The present day economies of the world which are function ing beyond the international boundaries are relying to a very great extent on the mechanism of the Negotiable Instruments such as cheques and bank drafts and also the oriental bill of exchange prevalent in India and known as Hundis. Since business activities have increased, the attempt to commit crimes and indulge in activities for making easy money have also increased. Thus besides civil law, an important development both in internal and external trade is the growth of crimes and we find that banking transactions and banking business is every day being confronted with criminal actions and this has led to an increase in the number of criminal cases relating to or concerned with the Banking transactions.
Whenever a cheque is dishonoured, the legal machinery relating to the dishonour of a cheque comes into motion. What is dishonour has first to be considered and for this we have to refer to sections 92 and 93 of the Negotiable Instruments Act, 1881. Section 92 reads as under:
“Dishonour by non-payment.-A promissory note, bill of exchange or cheque is said to be dishonoured by non payment when 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.”
Thus if on presentation the banker does not pay then dishonour takes place and the holder acquires at once the right of recourse against the drawer and the other parties on the cheque.
Explore the The Negotiable Instruments Act, 1881 Bare Act PDF to read the official text along with our legal team’s executive summary.
The provisions of this section were applicable to bills of exchange payable at sight or on demand’. But consequently the Supreme Court has held in Jagjivan v. Ranchoddas that where a bill payable at sight or on demand is presented it is presented both for acceptance and payment. If the bill is not paid, it is treated as dishonoured by non-acceptance.
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