The Section 138 Offence: Complete Notes (Part J)

Part J covers the substantive law of the cheque dishonour offence: its origin and nature, its ingredients, the requirement of a legally enforceable debt, the demand notice, the presumptions in Sections 139 and 140, and the liability of companies, directors and partners. This consolidated note covers Topics 41 to 46.

41. Origin and Object

Chapter XVII, inserted by the 1988 amendment and in force from 1 April 1989, made dishonour of a cheque for want of funds an offence, to enhance the credibility of cheques and faith in banking (Electronics Trade and Technology Development Corporation, 1996). The offence is primarily compensatory in character (Meters and Instruments, 2018). Heavy pendency, over 6.5 lakh cases in Delhi alone, has led to repeated Supreme Court guidelines, most recently in Sanjabij Tari (2025).

42. Ingredients

A cheque drawn on the accused's own account, for a legally enforceable debt, presented within validity (now three months), returned for insufficiency or exceeding arrangement, written notice within 30 days, and failure to pay within 15 days (Kusum Ingots, 2000). Only the signatory drawer is liable (Jugesh Sehgal; Aparna Shah); a guarantor's cheque is covered (I.C.D.S.). Successive presentations are allowed (MSR Leathers, 2013); each cheque is a separate cause of action (Sumit Bansal, 2026). "Stop payment", "account closed" and similar returns are covered (Modi Cements; NEPC Micon; Laxmi Dyechem). Punishment: up to two years, fine up to twice the cheque amount, or both.

43. Legally Enforceable Debt

• Security cheques: covered if the debt was due on presentation (Sampelly, 2016; Sripati Singh, 2021); not an advance under a cancelled order (Indus Airways, 2014).
• Blank cheques: the payee may complete them (Bir Singh, 2019).
• Time-barred debts: not covered (Sasseriyil Joseph), unless the cheque is a promise under Section 25(3), Contract Act (A.V. Murthy, 2002).
• Part payment: present only for the balance (Dashrathbhai, 2022).
• Cash loans in breach of Section 269SS of the Income-tax Act remain enforceable (Sanjabij Tari, 2025).

44. Demand Notice and Deemed Service

The notice must demand the correct cheque amount (Rahul Builders; Kaveri Plastics, 2025); other claims may be added if severable (Suman Sethi). Service by post to the correct address is presumed, including refusal or non-claiming (K. Bhaskaran, 1999) and receipt by a family member (Sainaba, 2026); a drawer who does not pay within 15 days of summons cannot plead non-receipt (C.C. Alavi Haji, 2007). A complaint before the 15 days expire is premature (Yogendra Pratap Singh, 2014).

45. Presumptions Under Sections 139 and 140

Once the cheque and signature are established, a legally enforceable debt is presumed (Rangappa, 2010). The accused rebuts it on a preponderance of probabilities, using any material including the complainant's (Basalingappa, 2019), but not by bare denial (Kumar Exports, 2009) or mere doubt about financial capacity (Sanjabij Tari). The burden shifts in two stages (Rajesh Jain, 2023), and the presumption cannot be displaced at the process stage (Renuka, 2026). Under Section 140, lack of expectation of dishonour is no defence.

46. Companies, Directors and Partners

Every person in charge of and responsible for the company's business when the offence was committed, as well as the company, is deemed guilty, subject to no knowledge or due diligence and the exemption for government nominees; officers whose consent, connivance or neglect caused the offence are also liable. The company must be arraigned (Aneeta Hada, 2012); specific averments are needed except for managing directors and signatories (S.M.S. Pharmaceuticals, 2005); non-executive directors need specific roles (Sunita Palita; K.S. Mehta; Saroj Pandey, 2026). Partners may be prosecuted without arraigning the firm (Dhanasingh Prabhu, 2025).

47. The Topics of This Part

Topic 41: origin and object; Topic 42: ingredients; Topic 43: legally enforceable debt; Topic 44: notice and deemed service; Topic 45: presumptions under Sections 139 and 140; Topic 46: companies, directors and partners (Section 141).