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When a negotiable instrument is
dishonoured, the holder must give a
notice of dishonour to all the previous
parties in order to make them liable.
Dishonour means not honouring one’s
obligation. A negotiable instrument can be
dishonoured either by non acceptance or
by non- payment. A cheque and a
promissory note can only be dishonoured
by non-payment but a bill of exchange can
be dishohoured either by non acceptance
Dishonour By Non-Acceptance(section 91)
Introduction.
Cheques are regarded as the most
convenient and safe method of making
payments. If a cheque is dishonoured by
the bank, the person who has presented
the cheque faces many hardships. Section
138 to 142 were introduced in the Act
providing for penalties in case of
dishonour of cheques for want of founds
in the drawer’s account.
Under What Circumstances
Dishonour Of Cheque Is An
Offence!!!
Where a cheque is dishonoured, the
cheque is deemed to have committed an
offence if the cheque was issued in
discharge of a legally enforceable debt or
other liability and the same has been
returned by the bank for want of funds in
the account or for the reason that the
amount of cheque exceeds the
arrangements.
A cheque is said to be bounced or
Ingredients of the offence (Section 138)-
The offence under section 138 is deemed to
have been committed if:
1. The cheque should have been issued by the
drawer to the prayer (Petitioner) in the
discharge of any financial liability which is
legally enforceable.
2. The cheque is presented to the bank with in
a period of 6 month of the date of its drawal
or within the period of its validity, whichever
is earlier.
3. The cheque should have been returned by
the bank unpaid because the amount of
money standing to the credit of the account
is insufficient.
4. The payee or the holder-in-due-course of
such cheque should have made a demand for
the payment of the amount mentioned in the
cheque by giving a written notice to the
drawer of the cheque within 30 days from
the date of receipt of intimation by him
from the bank regarding the dishonour of
cheque.
5. The drawer of said cheque should have
failed to make payment within fifteen days
of the said notice given by the payee or the
holder.
6. If the payment is not made after the
receipt of the notice within stipulated time
a cause of action of initiating criminal
Under What Circumstances
Dishonour is not an offence ?
However, in the following cases it is not an
offence-
(a) A cheque given in gift.
(b) A cheque not presented within validity period.
(c) The payee and holder has not given notice
demanding payment within 15days of dishonour
in case of insufficiency of funds.
(d) The payee has paid the same within 15days of
receipt of notice.
(e) The complaint was made after a month of cause
of action (Section 142)
Presumption in favour of holder.
It shall be presumed unless contrary is
proved that the holder of cheque received
the cheque of the nature referred to in
section 138 for discharge, in whole or in
part of any debt or other liability
(Section.139)
Defence which may not be allowed in
any prosecution under sec.138.
It shall not be a defence in a prosecution
of an offence under sec.138 that the
drawer has no reason to believe that when
he issued the chque that the cheque may
be dishonoured for the reasons mentioned
Consequences of Dishonour of a Cheque.
The drawer of the dishonoured cheque is
liable to be punished with imprisonment for
a term which may extend to two years or
with fine which may extend to twice the
amount of the cheque or with both.