The Negotiable Instruments Act, 1881 was basically introduced to define the law relating

to the various aspects of the different negotiable instruments like Promissory Notes, Bills

of Exchange and Cheques. But the increasing use of these negotiable instruments

necessitated the introduction of a number of amendments in the Negotiable Instruments

Act with the main aim of making the use of the negotiable instruments easy. Amongst all

the amendments made in the Negotiable Instruments Act the amendment responsible for

the insertion of the Chapter XVII into the Act [1] can be considered to be the most

important one as it helped in bringing about a revolutionary change with respect to the

use of cheques. Prior to this amendment the scope of misuse of the power to issue

cheques was on a rise in spite of the available civil remedy and the criminal remedy

under Sec 420 of the Indian Penal Code. And the cheques being a part and parcel of the

commercial transactions people started loosing faith in the cheque system at large. So

there was a need to curb down such misuse of the power to issue cheques and the

insertion of the Chapter XVII by the Banking, Public Financial Institutions and

Negotiable Instruments Laws ( Amendment) Act, 1988 (66 of 1988) was blessing in

disguise for the payee, the people who were the worst affected in case of such misuse.

Chapter XVII as a whole deals with Penalties in case of Dishonour of Certain Cheques

for insufficiency of funds in the accounts of the drawer of the cheques. This chapter

consists of a total of ten sections amongst which Section 138 is of utmost importance.

Section 138 speaks of dishonour of cheques for insufficiency, etc. of funds in the account

of the drawer. This section imposes criminal liability on the person who is responsible for

issuing a cheque to another person for the fulfillment of his liability without having

sufficient funds in his account. This section actually forces a person to think twice before

issuing a cheque if he has minimal funds in his accounts as because such issuance of

cheques may land the drawer of the cheque in jail even if he had no dishonest intention to

cheat the payee.

Understanding the concept of cheques and importance in

Commercial World:

The word cheque is a very well known concept and every individual who operates an

account in a bank is familiar with the concept of cheques. It is a very famous negotiable

instrument which is very much essential in world of commerce. In simple words cheque

can be said to be a written order instructing a financial institution which is a bank to pay a

certain sum of money to a particular person on demand. [2] Cheque as a negotiable

instrument is a piece of paper which promises to pay its owner the amount written over it

either on demand or as per the date mentioned on it. So the cheque can be said to be a

negotiable instrument which is negotiable by delivery. [3] It is generally presumed that

once the cheque is delivered to the payee by the drawer of the cheque the payment of

money to the payee will be made in due course of time and so the date on which the

cheque is delivered is considered to be the date on which the payment is made

irrespective of the fact as to when the cheque is presented for payment. [4] 

When we try and analyze the facts with regards to the development of the cheques as an

important negotiable instrument we realize that the origin of the cheques can be traced far

back in the seventeenth century in England. The scriveners who were basically the

writers and drafters of contracts and other documents and who were also entrusted with

the money as well as estates of the local people were the first persons who started the

concept of borrowing, lending money and paying and charging of interest on the amount

which was borrowed or lent by them. But the actual credit for discovering the concept of

cheques goes to the goldsmiths of England. The reason behind it is that the merchants of

England prior to the civil war used the King’s Mint to save the surplus money available

with them. But just before the civil war the King forcefully took away a large portion of

the saved money there by causing a great deal of loss to the merchants. As a result of this

the merchants were forced to find some other alternative option where they could save

their hard earned money. This confusion made the merchants to go to the goldsmiths who

accepted to save their surplus amount. The merchants’ money were accepted by the

goldsmiths by giving receipt notes to them which were duly signed by the goldsmiths.

The goldsmiths made good use of the money by lending the same to the other merchants.

The merchants even encouraged the goldsmiths to pay up the money to their creditors by

writing a short letter to them which authorized the goldsmiths to pay up the merchant’s

debts. The letter sent by the merchants to pay up their debts later took the form of order

notes which ordered the goldsmiths to pay up the debts of the merchants. These notes

were also known as drawn notes. It is from this concept of drawn notes that the concept

of cheques came into being [5] .

