UNIT 6-NEGOTIABLE INSTRUMENTS

Objectives:
 The law relating to negotiable instruments was enacted to facilitate trade &
commerce, giving sanctity to instruments of credit that is convertible to money and
that can be passed easily from one person to another.
 The source of Indian law related to such instruments is English common law.
 The main object of the Negotiable Instruments Act 1881, is to legalize the system by
which the instruments could pass from one person to another like any other goods.
 The purpose of the Act was to present an orderly & authoritative statement of the
rule of law relating to negotiable instruments.
 Negotiable Instrument consists of two words-negotiable & instrument which literally
means a document which is transferable by delivery.
History:
 In 1866 the Indian Law Commission drafted the Negotiable Instruments Bill which
was introduced in the Council in Dec, 1867.The bill was referred to a select
committee.
 The bill was redrafted in 1877, but still did not reach the final stage & again was
referred to a new Law Commission. On the recommendation of the new Law
Commission the bill was redrafted & again it was sent to a select Committee which
adopted most of the additions recommended by the new law Commission.
 The Bill received its assent on 9 Dec,1881 & came into force on 1882 as the
Negotiable Instruments Act 1881.
Definition:
 “Some instruments used as a money in commercial & monetary transactions are
called negotiable instruments.”
 Negotiable instruments consists of two words “negotiable” and “instruments” which
literally means a document which is transferable by delivery.In other words,
documents having incidence of negotiability are called negotiable instruments.
Therefore, instruments which are negotiable are negotiable instruments.
 “A negotiable instrument is one, the property in which is acquired by anyone who
takes in bona fide and for value notwithstanding any defect of title in the person
from whom he took it.” Justice Willis
Features of N.I:

 In writing
 Negotiability-transferability
 Contract to pay money
  Acquisition of better title
 Legal ownership
 N.I may be payable by order or bearer
 Consideration
Acquisition of a better title

 General principle relating to transfer of property is ‘nemo dat quod non habet’ but
N.I is an exception to this principle. For a person who takes a N.I in good faith & for
value becomes the true owner even if he takes it from a thief or finder, provided the
holder has acquired it in good faith, for consideration, without notice of any defect in
the title of transfer.
 Raephal v. Bank of England-the great element of negotiability is the acquisition of
property by your own conduct not by another’s that if you take it bonafide & for
value nobody can deprive you of it.

CONSIDERATION

 There is a presumption of existence of consideration in a negotiable instrument.

 S 118(a) of the N.I Act provides that every negotiable instrument when it has been
accepted, endorsed, negotiated or transferred was accepted, endorsed or
negotiated for consideration. But this presumption is rebuttable & the person who
contends that there is no consideration has the burden to prove that the instrument
has been drawn, accepted, negotiated or transferred without consideration.
 Tatipmula Nag Raju v. Pattem Padmavati- SC held that in case of tampered
promissory note for which no consideration had ever passed from the plaintiff the
defendant cannot be held liable.
 Yalamanchili Vijaya Kishore v. Petta Brahmannanda Rao.
 Kundan Lal Rallaram v. Custodian Evacuee Property Bombay
 K.P.O Maideen Kutty Haji v. Pappu Manjooran-S.C held that under S118(a) of the Act,
until the contrary is proved presumption shall be that every N.I was made for
consideration.
 S.13 of the N.I Act 1881, Negotiable Instrument include:
 Promissory Note, Bill of Exchange & Cheque.

Promissory Note

 Promissory notes (S 4 of the NI Act)-defines promissory notes as an instrument in

writing (not being a
bank note or a currency note)containing an unconditional undertaking, signed by the
maker, to pay a
certain sum of money only to or to the order of, a certain person or to the bearer of
the instrument.
 Must be in writing
  Must be duly stamped
 There must be an undertaking to pay-express promise to pay.
 Signed by the maker
 The sum must be certain
 Money only
 Parties must be certain

Promise to pay money only

• I promise to pay John ₹5000.

• I acknowledge myself to be indebted to Z in ₹15000 to be paid on demand, for value
received.
• When the instrument contains a promise to pay something other than money or
something in addition to money it will not be a pro-note.

