Section 138 of Negotiable Instrument Act (As amended) [Section 138] is popularly called as Cheque Bouncing case and this is one of the most trusted and success legal remedy being availed almost by all at their first instance till the new law came under Insolvency and Bankruptcy Code for its various benefits and among all great benefits, the benefit of this proceedings under Section 138 is of being a Criminal proceedings and thereby criminal provisions takes care of the trial proceedings under Section 138. Section 138 is a summary trail and the procedure is made very simple but there is no hidden fact that a single case under Section 138 takes an average 2.5 years and or more and then there is appeal and appeal and hence there is no end to the same and infact most of the case which are being piled up are specially filed by NBFC, Banks, Financial Institutions, etc. However, the motive of this Article is to understand what are the common mistaken is made which makes this summary trial going against the Complainant and or delay the case to many years.

Before we come to this aspect, let us understand in a very simple way how Section 138 comes into pictures:

  1. There is a commercial or non-commercial transaction and one party is the Payer and another party is the Payee. The term Payer means who gives the cheque to the Payee for either in commercial transaction or non-commercial transaction and Payee means who receives the cheques or else instruments from the Payer for either in commercial transaction or non-commercial transaction [don’t read the term Payer and Payee as per any act but is being restricted as defined in this para]
  2. Due to the transactions, there is a promise to do some work and against the said work payment is to be made
  3. Payer either makes the payment via Cheque or other instrument to the Payee and assures of making the payment
  4. Payee on trust basis that the payment will be made present the Cheque with its bankers
  5. Payee later finds from the Bankers that the Cheque has been dishonoured for reason as stated in Bank Memo

From here the provisions of proceedings under Section 138 start. Please note that over a period of time the various judgements have made one thing clear that though Section 138 is a summary criminal trial proceedings but is a very technical provision and even a small mistake or typo error may land the case as dismissed against the Complainant and hence more vigilance is required to ensure that the case to be filed under Section 138 first hits all the ingredients of N. I Act and then all the facts are stated proper. Here I am of the view that the Complainant shall take the assistance of skilled and experienced lawyer and not take in any manner online legal services as this will only make the good case even worst case. To know why I don’t prefer one taking online legal services, please click on the link https://taxguru.in/corporate-law/customers-clients-ensures-business-growth.html

[Note: I always of the view that Lawyers are an Asset and is a step towards Business Growth and if you have the system of having legal audit done in your organisation then for sure you half of the problems are resolved till you reach from para 1 to 5 as mentioned above]

Coming to the point post completion of para 5, one has to ensure to avoid small mistakes:

