INDORE INSTITUTE OF LAW, INDORE

SUBJECT: BANKING LAW

TOPIC: CRITICAL ANALYSIS OF THE LIABILITY OF A COMPANY TOWARDS

BANK FOR DISHONOUR OF CHEQUE

SUBMITTED TO:

ASST. PROFESSOR AMIT KUMAR

SUBMITTED BY:

AKSHANSH NEGI

[B.B.A. LL.B. (HONS.)]

SESSION: 20

SEMESTER – VII

1
 DECLARATION

"The text reported in this research paper is the outcome of my own efforts and no part of this
research paper has been copied in any unauthorized manner and every part of it has been
incorporated with due acknowledgement.”

AKSHANSH NEGI

2
 CERTIFICATE

This is to certify that AKSHANSH NEGI has successfully completed this research paper
titled “Critical Analysis of the Liability of a Company towards bank for Dishonour of
Cheque “for the partial fulfilment of the DAVV norms under the supervision of Asst. Prof.
Amit Kumar Sir at Indore Institute of Law.

Faculty Signature

Date:

3
 ACKNOWLEDGEMENT

Any research paper requires base of sound knowledge and a lot of hard work. Nonetheless, it
can be a success without the insight & guidance of our teachers and the unending support of
our parents. For this, I am highly indebted to the Asst. Prof. Amit Kumar Sir for her guidance
and constant supervision as well as for providing necessary information regarding the
research paper and also for her immense support in completing the research paper. I would
also like to express my gratitude towards my parents for their kind co-operation and
encouragement which helped me in the completion of this research paper.

4
 TABLE OF CONTENTS

Research Methodology...............................................................................................................6

Objective of the research........................................................................................................6

Scope of the research..............................................................................................................6

Research questions.................................................................................................................6

Research methodology...........................................................................................................6

Sources...................................................................................................................................6

Abstract......................................................................................................................................7

Introduction................................................................................................................................8

Dishonour of Cheque under Section 138 of the Negotiable Instruments Act, 1881............10

Liability of a Company for Dishonour of Cheque under Section 138 & 141 of the
Negotiable Instruments Act, 1881- Analysis........................................................................12

Conclusion................................................................................................................................19

Bibliography.............................................................................................................................20

5
 RESEARCH METHODOLOGY

The research methodology adopted for the purpose of the study is doctrinal.

OBJECTIVE OF THE RESEARCH

The objective of this paper is to do the critical analysis of the liability of a company for
dishonour of cheque under section 138 & 141 of the Negotiable Instruments Act, 1881.

SCOPE OF THE RESEARCH

The scope of this research is limited to the analysis of the liability of a company for
dishonour of cheque under section 141 read with section 138 of the Negotiable Instruments
Act, 1881.

RESEARCH QUESTIONS

(i) What do you mean by dishonour of cheque?

(ii) What are the provisions relating to dishonour of cheque under section 138 of the
Negotiable Instruments Act, 1881?

(iii) What are the provisions relating to dishonour of cheque by company under section 141
of the Negotiable Instruments Act, 1881?

(iv) Who shall be liable for dishonour of cheque by a company?

RESEARCH METHODOLOGY

The research methodology adopted for the purpose of the study is doctrinal.

SOURCES

The sources of data used for the purpose of the study are both primary and secondary. The
researcher has referred both printed and non-printed materials. Printed material includes
books, whereas non-printed materials include data obtained from online databases.

6
 ABSTRACT

Cheque is an important medium for business transactions as it is very convenient for the
people to carry & execute a small piece of paper called cheque as compared to carrying the
currency worth the value of cheque. In India, with the rapid increase in business activities, the
usage of cheque is also increased & so the cheque dishonour cases. Chapter XVII (section
138 to 148) of the Negotiable Instruments Act, 1881 deals with the provisions regarding the
penalties in case of dishonour of certain cheques for insufficiency of funds in the account of
the drawer of the cheque. Section 138 of the Negotiable Instruments Act, 1881 deals with the
dishonour of cheque due to insufficiency, etc., of funds in the account of the drawer of the
cheque. Section 141 of the said Act makes provisions regarding the dishonour of cheque by
companies. In case of dishonour of cheque by company, the main issue which arises is who
shall be held liable for it as the company is an artificial person which acts through its officers.
Thus, in this paper, the critical analysis of the liability of a company for dishonour of cheque
under section 138 & 141 of the Negotiable Instruments Act, 1881 has been done.