Signature, certainty of Sum

• Without signature the instrument has no effect

• If illiterate, thumb impression is required
• The amount payable by the instrument must be certain (when payment is required
at a particular place, with interest, as per given exchange rate etc) Amount must be
mentioned in words or figures & if there is any discrepancy, amount stated in words
will prevail (S 18)
BILL OF EXCHANGE

 S 5-Bill of Exchange is an instrument in writing containing an unconditional order,

signed by the maker, directing a certain person to pay a certain sum of money only
to, or to the order of a certain person or to the bearer of the instrument.
 Parties to a BOE-drawer, drawee & payee.
Drawer- who draws bill of exchange & orders his debtor to pay a certain sum of
money.
Drawee- the acceptor who is directed to pay under the instrument.
Payee-The person who is to be paid.
 S 3 of Bill of Exchange Act (English) 1882 defines: An unconditional order in writing,
addressed by one person to another, signed by the person giving it requiring the
person to whom it is addressed to pay on demand or at a fixed or determinable
future time a sum certain in money to or to the order of a specified person or to
bearer.
 Essentials-
-In writing
-An order to pay( if it consists an order to pay in spite of being polite or courteous
language it will constitute a bill of exchange)
 -Unconditional order ( an order to pay Rs.50,000 out of the proceeds of sale of a
house, will be a conditional order, hence its not a BOE)
-Money only
-Parties must be certain ( all 3 parties must be certain-but the drawer & payee can
be same)
Drawee must be certain
-Payee must be certain
-bill must be signed & stamped
 5 certainties of a BOE
-Drawer, Drawee, Payee, Order & Sum must be certain

PROMISSORY NOTE

 2 parties-maker & payee.

 Liability of the maker is primary.
 It contains an unconditional promise to pay
 Acceptance- does not require acceptance, from the date of issue it creates privity of
contract between parties.
 Dishonor-Pro-note is dishonored by non payment
 Relationship-Debtor-Creditor relation between maker & payee

Bill of Exchange

 3 parties-drawer, drawee & payee.

 Liability of drawer is secondary & drawee’s liability is primary.
 It contains an unconditional order for payment
 Acceptance of drawee is important without it no privity of contract between the
parties.
 Dishonor can be by non-acceptance & non-payment.
 Debtor-Creditor relation between drawee & drawer.

CHEQUE
 S 6- Cheque is a bill of exchange drawn on a specified banker & not expressed to be
payable otherwise than on demand and it provides the electronic image of a
truncated cheque and a cheque in the electronic form.
 All cheques are Bills, but all Bills need not be cheques.
 In case of cheques the drawee must be a banker; this is the fundamental difference
between a BOE & cheque. Any person (including a banker) can be drawee in case of
BOE, while only a bank can be a drawee in case of a cheque.
Cheque Truncation System
 CTS or image based clearing system (ICS) in India is a project of RBI introduced in
2010 for faster clearing of cheques.
 ‘A truncated cheque’ is one which is truncated during the course of a clearing cycle,
either by the clearing house or by the bank immediately on generation of an
electronic image for transmission, substituting the further physical movement of the
cheque in writing.
 ‘Cheque in the electronic image’ means a cheque which contains the exact mirror
image of a paper cheque & is generated, written & signed in a secure system
ensuring the minimum safety standards with the use of digital signature &
asymmetric crypto system.
Advantages
 Time, money & man power is limited
 Clearing related frauds become less
 Probability of cheques misplaced in transit is eliminated
 Provides quicker clearance
 Reduces operational risk & risk related to paper clearing
 No extra charges levied for collection of cheques drawn on banks located within the
grid & no geographical restrictions.
Difference between Cheque & BOE
Cheque
 Drawee is always the banker
 Always payable on demand
 Acceptance-acceptance of drawee bank not required
 Always drawn on funds of the drawer
 Crossing can be done
 No stamping required
 Cheque can be countermanded(payment can be forbidden)
 Printed form, truncated cheques, digital signature
 Validity period-3 months
  Post dated cheques ,stale cheques can be revalidated

BOE
 Drawee can be any one including banker.
 Payable on demand and otherwise, i.e, after a fixed period
 Requires acceptance of the drawee
 No funds of the drawer in the hands of the drawee
 No crossing
 Stamping required
 Bill cannot be countermanded
 No such provisions
 No provision
 Not so.
Types of Cheques
1. Bearer cheques- sec 13 read with sec 85 (2) of NI ACT
 Cheques which are not crossed
 Payable to the presenter of the cheque
 A bearer cheque cannot be converted to order cheque (once a bearer, always a
bearer)
2. Order cheque- payable to payee or order.
3. Blank cheque
4. Stale cheque- more than three months old
5. Mutilated cheques
6. Post dated cheques-stop payment of post dated cheques.
7. Gift cheques
8. Travellers cheques
9. Electronic cheques- mirror and truncated
10. Open cheques
11. Crossed cheques

