lies in any court within whose jurisdiction any of them occurred. Payees used this to file where they were based.
• Dashrath Rupsingh Rathod v. State of Maharashtra, 2014 INSC 514, (2014) 9 SCC 129 (three judges): the offence is committed where the cheque is dishonoured by the drawee bank, and only the court there has jurisdiction; the place of issue of notice or of the payee's bank is irrelevant. Bhaskaran was overruled on this point and pending complaints were returned.
• The 2015 amendment (Negotiable Instruments (Amendment) Act, 2015) reversed Dashrath. New s.142(2): where the cheque is delivered for collection through an account, the complaint is tried only by the court where the branch of the payee's bank is situated; where presented otherwise, where the drawer's branch is. All later complaints against the same drawer go to the same court. Section 142A validated the transfer of pending cases.

6. Procedure, interim compensation, compounding

• Summary trial (s.143), with the aim of conclusion within six months; service of summons by post or courier (s.144); evidence of the complainant on affidavit (s.145), which need not be repeated in examination-in-chief when he is summoned for cross-examination: Mandvi Co-op. Bank Ltd. v. Nimesh B. Thakore, 2010 INSC 27, (2010) 3 SCC 83; the bank's return memo is prima facie evidence of dishonour (s.146).
• Interim compensation (s.143A) up to 20 per cent of the cheque amount, payable within sixty days, when the accused pleads not guilty in a summary or summons trial or on framing of charge; refundable with interest on acquittal.
• Deposit in appeal (s.148): the appellate court may order the convicted drawer to deposit a minimum of 20 per cent of the fine or compensation, in addition to any interim compensation.
• Compounding (s.147): every offence under the Act is compoundable. Damodar S. Prabhu v. Sayed Babalal H., 2010 INSC 260, (2010) 5 SCC 663, laid down graded costs to encourage early compounding: the later the stage, the higher the cost.
• Meters and Instruments Pvt. Ltd. v. Kanchan Mehta, 2017 INSC 1009, (2018) 1 SCC 560: the offence is primarily a civil wrong given a criminal remedy, and is compensatory in character. Where the accused pays the cheque amount with interest and costs assessed by the court, the court may close the proceedings even without the complainant's consent; personal appearance may be exempted and proceedings may be conducted online.

7. The 2021 Constitution Bench and after

In In re: Expeditious Trial of Cases under Section 138 of N.I. Act, 1881, 2021 INSC 257, a suo motu writ petition on the huge pendency of cheque cases, a five-judge Bench held and directed:

• the inquiry under s.202 of the Code (now s.225 BNSS) for an accused residing outside the court's jurisdiction is required, but evidence of witnesses on behalf of the complainant may be taken on affidavit, and s.202(2) on examination of witnesses on oath does not apply;
• several complaints arising from the same transaction may be tried together where the Code permits joinder for offences of the same kind within twelve months;
• the trial court has no inherent power to review or recall the issue of summons; and
• s.258 of the Code (stopping proceedings) does not apply to complaints under s.138; the view in Meters and Instruments that it does was held not to be correct law. The other observations of Meters on the compensatory nature of the offence stand.

The Court also asked the Union to create additional courts for cheque cases and the High Courts to issue practice directions.

In Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158, the Court set aside a High Court order in revision that had acquitted the accused and reversed concurrent findings of conviction, reaffirming the strength of the s.139 presumption once execution of the cheque is admitted. Noting that the directions in earlier cases had not reduced pendency, it issued fresh directions for speedy disposal, including a revised scale of costs for compounding at different stages in place of the Damodar Prabhu scale.

A parallel offence for dishonour of an electronic funds transfer, such as a failed ECS or NACH mandate for want of funds, is in s.25 of the Payment and Settlement Systems Act, 2007.

8. The Bankers' Books Evidence Act, 1891

The Act lets a bank's records be proved without producing the original books or calling bank officers in every case.

• Bankers' books (s.2(3)) include ledgers, day-books, cash-books, account books and all other records used in the ordinary business of the bank, whether written or stored on microfilm, magnetic tape or any electronic data retrieval mechanism, onsite or offsite.
• Certified copy (s.2(8)): a copy of the entry with a certificate at the foot, signed and dated by the principal accountant or manager, that it is a true copy made in the usual course of business and that the book is still in the bank's custody; for computer records, a printout with the certificates required by s.2A (from the branch manager, and from the person in charge of the computer system describing its safeguards and confirming that it worked properly).
• Mode of proof (s.4): a certified copy of any entry is received in all legal proceedings as prima facie evidence of the existence of the entry, and is admitted as evidence of the matters recorded to the same extent as the original entry.
• Officers not compellable (s.5): in proceedings to which the bank is not a party, no officer can be compelled to produce the books or appear as a witness to prove their contents, unless the court orders so for special cause.
• Inspection (s.6): on a party's application, the court may order that he be at liberty to inspect and take copies of entries, or direct the bank to prepare and produce certified copies within a specified time.

The Act complements the Bharatiya Sakshya Adhiniyam, 2023 (which replaced the Evidence Act, 1872): s.2A is the banking counterpart of the certificate for electronic records now in s.63 of the Adhiniyam (formerly s.65B).

How this is examined

The syllabus lists “penal provisions under NI Act” and the “banker's book evidence Act”. Expect an essay on the ingredients of s.138 and the procedure, or a problem on timing (notice sent on the 35th day, complaint filed in the payee's town). Lay out the timetable, the presumption with Rangappa, s.141 with Aneeta Hada, the jurisdiction story in three steps, and the 2018 and 2021 changes. The Bankers' Books Evidence Act makes a compact 6-mark note: ss.2(3), 2(8), 2A, 4, 5 and 6.