RESEARCH METHODOLOGY

AIMS AND OBJECTIVES:

Through this paper the researcher aims at understanding the concept of dishonour cheques as
it appears in a new chapter inserted into the Negotiable Instruments Act, 1988. the researcher
has tried to understand as to what is meant by dishonour, who will be liable upon such
dishonour and related questions and issues.
Also the objective of this paper is to see the interface between criminal law and civil law, as
before the amendment dishonour of cheques was a purely criminal law issue, however now it
has been brought out of that purview.
SCOPE AND LIMITATIONS:
The scope of this research paper is understand the concept of dishonour of cheques as it
appears under the Negotiable Instruments Act, also looking at how the position of dishonour
of cheques has been altered in law.
The researcher has limited herself to discussing the substantial law aspects of the paper which
are connected with Banking law and has kept the discussion of the procedural aspects at a
minimum.
METHOD OF WRITING:
The researcher has used both a descriptive and analytical method of writing in order to
understand the issues better. The researcher has also relied on case law, to get an indepth
understanding of the topic.
MODE OF CITATION:
A uniform mode of citation has been followed throughout this project.
SOURCES OF DATA :
The researcher has used secondary sources in order to obtain sufficient data for this project,
namely, books, articles and the internet.

INTRODUCTION
Advent of cheques in the market have given a new dimension to the commercial and
corporate world, its time when people have preferred to carry and execute a small piece of
paper called Cheque than carrying the currency worth the value of cheque. Dealings in
cheques are vital and important not only for banking purposes but also for the commerce and
industry and the economy of the country. But pursuant to the rise in dealings with cheques
also rises the practice of giving cheques without any intention of honouring them.
Before 1988 there being no effective legal provision to restrain people from issuing cheques
without having sufficient funds in their account or any stringent provision to punish them in
the vent of such cheque not being honoured by their bankers and returned unpaid. Of course
on dishonour of cheques there is a civil liability accrued. However in reality the processes to
seek civil justice becomes a long drawn process and recovery by way of a civil suit takes an
inordinately long time. To ensure prompt remedy against defaulters and to ensure credibility
of the holders of the negotiable instrument a criminal remedy of penalty was inserted in
Negotiable Instruments Act, 1881 in form of the Banking, Public Financial Institutions and
Negotiable Instruments Laws (Amendment) Act, 1988 which were further modified by the
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002. This article
attempts to elucidate the penal provision in the light of the amendments and the judicial
interpretations.
Many issues arise under this section such as what happens in case of default, who will be
liable to the holder of the cheque, what are the procedures involved to make the case adept in
the eyes of the magistrate, etc. in this paper the researcher has attempted to look at all these
issues comprehensively and analyse them with sufficient illustrations.

DISHONOUR OF CHEQUES
Amendment to the Act: an interface with criminal law
S. 138 creates a penal liability, it makes a civil transaction to be an offence under law.1
The court has noted that S.138 of the Act has created a contractual breach as an offence and
the legislative purpose to promote efficacy in banking and of ensuring that in commercial or
contractual transactions cheques cheques are not dishonoured and credibility in transacting
business through cheques is maintained.2
Prior to the introduction of this chapter, the drawer of a dishonoured cheque could be
criminally prosecuted under S.420 of the Indian Penal Code. 3However, even today
prosecution under the general for the offence of cheating is maintainable. The offence under
S.138 of the Act and S.420 of the IPC are different in nature, therefore conviction of offence
under one provision does not bar prosecution under the other. The full bench of the Andhra
Pradesh High court has held that when a person issues a cheque or a post-dated cheque, he
impliedly represents to the payee that in the ordinary course of events, the cheque on its
presentation to the bank would be met. In such a circumstance, even with the introduction of
S.138 of the Act, prosecution under S.420 IPC is maintainable if dishonest intention at the
time of the issuance of the cheque is established.4
What then is the advantage of S.138 of the Negotiable instruments Act? What we see is that
under criminal law for a crime of dishonour of cheque to be made out there is need for the
prosecution to first establish dishonest intention on the part of the drawer from the inception
of the instrument. The crime of cheating cannot be constituted if the cheque is dishonoured

OPFaizi, Khergamvala on the Negotiable Instruments Act, 19th

ed ( New Delhi; Lexis Nexis, 2003) at 379.
1

Ibid, at 381.

Herein after referred to as IPC.

