Ni 138 is an Offence which has a criminal nature but with due diligence and due care one can easily sail through it. The NI 138 act is today being widely misused. The true intent of NI-138 is to protect the negotiable instruments to be misused in a type of fraud.

Essentials of NI 138

1. There must be debt and liability.

2. In discharge of debt the cheque is issued to the payee by the drawer.

3. As soon as cheque is handed over to the payee he becomes holder.

4. Holder then en cashes the cheque and if it gets dishonored the cause of action arises and the drawer of the cheque becomes the accused.

the procedure of complaint is there in the code. But today NI-138 is being used as recovery tool instead of availing remedy under specific performance or in civil cases. The idea of NI 138 is to protect the misuse of cheque but not to misuse NI 138 for some other reliefs.

For example if a cheque is issued under an agreement and breach of agreement involves payment of money. Then cheque used under such agreement is a security.The apt relief is specific performance not the NI-138.

As in India legal awareness is minimal that’s why people under the pressure negotiate their case  under NI-138 instead of fighting it. The result is defeat of meritorious cases. Misuse of Law.

—Part-2 coming soon.

Nitish Banka

Nitish Banka is an advocate practicing in Supreme Court of India and can be reached at [email protected] or 9891549997