The cheques play a vital role in the commercial world as because it relieves the

businessmen from the burden of carrying currency notes to each and every place they go

to carry on their business. From this we can understand that cheques actually have

undertaken the function of money. [6] It is a small piece of paper which is enough to pay

off all the debts of the drawer. Cheques have actually oiled the wheels of commercial

transactions by facilating quick and prompt commercial transactions. [7] In a developing

Country like India cheques have really helped in the development of the economy by

facilating quick commercial transactions which would not have been possible in case of

absence of cheques. The importance of cheques in the commercial world can be

understood from the fact of introduction of electronic cheques by Negotiable Instruments

(Amendment and Miscellaneous Provisions) Act, 2002. The concept of electronic cheque

is defined as a cheque which contains the exact mirror image of a paper cheque and is

generated, written and signed in a secured system ensuring the minimum safety standards

with the use of digital signature (with or without biometric signature and asymmetric

crypto system). [8] The Electronic Cheques are valid as a paper cheque itself. These

cheques are more safe and secure in comparison to the paper cheques and these cheques

do not even require the payee to personally approach the banker to pay the debt of the

drawer. These chequese are basically sent by mail to the person to whom the drawer has

an intention to make the payment in order to fulfill his debt or liability and that person

deposits the same with the banker. On deposition of such cheque with the banker the

banker is obliged to make a transfer of payment from the account of the drawer who

actually issued the cheque into the account of the person to whom the cheque was

credited. This process of cheque transfer makes process of commercial transactions quite

easy and feasible. So we can say that the introduction of cheques is actually a blessing in

disguise for the commercial trade.

Understanding the concept of Dishonour:

When a cheque drawn by the drawer is presented for payment with the banker by the

payee and the banker refuses to satisfy the claim of the payee then such a process is

known as dishonour of cheques. The dishonour of cheque or refusal to satisfy the claim

of the payee by the banker may be due to varied type of reasons like insufficiency of

funds in the drawers account, closure of the account of the drawer due to any legal

reasons etc. This process of dishonour of cheque gives a right to the person in whose

name the cheque is issued to take the issuer of the cheque to the Court of Law for not

being able to discharge his debt or liability either due to insufficiency of funds or due to

closure of account.

Further section 92 of the Act defines, a 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.

In the case of K. Venkatasubbaya vs. P.R. Rao Tobacco Co. [9] [9], the court held that a

promissory note, Bills 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 as against section 92 applied to all the

three types of instruments like promissory notes, cheques and bills of exchange.

Need for an Amended Provision to prevent such

dishonour:

Prior to the introduction of Section 138 by the Banking, Public Financial Institutions and

Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988) all the issues relating

to dishonour of cheque and the consequent non payment of the debt vested a right in the

payee of the cheque to approach the civil courts for recovery of the amount which was

due. But due to the absence of a specific provision which made the drawer of the cheque

criminally liable for dishonour of cheque the payee had the right to seek relief under Sec

420 read with Sec 415 of the Indian Penal Code. Sec 420 of Indian Penal Code which

provides for cheating and dishonestly inducing delivery of property imposes the burden

on the payee to prove dishonest intention on the part of the drawer while issuing a

cheque. That means to charge the drawer for cheating under Sec 420 of the Indian Penal

Code the payee had to prove mens rea or guilty intention on the part of the drawer to

cheat the payee. But such proving on the part of the payee was not always possible as

because the element of deception could not be inferred in the absence of any evidence to

prove that the drawer had the intention to cheat the payee during the time the cheque was

issued. The remedy available in case of a civil suit was also no better as because the relief

available took a lot of time to be delivered and the cost of civil suit many a times

exceeded the debt amount. Due to such prevalent conditions the drawer of the cheque

generally went scot free [10] and the payee had always suffer constantly either in the

hands of the drawer or in the hands of the Court itself. This led to the loss of faith of the

mercantile community in the concept of cheques as a whole. [11] In such a back drop

there was a need to introduce an amended provision which actually would make the

drawer criminally liable in case of dishonour of cheques and provide appropriate relief to

the payee. This requirement was fulfilled by the Legislature by introducing Sec 138 along

with Chapter XVII in the Negotiable Instruments Act, 1881.

