How To Get Bail Under Section 138 Of The Negotiable Instruments Act?

Have you received a legal notice regarding a bounced cheque? Did you receive a summons concerning the same issue? Is there an arrest warrant out for you? If so, do not worry too much. However, you may be prepared to understand the legal position. The relevant law is Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonouring of a cheque for insufficient funds. This law is considered a serious offence and can lead to criminal prosecution if nothing is done. However, you may not panic just yet. One important item to remember is that the offence is considered bailable. This means you are able to seek bail, and have a right to bail. This should provide you with some immediate comfort and legal security while proceedings occur. Personally, I suggest being proactive and seeking legal counsel. This will help you in finding out what your next steps are. Your understanding of this legal position at this time could change the outcome significantly. Always respond and do not ignore the legal notice. It costs nothing to respond.

In this article, you will get to know about:

• How to Get Bail Under Section 138 of the Negotiable Instruments Act?
• What is Section 138 of the Negotiable Instruments Act?
• Is Bail Allowed in a Section 138 Case?
• Types of Bail Applicable in Section 138 Cases.
• Key Case Laws.

What Is Section 138 Of The Negotiable Instruments Act?

Section 138 of the Negotiable Instruments Act, 1881 was enacted to promote the credibility of cheques as a trusted negotiable instrument for financial transactions and ensure cheque payments are fulfilled. It provides a legal remedy in the event a cheque is dishonoured by the bank, due to insufficient funds in the drawer's (the person who issued the cheque) account. In the event of dishonour, the beneficiary (the person or entity to whom the cheque was issued) has a cause of action against the drawer of the cheque (the person or entity who issued the cheque).

Legal Definition of the Offence

According to Section 138, an offence arises whenever a person issues a cheque out of their bank account for payment to another person or for their acquittance and the bank returns the cheque, unpaid. This may occur due to a lack of sufficient funds in the account or if the amount presented to the bank is in excess of the overdraft limit allowed. In either case, the cheque being dishonoured is an offence punishable under this provision.

When Section 138 is Invoked?

The following describes the conditions under which Section 138 is applied:

• Cheque Issued for a Debt or Liability: The check must have been written to settle a debt or other obligation that is enforceable by law. This is an important component. In general, a check given as a gift or donation is exempt from Section 138.
• Dishonour Due to Insufficient Funds: The drawer's account having insufficient money or going over the agreed-upon overdraft limit must be the main cause of the check being returned unpaid.
• Demand Notice by Payee: Within 30 days of learning that the check was returned by the bank, the payee must send a written demand for payment of the specified sum to the drawer.
• Failure to Pay by Drawer: The drawer fails to make the payment of the cheque amount to the payee within 15 days of the receipt of the demand notice.

Penalties and Consequences under Section 138

The payee has one month from the end of the 15-day period specified in the demand notice to file a complaint against the drawer in a magistrate's court if all of the previously listed requirements are satisfied. If found guilty under Section 138, the drawer may face the following penalties:

• Imprisonment: For a term which may extend to two years, or
• Fine: Which may extend to twice the amount of the cheque, or
• Both: Imprisonment and fine.  

Furthermore, a conviction under Section 138 can negatively impact the creditworthiness and reputation of the drawer.

Is Bail Allowed In A Section 138 Case?

Yes, absolutely. A violation under Section 138 of the Negotiable Instruments Act results in a bailable offense. The Code of Criminal Procedure (CrPC), 1973 [now replaced by Bharatiya Nagarik Suraksha Sanhita, 2023] schedule outlines two types of offenses, which are bailable and non-bailable.

Bail as a Matter of Right in Bailable Offences

When an individual faces bailable charges, they have a legal right to receive bail according to the legal framework. The law guarantees that any person facing bailable offences can obtain bail after completing the required bail process, even if the court demands sureties. The individual who arrests the accused person or the court that receives the case holds the responsibility to provide bail when the accused offers sufficient security.

When Can Bail Be Granted?

Bail in a Section 138 case can typically be granted at two primary stages:

By the Police Officer (Station Bail)

When the police arrest an individual, the station house officer possesses the power to release them on bail. The practice of releasing an accused person from custody at the police station is commonly known as "station bail." To secure release from custody, the accused must provide a personal bond with or without sureties to pledge court appearances as needed.

By the Magistrate's Court (Regular Bail)

When the police do not arrest the accused person or the accused is not granted station bail then they have the option to request bail from the Magistrate's court. This application typically occurs after the accused either goes to court or gets presented to the court.