OPTS Marketing Pvt. Ltd v. State of A.P., (2001) 105 Comp Cas
794.
4

by itself. Thus failure of the prosecution to prove this element of deception usually led the
court to hold that the matter was of civil nature. Also another problem arising under criminal
law is the necessity to prove the dishonest intention beyond reasonable doubt. 5 Thus S.138
does away with this formalistic rigour of criminal law. If a cheque is dishonoured for paucity
of fund, the offence under S.138 is constituted, notwithstanding the intention of the person
issuing the cheque.
Ingredient of Liability under S.138:
The object of bringing in this section as mentioned above is to inculcate faith in the efficacy
of banking operations and credibility in transacting business on negotiable instrument. The
ingredients which are to be satisfied for making out a case under S.138 of the Act are:
1. The cheque is drawn on a bank for the discharge of any legally enforceable debt or
other liability. This means that the cheque must have been drawn for payment of
money to a person other than the drawer for the full or partial discharge 6 of any
legally enforceable debt or liability. Thus what we see here is that if a cheque was
given merely as a security, then a suit cannot be filed upon that and S.138 will not be
attracted. Also to bring it under the ambit of this section, a cheque should have
presumably been issued and not merely drawn for payment in discharge of a debt.
2. The cheque so dishonoured must have been presented to the drawee/ bank within a
period of six months from the date on which it is drawn or within the period of its
validity, whichever is earlier.7

A.N.Saha, Law of Dishonour of Cheques, 1st ed ( New Delhi;

Orient Publishing Company, 1995) at 3.
5

Since a cheque must be for the full or partial discharge of the

debt, then if it appears that the cheque is for an amount more
than the debt or liability, the section will not be attracted. This
was held in Angu Parameswari textiles (P) ltd v. Sri Rajam & Co,
(2001) 105 Comp Cas 186.
6

Rajesh Gupta, Dishonour of Cheques (Law &Practise), 1st ed

( New Delhi; Bharat Law House Pvt. Ltd, 1996) at 47.
7

3. The cheque is returned by the bank unpaid.

4. The cheque is returned unpaid because the amount available in the drawers account is
insufficient for paying the cheque.
5. The payee has given a notice to the drawer claiming the amount within 15 days of the
receipt of the information from the bank.
6. The drawer has failed to pay within 15 days from the date of the receipt of notice.
7. The offence under this section is not complete till a statutory opportunity is offered to
the drawer of the cheque for making the default good within 15 days of the receipt of
notice to that effect. It is only the failure of the drawer to avail of this opportunity and
meet the demand for the amount of the cheque that becomes the cause of action under
the S.138. This position was laid down in Mahalakshmi Enterprises v. Sri Vishnu
Trading Co,8 and has been deemed to be one of the essential ingredients of this
section.
8. The payee has a limitation period of 30 days, within which he can file a complaint.
Mens Rea:
S.138 excludes Mens Rea by creating strict liability and this is explicit from the words such
person shall be deemed to have committed an offence. The returning of a cheque by a bank
either because the amount of the money standing to the credit of the drawer is insufficient or
the amount covered by the cheque is in excess of the amount arranged to be paid from the

(1993) 77 Comp Cas 249. In this case the accused received a

statutory notice on 24th August 1989 and the complaint was filed
on 5th September 1989. it was held that the limitation would
begin from 9th September 1989 and the complaint was within
time. It would however appear from the clear wordings of S.138
( c) that the cause of action arises only if the drawer fails to make
payment within 15 days of the notice, this is one of the essential
ingredients of the section. In this case, the drawer had till 8th
September 1989 to pay the amount.
8

account by an agreement with the bank are two necessary conditions creating strict liability
which will be discussed in the subsequent section.
S.140 excludes the defence that the drawer had no reason to believe, when he issued the
cheque, that it maybe dishonoured on presentment for the reasons stated in S.138. the
exclusion of mens rea as a necessary ingredient to this section is thus clarified here.9
Having thus touched just the basic aspects of dishonouring of cheques, and laying down its
place in the Act, The researcher will now deal with the offence that is prescribed under the
Section and dealing with the various circumstances that could attract this section.

