Question

Dishonour of a cheque is an offence punishable under ........

• A. Indian Penal Code
• B. Negotiable Instruments Act
• C. Banking Regulations Act
• D. Payment and Settlement Act

Hint:

Always ensure there are sufficient funds in your account before issuing a cheque to avoid dishonour and potential legal penalties.

Answer 1

The Correct Option is B

Dishonour of a cheque is an offence punishable under the Negotiable Instruments Act. According to Section 138 of the Negotiable Instruments Act, if a cheque is dishonoured due to insufficient funds or for any other reasons, the drawer of the cheque is liable to be penalized. The penalty may include imprisonment or a fine or both. 
 

Answer 2

The dishonour of a cheque is an offence punishable under the Negotiable Instruments Act, 1881. Specifically, this offence is covered under Section 138 of the Act.

Meaning of Dishonour of Cheque:
A cheque is said to be dishonoured when the bank refuses to pay the amount written on the cheque due to insufficient funds or because the account has been closed or instructions have been issued by the drawer to stop payment.

Legal Provision – Section 138 of the Negotiable Instruments Act:
According to Section 138, if a cheque drawn by a person on an account maintained by him is returned by the bank unpaid due to:
1. Insufficient funds, or
2. Exceeding the amount arranged to be paid by the drawer,
then it is deemed to be an offence punishable under this section.

Conditions to Attract Liability:
1. The cheque must have been issued in discharge of a legally enforceable debt or liability.
2. The cheque must be presented to the bank within its validity period (usually 3 months).
3. The payee must issue a written demand notice within 30 days of receiving information of dishonour from the bank.
4. The drawer must fail to make payment within 15 days of receiving the notice.

Punishment:
The offence is punishable with:
- Imprisonment up to two years, or
- Fine up to twice the amount of the cheque, or
- Both.

Conclusion:
The dishonour of a cheque is treated as a criminal offence under the Negotiable Instruments Act, 1881 to promote the credibility and reliability of cheque-based transactions.

Therefore, the correct answer is: Negotiable Instruments Act.