Payable to order/ bearer

 Payment of order instrument has to be made to the person concerned only or to his
order, any other person in case of endorsement. The identity of such person has to
be verified and established at the time of payment.
 Bearer is one who bears or carries; payment of bearer instrument is very easy as it
requires no verification or identification of the person receiving it.
Once a bearer, always a bearer

 Where a cheque is originally expressed to be payable to bearer, the drawee is

discharged by payment in due course to the bearer thereof, notwithstanding any
endorsement appearing on it that excludes further negotiation.
 This was added by Amendment Act 1934, & provides a protection to the banker.
 The necessity of the Amendment had arisen out of a Bombay High Court ruling that
held that a bearer bill can legally be changed to an order bill by endorsement.(Forbes
Campbell & Co. v. Official Assignee of Bombay)
Crossing of cheques (S 123-131)
 Open cheque can be encashed by unauthorized persons, when the cheque gets lost
or stolen, the finder may encash it at the drawee bank.
 Crossing of cheques affords security & protection to the true owner since payment is
made to the account & it can be easily detected as to whose account money has
been credited. It thus reduces the danger of unauthorized persons getting the
cheques & encashing them.
What is crossing?
 Drawing of two parallel transverse lines of the face of the cheque is called crossing of
cheque.
 The function of crossing of cheque is that such cheques cannot be paid at the
counter of the bank & they are deposited through the bank for collection & after
collection the amount is credited in the account.
 Role of two banks-paying & collecting bank.
Types of crossing
1. General Crossing- Sec 123
 Also called as simple crossing
2. Special Crossing- Sec 124
 Cheques bears in its face the name of the banker, the cheque is crossed specially and
to be crossed to that banker.
Transfer & Negotiation
 The word ‘transfer’ is used to all movable & immovable property in relation to
Transfer of property Act but the word ‘negotiation’ is used in relation to N.I Act.
 N.I are an exception to the general principle of transferability-’Nemo dat quod not
habet’
 N.I can be transferred by delivery or by endorsement and delivery thereof.
 Therefore a person in possession of N.I may transfer(title) to the person receiving
the instrument even when the former is acting in fraud of the true owner or he may
not be the owner of it.
 The function of the term negotiation is to transfer them to any person so as to
constitute that person as holder thereof.
 So there must be an intention to make that person holder & when it is missing
simply handing over will not constitute Negotiation.
Who is a Holder?
 A person who claims to be the holder should be entitled in his own name to the
possession of the instrument and has the right to receive the amount. (in the
capacity of the payee or endorsee)
 The person who received the instrument through forgery or by fraudulent method
cannot be a holder.
 In case of an instrument payable to bearer, the person to whom it is delivered
becomes the holder.
 Instrument payable to order, once endorsed & delivered to the endorsee, endorsee
becomes the holder.
 S. 8 of the N.I Act defines holder as-any person entitled in his own name to the
possession thereof and to receive or recover the amount due thereon from the
parties thereto.
 Where the N.I is destroyed, its holder is the person so entitled at the time of such
loss or destruction. Definition gives emphasis on ‘possession’. It means any person
who is entitled to the possession of the instrument in his own name is the holder
thereof.
 Conditions: possession under legal title, right to receive or recover the amount due
thereon from the parties, right to enforce rights in his own name.
 A thief or finder cannot be holder. Ex: Rema steals a cheque from Renu. Rema is not
the holder and Renu will continue to be the holder of that cheque.
Rights of Holder
 Right to possession of the instrument
 Right to receive & recover the amount due therein
 Right to endorse the instrument
 Holder in Due Course
 A person who takes an instrument ‘in good faith & for value ‘becomes the true
owner & is known as holder in due course.
 Swan v. North Branch Reader Co- It was held that a person taking a N.I in good faith
& for value obtains a valid title though he takes from one who had none.
 Conditions: possessor of the N.I or payee or endorsee of the N.I & for consideration,
before maturity without notice & in good faith.
 Whether original payee can be holder in due course?
 S.9 of the N.I defines holder in due course-’Holder in due course means any person
who for consideration became the possessor of the pro-note, BOE or cheque if
payable to bearer or payee or endorsee thereof, if payable to order, before the
amount mentioned in it became payable & without having sufficient cause to believe
that any defect existed in the title of the person from whom he derived his title.
 When A issues a cheque in favor of B, that does not bear the words ‘not negotiable’
& if C steals it from B and endorses it to D, who receives it for value, in good faith
without having the idea that the cheque is stolen by C from B.D is the holder in due
course in this example and he will acquire a good title.
Privileges
 Possess better title- free from all defects if acquired in good faith & for consideration
 Liability of prior parties to holder in due course
 Rights in case of incomplete instruments, fictitious bills, obtained by unlawful means
or for unlawful consideration
 Estoppel against denying capacity of payee to endorsee
 Prosecution in case of dishonor.
Modes of Negotiation
 By delivery where the bill is payable to bearer.( S 47)
 By endorsement & delivery where bill is payable to order.(S 48)
 Negotiation becomes complete only by delivery.(=voluntary transfer of possession
from one person to another)
 Delivery can be actual or constructive
Endorsement
 S 15-signing the name of the endorser on the back of the instrument & if it is already
full, then endorsement is signed on a slip of paper annexed to the instrument
(allonge)
 Endorsement can be made either on the face of the instrument, back, a slip annexed
to it or on a stamp paper.
 The cheque is normally payable to payee or bearer. In case the payee is not able to
go to the bank’s branch & get payment, he can authorize another person to receive
the amount from the bank. This authorization is called as endorsement. For this
purpose payee will sign on the back side of the cheque. His signature on the backside
is known as endorsement; he is called as endorser; the person to whom the cheque
has been endorsed is the endorsee & the cheque is called as an endorsed cheque.
Example:
 A buys goods from X and re-sells the goods to B, then B owes to A for the supplies &
in turn A has to pay X for the goods purchased.
 B issues a cheque in favor of A
 If the cheque is simply crossed then A can endorse the cheque in favour of X.
 Instead of two separate transactions both the liabilities get extinguished by a single
cheque.
 X may present the cheque & get the proceeds credited to his account.
 An account payee crossed cheque or not negotiable crossed cheque cannot be
endorsed.
Features-Validity
 Place of Endorsement
 Purpose
 Signature
 Delivery after Endorsement
 Endorsement of the whole amount of the instrument
 Endorsement by an authorized person
 Endorsement must contain an order to pay
 Maker or holder can Endorse
Types
 Blank Endorsement
 Full Endorsement
 Restrictive or Conditional Endorsement
 Whole or Partial Endorsement
 Facultative Endorsement
 Effect- Endorsement of a N.I followed by delivery transfers to the endorsee the
property therein with the right of further negotiation.

