Section 138 of the Negotiable Instruments Act 1881explains about dishonour of cheque for insufficiency of funds in the account. If a cheque is drawn by a person with a banker for payment of certain amount to another person in whole or in part and it is returned back by bank unpaid for the reason of insufficient of amount to honour the cheque, shall be deemed to have committed offence under this Act. Punishment for this will be imprisonment for a term of 2 years or fine or both. Cheque has to be presented to the bank within 6 months from date of its issue. The holder makes a demand for payment of said amount by giving written notice and drawer fails to make payment of said amount to payee these are the main things that come under this section.
Under Section 139 of the said Act states that unless the contrary is proved, it will be presumed that the holder of a cheque had received the cheque for discharge. Section 140 states that the drawer of the cheque cannot take defence for an offence under Section 138, stating that he had no reason to believe when he had issued the cheque and had no idea that the cheque would be dishonoured when it was presented at the bank.
Section 141 of the Act states about the offence committed under Section 138 is a company then everyone in charge of the company for conduct of business will be held liable and shall be deemed guilty of offence under the said Act. But one exception is that if any person proves that he has not committed offence then he cannot be held liable. If the offence under this Act is committed with the consent or any director, manager or officer of company then they shall also be held liable and punished.
In K. S. Anto v. Union of India (8 July, 1991) 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.”