Also Read : Cheque Bounce Under Section 138 Of Negotiable Instruments Act, 1881

Types Of Bail Applicable In Section 138 Cases

In the context of a Section 138 case, the primary types of bail that an accused can seek are:

Anticipatory Bail (Section 438 CrPC/Section 482 BNSS)

This bail is for pre-arrest. A person may request anticipatory bail from the Sessions Court or the High Court if they have a legitimate fear of being arrested for an offense for which there is no bail (while Section 138 is bailable, anticipatory bail is occasionally requested as a precaution or because of particular circumstances). Although it isn't technically required for a bailable offense, it might give comfort and keep someone from getting arrested. However, unless there are special circumstances, judges are typically reluctant to issue anticipatory bail in cases involving bailable offenses.

Station Bail (Section 436 CrPC/Section 478 BNSS)

As previously stated, this is bail that is given by the police officer in charge of the station when the accused is arrested for a crime for which bail is available. To ensure their release, the accused must provide a personal bond and occasionally sureties.

Regular Bail (Section 437 CrPC/Section 480 BNSS)

Following the filing of the complaint under Section 138, the accused must appear or be produced before the court, and the magistrate's court will issue this bail. When the accused provides a bail bond and sureties as judged necessary, the court will typically grant bail based on the offense's bailable nature.

Procedure To Get Bail Under Section 138

The procedure to obtain bail in a Section 138 case is generally straightforward due to its bailable nature.

Step-by-Step Process

1. Apprehension of Arrest or Receipt of Summons: If you anticipate arrest or have received a summons from the Magistrate's court in a Section 138 case, the first step is to consult with a lawyer experienced in such matters.
2. Station Bail (If Arrested): If you are arrested by the police, inform the police officer that the offence under Section 138 is bailable and request to be released on station bail. You will need to execute a personal bond, promising to appear before the Magistrate when required. The police officer may also ask for one or more sureties (persons who will guarantee your appearance).
3. Applying for Regular Bail (If Not Arrested or Station Bail Refused): If you were not arrested or if station bail was refused (which is uncommon in bailable offences without valid reasons), your lawyer will file a bail application before the Magistrate's court where the complaint is pending.
4. Filing the Bail Application: The bail application will typically include details of the case, your personal information, and an undertaking that you will abide by all the conditions imposed by the court.
5. Submitting Supporting Documents: Along with the bail application, certain documents will need to be submitted (listed below).
6. Hearing on the Bail Application: The Magistrate will hear the arguments presented by your lawyer and the public prosecutor (if present). Given that Section 138 is bailable, the court will generally grant bail unless there are specific reasons to believe that you will abscond or tamper with evidence (which are usually not strong grounds in such cases).
7. Furnishing Bail Bond and Sureties: Once the bail is granted, you will need to execute a bail bond, which is a written undertaking to appear before the court on all dates fixed for the hearing. The court may also require you to provide one or more sureties – individuals who will stand guarantee for your appearance and may be required to deposit a certain amount if you fail to appear.
8. Release on Bail: After the bail bond is accepted and sureties (if any) are verified, the court will issue a release order, and you will be released from custody (if arrested).

Documents Required for Bail

The documents typically required for a bail application in a Section 138 case include:

• Copy of the Complaint and Legal Notice: To understand the allegations.
• Copy of the Summons or Warrant (if received).
• Your Identity Proof: Aadhar Card, PAN Card, Voter ID, Passport, Driving License.
• Your Address Proof: Ration Card, Electricity Bill, Bank Statement.
• Details of Sureties (if required): Identity and address proof of the persons willing to stand as surety.
• Their Financial Standing Proof (if required): Documents to show that the sureties are financially sound (e.g., bank statements, salary slips, property documents).
• Affidavit by the Accused: A sworn statement undertaking to abide by the conditions of bail.
• Any Other Relevant Documents: As advised by your lawyer.

Grounds On Which Bail May Be Denied Or Delayed

While bail is a right in bailable offences like Section 138, there can be exceptional circumstances where the court may deny or delay the grant of bail. These grounds are generally invoked when there is a credible apprehension of:

• Absconding: If the court believes that the accused is likely to flee from justice and not appear for future hearings. However, in Section 138 cases, where the accused often has roots in the community and the offense is primarily financial, this is usually not a strong ground for denial.
• Tampering with Evidence: If there is a reasonable apprehension that the accused may try to influence witnesses or destroy evidence. Again, this is less likely in Section 138 cases where the evidence is primarily documentary (bank records, legal notices).
• Committing Further Offences: If the accused has a history of similar offences or there is a strong likelihood of them committing further offences.
• Threatening Witnesses: If there is a concern that the accused might threaten or intimidate the complainant or other witnesses.

