When Cause of action arises under section138 of the Negotiable Instrument Act, 1881

Cheque as a negotiable instrument is familiar with the economic transaction which may be for personal or business purposes as we don’t yet conceive cashless transaction method. So, a huge amount can be given by Cheque endorsing to someone who is actually entitled to get money from the drawer of the Cheque and later (which means for the purposes of section138 of the Negotiable Instrument Act– six months from the date on which it is drawn or within the period of its validity, whichever is earlier) the payee present that Cheque for the encashment. The whole process is too easy as the plain water, right? No. As most of you know the huge number of cases filed under the Negotiable Instrument Act, 1881 mainly fall under section-138 of the Act and many lawyers have skill on this particular section but surprisingly they have no idea about other sections of the said Act, today my initiative is to writing up for those newcomers to make them understand the cause of action and when it arises under section 138 of the NI Act, 1881.

Get an overall idea of a cheque dishonour case here: Cheque dishonour case under Negotiable Instrument Act, 1881

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In comparison with other criminal cases, a cause of action deemed to arise whenever an offence is committed or has been committed under the Penal Code or under any other statute, generally when FIR is logged. Unlike this, a cause of action under section 138 would arise in case of non-compliance with requirements stated therein in the section. If we read carefully clauses (b) and (c) of the proviso to sub-section (1) of section 138 of the Act, 1881 and clause (b) of section 141 thereof, it would appear that cause of action to file a petition complaining an offence under subsection (1) of section 138 would arise only when the drawer of the unpaid/dishonoured Cheque fails to make the payment of the amount of money of such Cheque(s) to the payee or to the holder in due course of the Cheque(s) within 30 days of the notice served under clause (b) of the proviso to sub-section (1) of section 138, though the offence shall be deemed to have been completed after the Cheque is returned unpaid ie dishonoured on any of the grounds mentioned therein. This view was taken by the court in case of Majed Hossain vs State 17 BLC (AD) (2012).


Now the question is whether crossed Cheque or an account payee Cheque after being dishonoured will constitute an offence under section 138 and the drawer of such Cheque(s) will be prosecuted for committing such offence. In section 6 nothing has been said about crossed Cheque or an account payee Cheque. We get the idea of crossed Cheque or “account payee” Cheque in section 123 and 123A of the Act,1881 through section 13 of the said Act, which has defined “Negotiable instrument” but interestingly has not made any distinction between crossed Cheque “account payee” or Cheque of other kinds such as ‘bearer Cheque’. Now we need to look through section 123 and 123A of the Act.  Section 123 deals with “Cheque crossed generally” which stated that Where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply, either with or without the words “not negotiable”, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed generally. And section 123A stated the provision as to Cheque crossed “account- payee”, sub-section (1) of which provides a definition of  Cheque crossed “account- payee” and sub-section (2) stated that– When a cheque is crossed “account payee”

  • (a) it shall cease to be negotiable; and
  • (b) it shall be the duty of the banker collecting payment of the cheque to credit the proceeds thereof only to the account of the payee named in the cheque.

Therefore, we need to consider what is the legal implication of these words “when a cheque is crossed ‘account payee’ it shall cease to be negotiable” as stated in clause (a) of sub-section (2) of section 123A to answer the question.


From a mere reading of section 138(1), it is apparent that legislature willfully kept space for any kind of Cheque without making any distinction. So, we should follow them without creating any legal ordeals for our own benefit. The court observed in case of Arif-uz-Zaman vs. State 17 BLC(AD) (2012)170 that, “when a Cheque is crossed ‘account payee’ shall cease to be negotiable means it cannot be negotiated or encashed with any other person except the person in whose favour the same was issued. So, by no means, a crossed Cheque ‘account payee’ loses its character as a negotiable one within the meaning of section 138 of the Act,1881.” Moreover, it was held in the same case that, “the moment a Cheque is dishonoured, either a bearer or crossed Cheque ‘account payee’, for any reason whatsoever including dissimilarity of the signature of the drawer on the Cheque as ‘etc’ used in the heading of section 138, the offence under the section shall be complete and in that case, the payee shall have the liberty to file a petition of the complaint before the competent Magistrate against the drawer of the Cheque, of course, by complying with the proviso to sub-section (1) of section 138.”

Thus, section 123A of the Act creates no bar for the initiating any proceeding under section 138 of the Act,1881. In a nutshell, it can be said that if a Cheque either crossed Cheque or an account payee Cheque become unpaid/dishonoured bearing the signature of the drawer of such Cheque(s) under any ground stated in section 138, will constitute an offence and such drawer will be held liable for non-compliance with the requirements mentioned in section 138.

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1 Response

  1. Md.Shahidul Islam says:

    I give blank cheque to a company without date but a date given under my signature.
    After 3 years they dishonoured my cheque.
    Now it is in case.
    May I get any benefit from this date which was under my signature

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