Endorsement-Effects
 Crossed cheques are not payable over the counter, amount is credited to the bank
account of the payee.
 Crossed cheque (which is not crossed as A/c payee only) can be endorsed further by
the payee in favor of another beneficiary by writing ‘pay to…..’ on the reverse of the
cheque & signing. The cheque can be endorsed any number of times.
 Law permits proceeds of such cheques to be credited to the account of the
endorsee.
 An account payee crossed cheque or not negotiable crossed cheque cannot be
endorsed.
Presentment
 A demand by which the holder of the instrument is required to do as per the
direction of the instrument.
 It can be acceptance in case of BOE or payment in case of all instruments.
 Types
-presentment for acceptance
-presentment of promissory note for sight
-presentment for payment
-presentment of cheque to the drawee bank
Presentment of Negotiable Instrument - (lawnn.com)

Dishonour & Notice

 Dishonor by non-acceptance ( S 91)
 Dishonor by non-payment ( S 92)
 Notice of dishonour (S 93)-When a pro-note, cheque or BOE is dishonoured by non-
acceptance or non-payment, the holder thereof or some party thereto who
remains liable, must give notice that the instrument has been dishonoured to all
other parties whom the holder seeks to make liable & to someone whom he seeks
to make severally liable.
Mode of Notice-S 94
 Notice may be given to a duly authorized agent of the person to whom it is required
to be given or where he has died, to his legal representative or where he has been
declared insolvent to his assignee, oral or written, if written, be sent by post;& may
be in any form; but it must inform the party to whom it is given, that the instrument
has been dishonored; in what way he will be held liable & must be given within a
reasonable time after dishonor, at the place of business or at the residence of the
party for whom it is intended.

