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Dishonor of Cheque

Fraud and deceit are anxious for your money. Be informed and prudent.� - John Andreas Widtsoe

Business is done on trust, when someone breaks this trust liabilities are bound to arise.

Dishonor of Cheque means the cheque is discredited and lost its value.

This blog will provide the reader all the legal knowledge which they need to deal with this issue.

So please read the blog patiently and give your valuable suggestion in the comment box, and if you like it, please follow the blog.

As time passes, business globalized and becomes modern, so the mode of the transaction was too modernized. Cheques, Promissory Note, Bills of Exchange, etc., are the modern way of transaction.

Cheques are the order to the bank to pay the check holder amount mentioned in the check from the account of the person who issued the check. Post-Dated Cheques are the most popular way of transaction presently.

But as the use of cheques increases, disputes also increase. Dishonoring of cheques become very common, and courts have a surplus of these cases. Section 138 to section 142 of the Negotiable Instrument Act, 1881 deals with this issue, and according to section 138, Dishonouring of Cheque is criminal liability. [1]

What is Dishonour of Cheque?

When a person who is in a debt gives a cheque to the debtor to clear his debt, but the cheque is returned by the bank because of the insufficiency of the fund, or because the amount mention on the cheque exceeds the permissible withdrawal limit from the account of the borrower is called Dishonour of Cheque or in common language Cheque Bounce.

Main Ingredient to attract Dishonour of Cheque:

  • The cheque must be submitted to the bank within a period of six months from the date on which it is issued, or before the expiry of the cheque whichever is earlier.
  • After receiving the cheque back from the bank, the holder of the cheque must give written notice to the borrower within thirty days for the payment of the said amount.
  • The borrower failed to pay the said amount within fifteen days.

Important Legalities

  • It shall be presumed that the holder of the cheque received the cheque from the borrower to clear the debt of the borrower
  • The burden to prove the contrary to the above point lies on the person who issues the check.
  • The borrower on dishonoring of the cheque cannot take the defense that while issuing a cheque he has no reason to believe that the cheque is going to be dishonored. [2]

Law for Dishonour of Blank Cheques:

Apex Court in the case of Bir Singh v/s Mukesh Kumar clears all the doubt surrounding the issue of Dishonour of blank cheques.

The Supreme Court ruled that:
  • The presumption that the holder of the cheque received the cheque from the borrower to clear the debt of the borrower is valid in the case of blank cheques as well
  • A cheque won�t become invalid if it is duly signed by the borrower, and the details are filled by the debtor.
  • The burden to prove the contrary to the above points is lies on the person who issued the check. [3]

Dishonor of Cheque by companies

  • Companies are treated as a person they can be liable for the offense, and can be proceeded against, and shall be punished accordingly.
  • Any person who at the time of the offense is responsible for the business and management of the company is liable for that offense.
  • If the accused person proves that the offense took a place without his knowledge, or he has taken all steps to prevent such offense, then he is not liable for punishment
  • If it�s proved that the offense took place with the consent or the negligence of any director, manager, secretary, or other officers of the company, such director, manager, secretary or other officers shall also be deemed to be guilty of that offense and shall be liable to proceed against and punished accordingly.
  • If the person is appointed as the Director of the company, which is controlled by a state or central government, then he is not liable for the offense.

Procedure to follow:
  • The check can be delivered by the holder in the bank in which he holds the account, or in the bank in which the borrower holds an account
  • The complaint should be made within one month after the borrower failed to pay the amount within fifteen days.
  • The court cannot take cognizance of the case until the written complaint is made by the debtor or the holder of the cheque.
  • Offense can be inquired and tried only by the court in whose local jurisdiction the cheque is delivered in the bank.
  • Only a Metropolitan Magistrate or a Judicial Magistrate of the first class or above can try in this offense. [4]


If found guilty, then there is provision for a maximum of two-year imprisonment or fine, which may extend to twice the amount of the cheque, or with both.

The court that is hearing an offense on matters of cheque bouncing can issue direction for the borrower to compensate about 20% of the amount on which the cheque was made to the holder of the cheque within a period of sixty days of such decision.

The court can also direct the borrower to deposit 20% of the original compensatory amount in court.

If the borrower is acquitted, the Court shall direct the complainant to repay to the borrower the amount of interim compensation, with interest within sixty days. The time limit can be exceeded by thirty days if the court is satisfied by the reason by the complainant. [5]

Negotiable Instrument Act came into force in 1881, since then it develops with time and ensures the rights of the debtors and strict liability against the payment defaulters.

But at the same time, it overburdens the court with a thousand Dishonor of Cheque cases every year. And it is a criminal offense, sometimes considered a little aggressive any from many years, voices are raising to decriminalize the offense.

In 2020, the Government of India proposed to decriminalize various minor financial offenses for ease of business and to relieve overburdened courts. Dishonoring of Cheque is among those various offenses which the government proposed to decriminalize and ask the suggestion from the public.

Presently it is still a criminal offense.

  1. Law Commission of India, �213th Report on Fast Track Magisterial Courts for Dishonored Cheque Cases� (November 2008
  2. The Negotiable Instruments Act, 1881, No. 26, Acts of Parliament, 1881 (India)
  3. Bir Singh V. Mukesh Kumar, (2019) 4 SCC 197 (India)
  4. The Negotiable Instruments Act, 1881, No. 26, Acts of Parliament, 1881 (India).
  5. The Negotiable Instruments (Amendment) Act, 2018, NO. 20 OF 2018 (India).
Written By: Abhishek Sahu

Dishonor of Cheque

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