Research Methodology Aims and Objectives

8/3/2019 Research Methodology Aims and Objectives

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RESEARCH METHODOLOGYAims and objectivesThe project aims at studying the various aspects related todishonour of cheques andliability arising therefrom. It begins by

defining the concept of dishonour of cheques andthen proceeds tothe liability arising out of such dishonour and the laws relatedthereto.The ult ima te o bject ive is to unders tand theliability and the penal provisions for dishonour of chequesand then to understand its application in the Indian context.ScopeThe scope of the project has been restricted to the broad topicslike the laws applicableand the procedures followed. The authorhas limited the scope to a very conceptual andtheoreticalunderstanding of dishonour of cheques and liability arising therefrom.Method of writing

The researcher has endeavored to use a combination ofdescriptive and analytical stylesof writing throughout this projectand has cited various case laws for better understandingof the topic.More emphasis has been placed on the descriptive style of writing.Sources of DataThe main sources have been textbooks, articles and web-search.6

INTRODUCTIONAdvent of cheques in the market have given a new dimension tothe commercial andcorporate world, its time when people havepreferred to carry and execute a small pieceof paper called cheque

than carrying the currency worth the value of cheque. Dealingsincheques are vital and important not only for banking purposes butalso for the commerceand industry and the economy of thecountry. But pursuant to the rise in dealings withcheques, thepractice of giving cheques without any intention of honoring them hasalsorisen. In case a cheque is issued by a person in liquidation ofhis debt or liability, andsame is dishonoured, then it not only createsa bad taste, but can also result in harassmentand can cause damagesto the person to whom the cheque may have been issued.Sincebusiness activities have increased, the attempt to commit crimesand indulge inactivities for making easy money have also

increased. Thus besides c ivil law, animportant developmentboth in internal and external trade is the growth of crimes andithas been found that the banking transactions and bankingbusiness is every day beingconfronted with criminal actions and thishas led to an increase in the number of criminalcases relating to orconcerned with the banking transactions.In India, cheques aregoverned by the Negotiable Instruments Act, 1881, which is largelyacodification of the English Law on the subject. Before 1988 there was


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no effective legal provision to restrain people from issuing chequeswithout having sufficient funds in their account or any stringentprovision to punish them in the event of such cheque notbeinghonoured by their bankers and returned unpaid. Although, ondishonour of cheques thereis a civil liability accrued, however in reality

the processes to seek civil justice becomesnotoriously dilatory andrecover by way of a civil suit takes an inordinately long time. Toensureprompt remedy against defaulters and to ensure credibility of theholders of thenegotia ble ins trum ent a crimi nal remed y o fpenal ty was inserted in Negot iable Instruments Act , 1881in form of the Banking, Publ ic F inancial Inst i tut ionsand Negotiable Instruments Laws (Amendment) Act, 1988 whichwere further modified bythe Negotiable Instruments (Amendmentand 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 ofcheques on the ground of insufficiency of funds inthe accountmaintained by a person with the banker. Section 138 of theNegotiableInstruments Act, 1881 is a penal provision wherein if aperson draws a cheque on anaccount mainta ined by him with abanker for payment of any amount of money toanother personfrom out of that account for the discharge, in whole or in part of anydebtor other liability, is returned by the bank unpaid, on theground either because of theamount of money standing to thecredit of that account is insufficient to honour thecheq ue orthat i t exceeds the amount arranged to be paid f rom that

ac cou nt by an agreement made with that bank, such personshall be deemed to have committed anoffence.Section 138 of theAct can be said to be falling in the acts which are not criminal inrealsense, but are acts which in public interest are prohibitedunder the penalty or thosewhere although the proceedingmay be in criminal form, they a re in reality only asummarymode of enforcing a civil right. Normally in criminal law existenceof guiltyintent is an essential ingredient of a crime. However theLegislature can always create anoffence of absolute liability or strictliability where mens rea is not at all necessary.This paper deals withthe various aspects of dishonour of cheques and then,

proceedstowards the liability arising out of such dishonour.8

DISHONOUR OF CHEQUES MEANINGSection 6 of the Negotiable Instruments Act, 1881 defines a chequeas"a bi l l of exchange drawn on a specif ied banker and notexpressed to be payableotherwise than ondemand"."Dishonour" means "to refuse or neglect to accept or


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pay when duly presented for payment of a bill of exchange or apromissory note or draft on a banker .1Blacks Law Dictionary2

defines the term "Dishonour" as"to refuse to accept or pay a draftor to pay a promissory note when duly presented. Aninstrument isdishonored when a necessary or optional presentment is duly madeand dueacceptance or payment is refused, or cannot be obtainedwithin the prescribed time, or incase of bank collections, theinstrument is reasonably returned by the midnight deadline;Referenceto the term 'dishonour' has been made in Section 91 and Section92 of the Negotiable Instruments Act, 1881.Section 91 - Dishonor bynon- acceptance"A bill of exchange is said to be dishonored by non-acceptance when the drawee, or oneof severa l drawee not be ingpartners, makes default in acceptance upon being

dulyrequired to accept the bill, or where presentment is excused andthe bill is not accepted.Where the drawee is incompetent tocontract, or the acceptance is qualified the bill may be treated asdishonored".Section 92- Dishonour by non-payment"A promissory note,bill of exchange or cheque is said to be dishonored by non-paymentwhen the maker of the note, acceptor of the bill or drawee ofthe cheque makes default in payment upon being duly required to paythe same".1Vide Whartons Law Lexicon, 1978 Ed. p. 335

2Vide Rakesh Porwal v. Narayan Joglekar, 1993 Cr LJ 680 p. (688)(Bom).9

Liability for Dishonor of

Cheques _ Project

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