Noting and Protest

 Noting (S 99)-when a pro-note or BOE has been dishonored by non-acceptance or
non-payment, the holder may cause such dishonor to be noted by a notary public
upon the instrument or upon paper attached thereto or partly upon each.
 Protest (S 100)-when a pro-note or BOE has been dishonored by non acceptance or
non payment the holder may within a reasonable time cause such dishonor to be
noted and certified by a notary public such certificate is called a protest.
Dishonor of cheques(S138-142)
 Before 1988 dishonor of cheques was regarded only as a moral obligation so
dishonor was rampant in the society.
 Dishonor of cheques is now a penal offence; by the insertion of a new Chapter XVII in
the N.I Act 1881, by the Banking Public Financial Institutions & Negotiable
Instruments Laws (Amendment) Act 1988, which came into force on 1989.
 The object of amendment was to encourage the use of cheques and to enhance the
credibility and acceptability of cheques.
 N.E.P.C Mecon Ltd v. Magma Leasing Ltd-S.C observed that the object of bringing S
138 on statute is to inculcate faith in banking operations , to promote the efficacy
of banking operations & to ensure credibility in transacting business through
cheques.
 M/s Modi Cements Ltd v. K.K Nandi-SC explained the object of Chapter XVII, is to
promote the efficacy of banking operations & to ensure credibility in transacting
business through cheques.
 M/s Dalmia Cement (Bharat) Ltd v. M/s Glaxy Traders & Agency Ltd- S 138 makes a
civil transaction to be an offence by introducing a special provision by incorporating
a strict liability in case of dishonor of cheque due to insufficiency of funds.
 Vinay Devanna Nayak v. Ryot Seva Sahkari Bank Ltd-compounding of offence
should not be normally denied.
 Rangappa v. Mohan-offence made punishable under S138 can be regarded as a
regulatory offence since the bouncing of cheques is largely in nature of civil wrong
 whose impact is usually confined to the private parties involved in commercial
transactions.
 Mahanan v. Bhibhuti Kumar –the purpose of S 138 of N.I Act is to usher a new
commercial morality among people.
Justified Dishonour
 For want of sufficient & adequate funds
 In case of stale cheques
 In case of forged cheques
 cheques are mutilated
 cheques are materially altered
 drawer’s signature differs or is forged
 amount of cheque differs in words & figures
 Court prohibits payment from customer’s account under garnishee order
 Death, insolvency, insanity of customer.
 Reasonable suspicion by the drawee bank in case of truncated cheque
 In case of closed accounts.
 Cheques crossed specially more than one
 payment has been stopped by customer
 Endorsement is irregular
 Presentment is not proper
Liability of drawer under S 138
 A person draws a cheque on an account maintained by him in a bank for payment of
a certain sum of money to another person from/out of that account for the
discharge of any debt or other liability.
 Cheque is presented within a period on which it is drawn or within a period of its
validity (earlier of the two)
 Cheque is returned by bank unpaid due to insufficient funds/exceeding the
arrangement between banker and the drawer
Holder in due course/Payee demanded the money, in writing, from the drawer
within 30 days of dishonour by the bank and the drawer failed to make the payment
within 15 days of such notice from the payee/holder in due course
Dalmia Cement vs Galaxy traders
 -Dashrath Roop Singh Rathod vs State of Maharashtra- case is initiated at the place
where the branch of the bank on which cheque is drawn is located
-Ramawati Sharma v. UOI-Sec 138 not violative of Art. 14, 19, and 21
• Complaint against dishonor of cheque should be filed within 1 month from the date
of expiry of the grace time of 15 days before a Metropolitan Magistrate or any
magistrate below the rank of a Judicial Magistrate of the first class.

Sec.138
 Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of that
account, is returned by the bank unpaid because of : the amount of money standing
to the credit of the account is insufficient to honor the cheque or that it exceeds the
amount arranged to be paid from that account by an agreement with that bank.
 Punishment-Such person shall be deemed to have committed an offence & shall be
punished with 2 yrs imprisonment or with fine which may extend to twice the
amount of the cheque or with both.
 Sukanraj Khimraja, Bombay v. N. Raja Gopalan-The cheque on being dishonored
loses its negotiability
Who is liable for Dishonour of cheques?
 A banker may dishonor cheque-
-having insufficient funds in the account of the drawer(valid dishonor)
-having sufficient funds in the account of the drawer (negligence of banker)
 There is privity of contract between the drawer & drawee, such relation does not
extend to the payee or holder of the cheque. So payee or holder has no remedy
against the drawee(banker).
 Venkitasubbaya v. P.R Rao Tobacco Co-a banker to whom a cheque is drawn fails &
neglects to pay the amount against the instrument according to the tenor thereof
when presented to him on the due date, dishonor become complete.
 S 64-a cheque must be presented for payment to the drawee thereof, by or on
behalf of the holder. In default of such payment other parties are not liable to such
holder.
Liability of banker to drawer
 liability in dishonor of cheque extends to the drawer of the cheque against
payee/holder of the cheque & not to the banker except in cases where the banker
dishonor’s cheque without having sufficient cause, having sufficient funds in the
account of his customer, where, he becomes liable to his customer.
 S 31-drawee of a cheque having sufficient funds of the drawer in his hands, must pay
the cheque when duly required to do so & in default of such payment, must
compensate the drawer for any loss or damage caused by such default.
 Liability under the amended provisions extends only to the drawer &even in cases
where the drawer has sufficient funds in his accounts & banker fails or neglects to
pay, banker’s liability arises only against the drawer for any loss or damage caused
by such default & not against the payee or holder in due course.