Section 138 of the Negotiable Instruments Act, 1881 and its Significance:

Section 138 of the Negotiable Instruments Act is a pragmatic legislative step to reach

justice to the aggrieved. [12] This section was introduced by the legislature to fill in the

void created by the denial of access to justice to the people who were victims of

dishonour of cheques. This section basically provides for Dishonur of cheques for

insufficiency etc., of funds in the account. As per Sec 138 if under any circumstance the

cheque issued by the drawer of the cheque is dishonored or it bounces back due to lack of

funds in the account of the drawer or for the reason that it exceeds the arrangements made

by the drawer with the bank then the drawer of cheque is liable for such

dishonour. [13] The signifance of Section 138 can be proved from the fact that it not only

provides justice to the payee in case of dishonour of cheques but it also gives a chance to

the honest drawers to rectify their actions in case of negligent behaviour so as to protect

them from the clutches of law and to prevent their harassment at the hands of law. It can

be said that Section 138 is a provision which clothes a civil dispute with the garment of

criminality. [14] 

Constitutional Validity of Sec 138:

The Constitutional Validity of Sec 138 is in debate from the day the said provision was

inserted in the provisions of the Negotiable Instruments Act, 1881. The provision of

Section 138 was considered to be unconstitutional and violative of Articles 14, 19 and 21

of the Constitution of India. The Constitutionality of Sec 138 under Article 21 was

challenged in the case of Ramawati Sharma v. Union of India [15] . In this case it was

challenged that Sec 138 only aimed at providing punishment in case of cheques and not

promissory notes or bills of exchange and that the repayment of loan is only a civil

offence and it could not be treated as a criminal offence as per the provisions of Sec 138.

The Court was of the view that cheques and promissory notes cannot be treated at the

same level as the promissory note only creates liability whereas by issuing a cheque an

individual makes a promise of paying a certain amount to the holder of the instrument.

The Court further said that under Sec 138 the act of taking a loan is not what is

punishable under but the act of promising a person to pay a certain amount by way of

cheque and later not doing so due to dishonour. Further in the case of Mohan Krishna v.

Union of India [16] it was challenged that the Section was violative of Article 14 of the

Indian Constitution as because it created a line of distinction between natural and

artificial persons. That means that as per the provisions of the Section the directorates, or

employers of a firm could escape their liability simply by proving that the cheque which

was dishonoured was not issued within their knowledge but the same was not applicable

to individual persons. The Court was of the view that Article 14 of the Constitution of

India prevented class legislation but it never prevented the formation of reasonable

classification based upon certain provisions. So it is not violative under Article 14. In

addition to that the Court further held that the criminal law of the Country has created a

line of distinction in case of natural and artificial persons in order to fasten them with

criminal liability. So such an act is not violative under Article 14 of the Indian

Constitution. It was further challenged on the ground that the concept of mens rea which

is the heart and soul of any criminal offence has been excluded under Section 138. Here

the Court was of the view that the legislature could always move a step ahead and

substitute the presumption of mens rea either with the creation of absolute or strict

liability [17] and that is what it has done here and so there is no violation.

Necessary Ingredients which attract Section 138:

Section 138 of the NI Act, 1881 was mainly enacted by the Legislature to restore back

the faith of the mercantile community with respect to the mechanism of the cheques as a

whole. This section was mainly enacted to protect the payee from the dishonest attitude

of the drawer of the cheque. But in order to attract liability under Sec 138 certain

provisions of the section are to be complied with as specified in case of Anchor Capital of

India v. State of Gujarat [18] . These provisions are as follows: The cheque must be

issued in favour of a payee for the discharge either in full or in part of a legally

enforceable debt. Then the same cheque must be presented for payment within six

months from the date of issue of the cheque or the date of validity which ever is earlier

and the cheque should be returned back by the banker as unpaid as because the funds

available in the account of the drawer are insufficient for the debt to be paid. After

receiving such an information from the banker with regards to the insufficiency of funds

the payee must sent a notice intimating the same to the drawer within thirty days of

receiving such notice, Then it is the duty of the drawer that within fifteen days of

receiving such notice from the payee it has a duty of taking any action to make good the

loss suffered by the payee. But if under any circumstances the drawer fails to take any

action with regards to the dishonour of cheque then the drawer is considered to be

responsible for the loss suffered by the payee without even he having an intention to

cheat the payee. So under Sec 138 the concept of criminal liability begins from the point

where the drawer even after receiving the notice from the payee fails to take any action in

order to prevent such loss suffered by the payee. So a detailed analysis of the Section 138

helps us to understand that the section does not make the drawer criminally liable from

the very starting point when the cheque is dishonoured. It gives a chance to the honest

drawers to prevent any type of harassment at the hands of law by way of taking any

action to make good the loss suffered by the payee after receiving a notice from the payee

intimating him about the dishonour of the cheque. So this means that the cause of action