PENALTIES AND LIABILITIES FOR DISHONOUR

Dishonouring of a cheque:
In order to begin a discussion on the issue of dishonour under the Act, it is important to first
consider the meaning of the term dishonour and what does it constitute. This finds mention in
S.91 and S.92 of the Act.
Dishonour of negotiable instruments may be of two kinds:
1. Dishonour by non-acceptance.
2. Dishonour by non-payment is said to be dishonoured.
S.9110of the Act speaks of dishonour by non-acceptance. What we see from this definition is a
condition of presentment of the negotiable instrument, however presentment for acceptance is
required only in the case of a bill of exchange. Usually acceptance and payment go together
and this usually happens in case an instrument is payable after sight, thus often it is difficult

M.S.Parthasarathy, Cheques in law and Practise, 6th ed (Delhi;

Universal Law Publishing Co. Pvt. Ltd, 2003).
9

to distinguish the two because dishonour by non-payment is usually dishonour by nonacceptance, 11and thus it is only this bill of exchange which can be dishonoured by nonacceptance and not a cheque as in the case of a cheque no acceptance is required to be taken
to the banker and cheques are mainly instruments payable at sight.
The second kind of dishonour, is that of dishonour by non-payment. A negotiable instrument
is said to be dishonoured by non-payment when the drawee of a cheque makes default in
payment upon being duly required to pay the same.12A drawee can dishonour a cheque
Thus it is well established that cheques are always dishonoured only for the reason of nonpayment and not non-acceptance.
Apart from the broad heads mentioned above, cheques can be dishonoured by the banker for
several reasons. (i) payment countermanded, (ii) insufficiency of funds, (iii) non-applicability
of funds, (iv) improper presentation, (v) notice of death of account holder, (vi) courts order
prohibiting payment, (vii) post-dated cheques, (viii) stale cheques, (ix) lunacy, (x) insolvency,
etc. the researcher will proceed to deal with only few of these instances.
Payment countermanded:

S.91 a bill of exchange is said to be dishonoured by nonacceptance when the drawee, or one of the several drawees not
being partners, makes default in acceptance upon being duly
required to accept the bill, or where the presentment is excused
and the bill is not accepted. Where the drawee is incompetent to
contract, or the acceptance is qualified, the bill maybe treated as
dishonoured.
10

11

Jagivan v. Ranchoddas, AIR 1954 SC 554.

S.92 of the Act. It states as follows, A promissory note, bill of

exchange or cheque is said to have been dishonoured by nonpayment when the maker of the note, acceptor of the bill or
drawee of the cheque makes default in payment upon being duly
registered to pay the same.
12

When the drawer of the cheques issues instructions to the bank not to make any payment of a
particular cheque issued by him, the bank then stands revoked from making payment on that
cheque, this is known as countermand of cheques by the drawer. It must be noted here that
any payment by the bank after such notice will not be considered as good payment. When a
drawer wishes to stop payment he must give notice to the Bank, though it is usually the
drawer who gives such notice, however a payee can give a notice to the banker that the
cheque is stolen or lost. In such a case the banker must inform the drawer, so that the latter
can give necessary instructions.13
Insufficiency of funds:
When there are no funds to meet the cheque or the account of the drawer does not hold
sufficient funds to meet the whole credit amount of the cheque, the banker is then justified in
refusing the payment of such a cheque. However where the account has sufficient funds, the
banker is under an obligation to its customer of honouring the cheque presented to it.
A cheque when dishonoured for the purpose of insufficiency of funds, the drawer of such
cheque is liable to penal consequences as under S. 138 of the Act. However there maybe an
agreement to the contrary whereby the banker has undertaken to meet the customers cheques
even though there may not be sufficient funds in his account, then in such a case the banker is
bound to honour the cheque failing which the banker would be liable by way of breach of
contract for an overdraft facility 14and the necessary legal consequences will ensue.
One issue that arises here and has been under constant debate, is that whether a cheque
returned by the banker endorsed with the words refer to drawer would amount to a
dishonour under S.138. after a number of decisions on the point, there has been a sort
consensus on the point and courts have often said that refer to drawer meant nothing but that
the drawer lacked sufficient funds in his account and therefore S.138 would be attracted in
certain circumstances.

