Research Methodology Aims And Objectives 3ln36

RESEARCH METHODOLOGYAims and objectives The project aims at studying the various aspects related to dishonour of cheques andliability arising therefrom. It begins by defining the concept of dishonour of cheques andthen proceeds to the liability arising out of such dishonour and the laws related thereto.T h e u l t i m a t e o b j e c t i v e i s t o u n d e r s t a n d t h e l i a b i l i t y a n d t h e p e n a l p r o v i s i o n s f o r dishonour of cheques and then to understand its application in the Indian context. Scope The scope of the project has been restricted to the broad topics like the laws applicableand the procedures followed. The author has limited the scope to a very conceptual andtheoretical understanding of dishonour of cheques and liability arising therefrom. Method of writing The researcher has endeavored to use a combination of descriptive and analytical stylesof writing throughout this project and has cited various case laws for better understandingof the topic. More emphasis has been placed on the descriptive style of writing. Sources of Data The main sources have been textbooks, articles and web-search.6 INTRODUCTION Advent of cheques in the market have given a new dimension to the commercial andcorporate world, its time when people have preferred to carry and execute a small pieceof paper called cheque than carrying the currency worth the value of cheque. Dealings incheques are vital and important not only for banking purposes but also for the commerceand industry and the economy of the country. But pursuant to the rise in dealings withcheques, the practice of giving cheques without any intention of honoring them has alsorisen. In case a cheque is issued by a person in liquidation of his debt or liability, andsame is dishonoured, then it not only creates a bad taste, but can also result in harassmentand can cause damages to the person to whom the cheque may have been issued.Since business activities have increased, the attempt to commit crimes and indulge inactivities for making easy money have also increased. Thus besides civil law, animportant development both in internal and external trade is the growth of crimes and ithas been found that the banking transactions and banking business is every day beingconfronted with criminal actions and this has led to an increase in the number of criminalcases relating to or concerned with the banking transactions.In India, cheques are governed by the Negotiable Instruments Act, 1881, which is largelya codification of the English Law on the subject. Before 1988 there was

no effective legal provision to restrain people from issuing cheques without having sufficient funds in their or any stringent provision to punish them in the event of such cheque not beinghonoured by their bankers and returned unpaid. Although, on dishonour of cheques thereis a civil liability accrued, however in reality the processes to seek civil justice becomesnotoriously dilatory and recover by way of a civil suit takes an inordinately long time. Toensure prompt remedy against defaulters and to ensure credibility of the holders of then e g o t i a b l e i n s t r u m e n t a c r i m i n a l r e m e d y o f penalty was inserted in NegotiableInstruments Act, 1881 in form of the Banking, Public Financial Institutions a n d Negotiable Instruments Laws (Amendment) Act, 1988 which were further modified bythe Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002[3].7 Of the ten sections comprising chapter XVII of the Act, section 138 creates statutoryoffence in the matter of dishonour of cheques on the ground of insufficiency of funds inthe maintained by a person with the banker. Section 138 of the NegotiableInstruments Act, 1881 is a penal provision wherein if a person draws a cheque on an maintained by him with a banker for payment of any amount of money toanother person from out of that for the discharge, in whole or in part of any debtor other liability, is returned by the bank unpaid, on the ground either because of theamount of money standing to the credit of that is insufficient to honour thec h e q u e o r that it exceeds the amount arranged to be paid from that a c c o u n t b y a n agreement made with that bank, such person shall be deemed to have committed anoffence.Section 138 of the Act can be said to be falling in the acts which are not criminal in realsense, but are acts which in public interest are prohibited under the penalty or thosewhere although the proceeding may be in criminal form, they are in reality only asummary mode of enforcing a civil right. Normally in criminal law existence of guiltyintent is an essential ingredient of a crime. However the Legislature can always create anoffence of absolute liability or strict liability where ‘mens rea’ is not at all necessary.This paper deals with the various aspects of dishonour of cheques and then, proceedstowards the liability arising out of such dishonour.8 DISHONOUR OF CHEQUES – MEANING Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as" a b i l l o f e x c h a n g e d r a w n o n a s p e c i f i e d b a n k e r a n d n o t e x p r e s s e d t o b e p a y a b l e otherwise than on demand"."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 . 1 Black’s Law Dictionary 2 defines the term "Dishonour" as"to refuse to accept or pay a draft or to pay a promissory note when duly presented. Aninstrument is dishonored when a necessary or optional presentment is duly made and dueacceptance or payment is refused, or cannot be obtained within the prescribed time, or incase of bank collections, the instrument is reasonably returned by the midnight deadline;Reference to the term 'dishonour' has been made in Section 91 and Section 92 of the Negotiable Instruments Act, 1881.Section 91 - Dishonor by non- acceptance"A bill of exchange is said to be dishonored by nonacceptance when the drawee, or oneof several drawee not being partners, makes default in acceptance upon being dulyrequired to accept the bill, or where presentment is excused and the bill is not accepted.Where the drawee is incompetent to contract, or the acceptance is qualified the bill may be treated as dishonored".Section 92- Dishonour by non-payment"A promissory note, bill of exchange or cheque is said to be dishonored by nonpaymentwhen the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same" . 1 Vide Wharton’s Law Lexicon, 1978 Ed. p. 335 2 Vide Rakesh Porwal v. Narayan Joglekar, 1993 Cr LJ 680 p. (688) (Bom). 9

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