Keywords: cheque, dishonour, company, vicarious liability, directors.

7
 INTRODUCTION

A cheque may be defined as an acknowledged bill of exchange that is readily accepted in lieu
of payment of money. It is a negotiable instrument. It has been developed as a mode of
making payments without the need to carry huge amount of money. It is an important
medium for business transactions as it is very convenient for the people to carry & execute a
small piece of paper called cheque as compared to carrying the currency worth the value of
cheque.

Dealings through cheque play an important role in the commercial world & in the
development of the economy of the country as payment through cheques makes the monetary
transactions much easier. In India, with the rapid increase in business activities, the usage of
cheque is also increased & so the cheque dishonour cases. A cheque is said to be dishonoured
when it is refused to be accepted or paid upon presentation by the payee of the cheque or the
payee’s authorized agent to the bank because of insufficiency of funds in the account on
which the cheque was drawn.

Dishonour of cheques is one of the biggest problems in the smooth functioning of the cheque
system. As the cheque plays a vital role in monetary transactions, dishonour of cheque
threatens the credibility of this negotiable instrument. Dishonour of cheque hinders smooth
monetary transactions. Thus, dishonour of cheque adversely affects the economy of the
country. For business to flourish, it was required that some law, which could ensure
credibility to the holder of this negotiable instrument, should be enacted.

The great hardship is faced by a person if a cheque issued in his favour is dishonoured
because of insufficiency of funds in the account of the drawer of the cheque. To prevent this,
the act of dishonour of certain cheques has been made an offence by an amendment of the
Negotiable Instruments Act, 1881 by the Banking, Public Financial Institutions and
Negotiable Instrument Laws (Amendment) Act, 1988.

Through this amendment, a new chapter, that is, Chapter XVII comprising of section 138 to
142 has been incorporated in the Negotiable Instruments Act, 1881 for penalties in case of
dishonour of certain cheques for insufficiency of funds in the account of the drawer of the
cheque, which came into force on 1 April, 1989. Before such commencement, a criminal

8
charge could be brought against the drawer of a cheque only if the doctrine of mens rea was
established as required by sections 415 & 420 of the Indian Penal Code, 1860.

Thus, there was no effective legal provision to prevent people from issuing cheques without
having sufficient funds in their account or any stringent provision to punish them on cheque
being dishonoured by their bankers & returned unpaid.

The amendment makes provisions for prosecution for dishonour of certain cheques per se
without restricting the aggrieved party’s right to prosecute under the aforesaid sections of the
Indian Penal Code, 1860. Another remedy, in case a cheque was not honoured on
presentment, was to file a suit for recovery of money which was civil in nature. Such remedy
was dilatory and did not have a desired deterrent effect on offenders & cheques started losing
their credibility. Thus, to ensure a prompt remedy against defaulters & to ensure credibility of
the cheque, a criminal remedy of penalty was incorporated in Negotiable Instruments Act,
1881. Thus, the object of such amendment appears to be, to encourage the culture of use of
cheques & to enhance the credibility of the cheque in commercial transactions.

The Negotiable Instruments Act, 1881 has been amended several times to incorporate more
stringent provisions to deal with dishonour of cheque. The Negotiable Instruments Act, 1881
extends to the whole of India. Section 138 of the Negotiable Instruments Act, 1881 creates an
offence of dishonour of cheque for insufficiency of funds in the account maintained by a
person with the banker. Section 141 of the said Act makes provisions regarding the dishonour
of cheque by companies & also defines the term “company” for the purposes of section 141
of the said Act.

A company is considered as an artificial or a legal person or legal entity, separate from, &
capable of surviving beyond the lives of its members. Thus, a company can sue and be sued
in its own name. Since a company is an artificial person, it is not capable of committing any
offence personally. A company acts through its directors & officers who are responsible for
the conduct of the business of the company. Thus, if certain offences are committed by its
officials in the name of the company, then in such circumstances a company is said to have
committed those offences.

This paper deals with the analysis of the liability of the company for dishonour of cheque. In
case of dishonour of cheque by company, the main issue which arises is who shall be held
liable for it as the company is an artificial person which acts through its officers. This paper

9
discusses this issue in detail in the light of the law regarding the dishonour of cheque and in
the light of the cases decided by the Hon'ble Supreme Court of India.

