DISHONOUR OF CHEQUES
A cheque is one form of a bill of exchange. However, all bills of exchange are not cheques. A cheque is always drawn on a bank or a banker. It is payable immediately on demand, without any days of grace. The sum that is directed to be paid should be distinctly expressed in the instrument. If there is a discrepancy between the amount stated in words and that stated in figures, then the amount stated in words shall be the amount that is ordered to be paid. As per the amendments, brought in by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, truncated cheques and electronic cheques also fall within the purview of the definition of cheques.
The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 defines truncated cheques as those cheques, which are truncated by the clearinghouse or by the bank during the course of a clearing cycle and electronic cheques as those cheques, which contain the exact mirror image of paper cheques. In order to ensure the minimum safety standards with the use of digital signatures and asymmetric crypto system, such cheques are generated, written and signed in a secure system.
When any cheque, drawn by a person for the discharge of any liability is returned by the bank unpaid, because of insufficiency of the amount of money, standing to the credit of the account on which the cheque was drawn or, for the reason that it exceeds the arrangements made by the drawer of the cheque, the cheque is said to have been dishonoured.
In India, the Negotiable Instruments Act, 1881 was framed as an attempt to consolidate the law that relates to the Bills of Exchange, cheques and promissory notes. This Act is based upon English Common Law, based upon the decisions of the English Cou ...