SCOPE OF SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT OF 1881

Advent of cheques has given market a new dimension to corporate and commercial world for transaction. People prefer carrying and execute small piece of paper called cheque than carrying the currency worth the value of cheque. But, there is certain Section of society that intends to execute a cheque without having an intention to honor it. Prior to 1988, no legal provision existed which restrained people from issuing cheques without sufficient funds in their accounts or punishes them in event of the same.

 

Thus, an amendment to ensure remedy against defaulters and to ensure credibility of the holder of instrument, a criminal penalty was inserted under Negotiable Instruments  Act 1881, in form of Banking, Public, Financial Institutions and Negotiable Instrument Laws (Amendment) Act, 1988,which in turn modified Negotiable Instruments (Amendment and Miscellaneous Provisions)Act of 2002. Therefore, Section 138 of Negotiable Instruments Act 1881 creates statutory offence in matter of dishonor of cheques on the ground of insufficiency of funds in the holders account.

 

 

 

Although Section 138 falls under purview of criminal law, but  there has always been debate around whether it follows exact criminal procedure or not, because in criminal offence an essential ingredient is to establish a guilty intent. We must understand that, the cases falling under Section 138 are not exactly criminal offences, but such acts have been penalized in order to maintain public interest. Therefore, the purpose behind making such act an offence is to create absolute or strict liability; where mens rea is not necessary. Even in case of K. S. Anto v. Union of India, the Kerala High Court held that: “Knowledge or reasonable belief, that pre requisite could be statutorily dispensed with in appropriate cases by creating strict liability offences in the interest of the Nation.” Even the Hon’ble Supreme Court has formed stringent guidelines with reference to cases for dishonor of cheques and the Section 138 of the Negotiable Instruments Act of 1881 respectively. Thus, by making strict liability in matters of Section 138, it is indeed an effective measure which encourages greater amount of vigilance to prevent callous attitude of drawers of cheques in discharge of debts or otherwise.