DISHONOUR OF CHEQUE IN INDIA: IT’S LEGAL ISSUES AND CHALLENGES

AUTHOR – VIJAY CHANDRAN R, LL.M STUDENT, AMITY LAW SCHOOL, NOIDA, U.P

BEST CITATION – VIJAY CHANDRAN R,, DISHONOUR OF CHEQUE IN INDIA: IT’S LEGAL ISSUES AND CHALLENGES, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (6) OF 2025, PG. 623-631, APIS – 3920 – 0001 & ISSN – 2583-2344

ABSTRACT

In India, cheque has a significant role and used it as an instrument for financial transactions, especially during the trade transactions and also used for the personal purposes. The cheque is considered as a negotiable instrument, and it means as a written document which gives a guarantee or promise to pay a certain amount to a specific person for discharging his debt. Apart from cheque, promissory note and the bill of exchange is considered as negotiable instrument. In India, the Negotiable Instruments Act 1881 is the legal framework which governs all these and also it specifies certain procedures in case of any cheating or fraud. Section 138 of Negotiable Instrument Act 1881 clarifies the penal provisions in case of dishonoring of cheque and it attracts both criminal and civil liability in India. The aim of this act is to safeguard the payee (the person whom the money is directed to be paid) and facilitate both personal and business transactions and also have the legal right to receive it from the borrower. In early days, due to the growth of trade, funds become necessary for the shipment of goods and the importance of cheques increased and they considered as an alternative method instead of carrying physical cash in hand. But gradually the lenders faced several issues regarding the delay in repayment of funds and need a statute to tackle this problem and finally it led to the enactment of Negotiable Instruments Act 1881 in India. Section 138 considered as the cornerstone of the Negotiable Instrument Act and it criminalizes the dishonor of cheque practice aiming to safeguard the payee and enhance the credibility of the negotiable instruments. But at the same time, it faces some challenges and issues.

Here, this paper delves into the major legal issues and challenges that arising while applying the law like misusing of laws, delays in complaint filing, heavy burden of cases upon the courts, the burden of proof, liability of the bank, lack of legal knowledge and also strengthening the alternative dispute resolution mechanism to reduce the pending dishonor of cheque cases and for the speedy disposal of it. This paper attempts to provide a thorough examination of section 138 by assessing the difficulties and complications related to the statute.

KEYWORDS: Negotiable Instruments Act,1881, Dishonour of cheques, Section 138, Bank ability, Insufficient funds, Alternative resolution mechanism.