Can Bail Be Cancelled In Section 138 Cases?

Yes, even after bail has been granted in a Section 138 case, it can be cancelled by the court under specific circumstances. The grounds for cancellation of bail are generally similar to the grounds for denial of bail after it has been granted. These include:

• Violation of Bail Conditions: If the accused violates any of the conditions imposed by the court while granting bail (e.g., failure to appear for hearings, leaving the jurisdiction without permission).
• Tampering with Evidence or Witnesses: If it is established that the accused is trying to influence witnesses or tamper with evidence after being released on bail.
• Absconding: If the accused is found to be absconding or making preparations to flee from justice.
• Committing Further Offences: If the accused commits another serious offence while on bail.

Tips To Get Bail Easily In Section 138 Allegations

Given the bailable nature of the offence under Section 138, obtaining bail is usually not overly complicated. However, following these tips can help ensure a smoother process:

• Consult a Lawyer Immediately: As soon as you receive a legal notice or apprehend arrest, consult an experienced lawyer specializing in Negotiable Instruments Act cases.
• Cooperate with the Police (If Arrested): Do not resist arrest and cooperate with the police procedures. Inform them that the offence is bailable and request station bail.
• Be Prepared with Documents: Keep all necessary identity and address proofs readily available. If sureties are likely to be required, have their details and financial documents prepared as well.
• Execute the Bail Bond Promptly: Once bail is granted, ensure that the bail bond is executed without delay.
• Provide Reliable Sureties (If Required): If the court asks for sureties, ensure that they are respectable individuals with proper identification and financial standing, who can assure the court of your appearance.
• Undertake to Abide by Court Conditions: Be prepared to give a clear undertaking that you will attend all court hearings and comply with any other conditions imposed by the court.
• Maintain a Respectful Demeanour in Court: Show respect for the court and the legal process.
• Follow Your Lawyer's Advice: Your lawyer is your best guide through the legal process. Follow their instructions carefully.

Key Case Law Supporting Bail As A Right Under Section 138

A few case laws are:

Dilip S. Dahanukar v. Kotak Mahindra Co. Ltd.

In the case of Dilip S. Dahanukar v. Kotak Mahindra Co. Ltd., the Supreme Court recognized that the offense was bailable in this instance involving the compounding of offenses under Section 138, which affected the factors taken into account for both settlement and compounding.

Parties

• Appellant: Dilip S. Dahanukar (Chairman of M/s. Goodvalue Marketing Co. Ltd., Accused No. 2 in the trial court).
• Respondents: Kotak Mahindra Co. Ltd. (Complainant) and Another (likely the State).

Issues

1. The Appellate Court maintains the authority to establish a mandatory deposit requirement for appellants who contest their Section 138 NI Act 1881 conviction while securing sentence suspension against compensation payments ordered by the Trial Court.
2. The protection of the fundamental right to appeal under Article 21 of the Constitution faces potential limitations due to this condition.
3. The analysis of Section 357 from the Code of Criminal Procedure 1973 focuses on the question of automatic sentence suspension regarding both fine and compensation during appeal registration.

Outcome

The Supreme Court has partially approved the appeals. Appellate Court’s power to suspend sentences includes the authority to require deposit of a reasonable portion of compensation amounts according to the Court's decision, which protects the statutory appeal right under Article 21. The imposed condition must remain at a level that is fair and not excessively burdensome to the appellant.

Judgement

The Supreme Court held that:

• The right to appeal is a statutory right and also a fundamental right under Article 21, especially when it concerns personal liberty. This right cannot be interfered with or subjected to arbitrary or unreasonable conditions.
• However, a distinction exists between a sentence of fine and an order of compensation under Section 357(3) of the CrPC (when fine does not form part of the sentence). While the realization of a fine might be stayed pending appeal under Section 357(2), this does not automatically apply to compensation ordered under Section 357(3).
• The Appellate Court, in exercise of its inherent powers and the interest of justice, can direct the deposit of a part of the compensation amount as a condition for suspending the sentence, but this amount must be reasonable and not defeat the right to appeal. The Court should consider the convict's ability to pay.
• The Court did not find the condition of depositing ₹5 lakhs each by the appellants (in the specific facts of the case as noted by the Bombay High Court) to be unreasonable at the stage of admitting the appeal against a compensation order of ₹15 lakhs.

