DISHONOUR OF NEGOTIABLE INSTRUMENTS

DISHONOUR OF NEGOTIABLE INSTRUMENTS SUBMITTED TO DR. S. Z. AMANI

SUBMITTED BY SAHIL CHOWDHURY TH

B.A. LL.B. (HONS.) 10  SEMESTER TH

5  YEAR

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ACKNOWLEDGEMENT Firstly, I would like to express my profound sense of gratitude towards the Almighty “ALLAH” for providing me with the authentic circumstances which were mandatory for the completion of my research work. I am also thankful to Dr. S.Z. AMANI, for his invaluable support, encouragement, supervision and useful suggestions throughout this research work. His moral support and continuous guidance enabled me to complete my work successfully. His intellectual thrust and blessings motivated me to t o work rigorously on this study. In fact this study could not have seen the light of the day if his contribution had not been available. It would be no exaggeration to say that it is his unflinching faith and unquestioning support that has provided the sustenance necessary to see it through to its present shape.

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TABLE OF CONTENT Introduction

3

Dishonour by non-acceptance

3

Dishonour by non-payment

4

Dishonour of cheque

5

Causes of dishonour of a cheque

6

Consequences of dishonour

19

Objects and reasons

20

Ingredients of liability under section 138 of negotiable instruments act, 1881

22

Constitutional validity of section 138 of N.I.ACT, 1881

22

 Nature of offence under section 138 of N.I. ACT, ACT, 1881

24

Offence committed by companies

25

Offences by the firms or association of individuals

30

Concluding remarks

31

Bibliography

32

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INTRODUCTION The main object of this piece of legislation is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Section 138, THE NEGOTIABLE INSTRUMENTS ACT 1881 is intended to prevent dishonesty on the  part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induces the payee or holder in due course to act upon it. The dishonour of cheque is now a criminal offence punishable by imprisonment up to one year or with fine up to the double the amount of dishonored cheque or with both. 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. 1 It has been noted above that dishonour by non-acceptance could be only of a bill of exchange,  but dishonour by non-payment could be of any negotiable instrument including a bill of exchange. When presentment for payment is made and the maker, acceptor or drawee, as the case may be, makes default in making the payment, there is dishonour of the instrument. Dishonour is of two kinds: 1. Dishonour of a bill of exchange by non-acceptance. 2. Dishonour of a promissory note, bill of exchange or cheque by non- payment.

DISHONOUR BY NON -ACCEPTANCE Since presentment for acceptance is required only of a bill of exchange, it is only the bill of exchange which could be dishonoured by non-acceptance. Section 91 provides that the dishonour of a bill of exchange, by non-acceptance, may take place in any of the following ways:

When a bill of exchange is presented for acceptance and the drawee or the drawees makes default in acceptance. When there are several drawees even if one of them makes a default in acceptance the bill is deemed to be is honoured, unless these

1

 Section 92

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