Dishonours of cheques

Dishonours of cheques: Any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from that account for the discharge, in whole or in part, of any debt or other liability is returned by the bank unpaid, either because the amount of money standing to the credit of that account is insufficient to honour the cheque or because it exceeds the amount arranged to be paid from that account by an agreement made with that banker. Except as provided in this section, nothing in this section shall apply unless:

(a) The check was given to the bank within six months after the date on which it was drawn, or during the validity term of the cheque, whichever comes first;

(b) The payee or the holder of the check in good standing, as the case may be, makes a claim for payment of the specified amount of money by providing notice in writing to the drawer of the cheque [within thirty days] after receiving information from the bank indicating the cheque’s return as unpaid; and

(c) Within fifteen days of receiving the said notification, the drawer of such check fails to make payment of the said sum of money to the payee or, as the case may be, to the holder in due process of the cheque.

Explanation: A legally enforceable debt or other responsibility is referred to as a “debt or other liability” in this section.

Dishonours of cheques

There are two types of dishonours of cheque

• Non-acceptance of a bill of exchange is an act of dishonour.
• Non-payment of a promissory note, bill of exchange, or check

There is dishonour of the instrument when it is presented for payment and the maker, acceptor, or drawee, as the case may be, fails to make the payment. Also, if there are specific instances in which payment presentation is waived and the instrument is declared dishonoured even if it is not presented. When the maker, acceptor, or drawee purposefully blocks the instrument from being presented, it is considered dishonoured even if it is not presented.

Dishonours of cheques Notice

The term “notice of dishonour” refers to notification that the instrument has been dishonoured.

The party seeking to be held accountable is given notice of dishonour, which acts as a warning to the person to whom the notice is delivered that he may now be held liable.

The plaintiff’s claim to the dishonoured instrument may be terminated if the plaintiff fails to provide notification of dishonour in a timely manner.

A person who wishes to make a previous party of his liable on the instrument must provide notice of dishonour. As a result, the following notification might be given:

• Either by the holder or by a third party.
• Those who are nonetheless accountable for the instrument’s terms.

Dishonours of cheques

A person suffers greatly if a check issued in his name is returned owing to insufficient money in the account of the cheque’s drawer. The Banking, Public Financial Institutions, and Negotiable Instrument Laws (Amendment) Act, 1988, amended the Negotiable Instrument Act to make such dishonesty a criminal offence.

The Negotiable Instrument Act has been amended to include a new Chapter VII, Sections 138 to 142.

Dishonours of cheques is illegal under Section 138. In due course, the payee or holder may pursue the drawer, who may be held accountable for the offence.