with respect to the dishonour of a cheque necessary to make a person criminally liable

arises only after the drawer fails to take any action within fifteen days of receipt of the

notice from the payee informing him about the dishonour of the cheque to make good the

loss suffered by him. In the case of Raman B v. Shasun Chemicals and Drugs Ltd.,

(2006) 4 CTC 529: (2006) 2 LW (Cri) 775(Mad). It was held that the cause of action for

prosecution under the Section 138 does not arise from mere presentment or dishonour of

the cheque. It arises only when the drawer defaults in paying up the cheque amount due

within fifteen days of receipt of the notice informing him about the dishonour of the

cheque. The legislative mandate is that the Drawer should not be prosecuted immediately

with the dishonour of cheque but rather he should be given a chance by the payee to

rectify his mistake.

Burden of Proof & Criminal Liability under Sec 138:

In cases of criminal liability under dishonour of cheques the burdern of proof lies on the

accused who has to prove with the help of the required evidence that the cheque issued

were not for the discharge of the existing debt or liability incurred by the drawer during

the due course of time [19] . No burden of proof lies on the complainant to prove with the

help of evidence that the said cheque was issued with respect to the discharge of any

existing debt or liability incurred by the accused. [20] In complaints under Section 138

the Courts have to presume that the cheque or cheques issued were merely for

discharging the liability of the drawer and such a presumption made by the Court is

rebuttable. [21] 

The drawer is considered to be criminally liable for dishonour of cheques when he fails to

make payment of the amount which is due to the payee within fifteen days of receipt of

notice from the payee intimating him regarding the dishonour of cheque and demanding

payment of the said amount. In such a case it is considered that as the chance given to the

drawer to pay up the amount due after the receipt of the notice was misused by the

drawer and so this makes the Courts presume that even if there was no dishonest

intention on part of the drawer then also he is considered to be criminally liable for the

dishonour of the cheque. Under such circumstances the drawer may subjected to

imprisonment for a term of two years or with fine which may exceed twice the amount of

the cheque or with both. But assumption of criminal liability varies from case to case.

The option either to prosecute the accused or to lay a suit for recovery lies with the payee

or the complainant. The payee is even entitled to pursue both the civil as well as the

criminal remedies together. The initiation of criminal proceedings does not bar the payee

from initiating the civil proceedings against the accused for recovery of the amount due.

In Act. G.N. Raju v. B.S. Jaiprakash & Anr., 2006 Cr LJ 820 (Kant) it was held that if the

complainant was successful in getting the fruits of the decree in civil court, it would be

helpful only as a mitigating circumstance while imposing sentence under Section 138 of

NI Act.

But such a criminal liability will not be attached on the drawer if the cheque issued was

not with respect to the discharge of the legally enforceable debt on the part of the drawer,

if the cheque issued was a gift without any consideration, if the cheque was returned by

due to some technical problems like signature being not clear, or date not mentioned

properly, if the complaint made is not within the time limit prescribed by Section 138 and

142 etc.

Recent Development in the law

Lok adalats can decide cheque bouncing: Recently, the Bombay High Court held that Lok

adalats constituted under Legal Services Authority Act, 1985 can decide the issue of cheque

bouncing cases, and their verdict is final in such matters

LIABILITY ON DISHONOUR OF CHEQUE

 

a.      Necessary Ingredients for Liability

b.      Civil Liability

c.       Criminal Liability

 

a.      Necessary Ingredients for Liability

 

In Anchor Capital of India vs. State of Gujarat1[25], relates to the ingredients that are necessary

to constitute an offence under section 138. The necessary ingredients are as follows:-

a.       the cheque must have been issued in favour of the payee;

b.      the cheque so issued must have been issued in discharge, either in whole or in part, of a

legally enforceable debt or liability;

c.       the cheque should have been presented for encashment within six months of the date it bears

or within its specific validity period which is earlier;

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d.      the cheque should have been returned by the bank unpaid, because the amount of money

standing to the credit of the account is insufficient or it exceeds the amount arranged;

e.       that the payee should have given a notice of dishonour to the drawer within 15 days of the

receipt of information by him from the bank regarding dishonour of the cheque demanding

payment of the cheque amount;

f.        that the drawer should have failed to make payment within 15 days of the receipt of notice.

g.       Under section 142 of the Act, the Magistrate is empowered to take the cognizance of any

offence under section 138 only on a complaint in writing made by the payees or the holder in

due course of the cheque provided that such complaint is made within one month from the

date on which a cause of action has arisen under clause (c) of the proviso to section 138.

b.      Civil liability

Civil Liability is also arises when the cheque is presented for the payment to the bank gets

dishonoured. Section 138 also provides for civil liability which provides for fine twice the

amount of dishonoured cheque.

c.       Criminal Liability

A criminal liability is provided under section 1382[26] of the Act, which provides imprisonment

for two years or with fine which may extend to twice the amount of the cheque, or with both.

