DISHONOUR OF CHEQUE: LEGAL PROCEDURE
In this competitive world, finance is the most important and key area in every
organization. Every commercial and non-commercial organization has the involvement of
money or fund, to run their affairs and activities. Healthy fund management plays a vital
role in the growth of every entity. The dishonor of cheques may hinder the smooth
functioning and result in loosing the financial gains. Wastage of time, energy, and posing
bad impression amongst the financial institution and parties concerned, are also the
consequences of cheque dishonor.
The Negotiable Instrument Act has provided legal framework in the matter of
cheque dishonor. It also provided the remedial measures to the payee, as well statutory
consequential penal provisions on the part of drawer of cheque. A summary of these
provisions has been given as under for ready use of the members:
1. AFTER the receipt of dishonoured cheque with return memo from bank, demand
notice to be sent by registered post with AD within 30 days from the date of receipt of
return memo and dishonoured cheque from bank.
2. IN demand notice, 15 days time to be given to the accused for making payment from
the date of receipt of notice by the accused.
3. IN case of non-payment within 15 days, CAUSE OF ACTION arises on 6th day from
the date of receipt of notice by the accused.
4. COMPLAINT case under section 138 of NEGOTIABLE INSTRUMENT ACT is to
be filed within 30 days from the date of CAUSE OF ACTION, i.e. from 16th day of
receipt of notice by the accused.
5. SA (Solemn Affirmation), i.e. preliminary evidence either by disposition or by
affidavit in evidence to be completed under section 200 CRPC for issue of summon.
6. AFTER issue of summon next stage shall be for S.R. (Summon Report).
7 (a)In case the summon is served, party has to appear and take bail and the next stage
would for plea.
(plead guilty or not guilty).
(b) In case the summon is served and party does not appear, warrant of arrest would
be issued as per the provisions of CRPC.
(c) In case the summon service report has not arrived in the court's record the next
date would be for TAGID (follow-up of report).
(d) In case the summon is returned with such remark like 'does not exist',
'incomplete address' etc. then fresh requisite with complete particulars to be
provided for issue of fresh summon.
8. AFTER the completion of the above stage next stage would be for plea.
9. AFTER plea the evidence process will start:
(a) 1st Date-Evidence of completion also called as evidence in Chief shall be
(b) Then the cross examination of the complaint by the defence lawyer shall be
(c) Then the bank evidence will start and in this case evidence of only one bank
or both the banks
(complainant’s bank and accused’s bank) may take place depending upon the
return memo and averments in the complaint petition. Nevertheless, as per the
recent amendments in Feb.2003, banking evidence is not mandatory since exhibit
of return memo is sufficient to construe banker’s evidence.
(d) After the completion of the above evidences, examination of the accused
under section 313 CRPC by the magistrate takes place.
(e) Then the evidence of defense witness by the complainant's lawyer takes
place. And the evidence is closed.
10. AFTER the completion of the evidence argument between both the lawyers takes
place and judgment is delivered.
11. IN the case of cheque dishonour the punishment is upto twice the amount of cheque
and upto two years' of imprisonment.
MONEY SUIT IN NUTSHELL
Notice within 3 years.
Suit file within 3 years.
Issue of summons by Bailee and by registered post.
Fate of summon.
If party appears and file W.S. or even after the case moves to ex-parte, the party
appears and file petition to bail out of ex-parte stage, petition is generally allowed
and order to file W.S. is given.
After filing of W.S. by the defendant and service of copy of W.S. on to petitioner,
date for framing of issue is fixed.
After issue is framed, evidence starts and all original supporting are examined.
After examination of originals and witnesses, decree is passed.
After decree is passed and the defendant fails to make payment as per the order,
order for execution is passed.
The process of execution starts by appointment of liquidator, attachment of
properties, auction and realisation of dues.
If Summon is served If Summon is not served
Party to appear and file WS (written For tagit (follow-up)
statement) If party does not appear and If summon is returned with such remarks
acknowledgement of service is recorded not accepted by court as service then fresh
then case moves to ex-parte. requisite to be filed with complete
After the case moves to ex parte, full Even after providing complete particulars if
particulars along with all original summon could not be served then and
supporting to be filed along with affidavit affidavit for correctness of the address and
in evidence for ex-parte hearing. a petition under order 5 rule 9 of CPC to be
filed for deemed service of summon
After hearing ex-parte decree is passed The case moves to ex-parte and the same
procedure follows like summon served and
ex-parte decree is obtained.