Is 138 A Criminal Case?

Sections 138 to 142 of the Negotiable Instruments (NI) Act were introduced by The Banking, Public Financial Institutions, and Negotiable Instruments Laws (Amendment) Act, 1988. However, it was discovered that the method offered was onerous and the punishment was insufficient. As a result, the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 was amended further to, among other things, increase the period of imprisonment imposed under Section 138 of the Negotiable Instruments Act.

Section 138 of the NI Act was enacted to instill trust in the efficacy of banking operations and credibility in the business of negotiable instruments.
The legislature's goal is evident from the foregoing. Though largely a civil wrong, cheque dishonor has been given a criminal hue by the introduction of a sentence of imprisonment for cheque dishonor.

Nature of Offence:

The offense under Section 138 of the NI Act is not fully criminal because it is not listed in the Indian Penal Code (IPC), which is the basic criminal legislation in India. Instead, it is a unique provision under the NI Act that deals with negotiable instruments like checks, bills of exchange, and promissory notes.

However, the crime under Section 138 of the NI Act has certain characteristics of a criminal offense. For example, it needs mens rea, or the intent to do the crime. The dishonor of a cheque alone does not constitute a crime; there must be a conscious purpose on the side of the person who issued the cheque to defraud the other party. Furthermore, the punishment for the offense under Section 138 of the NI Act is comparable to that of a criminal crime. The punishment is imprisonment for a duration of up to two years, a fine of up to double the amount of the cheque or both.

The procedure for the trial of violations under Section 138 of the NI Act is likewise comparable to that of a criminal offense. The procedure comprises the submission of a complaint by the aggrieved party, the issue of a summons to the accused, and the conducting of a trial. Another characteristic of the offense under Section 138 of the NI Act that renders it quasi-criminal is that it is compoundable. This implies that the parties can reach an agreement and the complainant can withdraw the lawsuit if certain requirements are met.

In the case of Kaushalya Devi Massand vs Roopkishore Khore [(2011) 4 SCC 593], the Supreme Court said unequivocally that an infraction under Section 138 of the Negotiable Instruments Act, 1881 is essentially a civil wrong with criminal undertones.

Furthermore, in the case of P. Mohanraj & Ors vs Shah Brothers Ispat Pvt Ltd. [AIR 2021 SC 1308], the Supreme Court stated that a Section 138 proceeding is a "civil sheep in a criminal wolf's clothing," because it is the victim's interest that is sought to be protected, with the larger interest of the State being subsumed in the victim alone moving a court in cheque bouncing cases.

Section 138 procedures are civil suits disguised as criminal cases. In the instance of cheque dishonoring, the legislative goal appears to be both punitive as well as compensating and restitutive. The entire Chapter XVII of the NI Act, titled 'Of penalties in case of dishonor of certain cheques for insufficiency of funds in the accounts,' is a unique exercise that bears the dividing line between civil and criminal jurisdictions and provides a single forum to enforce a civil and criminal remedy. [R. Vijayan vs. Baby (2012) 1 SCC 260].

Based on the foregoing, it is fair to say that the proceedings under Section 138 of the NI Act are unique. Even though it stems from a civil issue, it may end in criminal charges. Even if the legislation is penal, its spirit and goal are to pay compensation and secure restitution, which must take precedence over punishment [Dayawati vs Yogesh Kumar Gosain (MANU/DE/31732017)].

Conclusion

The crime under Section 138 of the NI Act is quasi-criminal. While it is not a fully criminal offense, it shares several characteristics with one, such as the men's rea requirement and comparable penalties and trial procedure. Because of the one-of-a-kind character of the violation, it is critical to understand the legal ramifications of sending a cheque that bounces owing to inadequate money or for any other reason.

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