Open Access Research Article
NEGOTIABLE INSTRUMENTS ACT AND DISHONOUR OF CHEQUE
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Article Details
NEGOTIABLE INSTRUMENTS ACT AND DISHONOUR
OF CHEQUE
AUTHORED BY - ASHWINI DATTATREYA
DAGADE
Modern Law College,
Ganeshkhind, Pune, Maharashtra 411007
Academic Year 2022-23
Ll.M. 2nd Year
Introduction
The dishonour of cheque mainly
happens because most of the people are not aware of creating and operating our
bank accounts and the services given by the banks. That is the main reason that
we make minor mistakes while writing the cheque. So, it becomes important for us
to know about the exact meaning of the banking terms to safe our money and to
protect our cheque of being rejected by the banks. Section 138 of Negotiable
Instruments Act deals with the punishment and Meaning of dishonour of cheque. First, let’s know about the
Drawer, drawee and
payee which are the parties in the case of Cheque. The person who has a bank
account and writes or
draws the cheque of his bank is known as Drawer. The bank is known as the
drawee and the person to whom the cheque is payable is known as Payee.
Meaning of Dishonour of cheque
When the cheque is rejected or
dishonoured by the bank, the bank issues the receipt, which is called Cheque
return Memo and dishonoured check to the payee of the cheque. The payee can
resubmit the cheque within 3 months, after resolving the issues with the
cheque. Also, the Payee has to give the notice to the drawer of the cheque
within the 30 days after receiving the Cheque return Memo which is given by the
bank. The notice should contain the point that cheque amount will be paid
within 15 days by the drawer after receiving the notice.
It the Drawer is still failed to pay
the money to the payee within 30 days after receiving the notice sent by the
payee; The Payee has the right to file a criminal case against the Drawer under
section 138 of Negotiable Instruments Act.
Section 138 of Negotiable Instruments
Act, 1881
According to Section 138 of
Negotiable Instruments Act, if a cheque which is given to Payee by the Drawer, drawn by the drawer on the
account maintained by him with a bank, is returned by the bank unpaid, either the reason is
insufficient of money in the account or the cheque exceeds the amount to be paid from that account
by an agreement between Drawer and bank,
the Drawer shall be recognized as the accused of committing the crime of
Dishonour of cheque and shall be
punished with the imprisonment, which can be extended upto 2 Years, or
fine which can be extended to two times
of the amount given in the Cheque or Both.
The condition is, the cheque must be
presented in the bank within the 6 months from the date when the cheque was
drawn by the Drawer or within the period of the validity of the cheque.
Reasons for the dishonour of Cheque
If you have written everything mentioned above, then your cheque
is dishonoured due to any of give reason:
1. Insufficient funds: – it is a very common reason due to
which the bank refuses to accept the cheque because of insufficient balance in
your account. Let’s make it easy to
understand, You write a check with the amount of one lakh because you know that your salary which is 2
lakh will be credited shortly into your
account but due to some reasons, salary is not credited to your account
and in the meantime, payee tries to
apply the check into your account, the bank will dishonour the check because of the
insufficient amount.
2. Different Amount in Words and
Figures: – if you
have written the different amount in words and figures, the bank will dishonour
the cheque.
3. Signature Differ: – if your signature is not correct or
doesn’t match with the specimen available in the bank.
4. Alterations / Overwriting on cheque:
– bank will not
accept the cheque which is altered or overwritten.
5. The cheque is Post Dated: – postdated cheque means the date
written on the cheque is yet to come. Let’s take an example, you have written
the date 1st November 2021 on the cheque, but the payee present in for payment
on 29th October 2021, the cheque will not be accepted by the bank.
Cases of Dishonour of Cheque
1) Birendra Prasad Sah v. State of Bihar and Others (2019 7
SCC 273) In the case of Birendra Prasad Sah v. State of Bihar and Others
(2019 7 SCC 273), the appellant served a legal notice within 30 days of receipt
the memo of dishonour. As a result, the proviso (b) to section 139's
requirement was met. The respondent claimed that he was not served with the
legal notice. The appellant specifically claimed in the complaint that despite
numerous requests to the Postal Department, no acknowledgement of notice was
provided. As a result, the appellant had no choice but to issue a second
notice. The Court held that the first notice formed the cause of action for a
complaint under s.138 since it had to be issued within the time limit.
2) K Bhaskaran v. Sankaran Raidhyan
Balan (1999) 7 SCC 510
K Bhaskaran v. Sankaran Raidhyan Balan, reported in (1999) 7 SCC
510, the Apex court held that a crime under section 138 of the Act can only be
committed by concatenating several acts. 1. The Cheque Drawing
2. The
presentation of cheque to the bank
3. The drawee
bank's unpaid cheque is returned to the sender.
4. giving written notice to the cheque drawer requesting payment
of the cheque amount 5. The drawer's failure to make within 15 days of receipt
the notice these elements combine to form the crime of cheque dishonour.
Conclusion
The law related to Negotiable
Instruments is a law of commercial world that was enacted to facilitate trade and commerce by providing
for the sanctification of a credit instrument that would be deemed convertible into money and
easily transferable from one person to another.
In absence such instruments, trade and commerce activities were expected
to affected, as it was not practical for
the trading community to continue using the bulk of the currency in force.
The Act's key objective is to
legalize the instruments covered by it can be passed from hand to hand through negotiation, just like any other
good. Though the penal provisions have served to reduce the issue of cheques in a lighthearted
or playful manner, or with a dishonest intention, the trading community today feels more
comfortable in receiving payment by cheques.
Article Information
NEGOTIABLE INSTRUMENTS ACT AND DISHONOUR OF CHEQUE
Authors: ASHWINI DATTATREYA DAGDE
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/07/25
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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