In case of dishonour of cheque the drawer of it may be prosecuted under sections 4173[27] and

4204[28] of the Indian Penal Code, 1960 (IPC). However, it all depends on the circumstances of

each case. Every dishonour of a cheque is not cheating.5[29]

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In A Veerbhadra Rao vs. Government of A.P.,6[30] it has been held by the Andhra Pradesh High

Court that where the accused issues a post-dated cheque with knowledge that the funds in his

account are insufficient and such cheque would be dishonoured; he commits offence of cheating

under section 420 of IPC.

The punishment in the form of two years imprisonment has been provided in case of dishonour

of cheque.7[31] The imprisonment generally given only for criminal activity and dishonour of

cheque considering criminal Act punishment for two years imprisonment provision has been

made. Consequently, criminal liability has been imposed when the cheque gets dishonoured.

i. Exceptions to Criminal Liability

a.                  Cheque issued in Discharge of Liability: It is must that the cheque which is given

should be in discharge, in whole or in part of any debt or other liability of the drawer towards the

payee.8[32]

In K. Kumar vs. Bapsons Foot Wear9[33], a complaint was filed for the dishonour of a cheque, it

was alleged that in the course of business the accused issued a cheque. A petition was filed to

quash the complaint. The court allowed the petition holding that the essential requirement for an

offence under section 138 of the Act that the cheque must be drawn for discharge in whole or in

part of any debt or other liability has not been fulfilled as according to the allegation in the

complaint the cheque was issued in the course of their business by the accused.

1.                  Cheque must not be given as a gift: In B. Mohan Krishna vs. Union of India,10[34] the

court held that if a cheque was not issued for the purpose of discharge of any debt or other

liability, the maker of the cheque is not liable for prosecution. If the cheque is given by way of

gift or present and if it is dishonoured by the bank, the maker of the cheque is not liable for

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prosecution. Unless the two conditions set out in section 138 were satisfied, no criminal liability

can be fastened.

ii. Defence that may be taken

If the matter is examined critically, then the following may be a set of defence that may be taken

are as follows:-11[35]

1.      Absence of a legally enforceable debt or liability.

2.      Cheque was not returned for the reasons constituting an offence.

3.      Complaint is not as per time period provided in sections 138 and 142, i.e., the plea of

limitation.

4.      Absence of legal notice of 15 days.

5.      Lack of Jurisdiction.

6.      No return of cheque to the payee.

V. DOES CRIMINAL LIABILITY HAS SOLVED THE PROBLEM?

The criminal liability under section 138 of the Act has not solved the problem of cheque

bouncing and did not develop faith in this credit instrument among the people who widely use it

Our judiciary has played a crucial role by imposing strict liability when the cheque is

dishonoured but it did not work effectively and still the cheques are getting dishonoured. It is

evident from the fact that courts are overburdened due to the complaints of dishonour of cheques

inspite of law in this regard.

A.     THE ACT A FAILURE

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It is sadly submitted that the Act is a failure; numerous factors have all contributed to this failure.

The structural flaws intrinsic in the Act caused its failure, more than anything else, but the larger

reason of failure is socio-cultural.

For the activity the Act was enacted to remove is still rampant. In other words, people still

choose to gather cash in the discharge of obligations owed them in preference to cheque. It is

general place to get that people still hold large amount of cash in settlement of financial

obligations and in consummation of commercial activities. The foremost reason for the

preference for cash is a lack of confidence in the use of cheques. This lack of confidence

primarily due to the continuing prevalence of dishonoured cheques.

i. Socio Cultural Impediment

The failure of the Act has more sociological and cultural bases than structural defects inbuilt in

the Act. Indian does have extremely small regard for the imperatives of discharging his financial

obligations. They think nothing erroneous in issuing a cheque for the reason of discharging his

financial obligations that he knows will be dishonored on presentation for insufficiency of funds

in his bank account. This is a constituent of the encompassing widespread corruption that

damages the foundation of Indian society. They don’t file a complaint being issued a dishonour

cheque in the court, but would rather find other means of getting back debts owed them by the

drawers of the cheque.

