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Liability Under The Negotiable Instrument Act

• Where any cheque drawn by a person for the discharge of a liability is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque.
• That it exceeds the amount arranged to be paid from that account by an agreement made with that bank.

Such person cheque shall be deemed to have committed an offence and shall be punishable with imprisonment for a term, which may extend to two year, or with fine, which may extend to twice the amount of the cheque or with both.

Constitutes An Offence

1. Such 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.
2. 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.
3. 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 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.

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.

Presentation Of Cheque.

Effect Of Stop Payment.

Notice In Case Of Dishonour.

Period For Payment.

Remedies In Dishonour Of Cheque.

Filing Of Complaint.