S.N.Gupta, Dishonour of Cheques: Liability Civil and Criminal

( Delhi; Universal Book Traders, 1991) at 14.
13

Flemming v. Bank of New Zealand (1990) AC 577, see also

Rayner&Co v. Hambros Banks, (1942) 2 All ER 694.
14

Non-applicability of funds:
Under S.31 of the Act it is the bankers duty to honour the cheque when funds which are
lying in the account of the drawer are applicable for the purpose. Thus when the funds in the
account are lying for other purposes, the will necessarily dishonour the cheque presented
before it for payment. An example of such a situation is when the banker may have a lien
over the funds lying in the account of the drawer under S.171 of the Indian Contract Act.
Another situation might be where the funds in the account of the drawer is meant for a trust
and a cheque is drawn in breach of a trust.
Effects of dishonour of cheque:
Firstly, taking of legal action. The payee/holder can take action against the drawer of such a
bill may take action on the exact time of dishonouring of the bill. Thus the holder need not
wait for the bill to mature and then to take action for dishonouring the same. Secondly, when
a cheque is said to be dishonoured it loses its basic characteristic of negotiability with
immediate effect. Thirdly, on the dishonouring of a cheque, nothing prevents the holder
thereof to present it again particularly on being asked by the drawer of the cheque. Lastly,
under S.138, mere dishonouring of cheques does not give rise to a cause of action in favour
of the complainant but it accrues only after the issue of demand notice and failure of the
drawer to make the payment.
The payee or holder of a cheque has the right to present the cheque for payment for any
number of times and he may have it repeatedly dishonoured, but he can prosecute the drawer
only once.15
Post dated cheques:
Would the above aspects apply to a post dated cheques? A post-dated cheque represents a
mere promise by the drawer to pay at some future date and it represents the holding out of a
hope rather than the representation of a present fact and thus a broken promise is not a
criminal offence though it may amount in certain business relations to discreditable behaviour
on the part of the drawer. However the English law on this issue is different and more logical.

Avtar Singh, Negotiable Instruments, 4th ed ( Lucknow; Eastern

Book Company, 2005) at 364.
15

According to them the drawer impliedly represents that the existing facts at the date when he
gives the cheque to the payee or his agent is such that in the ordinary course the cheque will,
on presentation on or after the date specified in the cheque, be met.
Liability of dishonouring of cheque:
Dishonouring of cheques can be rightfully done or wrongfully done depending on the nature
of the action taken upon the cheque. Here we shall see the various entities which may fall
liable upon the dishonour of a cheque subject to it being a rightful dishonour or a wrongful
one:
Liability of the drawer to the payee:
S.30 of the Act lays down that the drawer is bound to compensate the payee/ holder in case of
dishonour by the acceptor/ drawee.16 Thus what we see here is that the liability of the drawee/
bank is the primary liability and only when the bank fails to honour the cheque, the holder
can then proceed against the drawer. The bank is under a legal obligation to honour the
cheque as long as the drawer has sufficient funds lying in his account in the bank. 17However
it must be noted that in the event of non-compliance by the bank, the payee cannot enforce
any obligation upon it, this is because there is no privity of contract between them, nor any
trust created so as to make the payee a beneficiary thereunder.
Liability of the banker to the drawer:

S.30 of the Act says, the drawer of a bill of exchange or

cheque is bound, in case of dishonour by the drawee or acceptor
thereof, to compensate the holder, provided due notice of
dishonour has been given to or received by, the drawer as
hereinafter provided.
16

S.31 of the Act- the drawee of a cheque having sufficient

funds of the drawer in his hands, properly applicable to the
payment of such cheque, must pay the cheque when duly
required to do so, and in default of such payment, must
compensate the drawer for any loss or damage caused by such
default.
17

The drawee of a cheque is usually a banker and the legal relation between him and the
drawer, that is to say, between the banker and the customer is that of a creditor and a debtor.
The banker who is holding the money of his customer owes a debt to him to the extent lying
in the customers account and the drawee/banker is therefore under an obligation to honour
the cheques of the customer so long as he can meet them from such funds as exist in the
customers account. Thus what we see here is that the drawees liability is towards the drawer
and not the payee. This is simply because there is no privity of contract between the drawee
and the payee and The Act only provides for the liability of the drawee in favour of the
drawer of the cheque as he is an account holder of the drawer and thus there exists a
contract inter se.
The idea was laid down clearly in jagjivan Mavji v. Ranchhodas Maghaji18, which says that
there is no provision as such which makes the drawee liable on the instrument, with the
exception of S.31 of the Act where the drawee must pay if there is sufficient funds in the
account of the drawer. Such a liability arises out of breach of contract in between the banker
and the customer and in the case of wrongful dishonouring of the cheque, the party in breach
of the contract must pay damages which flow from such breach.
It must be noticed that the liability of the drawee however is conditional upon his having in
his hands funds of the drawer sufficient to pay the cheque amount. Apart from this there are
various other situations whereby the banker can rightfully dishonour the cheque and if he
dishonours the cheque for these reasons liability will not fall upon him.
In case of wrongful dishonor the customer can sue for damages. However quantification of
damages depends largely on the creditworthiness of the customer. This is important because
dishonour of a cheque impacts largely the reputation and integrity of a person, more so if the
customer is a well known trader. In almost every case the drawer can recover substantial
damages from the drawee on the basis of the above factors of loss of credit, etc., however it
maybe difficult to award pecuniary damages in such a situation. Thus we see the civil
remedies available in case of dishonouring of cheques, however such civil remedies do not
exclude criminal action as is laid down in the amended chapter of the Act.
Liability in case of forgery:
18

