FAQs on Section 138 of NI Act: What happens once your cheque is dishonoured?
This article explains the legal implications of Section 138 of the Negotiable Instruments Act regarding bounced cheques in India. It outlines the specific conditions under which a dishonoured cheque becomes a criminal offence and the procedural steps a payee must follow to seek legal recourse.
Why it matters
Understanding these legal requirements is crucial for individuals and businesses to protect their financial interests and avoid potential criminal liability.
NEW DELHI: A bounced cheque feels like a banking hassle, but legally it can be a criminal offence. Section 138 of the Negotiable Instruments Act, 1881 can turn a dishonoured cheque into a court case and, for some, a jail sentence.What is Section 138?Section 138 deals with a cheque being returned unpaid because there is not enough money in the account or because the amount is more than the arrangement made with the bank.If a person issues a cheque towards a legally enforceable debt and the cheque is returned unpaid for these reasons, the person who issued the cheque can face legal proceedings, but only if the conditions set by law are met.Section 138 was added only in 1988.
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