Conditions for commission of offence

 Sadanandan Bhadran v. Madhavan Sunil Kumar-SC held that these conditions must
be proved successfully to prosecute the drawer for an offence u/s 138
-cheque was drawn for payment on an amount or money for discharge of a
debt/liability & cheque was dishonored.
-payee made a demand for payment of money by giving notice in writing to the
drawer within the stipulated period.
-drawer failed to make payment within 15 days of receipt of notice.
 Rangappa v. Mohan-
 Goa Plast P. Ltd v. Chico Ursula D’Souza- S.C highlighted the ingredients of S 138-
there is a legally enforceable debt, cheque was drawn from the account of bank for
discharge in whole or in part of any debt or liability which presupposes a legally
enforceable debt & the cheque so issued had been returned due to insufficiency of
funds.
 K.R Indira v. Adinaraya
Conditions
1) Issuance of cheque for discharge of Debt or liability-In the absence of debt or
liability, offence under the Act will not be attracted. Existence of debt or liability is
the sine qua non for constituting an offence contemplated under S 138.
-proceedings can be quashed where cheques are not issued to meet legal liability.
-The term liability is used in a wider sense. It is not necessary that the debt should
arise of commercial transaction.
2. Presentment of cheque for payment-In order to attract penal provision under S
138 it is essential that the cheque must be presented for payment to the bank.
 Presentment at drawee bank-Prabhu Dayal Modi v. M/S Euro Developers P Ltd-It
was held that presentment of cheque is the presentation of cheque to the drawee
bank & none-else. Act of returning cheque is contemplated at the place where
drawee bank is situated.
  Public holiday to be excluded.
3.Cheque is returned unpaid by the bank-banker’s statutory liability is subject to
sufficiency of funds in the account of the drawer.
 A cheque can be returned by the banker unpaid on many grounds; but it is only on
the grounds of insufficiency of funds there is a penal liability on the drawer.(earlier
view)
 Insufficiency of funds-amount of money standing to the credit of that account is
insufficient to honor the cheque or it exceeds the amount arranged between the
parties.
 Deemed dishonor (modern view)
 NEPC Micon Ltd v. Magma Leasing Ltd-deemed dishonor also attracts penal
provisions under S 138.
 Stop payment, Account closed ( S 138-140)
 4.Notice of Demand for payment-notice of demand for payment of the said amount
must be given by the payee or the holder in due course in writing to the drawer of
the cheque within 30 days of receipt of information of dishonor from the bank.
 Notice must be in writing, mode of notice is not specified by the Act.
S 142-conditions for taking cognizance of offence
 Upon a complaint-in writing ,by the payee or holder in due course or by any person
on behalf of payee or holder in due course.
 Complaint must be filed within the statutory period of one month-
 To a metropolitan magistrate or a magistrate of first class.
 S 147- compounding of offences. Devenna Nayak v. Sahakari Bank.
 Anil Kumar Haritwal v. Alka Gupta-SC set aside the conviction & sentence in view of
the fact that the dispute was settled & amount due to the complainant had been
paid.
 Damodar S. Prabhu v. Sayed Babalal
 Rajendra v. Nand Lal
 Ritesh Ajmera v. Dainik Bhasker,2019-S.C held that costs not to be imposed if
settlement is reached at the stage of issuance of summons.
 Sec 143- Summary trial- within six months from the date of complaint
 Sec 144- Mode of summons- residence/ place of business/ employment
 Sec 145- Evidence on affidavit
 Sec 146- Bank slips as evidence for dishonour
 Sec 147- Compounding of offences