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Dishonour of Cheques and

Wrongful dishonour by banks

A cheque as a negotiable instrument has been
clearly defined under Section 6 of the Negotiable
instrument Act.
"a bill of exchange drawn on a specified banker and
not expressed to be payable otherwise than on
Advent of Cheques have give a new dimensions
to the commercial world
Since business activities have increased, the
attempt to commit crimes and indulge in
activities for making easy money have also
Dishonour of Cheques
"Dishonour" means "to refuse or neglect to
accept or pay when duly presented for
payment of a bill of exchange or a promissory
note or draft on a banker.
Dishonour Of Cheques have been dealt in
Sec.138 of the NI Act,1881.
Section 138 is dealing with dishonour in case
of insufficient of funds
Sec.138 Of NI Act,1881
Cheque drawn on a bank account.
Issue of Cheque in discharge of a
debt or liability .
If the above conditions are fulfilled,
then this section will be attracted
irrespective of the mental conditions.
Exclusion Of Mens Rea and Cause of
For committing an offence under Section 138 of the
Act "mens rea" is not an essential ingredient.
Mahendra A.Dadia V. State of Maharashtra (2000) (1)
Civil Court Cases 438 (Bom.)

Cause of action for prosecution under section 138 of

the Negotiable Instruments Act does not arise by mere
presentation of the cheque in bank and by its
Only after payee filing a written complaint as
mentioned under Sec.142 within 30 days of dishonour
then the cause of action arises.
Civil or Criminal offence
It was held in the case Medchl Chemicals and
Pharma Pvt. Ltd. v. Biological E. Ltd that As a
matter of fact they are not mutually exclusive
but clearly co-extensive and essentially differ in
their content and consequence. The object of
criminal law is to punish an offender who
commits an offence against a person, property or
the State for which the accused, on proof of the
offence, is deprived of his liberty and in some
cases even his life. This does not, however, affect
civil remedies at all for suing the wrongdoer in
case like arson, accidents etc.
Wrongful dishonour
When there is the relationship of banker and customer,
the banker is under an obligation to pay cheques when
a mandate is received from the customer
Section 31 of NI Act speaks about the drawees
In Jogendra Nath Chakrawarti v. New Bengal Bank
Limited, it was held, "where the banker, being bound to
honour his customers cheque, has failed to do so, he
will be liable in damages. If, special damage, naturally
ensuing from the dishonour, is proved, it will be
properly taken into account in assessing the amount of
the damages.
Compensation for Wrongful dishonour
For the calculation of loss customers are divided
Trader ( Current Account)
Non Trader
Nominal amount is given to a non trader since
there is no loss of reputation unless there is
special facts. Where as substantive amount to a
trader regardless of special facts.
However there being no provision for recovery of
the amount covered under the dishonoured
cheque, in a case where accused is convicted
under section 138 and the accused has served
the sentence but, unable to deposit amount of
fine, the only option left with the complainant is
to file civil suit. The provisions of the Act do not
permit any other alternative method of
realization of the amount . So I personally think
that this provision is to be added.