Cheque Dishonour

What is a cheque?
Cheque defined under section 6 of The Negotiable Instrument Act, 1881. It

articulated, A “Cheque” is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.
In simple terms, a cheque is a document that is negotiable and
exchangeable and the bank who issued the cheque is liable to pay the
amount mentioned in the cheque on demand.
What is cheque dishonour?
A cheque is said to be dishonoured when the cheque is presented before
the authorised bank within six months of the issue date of the cheque and
the amount mentioned in the cheque is not paid by the bank for any
default of the drawer of the cheque.
That means when drawee or the person who is a holder in due course get
rejected by the bank in other word dishonoured by the bank by not
providing the mentioned amount as instructed by the drawer (via cheque)
by the fault of the drawer.
Reasons for dishonour of cheque
Generally, a cheque is dishonoured when;
The amount not available in the account is not sufficient to pay the cheque or no money in the amount.
Where instruction is given to stop payment.
If the sign does not match with the sign of the drawer.
When the written amount (by words) does not match the amount mentioned in the cheque.
When the cheque is not filled up correctly.
When it is evident that the cheque is edited improperly and not confirmed by additional signature at the
place of editing.
In the mentioned situation a cheque can be dishonoured but the drawer of the cheque would only be
liable if he is responsible for any such matter or when he dishonoured the cheque with criminal
intention.
Cause of action
Cause of action means when you can start the procedure a case or suit. In
case of a cheque, a cheque must be presented before the bank within six
months from the issuance of the cheque and after that if the cheque is
dishonoured by the bank the cause of action shall initiate for the cheque
dishonour case.
If a bank dishonours the cheque ask them to provide a written document
for such dishonour. They will provide a written
document/cheque dishonour slip providing the reason for dishonour and
other details.
Punishment for cheque dishonour
An accused, if proved guilty of cheque dishonour, can be punished with
imprisonment for a term which may extend to one year, or with fine which
may extend to thrice the amount of the cheque, or with both.
The court may provide both imprisonment and fine (general practice) but
if the court wants to punish the offender only by imprisonment he can do
so. The court may provide fine up to thrice the amount of the cheque. It
solely depends on the court’s discretion.
Procedure
Issue notice
The first step to initiate a case under section 138 of the Negotiable
Instrument Act, 1881 to issue a legal notice via the registered post with AD
to the drawer and this is a must precondition. The notice must be issued
within 30 days of the dishonour of the cheque; informing the drawer that
his cheque has been dishonoured by his bank and he must pay the amount
in full within 30 days of the notice otherwise you will take legal action.
The payee or the holder in due course of the cheque can file a complaint
case after the compilation of 30 days or notice, if the drawer does not
provide the money within 30 days after receiving the notice or does not
reply or where replied to legal notice but did not provide any satisfactory
answer to the notice provided.
Documents needed to issue notice and initiate a case
Following documents and information would be necessary to issue a
notice and initiate a cause under section 138 or section 140 of the
Negotiable Instrument Act, 1881.
The cheque
Issue date of the cheque and rejection date of the cheque
cheque dishonour document provided by the bank
Copy of the notice and reply of that notice (if provided)
Receipt of acknowledgement of the notice
Why the cheque was provided or reason behind the transaction
Details of the cheque
Details of the complainant

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What is a cheque?

Cheque defined under section 6 of The Negotiable Instrument Act, 1881. It

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