What is the punishment prescribed under the act for dishonour of a cheque?
The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 prescribes imprisonment, which may extend to two years or payment of a fine, which may extend to twice the amount of the cheque or, both for an offence under section 138.

What are pre-conditions to file case u/s. 138 of N.I. Act?
In order to proceed under Section 138, the following events should have occurred:

		The cheque in question should have been issued in discharge of whole or part of a debt or liability otherwise the maker of the cheque is not liable for prosecution. For example if the cheque is given as a gift or present and if the bank dishonours it the maker of the cheque is not liable for prosecution
		Cheque should have been presented to the bank within a period of six months of the date of on which it is drawn or within the period of its validity, which ever is earlier;
		A dishonour of cheque due to certain defined reason
		The payee or holder in due course of such cheque should have made a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque within thirty days of the receipt of the information by him from the bank regarding the return of the cheque unpaid; and
		The drawer of such cheque should have failed to make the payment of the said amount of money to the payee or the holder in due course of the cheque within fifteen days of receipt of the said notice
		The complaint can be made only by the payee or holder in due course within one month of the drawer failing to make payment after 15 days of receiving notice.

What precautions one must take for issue of Notice?

		The requirement of giving of notice is mandatory. If no notice making a demand for payment is served upon the drawer within 30 days from the date of dishonour of cheque, a complaint is not maintainable unless the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.
		Notice means a notice in writing.
		A postal acknowledgement due containing the signature of the accused is proper proof of service of the notice on the addressee shown in the postal acknowledgement.
		When a notice is returned by the sender as unclaimed such date would be the commencing date in reckoning the period of 15 days. Such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address.
		The notice need not necessarily be by registered post only. It can be sent by a telegram, fax or by a letter as well. However it is preferable to send the notice by registered post, as that is clear evidence of service.

Where the complaint needs to be filed?
No court that is inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class can try any offence u/s138. All the following Courts will have jurisdiction:

		The Court, situated at the place where the drawer of the cheque fails to make the payment of money;
		The Court situated at the place where the bank through whom the cheque was issued, is located;
		The Court situated at the place where the cheque was issued or delivered.

What precautions to be taken for filing of Complaint?

1.		The payee or holder in due course of the cheque makes a complaint in writing.
2.		The payee cannot lodge a complaint after the completion of one month from the date on which the cause of action arose.
3.		A complaint can be filed through Power of Attorney, agents of the payee or holder in due course.
4.		A complaint has to be filed in writing alongwith the list of witnesses and the list of documents.

What about Offences by Companies?

1.		If the person committing the offence is a company, every person who, at the time offence was committed, was in charge of, and responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.
2.		If a person proves that the offence was committed without his knowledge, or that he had exercised due diligence to prevent the commission of such offence, he shall not be punishable.
3.		Where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial Corporation owned or controlled by the Central Government or State Government, he shall not be liable for prosecution.
4.		Where any offence has been committed by a Company and f it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary, or other officer of the Company, such person shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Can a person file a suit for recovery and also file a complaint under Section 138 of the Negotiable Instruments Act for dishonour of a cheque?
Yes. In case a person has filed suits for recovery, then he is not precluded from filing a complaint under Section 138 of the Negotiable Instruments Act and Section 420 of the Indian Penal Code. The pendency of criminal matters would not be an impediment to proceeding with the civil suits.

If a cheque is dishonoured on the grounds that the bank account has been closed by the drawer, will it constitute an offence under Section 138?
Yes. Dishonour of a cheque on the ground that the account has been closed by the drawer of the cheque does not constitute an offence under Section 138 as the said section, contemplates dishonour of a cheque either for want of funds or for exceeding the arrangements made. However, now the Supreme Court has held that even if a cheque is dishonoured due to the bank account being closed by the drawer, it will amount to an offence under Section 138 of the Negotiable Instruments Act.

If issue of notice gets delayed can I represent the cheque?

		There is no embargo upon the payee to successively present a dishonoured cheque during the period of its validity.
		There is no restriction regarding the no of times a cheque can be presented and that every subsequent representation and dishonour gives rise to fresh cause of action for filing complaint.
		In the course of business transactions it is not uncommon for a cheque being returned due to insufficient funds or similar such reason and being presented again by the payee after sometime, on his own volition or at the request of the drawer, in expectation that it would be encashed.
		For dishonour of one cheque there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within 15 days of the receipt of the notice served.
		On each presentation of the cheque and its dishonour, a fresh right and not cause of action accrues. Therefore the payee without taking pre-emptory action in exercise of his right may, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque.
		Cause of action would arise only on failure to pay after notice.
		Once a notice for payment is given a fresh cause of action will not arise if the cheque is presented again and it is dishonoured.

What about Payment against Cheque STOPPED by drawer?

		Stop payment instructions cannot obviate the offence.
		Even if stop payment instructions are given and notice of the same is given to the payee or holder in due course liability cannot be avoided.
		The position will not be different even if the drawer had instructed the bank to stop payment prior to the presentation of the cheque for encashment.
		Once the cheque is issued there is a presumption, that the holder received the cheque for the discharge, of any debt or liability and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under the Act

What is the procedure in Magistrate's Court?

		If the magistrate is of the opinion that there are sufficient grounds for proceeding he shall call the complainant for pre summoning evidence and the necessary documents are exhibited.
		Thereafter summons are issued for the attendance of the accused and the witnesses.
		If accused fail to appear, warrants are issued by which Police authority are instructed to make accused present in the Court.
		The evidence of the witnesses is recorded.
		The particulars of the offence are stated to the accused, and he shall be asked whether he pleads guilty or has any defence to make.
		If he accused pleads guilty, the magistrate shall record the plea and convict him.
		If the accused does not plead guilty the Magistrate shall proceed to hear the complainant and the accused and take all the evidence as may be produced by both.
		On the hearing and evidence the Magistrate shall pass the order of conviction or acquittal.