Q. Analyse the legal implications of dishonour of cheque with 2 case laws.

Ronsha Roys Anna

Sem 3, 1693

One of the three negotiating instruments, together with promissory notes and bills of exchange, is
a check. Cheque dishonour is a crime that is punishable by a year in jail or a fine under Section
138. The sentence might last for two years. Section 142 contains the steps for taking cognizance
of an offence under Section 138. While the Act's offences are compoundable under Section 147.
The presumption that the check the drawee receives is for the discharge of any debt or liability of
the drawer is established by Section 139, and it is in the drawee's favour. This debt discharge
may be partial or total. The check is said to have been dishonoured if the bank refuses to give the
money to the payee. In other terms, a dishonoured check is one that the bank refuses to pay the
amount to the payee.

When a check is returned unpaid, the drawee bank promptly sends a "Cheque Return Note"
stating the cause to the payee's bank. "At that time, the notice and the dishonoured check are
given to the payee by the investor. If the holder or payee agrees that the check will be honoured a
second time, they may resubmit it within three months after the date on it. Yet, if the person who
wrote the check is unable to make a payment, the payee has the right to hold the drawer legally
accountable. If the amount stated in the check is intended to relieve a debt or cover any other risk
the defaulter may have against the payee, the payee may legally sue the drawer for disrespect of
the check. The drawer cannot be charged with a crime if the check was written as a gift, as
collateral for a loan, or for illicit purposes.

The most recent significant case involving the N.I. Act is entitled Expeditious trial of matters
under Section 138 of the N.I. Act 1881 (2020). With this case, the Supreme Court exercised suo
moto jurisdiction over the N.I. Act matters that were still pending. The Court acknowledged that
numerous instances involving cheque dishonouring have been ongoing at various levels for the
past 20 years. The Court mandated that specific actions be performed in order to hasten the trial
process. A report on the causes of the delay in the Section 138 summary trials was requested
from an Amicus Curiae, or friend of the court. Based on the preliminary investigation, it was
determined that 35.16 lakh of the 2.31 crore criminal cases that were pending as of the end of
2019 were cases under Section 138.

The Allahabad High Court noted in Ravi Dixit v. State of UP & Anr (2020) that if the drawer's
intention to withhold payment is evident, the drawee need not wait the full fifteen days before
filing a complaint under Section 138. According to Section 138(c), if the drawer wants to make a
payment, he must be given a minimum of fifteen days to do so in order to avoid causing him
undue hardship. Based on the response to the notice for payment in this instance, it was evident
what the drawer intended. According to the Court, the proviso to Section 138 is intended to delay
the prosecution of the offence, but it does not preclude the prosecution from beginning when the
drawer's intention to not honour the liability is obvious.