Advent of cheques in the market have given a new dimension to the commercial and corporate world, its time when people have preferred to carry and execute a small piece of paper called cheque than carrying the currency worth the value of cheque. Dealings in cheques are vital and important not only for banking purposes but also for the commerce and industry and the economy of the country. But pursuant to the rise in dealings with cheques, the practice of giving cheques without any intention of honoring them has also risen. In case a cheque is issued by a person in liquidation of his debt or liability, and same is dishonoured, then it not only creates a bad taste, but can also result in harassment and can cause damages to the person to whom the cheque may have been issued.
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 it has been found that the 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.
In India, cheques are governed by the Negotiable Instruments Act, 1881, which is largely a codification of the English Law on the subject. Before 1988 there was no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision to punish them in the event of such cheque not being honoured by their bankers and returned unpaid. Although, on dishonour of cheques there is a civil liability accrued, however in reality the processes to seek civil justice becomes notoriously dilatory and recover by way of a civil suit takes an inordinately long time. To ensure prompt remedy against defaulters and to ensure credibility of the holders of the negotiable instrument a criminal remedy of penalty was inserted in various Amendments. This paper deals with the various aspects of dishonour of cheques and then, proceeds towards the liability arising out of such dishonour.