Dishonour of cheque

The drawer is liable for legal action by the holder u/s 138-147 of NI Act (w.e.f
01.04.89) incase of dishonour of cheque. In this context which statement is
incorrect with regard to holder to proceed against the drawer under this
section

If a cheque is dishonoured, the drawer is liable for legal action by holder, u/s 138-147 of
NI Act (wef 01.04.89) where:
1. Cheque is issued to discharge a liability (for gift cheque not liable).
2. Cheque presented within validity period (max restricted to 6 months/ 3 months from
1st April 2012)
3. Dishonour is due to insufficiency of funds or even for stop payment or closure of
account.
a) The cheque should have been issued for discharge of lawful liability
b) Cheque should be returned with the reason 'insufficient balance' but due to different
judgments of Supreme Court reasons like Refer to drawer, A/cclosed, Exceeds
arrangement, Payment stopped by drawer and effects not clear are treated equal to
insufficient balance.
c) The payee or holder in due course should give notice to drawer within 30 days of
return of , cheque with the reason 'insufficient balance' and demanding payment within
15 days of his receiving information of dishonour.
d) The drawer can make payment within 15 days of the receipt of notice and only if he
fails to do so prosecution could take place.
e) The complaint is to be made within one month of the cause of action arising i.e, expiry
of notice period.
f) Summary Proceedings: Fine upto Rs, 5000 or imprisonment upto 1 year or both.
g) Regular Proceedings: Punishment is fine upto double the amount of cheque or
imprisonment upto 2 years or both.