DISHONOUR OF CHEQUES
A cheque is one form of a bill of exchange. However, all bills of exchange are not cheques. A cheque is always drawn on a bank or a banker. It is payable immediately on demand, without any days of grace. The sum that is directed to be paid should be distinctly expressed in the instrument. If there is a discrepancy between the amount stated in words and that stated in figures, then the amount stated in words shall be the amount that is ordered to be paid. As per the amendments, brought in by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, truncated cheques and electronic cheques also fall within the purview of the definition of cheques. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 defines truncated cheques as those cheques, which are truncated by the clearinghouse or by the bank during the course of a clearing cycle and electronic cheques as those cheques, which contain the exact mirror image of paper cheques. In order to ensure the minimum safety standards with the use of digital signatures and asymmetric crypto system, such cheques are generated, written and signed in a secure system. When any cheque, drawn by a person for the discharge of any liability is returned by the bank unpaid, because of insufficiency of the amount of money, standing to the credit of the account on which the cheque was drawn or, for the reason that it exceeds the arrangements made by the drawer of the cheque, the cheque is said to have been dishonoured. In India, the Negotiable Instruments Act, 1881 was framed as an attempt to consolidate the law that relates to the Bills of Exchange, cheques and promissory notes. This Act is based upon English Common Law, based upon the decisions of the English Court. The Madras High Court, in the case of Sivram vs. Jayram AIR 1966 Madras 297, held "..... in many portions the legislature while codifying has reproduced the principles of English Law as enunciated in the English discussion, rendered up to the time, besides taking such guidance as was necessary from the leading English text books like Chitty on Bills or Story on Bills." Thus, it becomes clear that these laws had their roots in English Law which prevailed at the time of the enactment of the Negotiable Instrument Act, 1881. While drafting the Act, the framers of the statute were well aware of the changing needs of the merchants. Therefore, the framers of these laws thought far ahead and so the Act encompassed all the needs of that time and even the future. Consequently, there was no need to amend these laws for over a hundred years. It was only in 1988 that a need to revise the law was felt. Therefore, on the suggestions of the Law Commission, The Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988 was passed by the Parliament. This Act introduced a new chapter, namely Chapter XVII (Section 138 -- Section 142), to the Negotiable Instrument Act 1881. The Chapter is described to be a complete code in itself with respect to the dishonour of cheques and deals with various aspects of dishonour of cheques such as:
• What is the offence of dishonour of cheques;
• The quantum of punishment for committing of such offence; • Offences committed by companies;
• Procedure to file complaint before the Court etc.
It also states the liabilities of the drawer and the drawee as under: The holder has a remedy against the drawer but only in cases where the cheque has been presented and payment has been refused. The drawer should be informed of non-payment immediately so as to enable him to inquire into the causes of refusal and secure his funds in the bank. The drawer of a cheque is regarded as the principal debtor and is not absolutely discharged by the failure of the holder in making the due presentment or giving him notice of dishonour. The drawee of a cheque, having sufficient funds of the drawer in his hands, properly...
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