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Dishonour of Cheque: Punishment under NI Act

Dishonour of Cheque


Negotiable Instrument literally means any promissory note, bill of exchange or cheque, and in easier terms, it means a piece of paper which will hold the promisee to claim some amount of money out of the paper. Section 6 of the Negotiable Instruments Act defines the word cheque. It further is classified as Bearer Cheque, Crossed Cheque, Self Cheque, Post-dated cheque, Banker’s cheque and traveller’s cheque. In general sense, cheques are the easiest way to transact in the present times. One may easily transfer money through cheques over long distances on a daily basis. On one hand, wherein cheques are used to transact daily over the relationship of trust, it is always advisable on the face of it during transactions that the cheque be issued in the crossed account payee section to avoid its misuse. It is also stated that the transactions as these cheques are not negotiable to any other person than payee, it gives a prima facie advantage to both of them. In a layman’s language, a cheque is said to be dishonoured when it is deposited in the bank and is withdrawn by the bank at first place. It is thus said in general parlance that the one who is said to receive the cheque, i.e. the payee has complete rights to sue the one who has drawn the cheque, i.e. the drawer.


A cheque becomes dishonoured when it is not credited by the Bank, and that might be due to various reasons such as the mismatch of signature, insufficient money present in the account from which it is credited, invalid date mentioned on the cheque, expiry of the limitation period. The purpose of bringing acts such as the Negotiable Instruments Act in the ambit of law is that there engraves a sense of responsibility in the people holding power. Earlier before the enactment of the Act, there used to be limited scope for the person filing for claim, but after the Act has come into effect, it has transformed the culprits to the right amount of punishment that they deserved. The civil liability has been transformed into a criminal liability in case of dishonour of cheques. So, before the NI Act, the act of dishonouring of a cheque was purely a civil liability. Therefore, now the offence under Section 138 is not a crime per se, but it is created by the statute. Howsoever, as there were many shortcomings seen in the provisions of the Penal Code, thus the NI Act was enacted.

Limitation is an important aspect for initiating proceedings u/s 138 or 141 of Negotiable Instruments Act so as to get the justice from the court. The complainant have to send a legal notice within 30 days from the date of Returning memo from the bank (dishonour) of cheque asking the noticee to pay the amount within 15 days. On expiry of 15 days from the service of Legal notice, The complainant have to file a complaint before the Concerned magistrate within 1 month of the said expiry as per the Limitation Act. However, it is pertinent to mention that nothing precludes you from filing a separate civil suit for recovery of the amount due the limitation of which is 3 years from the cause of action/ date of dishonour of the said cheque.


It usually happens in the real world that if the cheque is said to be dishonoured, then the drawee bank, i.e. the one who withdraws the payment to the payee on the behalf of the drawer is said to have issued notice to the banker of the payee mentioning the reason for non-payment of the same. Under such circumstances, the payee lends back the dishonoured cheque to the drawee bank in the limitation period of 3 months, wherein if the payee then onwards fails to complete the debt, then the payee has all the legal rights against the drawer of the cheque and is free to draw legal claims from him. Once a cheque is dishonoured, then the person is called as defaulter and once he becomes a defaulter, he comes under the black shadow of being sued legally by the other person.


The Negotiable Instruments Act has come into place in 1881 and since then it has been amended many times. Section 138 of the NI Act provides for the punishment for the Dishonour of Cheques. The punishment that is prescribed under the NI Act is up to 2 years of punishment as well as the monetary losses amounting to double the amount of the cheque bounced. Working under strict limitation periods, the payee has to send the notice to the drawer before suing him in the court f law stating that he will be held liable if he does not act at the proper time. This period is called the notice period. Therefore, after the expiration of the notice period, the payee is liable to sue the drawer under the provisions of Section 138 of the Negotiable Instruments Act, 1881.


The NI Act lays down very simple and comprehensive step by step procedure of Law to sue the defaulter. Sections 138-142 of the NI Act deal with the punishment in regard to the defaulters. So, on completion of all the provisions of law beginning from the limitation period of the cheque return memo to the notice period, the defaulter may be held for the crime, providing justice to the needy, hence serving the purpose of Law.

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