AIR 1954 SC 544.

A banker/drawee has no obligation to pay if the signatures of the customer on the cheque are
forged and has a right to dishonour the cheque on this ground. The bank has the specimen
signature of his customer and it is the duty of the bank to compare the signatures, thus in
doing so if he finds that the signature is inconsistent , then the bank should not honour the
cheque.
There remains a possibility that the cheque presented for payment is not the customers
cheque at all but a forgery, or that this signature is forged, or signed without his authorization.
A banker paying a cheque under these circumstances is not entitled prima facie, to debit the
customers account. The law is that a cheque with the drawers signature forged is a mere
nullity. A landmark case which lays down the law in India is Canara Bank v. Canara Sales
Corporation and ors19,The court held that whenever a cheque purporting to be by a customer
is presented before a bank it carries a mandate to the bank to pay. If the cheque is forged then
there is no such mandate. The bank can escape liability only if it can prove knowledge on the
part of the customer. Thus keeping in view the fact that the banker is bound to know his
customers signature and compare the same, the paying banker will thus have no statutory
protection if he pays a cheque on which the customers signature is forged.
Company/Firm:
The drawer of a cheque, whether a natural person or a body corporate or even a firm, can be
prosecuted under S.14 20of the Act.

AIR 1987 SC 1603. in this case the question was whether the
bank was liable for payment of cheque of a customer over the
forged signature despite rendition of withdrawal sheets and
month deposits, where contents were not checked by him and
merely accepted. In the case, 42 cheques with forged signatures
were presented on various dates between 1957 and 1961. During
this period the customer would confirm the status of his accounts
at the end of every half year. The accounts were audited by the
Chartered Accountant and the banks contention was that, had
there been any misappropriation upto 3 lacs from the account the
same would have been detected it.
19

20

S.141- offences by companies.

In order that a company may be bound by a negotiable instrument purporting to have been
issued on its behalf two conditions must be satisfied: (i) the instrument must be drawn, made,
accepted or endorsed in the name of or by or on behalf of or account of the company, (ii) and
the person who makes, draws, endorses or accepts the instrument must have the authority
given to him by the company on their behalf.
Prosecution of the company is not sine qua non for the prosecution of the directors, and
merely because company is not made an accused in the proceedings is no ground to quash it.
Thus the in a decided case the Supreme Court held that officers of the company who may be
held liable falling under S.141 other than the directors, fall into the following categories:
(1)

those who are in charge of21the company and responsible for the conduct of its business;

and
(2)

persons other that those falling in the above category, who is a mere director, manager

or secretary, etc of the company.

(3) Any other person who is a director or a manager or a secretary or officer of the company
with whose connivance or due to whose neglect the company has committed the offence.
However a person who proves that the offence was committed without his knowledge and
that he had exercised due diligence in the conduct of his business is exempted from
becoming liable by operation of the proviso to Sub-section (1). The burden in this regard will
have to be discharged by the accused.22
The managing director may also be attached with liability and the essentials for such action
is:

S.141(1) if the persom committing an offence under S.138 is

a company, every person who, at the time the offence was
committed, was in charge of, and was responsible to the company
for the conduct of the business the company, as well as the
company, shall be deemed to be guilty of the offence ans shall be
liable to be prosecuted against and punished accordingly.
21