Indian Bank Association & Ors. vs. Union of India & Anr.

The case Indian Bank Association & Ors. vs. Union of India & Anr. is a significant judgment concerning the expeditious disposal of cases under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheques). Here's a breakdown in the requested format:

Parties

• Petitioners: Indian Bank Association (an association of banks and financial institutions) and two member banks, Punjab National Bank and another.
• Respondents: Union of India and another (likely the relevant government ministries/departments).

Issues

The core grievance that the petitioners highlighted was the huge delay in the disposal of complaints under Section 138 of the Negotiable Instruments Act filed in courts across India. They sought the following directions from the Supreme Court:

• To issue appropriate guidelines for summary trial of section 138 complaints under Section 143 of the NI Act, read with Sections 261 to 265 of the CrPC.
• Issue a writ of mandamus ensuring compliance with these guidelines in all competent courts.
  Direct respondents to take up the necessary policy and legislative changes for the speedy disposal of cheque dishonour cases.

Outcome

Many of the guidelines and directions provided by the Supreme Court in regards to the urgent disposal of Section 138 cases in order to preserve the sanctity of cheque transactions and to enable smooth commercial movement.

Judgment

The Supreme Court determined that there was a need for a uniform procedure for the summary trial of cases arising out of Section 138 of the Negotiable Instruments Act which allows for a mandatory summary trial in matters that are not triable by jury as follows:

• Mandatory Summary Trial: Courts should ordinarily, for all complaints under Section 138, follow the procedure for summary trial as outlined in Sections 262 to 265 of the CrPC, along with Section 143 of the NI Act.
• Recording the Evidence: The Court held that the evidence should be recorded by the Magistrate in substance and the judgment brief following the guidance within Section 264 of the CrPC in summary trials.
• Conversion to Summons Trial (Exception): converting a summary trial into a summons trial should be the exception and only in cases where the Magistrate finds it necessary in the interests of justice having recorded his reasons for proceeding the way he did.
• Affidavit Evidence: The Court permitted the complainant to give evidence by affidavit and the Magistrate could call for the deponent to be cross-examined if necessary.
• Strict Adherence to Timelines: The court expressed the hope that the trial courts would make a serious effort to conclude the proceedings within six months from the date of filing the complaint.

Conclusion

Facing legal action under Section 138 of the Negotiable Instruments Act for a bounced cheque can be quite alarming. Fortunately, this is a bailable offence, which means that you have the option to secure bail and leave custody the same day. Knowing the process and what your legal rights are can help alleviate much of the initial anxiety you face. If you can make the proper choices early on, it will help you feel more confident about handling the situation correctly. In order to obtain bail, commence by ensuring you have all of the documents you need and follow the authorities' instructions. Most people facing a charge under section 138 can obtain bail with little difficulty, if they follow the proper procedures. I would strongly advise anyone to get a properly qualified lawyer involved as soon as possible. He will help you to avoid making a serious error. Lawyers can ensure you to protect your rights throughout this process because timely and informed decisions will make a huge difference.

FAQs

A few FAQs are:

Q1. Is Section 138 of the Negotiable Instruments Act a bailable or non-bailable offence?

Section 138 of the Negotiable Instruments Act is a bailable offence.

Q2. What does it mean that Section 138 is a bailable offence?

It means that if a person is arrested for an offence under Section 138, they are entitled to be released on bail by the police officer or the court upon furnishing a bail bond and sureties (if required). Granting bail is generally a matter of right in bailable offences.

Q3. Can I get bail from the police station if I am arrested under Section 138?

Yes, if you are arrested by the police for an offence under Section 138, the officer in charge of the police station can grant you "station bail" upon you executing a personal bond and providing sureties (if asked for).

Q4. What if the police refuse to grant station bail in a Section 138 case?

While uncommon, if station bail is refused without valid reasons, you can apply for regular bail before the Magistrate's court where the complaint has been filed.

Q5. What documents are usually required to get bail in a Section 138 case?

Common documents include a copy of the complaint and legal notice, identity and address proof of the accused and sureties (if required), their financial standing proof (if required), and an affidavit by the accused.

Disclaimer: The information provided here is for general informational purposes only and should not be construed as legal advice.

For personalized legal guidance, please consult with a qualified civil lawyer.