DISHONOR OF CHEQUE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT,

1881

The Chapter XVII (section 138 to 148) of the Negotiable Instruments Act, 1881 deals with
the provisions regarding the penalties in case of dishonour of certain cheques for
insufficiency of funds in the account of the drawer of the cheque. Initially when, in 1988, the
Chapter XVII was inserted in the Negotiable Instruments Act, 1881, it contained sections 138
to 142 only. But after further amendments in the Negotiable Instruments Act, 1881, new
sections, that is, sections 143 to 148 also have been inserted in the Negotiable Instruments
Act, 1881.

Section 6 of the Negotiable Instruments Act, 1881 defines “Cheque” as a bill of exchange
drawn on a specified banker & not expressed to be payable otherwise than on demand & it
includes the electronic image of a truncated cheque & a cheque in the electronic form.

Explanation I of section 6 of the said Act provides that for the purposes of section 6, the
expressions-

(a) "a cheque in the electronic form" means a cheque drawn in electronic form by using any
computer resource and signed in a secure system with digital signature (with or without
biometrics signature) and asymmetric crypto system or with electronic signature, as the case
may be;

(b) “a truncated cheque” means a cheque which is truncated during the course of a clearing
cycle, either by the clearing house or by the bank whether paying or receiving payment,
immediately on generation of an electronic image for transmission, substituting the further
physical movement of the cheque in writing.

Explanation II of section 6 of the said Act provides that for the purposes of section 6, the
expression clearing house means the clearing house managed by the Reserve Bank of India or
a clearing house recognised as such by the Reserve Bank of India.

Explanation III of section 6 of the said Act provides that for the purposes of this section, the
expressions "asymmetric crypto system", "computer resource", "digital signature", "electronic

10
form" and "electronic signature" shall have the same meanings respectively assigned to them
in the Information Technology Act, 2000.

Section 138 of the Negotiable Instruments Act, 1881 deals with the dishonour of cheque due
to insufficiency, etc., of funds in the account of the drawer of the cheque. It provides that
where 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 out of that account for the
discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be paid from that account by an
agreement made with that bank, such person shall be deemed to have committed an offence
and shall, without prejudice to any other provision of this Act, be punished with
imprisonment for a term which may be extended to two years, or with fine which may extend
to twice the amount of the cheque, or with both:

Provided that nothing contained in section 138 of the said Act shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on
which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand
for the payment of the said amount of money by giving a notice in writing, to the drawer of
the cheque, within thirty days of the receipt of information by him from the bank regarding
the return of the cheque as unpaid; &

(c) the drawer of such cheque fails to make the payment of the said amount of money to the
payee or as the case may be, to the holder in due course of the cheque within fifteen days of
the receipt of the said notice.

Section 138 of the said Act further provides that for the purposes of section 138, debt or other
liability means a legally enforceable debt or other liability.

Thus, to constitute the offence under section 138 of the Negotiable Instruments Act, 1881,
following conditions are required to be fulfilled:

1) The cheque in question should have been issued by a person on an account maintained by
him with a banker for payment to another person from out of that account for discharge, in
whole or in part, of any legally enforceable debt or other liability;

11
2) The cheque in question should have been presented within the period of three months or
within the period of its validity, whichever is earlier;

3) The cheque in question should have been returned unpaid;

4) The payee or the holder in due course should have issued a notice to the drawer within
thirty days of the receipt of information by him from the bank regarding the return of the
cheque as unpaid; &

5) After the receipt of the said notice, the drawer should have been failed to pay the cheque
amount within fifteen days of the receipt of the said notice.

LIABILITY OF A COMPANY FOR DISHONOR OF CHEQUE UNDER SECTION 138 & 141 OF
THE NEGOTIABLE INSTRUMENTS ACT, 1881- ANALYSIS

Section 141of the Negotiable Instruments Act, 1881 deals with offences by companies.
Section 141(1) of the said Act provides that if the person committing an offence under
section 138 is a company, every person who, at the time the offence was committed, was in
charge of, & was responsible to the company for the conduct of the business of the company,
as well as the company, shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly:

Provided that nothing contained in the sub-section (1) of section 141 of the said Act shall
render any person liable to punishment if he proves that the offence was committed without
his knowledge, or that he had exercised all due diligence to prevent the commission of such
offence:

Provided further that where a person is nominated as a Director of a company by virtue of his
holding any office or employment in the Central Government or State Government or a
financial corporation owned or controlled by the Central Government or the State
Government, as the case may be, he shall not be liable for prosecution under the Chapter
XVII of the said Act.