  • Ensure that notice under Section 138 has to be sent within 30 days from the date of Bank Memo. Most of the times, aggrieved party waits for the last date and then issue the notice which is not good as this calls for debate of whether reaching the notice to accused was within 30 days or not or else and here starts the interpretation. Assuming the aggrieved party may be correct but why to take chance of getting any small matter into legal interpretation.
  • Ensure that you present the Cheque with the Bankers and then take the pay slip and then take the Bank Memo on time else waiting for the Bank Memo will only kill the time
  • Ensure that notice is properly drafted by skilled and experience lawyers as once the story is made in the notice issued under Section 138, it then cannot be denied and infact becomes the basis to prove very minutely during cross. Any small mistake or loophole will kill your matter badly.
  • Issuing notice is not difficult but ensure that all details are stated correctly. Specially Cheque Nos, Bank details, claiming amount, interest amount if included then to be deleted, word “Demand”, “Legal Debt”, “legal outstanding debt”, etc. Please note that a small mistake in notice will itself make the case invalid.
  • Ensure to whom notice is being sent is taken care off. For ex, if notice is issued to Sole Firm, then ensure that the owner name is accused no. 1 and firm as accused no. 2 and then following what the situation calls for as if not, then notice is taken as invalid and it shall be rejected at issuance of summon stage itself. In regard to partnership firm, ensure notice is issued to all Partners and Firm be accused no. 1. For else, ensure entity comes and then their name and also person signing the cheque. Please note that Section 138 is a criminal proceeding and hence the main person accused be a party to the case else it will be difficult to move further in your favour
  • Ensure that the notice is issued 6-7 days before the last date via post first and then on date of receipt of post, to issue via email stating receipt of post and attach postal receipts and then via Whatsapp and or other medium you feel. The reason gap of 6-7 days be there to rectify if there is any mistake done in the first notice. Rectification notice be sent within 30 days, please take a note
  • Notice be issued to valid address and last known address and ensure that there are certain judgements where it has been stated that if the Door is Locked, the notice is taken as not served though it can be interpreted. Suggestion here will be to check the current address and other and sent to all. For Companies, note to issue at registered office. You can refer to our article https://taxguru.in/corporate-law/customers-clients-ensures-business-growth.html which speaks of importance of KYC List.
  • Ensure that the case is filed within 45 days from date of serving of notice and if possible file the Criminal Complaint, Affidavit in Evidence including Evidence under Section 65B of Indian Evidence Act together so that the next date will come for Cross and then trial starts as not filing Criminal Complaint, Affidavit in Evidence only delays the process
  • Ensure that the verification clause is there in the Criminal Complaint and Affidavit in Evidence in the manner as stated in the CPC. I have seen many Complaints without verification clause and this only makes the case worse as you are giving a relevant technical point to accused to fight the matter. Our goal shall be to ensure there are no loopholes left so that accused has two options, majorly to settle or not in a position to delay.
  • Possibly avoid 20% interim compensation for small amount or case to case basis as I have found this is nothing but delay making process as this eats a full year sometimes
  • If you are the accused avoid replying to the Complainant notice if you as accused feel that stating will open your defence as most of the times the fall of case against the Complainant is written on notice. Therefore if the accused does not reply, the Complainant shall re-check whether they are on correct footings in regard to notice and its ingredients.
  • Try filing “all relevant evidence and not all evidence” with your Affidavit. There is a lot of difference between “all relevant evidence and not all evidence” and this is where the skilled and experience lawyer comes in picture as filing all evidence sometimes and infact most of the times given more queries and way to the accused to put his case in good stand. Evidence is a very dicey matter and if not handled well, good luck or bad luck can be discussed at that stage only.
  • Ensure that notice story and complaint story and evidence story are same and there is no difference

There can be many mistakes in addition but have stated relevant ones and if you think your matter is delayed or you feel that a second option is relevant to know whether your filed case is having all the ingredients or you feel that your matter is got stuck, then you can speak to us for know how to take your litigation matter faster. Note that Litigation is slow but by some vigilance and act, you can make it faster.

There is no doubt that if all the Business Entities totally comply with Pre-Litigation measures then for sure the Courts case will becomes less and if filed will be in a position to weaken the accused stand and will make them settling the matter and if not, then for sure accused will not be in a good position to fight.

Why you shall speak to us:

THE LEGAL DESK have been taking care of Recovery matters since more than 16 years. Please note that filing the case in the Court shall be the last resort as it is rightly said that ‘Litigate rarely, negotiate mostly, but settle alwaysand we at THE LEGAL DESK believes in this statement and infact in our view if there is a Legal System in place in Business entity, chances of visiting court for recovery will be at reduce percentage. Please note that the term ‘Litigate rarely, means that this shall be your last resort and not that you totally ignore the Litigation, the term “negotiate mostly” means that if your Pre-Litigation measures are strong and in compliance and mistakes are avoided then this will only force the opposite party to negotiate and settle and this is where you shall be agile to negotiate and the term “, but settle always” means if above two terms are taken care, third will follow by accused itself with no acts from our end.

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Qualification: LL.B / Advocate
Company: THE LEGAL DESK
Location: Maharashtra, IN
Member Since: 01 May 2020 | Total Posts: 39
I have been in Law Practice since more than 15 Years . My practice areas include: (a) Drafting of Commercial and Non-commercial Agreements/Contracts; (b) Recovery Matters before all Forums/Courts; (c) Arbitration and Conciliation; (d) Cross-Examination, Admission and Interim Stay; (d) Devising Strat View Full Profile

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