Cheque Bounce, Cheque Dishonour and Application of Law under Negotiable Instruments Act, 1881

Cheque Bounce, Cheque Dishonour and Application of Law under Negotiable Instruments Act, 1881

In case of Jagpreet Kalsi v. Rajesh Rakheja [2024] GCtR 3455 (Delhi), it was held that upon perusal of Section 138 of the Negotiable Instruments Act, 1881, it is observed that the said provision deals with the offence of dishonour of cheque and lays down certain criteria to be satisfied in order to make out a case under this provision. It is a settled principle of law that under Section 138 of the NI Act, only a drawer of the cheque is liable for the dishonour of the said cheque. 

It is a settled principle of law that the cheques arising out of the same transaction can be tried together as one subject matter, especially with respect to the offences under Section 138 of the NI Act. 

Now coming to Section 141 of the NI Act, 1881 it is observed that when a company commits an offence under Section 138 of the NI Act, any person who is “in charge of” or “responsible for the conduct of the affairs of the company” shall be held guilty of the offence. However, if it is proved that the said offence is committed without the knowledge, the said person cannot be made liable. Therefore, the burden of proving the same lies on such person claiming such defence. It is further stated that if the offence is committed with the connivance of the director, manager or any officer of the company, such person shall be held liable under Section 141 of the Act. Under Section 141 of the NI Act, 1881 the company is also inclusive of partnership firm and director is inclusive of a partner.

Section 141 of the NI Act merely states the liability of certain people for the offences committed by the company, which needs to satisfy the test of who is “in charge of” or “responsible for the conduct of company’s affairs”.