Section 141(2) of the said Act provides that notwithstanding anything contained in sub-
section (1) of section 141 of the said Act, where any offence under the said Act has been
committed by a company and it is proved that the offence has been committed with the
consent or connivance of, or is attributable to, any neglect on the part of, any director,
12
manager, secretary or other officer of the company, such director, manager, secretary or other
officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly.

Section 141 of the said Act further provides that for the purposes of section 141, (a) company
means any body corporate and includes a firm or other association of individuals; &(b)
director, in relation to a firm, means a partner in the firm.

Section 141 of the said Act begins with a reference to section 138 of the said Act. Thus, the
scope of section 141 extends to the offences committed by a company in regard to dishonour
of cheque.

The inter-relationship between sections 138 & 141has been clearly explained in SMS
Pharmaceuticals v. Neeta Bhalla1. In this case, it was held by the Court that section 138 of
the said Act casts criminal liability punishable with imprisonment or fine or with both on a
person who issues a chequetowards the discharge of a debt or liability as a whole or in part &
the cheque is dishonoured by the bank on presentation. Section 141 of the said Act extends
such criminal liability in case of a company to every person who at the time of the
commission ofthe offence, was incharge of &was responsible for the conduct of the business
of the Company. Such a person is vicariously liable to be held guilty for the offence under
section 138 of the Act & punished accordingly.

In Assistant Commissioner, Assessment- II, Bangalore and Ors. v. Velliappa Textiles Ltd.
and Ors.2, the Hon’ble Supreme Court of India introduced the concept of ego & alter ego in
relation to the employee & the employer corporation. The Court held that in order to fix
corporate criminal liability for the actions of the employee (who must generally be liable
himself), the actor-employee who physically committed the offence must be the ego, the
center of the corporate personality, the important organ of the body corporate, the alter ego of
the employer corporation or its directing mind. As the company or corporation has no mind
of its own, its active & directing will must, as a result, be sought in the person of somebody
who for some purposes may be called as an agent, but who is really the directing mind &will
of the company or corporation, the very ego and center of the personality of the corporation.
To this extent, in Indian law, the criminal liability on a company can be easily fixed.

1
AIR 2005 SC 3512.
2
AIR 2004 SC 86.
13
Thus, to fix the criminal liability on a company in case this offence is committed by the
company, section 141 of the Act provides that every person in charge of the company and
who was responsible to the company for the conduct of the business, shall be deemed to be
guilty of the offence.

This concept of vicarious liability has been explained in Sabitha Ramamurthy v. RBS
Channabasavaradhya3. In this case, it was held that section 141 of the Act creates a legal
fiction. So, by reason of the said provision, a person although is not personally liable for
commission of such an offence would be vicariously liable. Thus, such vicarious liability can
be inferred so far as a company registered or incorporated under the Companies Act, 1956 is
concerned, only if the requisite statements, which are required to be averred in the complaint
petition, are made so as to make the accused therein vicariously liable for the offence
committed by the company. Before a person can be held vicariously liable, strict compliance
of the statutory requirements would be insisted.

In Monaben Ketanbhai Shah v. State of Gujarat4, it was held that the criminal liability has
been imposed on those who, at the time the offence was committed, was in charge of & was
responsible to the firm for the conduct of the business of the firm.

The person in charge or responsible to the company could be the managers, directors,
secretaries or other officers of that company. But, it doesn’t mean that just by holding a
directorial position, the person would be liable under section 141 of the Act. This has been
held in the landmark case of SMS Pharmaceuticals v Neeta Bhalla5.

In this case, it was held that there is nothing which suggests that simply by being a director in
a Company, one is supposed to discharge particular functions on behalf of a company. What
a Board of Directors has the right to do in relation to a particular company depends upon the
role and functions assigned to Directors as per the Memorandum &Articles of Association of
the company. The key words which has been used in section 141 of the Act are "every
person". These are general words and take every person connected with a company within
their meaning. It is only those persons who were in charge of & responsible for conduct of
business of the company at the time the offence was committed, who will be liable forthe

3
AIR 2006 SC 3086.
4
AIR 2004 SC 4274.
5
Supra 1.
14
offence. Thus, a director of a Company, who was not in charge of and was not responsible for
the conduct of the business of the company at the relevant time, shall not be liable under
section 141 of the Act. The liability arises from being in charge of and responsible for
conduct of the business of the company at the relevant time when the offence was committed
and not on the ground of merely holding a designation or office in a company.

