A Comprehensive Commentary on Dishonour of Cheque by Malik | 2022

The introduction of cheques has significantly transformed the banking industry, the corporate sector, and the nation's economy. However, alongside the growing use of cheques has emerged the malpractice of issuing cheques without the intent to honor them. A cheque is essentially a bill of exchange drawn on a specific banker, intended to be payable on demand. This definition now includes electronic images of truncated cheques and cheques in electronic form. An e-cheque, in simple terms, is an ordinary cheque created on a computer system and digitally signed instead of being signed with ink. With the enactment of the Negotiable Instruments (Amendment and Miscellaneous Provision) Act, 2002, e-cheques have been granted legal recognition and are now on par with traditional cheques.

When a cheque is dishonored due to non-payment by the drawer or drawee, penalties may follow, including monetary fines or imprisonment, as stipulated under Section 138 of the Negotiable Instruments Act, 1881. The essential conditions for invoking Section 138 are:

1. The cheque must be dishonored.
2. The payment in question must relate to an existing debt or liability.
3. The cheque must be presented within its validity period.

Banks may justifiably dishonor a customer's cheque under specific circumstances, including:

1. If the drawer countermanded the payment.
2. Upon notice of the drawer's death.
3. Upon notice of the customer's insanity.
4. Upon notice of the customer's insolvency.
5. During the liquidation of a company.

Defenses available under Section 138 include:

1. Absence of a legally enforceable debt.
2. The cheque was returned for reasons not constituting an offence.
3. The claim is barred by limitation under Sections 138 and 142 of the Act.
4. Absence of a valid 15-day legal notice.
5. Lack of jurisdiction.

Section 143-A, introduced by the Negotiable Instruments (Amendment) Act, 2018, empowers courts to direct the drawer of a dishonored cheque to pay interim compensation in summary trials, provided the accused pleads not guilty. This interim compensation can be up to 20% of the cheque amount and must be paid within 60 days of the court's order. Additionally, Section 148 now enables appellate courts to order payment of a portion of the fine or compensation during appeals against convictions under Section 138.

In this book, we have made every effort to present a clear and comprehensive overview of the prevailing law in one place. Key judicial precedents are discussed in relevant sections, and statutory amendments are thoroughly explained. Furthermore, a detailed Subject Index has been included for the convenience of our esteemed readers. We hope this book achieves great success and serves as a valuable resource!

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