There is a dearth of reported cases of the offense created in the Act and by implication, of

prosecution of cases under the Act. There is the urgent need to amend the Act.

ii. Adequacy of the Penalty

The punishment provided by the Act has become dreadfully low and reflects very little

significance about limiting the criminal behavior to which the Act is committed. Only two years

imprisonment has been provided which seems to be very less in view of the wrong.

iii. Cognizance of offences

The procedure provided under section 142 of the Act is not friendly and viable because it

provides that the court will take cognizance of offence or complaint only in writing. It’s merely

cumbersome formality. The court should take the cognizance of offences or complaint in oral

also as provided under section 200 Criminal Procedure Code, 1973.

iv. Short period Limitation

The limitation provided for filing written complaint in the court is one month of the date on

which the cause of action arises under clause (c) of the proviso to section 138. The time period

within which complaint should be filed is very less, it should be extended maximum 6 months

because people are not aware of any such short period of limitation in the Act itself. It takes

away their right and left those with no remedy in spite of they have committed no wrong.

CONCLUSION AND SUGGESTIONS

The objective of the part VII Act is to solidify the importance of cheque as a way to inspire the

development of banking, commerce, and the economy and the need to protect the continuing

reliability coupled with the use of cheque as a main constituent of banking and as a medium of

exchange in commerce and other economic endeavors. We also have established that the micro

objective of the Act is the annihilation of the use of dishonour cheques to pay debts and settle

sundry financial obligations.

 

The Amendments should be made to remove various structural and functional defects that,

together with socio-cultural factors, have impeded the achievement of the Act's purpose.

 

The public must see that the writing of dishonour cheques is a significant corrupt practice and

that must be stopped. The public also should be counseled that cheques should be issued only

when there are enough funds in the bank to honour the cheques drawn, which would ensure that

paying banks would honor the cheques.

 

The Reserve Bank of India, in conjunction with the banks, should increase awareness campaigns

about the different strengths in using cheques to make payments and to discharge other financial

obligations and thereby persuade people to use cheques in discharging monetary obligations.

They should also educate the public about the peril of dishonour cheques.

 

The punishment should be enlarged to a minimum term of imprisonment for three years, without

an option of fine (for individuals), principally when it joined with the punishment for the offense

under IPC.

 

The offense must be considered committed immediately after issuance and not at any time before

the expiration of six months afterwards.

Lok Adalats should be given the jurisdiction to decide the issue of dishonour of cheque and in

this regard its decision should be made final. It will reduce the burden in the higher courts.

The period of fifteen days for reporting the cheque bouncing by the payee to the drawer should

be increased because this is very short span of time and numerous occasions it is felt inadequate.

There should be maximum 6 months time should be given to report the cheque bouncing to the

drawer.

Importance of Cheques in the Commercial World:

Cheques have played an important role in the development of the commercial world as

because they are the instruments which facilitate quick commercial transactions. So the

importance of cheques as a negotiable instrument is considered not only in India but all

through out the world and the same can be known better if one looks at the provisions

dealing with the dishonour of cheques in different Countries. In Scotland a cheque acts as

an assignment of particular amount to the payee and if such a cheque is dishonored then

all the funds present in the bank account of the drawer are attached and frozen. For the

drawer to bring back his account to normalcy he has to deposit some amount of money in

his account and then pay the cheque in the bank so that the debts of the payee can be paid

off. The drawer can also do the same if he obtains a letter from the payee stating that the

payee has no further interest in the cheque and deposits the same in the bank. [22] Then

in case of Australia Section 70 of the Cheques and Payment Orders Act, 1986 makes the

drawer or the endorser of a cheque liable for any cheque that is dishonored irrespective of

the fact that the drawer received no notice on this behalf. [23] Section 76 of the Cheques

and Payment Orders Act, 1986 also provides that in case of dishonour of cheque it is the

right of the payee to receive the payment due from any person liable to pay the cheque

and if there is a circumstance under which the indorser is forced to make the payment for

dishonour then he has a right to claim the same from the drawer. [24] In addition to the

above mentioned provisions there are other provisions with respect to the payment of

damages in case of dishonour of cheuqes in Australia.