In K. K. Ahuja v V.K.Vora6, it was held that a combined reading of Sections 5 and 291 of the
Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2
of that Act would indicate that the following persons are considered to be the persons who are
responsible to the company for the conduct of the business of the company:

(a) The managing directors;

(b) The whole-time directors;

(c) The manager;

(d) The secretary;

(e) Any person in accordance with whose directions or instructions, the Board of directors of
the company is accustomed to act;

(f) Any person charged by the Board with the responsibility of complying with that provision
& who has given his consent in that behalf to the Board; &

(g) where any company does not have any of the officers specified in clauses (a) to (c), any
director or directors who may be specified by the Board in this behalf or where no director is
so specified, all the directors.

Thus, other employees of the company cannot be said to be persons who are responsible to
the company, for the conduct of the business of the company.

Also there must be a specific averment in the complaint that at the time the offence was
committed, the person accused was in charge of & responsible for the conduct of the business
of the company. There must be the inclusion of the names of all those whom the complainant

6
JT 2009 (8) SC 691.
15
considers responsible, or whom the complainant wishes to be held responsible to be
specifically mentioned in the complaint.

InS.M.S Pharmaceuticals v. Neeta Bhalla7, it was held that it is necessary to specifically aver
in a complaint under section 141 of the Negotiable Instruments Act, 1881 that at the time the
offence was committed, the person accused was in charge of, and responsible for the conduct
of business of the company. This averment is an essential condition of the section 141 of the
Act &has to be made in a complaint. Without this averment being made in a complaint, the
conditions of the section 141 of the Act cannot be said to be fulfilled.

It was further held that even in the absence of such a specific averment, thesignatory of the
cheque and/or the Managing Directors or Joint Managing Directors shall be liable under
section 141 of the Act by virtue of the office they hold (as Managing or Joint Managing
Directors). These persons are covered under section 141 of the Act as persons in charge of
and responsible for the conduct of the business of the company.

InN Rangachari v. Bharat Sanchar Nigam Limited8, it was held that a person in the
commercial world having a transaction with a company has the right to presume that the
directors of the company are in charge of the affairs of the company. If any restrictions on
their powers are imposed by the Memorandum or Articles of the company, it is for the
directors to establish it at the trial. It is in that context that section 141 of the Act provides
that when the offender is a company, every person, who at the time when the offence was
committed was in charge of and was responsible to the company for the conduct of the
business of the company, shall also be deemed to be liablefor the offence along with the
company. Thus, an allegation in the complaint that the named accused are directors of the
company would itself indicate of their acting for and on behalf of the company and of their
being in charge of the company.

Under section 138 of the Act, the punishments for breaches of the section include fine (up to
twice the amount of the cheque) or imprisonment, or both. A fine can be imposed on the
company or corporation for a breach of this section. But in case the punishment of
imprisonment is to be imposed then it means that those sentences for imprisonment could be

7
Supra 1.
8
AIR 2007 SC 1682.
16
imposed upon the individuals who are held as ‘those in charge of and responsible to the
company’ as the company is an artificial person.

Aneeta Hada v. M/s. Godfather Travels & Tours Pvt. Ltd.9

In this case, it was held that if a group of persons that guide the business of the companies
have the criminal intent, that would be imputed to the body corporate. In this context, section
141 of the Act has to be understood. The said provision clearly provides that when a person
which is a company commits an offence, then certain categories of persons in charge as well
as the company would be deemed to be liable for the offences under section 138 of the Act.
Also the directors or the other officer of a company cannot be prosecuted alone which means
arraigning the company as accused is a condition precedent for their prosecution.

Standard Chartered Bank v. State of Maharashtra and Others etc.10

In this case, it was held that a Director cannot get a complaint under section 138 of the
Negotiable Instruments Act, 1881against him quashed under section 482 of the Code of
Criminal Procedure, merely on the ground that apart from the basic averment no particulars
are given in the complaint about his role.

Ashoke Mal Bafna v. M/s. Upper India Steel Mfg. & Engg. Co. Ltd.11

In this case, it was held that before summoning an accused under section 138 of the Act, the
Magistrate is required to examine the nature of allegations made in the complaint & the
evidence both oral & documentary in support thereof & then to proceed further with the
proper application of mind to the legal principles on the issue. Impliedly, it is necessary for
the courts to ensure strict compliance of the statutory requirements as well as settled
principles of law before making a person vicariously liable. Also for making a Director of a
Company liable for offences committed by the company under section 141 of the Act, there
must be specific averments against the Director indicating as to how & in what manner the
Director was responsible for the conduct of the business of the company.