S.V.Muzumdar and Ors v. Gujarat State Fertilizers Co. Ltd and

Anr, MANU/SC/0318/2005.
22

(1) he has to be incharge and responsible in case,

(2) there should be his consent and connivance for which there should be averments in
complaint or prima facie proof of it. The section being penal has to be strictly construed. In
the absence of basic facts being pleaded in the complaint, vicarious liability cannot be
imputed.23
in case of an action under S.138, the MD of a company on behalf of whom the dishonoured
cheque has been issued, cannot plead that he did not participate in the day to day
administration of the company and therefore is not criminally liable because normally, by
definition the MD is supposed to be in-charge of managing the company. Neither can an MD
pass the blame onto the directors of the company, imputing liability onto the directors for a
dishonoured cheque issued by the MD is a matter of facts and evidence. 24Lastly, a managing
director can only be sued in his official capacity and not as an individual.25
Firm:
In the case of a firm, if the receipt of the notice is by one partner who is habitually acting for
the business of the firm, it shall be deemed to be notice to the firm.
Having understood the substantive aspects of dishounour of a cheque, the researcher will now
discuss the procedural aspects in the subsequent chapter. Once the drawee establishes to the
payee that there has occurred a dishonour to the cheque, then the payee goes through a series
of procedural aspects so as to claim his money back and if all else fails then the payee will
finally file a complaint against the drawer.

23

Khergamvala, at442.

Sharda Aggarwal v. Additional Chief Metropolitan Magistrate,

(1993) 78 Comp Cas 123.
24

D. Chandra Reddy v. Gowrisetty Prabhakar Rao, (1996) 6 Andh

LD 281 (AP). Cf, avtar singh, at 435.
25

PROCEDURE AND PRACTICE:

The offence under S.138 is a non-cognizable offence by virtue of S.142 of the Act on account
of the non-obstante clause as comprised in section 142 of the Act, the magistrate must
proceed immediately on complaint. For a complaint however, first a statutory notice must be

sent to the drawer and if the drawer does not reply accordingly within 15 days, it opens itself
for prosecution.
Notice:
A notice is one of the essential characteristic of S.138. The period for cause of action is to be
counted from the date of receipt of notice by the accused. Notice has to be sent to the drawer
within 30 days of the receipt of information from the bank about the dishonour. 26As regards
liability of dishonour of cheques it is essential to prima facie show that after 15 days of
receipt of notice, the accused failed to pay the amount.
In the case of Padmini Polymers Ltd v. Unit Trust of India, 27it has been held that a notice is
must and mandatory. Unless and until the intention is clear on the part of the part of the
person giving notice that the payment by the drawer of the cheque should be made within 15
days of receipt thereof, any communication between the parties insisting for making the
payment cannot be termed as notice under S.138 of the Act. Otherwise the purpose of
presenting the cheque time and again during the period of validity would have no meaning.
So far as the question of giving notice is concerned, it is stated that every person who
becomes liable upon an action for dishonour of the instrument and only by such dishonour
either the holder thereof or some party thereto who remains liable thereon may give notice to
such parties as entitled to immediate notice. But the holder may give notice to such parties as
he desires to charge; but he cannot by giving notice make a person liable who is not otherwise
liable under law, e.g., drawee in the case of dishonour of cheques.
Serving the notice:
An important question that arises here is that when is a notice deemed to be served and upon
who is the burden of proving service?
The problem that arises is that the section does not only say delivery of notice, but receipt of
the notice, such wordings in the section can be put to numerous interpretations. The question
26

S.138 (b) proviso.

27

(2002) 101 Delhi LT 376.

is if receipt of notice, postulates actually delivery, then the drawer can easily preempt action
against him by deliberately staying away from his premises and the likes. It would be
inequitable that such a person be let off the hook, while another drawer who stays on and
accepts the notice would subject himself to prosecution.
In the case of V.Raja Kumari v. P.Subbarama Naidu and Anr28 the question that came up was
what is meant by a proper notice and if there is no proper would the complaint be quashed.
In Clause (c) of the proviso the drawer of the cheque is given fifteen days from the date of
receipt of said notice for making payment. This affords clear indication that giving notice in
the context is not the same as receipt of notice. Giving is the process of which receipt is the
accomplishment. The payee has to perform the former process by sending the notice to the
drawer in his correct address, if receipt or even tender of notice is indispensable for giving
the notice in the context envisaged in Clause (b) an evader would successfully keep the postal
article at bay at least till the period of fifteen days expires. Law shall not help the wrong doer
to take advantage of his tactics. Hence the realistic interpretation for the expression giving
notice in the present context is that, if the payee has dispatched notice in the correct address
of drawer reasonably ahead of the expiry of fifteen days, it can be regarded that he made the
demand by giving notice within the statutory period. Any other interpretation is likely to
frustrate the purpose for providing such a notice.
Thus from here we see that there can be deemed notice even where actual notice has not been
given. However this is a rebuttable presumption and its for the complainant to prove that the
notice was served and that the person either refused to accept the notice or was unavailable.
Though this is the popular position yet, many courts differ in opinion and it has been held that
where the delivery is done by post, then reading S.138 with S.27 of the General Clauses Act
Ingredients:
Though no form of notice is prescribed, the requirement is that the notice shall be given in
writing within fifteen days (now thirty with the amendment).

