The object of introducing Section 138 in the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) is to enhance the acceptability of cheques in the settlement of liabilities. The drawer of cheque is made liable to prosecution on dishonor of cheque with safeguards to prevent harassment to honest cheque bearers. The object of the provision is to facilitate smooth functioning of any transaction between the drawer and the bearer. The provision proves out to be very helpful and indeed necessary as there were several cases of frauds and it was high time that people were made to realize the seriousness of issuing a cheque as a financial instrument. Dishonor of cheque not only causes incalculable loss, injury and inconvenience to the payee but also brings a huge setback to the credibility of business transactions involved therein. Read More