Legal Consequences of Dishonour of Cheque with Reasons


This post has been written by Shaily Jain, a second year law student from Amity Law School, Amity University, Chhattishgarh.

Cheques are utilized in nearly all exchanges such as re-payment of credit, installment of compensation, bills, expenses, etc. An endless lion’s share of cheques are handled and cleared by banks on every day premise. Cheques are issued for the reason of securing verification of installment. All things considered, cheques stay a dependable strategy of installment for numerous individuals. On the other hand, it is continuously prudent to issue crossed “Account Payee Only” cheques in arrange to dodge its misuse.

A cheque is a negotiable instrument. Crossed and account payee cheques are not negotiable by any person other than the payee. The cheques ought to be kept into the payee’s bank account. Legally, the creator of the cheque is called ‘drawer’, the individual in whose support, the cheque is drawn is called ‘payee’, and the bank who is coordinated to pay the sum is known as ‘drawee’. However, cases of cheque bounce are common these days. Some of the time cheques bearing expansive sums stay unpaid and are returned by the bank on which they are drawn.


If the bank denies to pay the sum to the payee, the cheque is said to be dishonoured. In other words, dishonour of cheque could be a condition in which bank denies to pay the sum of cheque to the payee.

When a cheque is dishonoured, the drawee bank quickly issues a ‘Cheque Return Memo’ to the banker of the payee saying the reason for non-payment. “The payee’s investor at that point gives the dishonoured cheque and the notice to the payee. The holder or payee can resubmit the cheque inside three months of the date on it, in case he accepts it’ll be honoured the second time”. Be that as it may, on the off chance that the cheque issuer comes up short to form a installment, at that point the payee has the correct to indict the drawer lawfully. The payee may lawfully sue the defaulter / drawer for disrespect of cheque as it were on the off chance that the sum said within the cheque is towards release of a obligation or any other risk of the defaulter towards payee. If the cheque was issued as a gift, towards loaning a advance or for illegal purposes, at that point the drawer cannot be arraigned in such cases.


  • In case the cheque is overwritten.
  • In case the signature is missing or the signature within the cheque does not coordinate with the example signature kept by the bank.
  •  In case the title of the payee is missing or not clearly written.
  • In the event that the sum composed in words and figures does not coordinate with each other.
  • On the off chance that the drawer orders the bank to stop installment on the cheque.
  •   In case the court of law has given an arrange to the bank to stop installment on the cheque.
  •  In the event that the drawer has closed the account some time recently showing the cheque.
  •   If the fund within the bank account is inadequately to meet the installment of the cheque.
  • In case the account number isn’t specified clearly or is through and through absent.
  •  If the bank gets the data with respect to the passing or insanity or bankruptcy of the drawer.
  •  If any modification made on the cheque isn’t demonstrated by the drawer by giving his/her signature.
  •  In case the date isn’t specified or composed inaccurately or the date specified is of three months some time recently.


  • Know your balance: – Check your accessible adjust frequently. Utilize fund apps and content messages together with your bank to get it when cash clears out your account.
  • Keep a buffer: – Continuously take off a few additional cash in your checking account for unexpected costs. That can assist you when require cash critically. That cash can offer assistance after you forget about installment that hit your account. In case you continually keep your account adjust over zero, you’re more likely to pay overdraft charges.
  • Balance your account: – Continuously check your account adjust, store and withdrawals. In case you adjust your account, at that point you’ll have the knowledge around your account some time recently your bank does.
  • Communicate to the payee: – If you compose a cheque and afterward on you realize merely don’t have adequate sum in your account for installment, at that point you’ll be able contact to the payee quickly let the payee know some time recently he store the cheque and make other courses of action. This will spare time and cash for both of you.
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The Negotiable Instruments Act, 1881 is applicable for the cases of dishonour of cheque. This Act has been amended many times since 1881.

According to Section 138 of the Act, “the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both”.

If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately. Such a chance has to be given only in the form of notice in writing.

The payee has to sent the notice to the drawer with 30 days from the date of receiving “Cheque Return Memo” from the bank. The notice should mention that the cheque amount has to be paid to the payee within 15 days from the date of receipt of the notice by the drawer. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act.

However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice period. It is essential in this case to consult an advocate who is well versed and experienced in this area of practice to proceed further in the matter.


Lawfully, certain conditions have to be be satisfied in arrange to utilize the provisions of Section 138.

“The cheque ought to have been drawn by the drawer on an account kept up by him. The cheque should have been returned or dishonoured since of insufficient funds within the drawer’s account”.

The cheque is issued towards release of a debt or legitimate liability.

After receiving the notice, in the event that the drawer doesn’t make the installment inside 15 days from the day of getting the take note, at that point he commits an offense punishable under Section 138 of the Negotiable Instruments Act.


On getting the complaint, beside an affidavit and relevant paper trail, the court will issue summons and listen the matter. In case found guilty, the defaulter can be punished with monetary penalty which may be twice the sum of the cheque or imprisonment for a term which may be extended to two years or both. The bank too has the correct to stop the cheque book facility and close the account for repeat offences of bounced cheques.

If the drawer makes payment of the cheque sum inside 15 days from the date of receipt of the take note, at that point drawer does not commit any offence. Otherwise, the payee may continue to record a complaint within the court of the jurisdictional magistrate inside one month from the date of expiry of 15 days endorsed within the take note.



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