9
AIR 2012 SC 2795.
10
AIR 2016 SC 1750.
11
AIR 2017 SC 2854.
17
Thus, in the light of various legislative provisions, especially under Chapter XVII of the
Negotiable Instruments Act, 1881 which contains the provisions relating to dishonour of
cheque,& the judicial interpretation of those provisions, the concept of holding a company
criminally liable for its acts has become an established legal position.

CONCLUSION

As a company is an artificial person, it acts through its officials. Thus, in case of dishonour of
cheque by a company, all those persons who were in charge of & responsible for conduct of
business of the company at the time of commission of that offence, will be liable for the
offence. Thus, a director of a Company, who was not in charge of and was not responsible for
the conduct of the business of the company at the relevant time, shall not be liable under
section 141 of the Negotiable Instruments Act, 1881. The liability arises from being in charge
of and responsible for the conduct of the business of the company at the relevant time when
the offence was committed and not on the ground of merely holding a designation or office in
a company.

18
 BIBLIOGRAPHY

BOOKS

 Chaudhary, R.N., Banking Laws. Central Law Publications, 2015.

 Tannan, M.L., Tannan’s Banking Law. LexisNexis, 2015.

INTERNET SOURCES

 www.pbr.co.in/2014/2014_month/Nov/13.pdf

 https://indiacode.nic.in/acts/6.%20Negotiable%20Instruments%20Act,%201881.pdf

 https://books.google.co.in/books?
hl=en&lr=&id=0cWpXc6Q1PQC&oi=fnd&pg=PR5&dq=dishonour+of+cheque+by+
company+section+141&ots=cDJoq7bzsB&sig=cDfc679rMqnEEe38-s7MFlfI-
Mk#v=onepage&q=dishonour%20of%20cheque%20by%20company%20section
%20141&f=false

 https://poseidon01.ssrn.com/delivery.php?
ID=93912406709202406501301112509406412202405505201500702907509609103
011508911707100511701002504003002809903303009609206808510308705803204
204707811910707112307608607000701706605311808712500006407609003111100
0088105002105082088109071105118020116091096024091&EXT=pdf

 https://ndl.iitkgp.ac.in/document/
wJHfXHJS1fSgcbV3XkAL1puXgrZsgxvMeXubUEI0yNbpEK4usxoBpQivhi8vIjfET
tIA33EzO-eWUSJBzvt8ag

 https://www.google.com/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=17&ved=2ahUKEwj_i-
y7ze_fAhWFinAKHWx0DywQFjAQegQIARAC&url=http%3A%2F

19
 %2Fwww.lawjournals.org%2Fdownload%2F59%2F2-5-44-
192.pdf&usg=AOvVaw2tvYBUseHzB42347nBdPvC

 http://lawcommissionofindia.nic.in/reports/report213.pdf

Page 1

PLAG
SCAN
REPORT

Words 458 Date January 09,2024

Characters 2758 Exclude URL

15% 85% 5 13
Plagiarized
Plagiarism Unique Unique Sentences
Sentences

Content Checked For Plagiarism

A cheque may be defined as an acknowledged bill of exchange that is readily accepted in lieu of
payment of money. It is a negotiable instrument. It has been developed as a mode of making
payments without the need to carry huge amount of money. It is an important medium for business
transactions as it is very convenient for the people to carry & execute a small piece of paper called
cheque as compared to carrying the currency worth the value of cheque.
Dealings through cheque play an important role in the commercial world & in the development of
the economy of the country as payment through cheques makes the monetary transactions much
20
easier. In India, with the rapid increase in business activities, the usage of cheque is also increased &
so the cheque dishonour cases. A cheque is said to be dishonoured when it is refused to be accepted
or paid upon presentation by the payee of the cheque or the payee’s authorized agent to the bank
because of insufficiency of funds in the account on which the cheque was drawn.
Dishonour of cheques is one of the biggest problems in the smooth functioning of the cheque system.
As the cheque plays a vital role in monetary transactions, dishonour of cheque threatens the
credibility of this negotiable instrument. Dishonour of cheque hinders smooth monetary transactions.
Thus, dishonour of cheque adversely affects the economy of the country. For business to flourish, it
was required that some law, which could ensure credibility to the holder of this negotiable
instrument, should be enacted.
The great hardship is faced by a person if a cheque issued in his favour is dishonoured because of
insufficiency of funds in the account of the drawer of the cheque. To prevent this, the act of
dishonour of certain cheques has been made an offence by an amendment of the Negotiable

21