Dishonoured Cheque: What Does It Entail?


Section 138 of the Negotiable Instruments Act renders dishonouring of a cheque as a punishable offence and can entitle one to a year’s imprisonment or a penalty of double the amount of the cheques dishonoured or both. The Act also decrees that prosecutors will not take into account the circumstances that led to the dishonour of cheques and would only consider the fact that payments have been missed as opposed to the promise.

Components that define the offence
Drawing of a cheque

This is considered when the drawer fails to discharge a legal liability he has taken on himself. The debt should be legally enforceable i.e. to be settled within a specified period. The court will presume that the cheques were issued to settle liabilities indicated by the prosecution unless the defendant can prove otherwise. Gift cheques, if dishonoured, are not included in this section.

Cheque presentation

The defaulting cheque should be presented to the drawer within its validity period which is generally six months, although some cheques expire in shorter periods.

Returning the bounced cheque

The prosecution will not consider any other reason for dishonouring of a cheque such as illegible writing, overwriting or yet to be credited amount. They would only be interested in knowing if sufficient amount was there in the account or not when the cheque was presented.

Notice

It must be understood that issuing a cheque and it getting dishonoured is not an offence, however, failing to reimburse the payee within 15 days of receiving a notice is.

A notice and subsequent ones can be sent via fax as well while the dishonoured cheque can be deposited in the drawer’s account any number of times within the period of its validity.

Hence, in the event of a cheque getting dishonoured and the failure by the issuer to settle the debt, the complainant should file a lawsuit before a competent civil court for realizing the amount due to him.



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