Negotiable Instrument Act

A cheque is defined in Section 6 of the Act. A cheque must be an instrument in writing. Oral orders although they may have the other requisites, cannot be treated as cheques. The law does not restrict or lay down any restriction as to the writing materials to be used for making out a Cheque, although the banks do have their own written formats of Cheque, permissible to be used. The writing however may be done by pencil or pen, a typewriter or printed character. Although there is no legal flaw in the case of cheques written with ordinary lead pencil, yet bankers should discourage this practice. The cheque written in pencil entails many risks, as alterations unauthorised by the drawer are easy to make and difficult to detect. It is in the own interests of bankers and even the drawer. There is also no law that it should be in the handwriting of the drawer or maker, as stated in the case of Satish Shah v. state of Gujarat, (1999) 95 Comp Cas 303, 307, 308 *Guj).

# Penalties in case of dishonour of certain cheques for insuffiency of funds in the Accounts

Dishonour of chque for insufficiency, etc., of funds in the account.- 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 as u/s. 138 of Negotiable Instrument Act.

Provided that nothing contained in this section shall apply unless :

  • 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 ;
  • 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; and
  • 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.

Explanation- For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability


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