28

MANU/SC/0937/2004.

Secondly when a notice is served, it must demand the said amount i.e. the cheque amount
in it. If no such demand is made the notice falls short of legal requirement. However if apart
from the said amount other amounts by way of interest, costs, etc is mentioned, such a
notice would be a valid notice under the Section. The legislative intent of the Section is quite
clear, the drawer of the cheque will be liable for conviction if the demand is not met within
15days of the receipt. Thus if the cheque amount is paid within the statutory period or before
a complaint is filed the legal liability under S.138 will cease and and for recovery of
additional costs, a civil suit will lie.
Also the stating of the cheque number, though seems essential so that the drawer should
know of which cheque the notice relates to, yet it has been held that S.138 does not lay down
any such condition and if the cheque number is absent or wrong, depending on the facts and
circumstances, the notice will deemed good or bad in law.29
Burden of proof:
Under this law all presumptions are made against the drawer of such cheques and thus the
onus of proof is left on the accused rather than the prosecutor.

29

Khergamwala, at 408.

CONCLUSION
Though insertion of the penal provisions have helped to curtail the issue of cheque arising out
of its dishonour either honestly or with dishonest intention and the trading community now
feels more secured in receiving the payment through cheques. However there being no
provision for recovery of the amount covered under the dishonoured cheque, in a case where
accused is convicted under section 138 and the accused has served the sentence but, unable to
deposit amount of fine, the only option left with the complainant is to file civil suit.
The provisions of the Act do not permit any other alternative method of realization of the
amount due to the complainant on the cheque being dishonored for the reasons of
insufficient fund in the drawers account. The proper course to be adopted by the
complainant in such a situation should be by filing a suit before the competent civil court, for
realization/ recovery of the amount due to him for the reason of dishonoured cheque which
the complainant is at liberty to avail of if so advised in accordance with law.
Thus what we see is that the section is not full proof, however there is no denying that this
provision has done away with the rigorous and time consuming methods of criminal law. In
support of this we can see that the section also provides for summary proceedings, making
the issue penalty a lot simpler, because if a cheque gets dishonoured today and proceedings
go on as usual, then the person may only get relief after say three or four years, this defeats
the purpose of a cheque which is meant for immediate acceptance and distribution of cheque
amount.

BIBLIOGRAPHY
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K.Srivinasan, Bouncing of cheques issued in companies, Corporate Law

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OPFaizi, Khergamvala on the Negotiable Instruments Act, 19th ed ( New Delhi;

Lexis Nexis, 2003).

A.N.Saha, Law of Dishonour of Cheques, 1st ed ( New Delhi; Orient Publishing

Company, 1995).

Rajesh Gupta, Dishonour of Cheques (Law &Practise), 1st ed ( New Delhi; Bharat
Law House Pvt. Ltd, 1996).

Avtar Singh, Negotiable Instruments, 4th ed ( Lucknow; Eastern Book Company,

2005).

S.N.Gupta, Dishonour of Cheques: Liability Civil and Criminal ( Delhi; Universal

Book Traders, 1991).

S.K.Awasthi, Law of Dishonour of Cheques: Forgery and Cheating (Pune; CTJ

Publications, 1993).

Mr. Justice S.B. Malik (ed), S.Krishnamurthi Aiyars Law relating to the Negotiable
Instruments Act,6th ed ( Allahabad; The University Book Agency, 1997).

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Anonymous, SC ruling on dishonour of cheques, The Hindu, Thursday,

15th August,2002 www.hinduonnet.com/thehindu/2002/08/15/stories/2002081502381
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