Section 138 of NI Act

Dishonour of cheque for insufficiency, etc. Of funds in the account – where any cheque drawn by a person on account
maintained by him with a banker for the payment of any amount of money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because the amount of the money
standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from
that account by an arrangement made with that bank, such person shall be deemed to have committed an offence and shall,
without prejudice to any other provisions of this act, be punished with imprisonment for a term which may be extended to two years
or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless -

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period
of its validity, whichever is earlier.

(b) the payee or the holder in due course of the cheque as the case may be, makes a demand for the payment of the said amount of
money by giving a notice, in writing, to the drawer of the cheque within 30 days of the receipt of the information by him from the
bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of said amount of money to the payee or, as the case may be, to the holder
in due course of the cheque, within 15 days of the receipt of the said cheque.

Explanation – for the purpose of this section, “debt or other liability” means a legally enforceable debt or other liability.

It states that necessary ingredients to be satisfied for making out a case under the provision of s 138 of the act:

1) a person must have drawn a cheque on an account maintained by him in a bank for payment of certain amount of money to
another person from out of that account for discharge of any debt or other liability;

2) that the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the
period of its validity, whichever is earlier;

3) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is
insufficient to honour the cheque or that it exceeds the amount arranged to be paid for that account by an agreement made with the
bank;

4) the payee or the holder in due course of hte cheque makes a demand for the payment of hte said amount of money by giving a
notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return
of the cheque as unpaid;

5)the drawer of such cheque fails to make payment of hte said amount of money to the payee or the holder in due course of cheque
within 15 days of the reciept of the said notice.

1) cheque in discharge of a debt or liability

The cheque must have been drawn for payment of money to a person other than the drawee for the full and partial discharge of any
legally enforceable debt or liability. To be brought within the purview of sec 138, a cheque should be presumably have been issued,
and not merely drawn, for payment in discharge, wholly or partly, of a legally enforceable debt or liability. The debt or liability need
not be of the drawer of the cheque towards the payee. The cheque may have been issued for discharging of the debt or liability of
some person other than the drawer and the provision of sec 138 would nevertheless get attracted. the use of the words ‘such
person’ in sec 138 means the drawer of the cheque even though the debt or liability may be of someone else.

Once a cheque is admitted to have been issued, it carried it with several mandatory presumption that every instrument made or
drawn for consideration and when it is accepted, endorsed, negotiated or transferred, it is done for consideration. Hence the
burden of proving failure of consideration will be upon maker of the note. But still the party concerned is required to prove the
passing of the consideration. It is necessary for the complainant to establish that the cheque so dishonoured related to debt or
other liability was legally enfoeceable agaisnt the accused and the accused can also prove the non existence of such leaglly
enforceble debt by raising a probable defence.

2) presumption – Rebuttable – the presumption under ss 118 and 139 that every negotiable instrument for consideration is
rebuttable. The effect of that presumption is to place evidential burden on accused to prove that cheque was not issued