ACTION POINTS PROCEEDINGS UNDER SECTION-138 OF N.I.ACT,1881

ACTION POINTS

PROCEEDINGS UNDER SECTION-138 OF N.I.ACT,1881

IN CASE OF POST DATED CHEQUE (PDC)TAKEN AS SECURITY FOR LOAN

1. Branch should present the Cheque for payment within its validity.

2. If the Cheque is dishonored, please ensure following steps before initiating legal action.

a. First, the Branch has to send a Demand Notice to the drawer of the cheque within a

period of 30 days from the date of receiving the information from the Branch/Bank

regarding the return of the cheque as unpaid.

b. The Demand Notice should contain all the relevant facts, such as:-

(1). The nature of transaction. (2). Amount of Cheque. (3). Date of depositing the cheque

in the Branch/Bank. (4). Date of dishonoring of the cheque. (5). The drawer has to be

advised to pay the cheque amount within 15 days.

3. In case the notice could not be served for any reason within a period of 30 days, the

Branch/Bank has to re-submit the Cheque for payment within the period of validity of the

Cheque. If the Cheque is dishonored again, the procedure as laid down above, to be

followed.

4. The drawer of the Cheque need to make payment within a period of 15 days from the

days of receipt of notice. If the borrower fails to make payment within 15 days from the

date of receipt, the Branch/Bank can file a complaint in the Judicial Magistrate First Class

Court. The complaint should be filed within a period of 1 month from the date of

expiry of above mentioned 15 days period.

5. If the Branch/Bank fails to file the complaint within the period of 1 month, the same will

become time-barred and hence, may not be entertained by the court.

6. On receiving complaint, along with an affidavit and relevant papers, the court will issue

summons and hear the matter.

7. If the court finds the Drawer guilty, the court may award punishment which may extend to

two years imprisonment or with fine which may extend to twice the amount of Cheque or

with both.

8. In view of the above, when any Branch/Bank keeping PDC for any loan, it is required that

the concerned Branch should maintain proper records / registers in respect of the dates of

validity of the Cheques, notice in proper time, evidences of service of notice on the

drawer of the Cheque etc.